M&F Bank can no longer tout that it has turned an annual profit every year since it opened its first branch in 1908.
M&F Bancorp, the corporate parent of the Durham-based bank, one of the nation’s oldest and largest African-American-owned financial institutions, announced late Friday that for the full year 2016 it posted a net loss of $1.8 million, or 95 cents per share, down from net income of $110,000 a year ago. The loss would have been even larger without a $2.3 million gain realized when it paid off its nearly $12 million debt to the federal government.
CEO James H. Sills III said in an interview that although the company posted an annual loss for the first time, it took major steps during the year that bode well for the future.
“We made a lot of changes to our balance sheet in 2016,” Sills said. “We really believe we are in a position for long-term growth. The bank is a lot healthier than it was earlier in the year.”
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In addition to erasing its debt to the federal government – federal stimulus money it received during the recession under the Troubled Asset Relief Program, or TARP – the bank also: reduced its portfolio of real estate it owned as a result of foreclosures from $2.8 million at the outset of the year to $367,000 at the end of the year; and lowered its loan delinquency rate to 2 percent, down from more than 10 percent when Sills came on board as CEO in September 2014.
Sills said the bank’s game plan is to raise additional capital at some point – “I don’t want to say when” – and remain independent.
“Our goal is to have positive earnings for 2017,” he added.
The annual loss in 2016 was driven by a $4.7 million loss recorded on the sale of a portfolio of mortgages in the third quarter.
On the plus side, although the bank owed $11.7 million to the U.S. Treasury, it was able to erase that debt under a program set up by the government last year by paying just $9.4 million. That produced a gain of $2.3 million.
M&F also had another incentive to pay off that debt. It has been paying 2 percent interest, but the interest rate was scheduled to jump to 9 percent in November 2018.
Last year M&F laid off seven employees, or 11 percent of its staff, as part of a cost-cutting effort aimed at improving the bank’s performance. It also temporarily withdrew from the mortgage business in light of regulations that took effect in 2015.
However, the bank recently agreed to team up with North State Bank Mortgage, the home lending division of Raleigh’s North State Bank, to once again offer mortgages.
“We are in the process of launching that,” Sills said.
M&F has four branches in the Triangle and seven overall.