Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - Mayflower Bancorp IncFinancial_Report.xls
EX-32 - EXHIBIT 32 - Mayflower Bancorp Incd192784dex32.htm
EX-31 - EXHIBIT 31 - Mayflower Bancorp Incd192784dex31.htm

 

 

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 July 31, 2011

 

¨ 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  x    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 August 25, 2011

 

Common Stock $1.00 par value   2,072,071
(Title of class)   (Shares outstanding)

 

 

 


PART I - FINANCIAL INFORMATION

ITEM I - Financial Statements

MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

     July 31,
2011
     April 30,
2011
 
     (unaudited)      (audited)  
     (in Thousands)  

ASSETS

     

Cash and cash equivalents:

  

Cash and due from banks

   $ 4,092       $ 5,534   

Interest-bearing deposits in banks

     8,874         6,256   
  

 

 

    

 

 

 

Total cash and cash equivalents

     12,966         11,790   

Investment securities:

     

Securities available-for-sale, at fair value

     48,370         46,350   

Securities held-to-maturity (fair value of $47,723 and $46,400, respectively)

     46,469         45,554   
  

 

 

    

 

 

 

Total investment securities

     94,839         91,904   

Loans receivable, net

     123,240         124,497   

Accrued interest receivable

     940         891   

Real estate held for investment

     1,005         1,008   

Real estate acquired by foreclosure

     491         1,211   

Premises and equipment, net

     10,993         11,073   

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

     0         134   

Deferred income taxes

     769         855   

Other assets

     1,388         1,421   
  

 

 

    

 

 

 

Total assets

   $ 248,730       $ 246,883   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Deposits

   $ 223,242       $ 221,023   

Advances and borrowings

     2,500         3,500   

Advances from borrowers for taxes and insurance

     287         154   

Accrued income taxes

     62         0   

Allowance for loan losses on off-balance sheet credit exposures

     110         110   

Accrued expenses and other liabilities

     961         919   
  

 

 

    

 

 

 

Total liabilities

     227,162         225,706   
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY

     

Preferred stock $1.00 par value; authorized 5,000,000 shares; issued - none

     0         0   

Common stock $1.00 par value; authorized 15,000,000 shares; issued 2,072,071 at July 31, 2011 and 2,075,035 at April 30, 2011

     2,072         2,075   

Additional paid-in capital

     4,331         4,326   

Retained earnings

     14,275         14,062   

Accumulated other comprehensive income

     890         714   
  

 

 

    

 

 

 

Total stockholders’ equity

     21,568         21,177   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 248,730       $ 246,883   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements

 

2


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

 

     Three months ended
July 31,
 
     2011      2010  
     (In Thousands, Except Per Share Data)  

Interest income:

     

Loans receivable

   $ 1,749       $ 1,802   

Securities held-to-maturity

     372         415   

Securities available-for-sale

     400         470   

Interest-bearing deposits in banks

     11         6   
  

 

 

    

 

 

 

Total interest income

     2,532         2,693   
  

 

 

    

 

 

 

Interest expense:

     

Deposits

     378         473   

Borrowed funds

     31         66   
  

 

 

    

 

 

 

Total interest expense

     409         539   
  

 

 

    

 

 

 

Net interest income

     2,123         2,154   

Provision for loan losses

     57         60   
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     2,066         2,094   
  

 

 

    

 

 

 

Noninterest income:

     

Loan origination and other loan fees

     24         34   

Customer service fees

     170         196   

Gain on sales of mortgage loans

     77         111   

Gain on sales of investment securities

     60         34   

Interchange income

     57         50   

Other

     22         21   
  

 

 

    

 

 

 

Total noninterest income

     410         446   
  

 

 

    

 

 

 

Noninterest expense:

     

Compensation and fringe benefits

     1,066         1,051   

Occupancy and equipment

     267         295   

FDIC assessment

     49         91   

Data processing

     86         97   

Losses and expenses of other real estate owned

     3         20   

Other

     475         454   
  

 

 

    

 

 

 

Total noninterest expense

     1,946         2,008   
  

 

 

    

 

 

 

Income before income taxes

     530         532   

Provision for income taxes

     171         196   
  

 

 

    

 

 

 

Net income

   $ 359       $ 336   
  

 

 

    

 

 

 

Earnings per share (basic)

   $ 0.17       $ 0.16   
  

 

 

    

 

 

 

Earnings per share (diluted)

   $ 0.17       $ 0.16   
  

 

 

    

 

 

 

Weighted average basic shares outstanding

     2,074         2,083   

Diluted effect of outstanding stock options

     2         0   
  

 

 

    

 

 

 

Weighted average diluted shares outstanding

     2,076         2,083   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements

 

3


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

     Common
Stock
    Additional
Paid-in
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income

(Loss)
    Total  
     (In Thousands)  

BALANCE, April 30, 2010

   $ 2,079      $ 4,300      $ 13,293      $ 808      $ 20,480   

Net income for the three months ended July 31, 2010

     0        0        336        0        336   

Other comprehensive income, net of tax:

          

Change in unrealized gain on securities available- for-sale, net of deferred income taxes of $187,000

     0        0        0        288        288   

Reclassification adjustment for gains included in net income, net of deferred income taxes of $13,000

     0        0        0        (21     (21
          

 

 

 
             267   
          

 

 

 

Total comprehensive income

     0        0        0        0        603   
          

 

 

 

Issuance of 7,500 shares $1 par value common stock

     7        46        0        0        53   

Purchase of 1,048 shares of Company stock

     (1     (2     (5     0        (8

Cash dividends ($0.06 per share)

     0        0        (125     0        (125
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, July 31, 2010

   $ 2,085      $ 4,344      $ 13,499      $ 1,075      $ 21,003   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, April 30, 2011

   $ 2,075      $ 4,326      $ 14,062      $ 714      $ 21,177   

Net income for the three months ended July 31, 2011

     0        0        359        0        359   

Other comprehensive income, net of tax:

          

Change in unrealized gain on securities available- for-sale, net of deferred income taxes of $136,000

     0        0        0        212        212   

Reclassification adjustment for gains included in net income, net of deferred income taxes of $24,000

     0        0        0        (36     (36
          

 

 

 
             176   
          

 

 

 

Total comprehensive income

     0        0        0        0        535   
          

 

 

 

Grants of restricted stock

     0        4        0        0        4   

Stock-based compensation

     0        7        0        0        7   

Purchase of 3,449 shares of Company stock

     (3     (6     (21     0        (30

Cash dividends ($0.06 per share)

     0        0        (125     0        (125
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, July 31, 2011

   $ 2,072      $ 4,331      $ 14,275      $ 890      $ 21,568   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

4


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Three months ended
July 31,
 
     2011     2010  
     (In Thousands)  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Interest received

   $ 2,595      $ 2,677   

Fees and other income received

     371        419   

Interest paid

     (407     (541

Cash paid to suppliers and employees

     (1,812     (1,881

Income taxes paid

     (1     (6
  

 

 

   

 

 

 

Net cash provided by operating activities

     746        668   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Net decrease (increase) in loans receivable

     1,793        (396

Purchases of available-for-sale securities

     (7,710     (7,192

Proceeds from sales, calls, and maturities of available-for-sale securities

     5,974        8,390   

Purchase of held-to-maturity securities

     (7,937     (14,365

Proceeds from maturities and calls of held-to-maturity securities

     6,973        12,578   

Proceeds from sales of real estate acquired by foreclosure

     105        9   

Capital additions to real estate acquired by foreclosure

     0        (19

Purchases of premises and equipment

     (40     (46

Other - net

     64        68   
  

 

 

   

 

 

 

Net cash used in investing activities

     (778     (973
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net increase (decrease) in deposits

     2,219        (3,049

Payments on advances and borrowings

     (1,000     (2,000

Net increase in advances from borrowers for taxes and insurance

     133        100   

Issuance of common stock

     11        53   

Repurchase of Company stock

     (30     (8

Dividends paid on common stock

     (125     (125
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,208        (5,029
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     1,176        (5,334

Cash and cash equivalents - beginning of period

     11,790        20,473   
  

 

 

   

 

 

 

Cash and cash equivalents - end of period

   $ 12,966      $ 15,139   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

5


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

 

Reconciliation of Net Income to Net Cash

Provided by Operating Activities

(Unaudited)

 

     Three months ended
July 31,
 
     2011     2010  
     (In Thousands)  

Net income

   $ 359      $ 336   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     123        128   

Provision for loan losses

     57        60   

Premium amortization

     113        41   

Amortization of intangible assets

     0        4   

Deferred income taxes

     (26     132   

Gain on sales of investments

     (60     (34

Decrease (increase) in accrued interest receivable

     (49     (58

Decrease (increase) in prepaid expenses

     52        99   

Decrease (increase) in mortgage servicing rights

     0        (12

Decrease (increase) in refundable income taxes

     134        25   

Increase (decrease) in accrued expenses

     (42     (92

Increase (decrease) in accrued income taxes

     62        34   

Increase (decrease) in accrued interest payable

     1        (1

Increase (decrease) in deferred loan origination fees

     22        6   
  

 

 

   

 

 

 

Total adjustments

     387        332   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 746      $ 668   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES:

    

Total increase in unrealized gain on securities available-for-sale

   $ 288      $ 441   
  

 

 

   

 

 

 

Loans transferred to foreclosed real estate

   $ 0      $ 295   
  

 

 

   

 

 

 

Proceeds from sales of foreclosed real estate financed through loans

   $ 616      $ 174   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

6


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

A. 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, 2011. 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 July 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-20, Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which amends Accounting Standards Codification Topic 310, Receivables. The purpose of the Update is to improve transparency by companies that hold financing receivables, including loans, leases and other long-term receivables. The Update requires such companies to disclose more information about the credit quality of their financing receivables and the credit reserves against them. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosure requirements as of April 30, 2011 of ASU 2010-20 have been incorporated in the notes to the Company’s consolidated financial statements. Disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. As this Standard amends only disclosure requirements for loans and the allowance for loan losses, adoption will have no impact on the Company’s consolidated financial statements.

In January 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. The amendments in ASU 2011-01 temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, for public entities. The delay is intended to allow the FASB time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The deferral in ASU 2011-01 was effective January 19, 2011 (date of issuance). In April 2011, the FASB issued Accounting Standards Update No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. This Update will improve financial reporting by creating greater consistency in the way Generally Accepted Accounting Principles are applied for various types of debt restructuring by clarifying which loan modifications constitute troubled debt restructurings. This update is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Comprehensive Income (Topic 220). This update states that an entity has the option to present total comprehensive income, the components of net income, and the components of other comprehensive income in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive

 

7


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

income, and a total amount for comprehensive income. The amendments in this update should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this standard will not have a material impact on the Company’s consolidated financial position.

 

C. Investment Securities

Investment securities have been classified according to management’s intent. The amortized cost of securities and their respective fair values at July 31, 2011 and April 30, 2011 follows:

 

            Gross      Gross        
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  
     July 31, 2011  
     (In Thousands)  

AVAILABLE-FOR-SALE SECURITIES:

          

U.S. Government Agency obligations

   $ 9,490       $ 37       $ 0      $ 9,527   

Corporate debt securities

     500         0         (3     497   

Municipal obligations

     2,824         98         (5     2,917   

Mortgage-backed and related securities

     33,338         1,256         0        34,594   

Trust preferred securities

     750         0         (60     690   

Equity securities

     0         145         0        145   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 46,902       $ 1,536       $ (68   $ 48,370   
  

 

 

    

 

 

    

 

 

   

 

 

 

HELD-TO-MATURITY SECURITIES:

          

U.S. Government Agency obligations

   $ 15,011       $ 57       $ (2   $ 15,066   

Municipal obligations

     3,520         137         (1     3,656   

Mortgage-backed and related securities

     27,938         1,079         (16     29,001   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 46,469       $ 1,273       $ (19   $ 47,723   
  

 

 

    

 

 

    

 

 

   

 

 

 
            Gross      Gross        
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  
     April 30, 2011  
     (In Thousands)  

AVAILABLE-FOR-SALE SECURITIES:

          

U.S. Government Agency obligations

   $ 10,481       $ 33       $ (26   $ 10,488   

Corporate debt securities

     500         1         0        501   

Municipal obligations

     2,292         80         (10     2,362   

Mortgage-backed and related securities

     31,147         1,004         (10     32,141   

Trust preferred securities

     750         0         (18     732   

Equity securities

     0         126         0        126   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 45,170       $ 1,244       $ (64   $ 46,350   
  

 

 

    

 

 

    

 

 

   

 

 

 

HELD-TO-MATURITY SECURITIES:

          

U.S. Government Agency obligations

   $ 14,995       $ 42       $ (104   $ 14,933   

Municipal obligations

     3,723         100         (3     3,820   

Mortgage-backed and related securities

     26,836         867         (56     27,647   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 45,554       $ 1,009       $ (163   $ 46,400   
  

 

 

    

 

 

    

 

 

   

 

 

 

There was no impairment charge recognized against investment securities during the three months ended July 31, 2011 or 2010.

 

8


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

D. Loans Receivable

Loans receivable at July 31, 2011 and April 30, 2011 are summarized as follows:

 

     July 31,     April 30,  

(In Thousands)

   2011     2011  

Mortgage loans on real estate

    

Residential

   $ 48,746      $ 48,724   

Commercial

     43,550        43,511   

Construction

     5,924        6,272   

Home equity loans

     3,178        3,521   

Home equity lines of credit

     17,519        17,702   
  

 

 

   

 

 

 

Total mortgage loans

     118,917        119,730   

Consumer loans

     1,605        1,620   

Commercial loans

     4,923        5,576   
  

 

 

   

 

 

 

Total loans

     125,445        126,926   
  

 

 

   

 

 

 

Less:

    

Due borrowers on construction and other loans

     1,101        1,308   

Net deferred loan origination costs

     (71     (93

Allowance for loan losses

     1,175        1,214   
  

 

 

   

 

 

 
     2,205        2,429   
  

 

 

   

 

 

 

Loans receivable, net

   $ 123,240      $ 124,497   
  

 

 

   

 

 

 

Activity in the allowance for loan losses is summarized as follows for the three months ended July 31:

 

     Three months ended  
     July 31,     July 31,  
     2011     2010  
     (In Thousands)  

Beginning balance

   $ 1,214      $ 1,194   

Provision for loan losses

     57        60   

Loans charged off

     (98     (21

Recoveries

     2        2   
  

 

 

   

 

 

 

Balance at end of period

   $ 1,175      $ 1,235   
  

 

 

   

 

 

 

 

9


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based upon impairment method as of July 31, 2011 and April 30, 2011:

 

     Residential
Mortgages
    Commercial
Mortgages
    Construction
Mortgages
    Home Equity
Loans and
Lines of
Credit
    Commercial
Business
Loans
     Consumer
Loans
     Unallocated      Total  

(In Thousands)

   July 31, 2011  

Allowance for loan losses:

                   

Beginning balance

   $ 173      $ 635      $ 95      $ 182      $ 112       $ 17       $ 0       $ 1,214   

Loans charged off

     (43     (15     0        (40     0         0         0         (98

Recoveries

     0        0        0        0        2         0         0         2   

Provision for loan losses

     14        (39     (23     95        9         1         0         57   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Ending Balance

   $ 144      $ 581      $ 72      $ 237      $ 123       $ 18       $ 0       $ 1,175   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 0      $ 0      $ 0      $ 45      $ 0       $ 0       $ 0       $ 45   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 144      $ 581      $ 72      $ 192      $ 123       $ 18       $ 0       $ 1,130   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Loans Receivable:

                   

Ending balance

   $ 48,746      $ 43,550      $ 4,823      $ 20,697      $ 4,923       $ 1,605       $ 0       $ 124,344   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 760      $ 0      $ 0      $ 129      $ 0       $ 0       $ 0       $ 889   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 47,986      $ 43,550      $ 4,823      $ 20,568      $ 4,923       $ 1,605       $ 0       $ 123,455   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

10


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

     Residential
Mortgages
     Commercial
Mortgages
    Construction
Mortgages
     Home Equity
Loans and
Lines of
Credit
     Commercial
Business
Loans
    Consumer
Loans
    Unallocated      Total  

(In Thousands)

   April 30, 2011  

Allowance for loan losses:

                    

Beginning balance

   $ 161       $ 639      $ 95       $ 151       $ 129      $ 19      $ 0       $ 1,194   

Loans charged off

     0         (123     0         0         (119     (11     0         (253

Recoveries

     0         0        0         0         71        1        0         72   

Provision for loan losses

     12         119        0         31         31        8        0         201   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending Balance

   $ 173       $ 635      $ 95       $ 182       $ 112      $ 17      $ 0       $ 1,214   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 15       $ 0      $ 0       $ 55       $ 0      $ 0      $ 0       $ 70   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 158       $ 635      $ 95       $ 127       $ 112      $ 17      $ 0       $ 1,144   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Loans Receivable:

                    

Ending balance

   $ 48,724       $ 43,511      $ 4,964       $ 21,223       $ 5,576      $ 1,620      $ 0       $ 125,618   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 761       $ 456      $ 0       $ 139       $ 0      $ 0      $ 0       $ 1,356   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 47,963       $ 43,055      $ 4,964       $ 21,084       $ 5,576      $ 1,620      $ 0       $ 124,262   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

11


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

Impaired loans at July 31, 2011 and April 30, 2011 were as follows:

 

     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

(In Thousands)

   July 31, 2011  

With no related allowance recorded:

              

Residential mortgages

   $ 760       $ 760       $ 0       $ 760       $ 0   

With an allowance recorded:

              

Home equity loans and lines of credit

     129         129         45         129         0   

Totals:

              

Residential mortgages

   $ 760       $ 760       $ 0       $ 760       $ 0   

Home equity loans and lines of credit

   $ 129       $ 129       $ 45       $ 129       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 889       $ 889       $ 45       $ 889       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

(In Thousands)

   April 30, 2011  

With no related allowance recorded:

              

Residential mortgages

   $ 453       $ 453       $ 0       $ 455       $ 8   

Commercial mortgages

     456         579         0         580         20   

With an allowance recorded:

              

Residential mortgages

     308         308         15         309         6   

Home equity loans and lines of credit

     139         139         55         139         1   

Totals:

              

Residential mortgages

   $ 761       $ 761       $ 15       $ 764       $ 14   

Commercial mortgages

   $ 456       $ 579       $ 0       $ 580       $ 20   

Home equity loans and lines of credit

   $ 139       $ 139       $ 55       $ 139       $ 1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 1,356       $ 1,479       $ 70       $ 1,483       $ 35   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days and still accruing by class of loans as of July 31, 2011 and April 30, 2011:

 

     July 31, 2011      April 30, 2011  

(In Thousands)

   Non
accrual
     Loans Past
Due Over 90
Days and Still
Accruing
     Non
accrual
     Loans Past
Due Over 90
Days and Still
Accruing
 

Residential mortgages

   $ 1,217       $ 0       $ 1,108       $ 0   

Commercial mortgages

     0         0         456         0   

Home equity loans and lines of credit

     129         0         139         0   

Commercial business loans

     20         0         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,366       $ 0       $ 1,703       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

12


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

The following table presents the aging of the recorded investment in past due loans as of July 31, 2011 and April 30, 2011 follows:

 

     30-59 Days
Past Due
     60-89 Days
Past Due
     Greater
Than 90
Days Past
Due
     Total Past
Due
     Current      Total
Loans
Receivable
 

(In Thousands)

   July 31, 2011  

Residential Mortgages

   $ 178       $ 289       $ 928       $ 1,395       $ 47,351       $ 48,746   

Commercial Mortgages

     550         40         0         590         42,960         43,550   

Construction Mortgages

     362         0         0         362         4,461         4,823   

Home Equity Loans and Lines of Credit

     26         0         129         155         20,542         20,697   

Commercial Business Loans

     0         0         20         20         4,903         4,923   

Consumer Loans

     2         0         0         2         1,603         1,605   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,118       $ 329       $ 1,077       $ 2,524       $ 121,820       $ 124,344   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     30-59 Days
Past Due
     60-89 Days
Past Due
     Greater
Than 90
Days Past
Due
     Total Past
Due
     Current      Total
Loans
Receivable
 

(In Thousands)

   April 30, 2011  

Residential Mortgages

   $ 452       $ 0       $ 1,108       $ 1,560       $ 47,164       $ 48,724   

Commercial Mortgages

     176         300         456         932         42,579         43,511   

Construction Mortgages

     0         0         0         0         4,964         4,964   

Home Equity Loans and Lines of Credit

     158         0         139         297         20,926         21,223   

Commercial Business Loans

     4         0         0         4         5,572         5,576   

Consumer Loans

     0         0         0         0         1,620         1,620   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 790       $ 300       $ 1,703       $ 2,793       $ 122,825       $ 125,618   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Credit Quality Information

Loans rated Pass: Loans in this category have low to average risk.

Loans rated Special Mention: Loans in this category are currently protected, but exhibit conditions that have the potential for weakness. The borrower may be affected by unfavorable economic, market or other external conditions that may affect their ability to repay the debt. These may also include credits where there is deterioration of the collateral or have deficiencies which may affect the Company’s ability to collect on the collateral.

Loans rated Substandard: Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable.

 

13


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

The following table displays the loan portfolio by credit quality indicators as of July 31, 2011 and April 30, 2011:

 

     Residential
Mortgages
     Commercial
Mortgages
     Construction
Mortgages
     Home Equity
Loans and
Lines of
Credit
     Commercial
Business
Loans
     Consumer
Loans
     Total  

(In Thousands)

   July 31, 2011  

Pass

   $ 47,351       $ 41,445       $ 4,461       $ 20,568       $ 4,923       $ 1,605       $ 120,353   

Special mention

     615         890         362         0         0         0         1,867   

Substandard

     780         1,215         0         30         0         0         2,025   

Doubtful

     0         0         0         99         0         0         99   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 48,746       $ 43,550       $ 4,823       $ 20,697       $ 4,923       $ 1,605       $ 124,344   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Residential
Mortgages
     Commercial
Mortgages
     Construction
Mortgages
     Home Equity
Loans and
Lines of
Credit
     Commercial
Business
Loans
     Consumer
Loans
     Total  

(In Thousands)

   April 30, 2011  

Pass

   $ 47,437       $ 41,490       $ 4,964       $ 21,084       $ 5,576       $ 1,620       $ 122,171   

Special mention

     526         342         0         0         0         0         868   

Substandard

     453         1,679         0         99         0         0         2,231   

Doubtful

     308         0         0         40         0         0         348   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 48,724       $ 43,511       $ 4,964       $ 21,223       $ 5,576       $ 1,620       $ 125,618   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

E. 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 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, 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.

 

14


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

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.

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

 

15


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

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 July 31, 2011 and April 30, 2011 were as follows:

 

     July 31, 2011      April 30, 2011  
     Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
 
     (In Thousands)  

Financial assets:

           

Cash and due from banks

   $ 4,092       $ 4,092       $ 5,534       $ 5,534   

Interest-bearing deposits in banks

     8,874         8,874         6,256         6,256   

Investment securities

     94,839         96,093         91,904         92,750   

Loans, net

     123,240         123,684         124,497         125,804   

Accrued interest receivable

     940         940         891         891   

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

     223,242         223,668         221,023         221,412   

Advances and borrowings

     2,500         2,773         3,500         3,812   

 

F. 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.

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.

 

16


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

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, trust preferred securities, and equity 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.

The balances of assets and liabilities measured at fair value on a recurring basis as of July 31, 2011, 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:

           

U.S. Government Agency obligations

   $ 9,527       $ 0       $ 9,527       $ 0   

Corporate debt securities

     497         0         497         0   

Municipal obligations

     2,917         0         2,917         0   

Mortgage-backed and related securities

     34,594         0         34,594         0   

Trust preferred securities

     690         0         690         0   

Equity securities

     145         0         145         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities available-for-sale

   $ 48,370       $ 0       $ 48,370       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

17


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

The balances of assets and liabilities measured at fair value on a non-recurring basis as of July 31, 2011, 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)
     Losses  
(In thousands)                                   

Impaired loans

   $ 889       $ 0       $ 889       $ 0       $ 83   

Real estate acquired by foreclosure

   $ 491       $ 0       $ 491       $ 0       $ 0   

 

G. Stock-Based Compensation

The Company accounts for stock-based compensation pursuant to ASC 718 Compensation – Stock Compensation (“ASC 718”). The Company uses the Black-Scholes option pricing model as its method for determining the fair value of stock option grants. In 1999, the Company adopted a Stock Option and Incentive Plan for the benefit of officer and non-officer employees and directors of the Company. Shares reserved under this plan totaled 99,750 shares of authorized but unissued common stock. This plan expired in 2009. All remaining awards outstanding under this plan were granted in December 2005. However, awards outstanding at the time the plans expire will continue to remain outstanding according to their terms.

On August 24, 2010, the Company’s stockholders approved the Mayflower Bancorp, Inc. 2010 Equity Incentive Plan (the “Incentive Plan”). Under this plan, 156,475 shares have been reserved for issuance as options to purchase stock, restricted stock, or other stock awards, of which a maximum of 104,317 restricted shares may be granted. The exercise price of an option may not be less than the fair market value of the Company’s common stock on the date of the grant of the option and may not be exercisable more than ten years after the date of the grant. As of July 31, 2011, 151,655 shares remained unissued and available for award under the Incentive Plan, of which 101,892 are available as restricted stock.

Forfeitures of awards granted under the incentive plan are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates in order to derive the Company’s best estimate of awards ultimately expected to vest. Estimated forfeiture rates represent only the unvested portion of a surrendered option and are typically estimated based on historical experience. Based on an analysis of the Company’s historical data, the Company applied a forfeiture rate of 0% to stock options outstanding in determining stock compensation expense for the three months ended July 31, 2011.

During the three months ended July 31, 2011, the Company awarded options to purchase 2,395 shares which vest immediately. The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model and amounted to $2.97, or $7,000 for the three months ended July 31, 2011. Assumptions used to determine the fair value of stock options granted are as follows:

 

Weighted average fair value

   $ 2.97   

Expected dividend yield

     2.77

Risk-free interest rate

     3.01

Expected volatility

     45.10

Expected life in years

     5.00   

 

18


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

July 31, 2011 and 2010

 

Stock option activity was as follows for the three months ended July 31, 2011:

 

     Number of
Shares
     Average
Exercise Price
 

Options outstanding at April 30, 2011

     24,950       $ 14.00   

Options granted

     2,395         8.75   

Options exercised

     0         0   

Options forfeited

     0         0   
  

 

 

    

Options outstanding at July 31, 2011

     27,345       $ 13.54   
  

 

 

    

 

 

 

The Company also granted 2,425 restricted shares in the three months ended July 31, 2011 which vest over a five year period. Total compensation expense related to the grants was $4,000 for the three months ended July 31, 2011.

As of July 31, 2011, the expected future compensations related to restricted stock is approximately $4,000 for each of the next four years.

A summary of restricted stock activity is as follows:

 

     Number of
Restricted
Shares
    Weighted Average
Grant Date

Fair Value
 

Non-vested at April 30, 2011

     0      $ 0   

Granted

     2,425        8.75   

Vested

     (485     8.75   

Forfeited

     0        0   
  

 

 

   

Non-vested at July 31, 2011

     1,940      $ 8.75   
  

 

 

   

 

 

 

 

19


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

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, 2011. 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 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 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.

 

20


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 cash flows from other sources are adequate to meet its funding commitments and requirements. At July 31, 2011 and April 30, 2011, 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.

Financial Condition:

At July 31, 2011, the Company’s total assets were $248.7 million as compared to $246.9 million at April 30, 2011, an increase of $1.8 million. During the three months ended July 31, 2011, cash and cash equivalents increased by $1.2 million, total investments increased by $2.9 million, net loans receivable decreased by $1.3 million, and real estate acquired by foreclosure decreased by $720,000.

 

21


Net loans receivable were $123.2 million at July 31, 2011, compared to $124.5 million at April 30, 2011, representing a decrease of $1.3 million or 1.0%. This decrease was primarily due to decreases totaling $653,000 in commercial loan balances and $526,000 in aggregate balances of home equity loans and lines of credit. The decrease in commercial loans was primarily a result of scheduled principal repayments, while the decrease in home equity loans and lines of credit is a function of consumers de-emphasizing this type of borrowing. Additionally, net construction loans outstanding decreased by $141,000, from $5.0 million at April 30, 2011 to $4.8 million at July 31, 2011.

Also, during the three months ended July 31, 2011, historically low interest rates resulted in continued strong residential mortgage financing activity, as the Company originated $4.8 million in residential mortgages as compared to $5.2 million originated for the same period one year ago. During the three months, the Company sold $4.1 million of fixed-rate residential loans in the secondary mortgage market, producing gains of $77,000, compared to sales of $5.5 million for the prior year period which resulted in gains of $111,000. This activity, combined with other mortgage payoffs and regularly scheduled amortization, resulted in a $22,000 increase in residential loan balances as compared to April 30, 2011.

During the three months ended July 31, 2011, total investments increased by $2.9 million as the Company redeployed proceeds received from loan reductions and deposit growth.

Non-performing assets are comprised of non-performing 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 July 31, 2011, non-performing assets totaled $1.9 million, compared to $2.9 million at April 30, 2011. The decrease in non-performing assets is comprised of sales of real estate acquired by foreclosure totaling $720,000 and by a reduction of $337,000 in non-performing loans. During the period, the Company was able to resolve certain previously classified non-performing loans and charged off others. However, during the three months ended July 31, 2011, three loans with balances approximating $218,000 were newly classified as non-performing. This $218,000 was comprised of one residential first mortgage in the amount of $168,000, one commercial loan totaling $20,000 and one home equity line of credit totaling $30,000. At July 31, 2011, non-performing assets represented 0.75% of total assets compared to 1.18% of total assets at April 30, 2011.

At July 31, 2011, the Company’s allowance for loan losses was $1,175,000, which represented an allowance of 0.95% of net loans receivable and 86.0% of non-performing loans at that date. This compares to a balance of $1,214,000 at April 30, 2011, which represented 0.98% of net loans receivable and 71.3% of non-performing loans. During the three months ended July 31, 2011, the Company provided $57,000 to augment the reserve and charged off, net of recoveries, $43,000 in residential mortgages, $40,000 in home equity loans and lines of credit, and $15,000 in commercial mortgages, as offset by a recovery of $2,000 in commercial 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 dependent on the strength of the local real estate market and a significant deterioration in that market or other negative economic conditions could have an adverse 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 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.

 

22


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 July 31, 2011 and April 30, 2011. This allowance is intended to protect the Company against potential losses on undrawn or unfunded loan commitments made to customers.

Total deposits, after interest credited, increased by $2.2 million due primarily to an increase of $4.2 million in money market deposits and an increase of $497,000 in checking and savings accounts. These increases were partially offset by a decrease of $2.4 million in certificate of deposit balances. The growth in money market deposits was a result of a new municipal deposit customer established during the quarter, while the reduction in certificates of deposit was a result of a management decision to reduce interest rates paid on these accounts. Additionally, during the three months ended July 31, 2011, advances and borrowings decreased by $1.0 million, from $3.5 million at April 30, 2011 to $2.5 million at July 31, 2011.

Total stockholders’ equity increased by $391,000 when compared to April 30, 2011. The increase in total equity is due to net income for the three months of $359,000 and the granting of employee stock options and restricted stock totaling $11,000. Those increases in total equity were partially offset during the three-month period by dividends paid of $0.06 per share totaling $125,000 and Company stock repurchases totaling $30,000. Additionally, total equity increased by $176,000 due to an increase in the net unrealized gain on securities classified as available-for-sale.

Results of Operations:

Comparison of the three months ended July 31, 2011 and July 31, 2010.

General:

Net income for the three months ended July 31, 2011 was $359,000 compared with net income of $336,000 for the three months ended July 31, 2010, an increase of $23,000 or 6.8%. Net interest income decreased by $31,000 or 1.4%, the provision for loan losses decreased by $3,000, total non-interest income decreased by $36,000, and total non-interest expense decreased by $62,000.

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 July 31, 2011, the Company’s net interest margin decreased from 3.78% to 3.59%. This decrease in net interest margin is primarily the result of a greater percentage of assets held in interest-bearing deposits in banks.

 

23


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 July 31,                
     2011     2010  
     Average
Balance (1)
     Interest      Rate
(Annualized)
    Average
Balance (1)
     Interest      Rate
(Annualized)
 
                   (Dollars in Thousands)                

Interest-earning assets:

                

Loans

   $ 124,073       $ 1,749         5.64   $ 122,873       $ 1,802         5.87

Investment securities

     94,923         772         3.25     94,512         885         3.75

Interest-bearing deposits in banks

     17,629         11         0.25     10,518         6         0.23
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-earning assets

   $ 236,625         2,532         4.28   $ 227,903         2,693         4.73
  

 

 

         

 

 

       

Interest-bearing liabilities:

                

Deposits

   $ 232,065         378         0.65   $ 221,513         473         0.85

Borrowed funds

     2,663         31         4.66     6,533         66         4.04
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-bearing liabilities

   $ 234,728         409         0.70   $ 228,046         539         0.95
  

 

 

    

 

 

      

 

 

    

 

 

    

Net interest income

      $ 2,123            $ 2,154      
     

 

 

         

 

 

    

Weighted average interest rate spread (2)

  

        3.58           3.78
        

 

 

         

 

 

 

Net interest margin

           3.59           3.78
        

 

 

         

 

 

 

 

(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.

 

24


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 July 31,  
     2011 vs. 2010  
     Changes due to increase (decrease)  
     (in thousands)  
     Total     Volume     Rate     Rate/
Volume
 

Interest income:

        

Loans

   $ (53   $ 18      $ (70   $ (1

Investment securities

     (113     4        (116     (1

Interest-bearing deposits in banks

     5        4        1        0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (161     26        (185     (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     (95     22        (112     (5

Borrowed funds

     (35     (39     10        (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (130     (17     (102     (11
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in net interest income

   $ (31   $ 43      $ (83   $ 9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and Dividend Income:

Total interest and dividend income decreased by $161,000, or 6.0%, to $2.5 million for the three months ended July 31, 2011. Interest income from loans decreased by $53,000. This decrease was due to a reduction in the average rate earned on loans, from 5.87% to 5.64% on an annualized basis, as offset by an increase of $1.2 million in the average balance of loans outstanding. Interest and dividend income on investment securities decreased by $113,000 as a result of a decrease in the average yield earned, from 3.75% in the quarter ended July 31, 2010 to 3.25% in the quarter ended July 31, 2011, offset by an increase of $411,000 in the average balance of investments. Income from interest-bearing deposits in banks increased by $5,000 due to an increase of $7.1 million in their average balance, coupled with an increase in the average yield earned, from 0.23% in the 2010 quarter to 0.25% in the 2011 quarter.

Interest Expense:

Interest expense decreased by $130,000, or 24.1%, to $409,000 for the three months ended July 31, 2011. Interest expense on deposits decreased by $95,000 as a result of a decrease in the average rate paid, from 0.85% to 0.65%, offset by an increase of $10.6 million in the average balance of deposits. Interest expense on borrowed funds decreased by $35,000, or 53.0%, for the three months ended July 31, 2011. This decrease was due to a reduction of $3.9 million in the average balance of advances outstanding, offset by an increase in the average rate paid on borrowed funds, from 4.04% in the July 2010 three-month period to 4.66% in the July 2011 three-month period.

Provision for Loan Losses:

The provision for loan losses was $57,000 for the quarter ended July 31, 2011, compared to $60,000 for the quarter ended July 31, 2010. 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

 

25


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 $36,000 for the three months ended July 31, 2011 as compared to the three months ended July 31, 2010. This decrease was due to a decrease of $34,000 in gains on sales of loans and a decrease of $10,000 in loan origination and other loan fees. Additionally, customer service fees decreased by $26,000 due to reduced return check fees and declining ATM surcharge income. These decreases were offset by an increase of $26,000 in gains on sales of investments, an increase of $7,000 in interchange income, and an increase of $1,000 in other income.

Non-interest Expense:

Total non-interest expense decreased by $62,000 or 3.1% for the quarter ended July 31, 2011. This decrease was partially a result of a decrease of $42,000 in FDIC assessment expense, a result of a modification of the FDIC deposit insurance assessment base from domestic deposits to average consolidated total assets minus average tangible equity. Additionally, losses and expenses of foreclosed properties decreased by $17,000 due to the reduction of bank-owned properties. Finally, occupancy and equipment expense decreased by $28,000 and data processing decreased by $11,000. These decreases were offset by an increase of $15,000 or 1.4% in salary and benefit expense and by an increase of $21,000 in other expenses due to increased legal expenses for problem loans.

Provision for Income Taxes:

The provision for income taxes decreased by $25,000 for the three months ended July 31, 2011 when compared to the three months ended July 31, 2010. Effective income tax rates were 32.3% and 36.8% respectively in the 2011 and 2010 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.

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.

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.

 

26


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.

 

     July 31,
2011
    April 30,
2011
    July 31,
2010
 
     (Dollars in Thousands)  

Loans past due over 90 days:

      

Residential mortgages

   $ 928      $ 1,108      $ 0   

Home equity loans and lines of credit

     129        139        99   

Commercial and construction mortgages

     0        456        0   

Commercial time and demand loans

     20        0        100   

Consumer and other loans

     0        0        0   
  

 

 

   

 

 

   

 

 

 
   $ 1,077      $ 1,703      $ 199   
  

 

 

   

 

 

   

 

 

 

Loans past due over 90 days as a percentage of:

      

Net loans receivable

     0.87     1.37     0.16

Total assets

     0.43     0.69     0.08

Non-performing assets

      

**Non-accrual loans

   $ 1,366      $ 1,703      $ 199   

Real estate acquired by foreclosure

     491        1,211        1,953   
  

 

 

   

 

 

   

 

 

 
   $ 1,857      $ 2,914      $ 2,152   
  

 

 

   

 

 

   

 

 

 

Non-performing assets as a percentage of:

      

Net loans receivable

     1.51     2.34     1.78

Total assets

     0.75     1.18     0.85

Allowance for loan losses

   $ 1,175      $ 1,214      $ 1,235   

Allowance for loan losses as a percentage of non-performing loans

     86.02     71.29     620.60

Allowance for loan losses as a percentage of net loans

     0.95     0.98     1.02

 

** 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

 

27


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, 2011.

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)

May 1-31, 2011

       0        $ 0          0          66,628  

June 1-30, 2011

       1,422          8.80          1,422          65,206  

July 1-31, 2011

       2,027          8.60          2,027          63,179  

TOTAL

       3,449        $ 8.68          3,449          63,179  

 

(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.

 

28


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 4   Stock Certificate for Common Stock of Mayflower Bancorp, Inc. (1)
Exhibit 31   Rule 13a-14(a)/15d-14(a) Certifications
Exhibit 32   Section 1350 Certifications
Exhibit 101*   The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Changes in Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements, tagged as blocks of text.

 

(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 Current Report on Form 8-K (File No. 0-52477), filed with the SEC on August 12, 2011.
* Furnished, not filed.

 

29


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: September 9, 2011      
   

/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)

 

30