EXHIBIT (10)(k)



|                          |  |  |  |                                      
|------------------------- |  |  |  | -------------------------------------
|The Sage Group            |  |  |  |                                      
|CONSULTANTS TO MANAGEMENT |  |  |  | 10409 LESLIE DRIVE                   
|                          |  |  |  | RALEIGH, NORTH CAROLINA 27601        
|                          |  |  |  | (919) 844-9783                       
|                          |  |  |  | E-mail: steve@sagegroupconsulting.com



MEMORANDUM



|      |  |                                                          
|----- |  | ---------------------------------------------------------
|DATE: |  | May 1, 2004                                              
|      | 
|TO:   |  | Lee Johnson, President M&F Bank                          
|      | 
|FROM: |  | Steven A. Savia, CMC                                     
|      | 
|RE:   |  | Final 2004 Loan Production Incentive Compensation Program
|      | 
|CC:   |  |                                                          



This years incentive
compensation program will have multiple components.



| | 1. | Executive Plan
| | -- | --------------



| | 2. | City Executive Plan
| | -- | -------------------



| | 3. | Loan Production Plan
| | -- | --------------------



| | 4. | Branch Customer Service Plan
| | -- | ----------------------------



| | 5. | Corporate Support/Teller Plan
| | -- | -----------------------------



This memo describes the Loan Production Plan.



We worked with Wes Christopher to develop a new incentive plan for branch/commercial lenders. This year that plan recognizes the various roles involved in loan
production. It awards a portion of the fee income to those who exceed their budgeted goal. The plan does not include the City Executives, as they will have their own plan this year.



The Loan Production Plan differs from the Executive and City Executive Plans in that it is based on meeting individual thresholds of loan
production. These thresholds are monthly but are measured quarterly. Thus, a participant that fails to meet a monthly target could make that up during the quarter in which the incentive is granted.



We also have created a new approach toward rewarding mortgage loan personnel.



Schedule D on the following page is a listing of the Loan Officer, including Mortgage Loan,
employees that are included in the Loan Production Plan.



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SCHEDULE D  LOAN OFFICER PLAN PARTICIPANTS



|                      |  |                                      
|--------------------- |  | -------------------------------------
|EMPLOYEE              |  | LOCATION                             
|Cato, Leslie          |  | Charlotte                            
|                      | 
|Cheek, Julie          |  | Durham                               
|                      | 
|Clarke, Brian         |  | Raleigh                              
|                      | 
|Daniels, Aubra        |  | Sr. Mort. Loan Closer/Jr. Underwriter
|                      | 
|Dial-Bethune, Tanya   |  | Charlotte                            
|                      | 
|Dowdy, Scottie        |  | Durham                               
|                      | 
|Drayton-Harvey, JoAnn |  | Raleigh                              
|                      | 
|Gibson, Sam           |  | Raleigh                              
|                      | 
|Greene, Keith         |  | Charlotte                            
|                      | 
|Jackson, John         |  | Winston-Salem                        
|                      | 
|Nichols, Cheryl       |  | Mortgage Loan Production             
|                      | 
|Pickens, William      |  | Corporate Business Development       
|                      | 
|Reavis, Michele       |  | Mortgage Loan Manager                
|                      | 
|Stroud, James         |  | Mortgage Loan Production             



For Loan Production Plan
Participants, the measures will be based on individual goals and measured against those goals. This plan is not based on percent of salary. It is built on an incentive for the volume generated and a percent of the fees generated by the loans
originated. Additionally, the loan volume may be divided among multiple participants depending on the origination roles in which they are involved. Schedule I provides a sample of the measures for these participants.



SCHEDULE I  LOAN PRODUCTION PLAN THRESHOLDS



A  COMMERCIAL



|                      |  |                      |            |                           |   |      
|--------------------- |  | -------------------- | ---------- | ------------------------- | - | -----
|EMPLOYEE              |  | QUARTERLY LOANVOLUME |            | QUARTERLY FEE INCOME GOAL
|Cato, Leslie          |  | $                    | 900,000    |                           | $ | 4,500
|Cheek, Julie          |  | $                    | 900,000    |                           | $ | 4,500
|Clarke, Brian         |  | $                    | 1,500,000  |                           | $ | 7,500
|Dial-Bethune, Tanya   |  | $                    | 900,000    |                           | $ | 4,500
|Dowdy, Scottie        |  | $                    | 900,000    |                           | $ | 4,500
|Drayton-Harvey, JoAnn |  | $                    | 900,000    |                           | $ | 4,500
|Gibson, Sam           |  | $                    | 1,800,000  |                           | $ | 9,000
|Greene, Keith         |  | $                    | 900,000    |                           | $ | 4,500
|Jackson, John         |  | $                    | 900,000    |                           | $ | 4,500
|Pickens, William      |  | $                    | 1,800,0000 |                           | $ | 9,000



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COMMERCIAL LOAN PRODUCTION AWARD PAYOUTS



Below is a description of the basis for payouts for the various plans described above.



Loan Officer Plan 



This plan pays out on a quarterly basis. The pool is based on a schedule that allots a
percentage of the fees collected as a result of loan origination activities. While this is somewhat similar to the 2003 Loan Officer Plan, it differs in a couple of ways:



|1.0 | Awards are made only on the difference of actual versus the threshold (thus a loan officer with a threshold of $900,000 will be awarded additional compensation above base
salary for all of the loan value in excess of the $900,000);
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.0 | There are two factors in the computation of award: volume above threshold (0.5 cents on each dollar above the threshold); and, percentage of total fees collected (5 cents for
total fees collected); and,
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3.0 | A percentage is allocated to each of the origination functions (identification/referral; negotiation; underwriting; closing). Thus, credit for a loan can be divided among
multiple individuals involved in the loan. Those factors are broken out as follows:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.1. | Loan Originator  defined as the person who identifies the potential borrower and either follows up the opportunity personally or refers the opportunity to another loan
officer. The finder may not be a loan officer, in which case is provided for under his or her own incentive plan. This factor is valued at 20% of the total credit.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.2. | Loan Negotiator  defined as the person who, following up on the opportunity, negotiates the structure of the transaction to the point of presenting the transaction for
underwriting. The value of this factor is 30% of the credit.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.3. | Loan Underwriter defined as the person who is responsible for completing all aspects of underwriting the loan for presentation to the Loan Committee for approval,
including documentation of supporting financial data, financial analysis, identification of repayment capability, investigation of collateral value (as appropriate), identification of compliance with Bank policies (and support for approval in spite
of not meeting specific policies if approval is still sought), and preparation of the credit memorandum. This factor is valued at 40% of the credit.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.4. | Closer defined as the person who has responsibility for closing tasks on behalf of the Bank, including ensuring that all required documents are properly executed such
that the Banks position in being repaid, including access to any supporting collateral, is secure. The value for this factor is 10% of the credit.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.0 | Example: the Bank obtains a loan for $800,000. Credit toward an individuals threshold is broken down according to the factors above.
|--- | -------------------------------------------------------------------------------------------------------------------------------------



| | 4.1. | Originator - $160,000
| | ---- | ---------------------



| | 4.2. | Negotiator - $240,000
| | ---- | ---------------------



| | 4.3. | Underwriter - $320,000
| | ---- | ----------------------



| | 4.4. | Closer - $80,000
| | ---- | ----------------



36



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A single loan officer could get credit for the entire $800,000 or any portion thereof, depending on the
role played, toward her or his monthly/quarterly threshold.



|5.0 | Example: Actual award will be calculated based on volume and actual fees collected. The following example shows how the calculation is made:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



| | 5.1. | Threshold = $900,000
| | ---- | --------------------



| | 5.2. | Roles Credit = $1,350,000
| | ---- | -------------------------



| | 5.2.1. | Finder = $400,000 (Identified $2,000,000 in loans)
| | ------ | --------------------------------------------------



| | 5.2.2. | Negotiator = $360,000 (Negotiated $1,200,000 in loans)
| | ------ | ------------------------------------------------------



| | 5.2.3. | Underwriter = $480,000 (Underwrote $1,200,000 in loans)
| | ------ | -------------------------------------------------------



| | 5.2.4. | Closer = $110,000 (Closed $1,100,000 in loans)
| | ------ | ----------------------------------------------



| | 5.3. | Award Calculation = (5.2  5.1) = $450,000
| | ---- | ------------------------------------------



| | 5.4. | Volume = $0.005 on volume over threshold
| | ---- | ----------------------------------------



| | 5.4.1. | ($450,000 x $0.005) = $2,250.00
| | ------ | -------------------------------



| | 5.5. | Fees Collected (on 5.3 assuming 1%) = $4,500
| | ---- | --------------------------------------------



| | 5.5.1. | ($0.05 x $4,500) = $225.00
| | ------ | --------------------------



| | 5.6. | Incentive Award = (5.4.1. + 5.5.1.) = $2,475.00
| | ---- | -----------------------------------------------



B - MORTGAGE LOAN DEPARTMENT



Incentive payouts (% of basis points of origination fees)



|                |  |          |   |  |            |   |  |            |   |  |       |  
|--------------- |  | -------- | - |  | ---------- | - |  | ---------- | - |  | ----- | -
|Monthly volume  |  | $0-$500k |   |  | $501-$750k |   |  | $751-$999k |   |  | $1MM+ |  
|Nichols, Cheryl |  | -0-      | % |  | -0-        | % |  | 30         | % |  | 35    | %
|Stroud, James   |  |          |   |  |            |   |  |            |   |  |       |  
|Daniels, Aubra  |  | -0-      | % |  | 2          | % |  | 3.125      | % |  | 3.75  | %
|Reavis, Michele |  | -0-      | % |  | 3          | % |  | 3.75       | % |  | 4.5   | %



Case Example 1



Assume that on each loan we collected a 1% fee on all loans. Also assume that the production
for an individual Mortgage Loan Officer is $850,000.



Under this example, the
award for the month would be spread as follows:



Fees Collected: $8,000.00



Mortgage Loan Officer (Field Producer) Incentive: $2,400.00 ($8,000 x 30%)

Mortgage Loan Processor Incentive:
$250.00 ($8,000 x 3.125%)

Mortgage Loan Underwriter Incentive: $300.00 ($8,000 x 3.75%)



Total Incentive Paid Out: $2,950.00



37



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Case Example 2



Assume that on each loan we collected a 1% fee on all loans. Also assume that the production for an individual Mortgage Loan Officer is $1,345,000.



Under this example, the award for the month would be spread as follows:



Fees Collected: $13,450.00



Mortgage Loan Officer (Field Producer) Incentive: $4,035.00 ($13,450 x 30%)

Mortgage Loan Processor Incentive: $420.31 ($13,450 x 3.125%)

Mortgage Loan Underwriter Incentive: $300.00 ($13,450 x 3.75%)



Total Incentive Paid Out: $2,950.00

Fees Retained By Bank: $5,050.00



38