M&F BANCORP INC /NC/, DEF 14A, 2000-03-30

M&F BANCORP INC /NC/
DEF 14A, 2000-03-30
STATE COMMERCIAL BANKS

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SCHEDULE 14A - INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box: [ ] CONFIDENTIAL FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
[ ] Preliminary Proxy Statement BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

M&F Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date filed:

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<PAGE> 2

[M&F BANCORP, INC. LETTERHEAD]

March 31, 2000

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of M&F
Bancorp, Inc. at 10:00 a.m. on Wednesday, May 3, 2000. A formal notice
describing the business to come before the meeting, Proxy Statement and a form
of proxy upon which you may cast your vote are enclosed. The meeting will be
held at the Sheraton Imperial Hotel and Convention Center, I-40 at Page Road,
Research Triangle Park, North Carolina.

At the Annual Meeting, you will be asked to:

1. Elect six (6) persons to serve on the Board of Directors of M&F
Bancorp, Inc. until the annual meeting of stockholders in 2001.

2. Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. to increase the number of authorized shares of Common Stock from
1,000,000 to 5,000,000 shares.

3. Approve amendments to the Articles of Incorporation of M&F Bancorp,
Inc. that are designed to implement "anti-takeover" defenses.
Specifically you will be asked to:

a. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. to eliminate the preemptive rights of
stockholders to purchase additional shares upon issuance.

b. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. to eliminate the rights of stockholders to
cumulate their votes in the election of directors.

c. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. that would allow the Board of Directors to
consider certain factors in approving or disapproving any
potential merger offer.

d. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. requiring any potential acquirer to pay an equal
price for all shares of M&F Bancorp, Inc. in the event of an
acquisition offer.

e. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. requiring that members of the Board of Directors
may be removed only for cause.

f. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. requiring that any transaction not recommended
by the Board of Directors be approved by at least a
three-fourths favorable vote of the stockholders.

g. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. requiring that any amendment, repeal or deletion
of the "anti-takeover" amendments be approved by at least a
three-fourths favorable vote of the stockholders.

4. Ratify the selection of Deloitte & Touche, L.L.P. as the independent
auditor for M&F Bancorp, Inc. for the fiscal year ended December 31,
2000.

5. Consider whatever other business that may properly be brought before
the annual meeting or any adjournment of the annual meeting.

<PAGE> 3

Stockholder of M&F Bancorp, Inc.
March 31, 2000
Page 2

SOME OF THE MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING WILL REQUIRE THE
FAVORABLE VOTE OF AT LEAST THREE-FOURTHS OF THE OUTSTANDING SHARES OF M&F
BANCORP. THEREFORE, REGARDLESS OF THE NUMBER OF SHARES YOU OWN, IT IS IMPORTANT
THAT THEY ARE VOTED AT THE MEETING. PLEASE MARK, SIGN, DATE AND MAIL THE
ENCLOSED PROXY IN THE SELF-ADDRESSED POSTAGE PREPAID ENVELOPE PROVIDED FOR YOUR
CONVENIENCE. THIS IS THE OFFICIAL PROXY AUTHORIZED BY THE BOARD OF DIRECTORS. AS
NOTED IN THE FORMAL NOTICE, STOCKHOLDERS WHO EXECUTE A PROXY MAY ATTEND THE
ANNUAL MEETING, REVOKE THEIR PROXY, AND VOTE THEIR SHARES IN PERSON.

The Board of Directors unanimously recommends approval of all of the items to be
considered at the Annual Meeting. We look forward to seeing you on May 3, 2000.

Sincerely,

Julia W. Taylor
Chairman, President and
Chief Executive Officer

<PAGE> 4

[M&F BANCORP, INC. LOGO]

---------------------------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 3, 2000

---------------------------------------------

To Our Stockholders:

You are invited to attend the 2000 annual meeting of stockholders of M&F
Bancorp, Inc. to be held at the Sheraton Imperial Hotel and Convention Center,
I-40 Exit at Page Road, Research Triangle Park, North Carolina on Wednesday, May
3, 2000 at 10:00 a.m., Eastern Time. At the annual meeting, you will be being
asked to:

1. Elect six (6) persons to serve on the Board of Directors of M&F
Bancorp, Inc. until the annual meeting of stockholders in 2001.

2. Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. to increase the number of authorized shares of Common Stock from
1,000,000 to 5,000,000 shares.

3. Approve amendments to the Articles of Incorporation of M&F Bancorp,
Inc. that are designed to implement "anti-takeover" defenses.
Specifically you will be asked to:

a. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. to eliminate the preemptive rights of
stockholders to purchase additional shares upon issuance.

b. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. to eliminate the rights of stockholders to
cumulate their votes in the election of directors.

e. Approve an amendment to the Articles of Incorporation of M&F
Bancorp, Inc. requiring that members of the Board of Directors
may be removed only for cause.

4. To ratify the selection of Deloitte & Touche, L.L.P. as the
independent auditor for the M&F Bancorp, Inc. for the fiscal year
ending December 31, 2000.

5. Consider whatever other business that may properly be brought before
the annual meeting or any adjournment of the annual meeting.

Stockholders of record at the close of business on March 17, 2000 are entitled
to vote at the annual meeting or any adjournment of the annual meeting.

BY ORDER OF THE BOARD OF THE BOARD OF DIRECTORS

Fohliette W. Becote
Corporate Secretary

Durham, North Carolina
March 31, 2000

WE URGE YOU TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU
DO ATTEND THE ANNUAL MEETING, YOU THEN MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON. THE PROXY MAY BE WITHDRAWN AT ANY TIME PRIOR TO VOTING.

<PAGE> 5

[M&F BANCORP, INC. LOGO]
2634 CHAPEL HILL BLVD.
DURHAM, NORTH CAROLINA 27707

- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------

M&F Bancorp, Inc. is sending this proxy statement to you for the solicitation of
proxies by the Board of Directors of M&F Bancorp, Inc. to be voted at the annual
meeting. This proxy statement and the enclosed proxy card are being mailed to
stockholders on or about March 31, 2000.

INFORMATION ABOUT THE MEETING

WHEN AND WHERE ARE THE ANNUAL MEETING?

The annual meeting will be held at 10:00 a.m., Eastern Time, on Wednesday, May
3, 2000 at the Sheraton Imperial Hotel and Convention Center, I-40 Exit at Page
Road, Research Triangle Park, North Carolina.

WHAT MATTERS WILL BE VOTED ON AT THE ANNUAL MEETING?

At the annual meeting, you will be asked to:

- - Elect six (6) persons to serve on the Board of Directors of M&F Bancorp,
Inc. until the annual meeting of stockholders in 2001.

- - Approve an amendment to the Articles of Incorporation of M&F Bancorp, Inc.
to increase the number of authorized shares of Common Stock from 1,000,000
to 5,000,000 shares.

- - Approve amendments to the Articles of Incorporation of M&F Bancorp, Inc.
that are designed to implement "anti-takeover" defenses. Specifically, you
will be asked to:

- Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. to eliminate the preemptive rights of stockholders to purchase
additional shares upon issuance.

- Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. to eliminate the rights of stockholders to cumulate their votes in
the election of directors.

- Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. that would allow the Board of Directors to consider certain
factors in approving or disapproving any potential merger transaction.

- Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. requiring any potential acquiror to pay an equal price for all
shares of M&F Bancorp, Inc. in the event of an acquisition offer.

- Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. requiring that members of the Board of Directors may be removed
only for cause.

- Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. requiring that any transaction not recommended by the Board of
Directors be approved by at least a three-fourths favorable vote of the
stockholders.

- Approve an amendment to the Articles of Incorporation of M&F Bancorp,
Inc. requiring that any amendment, repeal or deletion of the
"anti-takeover" amendments be approved by at least a three-fourths
favorable vote of the stockholders.

- - Ratify the selection of Deloitte & Touche, L.L.P. as the independent
auditor of M&F Bancorp, Inc. for the fiscal year ended December 31, 2000.

- - Consider whatever other business that may properly come before the annual
meeting.

1
<PAGE> 6

WHO IS ENTITLED TO VOTE?

Only stockholders of record at the close of business on the record date, March
17, 2000, are entitled to receive notice of the annual meeting and to vote at
the annual meeting. On March 17, 2000, there were 853,725 shares of M&F Bancorp,
Inc. common stock outstanding, held by approximately 1,250 holders of record.
Each share of M&F Bancorp, Inc. common stock is entitled to one vote on each
matter considered at the meeting, including one vote for each director to be
elected. Stockholders are entitled to cumulate their votes in the election of
directors.

WHAT CONSTITUTES A QUORUM?

The presence at the annual meeting, in person or by proxy, of a majority of the
outstanding shares eligible to vote at the annual meeting is required for a
quorum to exist at the annual meeting. For this purpose, abstentions and broker
non-votes are counted in determining the shares present at the annual meeting.

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?

Election of Directors. The six nominees for election as directors who receive
the greatest number of votes will be elected directors. Votes may be cast in
favor of some or all of the nominees for election to the Board of Directors or
withheld as to some or all of the nominees.

Increase of Authorized Shares. The Proposal to increase the number of authorized
shares of common stock from one million shares to five million shares will
require the favorable vote of at least a majority of all outstanding shares of
M&F Bancorp, Inc.

Approval of Anti-Takeover Measures. Each of the proposed Amendments to the
Articles of Incorporation set forth as separate items to be voted upon under
Proposal No. 3 will require approval by at least three-fourths (75%) of all
outstanding shares of M&F Bancorp, Inc. Because M&F Bancorp, Inc. is further
asking stockholders to approve in Proposal No. 3g that any amendment, repeal, or
deletion of the anti-takeover amendments proposed in Proposal No. 3 not be
effective unless approved by three-fourths (75%) vote of the stockholders, that
same three-fourths (75%) vote of the stockholders is required to approve each of
the items set forth under Proposal No. 3.

Ratification of Accountants. The Board of Directors has selected Deloitte &
Touche, L.L.P. to act as the independent auditor for M&F Bancorp., Inc. for the
fiscal year ended December 31, 2000. This proposed ratification will require the
favorable vote of at least a majority of all shares of M&F Bancorp, Inc. which
are voted on the measure.

Other Matters. Any other matters presented for consideration at the Annual
Meeting will require the vote of at least a majority of the shares present and
voting at the meeting. Management currently knows of no other matters to be
presented before the Annual Meeting.

HOW DO I VOTE?

If you complete and properly sign the accompanying proxy sheet and return it to
M&F Bancorp, Inc., it will be voted as you direct. If you give no directions on
your proxy, the shares represented by your proxy will be voted FOR each of the
Proposals, including the election of the nominees for directors listed in this
proxy statement and each of the proposed Amendments to the Articles of
Incorporation. If any other matters are properly presented at the annual meeting
for consideration, the persons named in the proxy will have discretion to vote
on those matters according to their best judgment. "Street name" stockholders
who wish to vote at the annual meeting will need to obtain a proxy form from the
institution that holds their shares.

CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?

Yes. Even after you have submitted your proxy, your proxy may be withdrawn at
any time before it is voted by

- delivering written notice to Fohliette W. Becote, Corporate
Secretary, M&F Bancorp, Inc., at 2634 Chapel Hill Blvd.,
Durham, North Carolina 27707, on or before the taking of the vote
at the annual meeting, or
- completing a later dated proxy, or
- attending the annual meeting and voting in person.

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WHO PAYS THE COSTS OF SOLICITING PROXIES?

The enclosed proxy is solicited by the Board of Directors of M&F Bancorp, Inc.
M&F Bancorp, Inc. will bear the costs of soliciting proxies for the annual
meeting. In addition to soliciting proxies by mail, M&F Bancorp, Inc.'s
directors, officers and employees may solicit proxies personally or by telephone
or fax. No director, officer or employee of M&F Bancorp, Inc. who solicits
proxies will receive any compensation for their solicitation other than their
regular compensation for the positions they hold. M&F Bancorp, Inc. does not
intend to pay any compensation to any other persons for the solicitation of
proxies. However, it will reimburse brokerage houses and other custodians,
nominees and fiduciaries for reasonable expenses to mail proxy materials for
beneficial owners.

STOCK OWNERSHIP

WHO ARE THE OWNERS OF THE GREATEST PERCENTAGE OF M&F BANCORP, INC. STOCK?

Name and Address of Amount and Nature Percent of Outstanding
Beneficial Owner of Beneficial Ownership Common Stock
---------------- ----------------------- ------------
<S> <C> <C>
Mrs. Vivian M. Sansom 90,399 10.59%
1521 Cross Link Road
Raleigh, NC 27610

Mrs. Selena W. Wheeler 87,417 10.24%
302 Formosa Avenue
Durham, NC 27707

North Carolina Mutual 78,000 9.14%
411 W. Chapel Hill Street
Durham, NC 27701
</TABLE>

HOW MUCH STOCK DO M&F BANCORP, INC.'S DIRECTORS AND EXECUTIVE OFFICERS OWN?

The following table shows the beneficial ownership of M&F Bancorp, Inc. common
stock as of March 17, 2000 by:

- Each director and director nominee;

- The chief executive officer and those persons who served as
executive officers in 1999 and who received salaries and bonuses in
excess of $100,000 during 1999; and

- All directors and executive officers as a group.

3
<PAGE> 8

For purposes of this table and according to Rule 13d-3 under the Securities
Exchange Act of 1934, a person is the beneficial owner of any shares if he or
she has voting and/or investment power over those shares. The table includes
shares owned by spouses, other immediate family members in trust, shares held in
retirement accounts or funds for the benefit of the named individuals, and other
forms of ownership where the persons named in the table possess voting and/or
investment power over the shares.

Shares of Common Stock Beneficially
Owned at March 17, 2000
------------------------
Amount and Nature of Percent of Outstanding
Name of Beneficial Owner Beneficial Ownership Common Stock
- ------------------------ -------------------- ------------
<S> <C> <C>
Fohliette W. Becote.................................... 750 *
Genevia Gee Fulbright ................................. 528 *
W. Donald Harrington ................................. 150 *
Lee Johnson, Jr........................................ 1,344 *
Benjamin S. Ruffin..................................... 4,458 *
Joseph M. Sansom ...................................... 924 *
Harold G. Sellars ..................................... 385 *
Maceo K. Sloan ....................................... 6,063 *
E. Elaine Small........................................ 550 *
Aaron L. Spaulding..................................... 15,261 1.79%
Julia W. Taylor ....................................... 21,160 2.48%
Directors and executive officers
as a group (11 persons) ............................... 51,573 6.04%

</TABLE>

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* Represents less than 1.0% of M&F Bancorp Inc.'s outstanding common stock.

EXECUTIVE OFFICERS

The following table provides information about the executive officers of M&F
Bancorp, Inc. and Mechanics and Farmers Bank. All officers are appointed by the
Board of Directors and serve at the pleasure of the Board for an unspecified
term.

HAS SERVED M&F BANCORP, INC.
OR MECHANICS AND FARMERS
NAME AGE POSITION BANK SINCE
- ---- --- -------- ----------
<S> <C> <C> <C>
Julia W. Taylor (1) 62 Chairman, President and Chief Executive 1965
Officer of M&F Bancorp; Chairman and
Chief Executive Officer of Mechanics &
Farmers Bank
Lee Johnson, Jr. 56 Vice President of M&F Bancorp, Executive 1968
Vice President/Chief Financial
Officer/Financial Group Executive of Mechanics
and Farmers Bank
Fohliette W. Becote 41 Secretary and Treasurer of M&F Bancorp, 1983
Senior Vice President/Comptroller and
Corporate Secretary of Mechanics and
Farmers Bank
W. Donald Harrington 37 Senior Vice President/Credit Group 1994
Executive of Mechanics and Farmers Bank

</TABLE>

- ----------------

(1) For additional background information on Ms. Taylor, see "Proposal 1:
Election of Directors" on page ___ of this proxy statement.

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<PAGE> 9

HAS SERVED M&F BANCORP, INC.
OR MECHANICS AND
NAME AGE POSITION FARMERS BANK SINCE
- ---- --- -------- ------------------
<S> <C> <C> <C>
Harold G. Sellars 47 Senior Vice President/Banking Group 1998
Executive of Mechanics and Farmers Bank
E. Elaine Small 50 Senior Vice President/Operations Group 1972
Executive of Mechanics and Farmers Bank
----------
</TABLE>

INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES

HOW OFTEN DID THE BOARD OF DIRECTORS OF M&F BANCORP, INC. MEET DURING 1999?

During the year ended December 31, 1999, the Board of Directors of M&F Bancorp,
Inc. held two (2) meetings. No director of M&F Bancorp, Inc. attended fewer than
75% of the total meetings of the Board.

During 1999 the Board of Directors of M&F Bancorp, Inc. did not have any
committees.

During 1999 the Board of Directors of M&F Bancorp, Inc. did not receive any
compensation for service.

HOW OFTEN DID THE BOARD OF DIRECTORS OF MECHANICS AND FARMERS BANK MEET DURING
1999?

During the year ended December 31, 1999, the Board of Directors of Mechanics and
Farmers Bank held seven (7) meetings. No director of Mechanics and Farmers Bank
attended fewer than 75% of the total meetings of the Board and committees on
which a director served during this period.

The Executive Committee may act, between meetings of the Board of Directors,
with all the authority of the full Board of Directors. The committee met five
(5) times during 1999.

WHAT COMMITTEES HAS THE BOARD ESTABLISHED?

The Board of Directors of Mechanics and Farmers Bank has an Audit Committee and
Compensation and Management Development Committee. There is no Nominating
Committee.

Audit Committee. The Audit Committee:

- Reviews and approves the services of Mechanics and Farmers Bank's
independent auditors;
- Reviews the plan, scope and audit results of the internal auditors
and the independent auditors;
- Reviews the reports of bank regulatory authorities; and
- Reviews the annual and other reports to the Securities and
Exchange Commission and the annual report to M&F Bancorp, Inc.'s
stockholders.

The Audit Committee consists of directors B.S. Ruffin (chairman of the
committee), G.G. Fulbright, J.M. Sansom, J.C. Scarborough III, M.K. Sloan, and
W.S. Tucker. None of the members of the Audit Committee are officers or
employees of Mechanics and Farmers Bank or any subsidiary. There were five (5)
meetings of the Audit Committee during the year ended December 31, 1999.

Compensation and Management Development Committee. The Compensation and
Management Development Committee reviews and recommends compensation
arrangements for senior management. The members of the Compensation and
Management Development Committee are directors B.S. Ruffin (Chairman of the
committee), G.G. Fulbright, J.M. Sansom, W.J. Kennedy III (Director Emeritus)
and Lem Long, Jr. (Director Emeritus). None of the members of the Committee are
officers or employees of Mechanics and Farmers Bank or any subsidiary of
Mechanics

<PAGE> 10

and Farmers Bank. There was one (1) meeting of the Compensation Committee during
the year ended December 31, 1999.

HOW ARE DIRECTORS COMPENSATED?

During the year ended December 31, 1999, Mechanics and Farmers Bank's
non-officer directors received an annual retainer of $1,500 and a monthly fee of
$300 for each Board meeting attended. Non-officer directors also received $275
for each committee meeting attended with the Chairman of the committee receiving
$300 per meeting attended. Directors who are officers or employees of M&F
Bancorp, Inc. or its subsidiaries received no additional compensation for
service as directors or members of Board committees.

HOW CAN A STOCKHOLDER NOMINATE SOMEONE FOR THE BOARD?

According to M&F Bancorp, Inc.'s Bylaws, any stockholder nomination of
candidates for election to the Board of Directors at the 2001 annual meeting
must be made in writing to M&F Bancorp, Inc.'s Corporate Secretary not fewer
than thirty (30) days nor more than fifty (50) days prior to the date of the
annual meeting. If fewer than 21 days notice of the annual meeting is given to
stockholders, stockholder nominations must be mailed or delivered to M&F
Bancorp, Inc.'s Corporate Secretary by the close of business on the seventh day
following the day on which the notice of the meeting is mailed.

Stockholder nominations must contain the following information if known to the
nominating stockholder:

- The name and address of each proposed nominee;
- The principal occupation of each proposed nominee;
- The total number of shares of M&F Bancorp, Inc. common stock that
will be voted for each proposed nominee;
- The name and address of the nominating stockholder; and
- The number of shares of M&F Bancorp, Inc. common stock owned by the
nominating stockholder.

The chairman of the annual meeting, in her discretion, may disregard any
nominations that do not comply with the above-listed requirements. Upon the
chairman's instructions, the vote teller may disregard all votes cast for a
nominee if the nomination does not comply with the above-listed requirements.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows the aggregate compensation paid to M&F Bancorp, Inc.'s
chief executive officer and the other executive officer whose aggregate cash and
cash equivalent forms of compensation exceeded $100,000 in 1999 for services
rendered to M&F Bancorp, Inc. or its subsidiaries in all capacities, paid or
accrued, for the year ended December 31, 1999 compared to the same periods ended
December 31, 1998 and 1997.

<PAGE> 11

Annual Compensation Long Term Compensation
------------------- ----------------------
Other Securities
Annual Restricted Underlying All Other
Name and Principal Compen- Stock Options/ LTIP Compen-
Position Period Salary Bonus(1) sation Awards SARs Payouts sation(2)
- -------- ------ ------ -------- ------ ------ ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Julia W. Taylor
Chairman, 1999 $150,000 $ 9,113 0 0 0 0 $17,539
President and 1998 $133,250 $29,133 0 0 0 0 $30,424
Chief Executive 1997 $133,750 $25,041 0 0 0 0 $29,085
Officer
M&F Bancorp, Inc.
And
Mechanics and
Farmers Bank(3)

Lee Johnson, Jr. 1999 $ 95,000 $ 5,771 0 0 0 0 $16,618
Vice President - 1998 $ 84,383 $13,963 0 0 0 0 $11,285
M&F Bancorp; 1997 $ 73,320 $14,559 0 0 0 0 $11,198
Executive Vice
President/CFO/
Financial Group
Executive of
Mechanics &
Farmers Bank

</TABLE>

- ---------------------

(1) Beginning with the calendar year 1998, the Board of Directors approved a
management incentive plan to provide additional compensation to Ms. Taylor based
on M&F Bancorp, Inc.'s performance as of the end of each calendar year. M&F
Bancorp, Inc. accrued for this expense during 1999 and, although payment will
not be made until April 7, 2000, because the payment was earned in 1999 as a
result of M&F Bancorp, Inc.'s performance during that year, the bonus to Ms.
Taylor is deemed to be a part of her compensation for 1999, for purposes of this
report, as described above.
(2) For Ms. Taylor: Represents a Company contribution of $ 10,843 to the
Retirement Plus Plan and Deferred Salary Agreement, $1,584 in life insurance
premiums for coverage in excess of $50,000, and $5,112 in expenses incurred by
the Company under the Mechanics and Farmers Bank Supplemental Executive
Retirement Plan. For Mr. Johnson: Represents a Company contribution of $6,582 to
the Retirement Plus Plan and Deferred Salary Agreement, $728 in life insurance
premiums for coverage in excess of $50,000, and $9,308 in expenses incurred by
the Company under the Mechanics and Farmers Bank Supplemental Executive
Retirement Plan
(3) Ms. Taylor entered into an Executive Employment Agreement with the Bank
that, among other things, will pay to Ms. Taylor upon her termination coincident
with or within 12 months following a change in control, as defined in the
Agreement, a lump sum cash payment equal to 2.99 times the compensation paid to
Ms. Taylor in the preceding calendar year. Mr. Johnson entered into a Retention
Bonus Agreement that, among other things will pay to Mr. Johnson upon a change
in control 12 months base salary upon the consummation date.

OPTION GRANTS DURING 1999

In May 1999, the stockholders approved the adoption of the Incentive Stock
Option Plan of 1999, providing for the award of incentive stock options to
employees and nonqualified stock options to directors of M&F Bancorp, Inc. at
the discretion of the Board of Directors. Under the plan, on the date of grant,
the exercise price of the option must at least equal the market value per share
of M&F Bancorp, Inc.'s common stock. The plan provides for the granting of
options for up to 85,000 (as adjusted for M&F Bancorp, Inc.'s 3-or-2 stock split
in January, 2000) common shares. All awards made under the plan require vesting
over a three year period beginning on the date of grant. In 1999, no options
were

7
<PAGE> 12

granted under the Incentive Stock Option Plan of 1999. Under the plan, the
options must be exercised within five years of vesting.

EXECUTIVE EMPLOYMENT AGREEMENT

Mechanics and Farmers Bank entered into an employment agreement with Julia W.
Taylor, effective on April 1, 1999. The agreement with Ms. Taylor provides for
an annual base salary of $150,000, which may be increased at the discretion of
the Board of Directors or by an authorized board committee. In addition to base
salary, the agreement provides for Ms. Taylor's participation in employee
benefit plans and other fringe benefits applicable to senior executives of
Mechanics and Farmers Bank. The term of the agreement will run until April 1,
2000, and then will be automatically renewed for additional terms of one year
each unless notice is given prior to the expiration date of any term that
renewal will not be effected. In the event the employment of Ms. Taylor is
terminated by M&F Bancorp, Inc. at any time for "cause" or by Ms. Taylor without
"good reason", both as defined in the agreement, no termination benefit will be
payable. If Ms. Taylor is terminated without cause or she terminates the
agreement for good reason, a severance benefit will be payable in an amount
equal to amount of salary which would otherwise have been paid to her during the
then remaining term of the agreement or her base salary for a period of eight
(8) months, plus director's fees, whichever is greater.

The agreement with Ms. Taylor also provides for the payment of a severance
benefit to Ms. Taylor in the event of his termination of employment in some
cases preceding, and for any reason following by up to two years, a change of
control of M&F Bancorp, Inc. or Mechanics and Farmers Bank. Under the terms of
the agreement, Ms. Taylor is entitled to receive her then-current base salary
for three years following such termination or until the end of the term of the
agreement, whichever is longer ($450,000 based on Ms. Taylor's current salary
and assuming a three-year payment). In those circumstances, he also is entitled
to all benefits in his agreement, to be fully vested as to unvested options, and
to have restrictions lapse any restricted stock or other restricted securities.

For purposes of the agreement, "change in control" generally includes:

- the acquisition by any person of 25% or more of the outstanding
securities of M&F Bancorp, Inc.;
- replacement of incumbent directors or election of newly elected
directors constituting a majority of the Board of M&F Bancorp, Inc.
where the replacement or election has not been supported by the
Board;
- dissolution, or sale of 50% or more in value of the assets, of
either M&F Bancorp, Inc. or Mechanics and Farmers Bank or any of
their respective subsidiaries;
- or the merger of M&F Bancorp, Inc. into any corporation, 25% or
more of the outstanding common stock of which is owned by person
other than owners of the common stock of M&F Bancorp, Inc. prior to
such merger.

The employment agreement with Ms. Taylor provides that in the event the
executive receives an amount under the provisions of the agreements that results
in imposition of a tax on the executive under the provisions of the Internal
Revenue Code Section 4999 (relating to "golden parachute" payments), the
employer is obligated to reimburse the executive for that amount, exclusive of
any tax imposed by reason of receipt of reimbursement under the employment
agreement.

The agreement also restricts the right of Ms. Taylor to compete against
Mechanics and Farmers Bank within a 100 mile radius of the main office of
Mechanics and Farmers Bank for a period of 12 months following termination of
employment, except if employment is terminated without cause or good reason.

RETENTION BONUS AGREEMENTS

Mechanics and Farmers Bank entered into retention bonus agreements with Lee
Johnson, Jr., Fohliette W. Becote, Harold Sellars, W. Donald Harrington and E.
Elaine Small (the "Executives"), effective on April 1, 1999. The agreements with
the Executives provide for the payment of severance benefits to the Executives
in the event of a Change in Control. Under the terms of the agreements, the
Executives are entitled to receive their then current base salary for one year
following such Change in Control in a lump sum payment. Additionally, in the
event the Executives' employment is terminated by M&F Bancorp, Inc. or Mechanics
and Farmers Bank not for cause coincident with a Change in Control, the
Executives are entitled to a lump sum payment of 12 months base salary.

8
<PAGE> 13

For the purposes of the agreements, "Change of Control" generally includes the
acquisition by any person of 50% or more of the outstanding securities of M&F
Bancorp, Inc. or the occurrence of any merger, consolidation, exchange or
reorganization to which M&F Bancorp, Inc. is a party and to which M&F Bancorp,
Inc. is not the surviving entity or the sale of all or substantially all of the
assets of M&F Bancorp, Inc.

The agreements also restricts the rights of the Executives to compete against
Merchants and Farmers Bank within a 60-mile radius of the main office of
Merchants and Farmers Bank for a period of twelve months following the
termination of their employment and receipt of the retention bonus, except if
their employment is terminated without cause or good reason.

None of the Executives have a 12 month base salary exceeding $100,000.

PROPOSAL 1: ELECTION OF DIRECTORS

M&F Bancorp, Inc.'s Articles of Incorporation call for the Board of Directors to
fix the exact number of directors from time to time within a range of no fewer
than three (3) nor more than nine (9) persons. The Board of Directors has fixed
the number of directors for the coming year at six persons.

Directors have one year terms. The individuals elected as directors at this
Annual Meeting will hold office until the annual meeting of stockholders in the
year 2001 and until their successors are elected and qualified.

Each nominee for director has indicated that he or she is able and willing to
serve on the Board of Directors. If any nominee becomes unable to serve, the
shares represented by all properly completed proxies will be voted for the
election of a substitute nominee recommended by the Board of Directors. At this
time, the Board of Directors knows of no reason why any nominee might be
unavailable to serve or why a substitute nominee would be required.

Information about the nominees for election at the annual meeting is set forth
below.

NOMINEES FOR ELECTION AT THIS ANNUAL MEETING

Julia W. Taylor, Director of M&F Bancorp, Inc. Since 1999. Director of Mechanics
and Farmers Bank since 1978. Ms. Taylor, 63, is presently Chairman, President
and Chief Executive Officer of M&F Bancorp, Inc. and Chairman, President and
Chief Executive Officer of Mechanics and Farmers Bank. Mrs. Taylor is the
daughter of Mrs. Selena W. Wheeler, who owns more than ten percent of M&F
Bancorp, Inc.'s outstanding shares of Common Stock.

Benjamin S. Ruffin, Director of M&F Bancorp, Inc. Since 1999. Director of
Mechanics and Farmers Bank since 1977. Mr. Ruffin, 58, is the President of the
Ruffin Group, a management consulting firm located in Winston-Salem, North
Carolina. Mr. Ruffin was with R. J. Reynolds Tobacco Co. from 1986 until 1999,
most recently in the position of Vice President of Corporate Affairs.

Joseph M. Sansom, Director of M&F Bancorp, Inc. Since 1999. Director of
Mechanics and Farmers Bank since 1987. Mr. Sansom, 56, is serving the State of
North Carolina in the Treasurer's office and has served as the Assistant to the
State Treasurer since 1996. Prior to 1996 he worked for IBM in various financial
positions and retired in 1995 after 30 years of service. Mr. Sansom is the son
of Vivian M. Sansom, who owns more than ten percent of M&F Bancorp, Inc.'s
outstanding shares of Common Stock.

Aaron L. Spaulding, Director of M&F Bancorp, Inc. Since 1999. Director of
Mechanics and Farmers Bank since 1994. Mr. Spaulding, 57, is the Chairman,
President & CEO of Galaxy Travel Group, Inc. Mr. Spaulding also serves as a
member of the North Carolina Savings Institutions Commission and as a director
of Utendahl Capital Partners which is a company subject to the reporting
requirements of the Exchange Act.

Genevia Gee Fulbright, Director of M&F Bancorp, Inc. Since 2000. Director of
Mechanics and Farmers Bank since 1994. Ms. Fulbright, 37, is Vice President of
Fulbright and Fulbright, CPA, PA and has been associated with the firm since
1987. Prior to 1987 she was employed as a Senior Accountant by Adams, Grant,
Werner, & Company (now known as Grant & Smith, CPAs).

<PAGE> 14

Maceo K. Sloan, Director of M&F Bancorp, Inc. Since 2000. Director of Mechanics
and Farmers Bank since 1980. Mr. Sloan, 50, is currently Chairman, President &
CEO of Sloan Financial Group, Inc. Mr. Sloan serves as Chairman of Calvert-Sloan
Advisors, Calvert New World Funds and New Africa Management, LLC, as a director
of New Africa Advisors and NCM Capital Management Group, and as a trustee of
CREF-College Retirement Equities Fund and TIAA-CREF Mutual Funds, all of which
are investment companies subject to the reporting requirements of the Exchange
Act.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MESDAMES TAYLOR AND
FULBRIGHT AND MESSRS. RUFFIN, SANSOM, SLOAN AND SPAULDING AS DIRECTORS OF M&F
BANCORP, INC. FOR THE COMING YEAR.

PROPOSAL 2: AMENDMENT TO ARTICLES INCREASING
THE NUMBER OF AUTHORIZED SHARES

The Board of Directors recommends that the stockholders adopt a proposed
amendment to Section 2.1 of the Articles of Incorporation to increase the number
of authorized shares from 1,000,000 to 5,000,000.

The Board of Directors recommends the increase in authorized shares in order to
permit specific corporate purposes planned by the Board of Directors, as well as
to ensure flexibility of action with respect to future opportunities not yet
contemplated. If the proposed amendment is adopted, additional shares will be
available for issuance from time to time to such persons and for such
consideration as the Board of Directors may determine, without necessarily
requiring further action by M&F Bancorp, Inc.'s stockholders, other than as may
be required in certain instances by North Carolina or federal securities law.
The additional shares could be used for various corporate purposes, including
stock dividends, acquisitions of other companies, public offerings and stock
options and other employee benefit plans.

Opportunities often arise that require prompt action, and the delay necessary
for stockholder approval of this authorization of additional shares of stock
could be detrimental to M&F Bancorp, Inc. and its stockholders. Although
directors do not intend to seek stockholder approval for future issuances of
shares unless required by law, the directors will not issue any shares except on
terms that the Board of Directors deems to be in the best interest of M&F
Bancorp, Inc. and its stockholders.

Increasing the authorized number of shares has also been proposed for the
purpose of having an anti-takeover effect, although the Board of Directors has
no knowledge of any current efforts to obtain control of M&F Bancorp, Inc. The
authorization of additional shares could have the effect of discouraging an
attempt by another person or entity, through the acquisition of a substantial
number of M&F Bancorp, Inc.'s shares, to acquire control of M&F Bancorp, Inc.
with a view to imposing a merger, sale of all or any part of its assets or a
similar transaction, because the issuance of new shares or the granting of
rights to purchase shares, perhaps on very favorable terms, could be used to
dilute the stock ownership of a person or entity seeking to obtain control of
M&F Bancorp, Inc. Additionally, although the Board of Directors at present has
no intention of doing so, authorized but unissued shares could be issued to a
holder that would thereby have sufficient voting power to ensure that a merger
transaction and any proposal to change the number of directors would not receive
the required stockholder vote. The affirmative vote of the holders of at least a
majority of the outstanding shares of Common Stock of M&F Bancorp, Inc. entitled
to vote at the Annual Meeting is required to adopt Proposal 2.

The language to this Proposal 2 can be found in Section 2.1 of the proposed
Amended and Restated Articles of Incorporation attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 2.

<PAGE> 15

PROPOSAL 3: ADOPTION OF CERTAIN "ANTI-TAKEOVER" DEFENSES
BY AMENDMENT TO THE ARTICLES OF INCORPORATION

The Board of Directors recommends that stockholders adopt a number of proposed
amendments to the Articles of Incorporation that are designed to implement
"anti-takeover" defenses for M&F Bancorp, Inc. The proposed Amendments that are
designed to have anti-takeover implications are described in Proposals 3a
through 3g.

A principal effect of the adoption of the "anti-takeover" Amendments will be to
discourage and, therefore, reduce M&F Bancorp, Inc.'s vulnerability to takeover
attempts and certain other transactions which have not been negotiated and
approved by M&F Bancorp, Inc.'s Board of Directors. While the Board of Directors
has no knowledge that any attempt to take over M&F Bancorp, Inc. is being
contemplated, takeover transactions have become increasingly common in recent
years. An unapproved, non-negotiated takeover attempt may present to
stockholders the risk of a takeover on terms less favorable than that which
would be attained in a transaction negotiated with and approved by the Board of
Directors. For example, non-negotiated takeover bids may be timed to foreclose
or minimize the possibility of more favorable competing bids. Additionally,
non-negotiated takeover attempts may involve the acquisition of only a
controlling interest in M&F Bancorp, Inc.'s stock which would not afford all
stockholders the opportunity to participate. Furthermore, a non-negotiated
takeover may result in unfavorable tax consequences to stockholders of M&F
Bancorp, Inc.

The Board of Directors believes that stockholders at present are inadequately
protected from potential abuses of takeovers accomplished by tender offers and
certain of the proposed Amendments are part of an overall plan of the Board of
Directors to prevent unwanted changes in the control or ownership of M&F
Bancorp, Inc. Although under the Bank Holding Company Act of 1956, as amended, a
takeover of M&F Bancorp, Inc. by another company as defined in that Act would be
subject to prior approval of the Federal Reserve System, and a takeover by an
individual or a group, not defined as a company under that Act would be subject
to prior disclosure and possible denial under the Change in Bank Control Act,
the Board of Directors believes that a tender offer could be used to accomplish
a takeover without approval of either the Board of Directors or the stockholders
of M&F Bancorp, Inc.

If in the future a takeover attempt should be contemplated, a Board-approved
transaction can be planned carefully and undertaken at the optimum time to
obtain terms most favorable to stockholders, with due consideration given to
such essential matters as the underlying or long-term value of assets and the
recognition of gain or loss for tax purposes or the postponement of such
recognition in a tax-free transaction. By reducing M&F Bancorp, Inc.'s
vulnerability to unilateral takeover attempts, the changes resulting from
adopting the "anti-takeover" Amendments may preserve the Board's ability to
consider the long and short range impact of proposed transactions and to plan
and make decisions accordingly. However, the changes resulting from adoption of
the "anti-takeover" Amendments will not necessarily prevent a hostile takeover
of M&F Bancorp, Inc. It will, however, give the Board of Directors greater
control over M&F Bancorp, Inc.'s future direction.

Despite the belief of the Board of Directors as to the benefits to stockholders
of the proposed "anti-takeover" Amendments, those changes may also have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors but which a majority of M&F Bancorp, Inc.'s stockholders may
deem to be in their best interest or in which stockholders may receive a premium
for their shares over current market prices. As a result, stockholders who might
desire to participate in such transactions may not have the opportunity to do
so. Stockholders also should note that some provisions of the proposed
"anti-takeover" Amendments may make it more difficult for holders of a majority
of the voting power of the common stock to change the composition of the Board
of Directors in circumstances which do not involve a takeover attempt or a
related business combination, but where the only reason for such change may be
the performance of the incumbent directors. The proposed "anti-takeover"
Amendments are described below.

PROPOSAL 3A: AMENDMENT TO ARTICLES ELIMINATING PREEMPTIVE RIGHTS

Article 8 of M&F Bancorp, Inc.'s Articles of Incorporation currently provides
that stockholders have the preemptive right to purchase a pro rata portion of
additional shares of stock upon issuance so that the stockholder's existing
ownership is not diluted. The Board of Directors believes that it would be in
the best interest of M&F Bancorp, Inc. and its stockholders to eliminate the
mandatory preemptive right of stockholders to purchase a pro rata portion of

<PAGE> 16

additional shares upon issuance. With some exceptions, such as the sale by M&F
Bancorp, Inc. of shares repurchased by it and held in treasury for the issuance
of shares upon the exercise of options awarded under its current stock option
plans when M&F Bancorp, Inc. sells shares of its common stock for cash, holders
of M&F Bancorp, Inc.'s stock presently have the preemptive right to acquire
additional shares of the common stock in proportion to their holdings so that
their ownership percentage is not diluted. M&F Bancorp, Inc.'s right to declare
stock dividends and splits will not be affected by the elimination of preemptive
rights. The Board of Directors believes that the existence of preemptive rights
inappropriately restricts the Board of Directors' ability to react to the
potential for issuance of new shares at such times and upon such conditions as
the Board of Directors may deem appropriate. The elimination of mandatory
preemptive rights does not preclude M&F Bancorp, Inc. from offering shares of
its Common Stock to all stockholders in a stock offering should the Board desire
to do so. The affirmative vote of the holders of at least three-fourths of the
outstanding shares of Common Stock of M&F Bancorp entitled to vote at the Annual
Meeting is required to adopt Proposal 3a.

The language to this Proposal 3a can be found in Article VII of the proposed
Amended and Restated Articles of Incorporated attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF PROPOSAL 3A.

PROPOSAL 3B: AMENDMENT TO ARTICLES ELIMINATING CUMULATIVE VOTING

Section 6.3 of M&F Bancorp, Inc.'s Articles of Incorporation provides that
stockholders shall have cumulative voting rights in the election of directors.
Cumulative voting allows shareholders to cast all of their votes for any one or
more directors rather than voting for or against each director individually. The
Board of Directors believes that it would be in the best interest of M&F
Bancorp, Inc. and its stockholders to eliminate cumulative voting rights. The
Board of Directors believes that the existence of cumulative voting rights has
the potential for allowing a small portion of M&F Bancorp, Inc.'s total
stockholders to gain disproportionate representation on M&F Bancorp, Inc.'s
Board of Directors.

Deleting cumulative voting rights has been proposed for the purpose of having an
anti-takeover effect, although the Board of Directors has no knowledge of any
current efforts to obtain control of M&F Bancorp, Inc. The elimination of
cumulative voting could have the effect of discouraging an attempt by another
person or entity through the acquisition of a small number of M&F Bancorp, Inc.
shares to gain representation on M&F Bancorp, Inc.'s Board with a view to
imposing a merger, sale of all or part of its assets or a similar transaction.
The Board of Directors believes that M&F Bancorp's directors should be elected
by a majority of the voting shares. The affirmative vote of the holders of at
least three-fourths of the outstanding shares of Common Stock of M&F Bancorp,
Inc. entitled to vote at the Annual Meeting is required to adopt Proposal 3b.

The language to this Proposal 3b can be found in Section 6.3 of the proposed
Amended and Restated Articles of Incorporated attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 3B.

PROPOSAL 3C: AMENDMENT TO ARTICLES ALLOWING BOARD TO
CONSIDER FACTORS REGARDING MERGERS

The Board of Directors believes that it is in the best interest of M&F Bancorp,
Inc. to include in its Articles of Incorporation provisions which allow the
Board of Directors to consider various factors in determining what is in the
best interests of M&F Bancorp, Inc. and its stockholders, including, but not
limited to, deciding whether to enter a merger, reorganization or other business
combination transaction.

These provisions would authorize directors of M&F Bancorp, Inc., in connection
with the exercise of their judgment in determining what is in the best interests
of M&F Bancorp, Inc. and its stockholders when evaluating an actual or proposed
business combination, a tender or exchange offer, a solicitation of options or
offers to purchase or sell M&F Bancorp, Inc. shares of capital stock by another
person, or a solicitation of proxies to vote shares of M&F Bancorp, Inc. capital
stock by another person, in addition to considering the adequacy and form of the
consideration to be paid in

<PAGE> 17

connection with any such transaction, to consider any or all of the following
factors and any other factors that they deem relevant:

- the social and economic effects of the transaction on M&F Bancorp,
Inc. and its subsidiaries, its and their employees, depositors,
loan and other customers, and creditors and the communities in
which M&F Bancorp, Inc. and its subsidiaries operate or are
located;

- the business and financial condition, and earnings prospects of the
acquiring person, including, but not limited to, debt service and
other existing financial obligations, financial obligations to be
incurred in connection with the acquisition, and other likely
financial obligations of the acquiring person, and the possible
effect of such conditions upon M&F Bancorp, Inc. and its
subsidiaries and the other elements of communities in which they
operate or are located;

- the competence, experience and integrity of the acquiring person
and its management;

- the prospects for a successful conclusion of the business
combination, offer or proposal, and

- M&F Bancorp, Inc.'s prospects as an independent entity.

These provisions shall be deemed solely to grant discretionary authority to the
Board of Directors.

A Board of Directors is generally limited to considering primarily the interest
of stockholders when deciding on whether to enter into a merger, a sale of all
or substantially all of the assets of a corporation or other similar
transaction. Although courts which have reviewed this issue have indicated that
a board may consider other constituencies, such as the impact of communities in
which it does business, it is, nevertheless, not entirely clear how far a board
may go in considering such "other constituencies" in making such evaluation. M&F
Bancorp, Inc.'s Board of Directors verifies that, although the manner and effect
to which a matter may affect stockholders is a vital element in any
consideration of the matter, the impact upon other constituencies which
necessarily affects the success of the company (and, hence, benefits the
stockholders) is also a legitimate factor to consider. M&F Bancorp, Inc.'s Board
of Directors believes that the Board should be authorized to consider such other
constituencies in its determination of what is in the best interests of M&F
Bancorp, Inc. and its stockholders. A number of corporations have adopted
provisions for their articles of incorporation similar to those described
herein.

By proposing this provision, M&F Bancorp, Inc.'s Board of Directors is alerting
stockholders to, and seeking their approval of, the Board of Directors' view
that its obligation to evaluate certain kinds of transactions, including a
merger, a tender or exchange offer, or proposal therefor, will extend beyond
merely evaluating consideration offered in strict financial terms as measured at
the particular time. The value of the consideration offered is of primary
importance, but in the view of M&F Bancorp, Inc.'s Board of Directors, it should
not necessarily be determinative.

One effect of this amendment may be that if a stockholder were to challenge the
legal basis for a decision of M&F Bancorp, Inc.'s Board of Directors in a merger
or takeover context (either the refusal to sell M&F Bancorp, Inc. or the
entering into an acquisition transaction with a specific party), a court may
give greater deference to the decision of M&F Bancorp, Inc.'s Board. In other
words, the amendment may dissuade stockholders who might be displeased with M&F
Bancorp, Inc. Board of Directors' response to a merger, tender offer or other
transaction from engaging M&F Bancorp, Inc. in costly and time-consuming
litigation. Such litigation might involve an allegation by a stockholder that
M&F Bancorp, Inc. Board of Directors breached an obligation to the stockholder
by not limiting its evaluation of a transaction solely to the value of the
transaction consideration in relation to the market price of M&F Bancorp, Inc.'s
securities or properties.

Thus, the approval of Proposal 3c may have certain anti-takeover effects by
enabling the Board of Directors to decline to approve an offer that
stockholders, even a majority of stockholders, might favor because, in the
Board's judgment, the factors that the Board is entitled to consider under the
proposal lead M&F Bancorp, Inc. Board to conclude that the offer is not in the
best interests of M&F Bancorp, Inc. and its stockholders despite what may appear
to be a premium

13
<PAGE> 18

price for stockholders. The affirmative vote of the holders of at least
three-fourths of the outstanding shares of Common Stock of M&F Bancorp, Inc.
entitled to vote at the Annual Meeting is required to adopt Proposal 3c.

The language to this Proposal 3c can be found in Section 8.1 of the proposed
Amended and Restated Articles of Incorporated attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 3C.

PROPOSAL 3D: AMENDMENT TO ARTICLES REQUIRING A "FAIR PRICE"
TO ALL STOCKHOLDERS FOR MERGER TRANSACTIONS

The Board of Directors believes that it is in the best interests of M&F Bancorp,
Inc. to include in M&F Bancorp, Inc.'s Articles of Incorporation a provision
requiring that, in a merger or other certain business combinations involving a
stockholder who controls more than 20% of the outstanding capital stock of M&F
Bancorp, Inc. that each stockholder who is independent of the acquiring
stockholder receive at least a specified amount for his or her shares.

The fair price provision is designated to encourage potential acquirers to
negotiate at arm's length with the Board of Directors. In the absence of such
negotiations, this provision seeks to ensure that any multi-step attempt to take
over M&F Bancorp, Inc. will be made on terms offering similar treatment to all
stockholders. In the past, there have been takeovers of publicly held companies
accomplished by the purchase of blocks of stock in open market purchases or
otherwise at a price above the prevailing market prices, followed by a second
step merger or other transaction in which the shares acquired or purchased for
less than the value paid in the first step.

In a transaction where the fair price rules apply, the requirements include:

- the consideration to be received in the business combination
is in cash or in the same form as the interested stockholder
has paid for the largest number of shares acquired by such
interested stockholder and

- the per share consideration to be received by holders of
outstanding stock in the business combination (other than the
interested stockholder) is equal to the highest of

- the highest per share price paid by such interested
stockholders in acquiring M&F Bancorp's stock in the
three years prior to the announcement of the business
combination, or in the transaction in which it became
an interested stockholder,

- the fair market value per share on the announcement
date or on the date on which the interested
stockholder became an interested stockholder, or

- The price per share equal to the fair market value
(as determined by the non-interested directors in
good faith) per share of the stock of the Corporation
determined pursuant to subparagraph (b)(ii) above,
multiplied by the ratio of (1) the highest per share
price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the
interested stockholder for any shares of stock of M&F
Bancorp, Inc. acquired by it within the three year
period immediately prior to the Announcement Date to
(2) the Total Stockholders' Equity per share of
common stock (determined in accordance with generally
accepted accounting principles) on the first date in
such three year period on which the interested
stockholder acquired any shares of stock of M&F
Bancorp, Inc.

The Board of Directors recognizes that not all two-tiered tender offers or other
two-step transactions are intended to pressure stockholders into hasty decisions
or to discriminate among stockholders. However, taking all factors into
consideration, the Board believes that it is appropriate to take action to
reduce the possibility to two-tiered transactions which are unfair.

<PAGE> 19

While the Board believes that the fair price provision is in the best interests
of M&F Bancorp, Inc.'s stockholders, there are several possible negative
considerations. The effect of the fair price provision may be to deter a future
takeover attempt which the Board has not approved, but which a majority of
stockholders may deem to be in their best interest or in which stockholders may
receive a premium for their shares over the then market value. The affirmative
vote of the holders of at least three-fourths of the outstanding shares of
Common Stock of M&F Bancorp, Inc. entitled to vote at the Annual Meeting is
required to adopt Proposal 3d.

The language to this Proposal 3d can be found in Section 8.3 of the proposed
Amended and Restated Articles of Incorporated attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 3D.

PROPOSAL 3E: AMENDMENT TO THE ARTICLES REQUIRING DIRECTOR
REMOVAL ONLY FOR "CAUSE"

M&F Bancorp, Inc.'s Bylaws currently provide that a director may be removed with
or without cause by a vote of a majority of voting stockholders. The Board
recommends an amendment to the Articles of Incorporation to require the
directors be removed only for cause. This amendment may discourage potential
purchasers because it would operate to delay the purchaser's ability to obtain
control of the Board of Directors by petitioning to remove a director for any
reason other than for cause. In addition, the amendment would prohibit
stockholders who do not approve of policies of the Board of Directors from
replacing a majority of directors, unless they can show cause and obtain the
requisite vote. For the same reason, this amendment may so deter certain
mergers, tender offers or other takeover attempts which some of the company's
voting stock may deem to be in their best interests. In addition to adding this
language to the Article of Incorporation, the conflicting language of the Bylaws
will be removed. The affirmative vote of the holders of at least three-fourths
of the outstanding shares of Common Stock of M&F Bancorp, Inc. entitled to vote
at the Annual Meeting is required to adopt Proposal 3e.

The language to this Proposal 3e can be found in Section 6.4 of the proposed
Amended and Restated Articles of Incorporated attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 3E.

PROPOSAL 3F: AMENDMENT TO ARTICLES REQUIRING SUPERMAJORITY APPROVAL
OF CERTAIN TRANSACTIONS

The Board of Directors believes that it is in the best interest of M&F Bancorp,
Inc. to include in its Articles of Incorporation a provision establishing
supermajority voting approval requirements for certain business combinations
between M&F Bancorp, Inc. and a potential acquirer unless the transaction has
been approved by a majority vote of the Board of Directors. The Board of
Directors believes that it is in the best interest of M&F Bancorp, Inc. to
include this amendment in its Articles of Incorporation in order to ensure that
any potential acquirer presents its offer to acquire M&F Bancorp, Inc. to the
Board of Directors to ensure the fairness of the offer. The affirmative vote of
the holders of at least three-fourths of the outstanding shares of Common Stock
of M&F Bancorp, Inc. entitled to vote at the Annual Meeting is required to adopt
Proposal 3f.

The language to this Proposal 3f can be found in Section 8.2 of the proposed
Amended and Restated Articles of Incorporated attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 3F.

PROPOSAL 3G: AMENDMENT TO ARTICLES REQUIRING SUPERMAJORITY
APPROVAL FOR AMENDMENT OR REPEAL OF ARTICLES OF INCORPORATION

The Board of Directors believes that it is in the best interest of M&F Bancorp,
Inc. to include in M&F Bancorp, Inc.'s Articles of Incorporation a provision
requiring that certain provisions of M&F Bancorp, Inc.'s Articles be amended or
eliminated only by a higher stockholder vote than is required under North
Carolina law. Such a provision is intended to

<PAGE> 20

limit the ability of stockholders to eliminate the anti-takeover effects of
provisions of M&F Bancorp, Inc. Articles. If this amendment is approved, any
small stockholder who wishes to repeal or amend the anti-takeover defenses
listed above would have to get the approval of three-fourths of M&F Bancorp,
Inc.'s stockholders. The affirmative vote of the holders of at least
three-fourths of the outstanding shares of Common Stock of M&F Bancorp, Inc.
entitled to vote at the Annual Meeting is required to adopt Proposal 3g.

The language to this Proposal 3g can be found in Section 8.4 of the proposed
Amended and Restated Articles of Incorporated attached as Appendix A.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 3G.

PROPOSAL 4: RATIFICATION OF APPOINTMENT OF ACCOUNTANTS

The certified public accounting firm of Deloitte & Touche, L.L.P. has been
appointed by the Board of Directors to serve as the independent accountants for
2000, and a proposal to ratify that appointment will be submitted for voting by
the stockholders at the annual meeting. Representatives of Deloitte & Touche
are expected to attend the annual meeting and will be available to respond to
appropriate questions and will have the opportunity to make a statement if he
or she desires to do so.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PROPOSAL 4.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and greater than 10% stockholders to file reports of their
ownership and any changes in ownership of M&F Bancorp, Inc. securities with the
Securities and Exchange Commission. These directors, executive officers and
greater than 10% stockholders are required by regulation to provide M&F Bancorp,
Inc. with a copy of any Section 16(a) reports they file. Based on M&F Bancorp,
Inc.'s review of copies of these reports received by it and written
representations made to M&F Bancorp, Inc. by these persons, M&F Bancorp, Inc.
believes that all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10% stockholders were complied with during
the year ended December 31, 1999.

INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

During the year ended December 31, 1999, several directors and executive
officers of M&F Bancorp, Inc. and Mechanics and Farmers Bank and their
associates, were customers of Mechanics and Farmers Bank, and it is anticipated
that these persons will continue to be customers of Mechanics and Farmers Bank
in the future. All transactions between Mechanics and Farmers Bank and its
executive officers and directors, and their associates, were made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and, in the opinion of management, did not
involve more than the normal risk of repayment or present other unfavorable
features.

OTHER MATTERS

The Board of Directors knows of no other matters to be brought before the annual
meeting. If other matters are properly brought before the annual meeting, the
persons appointed in the proxy intend to vote the shares represented by the
proxy according to their best judgment.

STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING

Stockholders interested in presenting a proposal for consideration at the annual
meeting of stockholders in 2001 may do so by following the procedures prescribed
in Rule 14a-8 under the Securities Exchange Act of 1934. To be eligible for
inclusion, stockholder proposals must be received by M&F Bancorp, Inc. no later
than February 9, 2001.

<PAGE> 21

WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE, WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU DO ATTEND THE
ANNUAL MEETING, YOU THEN MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON. THE PROXY
MAY BE WITHDRAWN AT ANY TIME PRIOR TO VOTING.

MISCELLANEOUS

M&F Bancorp, Inc.'s annual report for the year ended December 31, 1999 has been
mailed along with this proxy statement to all stockholders of record as of March
17, 2000. Any stockholder who has not received a copy of this annual report may
obtain a copy by writing to M&F Bancorp, Inc. The annual report is not be
treated as part of the proxy solicitation material or having been incorporated
by reference in this proxy statement.

A copy of M&F Bancorp, Inc.'s Form 10-KSB that is to be filed with the
Securities and Exchange Commission by March 30, 2000 will be provided to you
without charge if you are a stockholder of M&F Bancorp, Inc. as of March 17,
2000. Please make your written request to Fohliette Becote, Corporate Secretary,
M&F Bancorp, Inc., 2634 Chapel Hill Blvd., Durham, North Carolina 27707.

17
<PAGE> 22

EXHIBIT A

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
M&F BANCORP, INC.

ARTICLE I

The name of the corporation is M&F Bancorp, Inc. (the "Corporation").

ARTICLE II

Section 2.1. Total Authorized Shares of Capital Stock. The Corporation
shall have authority to issue a total of 5,000,000 shares of capital stock, none
of which shall have any par value, divided into such classes as follows:

Class Number of Shares
----- ----------------
<S> <C>
Common Stock 5,000,000
</TABLE>

Section 2.2. Common Stock. The shares of Common Stock shall be one and
the same class. Subject to the rights of holders of any Preferred Stock as
determined by the Board of Directors pursuant to the North Carolina Business
Corporation Act ("NCBCA") as now constituted or hereafter amended, the holders
of shares of Common Stock shall have one vote per share on all matters on which
holders of shares of Common Stock are entitled to vote and shall be entitled to
participate pro rata after preferential rights of holders of any Preferred Stock
in the distribution of the net assets of the Corporation upon dissolution.

ARTICLE III

The street address and county of the current registered office of the
Corporation is 2634 Chapel Hill Blvd., Durham County, Durham, North Carolina
27707. The mailing address of the current registered office of the Corporation
is Post Office Box 1932, Durham, North Carolina 27702. The name of the current
registered agent is J.W. Taylor.

ARTICLE IV

The name and address of the incorporator is as follows:

J.W. Taylor
2634 Chapel Hill Blvd.
Durham, North Carolina 27707

ARTICLE V

The provisions of Article 9 and Article 9A of the NCBCA entitled "The
North Carolina Shareholder Protection Act" and "The North Carolina Control Share
Acquisition Act", respectively, shall not be applicable to the Corporation.

ARTICLE VI

Section 6.1. Board of Directors. The number of directors of the
Corporation shall not be less than three (3) nor more than nine (9), with the
exact number to be fixed from time to time as provided in the Corporation's
Bylaws.

<PAGE> 23

Section 6.2. Initial Board of Directors. The number of directors
constituting the initial Board of Directors of the Corporation shall be nine
(9).

Section 6.3. Cumulative Voting in Election of Directors. The
shareholders of the Corporation shall not have the right to cumulate their votes
in the election of directors.

Section 6.4. Removal of Directors. No director shall be removed during
the term of his or her office by the stockholders unless such removal is for
"cause" and such removal is approved by the holders of three-quarters of the
outstanding stock of the Corporation. For the purposes of this Article, "cause"
shall be defined to mean (i) the criminal prosecution and conviction during the
course of the director's service as a director of this Corporation of an act of
fraud, embezzlement, theft, or personal dishonesty (excepting minor traffic and
similar violations in the nature of a misdemeanor under North Carolina law);
(ii) the prosecution and conviction of any criminal offense involving dishonesty
or breach of trust described in the Federal Deposit Insurance Act, as amended,
or any successor federal statute that would disqualify such director from
serving as a director of the Corporation or any of its wholly-owned depository
institution subsidiaries, or (iii) the occurrence of any event resulting in a
director being excluded from coverage, or having coverage limited as to the
director when compared to other covered directors, under any of the
Corporation's fidelity bonds or insurance policies covering its directors,
officers or employees. Any attempt to remove a director for "cause" must be
established after written notice of specific charges and the opportunity to meet
and refute such charges.

ARTICLE VII

Shareholders shall not have preemptive rights, provided, however, that
the Corporation's Board of Directors, in its sole discretion, may choose to
permit preemptive rights upon any new stock issuance.

ARTICLE VIII

Section 8.1. Board Approval of Certain Transactions. In deciding
whether to recommend to shareholders or reject any proposed merger, share
exchange, consolidation, reverse stock split, sale, exchange or lease of all or
substantially all of the assets of the Corporation, or engage in any similar
transaction, the Board of Directors may consider any or all of the following
factors and any other factors they deem relevant:

(a) the social and economic effects of the transaction on M&F
Bancorp, Inc. and its subsidiaries, its and their employees,
depositors, loan and other customers, and creditors and the communities
in which the Company and its subsidiaries operate or are located;

(b) the business and financial condition, and earnings
prospects of the acquiring person, including, but not limited to, debt
service and other existing financial obligations, financial obligations
to be incurred in connection with the acquisition, and other likely
financial obligations of the acquiring person, and the possible effect
of such conditions upon M&F Bancorp, Inc. and its subsidiaries and the
other elements of communities in which they operate or are located;

(d) the prospects for a successful conclusion of the business
combination, offer or proposal, and

(e) M&F Bancorp, Inc.'s prospects as an independent entity.

These provisions shall be deemed solely to grant discretionary authority to the
Board of Directors.

Section 8.2. Shareholder Approval of Certain Transactions. The
affirmative vote of the holders of not less than 75% of the outstanding stock of
the Corporation is required to authorize (a) a merger, share exchange or
consolidation of the Corporation with, or (b) a sale, exchange, or lease of all
or substantially all of the assets of the Corporation to, any person or entity
unless approval of any such transaction in (a) or (b) above is recommended by at
least a majority of the entire Board of Directors. If any such transaction is
recommended to shareholders by at least a

A-2

<PAGE> 24

majority of the Board of Directors, then only a majority vote of shareholders is
required. For purposes of this provision, substantially all of the assets shall
mean assets having a fair market value or book value, whichever is greater, of
25% or more of the total assets as reflected on a consolidated balance sheet of
the Corporation as of a date no earlier than 45 days prior to any acquisition of
such assets. The affirmative vote of the holders of not less than 75% of the
outstanding voting stock of the Corporation is required to amend or repeal the
provisions of this Section 8.2.

Section 8.3. Fair-Price Requirements for Certain Transactions. The
affirmative vote of the holders of not less than 75% of the outstanding stock of
the Corporation and the affirmative vote of the holders of not less than a
majority of the outstanding stock held by stockholders other than the
Controlling Party (as defined below) shall be required for the approval or
authorization of any merger, share exchange, consolidation, reverse stock split,
sale, exchange or lease of all or substantially all of the assets of the
Corporation (collectively referred to as "Transactions") if any such Transaction
involves any stockholder owning or controlling 20% or more of the corporation's
stock at the time of the proposed Transaction ("Controlling Party"); provided,
however, that these voting requirements shall not be applicable in any
Transaction in which all of the conditions specified in either of the following
subparagraphs (a) and (b) are met:

(a) The Transaction shall have been approved by a majority of
the Continuing Directors (as defined below).

(b) The aggregate amount of (x) cash and (y) fair market value
(as determined by the Continuing Directors in good faith) as of the
date of the consummation of any Transaction of consideration other than
cash, to be received per share by the holders of stock of this
Corporation in such Transaction shall be at least equal to the highest
amount determined under sub-clauses (i), (ii) and (iii), below:

(i) The highest per share price (including any
brokerage commissions, Transfer taxes and soliciting dealer's
fees) paid by the Controlling Party for any share of stock of
the Corporation acquired by it (1) within the three-year
period immediately prior to the first public announcement of
the proposed Transaction (the "Announcement Date") or (2) the
Transaction in which it became a Controlling Party, whichever
is higher;

(ii) The fair market value (as determined by the
Continuing Directors in good faith) per share of stock of the
Corporation on the Announcement Date or on the date on which
the Controlling Party became a Controlling Party, whichever is
higher;

(iii) The price per share equal to the fair market
value (as determined by the Continuing Directors in good
faith) per share of the stock of the Corporation determined
pursuant to subparagraph (b)(ii) above, multiplied by the
ratio of (1) the highest per share price (including any
brokerage commissions, Transfer taxes and soliciting dealers'
fees) paid by the Controlling Party for any shares of stock of
the Corporation acquired by it within the three year period
immediately prior to the Announcement Date to (2) the Total
Stockholders' Equity per share of common stock (determined in
accordance with generally accepted accounting principles) on
the first date in such three year period on which the
Controlling Party acquired any shares of stock of the
Corporation.

The term "Continuing Director" means any member of the Board of
Directors of the Corporation, while such person is a member of the
Board of Directors, who is not a Controlling Party or in any manner
affiliated or associated with or a representative of the Controlling
Party and was a member of the Board of Directors prior to the time the
Controlling Party became a Controlling Party, and any person who
subsequently becomes a member of the Board of Directors, while such
person is a member of the Board of Directors, who is not a Controlling
Party or in any manner affiliated or associated with or a
representative of the Controlling Party if such person's nomination for
election or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors then in office.
Under no circumstances shall this Corporation be deemed to be a
Controlling Party.

A-3

<PAGE> 25

ARTICLE IX

Supermajority Approval for Amendments. Unless a greater voting requirement is
required by law for these Amended and Restated Articles of Incorporation, the
affirmative vote of the holders of three-fourths of the outstanding stock of the
Corporation is required to amend Sections 6.3, 6.4, Article VII, Sections 8.1,
8.2, 8.3, and this Article IX. Unless a greater voting requirement is required
by law or these Amended and Restated Articles of Incorporation, the affirmative
vote of the holders of a majority of the outstanding stock of the Corporation is
required to amend all other provisions of these Articles of Incorporation.

This the ___ day of ___________, 2000.

-----------------------------------
J. W. Taylor
Chairman, President and CEO

A-4
<PAGE> 26

APPENDIX TO SCHEDULE 14A

--------------------------

PROXY

--------------------------

M&F BANCORP, INC., DURHAM, NORTH CAROLINA

ANNUAL MEETING OF STOCKHOLDERS

MAY 3, 2000

The undersigned hereby appoints Vivion R. Patterson, Joseph M. Sansom, Julia W.
Taylor and Walter S. Tucker or either of them, as proxies, with full power of
substitution to vote as Proxy for the undersigned at the Annual Meeting of
Stockholders of M&F Bancorp, Inc. to be held at the Sheraton Imperial Hotel and
Convention Center, I-40 at Page Road, Research Triangle Park, North Carolina, at
10:00 a.m. Local Time, on Wednesday, May 3, 2000, and at any and all
adjournments thereof, the number of shares which the undersigned will be
entitled to vote if then personally present, for the following purposes:

1. To elect six (6) individuals to serve as Directors until the 2001
Annual Meeting. The nominees are:

Julia W. Taylor
Benjamin S. Ruffin
Joseph M. Sansom
Aaron L. Spaulding
Genevia Gee Fulbright
Maceo K. Sloan

[ ] FOR ALL NOMINEES LISTED ABOVE (EXCEPT AS INDICATED BELOW).

[ ] WITHHOLD AUTHORITY TO VOTE FOR NOMINEES. To withhold authority to
vote for any individual nominee, strike a line through the
nominee's name as set forth above.

2. To approve an amendment to the Articles of Incorporation to increase the
number of authorized shares of Common Stock from 1,000,000 to 5,000,000.