This excerpt taken from the VLKAY 10-K filed Mar 22, 2010.
Capital Resources. Total stockholders equity as of December 31, 2009 and 2008, including unrealized gains and/or losses net of taxes on available-for-sale securities and deferred pension liability, was $36.5 million and $24.3 million, respectively. The Company rewarded its common stockholders with cash dividends of $0.10 and $0.20 per share, totaling $0.2 million and $0.4 million, respectively, for the years ended December 31, 2009 and 2008. The preferred stock dividends under the CPP were $0.3 million in 2009.
As of December 31, 2009, the Company had a leverage ratio of 12.97%, a Tier 1 capital ratio of 14.29%, and a risk-based capital ratio of 15.54%. As of December 31, 2009, the Bank had a leverage ratio of 11.30%, a Tier 1 capital ratio of 12.86%, and a risk-based
M&F BANCORP, INC. AND SUBSIDIARY
capital ratio of 14.11%. These ratios exceed the federal regulatory minimum requirements for a well capitalized bank holding company and bank, respectively (see Item 8. Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements Note 16. Regulatory Matters and Restrictions for additional information on regulatory capital requirements).
Asset/Liability Management. Asset/liability management functions to maximize profitability within established guidelines for interest rate risk, liquidity and capital adequacy. Measurement and monitoring of liquidity, interest rate risk and capital adequacy are performed centrally through the Bank Boards Asset/Liability Committee, and reported under guidelines established by management, the Banks Board of Directors and regulators (see Item 7A. Quantitative and Qualitative Disclosures about Market Risk for information about interest rate risk).
Liquidity. Management involves the ability to meet the cash flow requirements of depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. To ensure the Company is positioned to meet immediate and future cash demands, management relies on internal analysis of its liquidity, knowledge of current economic and market trends and forecasts of future conditions. Regulatory agencies set certain minimum liquidity standards, including the setting of a reserve requirement by the Federal Reserve. The Company must submit quarterly reports to the Federal Reserve to ensure that it meets those requirements. The FDIC and Commissioner notified the Bank in October of 2009 that it would require daily reporting of liquidity-related information. As of December 31, 2009, the FDIC and Commissioner notified the Bank that it could resume weekly reporting of liquidity-related information. As of December 31, 2009, the Company met all of its liquidity and reporting requirements.
The Company had $30.3 million in cash and cash equivalents as of December 31, 2009. The Companys principal sources of funds are deposits, short-term borrowings and capital. Core deposits (total deposits less certificates of deposits in the amount of $100,000 or more), one of the most stable sources of liquidity, together with equity capital funded $178.7 million, or 65.12%, of total assets as of December 31, 2009. As of December 31, 2008, core deposits and equity capital totaled $172.6 million, or 63.56%, of total assets.
The Companys liquidity can be demonstrated best by an analysis of its cash flows. Operating activities provided $1.4 million of liquidity for the year ended December 31, 2009, compared to $1.2 million for the year ended December 31, 2008. The principal elements of operating activities are net income, increased by significant noncash expenses including the provision for loan losses, depreciation and amortization. In 2009, the Company used a net decrease in investments of $14.8 million and net cash from the sale of loans of $3.3 million and the $8.2 million net increase in deposits, to fund $6.1 million in new loan growth (excluding the sale), and the $17.2 net decrease in borrowings.
A secondary source of liquidity for the Company comes from investing activities, principally the sales of, maturities of, and cash flows from, investment securities. As of December 31, 2009, the Company had $0.3 million of investment securities that mature in the next 12 months, although the mortgage-backed securities will have principal reductions, and agency securities may be called by the issuers. During 2009, the Company purchased $3.0 million of investment securities, and $6.5 million in securities were sold at a net gain of $0.1 million.
Additional sources of liquidity are available to the Bank through the Federal Reserve and through membership in the FHLB System, and other correspondent banks. As of December 31, 2009, the Bank had a maximum borrowing capacity of $13.6 million through the FHLB of Atlanta. These funds are available with various maturities and interest rate structures. Borrowings may not exceed 12% of total assets or 18 times the amount of FHLB stock owned.
As of December 31, 2009, the Bank owned $1.1 million worth of FHLB stock or 13.7% percent of its outstanding advances of $7.8 million. Borrowings and letters of credit are collateralized by a blanket lien by the FHLB on the Banks qualifying assets. During 2009, the FHLB changed its process for repurchasing stock when a borrowing bank made principal reductions. Rather than repurchasing stock upon the paydown of principal, FHLB will determine quarterly whether or not it will repurchase stock.
Off Balance Sheet Arrangements. The Company has liquidity from other sources such as federal funds lines and brokered CDs. These liquidity sources may require collateral but are generally unsecured or easily utilized by the Company. In addition, during 2008, the Company secured a letter of credit in the amount of $2.0 million from the FHLB which provides collateral for public deposits. The letter of credit is an off-balance sheet source funding, collateralized by assets pledged to the FHLB, unless drawn. Federal funds lines totaled $12 million at December 31, 2009, none of which was drawn as of that date.
M&F BANCORP, INC. AND SUBSIDIARY
In addition to the sources of liquidity discussed above, the Company has off balance sheet contingent funding commitments with various probabilities of being drawn by borrowers. The following table shows the commercial off balance sheet contingencies:
Effects of Inflation. The Companys financial statements have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historic dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The rate of inflation has been relatively moderate over the past few years; however, the effect of inflation on interest rates can materially impact Bank operations, which rely on the spread between the yield on earning assets and rates paid on deposits and borrowings as the major source of earnings. Operating costs, such as salaries and wages, occupancy and equipment costs, can also be negatively impacted by inflation.
Recent Accounting Developments. Please refer to Item 8. Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies for a discussion of recent accounting developments.
This excerpt taken from the VLKAY 8-K filed Feb 23, 2010.
ITEM 8.01 Other Items
Because of the state of emergency declared in Maryland due to the recent series of uncommonly severe snow storms, we have not been able to prepare the quarterly 10-Q for period ending December 31, 2009 for filing within the 5 day extension period. The company anticipates the 10-Q will be filed within 5 days and there should not be any significant changes in results of operations from the prior Quarter as filed in the Company's 10-12G/A with the SEC on January 28, 2010.
ITEM 9.01 Financial Statements and Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.