M&F Bancorp (MFBP) 10QSB 2002 Q3 Quarterly report (small business)

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

FORM 10-QSB

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF  1934
For the quarterly period ended September 30, 2002
Commission File Number 0-27307
M&F BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
North Carolina		56-1980549
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
2634 Chapel Hill Blvd., P.O. Box 1932, Durham, North Carolina 27707
(Address of principal executive offices)
(919) 683-1521
(Issuer’s telephone number, including area code)

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

Yes x No o

State the number of shares outstanding of each of the issuer’s class of common equity, as of the latest practicable date:

Common Stock no par value          842,823

Outstanding at October 15, 2002

Transitional Small Business Disclosure Format (Check one):

Yes o No x

M&F BANCORP, INC.

INDEX

			Page
PART I.		FINANCIAL INFORMATION (unaudited)
Item 1.	Consolidated Condensed Financial Statements
	Consolidated Condensed Balance Sheets as of September 30, 2002 and December 31, 2001		3
	Consolidated Condensed Statements of Income for the nine months ended September 30, 2002 and September 30, 2001		4
	Consolidated Condensed Statements of Income for the three months ended September 30, 2002 and September 30, 2001		5
	Consolidated Condensed Statements of Shareholders’ Equity for the nine months ended September 30, 2002 and September 30, 2001		6
	Consolidated Condensed Statements of Cash flows for the nine months ended September 30, 2002 and September 30, 2001		7
	Notes to Consolidated Condensed Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3.	Controls and Procedures		14
PART II.		OTHER INFORMATION
Item 1.	Legal Proceedings		15
Item 2.	Changes in Securities		15
Item 3.	Defaults Upon Senior Securities		15
Item 4.	Submission of Matters to a Vote of Security Holders		15
Item 5.	Other Information		15
Item 6.	Exhibits and Reports on Form 8-K		15
Signature Page			16
Certification of Chief Executive Officer			17
Certification of Chief Financial Officer			19

2

PART I: FINANCIAL INFORMATION
ITEM 1 Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

			September 30, 2002			December 31, 2001
			(unaudited)
ASSETS
Cash and amounts due from fin. institutions			$	5,159		$	5,488
Interest-earning deposits in financial institutions				6,923			4,327
	Cash and cash equivalents			12,082			9,815
Securities available for sale (including FHLB stock)				28,254			28,913
Securities held to maturity				883			1,413
Loans:
	Commercial, financial and agricultural loans			74,607			71,573
	Real estate-construction loans			7,083			1,377
	Real estate-mortgage loans			49,517			44,438
	Installment loans to individuals			4,845			4,921
		Total Loans		136,052			122,309
	Unearned income			(566	)		(424	)
	Allowance for loan losses			(1,881	)		(1,505	)
		Net Loans		133,605			120,380
Premises and equipment, net				5,287			5,141
Other assets				2,784			2,434
TOTAL ASSETS			$	182,895		$	168,096
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Interest-bearing deposits			122,138			109,741
	Non-interest-bearing deposits			27,952			25,642
		Total Deposits		150,090			135,383
	Other borrowings			11,859			12,375
	Other liabilities			2,141			2,485
		Total Liabilities		164,090			150,243
Shareholders’ Equity:
	Common stock			5,892			5,998
	Retained earnings			12,232			11,615
	Accumulated other comprehensive income			681			240
	Shareholders’ Equity			18,805			17,853
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY			$	182,895		$	168,096

3

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)

Nine months ended:			September 30, 2002		September 30, 2001
Interest income:
	Interest on loans		$	7,685	$	7,278
	Securities:
		Taxable		704		867
		Tax exempt		310		321
	Federal funds sold			—		2
	Other interest			92		330
Total interest income				8,791		8,798
Interest expense:
	Interest-bearing demand			80		83
	Savings			966		917
	Time deposits			1,160		1,888
	Interest on other borrowings			464		472
Total interest expense				2,670		3,360
Net interest income				6,121		5,438
Provision for loan losses				553		419
Net interest income after provision for loan losses				5,568		5,019
Non-interest income				1,416		1,454
Salaries & employee benefits				3,642		3,257
Other non-interest expense				2,215		2,351
Income before taxes				1,127		865
Income tax expense				307		216
Net income			$	820	$	649
Earnings per share common share:
	Basic and diluted		$	0.97	$	0.76
Weighted average common shares outstanding:
	Basic and diluted			848		854
Dividends per common share:
	Basic and diluted		$	0.24	$	0.24

4

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)

Three months ended:			September 30, 2002		September 30, 2001
Interest income:
	Interest on loans		$	2,615	$	2,388
	Securities:
		Taxable		159		262
		Tax exempt		181		106
	Federal funds sold			0		(4	)
	Other interest			19		70
Total interest income				2,974		2,822
Interest expense:
	Interest-bearing demand			24		25
	Savings			369		292
	Time deposits			331		588
	Interest on federal funds & borrowings			155		157
Total interest expense				879		1,062
Net interest income				2,095		1,760
	Provision for loan losses			184		147
Net interest income after provision for loan losses				1,911		1,613
Non-interest income				420		458
Salaries & employee benefits				1,221		1,029
Other non-interest expense				794		696
Income before taxes				316		346
Income tax expense				83		89
Net income			$	233	$	257
Earnings per share common share:
	Basic and diluted		$	0.28	$	0.30
Weighted average common shares outstanding:
	Basic and diluted			843		854
Dividends per common share:
	Basic and diluted		$	0.08	$	0.08

5

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited)
(in thousands, except share data)

	September 30, 2002			September 30, 2001
Beginning balance, January 1	$	17,853		$	17,707
Net income		820			649
Other Comprehensive Income		441			207
Common Stock Repurchase/Retirement (10,902 shares @ $9.75 each)		(106	)		—
Dividends		(203	)		(205	)
Ending Balance, September 30	$	18,805		$	18,358

6

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands, except per share data)

Nine months ended:		September 30, 2002			September 30, 2001
Cash flows provided by operating activities:
Net income		$	820		$	649
Adjustments to reconcile net income to net cash from operating activities:
	Provision for possible loan losses		553			419
	Depreciation		281			313
	Deferred income taxes		86			(425	)
	Loss on disposal of assets		(45	)		(188	)
	Deferred loan fees		143			12
	Income taxes receivable		(496	)		196
	Interest Receivable		54			124
	Prepaid expenses and other assets		163			(88	)
	Accrued expenses and other liabilities		(259	)		(36	)
	Other		—			45
Net cash provided by operating activities			1,300			1,021
Cash flows used in Investing Activities:
	Proceeds from sales, calls and maturities of securities (AFS)		3,130			8,662
	Purchase of securities (AFS)		(3,200	)		(8,692	)
	Proceeds from maturity of securities (HTM)		530			—
	Net increase in loans		(13,743	)		(1,941	)
	Purchase of premises and equipment		(168	)		(107	)
Net cash used in investing activities			(13,431	)		(2,078	)
Net Cash Provided by (used in) Financing Activities:
	Net increase (decrease) in demand and savings deposits		17,000			(7,393	)
	Net (decrease) increase in certificates of deposit		(2,293	)		3,246
	Cash dividends		(203	)		(205	)
	Common Stock Repurchase/Retirement		(106	)		—
Net cash provided by (used in) financing activities			14,398			(4,352	)
Net Increase (decrease) in Cash and Cash Equivalents			2,267			(5,409	)
Cash and Cash Equivalents at the Beginning of the Period			9,815			15,599
Cash and Cash Equivalents at the End of the Period		$	12,082		$	10,190

7

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)

1.     Basis of Presentation
The consolidated financial statements include the accounts and transactions of M&F Bancorp, Inc. (the “Company”) and its wholly owned bank subsidiary, Mechanics & Farmers Bank (“M&F Bank”).   All significant intercompany accounts and transactions have been eliminated in consolidation.   The financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and instructions from Regulation S-B.

The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001.

In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation have been included.

2.     Earnings Per Share
Earnings per share are calculated on the basis of the weighted-average number of common shares outstanding.  The anti-dilutive potential common shares outstanding for the (nine-month and three-month) periods ended September 30, 2002 and September 30, 2001 represented 82,200 shares.

3.     Regulatory Capital Requirements
The Company is subject to various regulatory capital requirements administered by the federal and state banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.  As of September 30, 2002 and December 31, 2001, the capital levels are as indicated below:

	Capital
	Risk Based			(a) Tier 1			(b) Tier 1			Minimum Required Capital
September 30, 2002		14.04	%		12.47	%		9.49	%		6.00	%
December 31, 2001		15.64	%		13.94	%		10.31	%		6.00	%

a)   to risk weighted assets
b)   to average assets

4.     Common Stock Cash Dividends
On March 19, 2002, the Board of Directors of the Company declared a quarterly cash dividend of $0.08 per share to all shareholders of record on March 19, 2002 payable April 12, 2002. The dividend reduced shareholders’ equity by $68,298.  On June 19, 2002, the Board of Directors of the Company declared a quarterly cash dividend of $0.08 per share to all shareholders of record on July 3, 2002 payable July 12, 2002.  The dividend reduced shareholders’ equity by $67,426.  On September 18, 2002, the Board of Directors of the Company declared a quarterly cash dividend of $0.08 per share to all shareholders of record on October 3, 2002 payable October 11, 2002.  The dividend reduced shareholders’ equity by $67,426.

5.     Common Stock Repurchase and Retirement
On May 8, 2002 the Company purchased 10,902 shares of common stock at $9.75 per share for a total of $106,295.  The shares were retired from the outstanding shares of common stock.

8

ITEM 2

Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Critical Accounting Policies

The accounting and reporting policies of the Company and its subsidiary are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry.  One of the more critical accounting and reporting policies includes the Company’s accounting for the allowance for loan losses.  In particular, the Company’s accounting policy relating to the allowance for loan losses involves the use of estimates and requires significant judgments to be made by management.  Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position or consolidated results of operations.  See “Non-performing assets and allowance for loan losses” herein for a complete discussion.  Please also refer to Note A in the “Notes to Consolidated Financial Statements” in the Company’s Annual Report for the year ended December 31, 2001 on Form 10-KSB on file with the Securities and Exchange Commission for details regarding all of the Company’s critical and significant accounting policies.

General

The following discussion and analysis of earnings and related financial data should be read in conjunction with the Company’s financial statements and notes thereto included in the Annual Report on Form 10-KSB for the year ended December 31, 2001.  It is intended to assist you in understanding the financial condition and the results of operations for the nine months and three months ended September 30, 2002 and 2001.

Forward-Looking Statements

When used in this report, the words or phrases “will likely result,” “should,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or other similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are subject to certain risks and uncertainties including changes in economic conditions in the market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.  The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  The Company wishes to advise readers that the factors listed above and other factors could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or occurrences after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

9

Financial Condition

Total assets increased 8.80 percent to $182,895,000 at September 30, 2002 from $168,096,000 at December 31, 2001 primarily due to a $13.7 million increase in gross loans outstanding and a $2.6 million increase in interest bearing deposits in financial institutions.

Total loans increased 11.24 percent to $136,052,000 at September 30, 2002 from $122,309,000 at December 31, 2001.  Loans outstanding increased significantly during the third quarter as a result of an increased focus on loan production by management.  Management increased the required sales calls for lenders.  The increase is not expected to impact the quality as the lending standards and policies have not been reduced.  Management continues its effort to add more adjustable rate loans to the portfolio in an effort to reduce the interest rate sensitivity of our loan portfolio.  This effort is normally achieved in the area of commercial loans which are primarily secured by real estate.

The investment portfolio balance (including FHLB stock) as of September 30, 2002 was $29,137,000 compared to $30,326,000 at December 31, 2001.  Investment securities maturities and deposits were used to fund loan demand and satisfy liquidity needs.  Approximately 97 percent and 95 percent of the portfolio was classified as available-for-sale at September 30, 2002 and December 31, 2001, respectively.  All securities purchased during 2002 and 2001 were classified in the available-for-sale category.

The increase in interest-earning deposits in financial institutions is due to the Company’s desire to enhance liquidity needs.

Deposits increased 10.86 percent to $150,090,000 at September 30, 2002 from $135,383,000 at December 31, 2001.  The majority of the growth was a result of increased balances on the money market investment accounts.  The Company priced the accounts to attract deposits to meet the increased loan growth.

Total shareholders’ equity increased 5.33 percent to $18,805,000 as of September 30, 2002 from $17,853,000 at December 31, 2001.  The increase was due to year-to-date net income of $820,000 partially offset by dividends declared and common stock repurchase/retirements of $203,000 and $106,000, respectively.

Results of Operations - Comparison for the nine months and three months ended September 30, 2002 and 2001

Net income for the nine months ended September 30, 2002 increased 26.35 percent to $820,000 compared to $649,000 for the same period in 2001, primarily are a result of a significant decrease in the Company’s cost of funds.  Total interest income was $8,791,000 for the nine months ended September 30, 2002 as compared with $8,798,000 for the comparable period in 2001.  The primary reason for the decrease was that the increase in interest income on loans of $407,000 was more than offset by decreases in interest income on securities of $174,000 and other interest income of $238,000 for the nine months ended September 30, 2002 compared with the comparable period in 2001.

Interest income on loans increased $407,000 primarily due to an increase in the average loans outstanding to $130,709,000 from $115,031,000 for the nine months ended September 30, 2002 and 2001, respectively.  Interest income on securities decreased 14.65% when comparing the nine months ended September 30, 2002 with the same period in 2001.  This decrease was the result of a lower yield on securities.  The yield on the securities

10

portfolio for the period ended September 30, 2002 declined 111 basis points compared to a yield of 5.40 percent for the same period in 2001.  There was also a significant decrease in the rates earned on other interest-bearing assets, as the average balance on other interest-bearing assets held with financial institutions outstanding was $9,651,000 compared to $6,820,000 for the same period in the prior year.

Total interest expense decreased 20.54 percent to $2,670,000 for the nine months ended September 30, 2002 from $3,360,000 for the nine months ended September 30, 2001.  The decrease in interest expense is primarily the result of time deposits repricing during the nine months ended September 30, 2002 at rates 185_basis points lower than in the comparable period in 2001 which attributed to $728,000 of the decrease in total interest expense.  This decrease in rates more than offset a higher volume of deposits.

During the nine months ended September 30, 2002, the Company increased the loan loss provision 31.98 percent from $419,000 during the nine months ended September 30, 2001 to $553,000.  The increase in the provision for loan losses is the result of management’s assessment of the Company’s delinquency ratios, non-performing assets, charge-off history and composition of loans in the portfolio.

Non-interest income during the nine months ended September 30, 2002 decreased 2.61 percent to $1,416,000 from $1,454,000 for the same period in the prior year due to a small decrease in various activity-based fee accounts.  Salaries and benefits increased 11.82 percent to $3,642,000 for nine months ended September 30, 2002 from $3,257,000 for nine months ended September 30, 2001.  The average number of employees has increased from 81 to 93 or 13.4% compared to the same period in 2001 to meet the growing needs of our customer base.  Other non-interest expense decreased 5.78 percent from $2,351,000 during the nine months ended September 30, 2001 to $2,215,000 during the nine months ended September 30, 2002.  The decrease in this category was attributed to the successful implementation of cost management strategies.

Net income for the three months ended September 30, 2002 decreased 9.34 percent to $233,000 compared with $257,000 for the same period in 2001, primarily as a result of higher compensation and other non-interest expenses.  Total interest income increased 5.39 percent to $2,974,000 for the three months ended September 30, 2002 from $2,822,000 for the comparable period in 2001, due primarily to an increase in interest on loans of $227,000 which was not offset by decreases of $51,000 in interest income on other interest bearing assets held with financial institutions and $27,000 in interest income on securities.

Interest on loans increased 9.51 percent from $2,388,000 to $2,615,000 for the quarter ended September 30, 2002 compared to the comparable period in 2001 primarily due to an increase in the average loans outstanding to $130,940,000 from $114,648,000.  The reduction of 7.61 percent in the securities income from $368,000 for the quarter ended September 30, 2001 to $340,000 for the comparable period in 2002 was the result of lower yields earned on securities.  Interest on other interest-bearing assets held with financial institutions decreased 72.86 percent from $70,000 for the quarter ended September 30, 2001 to $19,000 for the quarter ended September 30,

11

2002 in response to a decline in average outstanding balance for the quarter from $7,895,000 in 2001 to $3,423,000 in 2002.

Total interest expense decreased 17.23 percent or $183,000 to $879,000 for the three months ended September 30, 2002 from $1,062,000 for the comparable period in 2001.    The decrease in interest expense is primarily the result of time deposits repricing during the three months ended September 30, 2002 at rates 97 basis points lower than in the comparable period in 2001 which attributed to $257,000 of the decrease in total interest expense which more than offset a $77,000 increase in interest expense on savings deposits due primarily to an increase in the average outstanding deposit balances to $53,538,000 from $38,179,000.

The Company increased the loan loss provision by 25.17 percent from $147,000 during the three months ended September 30, 2001 to $184,000 during the three months ended September 30, 2002.  The increase in the provision for loan losses is the result of management’s assessment of the Company’s delinquency ratios, non-performing assets, charge-off history and composition of loans in the portfolio.

Non-interest income decreased 8.30 percent from $458,000 during the three months ended September 30, 2001 to $420,000 during the three months ended September 30, 2002.  Salaries and benefits increased 18.65 percent from $1,029,000 during the three months ended September 30, 2001 to $1,221,000 during the three months ended September 30, 2002.  The increase was the result of an increase in the number of employees.  Other non-interest expense increased 14.08 percent from $696,000 during the three months ended September 30, 2001 to $794,000 during the three months ended September 30, 2002.  The increase in this category was attributed to increases in communication charges from the prior year.  The increased communication changes resulted from improvements in technology to enhance products/services.

Non-performing assets and allowance for loan losses

The allowance for loan losses is calculated based upon an evaluation of pertinent factors underlying the types and qualities of the Company’s loans.  Management considers such factors as the repayment status of a loan, the estimated net realizable value of the underlying collateral, the borrower’s ability to repay the loan, current and anticipated economic conditions which might affect the borrower’s ability to repay the loan and the Company’s past statistical history concerning charge-offs.  The September 30, 2002 allowance for loan losses was $1,881,000 or 1.38 percent of total loans outstanding compared with $1,505,000 or 1.23 percent of total loans outstanding at December 31, 2001.  The loan loss allowance increased primarily due to the amount of loans outstanding.  Management has also considered non-performing assets and total classified assets in establishing the allowance for loan losses.

The ratio of non-performing assets to total assets is one indicator of the exposure to credit risk.  Non-performing assets of the Company consist of non-accruing loans, accruing loans delinquent 90 days or more, restructured loans, and foreclosed assets which have been acquired as a result of foreclosure or deed-in-lieu-of foreclosure.  The following table provides certain information regarding non-performing assets.

		09/30/02			12/31/01
		(Dollars in Thousands)
Non-Accruing Loans		$	195			434
Accruing Loans Delinquent 90 days or more			560			263
Foreclosed Assets			—			133
Restructured Loans			658			914
	Total Non-Performing Assets	$	1,413		$	1,744
	Percentage of total assets		.77	%		1.04	%

12

Liquidity, Interest Rate Sensitivity and Market Risks

The objectives of the Company’s liquidity management policy include providing adequate funds to meet the needs of depositors and borrowers at all times, as well as providing funds to meet the basic needs for on-going operations of the Company and regulatory requirements.  The Company’s liquidity position remained substantially constant during the nine-month period ended September 30, 2002.

The Company places great significance on monitoring and managing its asset/liability position.  The Company’s policy for managing its interest margin (or net yield on interest-earning assets) is to maximize net interest income while maintaining a stable deposit base.  The Company’s deposit base has not historically been subject to the levels of volatility experienced in national financial markets in recent years; however, the Company does realize the importance of minimizing such volatility while at the same time maintaining and improving earnings.  Gap analysis, a common method historically used to estimate interest rate sensitivity, measures the difference or gap between the volume of interest-earning assets and interest-bearing liabilities repricing over various time periods.  However, this method addresses only the magnitude of funding mismatches and does not address the magnitude or relative timing of rate changes.  Therefore, management prepares on a quarterly basis earnings projections based on a range of interest rate scenarios of rising, flat and declining rates in order to more accurately measure interest rate risk.

Interest-bearing liabilities and the variable rate loans are generally repriced to current market rates.  The Company’s balance sheet is liability-sensitive, meaning that in a given period there will be more liabilities than assets subject to immediate repricing as the market rates change.  Because most of the Bank’s loans are fixed rate mortgages, they reprice less rapidly than rate sensitive interest-bearing deposits.  During periods of rising rates, this results in decreased net interest income.  The opposite occurs during periods of declining rates.

In addition to the gap analysis described above, the Company uses a modeling technique which projects net interest income under varying interest rate scenarios and the theoretical impact of immediate and sustained rate changes referred to as “rate shocks.”  “Rate shocks” measure the estimated theoretical impact on the Bank’s tax equivalent net interest income and market value of equity from hypothetical immediate changes in interest rates as compared to the estimated theoretical impact of rates remaining unchanged.  The prospective effects of these hypothetical interest rate changes are based upon numerous assumptions including relative and estimated levels of key interest rates.

The Company has not experienced a change in the mix of its rate-sensitive assets and liabilities or in market interest rates that it believes would result in a material change in its interest rate sensitivity since reported at December 31, 2001.

13

Item 3

Controls and Procedures

Within ninety (90) days prior to the filing date of this report, the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures.  Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to alert the Company to material information required to be included in reports filed with the Securities and Exchange Commission.  Subsequent to the date of the evaluation, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the disclosure controls, including any corrective actions with regard to significant deficiencies or material weaknesses.

14

PART II
Other Information

ITEM 1.	Legal Proceedings:  Not applicable
ITEM 2.	Changes in Securities:  Not applicable
ITEM 3.	Defaults upon Senior Securities:  Not applicable
ITEM 4.	Submission of Matters to a Vote of Security Holders:
ITEM 5.	Other Information:  Not applicable
ITEM 6.	Exhibits

                    Exhibit (3)(i) Articles of Incorporation of M&F Bancorp, Inc., incorporated by reference to Exhibit (3) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the Securities and Exchange Commission on November 12, 1999.

                    Exhibit (3)(ii) Bylaws of M&F Bancorp, Inc., incorporated by reference to Exhibit (3) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the Securities and Exchange Commission on November 12, 1999.

                    Exhibit (3)(iii) Amended and Restated Article III, Section 5 of the Bylaws of M&F Bancorp, Inc., adopted by the shareholders of M&F Bancorp, Inc. on April 30, 2002, incorporated by reference to Exhibit 3(iii) to the Form 10-QSB for the quarter ended March 31, 2002 filed with the Securities and Exchange Commission on May 14, 2002.

                    Exhibit (4) Specimen Stock Certificate incorporated by reference to Exhibit (4) to the Form 10-KSB40 for the fiscal year ended December 31, 2000 filed with the Securities and Exchange Commission on April 2, 2001.

                    Exhibit (10)(a) Employment Agreement between Mechanics and Farmers Bank and Lee Johnson, Jr. incorporated by reference to Exhibit 10(a) to the Form 10-QSB for the quarter ended September 30, 2000 filed with the Securities and Exchange Commission on November 9, 2000.

                    Exhibit (10)(b) Retention Bonus Agreement between Mechanics and Farmers Bank and Fohliette Becote incorporated by reference to Exhibit 10(b) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the Securities and Exchange Commission on November 12, 1999.

                    Exhibit (10)(c) Retention Bonus Agreement between Mechanics and Farmers Bank and Walter D. Harrington incorporated by reference to Exhibit 10(c) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the Securities and Exchange Commission on November 12, 1999.

                    Exhibit (10)(d) Retention Bonus Agreement between Mechanics and Farmers Bank and Harold G. Sellars incorporated by reference to Exhibit 10(d) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the Securities and Exchange Commission on November 12, 1999.

                    Exhibit (10)(e) Retention Bonus Agreement between Mechanics and Farmers Bank and Elaine Small incorporated by reference to Exhibit 10(e) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the Securities and Exchange Commission on November 12, 1999.

15

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

M&F BANCORP, INC.
(Registrant)
Date:  November 12, 2002
By:	/s/ LEE JOHNSON JR.
	Lee Johnson, Jr. President/Chief Executive Officer
By:	/s/ FOHLIETTE W. BECOTE
	Fohliette W. Becote Secretary/Treasurer

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CERTIFICATIONS

I, Lee Johnson, Jr., certify that:

     1.     I have reviewed this quarterly report on Form 10-QSB of M&F Bancorp, Inc.;

     2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

     4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

             a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

             b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of September 30, 2002 (the “Evaluation Date”); and

             c)   presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

             a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

             b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

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     6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to September 30, 2002, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated:   November 12, 2002	/s/ LEE JOHNSON, JR.
	President/Chief Executive Officer

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CERTIFICATIONS

I, Fohliette W. Becote, certify that:

     1.     I have reviewed this quarterly report on Form 10-QSB of M&F Bancorp, Inc.;

     2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

     4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

             a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

             b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of September 30, 2002 (the “Evaluation Date”); and

             c)   presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

             a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

             b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

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     6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to September 30, 2002, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated:   November 12, 2002	/s/ FOHLIETTE W. BECOTE
	Secretary/Treasurer (Chief Financial Officer)

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