XNAS:MFLR Quarterly Report 10-Q Filing - 1/31/2012

Effective Date 1/31/2012

 

 

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 January 31, 2012

 

¨ 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 February 23, 2012

 

Common Stock $1.00 par value   2,063,443
(Title of class)   (Shares outstanding)

 

 

 


PART I - FINANCIAL INFORMATION

ITEM I - Financial Statements

MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

      January 31,
2012
     April 30,
2011
 
     (unaudited)      (audited)  
     (In Thousands)  

ASSETS

     

Cash and cash equivalents:

     

Cash and due from banks

   $ 3,635       $ 5,534   

Interest-bearing deposits in banks

     9,237         6,256   
  

 

 

    

 

 

 

Total cash and cash equivalents

     12,872         11,790   

Investment securities:

     

Securities available-for-sale, at fair value

     45,747         46,350   

Securities held-to-maturity (fair value of $45,141 and $46,400, respectively)

     43,523         45,554   
  

 

 

    

 

 

 

Total investment securities

     89,270         91,904   

Loans receivable, net

     128,259         124,497   

Accrued interest receivable

     855         891   

Real estate held for investment

     931         1,008   

Real estate acquired by foreclosure

     266         1,211   

Premises and equipment, net

     10,784         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

     248         134   

Deferred income taxes

     773         855   

Other assets

     1,355         1,421   
  

 

 

    

 

 

 

Total assets

   $ 247,712       $ 246,883   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Deposits

   $ 221,612       $ 221,023   

Advances and borrowings

     2,500         3,500   

Advances from borrowers for taxes and insurance

     340         154   

Allowance for loan losses on off-balance sheet credit exposures

     110         110   

Accrued expenses and other liabilities

     1,248         919   
  

 

 

    

 

 

 

Total liabilities

     225,810         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 2,063,443 at January 31, 2012 and 2,075,035 at April 30, 2011

     2,063         2,075   

Additional paid-in capital

     4,322         4,326   

Retained earnings

     14,613         14,062   

Accumulated other comprehensive income

     904         714   
  

 

 

    

 

 

 

Total stockholders’ equity

     21,902         21,177   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 247,712       $ 246,883   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements

 

2


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

 

     Three months ended
January 31,
     Nine months ended
January 31,
 
     2012      2011      2012      2011  
     (In Thousands, Except Per Share Data)  

Interest income:

           

Loans receivable

   $ 1,730       $ 1,801       $ 5,198       $ 5,422   

Securities held-to-maturity

     332         349         1,058         1,151   

Securities available-for-sale

     344         396         1,125         1,306   

Interest-bearing deposits in banks

     6         5         24         17   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest income

     2,412         2,551         7,405         7,896   
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest expense:

           

Deposits

     304         412         1,018         1,334   

Borrowed funds

     30         46         91         168   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest expense

     334         458         1,109         1,502   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     2,078         2,093         6,296         6,394   

Provision for loan losses

     90         20         197         156   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     1,988         2,073         6,099         6,238   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-interest income:

           

Loan origination and other loan fees

     24         26         75         85   

Customer service fees

     161         157         492         523   

Gain on sales of mortgage loans

     133         113         267         427   

Gain on sales of investment securities

     107         183         241         231   

Interchange income

     57         53         170         152   

Other

     76         58         120         103   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-interest income

     558         590         1,365         1,521   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-interest expense:

           

Compensation and fringe benefits

     1,093         1,059         3,251         3,158   

Occupancy and equipment

     262         290         796         850   

FDIC assessment

     42         81         125         250   

Data processing

     97         98         276         289   

Losses and expenses of other real estate owned

     75         195         96         234   

Other

     454         443         1,426         1,351   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-interest expense

     2,023         2,166         5,970         6,132   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     523         497         1,494         1,627   

Provision for income taxes

     182         172         501         581   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 341       $ 325       $ 993       $ 1,046   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share (basic)

   $ 0.17       $ 0.15       $ 0.48       $ 0.50   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share (diluted)

   $ 0.17       $ 0.15       $ 0.48       $ 0.50   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average basic shares outstanding

     2,067         2,082         2,071         2,083   

Diluted effect of outstanding stock options

     3         0         3         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average diluted shares outstanding

     2,070         2,082         2,074         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
Compre-
hensive
Income
(Loss)
    Total  
     (In Thousands)  

BALANCE, April 30, 2010

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

Net income for the nine months ended January 31, 2011

     0        0        1,046        0        1,046   

Other comprehensive income, net of tax:

          

Change in unrealized gain on securities available-for-sale, net of deferred income taxes of $80,000

     0        0        0        (117     (117

Reclassification adjustment for gains included in net income, net of deferred income taxes of $93,000

     0        0        0        (138     (138
          

 

 

 
             (255
          

 

 

 

Total comprehensive income

     0        0        0        0        791   
          

 

 

 

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

     7        46        0        0        53   

Purchase of 6,782 shares of Company stock

     (7     (12     (43     0        (62

Cash dividends ($0.18 per share)

     0        0        (375     0        (375
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, January 31, 2011

   $ 2,079      $ 4,334      $ 13,921      $ 553      $ 20,887   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, April 30, 2011

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

Net income for the nine months ended January 31, 2012

     0        0        993        0        993   

Other comprehensive income, net of tax:

          

Change in unrealized gain on securities available-for-sale, net of deferred income taxes of $204,000

     0        0        0        335        335   

Reclassification adjustment for gains included in net income, net of deferred income taxes of $96,000

     0        0        0        (145     (145
          

 

 

 
             190   
          

 

 

 

Total comprehensive income

     0        0        0        0        1,183   
          

 

 

 

Grants of restricted stock

     1        5        0        0        6   

Stock-based compensation

     0        11        0        0        11   

Purchase of 12,336 shares of Company stock

     (13     (20     (69     0        (102

Cash dividends ($0.18 per share)

     0        0        (373     0        (373
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, January 31, 2012

   $ 2,063      $ 4,322      $ 14,613      $ 904      $ 21,902   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

4


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine months ended
January 31,
 
     2012     2011  
     (In Thousands)  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Interest received

   $ 7,845      $ 8,062   

Fees and other income received

     1,162        1,305   

Interest paid

     (1,113     (1,512

Cash paid to suppliers and employees

     (5,446     (5,415

Income taxes paid

     (641     (818
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,807        1,622   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Net increase in loans receivable

     (3,177     (7,381

Purchases of available-for-sale securities

     (23,662     (18,395

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

     24,578        25,341   

Purchases of held-to-maturity securities

     (24,169     (30,058

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

     26,022        30,351   

Proceeds from sales of real estate acquired by foreclosure

     125        408   

Capital additions to real estate acquired by foreclosure

     0        (76

Purchases of premises and equipment

     (69     (426

Other - net

     327        102   
  

 

 

   

 

 

 

Net cash used in investing activities

     (25     (134
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net increase (decrease) in deposits

     589        (6,668

Payments on advances and borrowings

     (1,000     (3,000

Net increase in advances from borrowers for taxes and insurance

     186        154   

Issuance of common stock

     0        53   

Repurchase of Company stock

     (102     (62

Dividends paid on common stock

     (373     (375
  

 

 

   

 

 

 

Net cash used in financing activities

     (700     (9,898
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     1,082        (8,410

Cash and cash equivalents - beginning of period

     11,790        20,473   
  

 

 

   

 

 

 

Cash and cash equivalents - end of period

   $ 12,872      $ 12,063   
  

 

 

   

 

 

 

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)

 

     Nine months ended
January 31,
 
     2012     2011  
     (In Thousands)  

Net income

   $ 993      $ 1,046   

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

    

Depreciation

     369        383   

Provision for loan losses

     197        156   

Loss on other real estate owned

     65        162   

Premium amortization

     404        166   

Amortization of intangible assets

     0        8   

Deferred income taxes

     (26     132   

Gain on sales of investments

     (241     (231

Grants of restricted stock

     6        0   

Stock based compensation

     11        0   

Decrease (increase) in accrued interest receivable

     36        (1

Decrease (increase) in prepaid expenses

     49        189   

Decrease (increase) in mortgage servicing rights

     14        (22

Decrease (increase) in refundable income taxes

     (114     (368

Increase (decrease) in accrued expenses

     11        (4

Increase (decrease) in accrued interest payable

     (5     (10

Increase (decrease) in deferred loan origination fees

     38        16   
  

 

 

   

 

 

 

Total adjustments

     814        576   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 1,807      $ 1,622   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES:

    

Total increase (decrease) in unrealized gain on securities available-for-sale

   $ 298      $ (428
  

 

 

   

 

 

 

Loans transferred to real estate acquired by foreclosure

   $ 168      $ 295   
  

 

 

   

 

 

 

Proceeds from sales of real estate acquired by foreclosure financed through loans

   $ 831      $ 457   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

6


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

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 October 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-20, Receivables (Topic 310): 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

January 31, 2012 and 2011

 

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 Update will not have a material impact on the Company’s consolidated financial position.

In September, 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-09, Compensation—Retirement Benefits (Subtopic 715): Disclosures about an Employer’s Participation in a Multiemployer Plan. This Update requires that employers provide additional separate disclosures for multiemployer pension plans and multiemployer other postretirement benefit plans. For employers that participate in multiemployer pension plans, the amendments in this Update require an employer to provide additional quantitative and qualitative disclosures. The amended disclosures provide users with more detailed information about an employer’s involvement in multiemployer pension plans. The amendments in this Update are effective for annual periods for fiscal years ending after December 15, 2011. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In December, 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210) Disclosures about Offsetting Assets and Liabilities. The amendments in this Update will enhance disclosures required by U.S. GAAP by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. The amendments in this Update are effective for annual periods for fiscal years beginning on or after January 1, 2013. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

 

8


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

C. Investment Securities

Investment securities have been classified according to management’s intent. The amortized cost of securities and their respective fair values at January 31, 2012 and April 30, 2011 follows:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 
     January 31, 2012  
     (In Thousands)  

AVAILABLE-FOR-SALE SECURITIES:

          

U.S. Government Agency obligations

   $ 8,496       $ 31       $ 0      $ 8,527   

Municipal obligations

     3,086         200         0        3,286   

Mortgage-backed and related securities

     31,937         1,252         0        33,189   

Trust preferred securities

     750         0         (84     666   

Equity securities

     0         79         0        79   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 44,269       $ 1,562       $ (84   $ 45,747   
  

 

 

    

 

 

    

 

 

   

 

 

 

HELD-TO-MATURITY SECURITIES:

          

U.S. Government Agency obligations

   $ 12,397       $ 59       $ 0      $ 12,456   

Municipal obligations

     3,039         294         0        3,333   

Mortgage-backed and related securities

     28,087         1,282         (17     29,352   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 43,523       $ 1,635       $ (17   $ 45,141   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
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 nine months ended January 31, 2012 or 2011.

 

9


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

D. Loans Receivable

Loans receivable at January 31, 2012 and April 30, 2011 are summarized as follows:

 

(In Thousands)

   January 31,
2012
    April 30,
2011
 

Mortgage loans on real estate

    

Residential

   $ 55,125      $ 48,724   

Commercial

     44,459        43,511   

Construction

     4,964        6,272   

Home equity loans

     2,957        3,521   

Home equity lines of credit

     17,264        17,702   
  

 

 

   

 

 

 

Total mortgage loans

     124,769        119,730   

Consumer loans

     1,829        1,620   

Commercial loans

     4,312        5,576   
  

 

 

   

 

 

 

Total loans

     130,910        126,926   
  

 

 

   

 

 

 

Less:

    

Due borrowers on construction and other loans

     1,491        1,308   

Net deferred loan origination costs

     (55     (93

Allowance for loan losses

     1,215        1,214   
  

 

 

   

 

 

 
     2,651        2,429   
  

 

 

   

 

 

 

Loans receivable, net

   $ 128,259      $ 124,497   
  

 

 

   

 

 

 

Activity in the allowance for loan losses is summarized as follows for the nine months ended January 31:

 

     Nine Months Ended  
     January 31,
2012
    January 31,
2011
 
     (In Thousands)  

Beginning balance

   $ 1,214      $ 1,194   

Provision for loan losses

     197        156   

Loans charged off

     (201     (64

Recoveries

     5        6   
  

 

 

   

 

 

 

Balance at end of period

   $ 1,215      $ 1,292   
  

 

 

   

 

 

 

 

10


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

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 January 31, 2012 and April 30, 2011:

 

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

(In Thousands)

   January 31, 2012  

Allowance for loan losses:

                 

Beginning balance

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

Loans charged off

     (80     (14     0        (104     0        (3     0         (201

Recoveries

     0        0        0        0        5        0        0         5   

Provision for loan losses

     101        (53     (21     169        (9     10        0         197   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending Balance

   $ 194      $ 568      $ 74      $ 247      $ 108      $ 24      $ 0       $ 1,215   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 28      $ 0      $ 0      $ 60      $ 0      $ 0      $ 0       $ 88   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 166      $ 568      $ 74      $ 187      $ 108      $ 24      $ 0       $ 1,127   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Loans Receivable:

Ending balance

   $ 55,125      $ 44,459      $ 3,473      $ 20,221      $ 4,312      $ 1,829      $ 0       $ 129,419   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 314      $ 0      $ 0      $ 60      $ 0      $ 0      $ 0       $ 374   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 54,811      $ 44,459      $ 3,473      $ 20,161      $ 4,312      $ 1,829      $ 0       $ 129,045   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

11


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

    Residential
Mortgages
    Commercial
Mortgages
    Construction
Mortgages
    Home Equity
Loans and
Lines of
Credit
    Commercial
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   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

12


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

Impaired loans at January 31, 2012 and April 30, 2011 were as follows:

 

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

(In Thousands)

   January 31, 2012  

With no related allowance recorded:

   $ 0       $ 0       $ 0       $ 0       $ 0   

With an allowance recorded:

              

Residential mortgages

     314         314         28         315         3   

Home equity loans and lines of credit

     60         60         60         60         2   

Totals:

              

Residential mortgages

   $ 314       $ 314       $ 28       $ 315       $ 3   

Home equity loans and lines of credit

     60         60         60         60         2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $    374       $    374       $ 88       $    375       $   5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans are designated as troubled debt restructures (TDR) when a concession is made on a credit as a result of financial difficulties of the borrower. Typically, such concessions consist of a reduction in interest rate to a below market rate, taking into account the credit quality of the borrower, or a deferment of payments, principal or interest, which materially alters the Company’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. Restructured loans are included in the impaired loan category.

There were no loans modified as troubled debt restructured during the nine months ended January 31, 2012. Losses on loans modified as troubled debt restructures, if any, are charged against the allowance for loan losses when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses.

 

13


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days and still accruing by portfolio segment as of January 31, 2012 and April 30, 2011:

 

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

(In Thousands)

   January 31, 2012      April 30, 2011  

Residential mortgages

   $ 596       $ 0       $ 1,108       $ 0   

Commercial mortgages

     0         0         456         0   

Home equity loans and lines of credit

     60         0         139         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 656       $ 0       $ 1,703       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the aging of the recorded investment in past due loans as of January 31, 2012 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)

   January 31, 2012  

Residential Mortgages

   $ 309       $ 0       $ 314       $ 623       $ 54,502       $ 55,125   

Commercial Mortgages

     675         0         0         675         43,784         44,459   

Construction Mortgages

     0         0         0         0         3,473         3,473   

Home Equity Loans and Lines of Credit

     164         0         0         164         20,057         20,221   

Commercial Loans

     0         0         0         0         4,312         4,312   

Consumer Loans

     0         0         0         0         1,829         1,829   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,148       $ 0       $ 314       $ 1,462       $ 127,957       $ 129,419   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     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 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

The Company utilizes the following indicators to assess credit quality:

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

 

14


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

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.

The following table displays the loan portfolio by credit quality indicators as of January 31, 2012 and April 30, 2011:

 

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

(In Thousands)

   January 31, 2012  

Pass

   $ 54,353       $ 42,454       $ 3,223       $ 20,161       $ 4,312       $ 1,829       $ 126,332   

Special mention

     176         806         250         0         0         0         1,232   

Substandard

     282         1,199         0         0         0         0         1,481   

Doubtful

     314         0         0         60         0         0         374   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 55,125       $ 44,459       $ 3,473       $ 20,221       $ 4,312       $ 1,829       $ 129,419   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Residential
Mortgages
     Commercial
Mortgages
     Construction
Mortgages
     Home Equity
Loans and
Lines of
Credit
     Commercial
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.

 

15


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

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.

Loans: For adjustable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analysis, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for non-performing loans are estimated using discounted cash flow analysis or underlying collateral values, where applicable.

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.

 

16


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

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 January 31, 2012 and April 30, 2011 were as follows:

 

     Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
 

(In Thousands)

   January 31, 2012      April 30, 2011  

Financial assets:

           

Cash and due from banks

   $ 3,635       $ 3,635       $ 5,534       $ 5,534   

Interest-bearing deposits in banks

     9,237         9,237         6,256         6,256   

Investment securities

     89,270         90,888         91,904         92,750   

Loans, net

     128,259         130,976         124,497         125,804   

Accrued interest receivable

     855         855         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

     221,612         222,133         221,023         221,412   

Advances and borrowings

     2,500         2,729         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.

 

17


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

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, 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 January 31, 2012, 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

   $ 8,527       $ 0       $ 8,527       $ 0   

Municipal obligations

     3,286         0         3,286         0   

Mortgage-backed and related securities

     33,189         0         33,189         0   

Trust preferred securities

     666         0         666         0   

Equity securities

     79         0         79         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities available-for-sale

   $ 45,747       $ 0       $ 45,747       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

18


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

The balances of assets and liabilities measured at fair value on a non-recurring basis as of January 31, 2012, 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

   $ 374       $ 0       $ 374       $ 0       $ 146   

Real estate acquired by foreclosure

   $ 266       $ 0       $ 266       $ 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 January 31, 2012, 148,820 shares remained unissued and available for award under the Incentive Plan, of which 100,597 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 no forfeiture rate to stock options outstanding in determining stock compensation expense for the nine months ended January 31, 2012.

During the nine months ended January 31, 2012, the Company awarded options to purchase 3,935 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 for the options granted in June 2011 and $2.32 for the options granted in August 2011, or $11,000 in total, for the nine months ended January 31, 2012. Assumptions used to determine the fair value of stock options granted are as follows:

 

     Granted June 2011     Granted August 2011  

Weighted average fair value

   $ 2.97      $ 2.32   

Options granted

     2,395        1,540   

Expected dividend yield

     2.77     2.73

Risk-free interest rate

     3.01     2.34

Expected volatility

     45.10     37.81

Expected life in years

     5.00        5.00   

 

19


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

January 31, 2012 and 2011

 

Stock option activity was as follows for the nine months ended January 31, 2012:

 

     Number of
Shares
     Average
Exercise Price
 

Options outstanding at April 30, 2011

     24,950       $ 14.00   

Options granted

     3,935         8.57   

Options exercised

     0         0   

Options forfeited

     0         0   
  

 

 

    

Options outstanding at January 31, 2012

     28,885       $ 13.26   
  

 

 

    

 

 

 

The Company also granted 3,720 restricted shares in the nine months ended January 31, 2012 which vest over a five year period. Total compensation expense related to the grants was $6,000 for the nine months ended January 31, 2012.

As of January 31, 2012, the expected future compensation related to restricted stock is approximately $6,000 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

     3,720        8.59   

Vested

     (744     8.59   

Forfeited

     0        0   
  

 

 

   

Non-vested at January 31, 2012

     2,976      $ 8.59   
  

 

 

   

 

 

 

 

20


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.

 

21


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 January 31, 2012 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.

 

22


Financial Condition:

At January 31, 2012, the Company’s total assets were $247.7 million as compared to $246.9 million at April 30, 2011, an increase of $829,000. During the nine months ended January 31, 2012, cash and cash equivalents increased by $1.1 million, net loans receivable increased by $3.8 million, total investment securities decreased by $2.6 million, and real estate acquired by foreclosure decreased by $945,000.

Net loans receivable were $128.3 million at January 31, 2012, compared to $124.5 million at April 30, 2011, representing an increase of $3.8 million. This increase was primarily due to an increase of $6.4 million in residential mortgages outstanding, partially a result of Mayflower Bank electing to retain a larger percentage of fixed-rate mortgage originations. During the nine months ended January 31, 2012, historically low interest rates spurred continued strong residential mortgage financing activity, as the Company originated $21.5 million in residential mortgages as compared to $27.0 million originated for the same period one year ago. Also during the nine-months, the Company purchased $5.0 million of newly-originated 30-year fixed-rate mortgages from a financial institution in eastern Massachusetts. Additionally, during the period, the Company sold $14.2 million of fixed-rate residential loans in the secondary mortgage market, producing gains of $267,000, compared to sales of $17.8 million for the prior year period, which resulted in gains of $427,000. This activity, combined with other mortgage payoffs, particularly on adjustable-rate mortgages, and regularly scheduled amortization, resulted in a $6.4 million increase in residential loan balances as compared to April 30, 2011.

Offsetting this increase in residential mortgages was a decrease of $1.5 million in net construction loans outstanding, a decrease of $1.0 million in home equity loans and lines of credit, and a decrease of $316,000 in commercial loans and mortgages. Finally, consumer loans outstanding increased by $209,000.

During the nine months ended January 31, 2012, total investments decreased by $2.6 million as the Company redeployed proceeds received from investment calls to loan 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 January 31, 2012, non-performing assets totaled $922,000, 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 $945,000 and by a reduction of $1.0 million in non-performing loans. During the period, the Company was able to resolve certain previously classified non-performing loans and charged off others. However, at January 31, 2012, three loans with aggregate balances approximating $374,000 were classified as non-performing that were not considered non-performing as of April 30, 2011. This $374,000 was comprised of one residential first mortgage in the amount of $314,000, and two home equity lines of credit totaling $60,000. At January 31, 2012, non-performing assets represented 0.37% of total assets compared to 1.18% of total assets at April 30, 2011.

At January 31, 2012, the Company’s allowance for loan losses was $1,215,000, which represented an allowance of 0.95% of net loans receivable and 185.2% 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 nine months ended January 31, 2012, the Company provided $197,000 to augment the reserve and charged off, net of recoveries, $80,000 in residential mortgages, $104,000 in home equity loans and lines of credit, $14,000 in commercial mortgages, and $3,000 in consumer loans, as offset by a recovery of $5,000 in commercial loans. Management and the Board of the Company continue to closely monitor the loan portfolio and will continue to provide for potential losses as they become likely.

 

23


The Company’s loan portfolio continues to be dependent on the strength of the local real estate market and further deterioration in that market or other negative economic conditions could have an adverse impact on the Company’s results. In addition, commercial, 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.

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 January 31, 2012 and April 30, 2011. This allowance is intended to protect the Company against potential losses on undrawn or unfunded loan commitments made to customers.

During the nine months ended January 31, 2012, total deposits, after interest credited, increased by $589,000 due primarily to an increase of $3.9 million in money market deposits and an increase of $1.8 million in checking and savings accounts. These increases were partially offset by a decrease of $5.2 million in certificate of deposit balances. The growth in money market deposits was partially a result of a new municipal deposit relationship established during the period, 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 nine months ended January 31, 2012, advances and borrowings outstanding decreased by $1.0 million, from $3.5 million at April 30, 2011 to $2.5 million at January 31, 2012.

Total stockholders’ equity increased by $725,000 when compared to April 30, 2011. The increase in total equity is due to net income for the nine months of $993,000 and stock-based compensation credits totaling $17,000. Those increases in total equity were partially offset during the nine-month period by dividends paid of $0.18 per share totaling $373,000 and Company stock repurchases totaling $102,000. Additionally, total equity increased by $190,000 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 January 31, 2012 and January 31, 2011.

General:

Net income for the three months ended January 31, 2012 was $341,000 compared with net income of $325,000 for the three months ended January 31, 2011, an increase of $16,000 or 4.9%. Net interest income decreased by $15,000, the provision for loan losses increased by $70,000, total non-interest income decreased by $32,000, and total non-interest expense decreased by $143,000.

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 January 31, 2012, the Company’s net interest margin decreased from 3.73% to 3.62%. This decrease in net interest margin is primarily a result of the decrease in yields on interest-earning assets that began during the Company’s second quarter and continued throughout the third quarter.

 

24


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 January 31,  
     2012     2011  
     Average
Balance(1)
     Interest      Rate
(Annualized)
    Average
Balance(1)
     Interest      Rate
(Annualized)
 
    

(Dollars in Thousands)

 

Interest-earning assets:

                

Loans

   $ 125,724       $ 1,730         5.50   $ 127,826       $ 1,801         5.64

Investment securities

     93,895         676         2.88     88,834         745         3.35

Interest-bearing deposits in banks

     9,903         6         0.24     7,550         5         0.26
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-earning assets

   $ 229,522         2,412         4.20   $ 224,210         2,551         4.55
  

 

 

         

 

 

       

Interest-bearing liabilities:

                

Deposits

   $ 223,073         304         0.55   $ 218,425         412         0.75

Borrowed funds

     2,500         30         4.80     4,500         46         4.09
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-bearing liabilities

   $ 225,573         334         0.59   $ 222,925         458         0.82
  

 

 

    

 

 

      

 

 

    

 

 

    

Net interest income

      $ 2,078            $ 2,093      
     

 

 

         

 

 

    

Weighted average interest rate spread (2)

           3.61           3.73
        

 

 

         

 

 

 

Net interest margin

           3.62           3.73
        

 

 

         

 

 

 

 

(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.

 

25


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 January 31,  
     2012 vs. 2011  
     Changes due to increase (decrease)  
     (in thousands)  
                       Rate/  
     Total     Volume     Rate     Volume  

Interest income:

        

Loans

   $ (71   $ (29   $ (42   $ 0   

Investment securities

     (69     42        (105     (6

Interest-bearing deposits in banks

     1        1        0        0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (139     14        (147     (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     (108     9        (114     (3

Borrowed funds

     (16     (20     8        (4
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (124     (11     (106     (7
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in net interest income

   $ (15   $ 25      $ (41   $ 1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and Dividend Income:

Total interest and dividend income decreased by $139,000, or 5.4%, to $2.4 million for the three months ended January 31, 2012. Interest income from loans decreased by $71,000. This decrease was due to a reduction in the average rate earned on loans, from 5.64% to 5.50% on an annualized basis, and a decrease of $2.1 million in the average balance of loans outstanding. Interest and dividend income on investment securities decreased by $69,000 as a result of a decrease in the average yield earned, from 3.35% in the quarter ended January 31, 2011 to 2.88% in the quarter ended January 31, 2012, offset by an increase of $5.1 million in the average balance of investments. Income from interest-bearing deposits in banks increased by $1,000 due to an increase of $2.4 million in their average balance.

Interest Expense:

Interest expense decreased by $124,000, or 27.1%, to $334,000 for the three months ended January 31, 2012. Interest expense on deposits decreased by $108,000 as a result of a decrease in the average rate paid, from 0.75% to 0.55%, offset by an increase of $4.6 million in the average balance of deposits. Interest expense on borrowed funds decreased by $16,000, or 34.8%, for the three months ended January 31, 2012. This decrease was due to a reduction of $2.0 million in the average balance of advances outstanding, offset by an increase in the average rate paid on borrowed funds, from 4.09% in the January 2011 three-month period to 4.80% in the January 2012, three-month period.

Provision for Loan Losses:

The provision for loan losses was $90,000 for the quarter ended January 31, 2012, compared to $20,000 for the quarter ended January 31, 2011. The allowance for loan losses is maintained at a level that management and the Board of the Company consider 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

 

26


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 $32,000 for the three months ended January 31, 2012 as compared to the three months ended January 31, 2011. This decrease was primarily due to a decrease of $76,000 in gain on sales of investment securities, offset by an increase of $20,000 in gain on sales of mortgage loans. Additionally, loan origination and other loan fees decreased by $2,000. These decreases were offset by an increase of $4,000 in customer service fees and an increase of $4,000 in interchange income. Finally, other income increased by $18,000, due primarily to an increase in a special dividend received from The Co-operative Central Bank, the excess deposit insurer of Mayflower Bank.

Non-interest Expense:

Total non-interest expense decreased by $143,000 or 6.6% for the quarter ended January 31, 2012. This decrease was partially a result of a decrease of $120,000 in losses and expenses of other real estate owned, a decrease of $39,000 in FDIC assessments, and a decrease of $28,000 in occupancy and equipment expense, due to reduced snow removal and heating costs. These were offset by an increase of $34,000, or 3.2%, in compensation and fringe benefits, and an increase of $10,000 in data processing and other operating expenses.

Provision for Income Taxes:

The provision for income taxes increased by $10,000 for the three months ended January 31, 2012 when compared to the three months ended January 31, 2011, due to the increase in net income before taxes. Effective income tax rates were 34.8% and 34.6%, respectively, in the 2012 and 2011 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.

Results of Operations:

Comparison of the nine months ended January 31, 2012 and January 31, 2011.

General:

Net income for the nine months ended January 31, 2012 was $993,000 compared with net income of $1,046,000 for the nine months ended January 31, 2011, a decrease of $53,000 or 5.1%. Net interest income decreased by $98,000 or 1.5%, the provision for loan losses increased by $41,000, total non-interest income decreased by $156,000, and total non-interest expense decreased by $162,000.

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 nine months ended January 31, 2012, the Company’s net interest margin decreased from 3.77% to 3.62%. This decrease in net interest margin is partially the result of a greater percentage of assets held in interest-bearing deposits in banks, and the decrease in yields on interest-earning assets.

 

27


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.

 

     Nine months ended January 31,  
     2012     2011  
     Average
Balance(1)
     Interest      Rate
(Annualized)
    Average
Balance(1)
     Interest      Rate
(Annualized)
 
                   (Dollars in Thousands)                

Interest-earning assets:

                

Loans

   $ 124,308       $ 5,198         5.58   $ 124,742       $ 5,422         5.80

Investment securities

     94,193         2,183         3.09     92,025         2,457         3.56

Interest-bearing deposits in banks

     13,206         24         0.24     9,404         17         0.24
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-earning assets

   $ 231,707         7,405         4.26   $ 226,171         7,896         4.65
  

 

 

         

 

 

       

Interest-bearing liabilities:

                

Deposits

   $ 226,156         1,018         0.60   $ 220,017         1,334         0.81

Borrowed funds

     2,555         91         4.75     5,490         168         4.08
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-bearing liabilities

   $ 228,711         1,109         0.65   $ 225,507         1,502         0.89
  

 

 

    

 

 

      

 

 

    

 

 

    

Net interest income

      $ 6,296            $ 6,394      
     

 

 

         

 

 

    

Weighted average interest rate spread (2)

           3.61           3.76
        

 

 

         

 

 

 

Net interest margin

           3.62           3.77
        

 

 

         

 

 

 

 

(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.

 

28


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).

 

     Nine months ended January 31,  
     2012 vs. 2011  
     Changes due to increase (decrease)  
     (in thousands)  
     Total     Volume     Rate     Rate/
Volume
 
        

Interest income:

        

Loans

   $ (224   $ (19   $ (206   $ 1   

Investment securities

     (274     58        (324     (8

Interest-bearing deposits in banks

     7        7        0        0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (491     46        (530     (7
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     (316     37        (344     (9

Borrowed funds

     (77     (90     28        (15
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (393     (53     (316     (24
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in net interest income

   $ (98   $ 99      $ (214   $ 17   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and Dividend Income:

Total interest and dividend income decreased by $491,000, or 6.2%, to $7.4 million for the nine months ended January 31, 2012. Interest income from loans decreased by $224,000. This decrease was due to a reduction in the average rate earned on loans, from 5.80% to 5.58% on an annualized basis, coupled with a decrease of $434,000 in the average balance of loans outstanding. Interest and dividend income on investment securities decreased by $274,000 as a result of a decrease in the average yield earned, from 3.56% for the nine months ended January 31, 2011 to 3.09% for the nine months ended January 31, 2012, offset by an increase of $2.2 million in the average balance of investments. Income from interest-bearing deposits in banks increased by $7,000 due to an increase of $3.8 million in their average balance.

Interest Expense:

Interest expense decreased by $393,000, or 26.2%, to $1,109,000 for the nine months ended January 31, 2012. Interest expense on deposits decreased by $316,000 as a result of a decrease in the average rate paid, from 0.81% to 0.60%, offset by an increase of $6.1 million in the average balance of deposits. Interest expense on borrowed funds decreased by $77,000, or 45.8%, for the nine months ended January 31, 2012. This decrease was due to a reduction of $2.9 million in the average balance of advances outstanding, offset by an increase in the average rate paid on borrowed funds, from 4.08% in the January 2011 nine-month period to 4.75% in the January, 2012 nine-month period.

Provision for Loan Losses:

The provision for loan losses was $197,000 for the nine months ended January 31, 2012, compared to $156,000 for the nine months ended January 31, 2011. The allowance for loan losses is maintained at a level that management and the Company’s Board consider adequate to provide for probable losses based upon evaluation of known and inherent risks in the loan portfolio. In determining the appropriate level

 

29


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 $156,000 for the nine months ended January 31, 2012 as compared to the nine months ended January 31, 2011. This decrease was due to a decrease of $160,000 in gains on sales of mortgage loans, coupled with a decrease of $10,000 in loan origination and other loan fees. Finally, customer service fees decreased by $31,000 due to reduced ATM surcharge income. These decreases were partially offset by an increase of $10,000 in gains on sales of investment securities, an increase of $18,000 in interchange income, and an increase of $17,000 in other income.

Non-interest Expense:

Total non-interest expense decreased by $162,000 or 2.6% for the nine months ended January 31, 2012. This decrease was attributable to a decrease of $54,000 in occupancy and equipment expense, a decrease of $125,000 in FDIC assessment expense, a decrease of $13,000 in data processing expense, and a decrease of $138,000 in losses and expenses of other real estate owned. These decreases were partially offset by an increase of $93,000, or 2.9%, in compensation and fringe benefits and an increase of $75,000 in other expenses, partially due to increased legal fees for troubled loans.

Provision for Income Taxes:

The provision for income taxes decreased by $80,000 for the nine months ended January 31, 2012 when compared to the nine months ended January 31, 2011. Effective income tax rates were 33.5% and 35.7%, respectively, in the 2012 and 2011 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 (interest-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.

 

30


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.

 

       January 31,
2012
    April 30,
2011
    January 31,
2011
 
       (Dollars in Thousands)  

Loans past due over 90 days:

        

Residential mortgages

     $ 314      $ 1,108      $ 761   

Home equity loans and lines of credit

       0        139        139   

Commercial and construction mortgages

       0        456        579   

Commercial time and demand loans

       0        0        63   

Consumer and other loans

       0        0        0   
    

 

 

   

 

 

   

 

 

 
     $ 314      $ 1,703      $ 1,542   
    

 

 

   

 

 

   

 

 

 

Loans past due over 90 days as a percentage of:

        

Net loans receivable

       0.24     1.37     1.21

Total assets

       0.13     0.69     0.63

Non-performing assets

        

**Non-accrual loans

     $ 656      $ 1,703      $ 1,542   

Real estate acquired by foreclosure

       266        1,211        1,211   
    

 

 

   

 

 

   

 

 

 
     $ 922      $ 2,914      $ 2,753   
    

 

 

   

 

 

   

 

 

 

Non-performing assets as a percentage of:

        

Net loans receivable

       0.72     2.34     2.15

Total assets

       0.37     1.18     1.12

Allowance for loan losses

     $ 1,215      $ 1,214      $ 1,292   

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

       185.21     71.29     83.79

Allowance for loan losses as a percentage of net loans

       0.95     0.98     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

 

31


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)

November 1-30, 2011

     0       $ 0         0       60,799

December 1-31, 2011

     4,249         7.90         4,249       56,550

January 1-31, 2012

     2,258         7.93         2,258       54,292
  

 

 

    

 

 

    

 

 

    

 

TOTAL

     6,507       $ 7.91         6,507       54,292
  

 

 

    

 

 

    

 

 

    

 

 

(1) On October 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.

 

32


Item 3. Defaults Upon Senior Securities

None

 

Item 4. Mine Safety Disclosures

 

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., as amended (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 January 31, 2012, 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 February 14, 2012.
* Furnished, not filed.

 

33


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: March 6, 2012  
 

/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)

 

34

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