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 March 31, 2007


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
            64-0636653(State
                or other jurisdiction of
            (I.R.S.
                Employer Identification Number)Incorporation
                or organization)





134
                West Washington Street, Kosciusko, Mississippi
            39090(Address
                of principal executive offices)
            (Zip
                Code)





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.   x
      Yes o No




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).


o
      Yes x
      No





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
            9,169,846
                SharesTitle
                of Class
            Shares
                Outstanding at April 30, 2007









**FIRST
      M & F CORPORATION**





**FORM
      10-Q**





**INDEX**





**PART
                1:**
            **FINANCIAL
                INFORMATION**
            **Page**Item
                1
            Financial
                Statements (unaudited):
            3Consolidated
                Statements of Condition
            3Consolidated
                Statements of Income
            4Consolidated
                Statements of Comprehensive Income
            5Consolidated
                Statements of Stockholders’ Equity
            6Consolidated
                Statements of Cash Flows
            7Notes
                to Consolidated Financial Statements
            9Report
                of Independent Registered Public Accounting Firm
            15Item
                2
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            16Item
                3
            Quantitative
                and Qualitative Disclosures About Market Risk
            32Item
                4
            Controls
                and Procedures
            32**PART
                II:**
            **OTHER
                INFORMATION**Item
                1
            Legal
                Proceedings
            33Item
                1A
            Risk
                Factors
            33Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            33Item
                3
            Defaults
                upon Senior Securities
            33Item
                4
            Submission
                of Matters to a Vote of Security Holders
            33Item
                5
            Other
                Information
            33Item
                6
            Exhibits
            33**SIGNATURES**
            
            34**EXHIBIT
                INDEX****CERTIFICATIONS**




2




FIRST
      M
& F CORPORATION AND SUBSIDIARY





**PART
      I: FINANCIAL INFORMATION**


**Item
      1 - Financial Statements (Unaudited)**





Consolidated
      Statements of Condition


(Unaudited)


*(Dollars
                in thousands)*March
                31
            
            December
                31Assets
            
            2007
            
            2006
            
            2006Cash
                and due from banks
            
            $
            51,458
            
            $
            56,309
            
            $
            59,793Interest
                bearing bank balances
            
            
            10,282
            
            
            7,087
            
            
            3,690Federal
                funds sold
            
            
            15,000
            
            
            6,600
            
            
            -Securities
                available for sale, amortized cost of $249,530, $242,855 and
                $263,238
            
            
            248,624
            
            
            240,436
            
            
            261,828Loans
                held for sale
            
            
            8,755
            
            
            7,429
            
            
            7,263Loans,
                net of unearned income
            
            
            1,108,550
            
            
            1,055,696
            
            
            1,087,283Allowance
                for loan losses
            
            
            (15,276
            )
            
            (15,182
            )
            
            (14,950
            )Net
                loans
            
            
            1,093,274
            
            
            1,040,514
            
            
            1,072,333Bank
                premises and equipment
            
            
            42,030
            
            
            38,549
            
            
            41,128Accrued
                interest receivable
            
            
            12,148
            
            
            9,865
            
            
            12,590Other
                real estate
            
            
            2,270
            
            
            3,889
            
            
            3,135Goodwill
            
            
            32,572
            
            
            30,261
            
            
            32,572Other
                intangible assets
            
            
            7,928
            
            
            6,202
            
            
            8,113Bank
                owned life insurance
            
            
            19,254
            
            
            18,398
            
            
            19,082Other
                assets
            
            
            20,513
            
            
            24,543
            
            
            18,748$
            1,564,108
            
            $
            1,490,082
            
            $
            1,540,275Liabilities
                and Stockholders’ EquityLiabilities:Noninterest-bearing
                deposits
            
            $
            188,116
            
            $
            192,517
            
            $
            180,273Interest-bearing
                deposits
            
            
            1,020,748
            
            
            974,478
            
            
            1,005,709Total
                deposits
            
            
            1,208,864
            
            
            1,166,995
            
            
            1,185,982Federal
                funds purchased and repurchase agreements
            
            
            6,177
            
            
            6,022
            
            
            19,612Other
                borrowings
            
            
            176,859
            
            
            154,559
            
            
            166,400Junior
                subordinated debt
            
            
            30,928
            
            
            30,928
            
            
            30,928Accrued
                interest payable
            
            
            4,679
            
            
            3,595
            
            
            4,784Other
                liabilities
            
            
            5,676
            
            
            9,105
            
            
            4,503Total
                liabilities
            
            
            1,433,183
            
            
            1,371,204
            
            
            1,412,209Noncontrolling
                interest in subsidiaries
            
            
            19
            
            
            21
            
            
            19Stockholders’
                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: 9,055,080,
                8,996,726 and 9,046,226 shares issued
            
            
            45,275
            
            
            44,984
            
            
            45,231Additional
                paid-in capital
            
            
            30,309
            
            
            29,463
            
            
            30,315Nonvested
                restricted stock awards
            
            
            459
            
            
            158
            
            
            375Retained
                earnings
            
            
            57,070
            
            
            47,617
            
            
            54,707Accumulated
                other comprehensive income (loss)
            
            
            (2,207
            )
            
            (3,365
            )
            
            (2,581
            )Total
                stockholders’ equity
            
            
            130,906
            
            
            118,857
            
            
            128,047$
            1,564,108
            
            $
            1,490,082
            
            $
            1,540,275





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




3




FIRST
      M
& F CORPORATION AND SUBSIDIARY





Consolidated
      Statements of Income


(Unaudited)





*(Dollars
                in thousands, except per share data)*
            
            Three
                Months EndedMarch
                31Interest
                income:
            
            2007
            
            2006Interest
                and fees on loans
            
            $
            21,219
            
            $
            17,760Interest
                on loans held for sale
            
            
            112
            
            
            70Taxable
                investments
            
            
            2,484
            
            
            1,794Tax-exempt
                investments
            
            
            462
            
            
            485Federal
                funds sold
            
            
            12
            
            
            238Interest
                bearing bank balances
            
            
            43
            
            
            58Total
                interest income
            
            
            24,332
            
            
            20,405Interest
                expense:Deposits
            
            
            8,671
            
            
            5,847Federal
                funds purchased and repurchase agreements
            
            
            188
            
            
            116Other
                borrowings
            
            
            1,970
            
            
            1,752Junior
                subordinated debt
            
            
            496
            
            
            241Total
                interest expense
            
            
            11,325
            
            
            7,956Net
                interest income
            
            
            13,007
            
            
            12,449Provision
                for loan losses
            
            
            630
            
            
            953Net
                interest income afterprovision
                for loan losses
            
            
            12,377
            
            
            11,496Noninterest
                income:Service
                charges on deposit accounts
            
            
            2,499
            
            
            2,263Mortgage
                banking income
            
            
            416
            
            
            231Agency
                commission income
            
            
            1,041
            
            
            950Trust
                and brokerage income
            
            
            137
            
            
            158Bank
                owned life insurance income
            
            
            190
            
            
            128Securities
                gains (losses), net
            
            
            -
            
            
            (1
            )Other
                income
            
            
            1,274
            
            
            616Total
                noninterest income
            
            
            5,557
            
            
            4,345Noninterest
                expenses:Salaries
                and employee benefits
            
            
            7,251
            
            
            6,282Net
                occupancy expenses
            
            
            867
            
            
            711Equipment
                expenses
            
            
            897
            
            
            738Software
                and processing expenses
            
            
            344
            
            
            309Telecommunication
                expenses
            
            
            259
            
            
            208Marketing
                and business development expenses
            
            
            345
            
            
            264Intangible
                asset amortization
            
            
            185
            
            
            45Other
                expenses
            
            
            2,534
            
            
            2,436Total
                noninterest expenses
            
            
            12,682
            
            
            10,993Income
                before income taxes and noncontrolling interests
            
            
            5,252
            
            
            4,848Income
                taxes
            
            
            1,691
            
            
            1,572Noncontrolling
                interest in earnings (losses) of subsidiaries, net of taxes of $4
                and
                $3
            
            
            7
            
            
            6Net
                income
            
            $
            3,554
            
            $
            3,270Earnings
                per share:Basic
            
            $
            .39
            
            $
            .37Diluted
            
            $
            .39
            
            $
            .36





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




4




FIRST
      M
& F CORPORATION AND SUBSIDIARY





Consolidated
      Statements of Comprehensive Income


(Unaudited)




*(Dollars
                    in thousands)*
                
                Three
                    Months EndedMarch
                    312007
                
                2006Net
                    income
                
                $
                3,554
                
                $
                3,270Other
                    comprehensive income:Change
                    in unrealized gains (losses) on securities available for sale,
                    net of tax
                    of $188 and $466 for the three months ended March 31
                
                
                316
                
                
                (783
                )Reclassification
                    adjustment for (gains) losses on securities available for sale
                    included in
                    net income, net of tax of $0 and $1 for the three months ended
                    March
                    31
                
                
                -
                
                
                1Defined
                    benefit pension plan:Transition
                    obligation amortization, net of tax of $1
                
                
                (1
                )
                
                -Prior
                    service cost amortization, net of tax of $3
                
                
                (6
                )
                
                -Actuarial
                    loss amortization, net of tax of $39
                
                
                65
                
                
                -Other
                    comprehensive income
                
                
                374
                
                
                (782
                )Total
                    comprehensive income
                
                $
                3,928
                
                $
                2,488


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




5




FIRST
      M
& F CORPORATION AND SUBSIDIARY





Consolidated
      Statements of Stockholders' Equity


Three
      Months Ended March 31, 2007 and 2006


(Unaudited)




*(Dollars
                  in thousands, except per share data)*Common
                Stock
              
              Additional
                Paid-in
                Capital
              
              Nonvested
                Restricted
                Stock
                Awards
              
              Retained
                Earnings
              
              Accumulated
                Other
                Comprehensive
                Income
              
              TotalJanuary
                  1, 2006
              
              $
              22,476
              
              $
              29,340
              
              $
              86
              
              $
              68,058
              
              $
              (2,583
              )
              $
              117,377Effect
                  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
              
              $
              (2,583
              )
              $
              117,377Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              3,270
              
              
              -
              
              
              3,270Cash
                  dividends ($.13 per share)
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,184
              )
              
              -
              
              
              (1,184
              )6,408
                  common shares issued in exercise of stock options
              
              
              32
              
              
              53
              
              
              -
              
              
              -
              
              
              -
              
              
              85Tax
                  benefits on stock option transactions
              
              
              -
              
              
              14
              
              
              -
              
              
              -
              
              
              -
              
              
              14Share-based
                  compensation expense recognized
              
              
              -
              
              
              5
              
              
              72
              
              
              -
              
              
              -
              
              
              77Net
                  change
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (782
              )
              
              (782
              )March
                  31, 2006
              
              $
              44,984
              
              $
              29,463
              
              $
              158
              
              $
              47,617
              
              $
              (3,365
              )
              $
              118,857January
                  1, 2007
              
              $
              45,231
              
              $
              30,315
              
              $
              375
              
              $
              54,707
              
              $
              (2,581
              )
              $
              128,047Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              3,554
              
              
              -
              
              
              3,554Cash
                  dividends ($.13 per share)
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,192
              )
              
              -
              
              
              (1,192
              )8,854
                  common shares issued in exercise of stock options
              
              
              44
              
              
              86
              
              
              -
              
              
              -
              
              
              -
              
              
              130Tax
                  benefits on stock option transactions
              
              
              -
              
              
              78
              
              
              -
              
              
              -
              
              
              -
              
              
              78Option
                  cancellation payments
              
              
              -
              
              
              (175
              )
              
              -
              
              
              -
              
              
              -
              
              
              (175
              )Share-based
                  compensation expense recognized
              
              
              -
              
              
              5
              
              
              84
              
              
              1
              
              
              -
              
              
              90Net
                  change
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              374
              
              
              374March
                  31, 2007
              
              $
              45,275
              
              $
              30,309
              
              $
              459
              
              $
              57,070
              
              $
              (2,207
              )
              $
              130,906


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




6




FIRST
      M
& F CORPORATION AND SUBSIDIARY





Consolidated
      Statements of Cash Flows


(Unaudited)





*(Dollars
                in thousands)*
            
            Three
                Months Ended March 312007
            
            2006Cash
                flows from operating activities:Net
                income
            
            $
            3,554
            
            $
            3,270Adjustments
                to reconcile net income to net cash provided by operating activities:Share-based
                compensation
            
            
            90
            
            
            77Amortization
                of pension costs
            
            
            70
            
            
            -Depreciation
                and amortization
            
            
            822
            
            
            593Provision
                for loan losses
            
            
            630
            
            
            953Net
                investment amortization (accretion)
            
            
            (101
            )
            
            (36
            )Net
                change in unearned fees/deferred costs on loans
            
            
            38
            
            
            117Capitalized
                dividends on FHLB stock
            
            
            (88
            )
            
            (87
            )Net
                accretion of discount on time deposits
            
            
            23
            
            
            31Net
                accretion of discount on debt
            
            
            4
            
            
            2Loss
                on securities available for sale
            
            
            -
            
            
            1Gain
                on loans held for sale
            
            
            (44
            )
            
            (20
            )Other
                asset sales (gains)/losses
            
            
            137
            
            
            190Earnings
                (loss) of noncontrolling interest
            
            
            11
            
            
            9Deferred
                income taxes
            
            
            (283
            )
            
            (258
            )(Increase)
                decrease in:Accrued
                interest receivable
            
            
            442
            
            
            (71
            )Cash
                surrender value of bank owned life insurance
            
            
            (190
            )
            
            (128
            )Loans
                held for sale
            
            
            (1,458
            )
            
            (1,739
            )Other
                assets
            
            
            (1,305
            )
            
            (1,208
            )Increase
                (decrease) in:Accrued
                interest payable
            
            
            (105
            )
            
            246Other
                liabilities
            
            
            1,215
            
            
            1,130Net
                cash provided by operating activities
            
            
            3,462
            
            
            3,072Cash
                flows from investing activities:Purchases
                of securities available for sale
            
            
            (1,101
            )
            
            (34,290
            )Sales
                of securities available for sale
            
            
            321
            
            
            8,617Maturities
                of securities available for sale
            
            
            14,589
            
            
            11,222Investment
                in First M&F Statutory Trust I
            
            
            -
            
            
            (928
            )Net
                (increase) decrease in:Interest
                bearing bank balances
            
            
            (6,593
            )
            
            2,215Federal
                funds sold
            
            
            (15,000
            )
            
            1,700Loans
            
            
            (21,870
            )
            
            (23,160
            )Bank
                premises and equipment
            
            
            (1,525
            )
            
            (1,550
            )Purchases
                of bank owned life insurance
            
            
            18
            
            
            -Proceeds
                from sales of other real estate and other repossessed
                assets
            
            
            945
            
            
            740Net
                (purchases) redemptions, of FHLB and FRB stock
            
            
            (288
            )
            
            95Net
                cash paid in acquisition
            
            
            -
            
            
            (22,838
            )Net
                cash used in investing activities
            
            
            (30,504
            )
            
            (58,177
            )






(Continued)




7




FIRST
      M
& F CORPORATION AND SUBSIDIARY





Consolidated
      Statements of Cash Flows


(Unaudited)





*(Dollars
                in thousands)*
            
            Three
                Months Ended March 312007
            
            2006Cash
                flows from financing activities:Net
                increase in deposits
            
            $
            22,858
            
            $
            54,212Net
                increase (decrease) in short-term borrowings
            
            
            (13,435
            )
            
            (12,040
            )Proceeds
                from other borrowings
            
            
            93,100
            
            
            12,700Repayments
                of other borrowings
            
            
            (82,646
            )
            
            (29,690
            )Proceeds
                from issuance of junior subordinated debt
            
            
            -
            
            
            30,928Earnings
                distributions to noncontrolling interests
            
            
            (11
            )
            
            (9
            )Cash
                dividends
            
            
            (1,192
            )
            
            (1,184
            )Common
                shares issued
            
            
            130
            
            
            85Payments
                to cancel stock options
            
            
            (175
            )
            
            -Common
                shares repurchased
            
            
            -
            
            
            -Tax
                benefits on stock option transactions
            
            
            78
            
            
            14Net
                cash provided by financing activities
            
            
            18,707
            
            
            55,016Net
                decrease in cash and due from banks
            
            
            (8,335
            )
            
            (89
            )Cash
                and due from banks at January 1
            
            
            59,793
            
            
            56,398Cash
                and due from banks at March 31
            
            $
            51,458
            
            $
            56,309Total
                interest paid
            
            $
            11,402
            
            $
            7,677Total
                income taxes paid
            
            
            1,650
            
            
            800Income
                tax refunds received
            
            
            301
            
            
            -Transfers
                of loans to foreclosed property
            
            
            204
            
            
            545




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





8




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 2006 financial statements to be
      consistent with the 2007 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,
      2006.




Note
      2: Acquisitions





*Alabama
      Bank Acquisition*





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 operation include the revenues and expenses
      of the acquired operation from the acquisition date forward. The goodwill
      recognized is not deductible for income tax purposes. The core deposit
      intangible asset is being amortized over 16 years.




*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 $31.672 million,
      the fair value of liabilities assumed was $26.511 million and goodwill was
      assigned a value of $2.311 million. A core deposit intangible of $1.171 million
      was recognized and is being amortized over 20 years.




*Florida
      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 closed in November 2006. The Company paid $1.025 million in cash
      to
      acquire the banking charter.





9




FIRST
      M
& F CORPORATION AND SUBSIDIARY





Notes
      to
      Consolidated Financial Statements




Note
      3: Earnings Per Share





*(Dollars
                in thousands, except per share data)*
            
            Three
                Months Ended March 312007
            
            2006Net
                income
            
            $3,554
            
            $3,270Weighted
                average shares outstanding
            
            
            9,052,627
            
            
            8,993,543Add
                dilutive effect of share-based compensation instruments
            
            
            50,835
            
            
            33,776Adjusted
                dilutive shares outstanding
            
            
            9,103,462
            
            
            9,027,319Earnings
                per share:Basic
            
            $
            .39
            
            $
            .37Diluted
            
            $
            .39
            
            $
            .36Stock
                options and stock awards not included in adjusted shares due to
                anti-dilutive effect
            
            
            1,184
            
            
            2,411




Note
      4: Loans





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





*(Dollars
                in thousands)*
            
            March
                31
            
            December
                312007
            
            2006
            
            2006Commercial,
                financial and agricultural
            
            $
            153,798
            
            $
            161,215
            
            $
            150,905Non-residential
                real estate
            
            
            644,816
            
            
            578,475
            
            
            621,840Residential
                real estate
            
            
            221,747
            
            
            220,115
            
            
            221,911Home
                equity loans
            
            
            37,496
            
            
            40,966
            
            
            40,136Consumer
                loans
            
            
            43,616
            
            
            50,048
            
            
            45,872Other
                loans
            
            
            7,077
            
            
            4,877
            
            
            6,619Total
                loans
            
            $
            1,108,550
            
            $
            1,055,696
            
            $
            1,087,283




The
      following table is a summary of the activity in the Allowance for Loan Losses
      for the first three months of 2007 and 2006.





*(Dollars
                in thousands)*
            
            Three
                Months Ended March 312007
            
            2006Balance
                at January 1
            
            $
            14,950
            
            $
            12,449Allowance
                from acquisition
            
            
            -
            
            
            2,030Loans
                charged off
            
            
            (935
            )
            
            (424
            )Recoveries
            
            
            631
            
            
            174Net
                charge-offs
            
            
            (304
            )
            
            (250
            )Provision
                for loan losses
            
            
            630
            
            
            953Balance
                at March 31
            
            $
            15,276
            
            $
            15,182





10




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
            
            Banking
              CharterBalance
                at December 31, 2005
            
            $
            16,348
            
            $
            -
            
            $
            234
            
            $
            124
            
            $
            -Addition
                due to acquisition
            
            
            13,913
            
            
            5,889
            
            
            -
            
            
            -
            
            
            -Amortization
                expense
            
            
            -
            
            
            (32
            )
            
            (6
            )
            
            (7
            )
            
            -Balance
                at March 31, 2006
            
            $
            30,261
            
            $
            5,857
            
            $
            228
            
            $
            117
            
            $
            -Balance
                at December 31, 2006
            
            $
            32,572
            
            $
            6,784
            
            $
            209
            
            $
            95
            
            $
            1,025Amortization
                expense
            
            
            -
            
            
            (172
            )
            
            (6
            )
            
            (7
            )
            
            -Balance
                at March 31, 2007
            
            $
            32,572
            
            $
            6,612
            
            $
            203
            
            $
            88
            
            $
            1,025Estimated
                amortization expenseRemainder
                of 2007
            
            
            
            
            $
            320
            
            $
            21
            
            $
            212008
            
            
            
            
            
            427
            
            
            27
            
            
            272009
            
            
            
            
            
            427
            
            
            27
            
            
            262010
            
            
            
            
            
            427
            
            
            27
            
            
            142011
            
            
            
            
            
            427
            
            
            27
            
            
            -2012
            
            
            
            
            
            427
            
            
            23
            
            
            -





The
      Company acquired a Florida banking charter in a transaction with Ameris Bancorp
      of Moultrie, Georgia in November 2006 for $1.025 million. The charter is being
      accounted for as an indefinite-lived intangible asset and is therefore not
      being
      amortized. The banking charter will be tested for impairment annually or when
      circumstances arise or events occur that indicate that the asset may be
      impaired.




Note
      6: Variable Interest Entity And Borrowing Arrangements





The
      following is a summary of other borrowings at March 31, 2007 and 2006 and
      December 31, 2006:





*(Dollars
                in thousands)*
            March
                31
            
            December
                312007
            
            2006
            
            2006Company’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
            $1,417
            
            $5,341
            
            $10,416Bank’s
                advances from Federal Home Loan Banks, net of unamortized purchase
                accounting adjustments of $127, $145, and $131
            175,442
            
            149,178
            
            155,984Other
                note payable of M&F Insurance Group, Inc.
            -
            
            40
            
            -$176,859
            
            $154,559
            
            $166,400Company’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
            
            $30,928
            
            $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.




11


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 18 to the December 31, 2006 financial statements, the Bank
      has
      a defined benefit pension plan covering substantially all full time employees
      of
      the Bank and its subsidiaries. The Company adopted Statement of Financial
      Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension
      and Other Postretirement Plans” as of December 31, 2006. The following table
      provides a summary of the components of the Unamortized Pension Costs recognized
      in stockholders’ equity as of March 31, 2007 and December 31, 2006.





*(Dollars
                in thousands)*
            
            Balance
            
            2007
            
            Balance12/31/06
            
            Amortization
            
            03/31/07Unamortized
                transition asset
            
            $
            (27
            )
            $
            2
            
            $
            (25
            )Unamortized
                prior service cost
            
            
            (182
            )
            
            9
            
            
            (173
            )Unamortized
                actuarial loss
            
            
            2,916
            
            
            (104
            )
            
            2,8122,707
            
            
            (93
            )
            
            2,614Deferred
                taxes
            
            
            (1,010
            )
            
            35
            
            
            (975
            )Net
                unamortized pension costs
            
            $
            1,697
            
            $
            (58
            )
            $
            1,639




The
      following is a summary of the components of net periodic benefit costs for
      the
      three month periods ended March 31, 2007 and 2006:





*(Dollars
                in thousands)*
            
            Three
                Months Ended
              March
                312007
            
            2006Service
                cost
            
            $
            -
            
            $
            -Interest
                cost
            
            
            118
            
            
            114Expected
                return on plan assets
            
            
            (141
            )
            
            (127
            )Amortization
                of transition asset
            
            
            (2
            )
            
            (2
            )Amortization
                of prior service costs
            
            
            (9
            )
            
            (9
            )Recognized
                actuarial (gain) loss
            
            
            104
            
            
            66Net
                pension cost
            
            $
            70
            
            $
            42





The
      Company did not make any contributions to the pension plan during the first
      quarters of 2006 and 2007. The Company expects to make contributions of
      approximately $300 thousand during 2007.





The
      Company made $75 thousand in contributions to the ESOP and $163 thousand in
      matching contributions to the 401k plan during the first quarter of 2007. The
      Company made no contributions to the ESOP and $92 thousand in matching
      contributions to the 401k plan for the first quarter of 2006.





The
      Company has a nonqualified deferred compensation plan for certain senior
      officers. Participants deferred $25 thousand of compensation during the first
      three months of 2007 and $24 thousand during the first three months of 2006.
      Employee benefit expenses include earnings credits attributed to the
      participants’ accounts of $28 thousand for the first three months of 2007 and
      none for the first three months of 2006. The plan incurred expenses of $2
      thousand during the first three months of 2007 and none during the first three
      months of 2006. Liabilities of the plan were $329 thousand at March 31, 2007,
      and $189 thousand at March 31, 2006, substantially all of which were vested.





12




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. 123R 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.





The
      fair
      value of stock options is 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.





Three
                Months Ended March 312007
            
            2006Number
            
            Price
            
            Number
            
            PriceJanuary
                1
            
            
            186,462
            
            $
            15.59
            
            
            239,370
            
            $
            15.20Exercised
            
            
            (8,854
            )
            
            14.74
            
            
            (6,408
            )
            
            13.30Expired
            
            
            -
            
            
            -
            
            
            -
            
            
            -Cancelled
            
            
            (38,108
            )
            
            13.96Granted
            
            
            -
            
            
            -
            
            
            -
            
            
            -March
                31
            
            
            139,500
            
            $
            16.09
            
            
            232,962
            
            $
            15.25Exercisable
                at March 31, 2007
            
            
            124,300
            
            $
            15.93Available
                for additional grant at March 31, 2007
            
            
            397,000





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.





Management,
      with authorization from the Board of Directors, negotiated a payment with three
      option holders to cancel 38,108 in-the-money options that were set to expire
      in
      March 2007. The values of the options at the times of the transactions were
      more
      than the amounts paid, thereby requiring no compensation expense to be
      recognized. The total amount paid to cancel the options was $175
      thousand.





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. The shares vest
      on
      the following schedule: 25,000 of the shares in seven (7) years, 6,000 shares
      in
      five (5) years and 6,000 shares in three (3) years. In December 2006 the Company
      issued 4,000 restricted stock awards at a grant date fair value of $19.59 to
      a
      senior officer of the Bank. The shares vest as follows: 1,500 shares in one
      year, 1,500 shares in two years and 1,000 shares in three years. The share
      awards issued in December of 2005 and 2006 have the same potential acceleration
      criteria as the awards issued in August. At March 31, 2007 there was $1.535
      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. In March 2007, 3,000 shares were forfeited.
      The following table provides a summary of the restricted share
      activity.





Grant
                DateShares
            
            Fair
                ValueJanuary
                1, 2006
            
            
            113,766
            
            $
            17.00Granted
                in 2006
            
            
            4,000
            
            
            19.59December
                31, 2006
            
            
            117,766
            
            
            17.09Forfeited
                in 2007
            
            
            (3,000
            )
            
            17.08March
                31, 2007
            
            
            114,766
            
            
            17.09




13




FIRST
      M
& F CORPORATION AND SUBSIDIARY





Notes
      to
      Consolidated Financial Statements




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.





14




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 March 31, 2007 and 2006, and the related
      consolidated statements of income, comprehensive income, stockholders’ equity
      and cash flows for the three-month periods ended March 31, 2007 and 2006. 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, 2006,
      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 23, 2007, 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, 2006 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


May
      8,
      2007




15




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 quarter of 2007 was $3.554 million, or $.39 basic and
      diluted earnings per share as compared to $3.270 million, or $.37 basic and
      $.36
      diluted earnings per share for the same period in 2006 and $3.739 million or
      $.41 basic and diluted earnings per share for the fourth quarter of 2006. Major
      factors contributing to the increased earnings were (1) strong growth in all
      noninterest income categories, (2) steady loan growth throughout 2006, and
      (3)
      the acquisition and integration of Columbiana Bancshares, Inc. and its bank
      subsidiary, First National Bank of Shelby County in the first quarter of
      2006.




16




FIRST
      M
& F CORPORATION




Highlights
      for the first three months of 2007 and 2006 are as follows:




·
            Return
                on assets for the first quarter of 2007 was .94% while the return
                on
                equity was 11.18%. Return on assets for the first quarter of 2006
                was .96%
                and return on equity was 11.20%.


·
            The
                largest contributors to year-over-year loan growth were the Memphis
                and
                Birmingham metropolitan markets and the Crestview, Florida
                operation.


·
            Nonperforming
                loans were .38% of total loans at March 31, 2007 with annualized
                net
                charge-offs as a percentage of average loans at .11% for the first
                three
                months of 2007.


·
            Completed
                construction on a banking location in Madison, Mississippi, which
                opened
                in April 2006


·
            Continued
                with construction plans in the Memphis, Tennessee and the Madison
                and
                Rankin County markets in Mississippi with expected completion dates during
                the second half of 2007


·
            Acquired
                Columbiana Bancshares, Inc. and its subsidiary, First National Bank
                of
                Shelby County and merged them into the Company and M&F Bank,
                respectively during the first quarter of
                2006


·
            Issued
                $30 million in Trust Preferred securities in February
                2006





17




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
                Deposits1st
                Qtr 2006
            
            
            122,619
            
            
            28,328
            
            
            164,9962nd
                Qtr 2006
            
            
            24,447
            
            
            4,811
            
            
            32,9123rd
                Qtr 2006
            
            
            11,657
            
            
            (6,148
            
            
            5,7084th
                Qtr 2006
            
            
            (4,520
            )
            
            (10,907
            
            
            (7,3891st
                Qtr 2007
            
            
            20,941
            
            
            7,843
            
            
            15,039Increases
                due to acquisitions1st
                Qtr 2006
            
            
            100,443
            
            
            30,528
            
            
            108,5522nd
                Qtr 2006
            
            
            9,782
            
            
            2,963
            
            
            23,367




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
              Expense1st
                Qtr 2006
            
            
            12,449
            
            
            953
            
            
            4,345
            
            
            10,9932nd
                Qtr 2006
            
            
            13,240
            
            
            1,004
            
            
            4,858
            
            
            12,3403rd
                Qtr 2006
            
            
            13,338
            
            
            954
            
            
            5,412
            
            
            12,3944th
                Qtr 2006
            
            
            13,322
            
            
            121
            
            
            5,238
            
            
            12,9041st
                Qtr 2007
            
            
            13,007
            
            
            630
            
            
            5,557
            
            
            12,682




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





1st
                Qtr
              2007
            
            4th
                Qtr
              2006
            
            3rd
                Qtr
              2006
            
            2nd
                Qtr
              2006
            
            1st
                Qtr,
              2006Net
                interest income
            
            $
            1.43
            
            $
            1.46
            
            $
            1.48
            
            $
            1.46
            
            $
            1.39Loan
                loss expense
            
            
            .07
            
            
            .01
            
            
            .11
            
            
            .11
            
            
            .11Noninterest
                income
            
            
            .61
            
            
            .58
            
            
            .59
            
            
            .53
            
            
            .48Noninterest
                expense
            
            
            1.39
            
            
            1.42
            
            
            1.36
            
            
            1.36
            
            
            1.22Net
                income before taxes
            
            
            .58
            
            
            .61
            
            
            .60
            
            
            .52
            
            
            .54Income
                taxes
            
            
            .19
            
            
            .20
            
            
            .20
            
            
            .16
            
            
            .18Net
                income
            
            $
            .39
            
            $
            .41
            
            $
            .40
            
            $
            .36
            
            $
            .36





18




FIRST
      M
& F CORPORATION




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





1st
                Qtr 2007
            
            4th
                Qtr 2006
            
            3rd
                Qtr 2006
            
            2nd
                Qtr 2006
            
            1st
                Qtr 2006Net
                interest margin
            
            
            3.94
            %
            
            3.99
            %
            
            4.04
            %
            
            4.05
            %
            
            4.16
            %Efficiency
                ratio
            
            
            67.17
            
            
            68.25
            
            
            65.09
            
            
            67.02
            
            
            64.26Return
                on assets
            
            
            .94
            
            
            .97
            
            
            .96
            
            
            .86
            
            
            .96Return
                on equity
            
            
            11.18
            
            
            11.71
            
            
            11.82
            
            
            10.78
            
            
            11.20Noninterest
                income to avg. assets
            
            
            1.44
            
            
            1.37
            
            
            1.42
            
            
            1.29
            
            
            1.25Noninterest
                income to revenues (1)
            
            
            29.43
            
            
            27.86
            
            
            28.26
            
            
            26.39
            
            
            25.40Noninterest
                expense to avg assets
            
            
            3.29
            
            
            3.36
            
            
            3.26
            
            
            3.28
            
            
            3.17Salaries
                and benefits to total noninterest expense
            
            
            57.18
            
            
            55.11
            
            
            57.17
            
            
            57.61
            
            
            57.15Contribution
                margin (2)
            
            
            61.60
            
            
            62.39
            
            
            62.79
            
            
            61.39
            
            
            63.27Nonperforming
                loans to loans
            
            
            .38
            
            
            .36
            
            
            .33
            
            
            .30
            
            
            .40Annualized
                net charge offs as a percent of average loans
            
            
            .11
            
            
            .46
            
            
            .33
            
            
            .13
            
            
            .10




(1)
            Revenues
                equal tax-equivalent net interest income before loan loss expense,
                plus
                noninterest income.


(2)
            Contribution
                margin equals revenues minus salaries & benefits, divided by
                revenues.




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





(*Dollars
                in thousands*)
            
            1st
                Qtr 2007
            
            4th
                Qtr 2006
            
            3rd
                Qtr 2006
            
            2nd
                Qtr 2006
            
            1st
                Qtr 2006Mortgage
                originations
            
            $
            18,360
            
            $
            19,164
            
            $
            19,610
            
            $
            16,519
            
            $
            14,054Commissions
                from annuity sales
            
            
            29
            
            
            25
            
            
            45
            
            
            42
            
            
            41Trust
                revenues
            
            
            67
            
            
            73
            
            
            75
            
            
            99
            
            
            99Retail
                investment revenues
            
            
            70
            
            
            74
            
            
            66
            
            
            72
            
            
            59Revenues
                per FTE employee
            
            
            33
            
            
            33
            
            
            34
            
            
            33
            
            
            33Agency
                commissions per agency FTE employee (1)
            
            
            25
            
            
            21
            
            
            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:





1st
                Qtr 2007
            
            4th
                Qtr 2006
            
            3rd
                Qtr 2006
            
            2nd
                Qtr 2006
            
            1st
                Qtr 2006Full-time
                equivalent employees
            
            
            565
            
            
            549
            
            
            560
            
            
            563
            
            
            541Number
                of noninterest-bearing deposit accounts
            
            
            38,100
            
            
            37,522
            
            
            36,371
            
            
            37,415
            
            
            36,498Noninterest-bearing
                deposit accounts added through acquisitions
            
            
            -
            
            
            -
            
            
            -
            
            
            732
            
            
            3,649





19




FIRST
      M
& F CORPORATION




**Net
      Interest Income**





Net
      interest income before loan loss expenses for the first quarter of 2007 was
      $13.007 million as compared to $13.322 million for the fourth quarter of 2006
      and $12.449 million for the first quarter of 2006. Earning asset yields
      increased by 54 basis points from 6.75% in the first quarter of 2006 to 7.29%
      in
      the first quarter of 2007. Three factors affecting earning asset yields were
      (1)
      loans held for investment increased by 5.01% from March 2006 to March 2007,
      (2)
      loan yields increased by 58 basis points for the same period and (3) loans
      as a
      percentage of earning assets increased by 46 basis points. Liability costs
      increased by 76 basis points from 2.99% in the first quarter of 2006 to 3.75%
      in
      the first quarter of 2007. Three factors affecting liability costs were (1)
      certificates of deposits grew 17.63% since the first quarter of 2006, (2) costs
      increased 97 basis points for the same period and (3) costs of other borrowings,
      dominated by the issuance of subordinated debentures during the first quarter
      of
      2006, increased by 57 basis points. The net interest margin and net interest
      spread dropped by 22 basis points from first quarter 2006 to first quarter
      2007.
      Market conditions affecting this trend were (1) the spread between corporate
      debt and short term Treasury securities decreased from 90 basis points in March
      2006 to 22 basis points in March 2007; (2) the spread between 10-Year Treasury
      securities and 3-Month Treasury securities decreased from a positive 9 basis
      point spread in March 2006 to a negative 52 basis point spread in March 2007,
      indicating a significant yield curve inversion; and (3) competitive pricing
      pressures for loan and deposit products in the Company’s primary markets became
      less intense over the fourth quarter in 2006 and first quarter in 2007. The
      leverage ratio related to net interest margins, the ratio of average earning
      assets to average costing liabilities, decreased from 1.15x during the first
      quarter of 2006 to 1.12x during the first quarter of 2007, putting additional
      pressure on the net interest margin. An influential factor in the composition
      of
      the leverage ratio was the addition of the subordinated debt used to fund the
      Columbiana acquisition in February 2006. Average interest-bearing liabilities
      as
      a percent of average earning assets increased from 86.81% in the first quarter
      of 2006 to 89.29% in the first quarter of 2007. After increasing by 7.77% during
      the second quarter of 2006 from the first quarter of 2006, average
      noninterest-bearing deposits decreased over time to remain relatively unchanged
      for the first quarter of 2007. Average noninterest-bearing deposits as a percent
      of average assets also decreased, from 12.80% in the first quarter of 2006
      to
      11.55% in the first quarter of 2007.





The
      Company is addressing the rising costs of deposits by (1) initiating an
      incentive-based demand deposit campaign running from February through April
      of
      2007, (2) using specially designed money market accounts targeted to
      single-service commercial loan customers and (3) moving the marketing of CD
      specials from external media to in-branch promotions. Although the competition
      among banks for deposits has been strong, management has decided not to price
      its deposits at the top of the market.





Management
      expects that the yield curve will remain inverted for the foreseeable future.
      Although inflation remains under control, it continues to be the Federal
      Reserve’s primary focus. At the present time, it appears that the Federal
      Reserve is more likely to increase, rather than decrease, rates during 2007.
      Management believes that the Federal Reserve will hold rates steady for the
      remainder of 2007 and is managing interest rate risk with expectations for
      no
      change in short-term rates or a second half increase in short-term
      rates.





20




FIRST
      M
& F CORPORATION




The
      following table shows the components of the net interest margin for the first
      quarters of 2007 and 2006 and the fourth quarter of 2006:





Yields/Costs1st
                Quarter, 2007
            
            4th
                Quarter, 2006
            
            1st
                Quarter, 2006Interest
                bearing bank balances
            
            
            4.67
            %
            
            5.42
            %
            
            3.09
            %Federal
                funds sold
            
            
            5.57
            
            
            4.59
            
            
            3.93Taxable
                investments
            
            
            4.82
            
            
            4.72
            
            
            4.53Tax-exempt
                investments
            
            
            6.28
            
            
            6.27
            
            
            6.34Loans
                held for sale
            
            
            5.21
            
            
            4.87
            
            
            3.37Loans
                held for investment
            
            
            7.83
            
            
            7.80
            
            
            7.25Earning
                asset yield
            
            
            7.29
            
            
            7.23
            
            
            6.75Interest
                checking
            
            
            1.38
            
            
            1.63
            
            
            1.50Money
                market deposits
            
            
            2.31
            
            
            2.19
            
            
            1.56Savings
            
            
            2.63
            
            
            2.51
            
            
            2.04Certificates
                of deposit
            
            
            4.58
            
            
            4.41
            
            
            3.61Short-term
                borrowings
            
            
            5.23
            
            
            4.77
            
            
            5.10Other
                borrowings
            
            
            5.15
            
            
            5.06
            
            
            4.58Cost
                of interest-bearing liabilities
            
            
            3.75
            
            
            3.67
            
            
            2.99Net
                interest spread
            
            
            3.54
            
            
            3.56
            
            
            3.76Effect
                of non-interest bearing deposits
            
            
            .48
            
            
            .48
            
            
            .42Effect
                of leverage
            
            
            (.08
            )
            
            (.06
            )
            
            (.02
            )Net
                interest margin, tax-equivalent
            
            
            3.94
            
            
            3.99
            
            
            4.16Less:
                Tax equivalent adjustments:Investments
            
            
            .09
            
            
            .08
            
            
            .10Loans
            
            
            .01
            
            
            .01
            
            
            .01Reported
                book net interest margin
            
            
            3.84
            %
            
            3.89
            %
            
            4.05
            %








The
      following table shows average balance sheets for the first quarters of 2007
      and
      2006 and the fourth quarter of 2006:





(*Dollars
                in thousands*)1st
                Quarter, 2007
            
            4th
                Quarter, 2006
            
            1st
                Quarter, 2006Interest
                bearing bank balances
            
            $
            3,694
            
            $
            4,800
            
            $
            7,661Federal
                funds sold
            
            
            876
            
            
            4,105
            
            
            24,628Taxable
                investments
            
            
            209,282
            
            
            208,822
            
            
            160,714Tax-exempt
                investments
            
            
            47,555
            
            
            48,309
            
            
            49,440Loans
                held for sale
            
            
            8,716
            
            
            8,003
            
            
            8,411Loans
                held for investment
            
            
            1,101,879
            
            
            1,083,648
            
            
            994,364Earning
                assets
            
            
            1,372,002
            
            
            1,357,687
            
            
            1,245,218Other
                assets
            
            
            168,914
            
            
            164,517
            
            
            141,060Total
                assets
            
            $
            1,540,916
            
            $
            1,522,204
            
            $
            1,386,278Interest
                checking
            
            
            205,598
            
            
            204,714
            
            
            220,101Money
                market deposits
            
            
            127,300
            
            
            123,453
            
            
            124,673Savings
                deposits
            
            
            96,941
            
            
            94,857
            
            
            90,198Certificates
                of deposit
            
            
            586,504
            
            
            571,450
            
            
            460,119Short-term
                borrowings
            
            
            14,550
            
            
            13,098
            
            
            9,198Other
                borrowings
            
            
            194,111
            
            
            193,921
            
            
            176,658Interest-bearing
                liabilities
            
            
            1,225,004
            
            
            1,201,493
            
            
            1,080,947Noninterest-bearing
                deposits
            
            
            177,959
            
            
            181,647
            
            
            177,427Other
                liabilities
            
            
            8,978
            
            
            12,370
            
            
            9,485Stockholders’
                equity
            
            
            128,975
            
            
            126,694
            
            
            118,419Liabilities
                and stockholders’ equity
            
            $
            1,540,916
            
            $
            1,522,204
            
            $
            1,386,278Loans
                to earning assets
            
            
            80.31
            %
            
            79.82
            %
            
            79.85
            %Loans
                to assets
            
            
            71.51
            %
            
            71.19
            %
            
            71.73
            %Earning
                assets to assets
            
            
            89.04
            %
            
            89.19
            %
            
            89.82
            %Noninterest-bearing
                deposits to assets
            
            
            11.55
            %
            
            11.93
            %
            
            12.80
            %Equity
                to assets
            
            
            8.37
            %
            
            8.32
            %
            
            8.54
            %





21




FIRST
      M
& F CORPORATION




**Provision
      for Loan Losses**





The
      accrual for the provision for loan losses for the first quarter of 2007 was
      $630
      thousand as compared to $953 thousand for the first quarter of 2006. The
      allowance for loan losses as a percentage of loans was 1.38% at March 31, 2007,
      1.37% at December 31, 2006, and 1.44% at March 31, 2006. Net charge-offs were
      $304 thousand in the first quarter of 2007 as compared to $250 thousand for
      the
      first quarter of 2006.





Nonperforming
      loans as a percentage of loans increased to .38% at March 31, 2007 from .36%
      at
      December 31, 2006, and decreased from .40% at March 31, 2006. The Company has
      not been negatively affected by the deterioration of credit quality in the
      sub-prime mortgage sector. Business activity and cash flows in the commercial
      real estate segment of the Company’s loan portfolio have remained steady through
      the first quarter of 2007. The Company continues to monitor real estate and
      commercial exposures on a monthly basis in order to address any problems in
      the
      earliest stages.





**Non
      Interest Income**





Noninterest
      income, excluding securities transactions, for the first quarter of 2007 was
      $5.557 million as compared to $4.346 million for the same period in 2006.
      Deposit revenues improved by 10.42% as overdraft fee revenues increased by
      7.74%
      compared to the first quarter of 2006. Monthly service and activity fee charges
      increased by 6.37% in the first quarter as compared to the same period in 2006.
      Debit card and ATM transaction volumes continued to increase, providing a 29.97%
      improvement in revenues for the first quarter of 2007 over the first quarter
      of
      2006. The Company initiated a campaign in February 2007 targeting new checking
      accounts. The incentive-based campaign is designed to last two months with
      expectations for an increase in number of checking accounts of approximately
      4.00%. Mortgage banking income increased by 80.07% for the first quarter of
      2007
      as compared to the first quarter of 2006. Mortgage originations per lender
      increased by 14.31% from the first quarter of 2006 to the first quarter of
      2007.
      Agency commission income increased by 9.56% for the first quarter of 2007 from
      the first quarter of 2006. Fiduciary and brokerage income decreased by $21
      thousand for the first quarter of 2007 from the first quarter of 2006, driven
      by
      a decrease in trust revenues of $32 thousand. Significant items in other income
      during the first three months of 2007 and 2006 were (1) profit-sharing revenues
      in the insurance agencies of $246 thousand in 2007 and $114 thousand in 2006,
      (2) loan fees of $171 thousand in 2007 and $123 thousand in 2006, (3) losses
      on
      sales of foreclosed properties of $148 thousand in 2007 and $190 thousand in
      2006 and (4) a $370 thousand insurance claim in 2007 to cover legal settlements
      paid.





The
      Company has a strategy to increase noninterest revenues as a proportion of
      total
      revenues over time. Noninterest revenues as a percentage of total revenues
      increased from 25.40% in the first quarter of 2006 to 29.43% in the first
      quarter of 2007. Another metric that the Company monitors is revenues per
      full-time employee, which was approximately $33 thousand per employee during
      the
      first quarter of 2007. Additionally insurance product revenues per producer
      improved from $21 thousand per producer in the first quarter of 2006 to $25
      thousand per producer in the first quarter of 2007. Management’s strategic focus
      is to improve revenues generated per employee while maintaining stability in
      revenue growth by increasing the mix of noninterest revenues to total
      revenues.




**Non
      Interest Expense**





Noninterest
      expenses were up by 15.36% in the first quarter of 2007 as compared to the
      same
      period in 2006. Salary and benefit expenses produced the largest increases
      with
      a 15.42% increase in the first quarter of 2007 over the same period in 2006.
      The
      average number of full-time equivalent employees was 565 at March 31, 2007
      as
      compared to 541 at March 31, 2006. The year-over-year increases were mainly
      due
      to the Crockett County, Tennessee acquisition and the de novo expansion in
      the
      Memphis metropolitan area. Noninterest expenses as a percent of average assets
      increased from 3.17% in the first quarter of 2006 to 3.29% in the first quarter
      of 2007. However, the 3.29% expense ratio was an improvement over the fourth
      quarter of 2006 ratio of 3.36%.





The
      business expansion and acquisition efforts during 2006 also produced an increase
      in related occupancy expenses. This resulted in a 21.95% or $156 thousand
      increase in occupancy expense in the first quarter of 2007 over the first
      quarter of 2006.





Significant
      items in other expenses during the first three months of 2007 and 2006 were
      (1)
      telecommunications expense of $259 thousand in 2007 and $208 thousand in 2006,
      (2) postage and shipping expense of $215 thousand in 2007 and $164 thousand
      in
      2006, (3) marketing expense of $345 thousand in 2007 and $264 thousand in 2006
      and (4) insurance expense of $202 thousand in 2007 and $149 thousand in
      2006.





22




FIRST
      M
& F CORPORATION




The
      Company also incurred non-recurring merger-related expenses in the first quarter
      of 2006 as a result of the acquisition of Columbiana Bancshares of approximately
      $300 thousand. The after tax effect of these charges reduced earnings by
      approximately $.04 per share.




**Income
      Taxes**





Income
      tax expense for the first three months of 2007 was up by 7.56% over the first
      three months of 2006. Pre-tax earnings for the first three months of 2007 were
      up by 8.33% over the same period in 2006. The effective tax rates for the first
      three months of 2007 and 2006 were 32.19% and 32.42% respectively.




**Assets
      and Liabilities**





Assets
      were up by 4.97% in the first three months of 2007 as compared to the first
      three months of 2006. Total assets were up by 1.55% from December 31, 2006.
      Investments increased by 3.41% as compared to March 31, 2006 and decreased
      by
      5.31% as compared to December 31, 2006. Loans grew by 1.96% during the first
      three months of 2007, and were up by 5.01% from March 31, 2006. Loans grew
      by
      13.14% during the first quarter of 2006. Loan growth in 2007 has occurred
      primarily in real estate-secured commercial credits. First quarter loan growth
      occurred primarily in the Birmingham and Memphis metropolitan markets, as well
      as in the Crestview, Florida market. 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 2007. Loans as a percent of total assets
      were 70.87% at March 31, 2007 as compared to 70.59% at December 31, 2006 and
      70.85% at March 31, 2006. 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 March 31, 2007,
      December 31, 2006, and March 31, 2006.





*(Dollars
                in thousands)*
            
            March
                31, 2007
            
            December
                31, 2006
            
            March
                31, 2006Commercial
                real estate
            
            $
            644,816
            
            $
            621,840
            
            $
            578,475Residential
                real estate
            
            
            221,747
            
            
            221,911
            
            
            220,115Home
                equity lines
            
            
            37,496
            
            
            40,136
            
            
            40,966Commercial,
                financial and agricultural
            
            
            153,798
            
            
            150,905
            
            
            161,215Consumer
            
            
            43,616
            
            
            45,872
            
            
            50,048Other
                loans
            
            
            7,077
            
            
            6,619
            
            
            4,877Total
            
            $
            1,108,550
            
            $
            1,087,283
            
            $
            1,055,696Mortgages
                held for sale
            
            $
            1,960
            
            $
            3,165
            
            $
            2,247Student
                loans held for sale
            
            
            5,469
            
            
            4,098
            
            
            12,115





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





February
                17, 2006Commercial
                real estate
            
            $
            48,623Residential
                real estate
            
            
            17,203Home
                equity lines
            
            
            16,198Commercial,
                financial and agricultural
            
            
            6,227Consumer
            
            
            10,131Other
                loans
            
            
            2,061Total
            
            $
            100,443




23





FIRST
      M
& F CORPORATION




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





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





Deposits
      increased by 1.93% during the first three months of 2007 and by 3.59% from
      the
      first quarter of 2006. Deposits grew by $22.882 million in 2007 with $15.039
      million being in interest bearing deposits. $26.034 million of the growth was
      due to growth in public funds. The majority of the deposit growth during the
      first quarter of 2007occurred in certificates of deposits and
      noninterest-bearing demand deposits. Deposits grew by 19.86% during the first
      three months of 2006. Excluding the first quarter 2006 acquisition, deposits
      grew by $53 million or approximately 5.50% in the first three months of 2006.
      Deposits grew by $193.324 million in the first quarter of 2006 with public
      funds
      deposits contributing $44.190 million of that increase. The large growth in
      public funds deposits is a natural trend that occurs during the early months
      of
      the year as tax receipts are collected. The funds generally move out during
      the
      summer months as spending occurs. The Company’s long-term strategy is to build
      the core customer deposit base and rely less on borrowed funds as a primary
      source of liquidity. Another source of deposits is the brokered CD market which
      the Company uses when funding is needed within a short period of time. However,
      when borrowed funds are less costly than time deposits or brokered 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 March 31, 2007, December 31, 2006,
      and March 31, 2006.





*(Dollars
                in thousands)*
            
            March
                31, 2007
            
            December
                31, 2006
            
            March
                31, 2006Noninterest-bearing
                demand
            
            $
            188,116
            
            $
            180,273
            
            $
            192,517NOW
                deposits
            
            
            196,035
            
            
            199,666
            
            
            235,018Money
                market deposits
            
            
            132,068
            
            
            128,694
            
            
            134,685Savings
                deposits
            
            
            99,549
            
            
            94,815
            
            
            98,422Certificates
                of deposit
            
            
            559,252
            
            
            547,513
            
            
            475,450Brokered
                certificates of deposit
            
            
            33,844
            
            
            35,021
            
            
            30,903Total
            
            $
            1,208,864
            
            $
            1,185,982
            
            $
            1,166,995




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





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





24




FIRST
      M
& F CORPORATION




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





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




The
      following table shows the mix of public funds deposits as of March 31, 2007,
      December 31, 2006, and March 31, 2006.





*(Dollars
                in thousands)*
            
            March
                31, 2007
            
            December
                31, 2006
            
            March
                31, 2006Noninterest-bearing
                demand
            
            $
            5,780
            
            $
            4,733
            
            $
            8,492NOW
                deposits
            
            
            66,487
            
            
            73,899
            
            
            108,101Money
                market deposits
            
            
            29,622
            
            
            17,953
            
            
            37,981Savings
                deposits
            
            
            342
            
            
            393
            
            
            456Certificates
                of deposit
            
            
            86,741
            
            
            65,936
            
            
            53,338Brokered
                certificates of deposit
            
            
            1,755
            
            
            1,779
            
            
            1,270Total
            
            $
            190,727
            
            $
            164,693
            
            $
            209,638




Other
      borrowings increased by $10.459 million during the first quarter of 2007 after
      increasing by $22.300 million since the first quarter of 2006. The increases
      were utilized to fund loan growth and to retire the parent company debt of
      Columbiana Bancshares upon its merger with the Company and to repay a
      correspondent line of credit used for the Crockett County acquisition. 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, net of the Company’s investment in the variable
      interest entity, qualify with certain limitations as Tier 1 capital for
      regulatory purposes. In May 2006 the Company borrowed $7.400 million for the
      acquisition of Crockett County Bancshares.





25




FIRST
      M
& F CORPORATION




**Equity**





The
      Company’s and Bank’s regulatory capital ratios at March 31, 2007, 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 BankAmount
            
            Ratio
            
            Amount
            
            RatioActual:Total
                risk-based capital
            
            $
            140,359
            
            
            11.50
            %
            $
            139,840
            
            
            11.47
            %Tier
                1 capital
            
            
            125,099
            
            
            10.25
            %
            
            124,593
            
            
            10.22
            %Leverage
            
            
            125,099
            
            
            8.32
            %
            
            124,593
            
            
            8.29
            %For
                Capital Adequacy Purposes:Total
                risk-based capital
            
            
            97,648≥
            
            
            8.00
            %
            
            97,566≥
            
            
            8.00
            %Tier
                1 capital
            
            
            48,824≥
            
            
            4.00
            %
            
            48,783≥
            
            
            4.00
            %Leverage
            
            
            60,150≥
            
            
            4.00
            %
            
            60,109≥
            
            
            4.00
            %To
                Be Well Capitalized Under Prompt Corrective Action
                Provisions:Total
                capital
            
            
            
            
            
            
            
            
            121,958≥
            
            
            10.00
            %Tier
                1 capital
            
            
            
            
            
            
            
            
            73,175≥
            
            
            6.00
            %Leverage
            
            
            
            
            
            
            
            
            75,136≥
            
            
            5.00
            %




The
      Company issued 8,854 shares upon the exercise of stock options during the first
      quarter of 2007 at an average exercise price of $14.74 per share and 6,408
      shares during the first quarter of 2006 at an average exercise price of $13.30
      per share.





The
      Company affected 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 2,500 shares per day. The Company’s
      price-to-earnings ratio, based upon the prior four quarters’ earnings, was 11.79
      as of March 31, 2007.




**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 March 31, 2007, 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 negative 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 more
      liabilities to reprice than the amount of assets repricing.





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.





26




FIRST
      M
& F CORPORATION




**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 evaluated quarterly with provision
      accruals approved by the Board. Allowance adequacy is dependent on loan
      classifications by external examiners as well as by internal and external loan
      review personnel, past due loans, collateral reviews, loan growth and loss
      history. Also, as part of this evaluation, individual loans are reviewed for
      impairment. An impairment exists if management estimates that it is probable
      that the Company will be unable to collect all contractual payments due. For
      collateral-dependent loans impairment is based on the value of the related
      collateral. Otherwise, impairment is based on the estimated present value of
      expected cash flows discounted at the effective interest rate of the loan.
      The
      material estimates necessary in this process make it inherently subjective
      and
      make the estimates subject to significant changes and may add volatility to
      earnings as provisions are adjusted. Loans not impaired are grouped into
      risk-rated pools and evaluated based on historical loss experience. Additionally
      management considers specific external credit risk factors (“environmental
      factors”) that may not be reflected in historical loss rates such as: (1) a
      potential for a slow-down in the real estate market and its effect on real
      estate concentrations; (2) competitive trends in loan to value exception rates;
      (3) general economic conditions; (4) higher fuel costs; and (5) reviews of
      underwriting standards in our various markets. These and other environmental
      factors will be reviewed on a quarterly basis.





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





(*Dollars
                in thousands*)
            
            March
                31
            
            December
                31
            
            March
                312007
            
            2006
            
            2006Nonaccrual
                loans
            
            $
            4,019
            
            $
            3,557
            
            $
            3,187Past
                due 90 days or more and still accruing interest
            
            
            254
            
            
            376
            
            
            1,030Total
                non-performing loans
            
            
            4,273
            
            
            3,933
            
            
            4,217Other
                real estate
            
            
            2,270
            
            
            3,135
            
            
            3,951Total
                non-performing assets
            
            $
            6,543
            
            $
            7,068
            
            $
            8,168Ratios:Non-performing
                loans to loans
            
            
            .38
            %
            
            .36
            %
            
            .40
            %Non-performing
                assets to assets
            
            
            .42
            %
            
            .46
            %
            
            .55
            %




**Off-Balance
      Sheet Arrangements**





The
      Company’s primary off-balance sheet arrangements are in the form of loan
      commitments and operating lease commitments. At March 31, 2007 the Company
      had
      $201.111 million in unused loan commitments outstanding. Of these commitments,
      $99.302 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’ business and are usually related
      to the acquisition of inventory or of assets to be used in the customers’
business. 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 no commercial letters of credit outstanding at the end of the first
      quarter. At March 31, 2007 the Company had $18.270 million in financial standby
      letters of credit issued and outstanding.





A
      liability of $104 thousand is recognized in Other Liabilities at March 31,
      2007
      related to the obligation to stand ready to perform related to standby letters
      of credit.





27




FIRST
      M
& F CORPORATION




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
      $16.476 million at March 31, 2007. These commitments are accounted for as
      derivatives and are marked to fair value with changes in fair value recorded
      in
      other income. At March 31, 2007 mortgage origination-related derivatives with
      positive fair values of $50 thousand were included in other assets and
      derivatives with negative fair values of $24 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 other income. At March 31, 2007 the Company had $6.473
      million in locked forward sales agreements in place. Forward sale-related
      derivatives with positive fair values of $21 thousand were included in other
      assets and derivatives with negative fair values of $19 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.




28


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. 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. Such information is used to determine if loans are impaired
      and to group unimpaired loans into risk pools. A loan is impaired if management
      estimates that it is probable that the Company will be unable to collect all
      contractual payments due. Impairment estimates may be based on discounted cash
      flows or collateral. Historical loan losses by loan type and loan grade are
      also
      a significant factor in estimating future losses when applied to the risk pools
      of unimpaired loans. Various external environmental factors are also considered
      in estimating the allowance. Concentrations of credit by loan type and
      collateral type are also reviewed to estimate 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 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 by 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 First M&F Corporation 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 to be 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. No impairments have been recognized since
      beginning testing in 2002.





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.





29




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
      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
      November 2005, the FASB issued FASB Staff Position Nos. FAS 115-1, “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 the guidance in EITF
      Issue No. 03-1 related to determining when an impairment is
      other-than-temporary, (2) carries forward the requirements with respect to
      cost-method investments, (3) carries forward the disclosure requirements of
      Issue 03-1 which are presented in Note 3 to the Company’s annual financial
      statements on Form 10-K and related examples and (4) references existing
      other-than-temporary impairment guidance as a replacement to the specific
      guidance originally given in 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 this standard on January 1, 2006 with no material effect on
      its
      financial condition or results of operations.





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
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements.” This Bulletin
      gives interpretive guidance regarding the quantification of financial statement
      misstatements. The Bulletin requires that registrants consider the effects
      of
      prior year errors on current financial statements, effectively preventing
      improper assets and liabilities arising from prior errors from remaining
      unadjusted. The Bulletin is effective for financial statements for fiscal years
      ending after November 15, 2006. The Company adopted the provisions of the
      Bulletin on November 15, 2006.





30




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 makes it effective as of January 1,
      2007 for the Company. The Company is in the process of identifying potential
      uncertain tax positions and probabilities of various outcomes for open tax
      years
      as of December 31, 2006. The Company expects to implement its accounting for
      uncertain taxes and record any cumulative effect adjustments during the second
      quarter of 2007. The implementation is not expected to have a material impact
      on
      the financial condition or results of operations of the Company.





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 adopted
      the recognition provisions of this Statement on December 31, 2006. The Company
      expects to adopt the measurement date provision of this Statement in 2008.
      The
      Company does not expect the adoption of the measurement date provision of this
      Statement to have a material impact on its financial condition or results of
      operations.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115.” This Statement permits companies to measure a variety of
      financial instruments and other financial statement items with characteristics
      similar to financial instruments at fair value. The fair value option permits
      a
      company to choose to measure eligible items at fair value at specified election
      dates. Unrealized gains and losses on items for which the fair value option
      has
      been elected are to be recognized in earnings at each subsequent reporting
      date.
      The fair value option (1) may be applied instrument by instrument, with a few
      exceptions, such as investments otherwise accounted for by the equity method,
      (2) is irrevocable (unless a new election date occurs) and (3) is applied only
      to entire instruments and not to portions of instruments. The Statement is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Therefore, it would become effective as of January 1, 2008
      for the Company. Early adoption is permitted as of the beginning of a fiscal
      year on or before November 15, 2007, provided the entity also elects to apply
      the provisions of FASB Statement No. 157, “Fair Value Measurements.” The Company
      has decided not to adopt SFAS No. 159 early, and does not expect the adoption
      of
      the Statement to have a material impact on its financial condition or results
      of
      operations.





31





FIRST
      M
& F CORPORATION




**Item
      3 - Quantitative and Qualitative Disclosures About Market
      Risk**





Market
      risk comes in the form of risk to the net interest income of the Company as
      well
      as to the market values of the financial assets and liabilities on the balance
      sheet and the values of off-balance sheet activities such as commitments. The
      Company monitors interest rate risk on a monthly basis with quarterly
      sensitivity analyses.





Interest
      rate shock analysis shows that the Company will experience a 4.62% decrease
      over
      12 months in its net interest income with a gradual (12 month ramp) and
      sustained 200 basis point decrease in interest rates. A gradual and sustained
      increase in interest rates of 200 basis points will result in a 2.82% increase
      in net interest income **.** While
      the
      repricing gap suggests a potential earnings benefit should rates fall, the
      net
      interest income simulation depicts slight exposure. This is due to inherent
      pricing lags of deposit products in relation to changes in market rate movement
      and the acceleration of loan and investment cash flows that would likely occur
      if market rates fall. Conversely, the lagging nature of the deposit base proves
      beneficial if interest rates rise.





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 increase by 6% with an immediate
      and sustained increase in interest rates of 200 basis points. The market value
      of equity will decrease by 15% with an immediate and sustained decrease in
      interest rates of 200 basis points. These simulated changes in market value
      of
      equity are strongly influenced by the shorter duration of loans due to the
      percentage of the portfolio represented by floating-rate loans. In a rising
      rate
      environment, fixed-rate loan durations tend to extend and deposit durations
      tend
      to decrease, typically causing a decrease in market value of equity. The
      floating-rate loans have an offsetting effect on the typical duration changes.
      The directional change of the market values of assets and liabilities under
      rising and falling rate shocks compliment the exposure profile illustrated
      by
      the net interest income simulation, outlined above.





The
      Company had no hedging instruments in place at March 31, 2007.




**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
      March 31, 2007 (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 March 31, 2007 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.





32





FIRST
      M
& F CORPORATION




**PART
      II: OTHER INFORMATION**




**Item
      1 - Legal Proceedings**





The
      Company and its subsidiaries were defendants in cases involving over 200
      plaintiffs which were filed over a three year period. These suits, alleging
      wrongful assessment of amounts related to credit insurance, were filed in Holmes
      County. In December 2006 substantially all of the cases were settled. The
      settlement was paid out of accrued funds in 2006. The Company’s insurance
      provider reimbursed the settlement and legal costs related to these cases in
      2007. The settlement did not have a material adverse effect on the Company’s
      financial condition or results of operations.





Additionally,
      the Company and its subsidiaries are defendants in various other lawsuits
      arising out of the normal course of business. In the opinion of management,
      the
      ultimate resolution of this category of 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 2006 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.





33




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
      :
      May 10, 2007




BY:
            /s/
              Hugh S. Potts,
              Jr.
            
            BY:
            /s/
              John G.
              CopelandHugh
              S. Potts,
              Jr.Chairman of the Board and Chief Executive Officer
            
            
            John
              G.
              CopelandExecutive Vice President andChief Financial
              Officer




34


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





35