10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

Commission File Number 0-27307

M&F BANCORP, INC.

(Exact name of small business issuer as specified in its charter)

North Carolina	56-1980549
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

2634 Durham Chapel Hill Blvd., P.O. Box 1932, Durham, North Carolina 27707

(Address of principal executive offices)

(919) 683-1521

(Issuer’s telephone number, including area code)

Indicate by check mark 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  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 125-2 of the Exchange Act.    Yes  ¨    No  x

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 1,685,646

Outstanding at November 10, 2005

Transitional Small Business Disclosure Format (Check one):    Yes  ¨    No  x

M&F BANCORP, INC.

Form 10-QSB

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets as of September 30, 2005 and December 31, 2004	3
	Consolidated Condensed Statements of Income for the nine-month periods ended September 30, 2005 and September 30, 2004	4
	Consolidated Condensed Statements of Income for the three-month periods ended September 30, 2005 and September 30, 2004	5
	Consolidated Condensed Statements of Shareholders’ Equity for the nine-month periods ended September 30, 2005 and September 30, 2004	6
	Consolidated Condensed Statements of Cash Flows for the nine-month periods ended September 30, 2005 and September 30, 2004	7
	Notes to Consolidated Condensed Financial Statements	8-12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12-22
Item 3.	Controls and Procedures	22
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	24
Item 6.	Exhibits	24-25
Signature Page		26

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PART I: FINANCIAL INFORMATION

ITEM 1 Financial Statements

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in thousands, except per share data)

	September 30, 2005 (Unaudited)			December 31, 2004*
ASSETS
Cash and amounts due from financial institutions	$	4,832		$	4,432
Interest-earning deposits in financial Institutions		34,181			15,236
Cash and cash equivalents		39,013			19,668
Securities available for sale		25,015			26,691
Securities held to maturity		190			385
Loans:
Commercial, financial and agricultural loans		99,985			102,241
Real estate-construction loans		21,449			20,296
Real estate-mortgage loans		40,761			40,014
Installment loans to individuals		5,020			6,743
Total Loans		167,215			169,294
Unearned income		(525	)		(618	)
Allowance for loan losses		(2,803	)		(2,512	)
Net loans		163,887			166,164
Land available for sale		590			590
Premises and equipment, net		6,121			6,196
Other assets		11,664			11,575
TOTAL ASSETS	$	246,480		$	231,269
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Interest-bearing deposits	$	170,464		$	157,410
Non-interest-bearing deposits		32,780			31,649
Total Deposits		203,244			189,059
Other borrowings		17,626			16,802
Other liabilities		5,239			5,068
Total liabilities		226,109			210,929
Commitments and Contingencies (Note 8)
Shareholders’ Equity:
Common stock, no par value, authorized 5,000,000 shares; issued and outstanding 1,685,646		5,901			5,901
Retained earnings		14,572			14,143
Accumulated other comprehensive income (loss)		(102	)		296
Total shareholders’ equity		20,371			20,340
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	246,480		$	231,269

* Derived from audited consolidated condensed financial statements.

See notes to unaudited consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(unaudited)

(Dollars in thousands, except per share data)

	Nine Months Ended:
	September 30, 2005		September 30, 2004
Interest income:
Interest on loans Securities:	$	8,896	$	8,382
Taxable		407		395
Tax exempt		258		286
Interest on bank deposits		375		75
Total interest income		9,936		9,138
Interest expense:
Interest on deposits		2,407		1,863
Interest on federal funds & borrowings		607		455
Total interest expense		3,014		2,318
Net interest income		6,922		6,820
Provision for loan losses		362		345
Net interest income after provision for loan losses		6,560		6,475
Non-interest income		1,866		2,189
Salaries & employee benefits		4,008		4,167
Other non-interest expense		3,478		2,779
Income before provision for income taxes		940		1,718
Provision for income taxes		258		476
Net income	$	682	$	1,242
Earnings per common share:
Basic	$	0.40	$	0.74
Diluted	$	0.39	$	0.72
Weighted average common shares outstanding:
Basic		1,686		1,686
Diluted		1,736		1,730
Dividends per common share	$	0.15	$	0.15

See notes to unaudited consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended:
	September 30, 2005		September 30, 2004
Interest income:
Interest on loans Securities:	$	3,117	$	2,894
Taxable		141		127
Tax exempt		83		90
Interest on bank deposits		156		31
Total interest income		3,497		3,142
Interest expense:
Interest on deposits		903		663
Interest on federal funds & borrowings		197		152
Total interest expense		1,100		815
Net interest income		2,397		2,327
Provision for loan losses		30		119
Net interest income after provision for loan losses		2,367		2,208
Non-interest income		686		1,104
Salaries & employee benefits		1,371		1,478
Other non-interest expense		1,090		946
Income before provision for income taxes		592		888
Provision for income taxes		184		261
Net income	$	408	$	627
Earnings per common share:
Basic	$	0.24	$	0.37
Diluted	$	0.23	$	0.37
Weighted average common shares outstanding:
Basic		1,686		1,686
Diluted		1,742		1,730
Dividends per common share	$	0.05	$	0.05

See notes to unaudited consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)

(Dollars in thousands)

	Nine Months Ended:
	September 30, 2005			September 30, 2004
Beginning balance, January 1	$	20,340		$	19,417
Net income		682			1,242
Changes in fair value of securities, net of tax		(398	)		(66	)
Dividends		(253	)		(253	)
Ending Balance, September 30	$	20,371		$	20,340

See notes to unaudited consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

(Dollars in thousands)

	Nine Months Ended:
	September 30, 2005			September 30, 2004
Cash flows from operating activities:
Net income	$	682		$	1,242
Adjustments to reconcile net income to net cash from operating activities:
Provision for possible loan losses		362			345
Depreciation and amortization		218			237
Deferred income taxes		(183	)		(409	)
Gain on sale of loans		—			(107	)
Deferred loan fees		(93	)		24
Income taxes receivable		225			550
Interest receivable		11			(78	)
Other assets		(325	)		(119	)
Other liabilities		561			552
Net cash provided by operating activities		1,458			2,237
Cash flows from investing activities:
Proceeds from sales, calls and maturities of securities (AFS)		1,271			5,654
Purchase of securities (AFS)		—			(3,500	)
Net decrease (increase) in loans		2,008			(16,041	)
Purchase of premises and equipment		(148	)		(647	)
Net cash provided by (used in) investing activities		3,131			(14,534	)
Cash flows from financing activities:
Net increase (decrease) in demand and savings deposits		13			(2,975	)
Net increase in certificates of deposit		14,172			8,148
Proceeds from FHLB Borrowing		843			—
Repayment of FHLB Borrowings		(19	)		(20	)
Cash dividends		(253	)		(253	)
Net cash provided by financing activities		14,756			4,900
Net increase (decrease) in cash and cash equivalents		19,345			(7,397	)
Cash and cash equivalents at the beginning of the period		19,668			25,859
Cash and cash equivalents at the end of the period	$	39,013		$	18,462
Interest Paid	$	2,928		$	2,327
Taxes Paid	$	28		$	365

See notes to unaudited consolidated condensed financial statements.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

The consolidated condensed financial statements include the accounts and transactions of M&F Bancorp, Inc. (the “Company”) and its wholly-owned bank subsidiary, Mechanics and Farmers Bank (the “Bank”). All significant inter-company accounts and transactions have been eliminated in consolidation. The financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB and Regulation S-B.

The consolidated condensed financial statements included herein should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2004.

In the opinion of management, the interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows in the accompanying unaudited consolidated condensed financial statements. Certain amounts for 2004 have been reclassified to conform to the 2005 presentation.

2. Loans and Allowance for Possible Loan Losses

The allowance for credit losses is maintained at a level sufficient to absorb probable loan losses inherent in the loan portfolio. The allowance is increased by charges to earnings in the form of provisions for loan losses and recoveries of loan charge-offs, and decreased by loans charged off. The provisions are calculated to bring the allowance to a level which, according to a systematic process of measurement, reflects the amount management estimates is needed to absorb probable losses within the portfolio. Loans are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

3. Earnings Per Share

Earnings per share are calculated on the basis of the weighted-average number of common shares outstanding. For the three and nine month periods ended September 30, 2005 and September 30, 2004, 56,400 and 110,400 stock options, respectively, were included in the computations of diluted earnings per share because the impact of their inclusion would be dilutive.

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4. Regulatory Capital Requirements and Issues

The Company is subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. As of September 30, 2005 and December 31, 2004, the capital levels are as indicated below:

	Capital
	Risk Based		(a) Tier 1		(b) Tier 1		Minimum Required Capital
September 30, 2005	11.90	%	10.48	%	8.42	%	6.00	%
December 31, 2004	12.00	%	10.48	%	8.54	%	6.00	%

a) to risk weighted assets

b) to average assets

The Bank recently completed a joint exam conducted by the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks. The final written report of examination has been received by management of the Bank and has been reviewed by its Board of Directors.

As a result of that examination, the Bank has agreed to among other things, improving loan asset quality, underwriting and credit administration, increasing liquidity, reviewing all overhead costs, continually evaluating the allowance for loan losses due to increases in levels of classified loans and more closely monitoring capital ratios and requirements. Management will report to the regulators throughout the year on the progress of each of the specific recommendations.

5. Common Stock Dividends

On March 15, June 23, and September 19, 2005 the Board of Directors of the Company declared a quarterly cash dividend of $0.05 per share to all shareholders of record on each of April 4, July 8, and October 7, 2005 payable on each of April 11, July 15, and October 14, 2005. The dividends reduced shareholders’ equity by $252,846.

6. Stock-Based Compensation

The Company accounts for compensation costs related to the Company’s employee stock option plan using the intrinsic value method. Therefore, no compensation cost has been recognized for stock option awards because the options are granted at exercise prices based on the market value of the Company stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the fair value method had been applied to all outstanding and unvested awards in each period. For purposes of the pro forma disclosures required by Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation -Transition and disclosure - an amendment of SFAS No. 123, the estimated fair value of the Company’s stock options is amortized over the vesting period, which is when an employee reaches age 55 and 30 years of service or age 65. All stock options were fully vested as of September 30, 2005.

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The Company estimates an option value at $1.09. In order to compute its estimation of compensation expense associated with the fair value method using the Black-Scholes Model, the following assumptions were used: a) risk-free rate: 5.50%; b) average expected term (years): 5.00; c) expected volatility: 18.22%; and d) expected dividend yield: 4.76%.

	Three Months Ended September 30						Nine Months Ended September 30
	2005			2004			2005			2004
Net income as reported	$	408		$	627		$	682		$	1,242
Deduct - total stock based employee compensation expense determined under fair value based method for all awards, net of income taxes		(0	)		(3	)		(0	)		(9	)
Pro forma net income	$	408		$	624		$	682		$	1,233
Basic earnings per share:
As reported	$	0.24		$	0.37		$	0.40		$	0.74
Pro forma	$	0.24		$	0.37		$	0.40		$	0.73
Diluted earnings per share:
As reported	$	0.23		$	0.37		$	0.39		$	0.72
Pro forma	$	0.23		$	0.36		$	0.39		$	0.72

7. Loan Commitments

In the normal course of business, the Bank has various commitments to extend credit, which are not reflected in the financial statements. At September 30, 2005 and December 31, 2004, the Bank had outstanding loan commitments of approximately $41.7 million and $41.1 million, respectively. Commitments under standby letters of credit amounted to approximately $3.6 million for the periods ending September 30, 2005 and December 31, 2004. These letters of credit represent agreements, whereby the Bank commits to lend funds to customers up to a predetermined maximum amount.

The Bank approves lines of credit to customers through home equity and overdraft protection loans. At September 30, 2005 and December 31, 2004, in addition to actual advances made on such loans, the Bank’s customers have available additional lines of credit on home equity and consumer overdraft protection loans. Available amount on home equity lines at September 30, 2005 and December 31, 2004 were approximately $1.0 million and $1.4 million, respectively. In addition, consumer overdraft protections loans had available lines of credit of $1.0 million and $0.9 as of September 30, 2005 and December 31, 2004, respectively.

8. New Accounting Pronouncements

In May 2004, Financial Accounting Standard Board (“FASB”) issued FASB Staff Position (“FSP”) No. 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP FAS 106-2), which supersedes FSP FAS 106-1, in response to the December 2003 enactment of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). FSP FAS 106-2 provides guidance on the accounting for the effects of the Act for employees that sponsor postretirement health care plans that provide prescription drug benefits. The Company believes that its plans are eligible for the subsidy provided by the Act but has not determined the effect on its financial statements.

The FASB Staff has issued FSP No 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain

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Investments.” FSP 115-1 and 124-1 addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. This FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP shall be applied to reporting periods beginning after December 15, 2005. Management is evaluating the impact on the financial condition, the results of operations and liquidity of this FSP.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which is an amendment of Statement No. 123. Statement 123R changes, among other things, the manner which share-based compensation, such as stock options, will be accounted for by both public and non-public companies. For public companies, the cost of employee services received in exchange for equity instruments including options and restricted stock awards generally will be measured at fair value at the grant date. The grant date date fair value will be estimated using option-pricing models adjusted for the unique characteristics of those options and instruments, unless observable market prices for the same or similar options are available. The cost will be recognized over the requisite service period, typically the vesting period, and will be re-measured subsequently at each reporting date through settlement date. SFAS No. 123R is effective for the first interim period following December 15, 2005. Accordingly, the Company will apply SFAS No. 123R during the quarter ended March 31, 2006. Because all of the Company’s outstanding options are fully vested, it does not believe that the implementation of SFAS No. 123R will have a material effect upon its results of operations.

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB No. 107”), Share-Based Payment, providing guidance on option valuation methods, the accounting for income tax effects of share-based payment arrangements upon adoption of SFAS No. 123 (R), and the disclosures in Management’s Discussion and Analysis, subsequent to the adoption. The Company will provide SAB No. 107 required disclosures upon adoption of SFAS No. 123 (R) on January 1, 2006 and is currently evaluating the impact the adoption of the Standard will have on the Company’s financial condition, results of operations, and cash flows.

In June of 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and SFAS No. 3. The Standard applies to all voluntary changes in accounting principle, and requires that changes in accounting principle be reported by restating all prior periods presented, unless it is impractical. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 improves financial reporting because its requirements enhance the consistency of financial reporting between periods.

9. Benefit Plans

The Company and the Bank have a non-contributory defined benefit retirement (pension) plan for substantially all full-time employees. The Company also has a supplemental unfunded excess retirement plan that provides benefits to higher-level employees. During the first nine months of 2005, the Company made contributions of $260,087 and expects to contribute an additional amount of approximately $51,353 during the remainder of 2005.

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The components of the net periodic benefit cost for the nine months ended September 30, 2005 and September 30, 2004 are:

	Pension Benefits (in thousands)						Other Executive Retirement Benefits (in thousands)
	2005			2004			2005		2004
Service Cost	$	75		$	72		$	44	$	47
Interest Cost		165			166			98		92
Expected Return on Plan Assets		(210	)		(200	)		—		—
Amortization of prior service cost		(23	)		(23	)		66		58
Amortization of net loss		14			17			25		24
Net Periodic Cost	$	21		$	32		$	233	$	221

The Company provides certain post retirement benefits to specified former executive officers. At September 30, 2005, the amount of the liability for these benefits was approximately $156,100.

An unrestricted lump sum distribution of retirement benefits was inadvertently paid out of the “M&F Bancorp, Inc.” Cash Balance Plan (the “Qualified Plan”) to a former highly compensated employee (“HCE”) during the quarter ending June 30, 2005. The lump sum payment to the former HCE should have been made as a restricted lump sum payment under the terms of the Plan. Several alternative methods are available to correct this error. The Company has evaluated these alternatives as well as the associated liability to the benefit plan and the Company has taken corrective action by pledging specific government securities to the Plan. This action has occurred prior to the filing of this report. The only cost related to this action is the cost of maintaining a security escrow account. The financial impact of this corrective action does not have a material effect on the financial condition of the Company.

ITEM 2

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

Overview

Management’s Discussion and Analysis is provided to assist in understanding and evaluating the Company’s results of operations and financial condition. The following discussion is intended to provide a general overview of the Company’s performance for the period ended September 30, 2005. Readers seeking a more in-depth discussion are invited to read the more detailed discussions below as well as the condensed financial statements and related notes included under Item 1 of this quarterly report. All information presented is consolidated data unless otherwise specified.

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Financial Highlights for The Quarterly Periods	Three Months Ended September 30,
	2005			2004			% Change
	(dollars in thousands, except per share data)
Earnings
Net interest income	$	2,397		$	2,327		3.01	%
Provision for loan losses		30			119		-74.8
Other income		686			1,104		-37.9
Other expense		2,461			2,424		1.5
Net income Per share		408			627		-34.9
Net income
-Basic		0.24			0.37		-35.1
-Diluted		0.23			0.37		-37.8
Average for period
Assets	$	233,331		$	223,581		4.3
Loans		169,303			167,317		1.2
Deposits		185,801			185,697		0.0
Shareholder’s equity		20,311			19,966		1.7
Ratios
Return on average assets		0.70	%		1.12	%
Return on average equity		8.04	%		12.56	%
Average equity to average assets		8.70	%		8.92	%
Efficiency ratio		80.61	%		73.19	%
Financial Highlights for The Nine Month Periods	Nine Months Ended September 30,
	2005			2004			% Change
	(dollars in thousands, except per share data)
Earnings
Net interest income	$	6,922		$	6,820		1.5	%
Provision for loan losses		362			345		4.9
Other income		1,866			2,189		-14.8
Other expense		7,486			6,946		7.8
Net income Per share		682			1,242		-45.1
Net income
-Basic		0.40			0.74		-45.9
-Diluted		0.39			0.72		-45.8
Average for period
Assets	$	238,267		$	216,002		10.3
Loans		169,303			160,680		5.4
Deposits		189,929			184,681		2.8
Shareholder’s equity		20,356			19,888		2.4
Ratios
Return on average assets		0.38	%		0.77	%
Return on average equity		4.47	%		8.33	%
Average equity to average assets		8.54	%		9.21	%
Efficiency ratio		88.84	%		80.17	%

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Critical Accounting Policies

The accounting and reporting policies of the Company and the Bank are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The significant accounting policies of the Company and the Bank are discussed in detail in note 1 of the consolidated financial statements included in the Company’s 2004 Annual Report on Form 10-KSB.

Certain accounting policies require us to make significant estimates and assumptions, which have a material impact on the carrying value of certain assets and liabilities, and we consider these to be critical accounting policies. Three of the more critical accounting and reporting policies include the Company’s accounting for the allowance for possible loan losses, investment securities and pension costs. The estimates and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods.

Allowance for Possible Loan Losses

The allowance for credit losses is maintained at a level sufficient in the judgement of management to absorb probable loan losses inherent in the loan portfolio. The allowance is increased by charges to earnings in the form of provisions for loan losses and recoveries of loan charge-offs, and decreased by loans charged off. The provisions are calculated to bring the allowance to a level which, according to a systematic process of measurement, reflects the amount which management estimates is needed to absorb probable losses within the portfolio. Loans are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

The Board of Directors of the Bank has recently approved a new credit classification system to evaluate the risks inherent in the Bank’s loan portfolio. During the coming months management will conduct an evaluation of the loan portfolio based on this new classification system. Management will take the results of that evaluation into consideration in determining future provisions to the allowance for loan losses. Management does not expect this approach will have a material impact on the financial results or on the amount included in the allowance for loan losses.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the

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scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance loans are collectively evaluated for impairment based on estimates of charge-off trends, expected default rates, general economic conditions and overall portfolio quality. The evaluation of collectability of the loan portfolio is inherently subjective as it requires material estimates and projections of future changes that could negatively affect a borrower’s ability to repay, such conditions could result in material adjustments to the allowance for loan losses that could adversely impact earnings in future periods.

Investment Securities

Non-equity securities, not classified as either “held to maturity” securities or trading securities, and equity securities, not classified as trading securities, are classified as “available for sale securities” and reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of consolidated shareholders’ equity in accumulated other comprehensive income. The fair values of these securities are based on quoted market prices, dealer quotes and prices obtained from independent pricing services. Available for sale and held to maturity securities are reviewed quarterly for possible other-than-temporary impairments. The review is inherently subjective as it requires material estimates and judgments, including an analysis of the facts and circumstances of each individual investment such as the length of time the fair value has been below cost, the expectation for that security’s performance, the credit worthiness of the issuer and the Company’s ability and intent to hold the security to maturity. Declines in the fair value of the individual held to maturity and available for sale securities below their costs that are other-than–temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in consolidated earnings as realized losses.

Pension Plans

The Company and the Bank maintain a qualified defined benefit cash balance pension plan (the “Qualified Plan”), which covers substantially all full time employees and a supplemental unfunded excess retirement plan to provide benefits to a select group of highly compensated employees. The excess plan provides benefits that would otherwise be provided under the Qualified Plan but for maximum benefit and compensation limits applicable under the tax law.

15

The benefit cost and obligation are dependent on numerous factors resulting from actual plan experience and assumptions of future experiences. The assumptions include discount rates, inflation, salary growth and long-term return on plan assets.

Please also refer to Note 1 in the “Notes to Consolidated Financial Statements” in the Company’s Annual Report for the year ended December 31, 2004 on Form 10-KSB on file with the SEC for details regarding all of the Company’s critical and significant accounting policies. Also, please refer to Note 9 to the Company’s Unaudited Consolidated Condensed Financial Statements in the report.

General

The following discussion and analysis of earnings and related financial data should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Annual Report on Form 10-KSB for the year ended December 31, 2004. It is intended to assist you in understanding the financial condition and the results of operations for the three and nine months ended September 30, 2005 and 2004.

Forward-Looking Statements

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

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

Executive Overview

The Company generated the majority of its income in the third quarter of 2005, from traditional banking services - lending and deposit services. The Company continued to execute on management’s strategy of targeting commercial business, diversifying the customer base and increasing variable rate products.

16

As management looks forward there are several key challenges that the Company will face to return the Company and the Bank to profitability levels previously achieved, namely:

• Improving operating efficiency while reducing overhead expenses

• Enhancing technology

• Improving asset quality and diversity of loan portfolio

• More closely monitoring capital ratios and requirements

• Enhancing financial reporting and credit administration systems

• Improving liquidity

• Focus on controlled growth

The Company will continue to rely on its emphasis on quality personal services to meet these challenges. The Company has developed both long-term and short-term strategic objectives to obtain profitable growth. Management will continually monitor and modify these objectives. The Company will also explore expansions of services as it seeks to increase fee revenue.

Financial Condition

Total assets increased 6.58 percent to $246.5 million at September 30, 2005 from $231.3 million at December 31, 2004, primarily due to a $18.9 million increase in interest earning deposits.

Total loans decreased 1.23 percent to $167.2 million at September 30, 2005 from $169.3 million at December 31, 2004. This decrease was primarily the result of a lower volume of loan originations, 170 loans for the nine months of 2005 as compared to 184 loans for the same period in 2004. This decrease in loan originations was also accompanied by higher than expected loan pay-offs.

The investment portfolio balance as of September 30, 2005 was $25.2 million compared to $27.1 million at December 31, 2004. Approximately 99.2 percent and 98.5 percent of the portfolio was classified as available-for-sale at September 30, 2005 and December 31, 2004, respectively. All securities purchased during 2005 and 2004 were classified as available-for-sale.

Deposits increased 7.50 percent to $203.2 million at September 30, 2005 from $189.1 million at December 31, 2004, primarily as a result of a $13.1 million increase in interest bearing deposits. During this period, the Federal Reserve Bank announced a series of short-term interest rate increases. Rate sensitive customers began to shop competing financial institutions for the best rates. Management adjusted interest rates to attract additional deposits to help improve liquidity. The Company used these deposits to invest in overnight funds and short-term government and agency securities, and to fund pending loan commitments. The impact on net interest margin as a result of these deposit rate increases was approximately 12 basis points decrease to 3.94 percent for the nine months ended September 30, 2005 as compared to 4.06 percent for the same period in 2004.

Total shareholders’ equity remained approximately the same at $20.4 million, as of September 30, 2005 compared with $20.3 million at December 31, 2004. Equity remained substantially unchanged because the net profit of $0.7 million as of September 30, 2005 was substantially offset by three quarterly dividends declared and a decrease in net unrealized investment gains as a result of rising interest rates.

17

Results of Operations - Comparison for the nine months ended September 30, 2005 and 2004.

Net income for the nine months ended September 30, 2005 decreased 45.0 percent to $0.7 million compared to income of $1.2 million for the same period in 2004. Total interest income was $9.9 million for the nine months ended September 30, 2005 compared to $9.1 million for the comparable period in 2004.

Interest income on loans increased $0.5 million primarily due to an increase in the average loans outstanding to $168.7 million from $160.7 million for the nine months ended September 30, 2005 and 2004, respectively, and an increase in yield from 6.92 percent to 6.99 percent. Interest income on securities decreased 2.35 percent when comparing the nine months ended September 30, 2005 with the same period in 2004. This decrease was the result of a decrease in the securities portfolio as a result of pay-downs on mortgage-backed securities, calls and maturities. Total investment securities at September 30, 2005 were $25.2 million as compared to $27.1 million for the same period in the prior year. The yield on the securities portfolio for the period ended September 30,2005 increased 33 basis points from a yield of 3.26 percent for the same period in 2004. Interest on bank deposits increased to $0.4 million for the nine months ended September 30, 2005 as compared to $0.1 million for the same period in 2004. This is primarily due to multiple rate increases as a result of Federal Reserve actions and higher outstanding balances of $34.2 million and $11.0 million for the nine months ended September 30, 2005 and September 30, 2004.

Total interest expense increased 30.0 percent to $3.0 million for the nine months ended September 30, 2005 from $2.3 million for the nine months ended September 30, 2004. The increase in interest expense is primarily the result of time deposits repricing during the nine months ended September 30, 2005 at significantly higher rates. The rates paid on interest bearing deposits were approximately 2.07 percent for the nine months ended September 30, 2005 as compared to 1.69 percent for the comparable period in 2004. During 2003, the Bank began to utilize a deposit acquisition program with Qwickrate, a CD listing service. CDs outstanding through this program as of September 30, 2005 were $31.8 million with an average interest rate of 4.01 percent. It is anticipated that interest expense may increase when these deposits are subject to renewal and reprice at higher rates over the next eighteen months. The impact on net interest margin as a result of these deposit rate increases was approximately 12 basis points decrease to 3.94 percent in 2005 for the nine months ended September 30, 2005 as compared to 4.06 percent for the same period in 2004. Interest on borrowed money increased to $0.6 million for the nine months ended September 30, 2005 as compared to $0.5 million for the same period in 2004 as average balances on borrowed increased to $17.2 million in 2005 as compared to $12.8 million in 2005. The cost of borrowed money decreased to 4.70 percent for the nine months ended September 2005 from 5.13 percent for the same period in 2004, as a result of $5.0 million in new borrowings in December 2004 at an average rate of 3.85 percent, compared to an average rate of 5.05% for the nine months ended September 30, 2004.

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During the nine months ended September 30, 2005, the Bank increased the loan loss provision by $0.4 million as compared to a $0.3 million increase for the nine months ended September 30, 2004. This is a result of an increase of $1.0 million in non-accrual, past due and restructured loans at September 30, 2005 as compared to December 31, 2004, which is included in a table format later in this report. The provision for loan losses is the result of management’s assessment of the Bank’s delinquency ratios, non-performing assets, charge-off history, and composition of loans in the portfolio.

Non-interest income during the nine months ended September 30, 2005 decreased 14.76 percent to $1.9 million from $2.2 million for the same period in the prior year. This was primarily due to the recognition of $439,000 from a BEA grant in 2004. Non-interest expense increased 7.78 percent from $6.9 million during the nine months ended September 30, 2004 to $7.5 million during the nine months ended September 30, 2005. This is primarily the result of $0.3 million in consultant fees expensed through the first nine months of 2005. These consultant fees are related to the reorganization and automation of the entire human resources function. Also, accounting fees increased $0.1 million and occupancy and equipment expense increases $0.2 million for the nine months ended September 30, 2005 as compared to the same period in 2004.

Results of Operations - Comparison for the three months ended September 30, 2005 and 2004.

Net income for the three months ended September 30, 2005 decreased 34.93 percent to $0.4 million compared to income of $0.6 million for the same period in 2004. Total interest income increased $0.4 million or 11.30 percent to $3.5 million for the three months ended September 30, 2005 compared to $3.1 million for the comparable period in 2004.

Interest income on loans increased $0.2 million primarily due to an increase in the average loans outstanding to $169.3 million from $167.2 million for the three months ended September 30, 2005 and 2004, respectively, in addition to an increase in yield from 6.92 percent to 7.36 percent. Interest income on securities increased 3.23 percent when comparing the three months ended September 30, 2005 with the same period in 2004. The yield on the securities portfolio for the period ended September 30, 2005 increased 64 basis points from a yield of 3.01 percent for the same period in 2004. Interest on bank deposits increased to $0.2 million for the three months ended September 30, 2005 as compared to $0.03 million for the same period in 2004. This is primarily the due to multiple rate increases as a result of Federal Reserve actions and higher outstanding balances of $34.2 million and $11.0 million for the three months ended September 30, 2005 and September 30, 2004.

Total interest expense increased 34.97 percent to $1.1 million for the three months ended September 30, 2005 from $0.8 million for the three months ended September 30, 2004. The increase in interest expense was primarily the result of time deposits repricing during the three months ended September 30, 2005 at significantly higher rates. The rates paid on interest bearing deposits were approximately 2.38 percent for the three months ended September 30, 2005 as compared to 1.72 percent, for the comparable period in 2004. During 2004, the Bank began to utilize a deposit acquisition program with Qwickrate, a CD listing service. CDs outstanding through this program as of September 30, 2005 were $31.8 million with an average interest rate of 4.01 percent. It is anticipated that interest expense may increase when these deposits are subject to

19

renewal and reprice at higher rates over the next eighteen months. Interest on borrowed money was $0.2 million for the three months ended September 30, 2005 as compared to $0.2 million for the same period in 2004 as average balances on borrowed increased to $17.6 million in 2005 as compared to $11.8 million in 2005. The cost of borrowed money decreased to 4.54 percent for the three months ended September 2005 from 5.14 percent for the same period in 2004, as a result of $5.0 million in new borrowings in December 2004 at an average rate of 3.85 percent, compared to an average rate of 5.04% for the three months ended September 30, 2004.

During the three months ended September 30, 2005, the Bank decreased the loan loss provision as compared to the three months ended September 30, 2004. This decreased provision for loan losses was the result of management’s assessment of the Company’s delinquency ratios, non-performing assets, charge-off history, and composition of loans in the portfolio.

Non-interest income during the three months ended September 30, 2005 decreased 37.86 percent to $0.7 million from $1.1 million for the same period in the prior year. This was primarily due to the recognition of $439,000 from a BEA grant in the third quarter of 2004. Non-interest expense during the three months ended September 30, 2005 and 2004 increased to 2.5 million from $2.4 million.

Non-Performing Assets and Allowance for Loan Losses

The allowance for loan losses is calculated based upon an evaluation of pertinent factors underlying the types and qualities of the Company’s loans. Management considers such factors as the repayment status of a loan, the estimated net realizable value of the underlying collateral, the borrower’s ability to repay the loan, current and anticipated economic conditions which might affect the borrower’s ability to repay the loan and the Company’s past statistical history concerning charge-offs. The September 30, 2005 allowance for loan losses was $2.8 million or 1.68 percent of total loans outstanding compared with $2.5 million or 1.48 percent of total loans outstanding at December 31, 2004. The loan loss allowance, as a percentage of total loans, increased based on the result of management’s assessment of the Company’s delinquency ratios, charge-off history and composition of loans in the portfolio. Management also considered non-performing assets and total classified assets in establishing the allowance for loan losses.

As a result of concerns over the asset quality of the Bank’s loan portfolio raised during the recent regulatory exam, management intends to make appropriate modifications to the Bank’s loan policies, more closely monitor loan documentation prior to and after loan closings, diversify the loan portfolio, and react in a more timely manner to borrowers’ with weakened financial conditions. Each of these activities among others will be utilized to more closely monitor the adequacy of the Bank’s allowance for loan losses. During 2005, the allowance for loan losses increased $0.3 million.

20

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

	September 30, 2005			December 31, 2004
	(in thousands)
Non-Accruing Loans	$	4,232		$	1,546
Accruing Loans Delinquent 90 days or more		303			2,089
Foreclosed Assets		598			509
Restructured Loans		—			52
Total Non-Performing Assets	$	5,133		$	4,196
Percentage of total assets		2.08	%		1.81	%

Non-accruing loans increased significantly from year-end due primarily to two large real estate loans to one borrower of approximately $2.8 million going past due more than 90 days and being placed in non-accrual status. Despite this increase, management considers the allowance for loan losses of $2.8 million at September 30, 2005 to be sufficient to cover the potential loan losses. However management intends to reevaluate the value of the underlying collateral by ordering a new appraisal. The last appraisal on these collateralized properties was prepared in 2001 and the properties were valued at a combined $3.3 million. Management will continue to monitor all nonaccrual loan relationships, including the one specifically mentioned, to insure improvement in borrowers’ cash flow and to maintain the value of any underlying collateral. In addition, significant loans in nonaccrual status or in excess of 90 days delinquent for a period of one year or more will be required to have a new appraisal performed to reevaluate the underlying collateral.

There were no restructured loans at September 30, 2005 as compared to $0.05 million at December 31, 2004. Federal regulation states that a restructured obligation that is in compliance with its modified terms and yields a market rate need not continue to be reported as a troubled debt restructured in calendar years after the year in which restructuring took place.

Liquidity, Interest Rate Sensitivity and Market Risks

The objectives of the Bank’s liquidity management policy include providing adequate funds to meet the needs of depositors and borrowers at all times, as well as providing funds to meet the basic needs for on-going operations of the Company and regulatory requirements. The Company’s liquidity position increased from 18.73 percent at December 31, 2004 to 25.70 percent for the period ended September 30, 2005. The increase in liquidity resulted from an increase in interest bearing deposits obtained through a CD listing service. Historically, core deposits have been a stabilizing factor in attaining the Bank’s desired level of liquidity. Current management intends to more aggressively work towards maintaining existing core deposits and attracting new sources of core deposits.

21

As a result of the Bank’s most recent regulatory exam, the management of the Bank intends to more actively manage the Bank’s liquidity position by establishing target goals that can be met and maintained while at the same time providing adequate funds for both loans and withdrawals.

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

Interest-bearing liabilities and the variable rate loans are generally repriced to current market rates. The Company’s balance sheet is liability-sensitive, meaning that in a given period there will be more liabilities than assets subject to immediate repricing as the market rates change. Because most of the Bank’s loans are fixed rate mortgages, they reprice less rapidly than rate sensitive interest-bearing deposits. In addition to the gap analysis described above, the Company uses a modeling technique which projects net interest income under varying interest rate scenarios and the theoretical impact of immediate and sustained rate changes referred to as “rate shocks.” “Rate shocks” measure the estimated theoretical impact on the Bank’s tax equivalent net interest income and market value of equity from hypothetical immediate changes in interest rates as compared to the estimated theoretical impact of rates remaining unchanged. The prospective effects of these hypothetical interest rate changes are based upon numerous assumptions including relative and estimated levels of key interest rates.

The Company has not experienced a change in the mix of its rate-sensitive assets and liabilities or in market interest rates that it believes would result in a material change in its interest rate sensitivity that was reported in its December 31, 2004, Annual Report on Form 10-KSB.

Item 3

Controls and Procedures

The Company maintains a system of internal controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. The Company’s Board of Directors, operating through its audit committee, which is composed entirely of independent outside directors, provides oversight to the Company’s financial reporting process.

22

The Company’s management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of the end of the period covered by this Report, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in internal control over financial reporting during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

23

PART II

OTHER INFORMATION

ITEM 1.	Legal Proceedings:
	In the opinion of management, neither the Company nor the Bank is involved in any pending legal proceedings other than routine litigation incidental to their business.
ITEM 2.	Unregistered Sales of Equity Securities and use of Proceeds:
	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
(a)	Exhibits

Exhibit	(3)(i)	Articles of Incorporation of M&F Bancorp, Inc., incorporated by reference to Exhibit (3) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the SEC on November 12, 1999.
Exhibit	(3)(ii)	Bylaws of M&F Bancorp, Inc., incorporated by reference to Exhibit (3) to the Form 10-QSB for the quarter ended September 30, 1999 filed with the SEC on November 12, 1999.
Exhibit	(3)(iii)	Amended and Restated Article III, Section 5 of the Bylaws of M & F Bancorp, Inc., adopted by the shareholders of M & F Bancorp, Inc. on April 20, 2002, incorporated by reference to Exhibit 3(iii) to the Form 10-QSB for the quarter ended March 31, 2002 filed with the SEC on May 14, 2002.
Exhibit	(4)	Specimen Stock Certificate, incorporated by reference to Exhibit 4 to the Form 10-KSB for the year ended December 31, 2000 filed with the SEC on April 2, 2001.
Exhibit	(10)(a)	Employment Agreement between Mechanics and Farmers Bank and Lee Johnson, Jr. incorporated by reference to Exhibit 10 to the Form 10-QSB for the quarter ended September 30, 2000 filed with the SEC on November 9, 2000.
Exhibit	(10)(b)	Retention Bonus Agreement between Mechanics and Farmers Bank and Fohliette Becote incorporated by reference to Exhibit 10.03 to the Form 10-QSB for the quarter ended September 30, 1999 filed with the SEC on November 12, 1999.
Exhibit	(10)(c)	Retention Bonus Agreement between Mechanics and Farmers Bank and Walter D. Harrington incorporated by reference to Exhibit 10.03 to the Form 10-QSB for the quarter ended September 30, 1999 filed with the SEC on November 12, 1999.
Exhibit	(10)(d)	Retention Bonus Agreement between Mechanics and Farmers Bank and Harold G. Sellers incorporated by reference to Exhibit 10.03 to the Form 10-QSB for the quarter ended September 30, 1999 filed with the SEC on November 12, 1999.
Exhibit	(10)(e)	Retention Bonus Agreement between Mechanics and Farmers Bank and Elaine Small incorporated by reference to Exhibit 10.03 to the Form 10-QSB for the quarter ended September 30, 1999 filed with the SEC on November 12, 1999.

24

Exhibit	(10)(f)	Supplemental Executive Retirement Plan incorporated by reference to Exhibit 10(f) to the Form 10-KSB for the year ended December 31, 2003 filed with the SEC on March 30, 2004.
Exhibit	(10)(g)	Summary of Retirement Package Benefits for Lee Johnson, Jr. incorporated by reference to Exhibit 10(g) to the Form 10-KSB for the year ended December 31, 2004 filed with the SEC on March 31, 2005.
Exhibit	(10)(h)	2004 President and CEO Incentive Compensation Program incorporated by reference to Exhibit 10(h) to the Form 10-KSB for the year ended December 31, 2004 filed with the SEC on March 31, 2005.
Exhibit	(10)(i)	2004 Executive Incentive Compensation Program incorporated by reference to Exhibit 10(i) to the Form 10-KSB for the year ended December 31, 2004 filed with the SEC on March 31, 2005.
Exhibit	(10)(j)	2004 City Executives Incentive Compensation Program incorporated by reference to Exhibit 10(j) to the Form 10-KSB for the year ended December 31, 2004 filed with the SEC on March 31, 2005.
Exhibit	(10)(k)	2004 Loan Production Incentive Compensation Program incorporated by reference to Exhibit 10(k) to the Form 10-KSB for the year ended December 31, 2004 filed with the SEC on March 31, 2005.
Exhibit	(10)(l)	2004 Incentive Compensation Program - Branch Customer Service Plan incorporated by reference to Exhibit 10(l) to the Form 10-KSB for the year ended December 31, 2004 filed with the SEC on March 31, 2005.
Exhibit	(10)(m)	2004 Corporate Support and Tellers Incentive Compensation Program incorporated by reference to Exhibit 10(m) to the Form 10-KSB for the year ended December 31, 2004 filed with the SEC on March 31, 2005.
Exhibit	(10)(n)	Employment Agreement dated May 10, 2005 between Ronald Wiley and Mechanics and Farmers Bank, incorporated by reference to Exhibit 99.1 to the Form 8-K filed with the SEC on May 13, 2005.
Exhibit	(10)(o)	Split Dollar Life Insurance Agreement (Endorsement Method) between Mechanics and Farmers Bank and Lee Johnson, Jr. dated September 2, 2003 incorporated by reference to Exhibit (10)(o) to the Form 10-QSB for the quarter ended March 31, 2005.
Exhibit	(10)(p)	Split Dollar Life Insurance Agreement (Endorsement Method) between Mechanics and Farmers Bank and Ethel M. Small dated September 17, 2003 incorporated by reference to Exhibit (10)(p) to the Form 10-QSB for the quarter ended March 31, 2005.
Exhibit	(31.1)	Certification of Ronald Wiley
Exhibit	(31.2)	Certification of Allan E. Sturges
Exhibit	(32)	Certification Pursuant to 18 U.S.C. 1350

25

SIGNATURES

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

M&F Bancorp, Inc.

      (Registrant)

Date: November 14, 2005

By:	/s/ Ronald Wiley
	Ronald Wiley
	President & Chief Executive Officer
By:	/s/ Allan E. Sturges
	Allan E. Sturges
	Acting Chief Financial Officer

26

EX-31.1

EXHIBIT (31.1)

CERTIFICATION

I, Ronald Wiley, certify that:

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

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

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

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

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Omitted];

c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Dated: November 14, 2005	/s/ Ronald Wiley
	President & Chief Executive Officer

27

EX-31.2

EXHIBIT (31.2)

CERTIFICATION

I, Allan E. Sturges, certify that:

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

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

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

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

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Omitted];

c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Dated: November 14, 2005	/s/ Allan E. Sturges
	Acting Chief Financial Officer

28

EX-32

EXHIBIT (32)

M & F BANCORP, INC.

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of M & F Bancorp, Inc. (the “Company”) certify that the Quarterly Report on Form 10-QSB of the Company for the fiscal quarter ended September 30, 2005 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and information contained in that Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2005	/s/ Ronald Wiley
	Ronald Wiley
	Chief Executive Officer
Dated: November 14, 2005	/s/ Allan E. Sturges
	Allan E. Sturges
	Acting Chief Financial Officer

* This certification is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

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