UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2010

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 000-52477

 

 

MAYFLOWER BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Massachusetts		20-8448499
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
30 South Main Street, Middleboro, Massachusetts		02346
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (508) 947-4343

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large Accelerated Filer		¨		Accelerated Filer		¨
Non-Accelerated Filer		¨  (Do not check if a smaller reporting company)		Smaller Reporting Company		x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of each of the registrant’s classes of common stock as of November 24, 2010

 

Common Stock $1.00 par value		2,083,550
(Title of class)		(Shares outstanding)

 

 

 

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PART I - FINANCIAL INFORMATION

ITEM I - Financial Statements

MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

		October 31, 2010				April 30, 2010
		(unaudited)				(audited)
		(in Thousands)
ASSETS
Cash and cash equivalents:
Cash and due from banks		$	4,949			$	4,559
Federal funds sold and interest-bearing deposits in banks			11,416				15,914
Total cash and cash equivalents			16,365				20,473
Investment securities:
Securities available-for-sale, at fair value			46,194				49,576
Securities held-to-maturity (fair value of $45,606 and $45,897, respectively)			44,311				44,793
Total investment securities			90,505				94,369
Loans receivable, net			123,106				120,545
Accrued interest receivable			867				926
Real estate held for investment			1,014				1,020
Real estate acquired by foreclosure			1,379				1,815
Premises and equipment, net			10,996				11,147
Deposits with The Co-operative Central Bank			449				449
Stock in Federal Home Loan Bank of Boston, at cost			1,650				1,650
Refundable income taxes			262				25
Deferred income taxes			537				797
Other assets			1,531				2,314
Total assets		$	248,661			$	255,530
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits		$	221,599			$	225,317
Advances and borrowings			4,500				7,500
Advances from borrowers for taxes and insurance			423				213
Allowance for loan losses on off-balance sheet credit exposures			110				110
Accrued expenses and other liabilities			848				1,910
Total liabilities			227,480				235,050
STOCKHOLDERS’ EQUITY
Preferred stock $1.00 par value; authorized 5,000,000 shares; issued - none			—				—
Common stock $1.00 par value; authorized 15,000,000 shares; issued 2,083,550 at October 31, 2010 and 2,078,985 at April 30, 2010			2,083				2,079
Additional paid-in capital			4,341				4,300
Retained earnings			13,746				13,293
Accumulated other comprehensive income			1,011				808
Total stockholders’ equity			21,181				20,480
Total liabilities and stockholders’ equity		$	248,661			$	255,530

See accompanying notes to consolidated financial statements

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

 

		Three months ended October 31,								Six months ended October 31,
		2010				2009				2010				2009
		(In Thousands, Except Per Share Data)
Interest income:
Loans receivable		$	1,819			$	1,857			$	3,621			$	3,804
Securities held-to-maturity			387				455				802				902
Securities available-for-sale			440				538				910				1,068
Federal funds sold and interest-bearing deposits in banks			6				4				12				7
Total interest income			2,652				2,854				5,345				5,781
Interest expense:
Deposits			449				852				922				1,805
Borrowed funds			56				121				122				257
Total interest expense			505				973				1,044				2,062
Net interest income			2,147				1,881				4,301				3,719
Provision for loan losses			76				—				136				—
Net interest income after provision for loan losses			2,071				1,881				4,165				3,719
Noninterest income:
Loan origination and other loan fees			25				30				59				49
Customer service fees			170				186				366				370
Gain on sales of mortgage loans			203				81				314				270
Gain on sales of investment securities			14				128				48				131
Interchange income			49				41				99				83
Other			24				30				45				51
Total noninterest income			485				496				931				954
Noninterest expense:
Compensation and fringe benefits			1,048				1,005				2,099				1,979
Occupancy and equipment			265				279				560				557
FDIC assessment			78				112				169				225
Data processing			94				84				191				171
Losses & expenses of other real estate owned			19				11				39				53
Other			454				488				908				956
Total noninterest expense			1,958				1,979				3,966				3,941
Income before income taxes			598				398				1,130				732
Provision for income taxes			213				96				409				198
Net income		$	385			$	302			$	721			$	534
Earnings per share (basic)		$	0.19			$	0.15			$	0.35			$	0.26
Earnings per share (diluted)		$	0.19			$	0.15			$	0.35			$	0.26
Weighted average basic shares outstanding			2,085				2,084				2,084				2,085
Diluted effect of outstanding stock options			—				7				—				7
Weighted average diluted shares outstanding			2,085				2,091				2,084				2,092

See accompanying notes to consolidated financial statements

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

(Unaudited)														Accumulated
		Common Stock				Additional Paid-in Capital				Retained Earnings				Other Comprehensive Income (loss)				Total
		(In Thousands)
BALANCE, April 30, 2009		$	2,086			$	4,311			$	12,747			$	194			$	19,338
Net income for the six months ended October 31, 2009			—				—				534				—				534
Other comprehensive income, net of tax:
Change in unrealized gain on securities available-for-sale, net of deferred income taxes of $500,000			—				—				—				710				710
Reclassification adjustment for gains included in net income, net of deferred income taxes of $46,000			—				—				—				(85	)			(85	)
																			625
Total comprehensive income			—				—				—				—				1,159
Purchase of 2,474 shares of Company stock			(3	)			(4	)			(13	)			—				(20	)
Cash dividends ($.16 per share)			—				—				(334	)			—				(334	)
BALANCE, October 31, 2009		$	2,083			$	4,307			$	12,934			$	819			$	20,143
BALANCE, April 30, 2010		$	2,079			$	4,300			$	13,293			$	808			$	20,480
Net income for the six months ended October 31, 2010			—				—				721				—				721
Other comprehensive income, net of tax:
Change in unrealized gain on securities available-for-sale, net of deferred income taxes of $147,000			—				—				—				232				232
Reclassification adjustment for gains included in net income, net of deferred income taxes of $19,000			—				—				—				(29	)			(29	)
																			203
Total comprehensive income			—				—				—				—				924
Issuance of 7,500 shares of common stock			7				46				—				—				53
Purchase of 2,935 shares of Company stock			(3	)			(5	)			(18	)			—				(26	)
Cash dividends ($.12 per share)			—				—				(250	)			—				(250	)
BALANCE, October 31, 2010		$	2,083			$	4,341			$	13,746			$	1,011			$	21,181

See accompanying notes to consolidated financial statements.

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Six months ended October 31,
		2010				2009
		(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received		$	5,498			$	5,865
Fees and other income received			883				801
Interest paid			(1,047	)			(2,059	)
Cash paid to suppliers and employees			(3,646	)			(4,695	)
Income taxes paid			(515	)			(351	)
Net cash provided by (used in) operating activities			1,173				(439	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans receivable			(2,587	)			9,536
Purchases of available-for-sale securities			(14,454	)			(16,306	)
Proceeds from sales, calls, and maturities of available-for-sale securities			18,273				13,035
Purchase of held-to-maturity securities			(27,269	)			(9,453	)
Proceeds from maturities and calls of held-to-maturity securities			27,201				8,393
Proceeds from sales of other real estate owned			—				40
Proceeds from sales of real estate acquired by foreclosure			408				—
Capital additions to real estate acquired by foreclosure			(76	)			(133	)
Purchases of premises and equipment			(95	)			(745	)
Other - net			49				(65	)
Net cash provided by investing activities			1,450				4,302
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits			(3,718	)			2,566
Payments on advances and borrowings			(3,000	)			(3,011	)
Net increase in advances from borrowers for taxes and insurance			210				214
Issuance of common stock			53				—
Repurchase of Company stock			(26	)			(20	)
Dividends paid on common stock			(250	)			(334	)
Net cash used in financing activities			(6,731	)			(585	)
Net (decrease) increase in cash and cash equivalents			(4,108	)			3,278
Cash and cash equivalents - beginning of period			20,473				10,376
Cash and cash equivalents - end of period		$	16,365			$	13,654

See accompanying notes to consolidated financial statements

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

Reconciliation of Net Income to Net Cash

Provided by (Used in) Operating Activities

(Unaudited)

 

		Six months ended October 31,
		2010				2009
		(In Thousands)
Net income		$	721			$	534
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			252				266
Provision for loan losses			136				—
(Gain) loss on other real estate owned			(6	)			29
Premium amortization			93				49
Amortization of intangible assets			7				7
Deferred income taxes			132				(134	)
Gain on sales of investments			(48	)			(131	)
Decrease (increase) in accrued interest receivable			59				35
Decrease (increase) in prepaid expenses			192				41
Decrease (increase) in mortgage servicing rights			(33	)			(45	)
Decrease (increase) in refundable income taxes			(237	)			(19	)
Increase (decrease) in accrued expenses			(93	)			(1,052	)
Increase (decrease) in accrued interest payable			(2	)			3
Increase (decrease) in deferred loan origination fees			—				(22	)
Total adjustments			452				(973	)
Net cash provided by (used in) operating activities		$	1,173			$	(439	)
SUPPLEMENTAL DISCLOSURES:
Total increase in unrealized gain on securities available-for-sale		$	331			$	1,079
Loans transferred to real estate acquired by foreclosure		$	295			$	—
Proceeds from sales of other real estate financed through loans		$	—			$	314
Proceeds from sales of foreclosed real estate financed through loans		$	457			$	—
Transfer of premises and equipment to real estate held for investment		$	—			$	1,094

See accompanying notes to consolidated financial statements

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

October 31, 2010 and 2009

 

A.	Reorganization and Basis of presentation:

The consolidated financial statements of Mayflower Bancorp, Inc. and Subsidiary presented herein should be read in conjunction with the consolidated financial statements of Mayflower Bancorp, Inc. and Subsidiary as of and for the year ended April 30, 2010. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation. Interim results are not necessarily indicative of results to be expected for the entire year.

 

B.	Recent Accounting Pronouncements:

In January 2010, the FASB issued Accounting Standards Update No. 2010-6, Improving Disclosures About Fair Value Measurements, which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. This update is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The Company does not expect the adoption this guidance to have a material impact on its consolidated financial statements.

In July 2010, the FASB issued Accounting Standards Update No. 2010-20, Disclosures about the Credit Quality of Financing Receivables, which amends Accounting Standards Codification Topic 310, Receivables, by requiring more robust and disaggregated disclosure about the credit quality of an entity’s loans and its allowance for loan losses. These new disclosures will significantly expand the existing requirements and are focused on providing transparency regarding an entity’s exposure to credit losses. This update is effective for interim and annual reporting periods ending on or after December 15, 2010. The Company does not expect the adoption of this Update to have a material impact on its consolidated financial statements. However, there will be a significant impact on required disclosures in the notes to the Company’s consolidated financial statements.

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

October 31, 2010 and 2009

 

 

C.	Investment Securities

Investment securities have been classified according to management’s intent. The amortized cost of securities and their respective fair values at October 31, 2010 and April 30, 2010 follows:

 

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
		October 31, 2010
		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. Government obligations		$	13,241			$	95			$	—			$	13,336
Corporate debt securities			500				—				(1	)			499
Municipal obligations			2,497				89				(9	)			2,577
Mortgage-backed and related securities			27,525				1,514				—				29,039
Trust preferred securities			750				—				(38	)			712
Marketable equity securities			—				31				—				31
		$	44,513			$	1,729			$	(48	)		$	46,194
HELD-TO-MATURITY SECURITIES:
U.S. Government obligations		$	16,008			$	115			$	(2	)		$	16,121
Municipal obligations			3,187				122				(1	)			3,308
Mortgage-backed and related securities			25,116				1,069				(8	)			26,177
		$	44,311			$	1,306			$	(11	)		$	45,606
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
		April 30, 2010
		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. Government obligations		$	14,739			$	66			$	(1	)		$	14,804
Corporate debt securities			500				—				—				500
Municipal obligations			1,977				75				—				2,052
Mortgage-backed and related securities			29,512				1,281				—				30,793
Trust preferred securities			750				—				(122	)			628
Marketable equity securities			748				73				(22	)			799
		$	48,226			$	1,495			$	(145	)		$	49,576
HELD-TO-MATURITY SECURITIES:
U.S. Government obligations		$	18,756			$	83			$	(2	)		$	18,837
Municipal obligations			2,661				90				—				2,751
Mortgage-backed and related securities			23,376				954				(21	)			24,309
		$	44,793			$	1,127			$	(23	)		$	45,897

There were no impairment charges on investment securities during the six months ended October 31, 2010 or 2009.

 

D.	Fair Values of Financial Instruments

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

October 31, 2010 and 2009

 

that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash, due from banks, federal funds sold and interest bearing deposits: The carrying amounts reported in the statements of financial condition for cash, due from banks, and federal funds sold and interest bearing deposits, approximate those assets’ fair values.

Investment Securities: Fair values of investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial real estate, residential mortgage, and other consumer. Each loan category is further segmented into fixed and adjustable rate interest terms, and by performing and non-performing categories.

The fair value of performing loans, except residential mortgage loans, is calculated by discounting contractual cash flows using estimated market discount rates which reflect the credit and interest rate risk inherent in the loan. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources adjusted to reflect differences in servicing and credit costs.

Fair value for significant non-performing loans is based on recent internal or external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information.

The carrying amount of accrued interest receivable approximates its fair value.

Deposit Liabilities: The fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings and NOW accounts, and money market and checking accounts, is equal to the amount payable on demand (that is, their carrying amounts). The fair value of certificates of deposit is based on the discounted value of contractual cash flows.

Advances and Borrowings: Fair values of advances and borrowings are estimated by discounting the future cash payment using rates currently available to the Company for borrowings with similar terms and maturities.

Deposits with The Co-operative Central Bank and Stock in Federal Home Loan Bank: The carrying amount of the deposits with The Co-operative Central Bank approximates its fair value. The carrying amount of the stock in Federal Home Loan Bank is at cost, since it is not practicable to estimate the fair value because the stock is not marketable.

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

October 31, 2010 and 2009

 

Commitments to Extend Credit: Commitments to extend credit were evaluated and fair value was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.

Limitations: The fair value estimates are made at a discrete point in time based on relevant market information and information about the financial instruments. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and such other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

In addition, the fair value estimates are based on existing on-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include the deferred tax assets or liabilities, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The estimated fair values of the Company’s financial instruments at October 31, 2010 and April 30, 2010 were as follows:

 

		October 31, 2010								April 30, 2010
		Carrying Amount				Fair Value				Carrying Amount				Fair Value
		(In Thousands)
Financial assets:
Cash and due from banks		$	4,949			$	4,949			$	4,559			$	4,559
Federal funds sold and interest-bearing deposits in banks			11,416				11,416				15,914				15,914
Investment securities			90,505				91,800				94,369				95,473
Loans, net			123,106				124,345				120,545				121,990
Accrued interest receivable			867				867				926				926
Deposits with The Co-operative Central Bank			449				449				449				449
Stock in Federal Home Loan Bank of Boston			1,650				1,650				1,650				1,650
Financial liabilities:
Deposits			221,599				222,014				225,317				225,726
Advances and borrowings			4,500				4,881				7,500				7,985

 

E.	Fair Value Measurement

The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

October 31, 2010 and 2009

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs as of the measurement date other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be derived from or corroborated by observable market data by correlation or other means for substantially the full term of the asset.

Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability as of the measurement date. These financial instruments do not have two way markets and are measured using management’s best estimate of fair value.

The following is a description of the Company’s valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Securities available for sale: Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based on quoted prices, when available. If quoted prices are not available, fair values are measured using pricing models.

The Company utilizes a third party pricing service to obtain fair values for investment securities. The pricing service utilizes the following method to value the security portfolio.

The securities measured at fair value utilizing Level 1 inputs are marketable equity securities and utilizing Level 2 inputs are corporate debt securities, municipal obligations, U.S. Government and Agency obligations, including mortgage-backed and related securities. The fair values represent either quoted market prices for the identical securities (Level 1 inputs) or fair values determined by pricing models that consider standard input factors such as observable market data, benchmark yields, reported trades, broker/dealer quotes, credit spreads, benchmark securities, as well as new issue data, monthly payment information, and collateral performance, among others. The Company does not currently have any Level 3 securities in its portfolio.

Loans: The Company does not record loans at fair value on a recurring basis. However, from time to time, non-recurring fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the collateral.

Real estate acquired by foreclosure: From time-to-time, the Company records non-recurring fair value adjustments to foreclosed real estate to reflect partial writedowns based on observable market prices or current appraised values.

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

October 31, 2010 and 2009

 

The balances of assets and liabilities measured at fair value on a recurring basis as of October 31, 2010, were as follows:

 

		Assets at Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Other Unobservable Inputs (Level 3)
(In thousands)
Securities available-for-sale		$	46,194			$	—			$	46,194			$	—

The balances of assets and liabilities measured at fair value on a non-recurring basis as of October 31, 2010, were as follows:

 

		Assets at Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Other Unobservable Inputs (Level 3)
(In thousands)
Impaired loans		$	1,379			$	—			$	1,379			$	—
Real estate acquired by foreclosure		$	1,379			$	—			$	1,379			$	—

 

F.	Real Estate Held for Investment

Real estate held for investment includes costs approximating $729,000 for office units constructed with the Obery Street branch in Plymouth, Massachusetts. The Company anticipates selling these units during the current fiscal year.

 

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ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements:

This report includes certain forward-looking statements that involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include the economic environment, competition, products and pricing in geographic and business areas in which Mayflower Bancorp, Inc. (“the Company”) and its wholly owned subsidiary, Mayflower Co-operative Bank (the “Bank”) operate, prevailing interest rates, changes in government regulations and policies affecting financial services companies, credit quality and credit risk management, and the other risk factors referred to in item 1A of the Company’s Annual Report on Form 10-K for the year ended April 30, 2010 and Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2010. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report.

Critical Accounting Policies:

Accounting policies involving significant judgments and assumptions by management, which have, or could have, a material effect on the carrying value of certain assets and impact income, are considered critical accounting policies. The Company believes the following are critical accounting policies:

Allowance for Loan Losses:

A provision for loan losses represents a charge or credit against current earnings and an addition to or deduction from the allowance for loan losses. In determining the amount to provide for potential loan losses, a key factor is the current adequacy of the allowance for loan losses. Management uses a methodology to systematically measure the amount of estimated loan loss exposure inherent in the loan portfolio for purposes of establishing an adequate allowance for loan losses. The methodology includes three elements: (1) an analysis of individual loans deemed to be impaired or potentially impaired and a subsequent allocation as required, (2) general loss allocations for various categories of loans based on loss experience factors, and (3) an unallocated allowance. General and unallocated allowances are determined as a function of management’s assessment of many factors including the risk characteristics of the loan portfolio, concentrations of credit, current and anticipated economic conditions that may affect borrowers’ ability to pay, and trends in loan delinquencies and charge-offs.

Material estimates that are susceptible to change in the near-term relate to the allowance for loan losses. Any significant changes in these assumptions and/or conditions could result in higher than estimated losses that could adversely affect the Company’s earnings. Management believes that the allowance for loan losses as currently constituted is adequate based on its review of the portfolio and other factors associated with the loans. While management uses available information to recognize loan losses, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. In addition, regulatory agencies, as part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additional allowances based on judgments different than those of management, which could also adversely affect the Company’s earnings.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest 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 when due. Loans that experience insignificant payment delays and payment shortfalls generally are not

 

13

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classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into account all the circumstances surrounding the loan and borrower, including the length of delay, 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, commercial real estate, 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 similar balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

The Company also maintains an allowance for possible losses on its outstanding loan commitments. The allowance for loan losses on off-balance sheet credit exposures (shown separately on the balance sheet) is maintained based on expected drawdowns of committed loans and their loss experience factors and management’s assessment of various other factors including current and anticipated economic conditions that may affect the borrowers’ ability to pay, and trends in loan delinquencies and charge-offs.

Other-Than-Temporarily Impaired Investment Securities:

Management judgment is involved in the evaluation of declines in value of individual investment securities held by the Company. Declines in value that are deemed other-than-temporary are recognized in the income statement through a write-down in the recorded value of the affected security. Management considers many factors in their analysis of which, if any, securities might be classified as other-than-temporarily impaired, including industry analyst reports, sector credit ratings, volatility in market price and other relevant information such as: financial condition, earnings capacity, near term prospects of the issuing company, length of time and extent to which the market value has been less than cost, and whether the instrument is performing in accordance with its terms.

Whenever a debt or equity security is deemed to be other-than temporarily impaired as determined by management’s analysis, it is written-down to its current fair market value. Any unfavorable change in general market conditions or the condition of a specific issuer could cause an increase in the Company’s impairment write-downs on investment securities, which would have an adverse effect on the Company’s earnings.

Liquidity and Capital Resources:

The Company’s primary sources of liquidity are deposits, loan payments and payoffs, investment income, principal repayments and maturities of investments, and advances from the Federal Home Loan Bank of Boston. The Company’s liquidity management program is designed to insure that sufficient funds are available to meet its daily cash requirements and this management program has proven to be successful toward that end. The Company has also established a line of credit with The Federal Reserve Bank, collateralized by certain securities issued by Government Sponsored Entities. Additionally, as a member of The Co-operative Central Bank’s Reserve Fund, the Company has the right to borrow from that entity’s Reserve Fund for short-term cash needs.

The Company believes its capital resources, including deposits, scheduled loan repayments, revenue generated from the sales of loans and investment securities, unused borrowing capacity at the Federal Home Loan Bank of Boston, and revenue from other sources are adequate to meet its funding commitments and requirements. At October 31, 2010 and April 30, 2010, the Company’s and the Bank’s capital ratios were in excess of regulatory requirements and the Company and the Bank are considered to be well-capitalized under all regulatory requirements.

 

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Financial Condition:

At October 31, 2010, the Company’s total assets were $248.7 million as compared to $255.6 million at April 30, 2010, a decrease of $6.9 million. During the six months ended October 31, 2010, cash and cash equivalents decreased by $4.1 million, total investments decreased by $3.9 million, and net loans receivable increased by $2.6 million.

During the six months ended October 31, 2010, historically low interest rates resulted in increased residential mortgage refinancing activity, as the Company originated $17.5 million in residential mortgages as compared to $12.0 million originated for the same period one year ago. During the first six months, the Company sold $12.9 million of fixed-rate residential loans in the secondary mortgage market, producing gains of $314,000, compared to sales of $14.3 million for the prior year period which resulted in gains of $270,000. This activity, combined with other mortgage payoffs and regularly scheduled amortization, resulted in a $357,000 increase in residential loan balances as compared to April 30, 2010.

Augmenting this growth in the residential lending portfolio an increase of $2.5 million in commercial loans and mortgages and an increase of $109,000 in home equity loans and lines of credit. These increases were partially offset by a decrease of $81,000 in net construction loans outstanding and a decrease of $156,000 in consumer loans. In aggregate, net loans outstanding increased by $2.6 million, from $120.5 million at April 30, 2010 to $123.1 million at October 31, 2010.

Non-performing assets are comprised of non-accrual loans, non-accrual investments and real estate acquired by foreclosure. Non-performing loans consist of loans that are more than 90 days past due and loans less than 90 days past due on which the Company has ceased accruing interest. As of October 31, 2010, non-performing assets totaled $1.5 million, compared to $2.3 million at April 30, 2010. The decrease in non-performing assets is comprised of a decrease of $395,000 in non-performing loans and a decrease of $436,000 in real estate acquired by foreclosure. During the period, the Company was able to resolve certain previously classified non-performing loans and charged off others. During the three months, one additional commercial loan with a balance outstanding of $20,000 was classified as non-performing. At October 31, 2010, non-performing assets represented 0.60% of total assets compared to 0.91% of total assets at April 30, 2010.

At October 31, 2010, the Company’s allowance for loan losses was $1,313,000, which represented an allowance of 1.07% of net loans receivable and 1,103.4% of non-performing loans at that date. This compares to $1,194,000 at April 30, 2010, which represented 0.99% of net loans receivable and 232.3% of non-performing loans. During the six months ended October 31, 2010, the Company provided $136,000 to augment the reserve and charged off $16,000 in commercial loans and $1,000 in personal loans. Management continues to closely monitor the loan portfolio and will continue to provide for potential losses as they become likely.

The Company’s loan portfolio continues to be heavily dependent on the strength of the local real estate market and a significant deterioration in that market or other negative economic conditions could have a negative impact on the Company’s results. In addition, commercial business, construction, and commercial real estate financing are generally considered to involve a higher degree of credit risk than long-term financing of residential properties due to their higher potential for default and the possible difficulty of disposing of the underlying collateral. As management continues to closely monitor the Company’s loan portfolio, higher provisions for loan losses and foreclosed property expense may be required should economic conditions worsen or the levels of non-performing assets increase.

The Company also maintains an allowance for loan losses against off-balance sheet credit exposures (shown separately on the balance sheet). This allowance totaled $110,000 at October 31, 2010 and April 30, 2010. This allowance is intended to protect the Company against potential losses on undrawn or unfunded loan commitments made to customers.

 

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Total deposits, after interest credited, decreased by $3.7 million due primarily to a reduction of $4.1 million in money market deposit accounts and $2.6 million in certificates of deposits, partially offset by growth of $2.9 million in checking and savings accounts. These fluctuations are the result of a management decision to reduce interest rates paid on certificates of deposit which the Company considers non-core, and the result of decreases in municipal deposits which tend to be larger in April during the tax collection period. Additionally, during the six months ended October 31, 2010, advances and borrowings decreased by $3.0 million, from $7.5 million at April 30, 2010 to $4.5 million at October 31, 2010.

Total stockholders’ equity increased by $701,000 when compared to April 30, 2010. The increase in total equity is due to net income of $721,000 for the first six months, the exercise of employee stock options totaling $53,000, and an increase of $203,000 in the net unrealized gain on securities available-for-sale. Dividends paid to shareholders totaling $250,000 or $0.12 per share and Company stock repurchases totaling $26,000 partially offset these increases in total equity.

Results of Operations:

Comparison of the three months ended October 31, 2010 and October 31, 2009.

General:

Net income for the three months ended October 31, 2010 was $385,000 compared with net income of $302,000 for the three months ended October 31, 2009, an increase of $83,000 or 27.5%. Net interest income increased by $266,000, the provision for loan losses increased by $76,000, total non-interest income decreased by $11,000, and total non-interest expense decreased by $21,000.

The Company’s results largely depend upon its net interest margin, which is the difference between the income earned on loans and investments, and the interest paid on deposits and borrowings as a percentage of average interest-earning assets. During the three months ended October 31, 2010, the Company’s net interest margin increased from 3.35% to 3.79%. This increase in net interest margin is primarily the result of the maturity of shorter-term certificates of deposit repricing into lower rates, as offset by reduced yields earned on investments and loans.

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

ANALYSIS OF INTEREST RATE SPREAD

The following table reflects the weighted average yield, interest earned, and the average balances of loans and investments, and the weighted average rates, interest expense, and the average balances of deposits and borrowed funds for the periods indicated. The yield data for loans does not include loan origination and other loan fees.

 

										Three months ended October 31,
		2010												2009
		Average Balance (1)				Interest				Rate (Annualized)				Average Balance (1)				Interest				Rate (Annualized)
										(Dollars in Thousands)
Interest-earning assets:
Loans		$	123,528			$	1,819				5.89	%		$	121,677			$	1,857				6.10	%
Investment securities			92,729				827				3.57	%			96,075				993				4.13	%
Federal funds sold and interest-bearing deposits in banks			10,145				6				0.24	%			6,949				4				0.23	%
All interest-earning assets		$	226,402				2,652				4.69	%		$	224,701				2,854				5.08	%
Interest-bearing liabilities:
Deposits		$	220,113				449				0.82	%		$	213,372				852				1.60	%
Borrowed funds			5,436				56				4.12	%			11,811				121				4.10	%
All interest-bearing liabilities		$	225,549				505				0.90	%		$	225,183				973				1.73	%
Net interest income						$	2,147											$	1,881
Weighted average interest rate spread (2)											3.79	%											3.35	%
Net interest margin											3.79	%											3.35	%

 

(1)	Average balances calculated using daily balances

(2)	Represents the weighted average yield earned on all interest earning assets during the period less the weighted average interest rate paid on all interest bearing liabilities.

 

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The effect on net interest income as a result of changes in interest rates and in the amount of interest-earning assets and interest-bearing liabilities is shown in the following table. Information is provided in the table below on changes for the period indicated attributable to (1) changes in volume (change in average balance multiplied by prior period yield), (2) changes in interest rates (changes in yield multiplied by prior period average balance) and (3) the combined effect of changes in interest rates and volume (change in yield multiplied by change in average balance).

 

		Three months ended October 31,
		2010 vs. 2009
		Changes due to increase (decrease)
		(in thousands)
		Total				Volume				Rate				Rate/ Volume
Interest income:
Loans		$	(38	)		$	28			$	(65	)		$	(1	)
Investment securities			(166	)			(35	)			(136	)			5
Federal funds sold and interest-bearing deposits in banks			2				2				—				—
Total			(202	)			(5	)			(201	)			4
Interest expense:
Deposits			(403	)			27				(417	)			(13	)
Borrowed funds			(65	)			(66	)			1				—
Total			(468	)			(39	)			(416	)			(13	)
Increase (decrease) in net interest income		$	266			$	34			$	215			$	17

Interest and Dividend Income:

Total interest and dividend income decreased by $202,000, or 7.1%, to $2.7 million for the three months ended October 31, 2010. Interest income from loans decreased by $38,000. This decrease was due to a reduction in the average rate earned on loans, from 6.10% to 5.89% on an annualized basis, as offset by an increase of $1.9 million in the average balance of loans outstanding. Interest and dividend income on investment securities decreased by $166,000 as a result of a decrease in the average yield earned, from 4.13% in the quarter ended October 31, 2009 to 3.57% in the quarter ended October 31, 2010, coupled with a decrease of $3.3 million in the average balance of investments. Interest on short-term investments increased by $2,000 due to an increase of $3.2 million in the average balance of short-term investments outstanding, coupled with a slight increase in the average yield earned, from 0.23% in the 2009 quarter to 0.24% in the 2010 quarter.

Interest Expense:

Interest expense decreased by $468,000, or 48.1%, to $505,000 for the three months ended October 31, 2010. Interest expense on deposits decreased by $403,000 as a result of a decrease in the average rate paid, from 1.60% to 0.82%, offset by an increase of $6.7 million in the average balance of deposits. Interest expense on borrowed funds decreased by $65,000, or 53.7%, for the three months ended October 31, 2010. This decrease was due to a reduction of $6.4 million in the average balance of advances outstanding, offset by a slight increase in the average rate paid on borrowed funds, from 4.10% in the October 2009 three-month period to 4.12% in the October 2010 three-month period.

 

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Provision for Loan Losses:

The provision for loan losses was $76,000 for the quarter ended October 31, 2010, compared to zero for the quarter ended October 31, 2009. The allowance for loan losses is maintained at a level that management considers adequate to provide for probable losses based upon evaluation of known and inherent risks in the loan portfolio. In determining the appropriate level for the allowance for loan losses, the Company considers past loss experience, evaluations of underlying collateral, prevailing economic conditions, the nature of the loan portfolio and levels of non-performing and other classified loans. While management uses available information to recognize loan losses, future additions to the allowance may be necessary based on additional increases in non-performing loans, changes in economic conditions, or for other reasons.

Non-interest Income:

Non-interest income decreased by $11,000 for the three months ended October 31, 2010 as compared to the three months ended October 31, 2009. This decrease was primarily due to a reduction of $114,000 in gain on sales of investments, offset by an increase of $122,000 in gains on sales of loans, from gains of $81,000 for the quarter ended October 31, 2009 to gains of $203,000 for the quarter ended October 31, 2010. Additionally, loan origination and other loan fees decreased by $5,000 as a result of increased amortization of the mortgage servicing asset, customer service fees decreased by $16,000 due to reduced return check fees, and other income decreased by $6,000. These decreases were partially offset by an increase of $8,000 in debit card interchange income.

Non-interest Expense:

Non-interest expense decreased by $21,000 or 1.1% for the quarter ended October 31, 2010. This decrease was comprised of a decrease of $14,000 in occupancy and equipment expense, a decrease of $34,000 in FDIC assessment expense, and a decrease of $34,000 in other operating expenses. Offsetting these decreases were increases in compensation and fringe benefits totaling $43,000, data processing expense totaling $10,000, and losses and expenses of other real estate owned totaling $8,000.

Provision for Income Taxes:

The provision for income taxes increased by $117,000 for the three months ended October 31, 2010 when compared to the three months ended October 31, 2009, due to the increase in net income before taxes. Effective income tax rates were 35.6% and 24.1% respectively in the 2010 and 2009 periods. The lower effective tax rate in comparison to statutory rates is reflective of income earned by a non-Bank investment subsidiary, which is taxed, for state tax purposes, at a lower rate. The increase in the effective tax rate for the most recent quarter ended October 31, 2010, is due to a higher proportion of net income earned by the Bank entity compared to its non-Bank investment subsidiary. Therefore, a greater proportion of the net income was taxed at a higher tax rate in the 2010 period compared to the same period in 2009.

Results of Operations:

Comparison of the six months ended October 31, 2010 and October 31, 2009.

General:

Net income for the six months ended October 31, 2010 was $721,000 compared with net income of $534,000 for the six months ended October 31, 2009. Net interest income increased by $582,000, the provision for loan losses increased by $136,000, total non-interest income decreased by $23,000, and total non-interest expense increased by $25,000.

 

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During the six months ended October 31, 2010, the Company’s net interest margin increased from 3.30% to 3.79%. This margin increase is primarily the result of the repricing of certificate of deposit accounts into lower yielding instruments.

MAYFLOWER BANCORP, INC. AND SUBSIDIARY

ANALYSIS OF INTEREST RATE SPREAD

The following table reflects the weighted average yield, interest earned, and the average balances of loans and investments, and the weighted average rates, interest expense, and the average balances of deposits and borrowed funds for the periods indicated. The yield data for loans does not include loan origination and other loan fees.

 

										Six months ended October 31,
		2010												2009
		Average Balance (1)				Interest				Rate (Annualized)				Average Balance (1)				Interest				Rate (Annualized)
		(Dollars in Thousands)
Interest-earning assets:
Loans		$	123,201			$	3,621				5.88	%		$	124,873			$	3,804				6.09	%
Investment securities			93,621				1,712				3.66	%			93,730				1,970				4.20	%
Federal funds sold and interest-bearing deposits in banks			10,331				12				0.23	%			6,555				7				0.21	%
All interest-earning assets		$	227,153				5,345				4.71	%		$	225,158				5,781				5.14	%
Interest-bearing liabilities:
Deposits		$	220,813				922				0.84	%		$	212,912				1,805				1.70	%
Borrowed funds			5,985				122				4.08	%			12,386				257				4.15	%
All interest-bearing liabilities		$	226,798				1,044				0.92	%		$	225,298				2,062				1.83	%
Net interest income						$	4,301											$	3,719
Weighted average interest rate spread (2)											3.79	%											3.31	%
Net interest margin											3.79	%											3.30	%

 

(1)	Average balances calculated using daily balances

(2)	Represents the weighted average yield earned on all interest earning assets during the period less the weighted average interest rate paid on all interest bearing liabilities.

 

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The effect on net interest income due to changes in interest rates and in the amount of interest-earning assets and interest-bearing liabilities is shown in the following table. Information is provided in the table below on changes for the period indicated attributable to (1) changes in volume (change in average balance multiplied by prior period yield), (2) changes in interest rates (changes in yield multiplied by prior period average balance) and (3) the combined effect of changes in interest rates and volume (change in yield multiplied by change in average balance).

 

		Six months ended October 31,
		2009 vs. 2010
		Changes due to increase (decrease)
		(in thousands)
		Total				Volume				Rate				Rate/ Volume
Interest income:
Loans		$	(183	)		$	(51	)		$	(134	)		$	2
Investment securities			(258	)			(2	)			(256	)			—
Short-term investments			5				4				1				—
Total			(436	)			(49	)			(389	)			2
Interest expense:
Deposits			(883	)			67				(916	)			(34	)
Borrowed funds			(135	)			(133	)			(4	)			2
Total			(1,018	)			(66	)			(920	)			(32	)
Increase (decrease) in net interest income		$	582			$	17			$	531			$	34

Interest and Dividend Income:

Interest and dividend income decreased by $436,000, or 7.5%, to $5.3 million for the six months ended October 31, 2010 from $5.8 million for the six months ended October 31, 2009. Interest income from loans decreased by $183,000. This decline was due to a decrease of $1.7 million in the average balance of loans outstanding coupled with a decrease in the average rate earned on loans from 6.09% to 5.88% on an annualized basis. Interest and dividend income on investment securities decreased by $258,000 as a result of a decrease in the average yield earned, from 4.20% in 2009 to 3.66% in 2010, coupled with a slight decrease of $109,000 in the average balance of investments. Interest on short-term investments increased by $5,000 as a result of an increase of $3.8 million in the average balance of short-term investments, coupled with a slight increase in the average yield earned, from 0.21% in the 2009 six-month period to 0.23% in the 2010 six-month period.

Interest Expense:

Interest expense decreased by $1.0 million, or 49.4%, to $1.0 million for the six months ended October 31, 2010. Interest expense on deposits decreased by $883,000, or 48.9%, as a result of a decrease in the average rate paid, from 1.70% in the 2009 six-month period to 0.84% in the 2010 six-month period, offset by an increase of $7.9 million in the average balance of deposits. Interest expense on borrowed funds decreased by $135,000, or 52.5%, for the six months ended October 31, 2010. This decrease was due to a decrease in the average balance of borrowed funds, from $12.4 million in the 2009 six-month period to $6.0 million in the 2010 six-month period augmented by a decrease in the average rate paid on borrowed funds, from 4.15% in the October 2009 six-month period to 4.08% in the October 2010 six-month period.

 

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Provision for Loan Losses:

The provision for loan losses was $136,000 for the six months ended October 31, 2010, compared to $0 for the six months ended October 31, 2009. The allowance for loan losses is maintained at a level that management considers adequate to provide for probable losses based upon evaluation of known and inherent risks in the loan portfolio. Management considers the allowance for loan losses to be adequate at this time. However, future additions to the allowance may be necessary based on additional increases in non-performing loans, changes in economic conditions, or for other reasons.

Non-interest Income:

Non-interest income decreased by $23,000 for the six months ended October 31, 2010 as compared to the six months ended October 31, 2009. This decrease was primarily due to a reduction of $83,000 in gain on sales of investments, a decrease of $4,000 in customer service fees, and a decrease of $6,000 in other income. These reductions in non-interest income were partially offset by an increase of $10,000 in loan origination and other loan fees, an increase of $44,000 in gains on sales of loans, and by an increase of $16,000 in debit card interchange income.

Non-interest Expense:

Non-interest expense increased by $25,000 for the six months ended October 31, 2010 as compared to the six months ended October 31, 2009. During the six-month period, salary and benefit expense increased by $120,000 due to increases in pension and health insurance costs. Additionally, data processing costs increased by $20,000 and occupancy and equipment expense increased by $3,000. These increases were offset by a decrease of $56,000 in FDIC assessment expense due to the elimination of the FDIC special assessment of $114,000 paid in September 2009 and by a decrease of $14,000 in losses and expenses of other real estate owned. Finally, other expenses decreased by $48,000 due to a reduction of ATM conversion costs expended during the prior fiscal year.

Provision for Income Taxes:

The provision for income taxes increased by $211,000 for the six months ended October 31, 2010 when compared to the six months ended October 31, 2009, due to the increase in net income before taxes. Effective income tax rates were 36.2% and 27.0% respectively in the 2010 and 2009 periods. The lower effective tax rate in comparison to statutory rates is reflective of income earned by a non-Bank investment subsidiary, which is taxed, for state tax purposes, at a lower rate. The increase in the effective tax rate for the most recent six months ended October 31, 2010, is due to a higher proportion of net income earned by the Bank entity compared to its non-Bank investment subsidiary. Therefore, a greater proportion of the net income was taxed at a higher tax rate in the 2010 period compared to the same period in 2009.

Interest Rate Risk Exposure and the Interest Rate Spread:

The Company’s net earnings depend primarily upon the difference between the income (interest and dividends) earned on its loans and investment securities (earning assets) and the interest paid on its deposits and borrowed funds (interest-bearing liabilities), together with other income and other operating expenses. The Company’s investment income and interest paid (cost of funds) are significantly affected by general economic conditions and by policies of regulatory authorities.

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest rate risk inherent in its lending, security investments, and deposit taking activities. To that end, management actively monitors and manages its interest rate risk exposure.

 

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The Company’s primary objective in managing interest rate risk is to minimize the adverse impact of interest rate changes on its net interest income and capital, while adjusting its rate-sensitive asset and liability structure to obtain the maximum net yield on that structure. The Company relies primarily on this structure to control interest rate risk. However, a sudden and substantial shift in interest rates may adversely impact the Company’s earnings to the extent that the interest rate earned on interest-earning assets and interest paid on interest-bearing liabilities do not change at the same frequency, to the same extent or on the same basis.

 

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Delinquent Loans, Loans in Foreclosure and Foreclosed Property:

The following table sets forth information with respect to the Company’s non-performing assets as of the date indicated.

 

		October 31, 2010				April 30, 2010				October 31, 2009
		(Dollars in Thousands)
Loans past due over 90 days:
Residential mortgages		$	99			$	99			$	354
Commercial and construction mortgages			—				295				—
Commercial time and demand loans			20				120				—
Consumer and other loans			—				—				—
		$	119			$	514			$	354
Loans past due over 90 days as a percentage of:
Net loans receivable			0.10	%			0.43	%			0.29	%
Total assets			0.05	%			0.20	%			0.14	%
Non-performing assets
**Non-accrual loans		$	119			$	514			$	1,777
Real estate acquired by foreclosure			1,379				1,815				723
		$	1,498			$	2,329			$	2,500
Non-performing assets as a percentage of:
Net loans receivable			1.22	%			1.93	%			2.05	%
Total assets			0.60	%			0.91	%			1.00	%
Allowance for loan losses		$	1,313			$	1,194			$	1,235
Allowance for loan losses as a percentage of non-performing loans			1,103.36	%			232.30	%			69.50	%
Allowance for loan losses as a percentage of net loans			1.07	%			0.99	%			1.01	%

** Includes loans which are contractually past due 90 days or more and/or loans less than 90 days past due on which the Bank has ceased accruing interest

 

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MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Item 3. Quantitative and Qualitative Disclosures About Market Risk

This item is not applicable as the Company is a smaller reporting company.

Item 4. Controls and Procedures

As of the end of the period covered by this report, management of the Company carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of both the Securities and Exchange Commission. It should be noted that the design of the Company’s disclosure controls and procedures is based in part upon certain reasonable assumptions about the likelihood of future events, and there can be no reasonable assurance that any design of disclosure controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote, but the Company’s principal executive and financial officers have concluded that the Company’s disclosure controls and procedures are, in fact, effective at a reasonable assurance level.

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required under paragraph (d) of Securities and Exchange Commission Rule 13a-15 that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1. Legal Proceedings

None

Item 1.A. Risk Factors

There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended April 30, 2010 and Quarterly Report on Form 10-Q for the quarter ended July 31, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information regarding the Company’s stock repurchases during the periods indicated.

 

Period		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of a Publicly Announced Repurchase Program (1)				Maximum Number of Shares That May Yet Be Purchased Under the Repurchase Program (1)
August 1-31, 2010			—			$	—				—				77,030
September 1-30, 2010			1,034				9.71				1,034				75,996
October 1-31, 2010			853				9.45				853				75,143
TOTAL			1,887			$	9.60				1,887				75,143

 

(1)	On July 2, 2007, Mayflower Bancorp, Inc. announced that it had approved a stock repurchase program to acquire up to 104,792 shares, or 5%, of the Company’s outstanding common stock.

 

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Item 3. Defaults Upon Senior Securities

None

Item 4. Removed and Reserved

Item 5. Other Information

None

Item 6. Exhibits

Exhibit 3.1 Articles of Organization of Mayflower Bancorp, Inc (1)

Exhibit 3.2 Bylaws of Mayflower Bancorp, Inc. (2)

Exhibit 10 Mayflower Bancorp, Inc. 2010 Equity Incentive Plan (3)

Exhibit 31 Rule 13a-14(a)/15d-14(a) Certifications

Exhibit 32 Section 1350 Certifications

 

(1)	Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 0-52477), filed with the SEC on February 16, 2007.

(2)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 0-52477) for the quarter ended January 31, 2009, filed with the SEC on March 13, 2009.

(3)	Incorporated by reference to the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders, filed with the SEC on July 22, 2010 (File No. 0-52477).

 

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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.

 

		MAYFLOWER BANCORP, INC.
Date: December 7, 2010
		/s/ Edward M. Pratt
		Edward M. Pratt, President & Chief Executive Officer
		(Duly Authorized Officer)
		/s/ Maria Vafiades
		Maria Vafiades, Chief Financial Officer
		(Principal Financial & Accounting Officer)

 

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