XNAS:MFLR Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

 

 

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 June 30, 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 July 24, 2012

 

Common Stock $1.00 par value   2,066,353
(Title of class)   (Shares outstanding)

 

 

 


PART I - FINANCIAL INFORMATION

ITEM I - Financial Statements

MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

     June 30,
2012
     March 31,
2012
 
     (unaudited)      (audited)  
     (In Thousands)  

ASSETS

     

Cash and cash equivalents:

     

Cash and due from banks

   $ 4,579       $ 3,764   

Interest-bearing deposits in banks

     7,701         8,602   
  

 

 

    

 

 

 

Total cash and cash equivalents

     12,280         12,366   

Investment securities:

     

Securities available-for-sale, at fair value

     45,073         44,295   

Securities held-to-maturity (fair value of $45,955 and $45,379, respectively)

     44,468         43,969   
  

 

 

    

 

 

 

Total investment securities

     89,541         88,264   

Loans receivable, net

     133,888         134,331   

Accrued interest receivable

     802         867   

Real estate held for investment

     622         628   

Real estate acquired by foreclosure

     194         194   

Premises and equipment, net

     10,630         10,717   

Deposits with The Co-operative Central Bank

     449         449   

Stock in Federal Home Loan Bank of Boston, at cost

     1,449         1,449   

Refundable income taxes

     385         596   

Deferred income taxes

     389         377   

Other assets

     1,344         1,317   
  

 

 

    

 

 

 

Total assets

   $ 251,973       $ 251,555   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Deposits

   $ 227,214       $ 226,562   

Advances and borrowings

     1,000         1,000   

Advances from borrowers for taxes and insurance

     529         655   

Allowance for loan losses on off-balance sheet credit exposures

     110         110   

Accrued expenses and other liabilities

     964         1,344   
  

 

 

    

 

 

 

Total liabilities

     229,817         229,671   
  

 

 

    

 

 

 

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 2,059,930 at June 30, 2012 and 2,063,067 at March 31, 2012

     2,060         2,063   

Additional paid-in capital

     4,329         4,321   

Retained earnings

     14,945         14,710   

Accumulated other comprehensive income

     822         790   
  

 

 

    

 

 

 

Total stockholders’ equity

     22,156         21,884   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 251,973       $ 251,555   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements

 

 

2


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

 

Unaudited

   Three months ended      Three months ended  
     June 30,
2012
     July 31,
2011
 
     (In Thousands, Except Per Share Data)  

Interest income:

     

Loans receivable

   $ 1,780       $ 1,749   

Securities held-to-maturity

     293         372   

Securities available-for-sale

     288         400   

Interest-bearing deposits in banks

     6         11   
  

 

 

    

 

 

 

Total interest income

     2,367         2,532   
  

 

 

    

 

 

 

Interest expense:

     

Deposits

     276         378   

Borrowed funds

     11         31   
  

 

 

    

 

 

 

Total interest expense

     287         409   
  

 

 

    

 

 

 

Net interest income

     2,080         2,123   

Provision for loan losses

     10         57   
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     2,070         2,066   
  

 

 

    

 

 

 

Noninterest income:

     

Loan origination and other loan fees

     19         24   

Customer service fees

     154         170   

Gain on sales of mortgage loans

     161         77   

Gain on sales of investment securities

     49         60   

Interchange income

     61         57   

Other

     27         22   
  

 

 

    

 

 

 

Total noninterest income

     471         410   
  

 

 

    

 

 

 

Noninterest expense:

     

Compensation and fringe benefits

     1,101         1,066   

Occupancy and equipment

     275         267   

FDIC assessment

     34         49   

Losses and expenses of other real estate owned

     4         3   

Other

     552         561   
  

 

 

    

 

 

 

Total noninterest expense

     1,966         1,946   
  

 

 

    

 

 

 

Income before income taxes

     575         530   

Provision for income taxes

     186         171   
  

 

 

    

 

 

 

Net income

   $ 389       $ 359   
  

 

 

    

 

 

 

Earnings per share (basic)

   $ 0.19       $ 0.17   
  

 

 

    

 

 

 

Earnings per share (diluted)

   $ 0.19       $ 0.17   
  

 

 

    

 

 

 

Weighted average basic shares outstanding

     2,062         2,074   

Diluted effect of outstanding stock options

     7         2   
  

 

 

    

 

 

 

Weighted average diluted shares outstanding

     2,069         2,076   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements.

 

3


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

Unaudited    Three months ended
June 30
    Three months ended
July 31
 
     2012     2011  
     (In thousands)  

Net Income

   $ 389      $ 359   
  

 

 

   

 

 

 

Other comprehensive income:

    

Unrealized holding gains on available-for-sale securities

     97        348   

Reclassification adjustment for gains realized in income

     (49     (60
  

 

 

   

 

 

 

Net unrealized gains (losses)

     48        288   

Tax effect

     (16     (112
  

 

 

   

 

 

 

Total other comprehensive income

     32        176   
  

 

 

   

 

 

 

Comprehensive income

   $ 421      $ 535   
  

 

 

   

 

 

 

 

4


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

(Unaudited)

   Common
Stock
    Additional
Paid-in
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
     Total  
     (In Thousands)  

BALANCE, April 30, 2011

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

Net income for the three months ended July 31, 2011

     0        0        359        0         359   

Other comprehensive income

     0        0        0        176         176   

Grants of restricted common stock

     0        4        0        0         4   

Stock-based compensation

     0        7        0        0         7   

Purchase of 3,449 shares of Company stock

     (3     (6     (21     0         (30

Cash dividends ($0.06 per share)

     0        0        (125     0         (125
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

BALANCE, July 31, 2011

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

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

BALANCE, March 31, 2012

   $ 2,063      $ 4,321      $ 14,710      $ 790       $ 21,884   

Net income for the three months ended June 30, 2012

     0        0        389        0         389   

Other comprehensive income

     0        0        0        32         32   

Grants of restricted common stock

     1        8        0        0         9   

Stock-based compensation

     0        6        0        0         6   

Purchase of 4,005 shares of Company stock

     (4     (6     (30     0         (40

Cash dividends ($0.06 per share)

     0        0        (124     0         (124
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

BALANCE, June 30, 2012

   $ 2,060      $ 4,329      $ 14,945      $ 822       $ 22,156   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

See accompanying notes to consolidated financial statements.

 

 

5


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

   Three months ended
June 30,
    Three months ended
July 31,
 
     2012     2011  
     (In Thousands)  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Interest received

   $ 2,595      $ 2,595   

Fees and other income received

     417        371   

Interest paid

     (288     (407

Cash paid to suppliers and employees

     (1,959     (1,801

Income taxes paid

     (2     (1
  

 

 

   

 

 

 

Net cash provided by operating activities

     763        757   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Net decrease in loans receivable

     438        1,793   

Purchases of available-for-sale securities

     (5,792     (7,710

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

     5,004        5,974   

Purchases of held-to-maturity securities

     (4,691     (7,937

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

     4,136        6,973   

Proceeds from sales of real estate acquired by foreclosure

     0        105   

Purchases of premises and equipment

     (28     (40

Other - net

     (278     64   
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,211     (778
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net increase in deposits

     652        2,219   

Payments on advances and borrowings

     0        (1,000

Net (decrease) increase in advances from borrowers for taxes and insurance

     (126     133   

Repurchase of Company stock

     (40     (30

Dividends paid on common stock

     (124     (125
  

 

 

   

 

 

 

Net cash used in financing activities

     362        1,197   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (86     1,176   

Cash and cash equivalents - beginning of period

     12,366        11,790   
  

 

 

   

 

 

 

Cash and cash equivalents - end of period

   $ 12,280      $ 12,966   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

 

6


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

 

Reconciliation of Net Income to Net Cash

Provided by Operating Activities

 

    Three months ended
June 30,
    Three months ended
July 31,
 
(Unaudited)   2012     2011  
    (In Thousands)  

Net income

  $ 389      $ 359   

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

   

Depreciation

    121        123   

Provision for loan losses

    10        57   

Premium amortization

    163        113   

Deferred income taxes

    (28     (26

Gain on sales of investments

    (49     (60

Grants of restricted stock

    9        4   

Stock based compensation

    6        7   

Decrease (increase) in accrued interest receivable

    65        (49

Decrease (increase) in prepaid expenses

    40        52   

Decrease (increase) in mortgage servicing rights

    (2     0   

Decrease (increase) in refundable income taxes

    211        134   

Increase (decrease) in accrued expenses

    (166     (42

Increase (decrease) in accrued income taxes

    0        62   

Increase (decrease) in accrued interest payable

    0        1   

Increase (decrease) in deferred loan origination fees

    (6     22   
 

 

 

   

 

 

 

Total adjustments

    374        398   
 

 

 

   

 

 

 

Net cash provided by operating activities

  $ 763      $ 757   
 

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES:

   

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

  $ 48      $ 288   
 

 

 

   

 

 

 

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

  $ 0      $ 616   
 

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

7


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 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 11-month transition period ended March 31, 2012. 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.

Effective February 2012, Mayflower Bancorp, Inc. changed its fiscal year-end from April 30 to March 31. The accompanying consolidated financial statements are for the period April 1, 2012 through June 30, 2012 as compared to the prior year period May 1, 2011 to July 31, 2011.

 

B. Recent Accounting Pronouncements:

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

 

8


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 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 June 30, 2012 and March 31, 2012 follows:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 
     June 30, 2012  
     (In Thousands)  

AVAILABLE-FOR-SALE SECURITIES:

          

U.S. Government Agency obligations

   $ 11,502       $ 31       $ (2   $ 11,531   

Municipal obligations

     3,078         173         0        3,251   

Mortgage-backed and related securities

     28,400         1,136         0        29,536   

Trust preferred securities

     750         0         (34     716   

Equity securities

     0         39         0        39   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 43,730       $ 1,379       $ (36   $ 45,073   
  

 

 

    

 

 

    

 

 

   

 

 

 

HELD-TO-MATURITY SECURITIES

          

U.S. Government Agency obligations

   $ 15,999       $ 35       $ (10   $ 16,024   

Municipal obligations

     3,228         241         0        3,469   

Mortgage-backed and related securities

     25,241         1,237         (16     26,462   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 44,468       $ 1,513       $ (26   $ 45,955   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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

AVAILABLE-FOR-SALE SECURITIES:

          

U.S. Government Agency obligations

   $ 9,004       $ 16       $ (6   $ 9,014   

Municipal obligations

     2,832         171         0        3,003   

Mortgage-backed and related securities

     30,414         1,079         (6     31,487   

Trust preferred securities

     750         0         (33     717   

Equity securities

     0         74         0        74   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 43,000       $ 1,340       $ (45   $ 44,295   
  

 

 

    

 

 

    

 

 

   

 

 

 

HELD-TO-MATURITY SECURITIES

          

U.S. Government Agency obligations

   $ 13,394       $ 38       $ (12   $ 13,420   

Municipal obligations

     3,037         240         0        3,277   

Mortgage-backed and related securities

     27,538         1,173         (29     28,682   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 43,969       $ 1,451       $ (41   $ 45,379   
  

 

 

    

 

 

    

 

 

   

 

 

 

There was no impairment charge recognized against investment securities during the three months ended June 30, 2012 or July 31, 2011.

 

9


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

D. Loans Receivable

Loans receivable at June 30, 2012 and March 31, 2012 are summarized as follows:

 

(In Thousands)

   June 30,
2012
    March 31,
2012
 

Mortgage loans on real estate

    

Residential

   $ 61,371      $ 60,691   

Commercial

     43,858        44,273   

Construction

     7,381        6,605   

Home equity loans

     2,793        2,821   

Home equity lines of credit

     16,397        17,271   
  

 

 

   

 

 

 

Total mortgage loans

     131,800        131,661   

Consumer loans

     1,647        1,745   

Commercial loans

     4,458        4,578   
  

 

 

   

 

 

 

Total loans

     137,905        137,984   
  

 

 

   

 

 

 

Less:

    

Due borrowers on construction and other loans

     2,845        2,487   

Net deferred loan origination costs

     (57     (51

Allowance for loan losses

     1,229        1,217   
  

 

 

   

 

 

 
     4,017        3,653   
  

 

 

   

 

 

 

Loans receivable, net

   $ 133,888      $ 134,331   
  

 

 

   

 

 

 

 

10


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 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 June 30, 2012 and March 31, 2012:

 

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

(In Thousands)

   June 30, 2012  

Allowance for loan losses:

                    

Beginning balance

   $ 182       $ 585      $ 65       $ 246       $ 114      $ 25      $ 0       $ 1,217   

Loans charged off

     0         0        0         0         0        0        0         0   

Recoveries

     0         0        0         0         2        0        0         2   

Provision for loan losses

     2         (6     3         18         (3     (4     0         10   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending Balance

   $ 184       $ 579      $ 68       $ 264       $ 113      $ 21      $ 0       $ 1,229   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 0       $ 0      $ 0       $ 87       $ 0      $ 0      $ 0       $ 87   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 184       $ 579      $ 68       $ 177       $ 113      $ 21      $ 0       $ 1,142   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Loans Receivable: Ending balance

   $ 61,371       $ 43,858      $ 4,536       $ 19,190       $ 4,458      $ 1,647      $ 0       $ 135,060   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 0       $ 0      $ 0       $ 87       $ 0      $ 0      $ 0       $ 87   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 61,371       $ 43,858      $ 4,536       $ 19,103       $ 4,458      $ 1,647      $ 0       $ 134,973   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

11


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

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

(In Thousands)

  March 31, 2012  

Allowance for loan losses:

               

Beginning balance

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

Loans charged off

    (110     (14     0        (104     0        (3     0        (231

Recoveries

    0        0        0        0        6        0        0        6   

Provision for loan losses

    119        (36     (30     168        (4     11        0        228   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Balance

  $ 182      $ 585      $ 65      $ 246      $ 114      $ 25      $ 0      $ 1,217   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

  $ 0      $ 0      $ 0      $ 60      $ 0      $ 2      $ 0      $ 62   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

  $ 182      $ 585      $ 65      $ 186      $ 114      $ 23      $ 0      $ 1,155   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans Receivable:

               

Ending balance

  $ 60,691      $ 44,073      $ 4,318      $ 20,092      $ 4,578      $ 1,745      $ 0      $ 135,497   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

  $ 0      $ 0      $ 0      $ 60      $ 0      $ 2      $ 0      $ 62   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

  $ 60,691      $ 44,073      $ 4,318      $ 20,032      $ 4,578      $ 1,743      $ 0      $ 135,435   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

12


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

Impaired loans at June 30, 2012 and March 31, 2012 were as follows:

 

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

(In Thousands)

   June 30, 2012  

With no related allowance recorded:

              

None

   $ 0       $ 0       $ 0       $ 0       $ 0   

With an allowance recorded:

              

Home equity loans and lines of credit

     87         87         87         87         0   

Totals:

              

Home equity loans and lines of credit

     87         87         87         87         0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 87       $ 87       $ 87       $ 87       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

(In Thousands)

   March 30, 2012  

With no related allowance recorded:

              

None

   $ 0       $ 0       $ 0       $ 0       $ 0   

With an allowance recorded:

              

Home equity loans and lines of credit

     60         60         60         60         2   

Consumer loans

     2         2         2         3         0   

Totals:

              

Home equity loans and lines of credit

     60         60         60         60         2   

Consumer loans

     2         2         2         3         0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 62       $ 62       $ 62       $ 63       $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

There were no loans modified as troubled debt restructures during the three months ended June 30, 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.

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 June 30, 2012 and March 31, 2012:

 

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

(In Thousands)

   June 30, 2012      March 31, 2012  

Residential mortgages

   $ 280       $ 0       $ 282       $ 0   

Commercial mortgages

     0         0         0         250   

Home equity loans and lines of credit

     87         0         30         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 367       $ 0       $ 312       $ 250   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

13


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 and March 31, 2012 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)

   June 30, 2012  

Residential Mortgages

   $ 280       $ 0       $ 0       $ 280       $ 61,091       $ 61,371   

Commercial Mortgages

     303         0         0         303         43,555         43,858   

Construction Mortgages

     0         0         0         0         4,536         4,536   

Home Equity Loans and Lines of Credit

     0         27         30         57         19,133         19,190   

Commercial Loans

     93         0         0         93         4,365         4,458   

Consumer Loans

     0         0         0         0         1,647         1,647   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 676       $ 27       $     30       $ 733       $ 134,327       $ 135,060   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     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)

   March 31, 2012  

Residential Mortgages

   $ 176       $ 16       $ 0       $ 192       $ 60,499       $ 60,691   

Commercial Mortgages

     0         125         250         375         43,698         44,073   

Construction Mortgages

     0         250         0         250         4,068         4,318   

Home Equity Loans and Lines of Credit

     0         67         30         97         19,995         20,092   

Commercial Loans

     0         0         0         0         4,578         4,578   

Consumer Loans

     0         2         0         2         1,743         1,745   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 176       $ 460       $ 280       $ 916       $ 134,581       $ 135,497   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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.

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.

 

14


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

On a quarterly basis, or more often if needed, the Company reviews the ratings on commercial mortgages, construction mortgages, and commercial loans.

The following table displays the loan portfolio by credit quality indicators as of June 30, 2012 and March 31, 2012:

 

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

(In Thousands)

   June 30, 2012  

Pass

   $ 61,091       $ 41,702       $ 4,411       $ 19,103       $ 4,458       $ 1,647       $ 132,412   

Special mention

     0         971         125         0         0         0         1,096   

Substandard

     280         1,185         0         0         0         0         1,465   

Doubtful

     0         0         0         87         0         0         87   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 61,371       $ 43,858       $ 4,536       $ 19,190       $ 4,458       $ 1,647       $ 135,060   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

(In Thousands)

   March 31, 2012  

Pass

   $ 60,058       $ 42,184       $ 4,068       $ 20,032       $ 4,578       $ 1,743       $ 132,663   

Special mention

     351         695         250         0         0         0         1,296   

Substandard

     282         1,194         0         0         0         0         1,476   

Doubtful

     0         0         0         60         0         2         62   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 60,691       $ 44,073       $ 4,318       $ 20,092       $ 4,578       $ 1,745       $ 135,497   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

E. Fair Value Measurements

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

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

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

 

15


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

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

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

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

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

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

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

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

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

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

June 30, 2012 and July 31, 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 June 30, 2012 and March 31, 2012 were as follows:

 

     Carrying
Amount
     Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Other
Unobservable
Inputs
(Level 3)
 

(In Thousands)

   June 30, 2012  

Financial assets:

           

Cash and due from banks

   $ 4,579       $ 4,579       $ 0       $ 0   

Interest-bearing deposits in banks

     7,701         7,701         0         0   

Investment securities

     89,541         0         91,028         0   

Loans, net

     133,888         0         0         138,360   

Accrued interest receivable

     802         0         0         802   

Deposits with The Co-operative Central Bank

     449         N/A         N/A         N/A   

Stock in Federal Home Loan Bank of Boston

     1,449         N/A         N/A         N/A   

Financial liabilities:

           

Deposits:

           

Checking, savings and money market accounts

     141,654         141,654         0         0   

Certificates of deposit

     85,560         0         86,034         0   

Advances and borrowings

     1,000         0         1,206         0   

 

     Carrying
Amount
     Fair
Value
 

(In Thousands)

   March 31, 2012  

Financial assets:

     

Cash and due from banks

   $ 3,764       $ 3,764   

Interest-bearing deposits in banks

     8,602         8,602   

Investment securities

     88,264         89,674   

Loans, net

     134,331         137,875   

Accrued interest receivable

     867         867   

Deposits with The Co-operative Central Bank

     449         449   

Stock in Federal Home Loan Bank of Boston

     1,449         1,449   

Financial liabilities:

     

Deposits:

     

Checking, savings and money market accounts

     140,020         140,020   

Certificates of deposit

     86,542         87,048   

Advances and borrowings

     1,000         1,219   

 

17


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

F. Fair Value of Financial Instruments

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

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

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

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

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

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

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.

 

18


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

The balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 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

   $ 11,531       $ 0       $ 11,531       $ 0   

Municipal obligations

     3,251         0         3,251         0   

Mortgage-backed and related securities

     29,536         0         29,536         0   

Trust preferred securities

     716         0         716         0   

Equity securities

     39         0         39         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities available-for-sale

   $ 45,073       $ 0       $ 45,073       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

The balances of assets and liabilities measured at fair value on a non-recurring basis as of June 30, 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

   $ 87       $ 0       $ 87       $ 0       $ 0   

Real estate acquired by foreclosure

   $ 194       $ 0       $ 194       $ 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 June 30, 2012, 144,700 shares remained unissued and available for award under the Incentive Plan, of which 98,682 are available as restricted stock.

 

19


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

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 three months ended June 30, 2012.

During the three months ended June 30, 2012, the Company awarded options to purchase 2,205 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 $2.87 for the options granted in May 2012, or $6,000 in total, for the three months ended June 30, 2012. For the prior year quarter ended July 31, 2011, the Company awarded options to purchase 2,395 with an estimated fair value of $2.97 per share, or $7,000 in total. Assumptions used to determine the fair value of stock options granted are as follows:

 

     Three
months ended
June 30, 2012
    Three
Months ended
July 31, 2011
 
     Granted
May 2012
    Granted
June 2011
 

Weighted average fair value

   $ 2.87      $ 2.97   

Options granted

     2,205        2,395   

Expected dividend yield

     2.89     2.77

Risk-free interest rate

     1.89     3.01

Expected volatility

     40.65     45.10

Expected life in years

     5.00        5.00   

Stock option activity was as follows:

 

     Three months ended
June 30, 2012
     Three months ended
July 31, 2011
 
     Number of
Shares
     Average
Exercise Price
     Number of
Shares
     Average
Exercise Price
 

Options outstanding beginning of period

     26,885       $ 13.20         24,950       $ 14.00   

Options granted

     2,205         9.90         2,395         8.75   

Options exercised

     0         0.00         0         0.00   

Options forfeited

     0         0.00         0         0.00   
  

 

 

       

 

 

    

Options outstanding end of period

     29,090       $ 12.95         27,345       $ 13.54   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company also granted 1,915 restricted shares in the three months ended June 30, 2012 and 2,425 restricted shares in the three months ended July 31, 2011, which vest over a five year period. Total compensation expense related to all grants was $9,000 for the three months ended June 30, 2012 and $4,000 for the three months ended July 31, 2011.

 

20


MAYFLOWER BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

June 30, 2012 and July 31, 2011

 

As of June 30, 2012, the expected future compensation related to restricted stock is approximately $11,000 for each of the next four years.

A summary of restricted stock activity is as follows:

 

     Three months ended
June 30, 2012
     Three months ended
July 31, 2011
 
     Number of
Restricted
Shares
    Weighted Average
Grant Date
Fair Value
     Number of
Restricted
Shares
    Weighted Average
Grant Date
Fair Value
 

Non-vested beginning of period

     2,976      $ 8.59         0      $ 0.00   

Granted

     1,915        9.90         2,425        8.75   

Vested

     (868     9.26         (485     8.75   

Forfeited

     0        0.00         0        0.00   
  

 

 

      

 

 

   

Non-vested end of period

     4,023      $ 9.07         1,940      $ 8.75   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

21


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 11-month transition period ended March 31, 2012. 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:

The adequacy of the allowance for loan losses is evaluated on a quarterly basis by management and the Company’s Board of Directors. Factors considered in evaluating the adequacy of the allowance include previous loss experience, current economic conditions and their effect on borrowers, the performance of individual loans in relation to contract terms, and the estimated value of any underlying collateral for those loans. The provision for loan losses charged to operations is based upon management’s judgment of the amount necessary to maintain the allowance at a level adequate to absorb possible losses. Loans are charged off when management believes the collectability of the principal is unlikely.

The allowance consists of general, allocated and unallocated components, as further discussed below.

General and unallocated components:

The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential mortgages and home equity loans and lines of credit - The Company generally does not generate loans with a loan-to-value ratio greater than 80 percent and does not grant subprime loans. All loans in these segments are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial mortgages - Loans in this segment are primarily income-producing properties such as apartment buildings and properties used for business operations such as office buildings and industrial facilities. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment.

 

22


Construction mortgages - Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property, as well as construction projects in which the property will ultimately be used by the borrower. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

Commercial loans - Loans in this segment are made to businesses and are generally secured by the assets of the business. Repayment is expected from the cash flows generated by the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Allocated component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for residential mortgages, commercial mortgages, construction mortgages, home equity loans and lines of credit, and commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan.

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 or interest when 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 payments 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 consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial 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 smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession that the Company would not otherwise consider is made because the borrower is experiencing financial difficulty, the modification is considered a troubled debt restructuring (TDR). All TDRs are initially classified as impaired.

Allowance for loan losses on off-balance sheet credit exposures:

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. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to

 

23


which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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 June 30, 2012 and March 31, 2012, the Company’s and the Bank’s capital ratios were in excess of regulatory requirements and the Company and the Bank are considered to be well-capitalized under all regulatory requirements.

Financial Condition:

At June 30, 2012, the Company’s total assets were $252.0 million as compared to $251.6 million at March 31, 2012, an increase of $418,000. During the three months ended June 30, 2012, total investment securities increased by $1.3 million, while net loans receivable decreased by $443,000.

Net loans receivable were $133.9 million at June 30, 2012, compared to $134.3 million at March 31, 2012, a decrease of $443,000. This decrease was primarily due to a reduction of $902,000 in home equity loans and lines of credit, a decrease of $535,000 in commercial loan and mortgage balances, and a decrease of $98,000 in consumer loans. These decreases were offset by an increase of $680,000 in residential mortgages, a result of a management decision to retain certain fixed rate residential mortgages in portfolio, and an increase of $418,000 in net construction loans outstanding.

During the three months ended June 30, 2012, continued historically low interest rates spurred strong residential mortgage financing activity, as the Company originated $10.1 million in residential mortgages as compared to $4.8 million originated for the three months ended July 31, 2011. Also during the three months, the Company sold $6.4 million of fixed-rate residential loans in the secondary mortgage market, producing gains of $161,000, compared to sales of $4.1 million for the prior year period, which resulted in gains of $77,000. This activity, combined with other mortgage payoffs and regularly scheduled amortization, resulted in a $680,000 increase in residential loan balances as compared to March 31, 2012.

During the three months ended June 30, 2012, total investments increased by $1.3 million as the Company redeployed available cash to the investment portfolio.

 

24


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 June 30, 2012, non-performing assets totaled $561,000, compared to $506,000 at March 31, 2012. The increase in non-performing assets is comprised of an increase of $55,000 in non-performing loans. During the period, two home equity lines of credit with aggregate balances approximating $57,000 that were not considered non-performing as of March 31, 2012 were classified as non-performing. At June 30, 2012, non-performing assets represented 0.22% of total assets compared to 0.20% of total assets at March 31, 2012.

At June 30, 2012, the Company’s allowance for loan losses was $1,229,000, which represented an allowance of 0.92% of net loans receivable and 334.9% of non-performing loans at that date. This compares to a balance of $1,217,000 at March 31, 2012, which represented 0.91% of net loans receivable and 390.1% of non-performing loans. During the three months ended June 30, 2012, the Company provided $10,000 to augment the reserve and recovered $2,000 in commercial loans previously charged off. 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.

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

During the three months ended June 30, 2012, total deposits, after interest credited, increased by $652,000 due primarily to an increase of $989,000 in checking and savings accounts and an increase of $645,000 in money market deposits. These increases were partially offset by a decrease of $982,000 in certificate of deposit balances. The reduction in certificates of deposit was a result of reduced interest rates paid on these accounts. Additionally, during the three months ended June 30, 2012, advances and borrowings outstanding remained constant at $1.0 million.

Total stockholders’ equity increased by $272,000 when compared to March 31, 2012. The increase in total equity is due to net income for the three months of $389,000 and stock-based compensation credits totaling $15,000. Those increases in total equity were partially offset during the three-month period by dividends paid of $0.06 per share totaling $124,000 and Company stock repurchases totaling $40,000. Additionally, total equity increased by $32,000 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 June 30, 2012 and July 31, 2011.

General:

Net income for the three months ended June 30, 2012 was $389,000 compared with net income of $359,000 for the three months ended July 31, 2011, an increase of $30,000 or 8.4%. Net interest income decreased by $43,000, the provision for loan losses decreased by $47,000, total non-interest income increased by $61,000, and total non-interest expense increased by $20,000.

 

25


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. As compared to the quarter ended July 31, 2011, during the three months ended June 30, 2012, the Company’s net interest margin decreased from 3.59% to 3.53%. This decrease in net interest margin is primarily a result of the decrease in yields on interest-earning assets.

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 June 30, 2012     Three months ended July 31, 2011  
     Average
Balance (1)
     Interest      Rate
(Annualized)
    Average
Balance (1)
     Interest      Rate
(Annualized)
 
     (Dollars in Thousands)  

Interest-earning assets:

                

Loans

   $ 136,564       $ 1,780         5.21   $ 124,073       $ 1,749         5.64

Investment securities

     88,845         581         2.62     94,923         772         3.25

Interest-bearing deposits in banks

     10,070         6         0.24     17,629         11         0.25
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-earning assets

   $ 235,479         2,367         4.02   $ 236,625         2,532         4.28
  

 

 

         

 

 

       

Interest-bearing liabilities:

                

Deposits

   $ 229,559         276         0.48   $ 232,065         378         0.65

Borrowed funds

     1,000         11         4.40     2,663         31         4.66
  

 

 

    

 

 

      

 

 

    

 

 

    

All interest-bearing liabilities

   $ 230,559         287         0.50   $ 234,728         409         0.70
  

 

 

    

 

 

      

 

 

    

 

 

    

Net interest income

      $ 2,080            $ 2,123      
     

 

 

         

 

 

    

Weighted average interest rate spread (2)

  

        3.52           3.58
        

 

 

         

 

 

 

Net interest margin

           3.53           3.59
        

 

 

         

 

 

 

 

(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.

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).

 

26


     Three months ended June 30 2012 vs.
Three months ended July 31 2011
 
     Changes due to increase (decrease)  
     (in thousands)  
     Total     Volume     Rate     Rate/
Volume
 

Interest income:

        

Loans

   $ 31      $ 176      $ (132   $ (13

Investment securities

     (191     (49     (151     9   

Interest-bearing deposits in banks

     (5     (5     0        0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (165     122        (283     (4
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     (102     (4     (99     1   

Borrowed funds

     (20     (19     (2     1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (122     (23     (101     2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in net interest income

   $ (43   $ 145      $ (182   $ (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and Dividend Income:

Total interest and dividend income decreased by $165,000, or 6.5%, to $2.4 million for the three months ended June 30, 2012. Interest income from loans increased by $31,000. This increase was due to an increase of $12.5 million in the average balance of loans outstanding, offset by a reduction in the average rate earned on loans, from 5.64% to 5.21% on an annualized basis. Interest and dividend income on investment securities decreased by $191,000 as a result of a decrease in the average yield earned, from 3.25% in the quarter ended July 31, 2011 to 2.62% in the quarter ended June 30, 2012, coupled with a decrease of $6.1 million in the average balance of investments. Income from interest-bearing deposits in banks decreased by $5,000 due to a decrease of $7.6 million in their average balance.

Interest Expense:

Interest expense decreased by $122,000, or 29.8%, to $287,000 for the three months ended June 30, 2012. Interest expense on deposits decreased by $102,000 as a result of a decrease in the average rate paid, from 0.65% to 0.48%, coupled with a decrease of $2.5 million in the average balance of deposits. Interest expense on borrowed funds decreased by $20,000, or 64.5%, for the three months ended June 30, 2012. This decrease was due to a reduction of $1.7 million in the average balance of advances outstanding, coupled with a decrease in the average rate paid on borrowed funds, from 4.66% in the July 2011 three-month period to 4.40% in the June 2012 three-month period.

Provision for Loan Losses:

The provision for loan losses was $10,000 for the quarter ended June 30, 2012, compared to $57,000 for the quarter ended July 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 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

 

27


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 increased by $61,000 for the three months ended June 30, 2012 as compared to the three months ended July 31, 2011. This increase was primarily due to an increase of $84,000 in gain on sales of mortgage loans. Additionally, interchange income increased by $4,000 and other income increased by $5,000. These increases were offset by a decrease of $16,000 in customer service fees due to reduced overdraft fees and ATM surcharges. Also, gain on sales of investment securities decreased by $11,000 and loan origination and other loan fees decreased by $5,000, a result of additional amortization expense recorded on the mortgage servicing asset in the current quarter.

Non-interest Expense:

Total non-interest expense increased by $20,000 or 1.0% for the quarter ended June 30, 2012. This increase was primarily a result of an increase of $35,000 in compensation and fringe benefit expense, an increase of $8,000 in occupancy and equipment expense, and an increase of $1,000 in losses and expenses of other real estate owned expense. These increases were partially offset by a decrease of $15,000 in FDIC assessment expense and a decrease of $9,000 in other expenses.

Provision for Income Taxes:

The provision for income taxes increased by $15,000 for the three months ended June 30, 2012 when compared to the three months ended July 31, 2011, due to the increase in net income before taxes. Effective income tax rates were 32.3% and 32.3%, 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 and tax-exempt interest income.

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.

 

28


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 11-month transition period ended March 31, 2012.

 

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)
 

April 1-30, 2012

     —         $ —           —           53,916   

May 1-31, 2012

     3,309         10.22         3,309         50,607   

June 1-30, 2012

     696         10.30         2,258         49,911   
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

     4,005       $ 10.23         4,005         49,911   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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.

 

29


Item 3. Defaults Upon Senior Securities

None

 

Item 4. Mine Safety Disclosures

Not applicable

 

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 June 30, 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.

 

(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.

 

30


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: August 9, 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)

 

31

XNAS:MFLR Quarterly Report 10-Q Filling

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XNAS:MFLR Quarterly Report 10-Q Filing - 6/30/2012
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