M&F Bank's profits shrink; loans increase

The corporate parent of Mechanics and Farmers Bank posted a lower profit in the third quarter because of increased operating costs stemming from the acquisition this year of crosstown rival Mutual Community Savings Bank.

"In light of recent events in the national and international economy, as well as our industry, we are very pleased with our profitability this quarter," said CEO Kim D. Saunders.

The Durham bank posted profit of $93,000, or three cents a share. A year ago, it posted a $429,000 profit, or 25 cents per share.

Non-interest expense in the third quarter totaled $3.4 million, up from $2.3 million a year earlier.

The union of M&F and Mutual Community combined two of the nation's oldest black-owned financial institutions. Mutual was pressured by regulators to overhaul its operations after two money-losing years.

Following the acquisition, M&F closed a branch in Mutual Community's former headquarters, plus a drive-through facility in Charlotte and a "part-time branch" that was open limited hours. The costs of operating those branches were included in the third-quarter results.

The closings left M&F with nine branches: three in Durham, two each in Raleigh and Charlotte, and single offices in Winston-Salem and Greensboro.

Loans totaled $204.9 million, up from $146.1 million at the end of 2007. Those numbers were bolstered by the Mutual Community acquisition, but the bank enjoyed 11 percent organic growth in its loan portfolio during the first nine months of this year. That contrasts to a decline in loans last year.

Saunders credited the turnaround to an overhaul of the bank's lending process, which sped up loan approvals, as well as the hiring in February of James E. Sansom as chief lending officer. Sansom previously was first vice president at Cardinal State Bank.