---

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

|x | QUARTERLY   REPORT PURSUANT TO SECTION 13 OR 15(d) OF   THE SECURITIES EXCHANGE ACT OF 1934 
|- | --------------------------------------------------------------------------------------------
|  | For the quarterly period ended   September 30, 2006                                         
|  |                                                                                             
|  | Or                                                                                          
|  |                                                                                             
|o | TRANSITION   REPORT PURSUANT TO SECTION 13 OR 15(d) OF   THE SECURITIES EXCHANGE ACT OF 1934
|  | For the transition period from   __________ to __________                                   

|Commission   File Number 000-09424                                                      
|----------------------------------------------------------------------------------------
|                                                                                        
|FIRST   M&F CORPORATION                                                                 
|                                                                                        
|(Exact name of registrant as specified in its   charter)                                
|                                                                                        
|MISSISSIPPI                                                                             
|                                                                                        
|(State or other jurisdiction of   Incorporation or organization)                        
|                                                                                        
|134 West Washington Street,   Kosciusko, Mississippi                                    
|                                                                                        
|(Address of principal executive offices)                                                
|                                                                                        
|662-289-5121                                                                            
|                                                                                        
|(Registrants telephone number, including area code)                                    
|                                                                                        
|No Change                                                                               
|                                                                                        
|(Former name, former address and former fiscal year,   if changed since the last report)
|                                                                                        

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|Yes
x | No
o
|----- | ----

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

|Large   accelerated filer | o | Accelerated   filer | x | Non-accelerated   filer | o
|------------------------- | - | ------------------- | - | ----------------------- | -

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

|Yes
o | No
x
|----- | ----

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

|Common stock, $5 par value |  | 9,035,226 Shares                      
|-------------------------- |  | --------------------------------------
|                           |  |                                       
|Title of Class             |  | Shares Outstanding at October 31, 2006

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FIRST M & F CORPORATION

FORM 10-Q

INDEX

|                |                                                                                        | Page
|--------------- | -------------------------------------------------------------------------------------- | ----
|                |                                                                                        |     
|PART 1:         | FINANCIAL INFORMATION                                                                  |     
|                |                                                                                        |     
|Item 1          | Financial Statements (unaudited):                                                      | 3   
|                | Consolidated Statements of Condition                                                   | 3   
|                | Consolidated Statements of Income                                                      | 4   
|                | Consolidated Statements of Comprehensive Income                                        | 5   
|                | Consolidated Statements of Stockholders Equity                                        | 6   
|                | Consolidated Statements of Cash Flows                                                  | 7   
|                | Notes to Consolidated Financial Statements                                             | 9   
|                | Report of Independent Registered Public Accounting   Firm                              | 16  
|                |                                                                                        |     
|Item 2          | Managements Discussion and Analysis of Financial   Condition and Results of Operation | 17  
|                |                                                                                        |     
|Item 3          | Quantitative and Qualitative Disclosures About   Market Risk                           | 33  
|                |                                                                                        |     
|Item 4          | Controls and Procedures                                                                | 33  
|                |                                                                                        |     
|PART II:        | OTHER INFORMATION                                                                      |     
|                |                                                                                        |     
|Item 1          | Legal Proceedings                                                                      | 34  
|                |                                                                                        |     
|Item 1A         | Risk Factors                                                                           | 34  
|                |                                                                                        |     
|Item 2          | Unregistered Sales of Equity Securities and Use of   Proceeds                          | 34  
|                |                                                                                        |     
|Item 3          | Defaults upon Senior Securities                                                        | 34  
|                |                                                                                        |     
|Item 4          | Submission of Matters to a Vote of Security Holders                                    | 34  
|                |                                                                                        |     
|Item 5          | Other Information                                                                      | 34  
|                |                                                                                        |     
|Item 6          | Exhibits                                                                               | 34  
|                |                                                                                        |     
|SIGNATURES      |                                                                                        | 35  
|                |                                                                                        |     
|EXHIBIT   INDEX |                                                                                        |     
|                |                                                                                        |     
|CERTIFICATIONS  |                                                                                       
|                |                                                                                        |     

2

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FIRST M & F CORPORATION AND SUBSIDIARY

PART I: FINANCIAL INFORMATION

Item 1  Financial Statements (Unaudited)

Consolidated Statements of Condition (Unaudited)

|                                                                                                                    |  | September   30 |           |             |  
|------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | ----------- | -
|                                                                                                                    |  |                |           | December 31 |  
|(Dollars in thousands)                                                                                              |  | 2006           |           | 2005        |  
|                                                                                                                    |  |                |           |             |  
|Assets                                                                                                              |  |                |           |             |  
|Cash   and due from banks                                                                                           |  | $              | 51,462    |             | $
|Interest   bearing bank balances                                                                                    |  |                | 17,825    |             |  
|Federal   funds sold                                                                                                |  |                | 15,700    |             |  
|Securities   available for sale, amortized cost of $235,566, $189,492 and $186,242                                  |  |                | 234,070   |             |  
|Loans   held for sale                                                                                               |  |                | 6,091     |             |  
|Loans,   net of unearned income                                                                                     |  |                | 1,091,803 |             |  
|Allowance for loan losses                                                                                           |  |                | (16,094   | )           |  
|                                                                                                                    |  |                |           |             |  
|Net loans                                                                                                           |  |                | 1,075,709 |             |  
|                                                                                                                    |  |                |           |             |  
|Bank   premises and equipment                                                                                       |  |                | 39,263    |             |  
|Accrued   interest receivable                                                                                       |  |                | 10,874    |             |  
|Other   real estate                                                                                                 |  |                | 4,090     |             |  
|Goodwill                                                                                                            |  |                | 33,957    |             |  
|Other   intangible assets                                                                                           |  |                | 4,963     |             |  
|Bank   owned life insurance                                                                                         |  |                | 18,858    |             |  
|Other   assets                                                                                                      |  |                | 22,419    |             |  
|                                                                                                                    |  |                |           |             |  
|                                                                                                                    |  | $              | 1,535,281 |             | $
|                                                                                                                    |  |                |           |             |  
|Liabilities   and Stockholders Equity                                                                              |  |                |           |             |  
|Liabilities:                                                                                                        |  |                |           |             |  
|Noninterest-bearing   deposits                                                                                      |  | $              | 191,180   |             | $
|Interest-bearing   deposits                                                                                         |  |                | 1,013,098 |             |  
|                                                                                                                    |  |                |           |             |  
|Total deposits                                                                                                      |  |                | 1,204,278 |             |  
|                                                                                                                    |  |                |           |             |  
|Federal   funds purchased and repurchase agreements                                                                 |  |                | 10,062    |             |  
|Other   borrowings                                                                                                  |  |                | 152,314   |             |  
|Junior   subordinated debt                                                                                          |  |                | 30,928    |             |  
|Accrued   interest payable                                                                                          |  |                | 4,645     |             |  
|Other   liabilities                                                                                                 |  |                | 8,455     |             |  
|                                                                                                                    |  |                |           |             |  
|Total liabilities                                                                                                   |  |                | 1,410,682 |             |  
|                                                                                                                    |  |                |           |             |  
|Noncontrolling   interest in subsidiaries                                                                           |  |                | 20        |             |  
|                                                                                                                    |  |                |           |             |  
|Stockholders   equity:                                                                                             |  |                |           |             |  
|Preferred   stock:                                                                                                  |  |                |           |             |  
|Class A; 1,000,000 shares authorized                                                                                |  |                |          |             |  
|Class B; 1,000,000 shares authorized                                                                                |  |                |          |             |  
|Common   stock of $5.00 par value; 15,000,000 shares authorized: 9,024,226, 8,984,318   and 8,990,318 shares issued |  |                | 45,121    |             |  
|Additional   paid-in capital                                                                                        |  |                | 29,784    |             |  
|Nonvested   restricted stock awards                                                                                 |  |                | 303       |             |  
|Retained   earnings                                                                                                 |  |                | 52,158    |             |  
|Accumulated   other comprehensive income (loss)                                                                     |  |                | (2,787    | )           |  
|                                                                                                                    |  |                |           |             |  
|Total stockholders equity                                                                                          |  |                | 124,579   |             |  
|                                                                                                                    |  |                |           |             |  
|                                                                                                                    |  | $              | 1,535,281 |             | $
|                                                                                                                    |  |                |           |             |  

The accompanying notes are an integral part of these financial statements.

3

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FIRST M & F CORPORATION AND SUBSIDIARY

Consolidated Statements of Income (Unaudited)

|                                                                                            |  | Three   Months Ended   September 30 |        | Nine   Months Ended   September 30 |  
|------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | ---------------------------------- | -
|                                                                                            |  |                                     |        |                                    |  
|(Dollars in thousands, except per share data)                                               |  | 2006                                |        | 2005                               |  
|                                                                                            |  |                                     |        |                                    |  
|Interest   income:                                                                          |  |                                     |        |                                    |  
|Interest   and fees on loans                                                                |  | $                                   | 20,808 |                                    | $
|Interest   on loans held for sale                                                           |  |                                     | 129    |                                    |  
|Taxable   investments                                                                       |  |                                     | 2,203  |                                    |  
|Tax-exempt   investments                                                                    |  |                                     | 493    |                                    |  
|Federal   funds sold                                                                        |  |                                     | 66     |                                    |  
|Interest   bearing bank balances                                                            |  |                                     | 132    |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Total interest income                                                                       |  |                                     | 23,831 |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Interest   expense:                                                                         |  |                                     |        |                                    |  
|Deposits                                                                                    |  |                                     | 7,997  |                                    |  
|Short-term   borrowings                                                                     |  |                                     | 90     |                                    |  
|Other   borrowings                                                                          |  |                                     | 1,830  |                                    |  
|Junior   subordinated debt                                                                  |  |                                     | 499    |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Total interest expense                                                                      |  |                                     | 10,416 |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Net interest income                                                                         |  |                                     | 13,415 |                                    |  
|Provision   for loan losses                                                                 |  |                                     | 954    |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Net interest income after provision for loan   losses                                       |  |                                     | 12,461 |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Noninterest   income:                                                                       |  |                                     |        |                                    |  
|Service   charges on deposit accounts                                                       |  |                                     | 2,753  |                                    |  
|Mortgage   banking income                                                                   |  |                                     | 522    |                                    |  
|Agency   commission income                                                                  |  |                                     | 1,098  |                                    |  
|Trust   and brokerage income                                                                |  |                                     | 141    |                                    |  
|Bank   owned life insurance income                                                          |  |                                     | 152    |                                    |  
|Securities   gains (losses), net                                                            |  |                                     |       |                                    |  
|Other   income                                                                              |  |                                     | 669    |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Total noninterest income                                                                    |  |                                     | 5,335  |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Noninterest   expenses:                                                                     |  |                                     |        |                                    |  
|Salaries   and employee benefits                                                            |  |                                     | 7,086  |                                    |  
|Net   occupancy expenses                                                                    |  |                                     | 908    |                                    |  
|Equipment   expenses                                                                        |  |                                     | 802    |                                    |  
|Software   and processing expenses                                                          |  |                                     | 293    |                                    |  
|Telecommunication   expenses                                                                |  |                                     | 277    |                                    |  
|Marketing   and business development expenses                                               |  |                                     | 457    |                                    |  
|Intangible   asset amortization                                                             |  |                                     | 95     |                                    |  
|Other   expenses                                                                            |  |                                     | 2,476  |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Total noninterest expenses                                                                  |  |                                     | 12,394 |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Income before income taxes and noncontrolling   interests                                   |  |                                     | 5,402  |                                    |  
|Income   taxes                                                                              |  |                                     | 1,734  |                                    |  
|Noncontrolling   interest in earnings  of subsidiaries, net of taxes of $2, $3, $6 and   $4 |  |                                     | 3      |                                    |  
|                                                                                            |  |                                     |        |                                    |  
|Net income                                                                                  |  | $                                   | 3,665  |                                    | $
|                                                                                            |  |                                     |        |                                    |  
|Earnings   per share:                                                                       |  |                                     |        |                                    |  
|Basic                                                                                       |  | $                                   | .40    |                                    | $
|Diluted                                                                                     |  | $                                   | .40    |                                    | $
|                                                                                            |  |                                     |        |                                    |  

The accompanying notes are an integral part of these financial statements.

4

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FIRST M & F CORPORATION AND SUBSIDIARY

Consolidated Statements of Comprehensive Income (Unaudited)

|                                                                                                                                                                                                                            |  | Three   Months Ended   September 30 |       | Nine   Months Ended   September 30 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ----- | ---------------------------------- | -
|                                                                                                                                                                                                                            |  |                                     |       |                                    |  
|(Dollars in thousands)                                                                                                                                                                                                      |  | 2006                                |       | 2005                               |  
|                                                                                                                                                                                                                            |  |                                     |       |                                    |  
|Net   income                                                                                                                                                                                                                |  | $                                   | 3,665 |                                    | $
|Other   comprehensive income:                                                                                                                                                                                               |  |                                     |       |                                    |  
|Change   in unrealized gains (losses) on securities available for sale, net of tax of   $890 and $565 for the three months ended September 30 and $123 and $1,097 for   the nine months ended September 30                  |  |                                     | 1,495 |                                    |  
|Reclassification   adjustment for  losses on securities available for sale included in   net income, net of tax of $0 and $0 for the three months ended September 30   and $2 and $0 for the nine months ended September 30 |  |                                     |      |                                    |  
|Minimum   pension liability adjustment, net of tax                                                                                                                                                                          |  |                                     |      |                                    |  
|                                                                                                                                                                                                                            |  |                                     |       |                                    |  
|Other comprehensive income                                                                                                                                                                                                  |  |                                     | 1,495 |                                    |  
|                                                                                                                                                                                                                            |  |                                     |       |                                    |  
|Total comprehensive income                                                                                                                                                                                                  |  | $                                   | 5,160 |                                    | $
|                                                                                                                                                                                                                            |  |                                     |       |                                    |  

The accompanying notes are an integral part of these financial statements.

5

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FIRST M & F CORPORATION AND SUBSIDIARY

Consolidated Statements of Stockholders Equity Nine Months Ended September 30, 2006 and 2005 (Unaudited)

|(Dollars in thousands, except per share data)                                       |  | Common   Stock |        | Additional   Paid-in   Capital |   | Nonvested   Restricted   Stock   Awards |   | Retained   Earnings |     | Accumulated   Other   Comprehensive   Income (Loss) | Total |        
|----------------------------------------------------------------------------------- |  | -------------- | ------ | ------------------------------ | - | --------------------------------------- | - | ------------------- | --- | --------------------------------------------------- | ----- | -------
|                                                                                    |  |                |        |                                |   |                                         |   |                     |     |                                                     |       |        
|January   1, 2005                                                                   |  | $              | 22,531 |                                | $ | 29,587                                  |   | $                   |    |                                                     | $     | 60,113 
|Effect   of stock split issued in the form of a 100% stock dividend on May 15, 2006 |  |                | 22,531 |                                |   | (4                                      | ) |                     |    |                                                     |       | (22,527
|                                                                                    |  |                |        |                                |   |                                         |   |                     |     |                                                     |       |        
|January   1, 2005, as adjusted                                                      |  | $              | 45,062 |                                | $ | 29,583                                  |   | $                   |    |                                                     | $     | 37,586 
|Net   income                                                                        |  |                |       |                                |   |                                        |   |                     |    |                                                     |       | 9,527  
|Cash   dividends ($.39 per share)                                                   |  |                |       |                                |   |                                        |   |                     |    |                                                     |       | (3,470 
|12,000   common shares issued in exercise of stock options                          |  |                | 60     |                                |   | 99                                      |   |                     |    |                                                     |       |       
|Share-based   compensation recognized                                               |  |                |        |                                |   | 5                                       |   |                     | 31  |                                                     |       |       
|40,000   common shares repurchased                                                  |  |                | (200   | )                              |   | (490                                    | ) |                     |    |                                                     |       |       
|Net   change                                                                        |  |                |       |                                |   |                                        |   |                     |    |                                                     |       |       
|                                                                                    |  |                |        |                                |   |                                         |   |                     |     |                                                     |       |        
|September   30, 2005                                                                |  | $              | 44,922 |                                | $ | 29,197                                  |   | $                   | 31  |                                                     | $     | 43,643 
|                                                                                    |  |                |        |                                |   |                                         |   |                     |     |                                                     |       |        
|January   1, 2006                                                                   |  | $              | 22,476 |                                | $ | 29,340                                  |   | $                   | 86  |                                                     | $     | 68,058 
|Effect   of stock split issued in the form of a 100% stock dividend on May 15, 2006 |  |                | 22,476 |                                |   | 51                                      |   |                     |    |                                                     |       | (22,527
|                                                                                    |  |                |        |                                |   |                                         |   |                     |     |                                                     |       |        
|January   1, 2006, as adjusted                                                      |  | $              | 44,952 |                                | $ | 29,391                                  |   | $                   | 86  |                                                     | $     | 45,531 
|Net   income                                                                        |  |                |       |                                |   |                                        |   |                     |    |                                                     |       | 10,186 
|Cash   dividends ($.39 per share)                                                   |  |                |       |                                |   |                                        |   |                     |    |                                                     |       | (3,561 
|33,908   common shares issued in exercise of stock options                          |  |                | 169    |                                |   | 309                                     |   |                     |    |                                                     |       |       
|Share-based   compensation expense recognized                                       |  |                |        |                                |   | 15                                      |   |                     | 217 |                                                     |       | 2      
|Tax   benefits on stock option transactions                                         |  |                |       |                                |   | 69                                      |   |                     |    |                                                     |       |       
|Net   change                                                                        |  |                |       |                                |   |                                        |   |                     |    |                                                     |       |       
|                                                                                    |  |                |        |                                |   |                                         |   |                     |     |                                                     |       |        
|September   30, 2006                                                                |  | $              | 45,121 |                                | $ | 29,784                                  |   | $                   | 303 |                                                     | $     | 52,158 
|                                                                                    |  |                |        |                                |   |                                         |   |                     |     |                                                     |       |        

The accompanying notes are an integral part of these financial statements.

6

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FIRST M & F CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

|                                                                                    |  | Nine   Months Ended September 30 |        
|----------------------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                                    |  |                                  |        
|(Dollars in thousands)                                                              |  | 2006                             |        
|                                                                                    |  |                                  |        
|Cash   flows from operating activities:                                             |  |                                  |        
|Net   income                                                                        |  | $                                | 10,186 
|Adjustments   to reconcile net income to net cash provided by operating activities: |  |                                  |        
|Share-based compensation                                                            |  |                                  | 234    
|Depreciation and amortization                                                       |  |                                  | 1,986  
|Provision for loan losses                                                           |  |                                  | 2,911  
|Net investment amortization (accretion)                                             |  |                                  | (273   
|Net loan amortization and lower of cost or fair   value adjustments                 |  |                                  | 180    
|Capitalized dividends on FHLB stock                                                 |  |                                  | (271   
|Net accretion of discount on time deposits                                          |  |                                  | 110    
|Net accretion of discount on debt                                                   |  |                                  | 11     
|Loss on securities available for sale                                               |  |                                  | 4      
|Gain on loans held for sale                                                         |  |                                  | (292   
|Other asset sales losses                                                            |  |                                  | 274    
|Earnings of noncontrolling interest                                                 |  |                                  | 17     
|Deferred income taxes                                                               |  |                                  | (634   
|(Increase) decrease in:                                                             |  |                                  |        
|Accrued interest receivable                                                         |  |                                  | (876   
|Cash surrender value of bank owned life insurance                                   |  |                                  | (376   
|Loans held for sale                                                                 |  |                                  | (89    
|Other assets                                                                        |  |                                  | (259   
|Increase   (decrease) in:                                                           |  |                                  |        
|Accrued interest payable                                                            |  |                                  | 1,195  
|Other liabilities                                                                   |  |                                  | 461    
|                                                                                    |  |                                  |        
|Net cash provided by operating activities                                           |  |                                  | 14,499 
|                                                                                    |  |                                  |        
|Cash   flows from investing activities:                                             |  |                                  |        
|Purchases   of securities available for sale                                        |  |                                  | (37,515
|Sales   of securities available for sale                                            |  |                                  | 10,061 
|Maturities   of securities available for sale                                       |  |                                  | 31,295 
|Redemptions   of FHLB and FRB stock, net of purchases                               |  |                                  | 2,126  
|Investment   in First M&F Statutory Trust I                                         |  |                                  | (928   
|Net   (increase) decrease in:                                                       |  |                                  |        
|Interest bearing bank balances                                                      |  |                                  | (5,569 
|Federal funds sold                                                                  |  |                                  | (893   
|Loans                                                                               |  |                                  | (52,947
|Bank premises and equipment                                                         |  |                                  | (3,402 
|Purchases   of bank owned life insurance                                            |  |                                  | (119   
|Proceeds   from sales of other real estate and other repossessed assets             |  |                                  | 2,594  
|Net   cash paid in acquisition                                                      |  |                                  | (29,826
|                                                                                    |  |                                  |        
|Net cash used in investing activities                                               |  |                                  | (85,123
|                                                                                    |  |                                  |        

(Continued)

7

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FIRST M & F CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

|                                                              |  | Nine   Months Ended September 30 |        
|------------------------------------------------------------- |  | -------------------------------- | -------
|                                                              |  |                                  |        
|(Dollars in thousands)                                        |  | 2006                             |        
|                                                              |  |                                  |        
|Cash   flows from financing activities:                       |  |                                  |        
|Net   increase in deposits                                    |  | $                                | 65,089 
|Net   increase (decrease) in short-term borrowings            |  |                                  | (8,001 
|Proceeds   from other borrowings                              |  |                                  | 30,100 
|Repayments   of other borrowings                              |  |                                  | (49,396
|Proceeds   from issuance of junior subordinated debt          |  |                                  | 30,928 
|Earnings   distributions to noncontrolling interests          |  |                                  | (18    
|Cash   dividends                                              |  |                                  | (3,561 
|Common   shares issued                                        |  |                                  | 478    
|Common   shares repurchased                                   |  |                                  |       
|Tax   benefits on stock option transactions                   |  |                                  | 69     
|                                                              |  |                                  |        
|Net cash provided by financing activities                     |  |                                  | 65,688 
|                                                              |  |                                  |        
|Net increase (decrease) in cash and due from banks            |  |                                  | (4,936 
|Cash   and due from banks at January 1                        |  |                                  | 56,398 
|                                                              |  |                                  |        
|Cash   and due from banks at September 30                     |  | $                                | 51,462 
|                                                              |  |                                  |        
|Total   interest paid                                         |  | $                                | 26,729 
|Total   income taxes paid                                     |  |                                  | 5,946  
|Income   tax refunds received                                 |  |                                  | 10     
|Transfers   of loans to foreclosed property                   |  |                                  | 2,474  
|                                                              |  |                                  |        
|Fair   value of identifiable assets acquired                  |  | $                                | 211,604
|Goodwill   recorded on Columbiana Bancshares acquisition      |  |                                  | 14,564 
|Goodwill   recorded on Crockett County Bancshares acquisition |  |                                  | 3,045  
|Cash   paid for Columbiana Bancshares stock                   |  |                                  | (31,294
|Cash   paid for Crockett County Bancshares Stock              |  |                                  | (7,472 
|                                                              |  |                                  |        
|Liabilities   assumed in acquisitions                         |  | $                                | 190,447
|                                                              |  |                                  |        

The accompanying notes are an integral part of these financial statements.

8

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FIRST M & F CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 1:  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated financial statements of First M & F Corporation include the financial statements of Merchants and Farmers Bank, a wholly owned subsidiary, and the Banks wholly owned subsidiaries, First M & F Insurance Company, Inc., M & F Financial Services, Inc., M & F Bank Securities Corporation, M & F
Insurance Agency, Inc., M & F Insurance Group, Inc., and M & F Business Credit, Inc. The consolidated financial statements also include the Banks 51% ownership in Merchants Financial Services, LLC, an accounts receivable financing business, and the Banks 55% ownership in MS Statewide Title, LLC, a title insurance agency. Certain reclassifications have been made to the 2005 financial statements to be consistent with the 2006 presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys annual report on form 10-K for the year ended December 31, 2005.

Note 2:  Acquisitions

On February 17, 2006, the Company acquired Columbiana Bancshares, Inc. of Columbiana, Alabama and its wholly owned subsidiary First National Bank of Shelby County. The acquisition executes part of a strategy of the Company to expand into Alabama and Tennessee. The attractiveness of the Birmingham and surrounding markets compels entrants to pay a premium to gain access to those markets, resulting in goodwill related to acquisitions of financial institutions with operations based there. The Company paid $31.294 million for all of the shares of Columbiana Bancshares. Included in the cash paid was a payment of $2.5 million to an escrow fund to settle contingent claims related to the legacy Columbiana Bancshares and First National Bank of Shelby County operations. Any remaining funds after settlements will be paid to the former Columbiana Bancshares stockholders. Results of operations include the revenues and expenses of the acquired operations from the acquisition
date forward. The goodwill recognized is not deductible for income tax purposes. The core deposit intangible asset is being amortized over 15 years.

The cost of the acquisition and allocation of the purchase price are provided in the table below.

|(Dollars in thousands)                                                |  |   |         |  |   |         | 
|--------------------------------------------------------------------- |  | - | ------- |  | - | ------- | 
|                                                                      |  |   |         |  |   |         | 
|Cash   paid to Columbiana Bancshares shareholders                     |  |   |         |  | $ | 28,525  | 
|Cash   paid to contingent obligation escrow on behalf of shareholders |  |   |         |  |   | 2,500   | 
|Direct   acquisition costs                                            |  |   |         |  |   | 269     | 
|                                                                      |  |   |         |  |   |         | 
|Total   cost of acquisition                                           |  |   |         |  |   | 31,294  | 
|                                                                      |  |   |         |  |   |         | 
|Assets   acquired at fair value:                                      |  |   |         |  |   |         | 
|Cash   and due from banks                                             |  | $ | 8,394   |  |   |         | 
|Short-term   interest-bearing funds                                   |  |   | 10,882  |  |   |         | 
|Securities   available for sale                                       |  |   | 42,126  |  |   |         | 
|Loans,   net                                                          |  |   | 98,413  |  |   |         | 
|Premises   and equipment                                              |  |   | 8,625   |  |   |         | 
|Other   real estate                                                   |  |   | 1,209   |  |   |         | 
|Bank   owned life insurance                                           |  |   | 3,991   |  |   |         | 
|Core   deposit intangible asset                                       |  |   | 4,834   |  |   |         | 
|Other   assets                                                        |  |   | 2,207   |  |   |         | 
|                                                                      |  |   |         |  |   | 180,681 | 
|Liabilities   assumed at fair value:                                  |  |   |         |  |   |         | 
|Deposits                                                              |  |   | 139,080 |  |   |         | 
|Other   borrowings                                                    |  |   | 23,014  |  |   |         | 
|Other   liabilities                                                   |  |   | 1,857   |  |   |         | 
|                                                                      |  |   |         |  |   | 163,951 | 
|                                                                      |  |   |         |  |   |         | 
|Net   assets acquired                                                 |  |   |         |  |   | 16,730  | 
|                                                                      |  |   |         |  |   |         | 
|Goodwill                                                              |  |   |         |  | $ | 14,564  | 
|                                                                      |  |   |         |  |   |         | 

9

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FIRST M & F CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 2:  (Continued)

The following condensed combined financial information presents results of operations of the Company as if the acquisition had taken place on January 1, 2005.

|                                                                                                  |  | Three   Months Ended   September 30 |        | Nine   Months Ended   September 30 |  
|------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | ---------------------------------- | -
|                                                                                                  |  |                                     |        |                                    |  
|(Dollars in thousands, except per share data)                                                     |  | 2006                                |        | 2005                               |  
|                                                                                                  |  |                                     |        |                                    |  
|Interest   income                                                                                 |  | $                                   | 23,831 |                                    | $
|Interest   expense                                                                                |  |                                     | 10,416 |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Net interest income                                                                               |  |                                     | 13,415 |                                    |  
|Provision   for loan losses                                                                       |  |                                     | 954    |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Net interest income after provision for loan losses                                               |  |                                     | 12,461 |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Noninterest   income                                                                              |  |                                     | 5,335  |                                    |  
|Noninterest   expense                                                                             |  |                                     | 12,394 |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Income before income taxes and noncontrolling   interests                                         |  |                                     | 5,402  |                                    |  
|Income   taxes                                                                                    |  |                                     | 1,734  |                                    |  
|Noncontrolling   interest in earnings (losses) of subsidiaries                                    |  |                                     | 3      |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Net income                                                                                        |  | $                                   | 3,665  |                                    | $
|                                                                                                  |  |                                     |        |                                    |  
|Basic earnings per share                                                                          |  | $                                   | .40    |                                    | $
|Diluted earnings per share                                                                        |  | $                                   | .40    |                                    | $
|                                                                                                  |  |                                     |        |                                    |  
|Purchase   adjustment and core deposit amortization included in pro forma net income   before tax |  | $                                   | 126    |                                    | $
|Estimated   financing costs included in pro forma net   income before tax                         |  |                                     | 498    |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Significant   nonrecurring expense items of Columbiana Bancshares in interim period:              |  |                                     |        |                                    |  
|Provision   for loan losses                                                                       |  |                                     |        |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Data   processing contract termination fee                                                        |  |                                     |        |                                    |  
|Columbiana   investment banking fees                                                              |  |                                     |        |                                    |  
|Accelerated   amortization of prepaid assets                                                      |  |                                     |        |                                    |  
|Impairment   of affordable housing investment                                                     |  |                                     |        |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Noninterest expense items                                                                         |  |                                     |        |                                    |  
|                                                                                                  |  |                                     |        |                                    |  
|Columbiana   net loan charge-offs in interim period                                               |  |                                     |        |                                    |  
|                                                                                                  |  |                                     |        |                                    |  

Tennessee Bank Acquisition

On May 12, 2006, the Company acquired Crockett County Bancshares, Inc. of Bells, Tennessee and its wholly owned subsidiary Bells Banking Company. The Crockett County acquisition allows the Company to branch within Tennessee, a process which has resulted in three branch locations in the Memphis metropolitan area. The Company paid $7.4 million in cash for all of the shares of Crockett County Bancshares and incurred $72 thousand in additional costs that were allocated to the purchase price paid. The fair value of assets acquired was $30.923 million, the fair value of liabilities assumed was $26.496 million and goodwill was assigned a value of $3.045 million.

10

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FIRST M & F CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 3:  Earnings Per Share

|                                                                            |  | Three   Months Ended   September 30 |           | Nine   Months Ended   September 30 |  
|--------------------------------------------------------------------------- |  | ----------------------------------- | --------- | ---------------------------------- | -
|                                                                            |  |                                     |           |                                    |  
|(Dollars in thousands, except per share data)                               |  | 2006                                |           | 2005                               |  
|                                                                            |  |                                     |           |                                    |  
|Net   income                                                                |  | $                                   | 3,665     |                                    | $
|                                                                            |  |                                     |           |                                    |  
|Weighted   average shares outstanding                                       |  |                                     | 9,022,240 |                                    |  
|Add   dilutive effect of outstanding options                                |  |                                     | 53,362    |                                    |  
|                                                                            |  |                                     |           |                                    |  
|Adjusted dilutive shares outstanding                                        |  |                                     | 9,075,602 |                                    |  
|                                                                            |  |                                     |           |                                    |  
|Earnings   per share:                                                       |  |                                     |           |                                    |  
|Basic                                                                       |  | $                                   | .40       |                                    | $
|Diluted                                                                     |  | $                                   | .40       |                                    | $
|                                                                            |  |                                     |           |                                    |  
|Stock   options not included in adjusted shares due to anti-dilutive effect |  |                                     | 1,296     |                                    |  

Note 4: Loans

The composition of the loan portfolio is shown in the table below:

|                                         |  | September   30 |           |             |   |        
|---------------------------------------- |  | -------------- | --------- | ----------- | - | -------
|                                         |  |                |           | December 31 |  
|(Dollars in thousands)                   |  | 2006           |           | 2005        |   | 2005   
|                                         |  |                |           |             |   |        
|Commercial,   financial and agricultural |  | $              | 166,963   |             | $ | 164,646
|Non-residential   real estate            |  |                | 606,293   |             |   | 483,341
|Residential   real estate                |  |                | 225,321   |             |   | 205,235
|Home   equity loans                      |  |                | 40,509    |             |   | 27,181 
|Consumer   loans                         |  |                | 46,665    |             |   | 42,090 
|Other   loans                            |  |                | 6,052     |             |   | 2,790  
|                                         |  |                |           |             |   |        
|Total   loans                            |  | $              | 1,091,803 |             | $ | 925,283
|                                         |  |                |           |             |   |        

The following table is a summary of the activity in the Allowance for Loan Losses for the first nine months of 2006 and 2005.

|                                             |  | Nine Months   Ended September 30 |       
|-------------------------------------------- |  | -------------------------------- | ------
|                                             |  |                                  |       
|(Dollars in thousands)                       |  |                                  | 2006  
|                                             |  |                                  |       
|Balance   at January 1                       |  | $                                | 12,449
|Allowance   from Columbiana acquisition      |  |                                  | 2,030 
|Allowance   from Crockett County acquisition |  |                                  | 204   
|Loans   charged off                          |  |                                  | (2,150
|Recoveries                                   |  |                                  | 650   
|                                             |  |                                  |       
|Net charge-offs                              |  |                                  | (1,500
|                                             |  |                                  |       
|Provision   for loan losses                  |  |                                  | 2,911 
|                                             |  |                                  |       
|Balance   at September 30                    |  | $                                | 16,094
|                                             |  |                                  |       

11

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FIRST M & F CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 5:  Goodwill and Other Intangible Assets

Following is a summary of intangible assets, net of accumulated amortization, included in the Consolidated Statements of Condition:

|(Dollars in thousands)                        |  |   | Goodwill |  |   | Core   Deposits |   |   | Customer   Renewal   Lists |   |   | Noncompete   Agreements |  
|--------------------------------------------- |  | - | -------- |  | - | --------------- | - | - | -------------------------- | - | - | ----------------------- | -
|                                              |  |   |          |  |   |                 |   |   |                            |   |   |                         |  
|Balance   at January 1, 2005                  |  | $ | 16,348   |  | $ |                |   | $ | 262                        |   | $ | 151                     |  
|Amortization   expense                        |  |   |         |  |   |                |   |   | (20                        | ) |   | (21                     | )
|                                              |  |   |          |  |   |                 |   |   |                            |   |   |                         |  
|Balance   at September 30, 2005               |  | $ | 16,348   |  | $ |                |   | $ | 242                        |   | $ | 130                     |  
|                                              |  |   |          |  |   |                 |   |   |                            |   |   |                         |  
|Balance   at January 1, 2006                  |  | $ | 16,348   |  | $ |                |   | $ | 234                        |   | $ | 124                     |  
|Addition   due to Columbiana acquisition      |  |   | 14,564   |  |   | 4,834           |   |   |                           |   |   |                        |  
|Addition   due to Crockett County acquisition |  |   | 3,045    |  |   |                |   |   |                           |   |   |                        |  
|Amortization   expense                        |  |   |         |  |   | (188            | ) |   | (20                        | ) |   | (21                     | )
|                                              |  |   |          |  |   |                 |   |   |                            |   |   |                         |  
|Balance   at September 30, 2006               |  | $ | 33,957   |  | $ | 4,646           |   | $ | 214                        |   | $ | 103                     |  
|                                              |  |   |          |  |   |                 |   |   |                            |   |   |                         |  
|Estimated   amortization expense              |  |   |          |  |   |                 |   |   |                            |   |   |                         |  
|Remainder   of 2006                           |  |   |          |  | $ | 81              |   | $ | 7                          |   | $ | 7                       |  
|2007                                          |  |   |          |  |   | 322             |   |   | 27                         |   |   | 28                      |  
|2008                                          |  |   |          |  |   | 322             |   |   | 27                         |   |   | 27                      |  
|2009                                          |  |   |          |  |   | 322             |   |   | 27                         |   |   | 27                      |  
|2010                                          |  |   |          |  |   | 322             |   |   | 27                         |   |   | 14                      |  
|2011                                          |  |   |          |  |   | 322             |   |   | 27                         |   |   |                        |  
|                                              |  |   |          |  |   |                 |   |   |                            |   |   |                         |  

The process of allocating acquisition purchase prices to identifiable tangible and intangible assets is substantially complete for the Columbiana acquisition, while the allocations for the Crockett County acquisition are ongoing. The remaining allocations for the Crockett County acquisition consist primarily of the valuation and allocation of the core deposit intangible asset and the valuation and allocation of fair values (generally replacement costs) related to certain fixed assets.

Note 6:  Variable Interest Entity And Borrowing Arrangements

The following is a summary of other borrowings at September 30, 2006 and 2005:

|(Dollars in Thousands)                                                                                                                                                                                      |  | 2006 |         | 2005 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | -
|                                                                                                                                                                                                            |  |      |         |      |  
|Companys   line of credit in the amount of $15,000,000, maturing in May 2009; secured by   approximately 29% of the Banks common stock; interest payable quarterly at   .75% below the lenders base rate |  | $    | 12,742  |      | $
|Banks   advances from Federal Home Loan Banks, net of unamortized purchase accounting   adjustments of $136 and $0                                                                                         |  |      | 139,572 |      |  
|Other   note payable of M&F Insurance Group, Inc.                                                                                                                                                           |  |      |        |      |  
|                                                                                                                                                                                                            |  |      |         |      |  
|                                                                                                                                                                                                            |  | $    | 152,314 |      | $
|                                                                                                                                                                                                            |  |      |         |      |  
|Companys   junior subordinated debentures, interest payable quarterly at 6.44% through   March 2011, payable quarterly at 90-day LIBOR plus 1.33% through March 2036;   redeemable after March 2011        |  | $    | 30,928  |      |  
|                                                                                                                                                                                                            |  |      |         |      |  

The Bank has advances from the Federal Home Loan Bank of Dallas (FHLB) under Blanket Agreements for Advances and Security Agreements.  These agreements allow the Bank to borrow funds from the FHLB to fund mortgage loan programs and to satisfy certain other funding needs.  The value of mortgage-backed securities and mortgage loans pledged under these agreements must be maintained at not less than 115% and 150%, respectively, of the advances outstanding.

12

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FIRST M & F CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 6:  (Continued)

In February 2006 the Company issued $30.928 million in fixed/floating rate junior subordinated deferrable interest debentures to First M&F Statutory Trust I. The Company received $30.000 million in cash and $928 thousand of common securities from the Trust. The debentures mature in March 2036 and interest is payable quarterly.

First M&F Statutory Trust I is a variable interest entity. A determination has been made that the Company, since its equity interest is not at risk, is not the primary beneficiary and therefore, the Trust is not consolidated with the Companys financial statements.

Note 7:  Pension and Other Employee Benefit Plans

As discussed in Note 10 to the December 31, 2005 financial statements, the Bank has a defined benefit pension plan covering substantially all full time employees of the Bank and its subsidiaries. The following is a summary of the components of net periodic benefit costs for the three and nine month periods ended September 30, 2006 and 2005:

|                                      |  | Three   Months Ended
September   30 |      | Nine   Months Ended
September 30 |  
|------------------------------------- |  | ----------------------------------- | ---- | -------------------------------- | -
|                                      |  |                                     |      |                                  |  
|(Dollars in Thousands)                |  | 2006                                |      | 2005                             |  
|                                      |  |                                     |      |                                  |  
|Service   cost                        |  | $                                   |     |                                  | $
|Interest   cost                       |  |                                     | 114  |                                  |  
|Expected   return on plan assets      |  |                                     | (127 | )                                |  
|Amortization   of transition asset    |  |                                     | (2   | )                                |  
|Amortization   of prior service costs |  |                                     | (9   | )                                |  
|Recognized   actuarial (gain) loss    |  |                                     | 66   |                                  |  
|                                      |  |                                     |      |                                  |  
|Net   pension cost                    |  | $                                   | 42   |                                  | $
|                                      |  |                                     |      |                                  |  

The Company made a $750 thousand contribution to the pension plan during the third quarter of 2006 and a $300 thousand contribution to the plan during the third quarter of 2005.

Other liabilities on the Consolidated Statements of Condition include an accrued benefit liability of $3.415 million at September 30, 2006, and December 31, 2005, and of $2.935 million at September 30, 2005, related to the unfunded minimum liability of the Companys defined benefit pension plan.

The Company made $75 thousand in contributions to the ESOP and $381 thousand in matching contributions to the 401k plan during the first nine months of 2006. The Company made $75 thousand in contributions to the ESOP and $269 thousand in matching contributions to the 401k plan during the first nine months of 2005.

The Company has a nonqualified deferred compensation plan for certain senior officers. Participants deferred $75 thousand of compensation during the first nine months of 2006 and $17 thousand during the first nine months of 2005. Included in employee benefit expenses is $8 thousand in earnings credits attributed to the participants accounts. The plan incurred no expenses during the first nine months of 2005. Liabilities of the plan were $248 thousand at September 30, 2006, and $17 thousand at September 30, 2005, substantially all of which were vested.

13

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FIRST M & F CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 8:  Share-based Compensation

The Company adopted Statement of Financial Accounting Standards (SFAS) 123 (revised 2004), Share-Based Payment, as of July 1, 2005. SFAS No. 123(R) requires the use of the fair value method of accounting for stock-based compensation. The Company adopted the modified prospective method of transition whereby stock-based compensation expense is recognized prospectively for all stock-based awards that were not fully vested as of the date of adoption of the Statement and for all awards issued thereafter.

Through June 30, 2005, the Company accounted for its stock-based employee compensation plans based on the intrinsic value method provided in Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations. Because the exercise price of the Companys employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense was recognized on option plans.

Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, requires pro forma disclosures for net income and earnings per share for companies not adopting its fair value accounting method for stock-based employee compensation. SFAS No. 123(R) requires that these disclosures be made for all periods for which SFAS No. 123(R) is not retrospectively applied. The pro forma disclosures required by SFAS No. 123 are shown below using the fair value method of SFAS No. 123(R) to measure compensation expense for stock-based employee compensation plans.

|                                                                                              |  | Three   Months Ended   September 30 |       | Nine   Months Ended   September 30 |  
|--------------------------------------------------------------------------------------------- |  | ----------------------------------- | ----- | ---------------------------------- | -
|                                                                                              |  |                                     |       |                                    |  
|(Dollars in thousands, except per share data)                                                 |  | 2006                                |       | 2005                               |  
|                                                                                              |  |                                     |       |                                    |  
|Net   income, as reported                                                                     |  | $                                   | 3,665 |                                    | $
|Add:       Stock option expense recognized, net of taxes                                      |  |                                     | 3     |                                    |  
|Restricted stock award expense recognized,   net of taxes                                     |  |                                     | 46    |                                    |  
|Less:       Total stock option expense determined under the fair value method, net of   taxes |  |                                     | 3     |                                    |  
|Restricted stock award expense, net of taxes                                                  |  |                                     | 46    |                                    |  
|                                                                                              |  |                                     |       |                                    |  
|Pro   forma net income                                                                        |  | $                                   | 3,665 |                                    | $
|                                                                                              |  |                                     |       |                                    |  
|Earnings   per share:                                                                         |  |                                     |       |                                    |  
|Basic  as reported                                                                           |  | $                                   | .40   |                                    | $
|Basic  pro forma                                                                             |  | $                                   | .40   |                                    | $
|Diluted  as reported                                                                         |  | $                                   | .40   |                                    | $
|Diluted  pro forma                                                                           |  | $                                   | .40   |                                    | $
|                                                                                              |  |                                     |       |                                    |  

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option pricing model.

The following table is a summary of outstanding options and weighted average exercise prices.

|                                                       |  | Nine Months   Ended September 30 |        
|------------------------------------------------------ |  | -------------------------------- | -------
|                                                       |  |                                  |        
|                                                       |  | 2006                             |        
|                                                       |  |                                  |        
|                                                       |  | Number                           |        
|                                                       |  |                                  |        
|January   1                                            |  |                                  | 239,370
|Exercised                                              |  |                                  | (33,908
|Expired                                                |  |                                  |       
|Granted                                                |  |                                  | 3,000  
|                                                       |  |                                  |        
|September   30                                         |  |                                  | 208,462
|                                                       |  |                                  |        
|Exercisable   at September 30, 2006                    |  |                                  | 193,262
|Available   for additional grant at September 30, 2006 |  |                                  | 397,000

14

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FIRST M & F CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 8:  (Continued)

The Company estimates a forfeiture rate of 9.45% (1.89% annual rate) for stock options issued to employees and a forfeiture rate of 5.45% (1.09% annual rate) for stock options issued to directors in determining net compensation costs that are recognized beginning with the third quarter of 2005 and prospectively.

In August 2005 the Company issued 76,766 restricted stock awards at a grant date fair value of $17.08 to certain senior officers of the Company. Substantially all of the shares vest in seven (7) years and are potentially forfeitable until the vesting date. Additionally the shares include a performance condition that may accelerate vesting at the achievement of a diluted earnings per share and net income target. Non-achievement of the performance condition during the seven (7) year vesting period would not prevent vesting of the shares. In December 2005 the Company issued 37,000 restricted stock awards at a grant date fair value of $16.86 to certain senior and executive officers of the Bank with 25,000 of the shares vesting in seven (7) years, with 6,000 shares vesting in five (5) years and with 6,000 shares vesting in three (3) years. The share awards issued in December have the same potential acceleration criteria as the awards issued in August. At September 30,
2006, there was $1.672 million in unrecognized compensation cost. The Company estimates that 4.00% (.57% annual rate) of the nonvested shares will be forfeited in determining net compensation expenses recognized.

Note 9: Stock Split

On May 15, 2006, the Company completed a 2-for-1 stock split in the form of a 100% stock dividend. The record date of the stock split was May 1, 2006. All share amounts and prices of prior periods have been adjusted to reflect the effect of the stock split.

Note 10: Charter Acquisition

On July 17, 2006, the Company announced that it had reached a definitive agreement to acquire a Florida banking charter and certain other assets and liabilities from Ameris Bancorp of Moultrie, Georgia. The Company plans to use the charter acquisition to locate a new banking facility in Crestview, Florida. The transaction is expected to close during the fourth quarter of 2006.

15

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Report of Independent Registered Public Accounting Firm

The Board of Directors First M & F Corporation Kosciusko, Mississippi

We have reviewed the accompanying consolidated statements of condition of First M & F Corporation and subsidiary as of September 30, 2006 and 2005, and the related consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2006 and 2005, and the related consolidated statements stockholders equity and cash flows for the nine-month periods ended September 30, 2006 and 2005. These financial statements are the responsibility of the Companys management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of condition of First M & F Corporation and subsidiary as of December 31, 2005, and the related consolidated statements of income, comprehensive income, stockholders equity and cash flows for the year then ended (not presented herein) and in our report dated February 3, 2006, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of condition as of December 31, 2005 is fairly stated, in all material respects, in relation to the consolidated statement of condition from which it has been derived.

/s/  Shearer, Taylor & Co., P.A.

Ridgeland, Mississippi November 7, 2006

16

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FIRST M & F CORPORATION

Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations

The following provides a narrative discussion and analysis of significant changes in the Companys results of operations and financial condition. This discussion should be read in conjunction with the interim consolidated financial statements and supplemental financial data presented elsewhere in this report.

Forward Looking Statements

Certain of the information included in this discussion contains forward looking financial data and information that is based upon managements belief as well as certain assumptions made by, and information currently available to management. Specifically, this discussion includes statements with respect to the adequacy of the allowance for loan losses, the effect of legal proceedings on the Companys financial condition, results of operations and liquidity, and market risk disclosures. Should one or more of these risks materialize or the assumptions prove to be significantly different, actual results may vary from those estimated, anticipated, projected or expected. For instance, if the economy deteriorated and real estate values became depressed, the approximately 79% of the Companys loan portfolio that is secured by real estate could come under stress, thus possibly requiring additional loan loss accruals. The Company may not be able to dispose of

its foreclosed real estate at prices above the properties carrying values, thus causing additional losses. Unfavorable judgments in excess of accrued liabilities related to ongoing litigation may result in additional expenses. Unanticipated catastrophic loss claims could occur that would reduce or eliminate the profit sharing revenues of the insurance agencies. Such claims may also affect the availability of insurance products for certain classes of customers, thereby reducing commission revenues available to the agencies. A severe slowing of the economy may affect the ability of the Companys customers to make timely loan payments, or may cause customers to use up deposit balances, thereby causing a potential strain on the Companys liquidity. A much steeper than anticipated increase in interest rates could cause the Companys net interest margins to decrease, thereby decreasing net interest revenues. Mortgage originations, and therefore mortgage revenues, would be hurt by
steeply rising interest rates. A poor stock market could reduce brokerage transactions, therefore reducing investment brokerage revenues. An unanticipated increase in inflation could cause the Companys operating costs related to salaries, technology, supplies and property taxes to increase. Unforeseen new competition from outside the traditional financial services industry could constrain the Companys ability to price its products profitably. Investments in the portfolio of the Companys pension plan may not provide adequate returns to fund the accumulated and projected plan obligations, thus causing higher annual plan expenses and requiring additional contributions by the Company. The Company could experience unforeseen difficulties in integrating and operating acquired banks, or could experience unanticipated customer attrition which might negatively affect financial performance. These examples are not intended to be exhaustive, and describe events, circumstances and contingencies
that may never materialize. Nevertheless, the reader is cautioned that such types of occurrences, usually outside of the control of the Company, may cause financial results to be different than the reader or the Companys management had originally estimated.

Financial Summary

Net income for the first nine months of 2006 was $10.186 million, or $1.13 basic and $1.12 diluted earnings per share as compared to $9.527 million, or $1.06 basic and diluted earnings per share for the first nine months of 2005. Net income for the third quarter of 2006 was $3.665 million, or $.40 basic and diluted earnings per share as compared to $3.284 million, or $.37 basic and diluted earnings per share for the same period in 2005 and $3.251 million, or $.36 basic and diluted earnings per share for the second quarter of 2006. Major factors contributing to the increased earnings over 2005 were (1) steady loan and deposit growth during 2006, (2) strong non-interest revenue growth during 2006, and (3) the volumes related to the acquisition and integration of Columbiana Bancshares, Inc. and its bank subsidiary, First National Bank of Shelby County. The Company added ten financial services locations from the end of 2005 to September 30, 2006, through acquisition
and expansion efforts.

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FIRST M & F CORPORATION

Highlights for the first nine months of 2006 and 2005 are as follows:

| | Return on assets for the first nine months of 2006   was .92% while the return on equity was 11.24%.  Return on assets for the first nine months of 2005 was 1.06%   and return on equity was 11.03%.                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The largest contributors to year-over-year loan   growth were DeSoto and Madison counties in Mississippi, Memphis, TN and the   acquisition of First National Bank of Shelby County in Alabama.                                                        
| | The largest contributors to year-over-year deposit   growth were DeSoto, Madison, and Attala counties in Mississippi, the   acquisition of First National Bank of Shelby County in Alabama and the   acquisition of Bells Banking Company in Tennessee.
| | Nonperforming loans were .33% of total loans at   September 30, 2006, with annualized net charge-offs as a percentage of average   loans at .19% for the first nine months of 2006.                                                                    
| | Completed construction on a banking location in   Madison, Mississippi, which was open in April 2006                                                                                                                                                   
| | Acquired Columbiana Bancshares, Inc. and its   subsidiary, First National Bank of Shelby County in February 2006 and merged   them into the Company and M&F Bank, respectively                                                                         
| | Issued $30 million in Trust Preferred securities in   February 2006                                                                                                                                                                                    
| | Acquired Crockett County Bancshares and its   subsidiary, Bells Banking Company in May 2006 and merged them into the   Company and M&F Bank, respectively                                                                                              
| | Opened two new banking locations in the Memphis, TN   metropolitan area                                                                                                                                                                                

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FIRST M & F CORPORATION

The following table shows the quarterly net loan, non-interest bearing deposit, and interest bearing deposit growth for the last five quarters.

(Net change, in thousands)

|Quarter                         |  | Loans |         | Non-Interest   Bearing   Deposits |   | Interest   Bearing   Deposits |  
|------------------------------- |  | ----- | ------- | --------------------------------- | - | ----------------------------- | -
|                                |  |       |         |                                   |   |                               |  
|3rd Qtr 2005                    |  | $     | 49,397  |                                   | $ | 11,978                        |  
|4th Qtr 2005                    |  |       | 7,797   |                                   |   | 16,237                        |  
|1st Qtr 2006                    |  |       | 122,619 |                                   |   | 28,328                        |  
|2nd Qtr 2006                    |  |       | 24,447  |                                   |   | 4,811                         |  
|3rd Qtr 2006                    |  |       | 11,657  |                                   |   | (6,148                        | )
|Increases due to   acquisitions |  |       |         |                                   |   |                               |  
|1st Qtr 2006                    |  |       | 100,443 |                                   |   | 30,528                        |  
|2nd Qtr 2006                    |  |       | 9,782   |                                   |   | 2,963                         |  

The following table shows the quarterly net interest income, loan loss accruals, non-interest income and non-interest expense amounts for the last five quarters.

(Net amount, in thousands)

|Quarter      |  | Net   Interest   Income |        | Loan Loss   Accruals |   | Non-Interest   Income |  | Non-Interest   Expense |      
|------------ |  | ----------------------- | ------ | -------------------- | - | --------------------- |  | ---------------------- | -----
|             |  |                         |        |                      |   |                       |  |                        |      
|3rd Qtr 2005 |  | $                       | 11,101 |                      | $ | 767                   |  | $                      | 4,466
|4th Qtr 2005 |  |                         | 11,775 |                      |   | 690                   |  |                        | 3,815
|1st Qtr 2006 |  |                         | 12,511 |                      |   | 953                   |  |                        | 4,283
|2nd Qtr 2006 |  |                         | 13,300 |                      |   | 1,004                 |  |                        | 4,798
|3rd Qtr 2006 |  |                         | 13,415 |                      |   | 954                   |  |                        | 5,335

The following table shows the components of diluted earnings per share for the last five quarters:

|                        |  | 3rd   Qtr  2006 |      | 2nd   Qtr  2006 |   | 1st   Qtr   2006 |  | 4th Qtr   2005 |      | 3rd Qtr 2005 |  
|----------------------- |  | --------------- | ---- | --------------- | - | ---------------- |  | -------------- | ---- | ------------ | -
|                        |  |                 |      |                 |   |                  |  |                |      |              |  
|Net interest income     |  | $               | 1.48 |                 | $ | 1.46             |  | $              | 1.39 |              | $
|Loan loss expense       |  |                 | .11  |                 |   | .11              |  |                | .11  |              |  
|Noninterest income      |  |                 | .59  |                 |   | .53              |  |                | .48  |              |  
|Noninterest expense     |  |                 | 1.36 |                 |   | 1.36             |  |                | 1.22 |              |  
|                        |  |                 |      |                 |   |                  |  |                |      |              |  
|Net income before taxes |  |                 | .60  |                 |   | .52              |  |                | .54  |              |  
|Income taxes            |  |                 | .20  |                 |   | .16              |  |                | .18  |              |  
|                        |  |                 |      |                 |   |                  |  |                |      |              |  
|Net income              |  | $               | .40  |                 | $ | .36              |  | $              | .36  |              | $

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FIRST M & F CORPORATION

The following table shows performance ratios for the last five quarters:

|                                                           |  | 3rd Qtr   2006 |       | 2nd Qtr   2006 |  | 1st Qtr   2006 |   | 4th Qtr   2005 |       | 3rd Qtr   2005 | 
|---------------------------------------------------------- |  | -------------- | ----- | -------------- |  | -------------- | - | -------------- | ----- | -------------- | 
|                                                           |  |                |       |                |  |                |   |                |       |                | 
|Net   interest margin                                      |  |                | 4.09  | %              |  | 4.05           | % |                | 4.11  | %              | 
|Efficiency ratio                                           |  |                | 64.98 |                |  | 67.02          |   |                | 64.26 |                | 
|Return on assets                                           |  |                | .97   |                |  | .86            |   |                | .94   |                | 
|Return on equity                                           |  |                | 11.91 |                |  | 10.75          |   |                | 11.05 |                | 
|Noninterest income to avg.   assets                        |  |                | 1.42  |                |  | 1.27           |   |                | 1.24  |                | 
|Noninterest income to   revenues (1)                       |  |                | 27.97 |                |  | 26.06          |   |                | 25.04 |                | 
|Noninterest expense to avg   assets                        |  |                | 3.29  |                |  | 3.27           |   |                | 3.17  |                | 
|Salaries and benefits to   total noninterest expense       |  |                | 57.17 |                |  | 57.61          |   |                | 57.15 |                | 
|Contribution margin (2)                                    |  |                | 62.85 |                |  | 61.39          |   |                | 63.27 |                | 
|Nonperforming loans to   loans                             |  |                | .33   |                |  | .30            |   |                | .40   |                | 
|Annualized net charge offs   as a percent of average loans |  |                | .33   |                |  | .13            |   |                | .10   |                | 

|
|
|
|

The following table shows revenue related performance statistics for the last five quarters:

(Amounts in thousands)

|                               |  | 3rd Qtr   2006 |        | 2nd Qtr   2006 |   | 1st Qtr   2006 |  | 4th Qtr   2005 |        | 3rd Qtr   2005 |  
|------------------------------ |  | -------------- | ------ | -------------- | - | -------------- |  | -------------- | ------ | -------------- | -
|                               |  |                |        |                |   |                |  |                |        |                |  
|Mortgage originations          |  | $              | 19,610 |                | $ | 16,519         |  | $              | 14,054 |                | $
|Commissions from annuity sales |  |                | 45     |                |   | 42             |  |                | 41     |                |  
|Trust revenues                 |  |                | 75     |                |   | 99             |  |                | 99     |                |  
|Retail investment revenues     |  |                | 66     |                |   | 72             |  |                | 59     |                |  
|Revenues per FTE employee      |  |                | 34     |                |   | 33             |  |                | 33     |                |  
|Agency commissions per agency  |  |                |        |                |   |                |  |                |        |                |  
|FTE employee (1)               |  |                | 24     |                |   | 21             |  |                | 21     |                |  

|                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------
|(1) Agency commissions are property, casualty, life   and health commissions produced by the insurance agency personnel.

The following table shows additional statistics for the Company at the end of the last five quarters:

|                                                                  |  | 3rd Qtr   2006 |        | 2nd Qtr 2006 |  | 1st Qtr   2006 |  | 4th Qtr   2005 |        | 3rd Qtr   2005 | 
|----------------------------------------------------------------- |  | -------------- | ------ | ------------ |  | -------------- |  | -------------- | ------ | -------------- | 
|                                                                  |  |                |        |              |  |                |  |                |        |                | 
|Full-time equivalent   employees                                  |  |                | 560    |              |  | 563            |  |                | 541    |                | 
|Number of   noninterest-bearing deposit accounts                  |  |                | 36,371 |              |  | 37,415         |  |                | 36,498 |                | 
|Noninterest-bearing deposit   accounts added through acquisitions |  |                |        |              |  | 732            |  |                | 3,649  |                | 

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FIRST M & F CORPORATION

Net Interest Income

Net interest income before loan loss expenses for the third quarter of 2006 was $13.415 million as compared to $13.300 million for the second quarter of 2006 and $11.101 million for the third quarter of 2005. Earning asset yields increased by 81 basis points from 6.38% in the third quarter of 2005 to 7.19% in the third quarter of 2006. Liability costs increased by 95 basis points from 2.57% in the third quarter of 2005 to 3.52% in the third quarter of 2006. The yield and cost changes caused the spread between earning asset yields and liability costs to decrease by 14 basis points from the third quarter of 2005. However, the net interest margin dropped by 6 basis points for the same periods. Average earning assets exceeded interest-bearing liabilities by $146.837 million on average during the third quarter of 2005. Due primarily to the acquisitions, average earning assets exceeded average interest-bearing liabilities by $160.315 million during the third quarter of
2006. This increase in net earning assets helped the net interest margin as the spread deteriorated. While asset yields increased by 81 basis points from the third quarter of 2005 to the third quarter of 2006, loan yields increased by 94 basis points during the same period. The less than expected influence of loan yields on asset yields was due to the decrease in average loans as a percentage of earning assets from 81.56% in the third quarter of 2005 to 80.62% in the third quarter of 2006. This change in mix was due primarily to the acquisitions closed during 2006. The cost of interest-bearing deposits increased to 3.23% for the third quarter of 2006 from 2.31% for the third quarter of 2005. This 92 basis point increase in cost of deposits was the primary influencing factor in the 95 basis point increase in total cost of funds. Another factor related to the increase in liability costs in 2006 from 2005 was the issuance of subordinated debt by the Company in February 2006 to facilitate the acquisition
of Columbiana Bancshares. This debt carries a fixed rate of 6.44% for five years, after which it floats based upon LIBOR.

The Company plans to address the rising costs of deposits by using specially designed money market accounts targeted to (1) customers in markets with strong deposit growth who tend to put larger proportions of their funds into time deposits and (2) customers and potential customers in markets that are experiencing low deposit growth. In markets that have grown primarily due to time deposits, management is becoming less aggressive in pricing certificates of deposit. Also, management has decided to link the higher-yield money market accounts and certificate of deposit premium-priced specials to checking accounts to reduce the acquisition of purely rate-sensitive customers. Although the competition among banks for deposits has been strong, management has decided to become more moderate in the pricing of certificate of deposit promotional specials for the foreseeable future.

In December 2005 the one-year and five-year Treasury yields converged. During the first quarter of 2006, the five-year Treasury yields fell below one-year yields and were virtually equal to 90-day Treasury yields. Since the end of February 2006, 90-day Treasury yields have increased by 39 basis points while five-year yields have increased by 10 basis points. The yield curve was inverted during the entire third quarter. This inverted yield curve, combined with increasing competition for loans and deposits, has become problematic. Loans that are priced on the long end of the yield curve have theoretical funding costs that are lower than short-term loans due to the inversion. Loan competition has also reduced the credit spreads between the priced loan yield and the funding cost. At the same time, deposits are primarily priced on the short end of the yield curve and therefore are costing more than the theoretical funding costs of loans being originated. The actions

of the Federal Reserve Board going forward will determine the future shape of the yield curve. The economic strength of the markets that the Company is in will determine the future supply and demand for loans and deposits. The strategy of the Company is to continue to expand into the more vibrant economies in DeSoto and Madison counties in Mississippi, in the Memphis metropolitan area and in the Birmingham suburbs. The expansion in these highly competitive markets will place more constraints on the Company related to its ability to manage loan pricing and the net interest margin than its more rural competitors will face.

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FIRST M & F CORPORATION

The following table shows the components of the net interest margin for the second and third quarters of 2006 and the third quarter of 2005:

|                                          |  | 3rd   Quarter 2006 |      | Yields/Costs   2nd Quarter 2006 |  | 3rd   Quarter 2005 |  
|----------------------------------------- |  | ------------------ | ---- | ------------------------------- |  | ------------------ | -
|                                          |  |                    |      |                                 |  |                    |  
|Interest bearing bank   balances          |  |                    | 6.19 | %                               |  | 5.39               | %
|Federal funds sold                        |  |                    | 5.71 |                                 |  | 4.79               |  
|Taxable investments                       |  |                    | 4.67 |                                 |  | 4.57               |  
|Tax-exempt investments                    |  |                    | 6.31 |                                 |  | 6.13               |  
|Loans held for sale                       |  |                    | 5.86 |                                 |  | 6.05               |  
|Loans held for investment                 |  |                    | 7.69 |                                 |  | 7.46               |  
|                                          |  |                    |      |                                 |  |                    |  
|Earning   asset yield                     |  |                    | 7.19 |                                 |  | 6.94               |  
|Interest checking                         |  |                    | 1.64 |                                 |  | 1.65               |  
|Money market deposits                     |  |                    | 1.96 |                                 |  | 1.76               |  
|Savings                                   |  |                    | 2.34 |                                 |  | 2.08               |  
|Certificates of deposit                   |  |                    | 4.26 |                                 |  | 3.95               |  
|Short-term borrowings                     |  |                    | 4.79 |                                 |  | 4.05               |  
|Other borrowings                          |  |                    | 5.02 |                                 |  | 4.87               |  
|                                          |  |                    |      |                                 |  |                    |  
|Cost   of interest-bearing liabilities    |  |                    | 3.52 |                                 |  | 3.26               |  
|                                          |  |                    |      |                                 |  |                    |  
|Net interest spread                       |  |                    | 3.67 |                                 |  | 3.68               |  
|Effect of non-interest   bearing deposits |  |                    | .48  |                                 |  | .45                |  
|Effect of leverage                        |  |                    | (.06 | )                               |  | (.08               | )
|                                          |  |                    |      |                                 |  |                    |  
|Net   interest margin, tax-equivalent     |  |                    | 4.09 |                                 |  | 4.05               |  
|Less:   Tax equivalent adjustments:       |  |                    |      |                                 |  |                    |  
|Investments                               |  |                    | .09  |                                 |  | .08                |  
|Loans                                     |  |                    | .01  |                                 |  | .01                |  
|                                          |  |                    |      |                                 |  |                    |  
|Reported   book net interest margin       |  |                    | 3.99 | %                               |  | 3.96               | %

The following table shows average balance sheets for the second and third quarters of 2006 and the third quarter of 2005:

(Amounts in thousands)

|                                         |  | 3rd   Quarter 2006 |           | 2nd   Quarter 2006 |   | 3rd   Quarter 2005 |  
|---------------------------------------- |  | ------------------ | --------- | ------------------ | - | ------------------ | -
|                                         |  |                    |           |                    |   |                    |  
|Interest bearing bank   balances         |  | $                  | 8,550     |                    | $ | 9,485              |  
|Federal funds sold                       |  |                    | 4,563     |                    |   | 16,007             |  
|Taxable investments                      |  |                    | 188,752   |                    |   | 193,769            |  
|Tax-exempt investments                   |  |                    | 49,841    |                    |   | 50,140             |  
|Loans held for sale                      |  |                    | 8,810     |                    |   | 8,646              |  
|Loans held for investment                |  |                    | 1,083,451 |                    |   | 1,064,858          |  
|                                         |  |                    |           |                    |   |                    |  
|Earning   assets                         |  |                    | 1,343,967 |                    |   | 1,342,905          |  
|Other assets                             |  |                    | 162,988   |                    |   | 167,944            |  
|                                         |  |                    |           |                    |   |                    |  
|Total   assets                           |  | $                  | 1,506,955 |                    | $ | 1,510,849          |  
|Interest checking                        |  |                    | 209,145   |                    |   | 231,908            |  
|Money market deposits                    |  |                    | 125,230   |                    |   | 129,239            |  
|Savings deposits                         |  |                    | 96,087    |                    |   | 97,403             |  
|Certificates of deposit                  |  |                    | 560,150   |                    |   | 534,911            |  
|Short-term borrowings                    |  |                    | 7,500     |                    |   | 5,323              |  
|Other borrowings                         |  |                    | 185,541   |                    |   | 188,941            |  
|                                         |  |                    |           |                    |   |                    |  
|Interest-bearing   liabilities           |  |                    | 1,183,653 |                    |   | 1,187,725          |  
|                                         |  |                    |           |                    |   |                    |  
|Noninterest-bearing deposits             |  |                    | 188,182   |                    |   | 191,212            |  
|Other liabilities                        |  |                    | 12,103    |                    |   | 10,989             |  
|Stockholders equity                     |  |                    | 123,017   |                    |   | 120,923            |  
|                                         |  |                    |           |                    |   |                    |  
|Liabilities   and stockholders equity   |  | $                  | 1,506,955 |                    | $ | 1,510,849          |  
|Loans to earning assets                  |  |                    | 80.62     | %                  |   | 79.30              | %
|Loans to assets                          |  |                    | 71.90     | %                  |   | 70.48              | %
|Earning assets to assets                 |  |                    | 89.18     | %                  |   | 88.88              | %
|Noninterest-bearing deposits   to assets |  |                    | 12.49     | %                  |   | 12.66              | %
|Equity to assets                         |  |                    | 8.16      | %                  |   | 8.00               | %

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FIRST M & F CORPORATION

Provision for Loan Losses

The accrual for the provision for loan losses for the third quarter of 2006 was $954 thousand as compared to $1.004 million for the second quarter of 2006 and $767 thousand for the third quarter of 2005. The allowance for loan losses as a percentage of loans was 1.47% at September 30, 2006, 1.33% at December 31, 2005, and 1.34% at September 30, 2005. Net charge-offs were $907 thousand in the third quarter of 2006 and $1.500 million in the first nine months of 2006 as compared to $631 thousand for the third quarter of 2005 and $1.665 million for the first nine months of 2005.

Nonperforming loans as a percentage of loans increased to .33% at September 30, 2006, from .20% at December 31, 2005, and .22% at September 30, 2005. Net charge-offs as a percentage of average loans were .19% during the first nine months of 2006 as compared to .26% for the first nine months of 2005. Management believes that credit quality will remain strong for the remainder of 2006. Management stratifies and reviews certain sectors of the portfolio to detect if there are weaknesses related to economic, environmental or other customer-specific factors. The Companys loan review personnel also monitor portfolios by geographic sector to address local credit issues expeditiously.

Non Interest Income

Noninterest income, excluding securities transactions, for the third quarter of 2006 was $5.335 million and for the first nine months of 2006 was $14.420 million as compared to $4.466 million for the third quarter of 2005 and $12.586 million for the first nine months of 2005. Deposit revenues improved by 16.06% for the third quarter of 2006 as compared to 2005 and by 23.03% for the first nine months of 2006 over 2005. Overdraft fee revenues, which represent approximately 70% of deposit revenues, were up by 11.28% in the third quarter of 2006 as compared to the third quarter of 2005 and up by 21.28% for the first nine months of 2006 as compared to 2005. Debit card and ATM transaction volumes continued to increase, providing a 47.56% improvement in revenues for the third quarter of 2006 over the third quarter of 2005 and a 48.96% increase for the first nine months of 2006 as compared to 2005. Debit card revenues represent approximately 13% of deposit revenues.
Mortgage banking income increased significantly for the third quarter of 2006 as compared to 2005 while revenues for the first nine months of 2006 remained ahead of 2005 by 62.44%. Rates paid on 30-year mortgages decreased by 47 basis points during the third quarter of 2006 in contrast to the 38 basis point increase that occurred during the third quarter of 2005. Mortgage originations for 2006 were $50.183 million as compared to $43.523 million during the first nine months of 2005, due primarily to the addition of mortgage loan originators and the favorable interest rate environment in 2006. The increase in agency commissions for the third quarter and for the first nine months of 2006 was due primarily to the property and casualty businesses. The property and casualty insurance businesses contributed revenue increases of 10.98% for the third quarter of 2006 as compared to 2005 and by 7.32% for the first nine months of 2006 as compared to 2005. Annuity and title insurance commissions were down for the
third quarter and the first nine months of 2006 as compared to 2005. Fiduciary revenues grew by 47.46% for the first nine months of 2006 as compared to 2005. Retail brokerage revenues grew by 24.73% for the first nine months of 2006 as compared to 2005. These areas have grown steadily over the last three years and management believes that there will continue to be growth opportunities going forward. Other noninterest revenues for 2006 included loan fees of $37 thousand in the third quarter and $347 thousand year-to-date, gains on sales of student loans of $248 thousand in the third quarter and $292 thousand year-to-date, losses on other real estate sales of $82 thousand in the third quarter and $272 thousand in losses year-to-date, agency profit-sharing revenues of $114 thousand year-to-date with none in the third quarter and gains on sales of timber of $124 thousand year-to-date with none in the third quarter. Other noninterest revenues for 2005 included loan fees of $157 thousand in the third
quarter and $317 thousand year-to-date, gains on sales of student loans of $142 thousand in the third quarter and $307 thousand year-to-date, losses on sales of other real estate of $17 thousand in the third quarter and $361 thousand year-to-date, agency profit-sharing revenues of $455 thousand year-to-date with none in the third quarter, and a gain from the sale of the PULSE network to Discover Financial Services of $128 thousand year-to-date with none in the third quarter.

The Company has a strategy to increase noninterest revenues as a proportion of total revenues over time. Management plans to do this by continuing to (1) emphasize fee-based services to deposit customers, (2) grow the trust and retail brokerage businesses and (3) emphasize corporate treasury and cash management services to play a vital part in the success of our commercial customers. Expansion of our treasury services products into the Memphis market is expected to improve those revenues for 2007 while the introduction of merchant deposit capture technology in the Memphis market is expected to generate fee revenues for 2007. Increased noninterest revenues would contribute to a more stable revenue base, mitigating the income statement effects of changing interest rates.

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FIRST M & F CORPORATION

Non Interest Expense

Noninterest expenses were up by 24.89% in the third quarter of 2006 as compared to the same period in 2005 and by 24.18% for the first nine months of 2006 as compared to 2005. Much of this increase was due to growth over the course of 2005 and the 2006 acquisitions. The Company incurred one-time expenses related to the Columbiana Bancshares and Crockett County Bancshares acquisitions of $300 thousand (approximately $.03 per diluted share on an after-tax basis) during the first nine months of 2006. Noninterest expenses as a percentage of average assets were 3.29% for the third quarter of 2006 as compared to 3.27% for the third quarter of 2005. For the first nine months of 2006, noninterest expenses were 3.24% of average assets as compared to 3.21% for 2005. The Company added ten locations during 2006, with seven of those locations added through acquisitions. The number of full-time equivalent employees was 560 at September 30, 2006, as compared to 472 at December
31, 2005, and 477 at September 30, 2005. Of the 2006 increases in full-time equivalent employees, 59 were added with the Columbiana Bancshares acquisition and 13 were added in the Crockett County Bancshares acquisition.

The Company has plans for further expansion in Madison and Rankin counties over the next eighteen months and is studying expansion possibilities in the DeSoto County and Memphis metropolitan areas. The Company has also signed an agreement to acquire a banking charter in Florida with branch expansion expected to occur during the fourth quarter of 2006.

The growth that occurred through 2005, during the first nine months of 2006, and that is expected to occur through 2007 will result in increases in noninterest expenses, especially in salary and benefit expenses and occupancy expenses. Management works to contain expenses at reasonable levels and has an active review policy related to unfavorable budget variances. Opportunities to reduce expenses through technology investments are also being studied, such as the roll-out of check image exchange during the third quarter and continuing through the end of the year.

Income Taxes

Income tax expense for the third quarter of 2006 was up by 9.19% over the third quarter of 2005 and for the first nine months of 2006 was up by 5.93% over 2005. Pre-tax earnings were up by 10.79% and 6.62% for the comparative periods. The effective tax rate for the first nine months of 2006 was 32.04% as compared to 32.26% for the first nine months of 2005.

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FIRST M & F CORPORATION

Assets and Liabilities

Assets at September 30, 2006 were up by 23.13% over September 30, 2005, and up by 21.16% over December 31, 2005. Excluding acquisitions, assets increased by 4.77% from September 30, 2005, and by 3.10% from December 31, 2005. Excluding acquisitions, loans grew by 6.08% from September 30, 2005. Substantially all of this growth occurred in the Madison and DeSoto county markets in Mississippi and in the Memphis metropolitan market. All of the growth in the investment portfolio was due to the two bank acquisitions. Of the acquired investment portfolios, approximately $9.276 million of investments, mostly structured notes, were eventually sold for a net loss of $2 thousand.

Excluding the effect of acquisitions, loans have grown by 5.20% during 2006. This slowed rate of growth is primarily the result of lower demand for credit. Another factor in the low loan growth rate for 2006 is the fact that the Birmingham suburban markets did not have a commercial lending staff in place prior to the February acquisition. The Company has added commercial lenders in the Alabama market and expects that loan production will begin to make a positive impact on financial performance in 2007. Loan growth in 2006 has occurred primarily in commercial and in real estate-secured commercial credits. Management expects that commercial real estate loans as well as other commercial operating loans will provide most of the loan growth for the remainder of 2006. Loans as a percent of total assets were 71.11% at September 30, 2006, as compared to 73.64% at December 31, 2005, and 74.21% at September 30, 2005. Management believes that one of the keys to the
Companys future success will be to continue to expand into markets that are vital economically and can provide high loan demand.

The following table shows loans held for investment by type as of September 30, 2006, December 31, 2005, and September 30, 2005.

|                                         |  | September   30,   2006 |           | December   31,   2005 |   | September   30,   2005 | 
|---------------------------------------- |  | ---------------------- | --------- | --------------------- | - | ---------------------- | 
|                                         |  |                        |           |                       |   |                        | 
|Commercial real estate                   |  | $                      | 606,293   |                       | $ | 509,986                | 
|Residential real estate                  |  |                        | 225,321   |                       |   | 201,086                | 
|Home equity lines                        |  |                        | 40,509    |                       |   | 26,080                 | 
|Commercial, financial and   agricultural |  |                        | 166,963   |                       |   | 151,599                | 
|Consumer                                 |  |                        | 46,665    |                       |   | 41,457                 | 
|Other loans                              |  |                        | 6,052     |                       |   | 2,872                  | 
|                                         |  |                        |           |                       |   |                        | 
|Total                                    |  | $                      | 1,091,803 |                       | $ | 933,080                | 
|                                         |  |                        |           |                       |   |                        | 
|Mortgages held for sale                  |  | $                      | 3,323     |                       | $ | 2,539                  | 
|Student loans held for sale              |  |                        | 2,768     |                       |   | 3,165                  | 

The following table shows the balances of loans at Columbiana Bancshares on the date of acquisition.

|                                         |  | February   17, 2006 |        
|---------------------------------------- |  | ------------------- | -------
|                                         |  |                     |        
|Commercial real estate                   |  | $                   | 48,623 
|Residential real estate                  |  |                     | 17,203 
|Home equity lines                        |  |                     | 16,198 
|Commercial, financial and   agricultural |  |                     | 6,226  
|Consumer                                 |  |                     | 10,130 
|Other loans                              |  |                     | 2,063  
|                                         |  |                     |        
|Total                                    |  | $                   | 100,443
|                                         |  |                     |        

The following table shows the balances of loans at Crockett County Bancshares on the date of acquisition.

|                                         |  | May 12,   2006 |      
|---------------------------------------- |  | -------------- | -----
|                                         |  |                |      
|Commercial real estate                   |  | $              | 2,478
|Residential real estate                  |  |                | 3,174
|Home equity lines                        |  |                |     
|Commercial, financial and   agricultural |  |                | 1,529
|Consumer                                 |  |                | 2,104
|Other loans                              |  |                | 497  
|                                         |  |                |      
|Total                                    |  | $              | 9,782
|                                         |  |                |      

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FIRST M & F CORPORATION

Excluding the effect of acquisitions, deposits increased by 9.34% from September 30, 2005, and by 6.70% from December 31, 2005. Most of the growth during 2006 was in interest-bearing deposits with substantially all of this growth occurring in the time deposit category. Substantially all of the deposits of acquired banks were retained, relieving the Company of any liquidity concerns during the post-acquisition months. The Company has consistently raised rates on time deposits over the course of 2006 as a response to competitive pressures. As short-term interest rates have also steadily increased during 2006, funds have moved into time deposits and away from lower yielding deposit products and annuities. During March and April, the Company had a campaign targeting the acquisition of new non-time deposit accounts. Approximately 1,500 new accounts were opened in that two month period.

Management strategies include concentrating on demand and money-market account acquisition, reducing the emphasis on promotional time deposit specials and targeting single-service customers for deposit acquisition campaigns. The Companys primary goal is to build the core customer deposit base and rely less on borrowed funds as a primary source of liquidity. However, when borrowed funds are less costly than time deposits, the Company will still look to those sources to help maintain the spread between the yield on earning assets and the cost of funds.

The following table shows the deposit mix as of September 30, 2006, December 31, 2005, and September 30, 2005.

|                                   |  | September   30,   2006 |           | December   31,   2005 |   | September   30,   2005 | 
|---------------------------------- |  | ---------------------- | --------- | --------------------- | - | ---------------------- | 
|                                   |  |                        |           |                       |   |                        | 
|Noninterest-bearing demand         |  | $                      | 191,180   |                       | $ | 164,189                | 
|NOW deposits                       |  |                        | 239,395   |                       |   | 192,792                | 
|Money market deposits              |  |                        | 126,119   |                       |   | 115,509                | 
|Savings deposits                   |  |                        | 96,001    |                       |   | 82,512                 | 
|Certificates of deposit            |  |                        | 521,413   |                       |   | 397,835                | 
|Brokered certificates of   deposit |  |                        | 30,170    |                       |   | 20,834                 | 
|                                   |  |                        |           |                       |   |                        | 
|Total                              |  | $                      | 1,204,278 |                       | $ | 973,671                | 
|                                   |  |                        |           |                       |   |                        | 

The following table shows the mix of deposits at Columbiana Bancshares on the date of acquisition.

|                                                 |  | February   17,   2006 |        
|------------------------------------------------ |  | --------------------- | -------
|                                                 |  |                       |        
|Noninterest-bearing demand                       |  | $                     | 30,528 
|NOW deposits                                     |  |                       | 35,331 
|Money market deposits                            |  |                       | 5,428  
|Savings deposits                                 |  |                       | 15,784 
|Certificates of deposit                          |  |                       | 43,244 
|Brokered certificates of   deposit               |  |                       | 8,765  
|                                                 |  |                       |        
|Total                                            |  | $                     | 139,080
|                                                 |  |                       |        
|Public funds deposits   included in above totals |  | $                     | 21,993 
|                                                 |  |                       |        

The following table shows the mix of deposits at Crockett County Bancshares on the date of acquisition.

|                                                 |  | May 12,   2006 |       
|------------------------------------------------ |  | -------------- | ------
|                                                 |  |                |       
|Noninterest-bearing demand                       |  | $              | 2,963 
|NOW deposits                                     |  |                | 6,468 
|Money market deposits                            |  |                | 36    
|Savings deposits                                 |  |                | 1,782 
|Certificates of deposit                          |  |                | 15,081
|Brokered certificates of   deposit               |  |                |      
|                                                 |  |                |       
|Total                                            |  | $              | 26,330
|                                                 |  |                |       
|Public funds deposits   included in above totals |  | $              | 1,736 
|                                                 |  |                |       

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FIRST M & F CORPORATION

The following table shows the mix of public funds deposits as of September 30, 2006, December 31, 2005, and September 30, 2005.

|                                   |  | September   30,   2006 |         | December   31,   2005 |   | September   30,   2005 | 
|---------------------------------- |  | ---------------------- | ------- | --------------------- | - | ---------------------- | 
|                                   |  |                        |         |                       |   |                        | 
|Noninterest-bearing demand         |  | $                      | 6,180   |                       | $ | 4,476                  | 
|NOW deposits                       |  |                        | 115,361 |                       |   | 84,539                 | 
|Money market deposits              |  |                        | 26,155  |                       |   | 28,772                 | 
|Savings deposits                   |  |                        | 483     |                       |   | 241                    | 
|Certificates of deposit            |  |                        | 46,890  |                       |   | 47,137                 | 
|Brokered certificates of   deposit |  |                        | 1,956   |                       |   | 428                    | 
|                                   |  |                        |         |                       |   |                        | 
|Total                              |  | $                      | 197,025 |                       | $ | 165,593                | 
|                                   |  |                        |         |                       |   |                        | 

Excluding the effect of acquisitions, other borrowings decreased by approximately $11 million during 2006 due to maturities exceeding advances on debt. The Company used its line of credit with a correspondent bank, drawing $7.4 million to fund the acquisition of Crockett County Bancshares in May 2006. In February 2006 the Company formed First M&F Statutory Trust I for the purpose of issuing corporation-obligated mandatory redeemable capital securities to third-party investors and investing the proceeds from the sale of the capital securities in floating rate junior debentures of the Company.  The $30 million in proceeds were used to fund the acquisition on February 17, 2006, of Columbiana Bancshares, Inc. The 30 year junior subordinated debentures pay interest quarterly at a rate of 6.44% fixed for five years, converting then to floating at a rate equal to three month LIBOR plus 133 basis points.  These junior subordinated debentures qualify with
certain limitations as Tier 1 capital for regulatory purposes.

Equity

The Companys and Banks regulatory capital ratios at September 30, 2006, as shown below are in excess of the minimum requirements and qualify the institution as well capitalized under the risk-based capital regulations.

|                                                                    |  | First M   & F Corporation |         | M & F   Bank | 
|------------------------------------------------------------------- |  | ------------------------- | ------- | ------------ | 
|                                                                    |  |                           |         |              | 
|                                                                    |  | Amount                    |         | Ratio        | 
|                                                                    |  |                           |         |              | 
|Actual:                                                             |  |                           |         |              | 
|Total risk-based capital                                            |  | $                         | 133,265 |              | 
|Tier 1 capital                                                      |  |                           | 118,347 |              | 
|Leverage                                                            |  |                           | 118,347 |              | 
|For Capital Adequacy   Purposes:                                    |  |                           |         |              | 
|Total risk-based capital                                            |  |                           | 95,381  | >            | 
|Tier 1 capital                                                      |  |                           | 47,691  | >            | 
|Leverage                                                            |  |                           | 58,791  | >            | 
|To Be Well Capitalized   Under Prompt Corrective Action Provisions: |  |                           |         |              | 
|Total capital                                                       |  |                           |         |              | 
|Tier 1 capital                                                      |  |                           |         |              | 
|Leverage                                                            |  |                           |         |              | 

The Company repurchased 40,000 shares during the first nine months of 2005 at an average price of $17.24 per share. The Company also issued 12,000 shares upon the exercise of stock options during the first nine months of 2005 at an average exercise price of $13.28 per share.  The Board authorized a new stock purchase plan in May 2005 for the purchase of up to 20,000 shares per month through May 2006.  No shares were repurchased during 2006. The Company issued 33,908 shares upon the exercise of options in the first nine months of 2006 at an average exercise price of $14.11.

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FIRST M & F CORPORATION

The Company effected a 2-for-1 stock split distributed in the form of a dividend on May 15, 2006. All share and stock price related amounts for periods prior to the split have been revised to reflect the effect of the stock split. The purpose of the split was to provide more liquidity to the market for the Companys stock. The Companys shares, listed as FMFC on the NASDAQ Global Select Market, trade at the rate of approximately 2,300 shares per day. The Companys price-to-earnings ratio, based upon the prior four quarters earnings, was 12.52 as of September 30, 2006.

Interest Rate Risk and Liquidity Management

Responsibility for managing the Companys program for controlling and monitoring interest rate risk and liquidity risk and for maintaining income stability, given the Companys exposure to changes in interest rates, is vested in the asset/liability committee. Appropriate policy and guidelines, approved by the board of directors, govern these actions. Monitoring is primarily accomplished through monthly reviews and analysis of asset and liability repricing opportunities, market conditions and expectations for the economy. Cash flow analyses are also used to project short-term interest rate risks and liquidity risks. Management believes, at September 30, 2006, there is adequate flexibility to alter the current rate and maturity structures as necessary to minimize the exposure to changes in interest rates, should they occur. The Company is currently in a virtually neutral gap position for assets and liabilities repricing within the next year. This generally

means that for assets and liabilities maturing and repricing within the next 12 months, the Company is positioned for the same amount of assets to mature and reprice as liabilities.

The asset/liability committee further establishes guidelines, approved by appropriate board action, by which the current liquidity position of the Company is monitored to ensure adequate funding capacity. Accessibility to local, regional and other funding sources is also maintained in order to actively manage the funding structure that supports the earning assets of the Company. These sources are primarily correspondent banks, the Federal Home Loan Bank and the Federal Reserve.

Credit Risk Management

The Company measures and monitors credit quality on an ongoing basis through credit committees and the loan review process. Credit standards are approved by the Board with their adherence monitored during the lending process as well as through subsequent loan reviews. The Company strives to minimize risk through the diversification of the portfolio geographically as well as by loan purpose and collateral. The Companys credit standards are enforced within the Bank as well as within all of its wholly-owned and majority-owned subsidiaries.

The adequacy of the allowance for loan losses is monitored quarterly with provision accruals approved by the Board. Allowance adequacy is dependent on loan classifications by external examiners as well as by internal loan review personnel, past due loans, loan growth and loss history. The allowance as a percentage of loans at September 30, 2006, is comparable to other peer banks.

The following table shows non-performing loans and other assets of the Company:

(Amounts in thousands)

|                                                       |  | September   30   2006 |       | December   31   2005 |   | September   30   2005 |  
|------------------------------------------------------ |  | --------------------- | ----- | -------------------- | - | --------------------- | -
|                                                       |  |                       |       |                      |   |                       |  
|Nonaccrual loans                                       |  | $                     | 2,949 |                      | $ | 1,403                 |  
|Past due 90 days or more   and still accruing interest |  |                       | 621   |                      |   | 510                   |  
|                                                       |  |                       |       |                      |   |                       |  
|Total non-performing loans                             |  |                       | 3,570 |                      |   | 1,913                 |  
|Other real estate                                      |  |                       | 4,090 |                      |   | 3,042                 |  
|                                                       |  |                       |       |                      |   |                       |  
|Total non-performing assets                            |  | $                     | 7,660 |                      | $ | 4,955                 |  
|                                                       |  |                       |       |                      |   |                       |  
|Ratios:                                                |  |                       |       |                      |   |                       |  
|Non-performing loans to   loans                        |  |                       | .33   | %                    |   | .20                   | %
|Non-performing assets to   assets                      |  |                       | .50   | %                    |   | .39                   | %
|                                                       |  |                       |       |                      |   |                       |  

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FIRST M & F CORPORATION

Off-Balance Sheet Arrangements

The Companys primary off-balance sheet arrangements are in the form of loan commitments and operating lease commitments. At September 30, 2006, the Company had $183.481 million in unused loan commitments outstanding. Of these commitments, $92.501 million mature in one year or less. Lines of credit are established using the credit policy of the Company concerning the lending of money.

Letters of credit are used to facilitate the borrowers businesses and are usually related to the acquisition of inventory or of assets to be used in the customers businesses. Letters of credit are generally secured and are underwritten using the same standards as traditional commercial loans. Most standby letters of credit expire without being presented for payment. However, the presentment of a standby letter of credit would create a loan receivable from the Banks loan customer. The Banks asset-based lending subsidiary uses commercial letters of credit to facilitate the purchase of inventory items by its customers. There were $186 thousand in commercial letters of credit outstanding at the end of the third quarter. At September 30, 2006, the Company had $19.514 million in financial standby letters of credit issued and outstanding.

Liabilities of $120 thousand and $164 thousand are recognized in Other Liabilities at September 30, 2006, and September 30, 2005, related to the obligation to stand ready to perform related to standby letters of credit.

The Company makes commitments to originate mortgage loans that will be held for sale. The total commitments to originate mortgages to be held for sale were $12.139 million at September 30, 2006. These commitments are accounted for as derivatives and are marked to fair value with changes in fair value recorded in mortgage income. At September 30, 2006, mortgage origination-related derivatives with positive fair values of $14 thousand were included in other assets, and derivatives with negative fair values of $20 thousand were included in other liabilities.

The Company also engages in forward sales contracts with mortgage investors to purchase mortgages held for sale. Those forward sale agreements that have a determined price and expiration date are accounted for as derivatives and marked to fair value through mortgage income. At September 30, 2006, the Company had $4.816 million in locked forward sales agreements in place. Forward sale-related derivatives with positive fair values of $8 thousand were included in other assets, and derivatives with negative fair values of $11 thousand were included in other liabilities.

In the ordinary course of business, the Company enters into rental and lease agreements to secure office space and equipment. The Company has a variety of lease agreements in place, all of which are operating leases. The largest lease obligations are for office equipment and mainframe computer systems.

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FIRST M&F CORPORATION

Critical Accounting Policies

The preparation of the Companys financial statements requires management to make certain judgments and assumptions in determining critical accounting estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and obligations. Management evaluates these judgments and estimates on an ongoing basis to determine if changes are needed. Management believes that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Companys consolidated financial statements.

Allowance for loan losses

The Companys policy is to maintain the allowance for loan losses at a level that is sufficient to absorb estimated probable losses in the loan portfolio. Accounting standards require that loan losses be recorded when management determines it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Managements estimate is reflected in the balance of the allowance for loan losses. Changes in this estimate can materially affect the provision for loan losses, and thus net income.

Management of the Company evaluates many factors in determining the estimate for the allowance for loan losses. Historical loan losses by loan type and loan grade are a significant factor in estimating future losses. Management reviews loan quality on an ongoing basis to determine the collectibility of individual loans and reflects that collectibility by assigning loan grades to individual credits. The grades will generally determine how closely a loan will be monitored on an ongoing basis. A customers payment history, financial statements, cash flow patterns and collateral, among other factors, are reviewed to determine if the loan has potential losses. Concentrations of credit by loan type and collateral type are reviewed to determine exposures and risks of loss. General economic factors as well as economic factors for individual industries or factors that would affect certain types of loan collateral are reviewed to determine the exposure of loans to
economic fluctuations. The Company also has a loan review department that audits types of loans as well as geographic segments to determine credit problems and loan policy violations that require the attention of management. All of these factors are used to determine the adequacy of the allowance for loan losses and adjust its balance accordingly.

The allowance for loan losses is increased by the amount of the provision for loan losses and recoveries of previously charged-off loans. It is decreased by loan charge-offs as they occur when principal is deemed to be uncollectible.

Goodwill, intangible assets and related impairments

The policy of the Company is to assess goodwill for impairment at the reporting unit level on an annual basis. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. Accounting standards require management to estimate the fair value of each reporting unit in making an annual assessment of impairment. Management performs this assessment as of January 1 of each year.

Impairment of goodwill is recognized by a charge against earnings and is shown as a separate line item in the noninterest expense section of the consolidated statement of income.

The estimate of fair value is dependent on such assumptions as: (1) future cash flows determined from the budget, strategic plan, and forecasts of growth, and (2) discount rates and earnings multiples used to determine the present value of those cash flows. Management uses a model similar to those used to evaluate potential mergers and acquisitions. Annual testing of the goodwill asset has resulted in no impairment charges.

Identifiable intangible assets are amortized over their estimated lives. Identifiable intangible assets that have indefinite lives are not amortized until such time that their estimated lives are determinable. Intangible assets with indefinite lives must be assessed for impairment annually.

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FIRST M&F CORPORATION

Contingent liabilities

Accounting standards require that a liability be recorded if management determines that it is probable that a loss has occurred and the loss can be reasonably estimated. Management must estimate the probability of occurrence and estimate the potential exposure of a variety of contingencies such as health claims, legal claims, tax liabilities and other potential claims against the Companys assets or requirements to perform services in the future.

Managements estimates are based upon their judgment concerning future events and their potential exposures. However, there can be no assurance that future events, such as changes in a regulators position or court cases will not differ from managements assessments. When management, based upon current facts and expert advice, believes that an event is probable and reasonably estimable, it accrues a liability in the consolidated financial statements. That liability is adjusted as facts and circumstances change and subsequent assessments produce a different estimate.

Accounting Pronouncements

In October 2003, the FASB approved the AICPAs issuance of SOP 03-3, Accounting for Loans or Certain Debt Securities Acquired in a Transfer, which modifies the accounting for certain loans that are acquired with evidence of deterioration in credit quality since origination. SOP 03-3 does not allow the excess of contractual cash flows over cash flows expected to be collected to be recognized as a yield adjustment, valuation allowance, or other loss accrual. Therefore, the yield that may be accreted is limited to the excess of cash flows expected to be collected in excess of the acquirers initial investment in the loan or security. SOP 03-3 is effective for years beginning after December 15, 2004. This pronouncement was adopted on January 1, 2005, and is being applied prospectively. The FDIC has also clarified that past due classifications are to be determined with reference to the contractual cash flows of the loans rather than the expected
cash flows used in recording the transfer.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)). SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of these equity instruments. SFAS 123(R) requires that the cost of share-based employee compensation be recognized as an expense over the period that the employee earns the awards. The Company will use the modified prospective method of adopting the new standard. This method basically requires that the grant date fair value of unearned share-based compensation must begin to be recognized, starting at the adoption date and going forward. All new awards after the adoption date will be
accounted for at fair value and recognized over the periods that they are earned by the employees. The adoption date for the Company would be July 1, 2005 under SFAS 123(R). In March 2005 the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) clarifying valuation and other issues related to the implementation of SFAS 123(R). In April 2005 the SEC issued guidance stating that it would allow companies to adopt SFAS 123(R) starting with fiscal years beginning after June 15, 2005, thereby delaying the Companys adoption date to January 1, 2006. The Company adopted SFAS 123(R) on July 1, 2005.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections  A Replacement of APB Opinion No. 20 and FASB Statement No. 3. This statement generally requires retrospective application to prior periods financial statements of changes in accounting principle, whereas under APB Opinion No. 20 the cumulative effect of a change in accounting principle was included in net income of the period in which the change was made. This Statement also requires that a change in depreciation, amortization or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle, and therefore, accounted for prospectively. This Statement carries forward the guidance in APB Opinion No. 20 related to corrections of errors. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The
Company adopted SFAS No. 154 on January 1, 2006.

In November 2005, the FASB issued FASB Staff Position Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This pronouncement relates to determining when an investment is considered impaired, whether that impairment is other-than-temporary, and the measurement of an impairment loss. This pronouncement (1) nullifies paragraphs 10  18 of EITF Issue No. 03-1 related to determining when an impairment is other-than-temporary, (2) carries forward the requirements of paragraphs 8 and 9 of Issue 03-1 with respect to cost-method investments, (3) carries forward the disclosure requirements included in paragraphs 21 and 22 of Issue 03-1 and related examples and (4) references existing other-than-temporary impairment guidance as a replacement to the specific guidance originally given in paragraphs 10  18 of EITF Issue No. 03-1. The provisions of this FSP are to be applied to reporting
periods beginning after December 15, 2005. The Company adopted FSP FAS 115-1 and FAS 124-1 on January 1, 2006.

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FIRST M&F CORPORATION

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No 109. This interpretation clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, Accounting for Income Taxes. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Generally, the entity may only recognize the benefit of tax positions that are more likely than not to be sustained upon examination. The amount of benefit recognized is the largest amount that is greater than 50% likely of being realized upon potential ultimate settlement (based upon the hypothetical tax examination and appeal process). The interpretation also provides derecognition criteria as well as guidance on how to account for

potential interest and penalties. A reconciliation of the beginning to ending balance of uncertain tax positions is also required in the financial statement footnotes. The interpretation is effective for fiscal years beginning after December 15, 2006, which would make it effective as of January 1, 2007 for the Company. The Company is in the process of determining the potential impact of this interpretation on its financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement generally applies to fair value measurements required under other accounting pronouncements, resulting in a consistent definition of fair value across GAAP. This Statement establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). This Statement expands disclosures about the use of fair value to measure assets and liabilities in interim and annual
reports. The disclosures focus on the inputs used to measure fair value and, for recurring fair value measurements using significant unobservable inputs (within Level 3 of the fair value hierarchy), the effect of the measurements on earnings for the period. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Therefore, the Statement would be effective for the Company beginning in 2008. The Company does not expect the adoption of this Statement to have a material impact on its financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106 and 132(R). This Statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (measured as the difference between plan assets at fair value and the benefit obligation) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. This Statement also requires that defined benefit plan assets and obligations be measured as of a companys year-end statement of financial position. This Statement also requires disclosures about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains and losses, prior service costs or credits, and
transition asset or obligation. The recognition and disclosure requirements of this Statement are initially effective for the fiscal year ending after December 15, 2006. The requirement to measure plan assets and obligations as of the date of the year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company does not expect the adoption of this Statement to have a material impact on its financial condition or results of operations.

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FIRST M & F CORPORATION

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

Market risk reflects the risk of economic loss resulting from changes in interest rates and market prices. This risk of loss can be reflected in either reduced potential net interest income in future periods or diminished market values of financial assets.

The Companys market risk arises primarily from interest rate risk, which the asset/liability management committee monitors and manages on a monthly basis. The committee manages the interest rate risks inherent in the loan, investment, deposit and borrowing portfolios of the institution. The asset/liability management committee determines the risk profile of the Company and determines strategies to maintain interest rate sensitivity at a low level. As of September 30, 2006, the institution was in a virtually neutral repricing gap position.

Interest rate shock analysis shows that the Company will experience a 1.70% decrease over 12 months in its net interest income with an immediate and sustained 100 basis point decrease in interest rates. An immediate and sustained increase in rates of 100 basis points will result in a .73% increase in net interest income. Factors that influence the simulation results are (1) the assumption that floating-rate loans adjust approximately simultaneously with changes in general interest rates, (2) the assumption that core deposits such as NOW and MMDA accounts will have average lives much longer than their initial repricing periods, (3) that noninterest-bearing deposits are a stable, source of funds, and (4) the durations of mortgage-backed securities will extend during periods of rising rates and shorten during periods of falling rates.

An analysis of the change in market value of equity shows how an interest rate shock will affect the difference between the market value of assets and the market value of liabilities. With all financial instruments being stated at market value, the market value of equity will decrease by 6.39% with an immediate and sustained decrease in interest rates of 100 basis points. The market value of equity will increase by 3.11% with an immediate and sustained increase in interest rates of 100 basis points. The floating-rate loans have an offsetting effect on the typical duration changes that are driven by the other fixed-rate earning assets. A stabilizing factor in the rising rate simulation is the positive effect of noninterest-bearing deposits and the decline in fair value of the long-term borrowings.

The Company had no hedging instruments in place at September 30, 2006.

Item 4 - Controls and Procedures

As defined by the Securities and Exchange Commission in Exchange Act Rule 13a-15(e), a companys disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms.

As of September 30, 2006 (the Evaluation Date), the Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures as defined in the Exchange Act Rules.  Based on their evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures are sufficiently effective to ensure that material information relating to the Company and required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms. During the last quarter ended September 30, 2006 there has been no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.

Subsequent to the Evaluation Date, there have been no significant changes in the Companys internal controls or in other factors that could significantly affect these controls.

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FIRST M & F CORPORATION

PART II: OTHER INFORMATION

Item 1 - Legal Proceedings

The Company and its subsidiaries are defendants in certain cases alleging that loans were originated or renewed in a way that the borrowers were improperly sold insurance products, such as credit life insurance. The Company denies these allegations and is defending these claims. The Company is also involved in various other lawsuits arising out of the normal course of business. The Company accrues for any probable losses expected to be incurred due to litigation. In the opinion of management, the ultimate resolution of these claims should not have a material adverse effect on the Companys consolidated financial position or results of operations.

Item 1A  Risk Factors

There have been no material changes in the risk factors previously disclosed under Part I - Item 1A of the Companys 2005 Form 10-K.

Item 2  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3  Defaults Upon Senior Securities

None.

Item 4  Submission of Matters to a Vote of Security Holders

None.

Item 5  Other Information

None

Item 6  Exhibits

| | Exhibit 3(A)  Articles of Incorporation, as   amended. Filed as Exhibit 3 to the Companys Form S-1 (File No. 33-08751)
September 15, 1986, incorporated herein by   reference.         
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                          
| | Exhibit 3(B)  By-Laws, as amended. Filed as Exhibit   3-b to the Companys Form S-1 (File No. 33-08751) September 15, 1986, incorporated herein by reference.                           
| |                                                                                                                                                                                          
| | Exhibit 10(A)  First M&F Corporation 2005   Equity Incentive Plan. Filed as Appendix A to the Companys Proxy Statement,   March 15, 2005, incorporated herein by reference             
| |                                                                                                                                                                                          
| | Exhibit 10(B)  Merchants and Farmers Bank Profit and   Savings Plan, as amended. Filed as Exhibit 10(B) to the Companys Form 10-Q   on August 9, 2005, incorporated herein by reference
| |                                                                                                                                                                                          
| | Exhibit 11  Computation of Earnings Per Share  See   note 3 to the consolidated financial statements included in this report.                                                          
| |                                                                                                                                                                                          
| | Exhibit 31  Rule 13a-14(a)/15d-14(a)   Certifications.                                                                                                                                  
| |                                                                                                                                                                                          
| | Exhibit 32  Section 1350 Certifications.                                                                                                                                                

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FIRST M & F CORPORATION

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|FIRST M & F CORPORATION |                                                     |  |    
|----------------------- | --------------------------------------------------- |  | ---
|                        |                                                     |  |    
|Date : November 8, 2006 |                                                     |  |    
|                        |                                                     |  |    
|BY:                     | /s/ Hugh S. Potts, Jr.                              |  | BY:
|                        |                                                     |  |    
|                        | Hugh S. Potts, Jr.                                  |  |    
|                        | Chairman of the Board and   Chief Executive Officer |  |    

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FIRST M & F CORPORATION

EXHIBIT INDEX

|3 (A) | Articles of Incorporation, as amended. Filed as   Exhibit 3 to the Companys Form S-1 (File No. 33-08751) September 15, 1986,   incorporated herein by reference.        
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                          
|3 (B) | Bylaws, as amended. Filed as Exhibit 3-b to the   Companys Form S-1 (File No. 33-08751) September 15, 1986, incorporated   herein by reference.                         
|      |                                                                                                                                                                          
|10(A) | First M&F Corporation 2005 Equity Incentive   Plan. Filed as Appendix A to the Companys Proxy Statement, March 15, 2005,   incorporated herein by reference             
|      |                                                                                                                                                                          
|10(B) | Merchants and Farmers Bank Profit and Savings Plan,   as amended. Filed as Exhibit 10(B) to the Companys Form 10-Q on August 9,   2005, incorporated herein by reference
|      |                                                                                                                                                                          
|11    | Computation of Earnings Per Share  Filed herewith   as note 3 to the consolidated financial statements.                                                                 
|      |                                                                                                                                                                          
|31    | Rule 13a-14(a) Certification of Hugh S. Potts, Jr.,   Chief Executive Officer and Rule 13a-14(a) Certification of John G. Copeland,   Chief Financial Officer            
|      |                                                                                                                                                                          
|32    | Section 1350 Certification of Hugh S. Potts, Jr.,   Chief Executive Officer and Section 1350 Certification of John G. Copeland,   Chief Financial Officer                

37

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