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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 March 31, 2000
Commission File Number 0-27307
M&F BANCORP, INC.
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(Name of small business issuer in its charter)
North Carolina 56-1980549
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2634 Chapel Hill Blvd., P.O. Box 1932, Durham, North Carolina 27707
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(Address of principal executive offices)
(919) 683-1521
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(Issuer's telephone number)
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 [ ]
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 853,725
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Outstanding at April 28, 2000
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
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M&F BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheet as of March 31, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Income for the three months ended March 31, 4
2000 and March 31, 1999
Consolidated Condensed Statements of Shareholders' Equity for the three months 5
ended March 31, 2000 and March 31, 1999
Consolidated Condensed Statements of Cash flows for the periods ended March 31, 6
2000 and March 31, 1999
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results 8
of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page 11
Exhibit 27 12
</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM 1 Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
<S> <C> <C>
Cash and due from financial institutions $ 6,310 $ 5,349
Interest-earning deposits in financial 4,975 4,187
institutions 1,725 5,100
Federal funds sold
Cash and cash equivalents 13,010 14,636
Securities available for sale 31,584 30,390
Securities held to maturity 1,412 1,412
Loans:
Commercial Loans 10,279 7,392
Real Estate-Construction Loans 6,187 7,395
Real Estate-Mortgage Loans 84,983 84,121
Consumer Loans 5,471 5,430
Other Loans 882 905
Total Loans 107,802 105,243
Unearned income 333 341
Allowance for Loan Losses 1,386 1,342
Net Loans 106,083 103,560
Bank premises and equipment, net 5,144 5,013
Other assets 2,113 2,733
TOTAL ASSETS $ 159,346 $ 157,744
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits 27,271 28,583
Savings, NOW, and MMDA 62,214 60,210
Time Deposits 41,343 40,736
Total Deposits 130,828 129,529
Other Borrowings 10,000 10,000
Other Liabilities 2,006 1,916
Total Liabilities 142,834 141,445
Shareholders' Equity:
Common Stock 6,000 6,000
Retained Earnings 10,606 10,352
Accumulated Other Comprehensive Loss (94) (53)
Shareholders' Equity 16,512 16,299
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 159,346 $ 157,744
</TABLE>
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CONSOLIDATED CONDENSED STATEMENT OF INCOME
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ending: March 31, 2000 March 31, 1999
<S> <C> <C>
Interest Income:
Interest on Loans $2,452 $2,085
Securities :
Taxable 372 269
Tax exempt 126 128
Federal Funds Sold 17 67
Other Interest 37 79
Total Interest $3,004 $2,628
Income
Interest Expense:
Interest-bearing Demand 31 32
Savings 303 273
Time Deposits 508 485
Interest on Federal Funds & Borrowings 116 126
Total Interest Expense $ 958 $ 916
Net Interest Income 2,046 1,712
Provision for Loan Losses 77 117
Net Interest Income After Provision for Loan Losses 1,969 1,595
Non-interest Income 355 364
Salaries & Employee Benefits 1,055 965
Other Non-interest Expense 792 717
Income before Taxes 477 277
Income Tax Expense 155 81
Net Income $ 322 $ 196
Earnings per share common equivalent shares:
Basic $ .38 $ .23
Diluted $ .38 $ .23
Weighted average common shares outstanding:
Basic 854 854
Diluted 854 854
</TABLE>
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CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
<S> <C> <C>
Beginning Balance, January 1 $ 16,299 $ 16,497
Net Income 322 196
Other Comprehensive Loss (41) (141)
Dividends (68) (111)
Ending Balance, March 31 $ 16,512 $ 16,441
</TABLE>
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended: March 31, 2000 March 31, 1999
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 322 $ 196
Adjustments to reconcile net income to net cash from
from operating activities:
Provision for possible loan losses 77 117
Provision for depreciation 98 93
Deferred income taxes 67 (5)
Gain on sale or disposal of assets (5)
Deferred loan fees 8 17
Income Taxes Payable 19 98
Interest Receivable 166
Prepaid expenses and other assets 19 33
Accrued expenses and other liabilities 128 (195)
Other (4) 172
Net Cash from Operating Activities 900 521
Cash flows used in Investing Activities:
Proceeds from sales and maturities of securities (AFS) 1,000 3,560
Purchase of securities (AFS) (2,000) (6,545)
Net increase (decrease) in loans (2,554) 1,003
Purchase of premises and equipment (202) (2,510)
Net Cash Used in Investing Activities (3,756) (4,492)
Net Cash Provided by (Used In) Investing Activities
Net increase (decrease) in demand and savings deposits (3,901) 641
Net increase (decrease) in certificates of deposit 657 (286)
Cash dividends (68) (111)
Net Cash Provided By (Used In) Financing Activities 1,230 (4,298)
Net Decrease in Cash and Cash Equivalents (1,626) (8,269)
Cash and Cash Equivalents at the Beginning of the Period 14,636 20,963
Cash and Cash Equivalents at the End of the Period $ 13,010 $ 12,694
</TABLE>
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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 subsidiary, Mechanics &
Farmers Bank (M&F Bank). All significant intercompany accounts and transactions
have been eliminated in consolidation. The accompanying unaudited Consolidated
Condensed Financial Statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and
instructions from Regulation S-B.
In the opinion of management, all adjustments consisting of normal recurring
adjustments necessary for a fair presentation have been included. M&F Bancorp,
Inc. became the parent holding company of Mechanics & Farmers Bank on September
1, 1999 therefore prior periods reflect the balances of M&F Bank and its
subsidiary.
2. Investment Securities
The Company accounts for investment securities using Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS 115). Under SFAS 115, the accounting for investment
securities held as an asset is dependent upon their classification as held to
maturity, available for sale, or trading assets.
3. Loans
Loans are carried at their principal amount outstanding, net of the allowance
for possible loan losses and deferred fees. Interest on commercial, mortgage and
installment loans is accrued and credited to operating income based upon the
principal amount outstanding. The Company's policy is to discontinue the accrual
of interest when, in management's judgment, circumstances indicate that
collection is doubtful. The Company applies Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a Loan (SFAS 114)
and Statement of Financial Accounting Standards No. 118, Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures (SFAS 118).
4. Earnings Per Share
Earnings per share is calculated on the basis of the weighted-average number of
common shares outstanding. There were no dilutive potential common shares
outstanding for the periods ended March 31, 2000 and March 31, 1999. The shares
outstanding have been adjusted for 3-for-2 stock split accounted for as a 50
percent dividend declared on December 14, 1999 to all shareholders of record
December 14, 1999 payable January 21, 2000.
5. Regulatory Capital Requirements
The Company is subject to various regulatory capital requirements administered
by the federal 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 March 31, 2000, the Company had the
following capital levels.
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Capital
Risk Based Tier 1 Tier 2
16.39% 10.64% 11.69%
6. Comprehensive Income
Effective January 1, 1999, The Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"). Adoption of this standard requires the
Company to (a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
7. Accounting Change Pending Implementation
The Financial Accounting Standards Board has issued Statement of Financial
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"). This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This Statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000.
8. Common Stock Cash Dividends
On March 14, 2000 the Board of Directors of the Company declared a quarterly
cash dividend of $.08 per share to all shareholders of record March 14, 2000
payable April 15, 2000. The payment of the cash dividend reduced shareholders'
equity by $68,298.
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The following discussion and analysis of earnings and related financial data
should be read in conjunction with the unaudited financial statements and
related notes to the consolidated condensed statements. It is intended to assist
you in understanding the financial condition and the results of operations for
the three months ended March 31, 2000.
Forward -Looking Statements
When used in this report, the words or phrases "will likely result," "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
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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 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.
Financial Condition
Total assets increased 1.01 percent to $159,346,000 at March 31, 2000 from
$157,744,000 on December 31, 1999. The investment portfolio balance (including
FHLB stock) as of March 31, 2000 was $32,996,000 compared to $31,802,000 at
December 31, 1999. The portfolio decrease was caused by the increase in the loan
portfolio. Maturities and deposits were used to fund loan demand. The portfolio
can be liquidated to meet loan demand if necessary. Approximately 96 percent of
the portfolio are classified as available -for-sale. All securities purchased
during 2000 were classified in the available-for-sale category.
The increase of 2.4 percent in net loans from December 31, 1999 was represented
by an increase in commercial loans. Management continues its effort to add more
adjustable rate loans to the portfolio in an effort to reduce the interest rate
sensitivity of our loans. This effort is normally achieved in the commercial
loans most of which are secured by real estate.
Deposits increased 1.00 percent to $130,828,000 at March 31, 2000 from
$129,529,000 at December 31, 1999. Management believes that the current level of
deposit growth may be difficult to maintain as we move forward as customers
continue to look for alternative investment opportunities with higher yields.
Because of availability of future deposits the Company will continue to seek
other sources of liquidity to meet loan demand.
Total shareholders' equity increased 1.30 percent to $16,512,000 on March 31,
2000 from $16,299,000 at December 31, 1999. The marginal change in this account
was due to an increase in net income and partially offset by dividends.
Results of Operations - Comparison of March 31, 2000 with March 31, 1999
Net income increased 64.29 percent to $322,000 on March 31, 2000 compared with
$196,000 for the same period in 1999. The increase in net income was primarily
due to an increase in loan income resulting from an increase in net loans
outstanding. Management increased the monthly loan loss provision beginning in
March and anticipates maintaining the higher provision for the remainder of
2000. The reduction in the loan loss
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provision for first quarter 2000 compared to first quarter 1999 contributed to
the increase in net income. Noninterest expenses were impacted by the end of the
lease period (February 2000) for some data processing equipment. The equipment
will be purchased by the Bank at fair market value during April 2000. Management
anticipates that noninterest expense will increase for the next quarter due to
retroactive merit increases and incentive compensation that will be paid in the
second quarter.
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 March 31, 2000 allowance for
loan losses was 1,386,000 or 1.29 percent of total loans outstanding compared
with $1,342,000 or 1.28 percent of total loans outstanding on December 31, 1999.
Management has 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, and foreclosed
assets, which have been acquired as a result of foreclosure or deed-in-lieu of
foreclosure.
<TABLE>
<CAPTION>
03/31/00 12/31/99 03/31/99
(Dollars in Thousands)
<S> <C> <C> <C>
Non-Accruing Loans $ 643 518 $ 765
Accruing Loans Delinquent 90 days or more 924 1,300 622
Foreclosed Assets 76 56 45
Restructured Loans 997 725
Total Non-Performing Assets $2,640 $2,599 $1,432
Percentage of total assets 1.66% 1.65% .96%
</TABLE>
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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: Not applicable
ITEM 5. Other Information: Not applicable
ITEM 6. Exhibits and Report on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended March 31, 2000
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to signed on its behalf by the undersigned, thereunto duly
authorized.
M&F Bancorp, Inc.
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(Registrant)
Date: May 8, 2000
By: /s/ J.W. Taylor
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J.W. Taylor
Chairman, President/CEO
Date: May 8, 2000
By: /s/ Lee Johnson Jr.
----------------------------------
Lee Johnson, Jr.
Vice President
11
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,310
<INT-BEARING-DEPOSITS> 4,975
<FED-FUNDS-SOLD> 1,725
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 31,584
<INVESTMENTS-CARRYING> 1,412
<INVESTMENTS-MARKET> 0
<LOANS> 107,469
<ALLOWANCE> 1,386
<TOTAL-ASSETS> 159,346
<DEPOSITS> 130,828
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,006
<LONG-TERM> 10,000
0
0
<COMMON> 5,999
<OTHER-SE> 10,512
<TOTAL-LIABILITIES-AND-EQUITY> 159,346
<INTEREST-LOAN> 2,452
<INTEREST-INVEST> 430
<INTEREST-OTHER> 85
<INTEREST-TOTAL> 3,004
<INTEREST-DEPOSIT> 842
<INTEREST-EXPENSE> 958
<INTEREST-INCOME-NET> 2,046
<LOAN-LOSSES> 77
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 1,848
<INCOME-PRETAX> 477
<INCOME-PRE-EXTRAORDINARY> 477
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 322
<EPS-BASIC> .38
<EPS-DILUTED> .38
<YIELD-ACTUAL> 7.54
<LOANS-NON> 643
<LOANS-PAST> 412
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 861
<ALLOWANCE-OPEN> 1,342
<CHARGE-OFFS> 45
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 1,386
<ALLOWANCE-DOMESTIC> 1,386
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
