UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from January 1, 2000 to March 31, 2000
Commission File Number 0-24791
MASSACHUSETTS FINCORP, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 04-3431804
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
70 Quincy Avenue, Quincy, Massachusetts 02169
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 825-5555
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(Issuer's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: the Issuer had
545,481 shares of common stock, par value $0.01 per share, outstanding as
of May 5, 2000.
MASSACHUSETTS FINCORP, INC.
FORM 10-QSB
Index
PART I FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION 14
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 16
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Massachusetts Fincorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,524,803 $ 1,956,175
Federal funds sold 670,443 1,124,762
-----------------------------
Total cash and cash equivalents 2,195,246 3,080,937
Securities available for sale 12,523,430 12,068,593
Securities held to maturity 521,099 523,851
Federal Home Loan Bank Stock, at cost 1,131,500 1,096,500
Mortgages loans held for sale 554,900 813,098
Loans 85,344,351 74,524,426
Less: allowance for loan losses (680,135) (595,676)
-----------------------------
Loans, net 84,664,216 73,928,750
Banking premises and equipment, net 4,079,198 3,825,086
Accrued interest receivable 533,760 460,022
Due from Co-operative Central Bank 242,850 242,850
Other assets 386,926 371,469
-----------------------------
$106,833,125 $ 96,411,156
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 76,152,773 $ 63,299,964
Federal Home Loan Bank borrowings 20,348,805 22,616,835
Mortgagor's escrow accounts 439,337 439,155
Accrued expenses and other liabilities 301,728 433,229
-----------------------------
Total liabilities 97,242,643 86,789,183
-----------------------------
Commitments and contingencies
Preferred stock, par value $.01 per share, 500,000 shares authorized;
no shares are issued or outstanding - -
Common stock par value $.01 per share, 2,500,000 shares authorized;
545,481 shares issued and outstanding 5,455 5,455
Additional paid-in capital 5,129,472 5,129,472
Unallocated ESOP shares (349,104) (349,104)
Unearned stock awards (242,147) (255,236)
Retained earnings 5,415,259 5,406,346
Accumulated other comprehensive income (368,453) (314,960)
-----------------------------
Total Shareholders' equity 9,590,482 9,621,973
-----------------------------
$106,833,125 $ 96,411,156
=============================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Massachusetts Fincorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
2000 1999
---- ----
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans $1,598,904 $1,174,198
Interest on investments 189,067 121,961
Dividends on investments 48,804 24,593
Interest on Federal funds sold 25,698 13,912
--------------------------
Total interest and dividend income 1,862,473 1,334,664
--------------------------
Interest expense:
Interest on deposit accounts 697,236 536,445
Interest on borrowed funds 324,676 72,584
--------------------------
Total interest expense 1,021,912 609,029
--------------------------
Net interest income 840,561 725,635
Provision for loan losses 4,264 -
--------------------------
Net interest income, after provision for loan losses 836,297 725,635
--------------------------
Non-interest income:
Customer service fees 31,946 37,517
Loan fees and gain on sale of loans and loan servicing rights 11,047 148,442
Net gain on sales of securities available for sale - 5,993
Miscellaneous 15,698 17,347
--------------------------
Total non-interest income 58,691 209,299
--------------------------
Non-interest expense:
Salaries and employee benefits 473,724 400,313
Occupancy and equipment 115,890 93,443
Data processing 44,933 62,734
Contributions 930 2,077
Other general and administrative 242,725 159,437
--------------------------
Total non-interest expense 878,202 718,004
--------------------------
Income before income tax provision 16,786 216,930
Income tax provision 7,873 50,609
--------------------------
Net income $ 8,913 $ 166,321
==========================
Other comprehensive income (loss), net of tax:
Unrealized gains (loss) on securities:
Unrealized holding gains (loss) arising during the period (53,493) (36,161)
Less: reclassification adjustment for (gains) included
in net income - (4,731)
--------------------------
Other comprehensive income (loss), net of tax (53,493) (40,892)
--------------------------
Comprehensive (loss) income $ (44,580) $ 125,429
==========================
Basic and diluted earnings per share $ 0.02 $ 0.33
Weighted average common shares outstanding - basic and diluted 511,117 506,753
</TABLE>
The accompanying notes are an intregral part of these consolidated
financial statements.
See accompanying notes to unaudited consolidated financial statements.
Massachusetts Fincorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Period Ended March 31, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Unallocated Unearned Other
Common Paid-in Retained ESOP Stock Comprehensive
Stock Capital Earnings Shares Awards Income(Loss) Total
------ ---------- -------- ----------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $5,455 $4,885,077 $5,003,345 $ (392,742) $ - $ 2,075 $9,503,210
Expenses incurred for initial public offering - (21,935) - - - - (21,935)
Net income for the period ended March 31, 1999 - - 166,321 - - - 166,321
Other comprehensive income, net of tax - - - - - (40,892) (40,892)
---------------------------------------------------------------------------------
Balance at March 31, 1999 $5,455 $4,863,142 $5,169,666 $ (392,742) $ - $ (38,817) $9,606,704
=================================================================================
Balance at December 31, 1999 $5,455 $5,129,472 $5,406,346 $ (349,104) $(255,236) $(314,960) $9,621,973
Stock awards amortization - - - - 13,089 - 13,089
Net income for the period ended March 31, 2000 - - 8,913 - - - 8,913
Other comprehensive income, net of tax - - - - - (53,493) (53,493)
---------------------------------------------------------------------------------
Balance at March 31, 2000 $5,455 $5,129,472 $5,415,259 $ (349,104) $(242,147) $(368,453) $9,590,482
=================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Massachusetts Fincorp, Inc and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------
2000 1999
---- ----
<S> <C> <C>
Cash flow activities:
Net income $ 8,913 $ 166,321
Adjustment to reconcile net income to net cash
(used)provided by operating activities
Provision (credit) for loan losses 4,264 -
ESOP compensation expense (12,498) (14,951)
Stock awards expense 13,089 -
Depreciation and amortization expense 62,349 38,103
Net gain on sales of securities available for sale - (5,993)
Loans originated for sale (2,375,600) (10,832,700)
Principal balance on loans sold 2,633,798 15,405,915
Amortization of deferred loan fees (52,616) (15,666)
Amortization of investment securities,
net of accretion 6,944 3,492
Increase in accrued interest receivable (73,738) (10,656)
Increase in other assets (15,457) (196,242)
Deferred tax provision (benefit) 38,318 (9,978)
Increase (decrease) in accrued expenses
and other liabilities (119,003) (118,805)
------------------------------
Net cash (used) provided by operating
activities 118,763 4,408,840
------------------------------
Cash flows from investing activities:
Purchase of securities available for sale (978,283) (600,000)
Proceeds from maturities of securities available for sale 335,000 -
Proceeds from maturities of securities held to maturity - 200,000
Proceeds from sales and calls of securities available
for sale - 655,993
Purchase of Federal Home Loan Bank stock (35,000) -
Principal payments received on mortgage-backed and
asset-backed securities 172,638 29,687
Loan (originations)/principal payments, net (10,767,309) (4,761,182)
Purchase of banking premises and equipment (316,461) (1,181,818)
------------------------------
Net cash used by investing
activities (11,589,415) (5,657,320)
------------------------------
Cash flows from financing activities:
Net increase (decrease) in deposits 12,852,809 (81,837)
Net increase in Federal Home Loan Bank
advances with maturities less than three months (687,000) (619,000)
Federal Home Loan Bank advances with maturities
in excess of three months 7,000,000 8,500,000
Repayment of Federal Home Loan Bank advances
with maturities in excess of three months (8,581,030) (6,001,760)
Net increase (decrease) in mortgagor's escrow accounts 182 24,655
IPO expenses - (21,936)
------------------------------
Net cash provided by financing activities 10,584,961 1,800,122
------------------------------
Net change in cash and cash equivalents (885,690) 551,642
Cash and cash equivalents at beginning of period 3,080,937 2,469,736
------------------------------
Cash and cash equivalents at end of period $ 2,195,247 $ 3,021,378
==============================
Supplementary Information
Interest paid on deposit accounts $ 696,840 $ 536,445
Interest paid on borrowed funds 315,093 72,548
Income tax payments (refunds), net 35,000 -
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
MASSACHUSETTS FINCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements of Massachusetts
Fincorp, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with instructions to Form 10-QSB and of Regulation S-B. Accordingly,
the financial statements do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of a normal recurring nature) considered necessary for a fair
presentation have been included. Operating results for the three months
ended March 31, 2000 are not necessarily indicative of the results that may
be expected for the current fiscal year.
For further information, refer to the consolidated financial
statements included in the Company's annual report and Form 10-KSB for the
period ended December 31, 1999, filed with the Securities and Exchange
Commission.
(2) REORGANIZATION AND STOCK OFFERING
The Company was incorporated under Delaware law on July 10, 1998. On
December 21, 1998, the Company acquired The Massachusetts Co-operative Bank
(the "Bank") as a part of the Bank's conversion from a mutual to a stock
Massachusetts-chartered co-operative bank (the "Conversion"). The Company
is a savings and loan holding company and is subject to regulation by the
Office of Thrift Supervision (the "OTS"). Currently, the Company does not
transact any material business other than through the Bank. Prior to
December 21, 1998, the Company had no operations. The Company retained 50%
of the net conversion proceeds amounting to $4.9 million which it used for
general business activities and to form and capitalize the Employee Stock
Ownership Plan (the "ESOP") Loan Subsidiary, which loaned funds to the ESOP
to purchase 8% of the stock issued in the Conversion.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Form 10-Q contains forward-looking statements within the meaning
of the federal securities laws. These statements are not historical facts,
rather the statements are based on the Company's current expectations
regarding its business strategies and their intended results and its future
performance. Forward-looking statements are preceded by terms such as
"expects," "believes," "anticipates," "intends" and similar expressions.
Forward-looking statements are not guarantees of future performance.
Numerous risks and uncertainties could cause or contribute to the Company's
actual results, performance and achievements to be materially different
from those expressed or implied by the forward-looking statements. Factors
that may cause or contribute to these differences include, without
limitation, general economic conditions, including changes in market
interest rates and changes in monetary and fiscal policies of the federal
government; legislative and regulatory changes; and other factors disclosed
periodically in the Company's filings with the Securities and Exchange
Commission.
Because of the risks and uncertainties inherent in forward-looking
statements, readers are cautioned not to place undue reliance on them,
whether included in this report or made elsewhere from time to time by the
Company or on its behalf. The Company assumes no obligation to update any
forward-looking statements.
General
Massachusetts Fincorp, Inc. (the "Company") was incorporated under
Delaware law on July 10, 1998. On December 21, 1998, the Company acquired
The Massachusetts Co-operative Bank (the "Bank") as a part of the Bank's
conversion from a mutual to a stock Massachusetts-chartered co-operative
Bank (the "Conversion"). The Company is a savings and loan holding company
and is subject to regulation by the Office of Thrift Supervision (the
"OTS").
The Bank is a community-oriented co-operative bank which was
originally organized in 1908 as The Massachusetts Co-operative Bank, a
Massachusetts-chartered mutual co-operative bank. The Bank's principal
business consists of the acceptance of retail deposits from the general
public in the areas surrounding its three full-service banking offices and
the investment of those deposits, together with funds generated from
operations and borrowings, primarily in mortgage loans secured by one-to-
four family residences and, to a lesser extent, multi-family and commercial
real estate loans, construction loans, home equity lines of credit and
consumer loans. However, in the future, the Bank intends to increase its
emphasis on multi-family, commercial real estate and construction lending.
The Bank operates through its three full-service banking offices which are
located in the greater Boston metropolitan area. The Bank originates loans
for investment and loans for sale in the secondary market, generally
releasing the servicing rights to all loans sold. The Bank also invests in
mortgage-backed securities, securities issued by the U.S. Government and
other investments permitted by applicable laws and regulations. The Bank's
revenues are derived principally from the generation of interest and fees
on loans originated and, to a lesser extent, interest and dividends on
investment securities. The Bank's primary sources of funds are retail
savings deposits and, to a lesser extent, principal and interest payments
on loans and investment securities, advances from the FHLB-Boston and
proceeds from the sale of loans.
Operating Strategy
The Bank's operating strategy has in the past consisted of
maintaining profitability and managing its interest rate risk mainly by
originating fixed-rate one-to-four family mortgage loans primarily for
sale, generally on a servicing released basis, and originating adjustable-
rate one-to-four family mortgage loans for investment. The Bank, however,
has begun to retain certain one-to-four family fixed-rate loans for its
portfolio, based on various factors, including its asset/liability position
and market interest rates. The Bank has also pursued a growth strategy to
broaden the Bank's lending and deposit base through the establishment of
two de novo branch offices in the Boston metropolitan area in 1996 and
1999. The Bank has used the opportunity of the additional space provided
by the new location in Quincy to consolidate operations. The Bank has
closed the loan origination centers in Norwell, and Wakefield,
Massachusetts. The Bank has made substantial infrastructure investments
recently, including staffing, offices and technology, to support future
growth.
Average Balance Sheet
Presented below are the average balance sheets for the periods
indicated.
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------------------------------------------
March 31, 2000 March 31, 1999
--------------------------------- --------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest earning assets:
Federal funds sold and
short term investments $ 2,137 $ 28 5.24% $ 1,461 $ 18 4.93%
Securities 11,325 186 6.57% 7,538 118 6.26%
Mortgage loans, net 78,515 1,572 8.01% 58,113 1,130 7.78%
Other loans 826 27 13.08% 876 15 6.85%
-------------------- -------------------
Total interest earning asssets 92,803 1,813 7.81% 67,988 1,281 7.54%
Noninterest-earning assets 6,343 3,432
-------- -------
Equity securities 2,243 49 8.74% 1,030 12 4.66%
-------------------- -------------------
Total assets $101,389 $1,862 $72,450 $1,293
========------------ =======------------
Liabilities and Surplus:
Interest bearing liabilities:
Deposits:
Savings accounts $ 10,061 $ 50 1.99% $ 9,528 $ 46 1.93%
Money market accounts 91 1 4.40% 724 4 2.21%
Now accounts 16,447 156 3.79% 13,543 114 3.37%
Certificates of deposit 37,733 490 5.19% 28,697 380 5.30%
-------------------- -------------------
Total deposits 64,332 697 4.33% 52,492 544 4.15%
FHLB advances 21,616 325 6.01% 5,132 73 5.69%
-------------------- -------------------
Total interest bearing liabilities 85,948 1,022 4.76% 57,624 617 4.28%
-------------------- -------------------
Noninterest -bearing demand
checking accounts 3,938 4,642
Noninterest-bearing liabilities 1,844 610
-------- -------
Total liabilities 91,730 62,876
Total surplus 9,659 9,574
-------- -------
Total liabilities and surplus $101,389 $72,450
======== =======
Net interest income $ 840 $ 676
====== =====
Net interest income/interest
rate spread 3.06% 3.25%
====== ======
Net interest margin as a percent
of interest-earning assets 0.91% 0.99%
====== ======
Ratio of interest-earning assets
to interest-bearing liabilities 107.98% 117.99%
====== ======
Net interest margin as a percentage
of surplus 8.70% 7.06%
====== ======
</TABLE>
Comparison of Financial Condition at March 31, 2000 and December 31, 1999
The Company's total assets increased by $10.4 million, or 10.8% for
the three months ended March 31, 2000 from $96.4 million at December 31,
1999 to $106.8 million at March 31, 2000. The increase was primarily due
to loan growth of $10.8 million, securities growth of $452,000, and an
increase of $254,000 in banking premises and equipment attributable to the
new building in Quincy, which opened in December 1999. The increase in the
loan portfolio primarily consisted of increases in one-to-four family,
multi-family and commercial real estate loans and loans from a new indirect
lending program on motorcycles and recreational vehicles. The loan growth
was primarily funded by a $6.9 million, or 38.4% increase in interest-
bearing checking accounts and a $4.9 million, or 13.9% increase in
certificate of deposit accounts. The increased deposit growth also allowed
for a decrease in Federal Home Loan Bank borrowings of 10.0% or $2.3
million.
Non-performing assets totaled $294,000 at March 31, 2000 as compared
to $92,000 at December 31, 1999, an increase of $202,000. The increase of
$202,000 was the result of the addition of two loans to non-accrual status.
Comparison of Operating Results for the Three Months Ended March 31, 2000
and 1999
General
Net income for the three months ended March 31, 2000 totaled $9,000,
or $0.02 per share, compared to $166,000 or $0.33 per share for the same
period last year. An increase in loan originations, funded by new deposit
accounts, produced an increase in the net interest margin of $111,000.
However, a reduction in the gains on loans sold, caused by a rising
interest rate environment, offset the increase in the net interest margin.
Earnings were also impacted by increased salary and advertising expenses
related to the opening of the Bank's new headquarters in Quincy, and
expenses related to a proxy contest. All the expenses related to the proxy
contest have not been paid. Expenses to be paid in the second quarter are
estimated to exceed an additional $51,000. Without the impact of the proxy
contest net income for the period would have been $31,000 or $.06 per
share.
Interest and Dividend Income
Interest and dividend income for the quarter ended March 31, 2000
increased $600,000, or 46.2%, to $1.9 million as compared to $1.3 million
for the quarter ended March 31, 1999. The increase in interest and
dividend income was primarily due to an increase in average interest
earning assets of $24.8 million from $68.0 million for the quarter ended
March 31, 1999 compared to $92.8 million for the quarter ended March 31,
2000, and to an increase in the average yield on interest earning assets of
30 basis points to 7.8% for the quarter ended March 31, 2000 as compared to
7.5% as of the quarter ended March 31, 1999. The increase in the average
balance was primarily due to a $454,000 increase in interest and fees on
loans which was the result of a $10.8 million increase in net loans, due to
increased loan originations in to-four family mortgage loans and
construction loans. A $68,000 increase in interest and dividend income on
investments contributed to the increase in net income.
Interest Expense
Interest expense for the quarter ended March 31, 2000 was $1.0
million compared to $609,000 for the quarter ended March 31, 1999, an
increase of $413,000 or 67.8%. The increase in interest expense was the
result of a $28.3 million increase in average interest bearing liabilities.
The increase in average interest bearing liabilities was primarily due to a
$2.9 million, or 21.4% increase in average interest bearing checking
accounts to $16.4 million, for the quarter ended March 31, 2000 as compared
to $13.5 million for the quarter ended March 31, 1999. Average term
certificates of deposit increased $9.0 million, or 31.4% to $37.7 million
for the quarter ended March 31, 2000 as compared to $28.7 million, for the
quarter ended March 31, 1999. The increase in interest bearing checking
accounts was mainly the result of the Bank's promotion of a high yield,
tiered interest bearing checking account for retail customers and the
increase in term certificates was the promotion of a new 11 month term
certificate. Average Federal Home Loan Bank borrowings increased $16.5
million, or 321.2% to $21.6 million for the quarter ended March 31, 2000 as
compared to $5.1 million, for the quarter ended March 31, 1999. This
increase was used to fund increased loan originations.
Provision for Loan Losses
The Bank's management assesses the adequacy of the allowance for loan
losses based on known and inherent risks in the loan portfolio and upon
management's continuing analysis of the quality of the loan portfolio.
While management believes that, based on information currently available,
the Bank's allowance for loan losses is sufficient to cover probable losses
inherent in its loan portfolio at this time, no assurances can be given
that the Bank's level of allowance for loan losses will be sufficient to
cover loan losses incurred by the Bank or that future adjustments to the
allowance for loan losses will not be necessary if economic and other
conditions differ substantially from the economic and other conditions used
by management to determine the current level of the allowance for loan
losses. Management may increase its level of allowance for loan losses as
a percentage of total loans and nonperforming loans if the level of multi-
family, construction or consumer lending as a percentage of its total loan
portfolio increases. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowance for loan losses. These agencies may require the Bank to provide
additions to the allowance based on judgments different from management.
Management periodically calculates a loan loss allowance sufficiency
analysis based upon the loan portfolio composition, asset classifications,
loan-to-value ratios, potential impairments in the loan portfolio and other
factors. Management believes that, based on information available at March
31, 2000, the Bank's allowance for loan losses was sufficient to cover
losses inherent in its loan portfolio at that time. As a result of
recoveries of $80,000 for the three months ended March 31, 2000, the
provision for possible loan losses was $4,000 compared to zero for the
three months ended March 31, 1999. The allowance for loan losses was
$680,135 at March 31, 2000 and $595,676 at December 31, 1999, which is
0.80% of total loans at such dates. The allowance for loan losses as a
percentage of non-performing loans was 231.3% at March 31, 2000 and 647.8%
Net Interest Income
Net interest income increased $115,000, or 15.9%, to $841,000 for the
quarter ended March 31, 2000 from $726,000 for the same period in 1999.
The increase was due to a combination of an increase in average interest
earning assets in excess of average interest bearing liabilities of $10.4
million, which was offset by the effect of a 19 basis point decline in
interest rate spread, which decreased from 3.25% for the quarter ended
March 31, 1999 to 3.06% for the quarter ended March 31, 2000.
Non-Interest Income
Non-interest income decreased $150,000, or 71.4% to $59,000 for the
quarter ended March 31, 2000 from $209,000 for the quarter ended March 31,
1998. This increase was primarily due to a $137,000 decrease in the gain
of sale of loans, resulting from decreased mortgage banking activity, due
to a rising interest rate environment. The decrease in gains on sold loans
resulted from management's determination to portfolio a greater portion of
its originated one-to-four family loans and as a result of an increase in
consumer demand for adjustable rate loans. The increased percentage in
portfolio loans originated contributed to greater net interest income which
management believes will have a stabilizing effect on net income in future
periods.
Non-Interest Expense
Non-interest expense for the quarter ended March 31, 2000 increased
$160,000, or 22.3%, to $878,000 from $718,000 for the quarter ended March
31, 1999. The increase was primarily due to a $73,000 increase in salaries
and benefits primarily due to staff additions based on growth and an
increase in other general and administration expenses of $83,000, of which
$46,000 was related to advertising and marketing the new Quincy office,
$6,000 related to examinations and audits and a $22,000 increase in
printing, professional and legal fees which were related to the proxy
contest. An increase in miscellaneous expense of approximately $20,000 is
primarily attributed to corporate franchise and filing fees and a
reclassification. These increases were offset with minimal decreases in
office supplies, subscriptions, dues and a significant decrease in meetings
and travel.
Income Tax Expense
Income tax expense differs from statutory tax rates due to the effect
of permanent differences such as tax credits and dividends received
deductions.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, principal and
interest payments on loans, proceeds from maturing securities and the sale
of loans and borrowings from the FHLB-Boston. While maturities and
scheduled amortization of loans and securities are predictable sources of
the funds, deposit outflows and mortgage prepayments are greatly influenced
by general interest rates, economic conditions and competition.
The primary investing activities of the Bank are the origination of
loans, primarily residential one-to-four family mortgage loans, and, to a
lesser extent, multi-family, commercial real estate loans, construction
loans, home equity lines of credit and consumer loans and the investment in
mortgage-backed securities, U.S. Government and agency obligations and
corporate equity securities and debt obligations. These activities are
funded primarily by principal and interest payments on loans, the maturing
of investment securities, deposit growth and the utilization of FHLB
advances. During the three months ended March 31, 2000 and 1999, the
Bank's loan originations totaled $13.2 million and $10.8 million,
respectively. For the three months ended March 31, 2000 and 1999, the
Bank's investments in U.S. Government and agency obligations and corporate
equity securities and debt obligations totaled $12.9 million and $8.4
million, respectively. The Bank experienced a net increase in total
deposits of $12.9 million for the three months ended March 31, 2000, as
compared to a net decrease of $82,000 for the three months ended March 31,
1999. Deposit flows are affected by the overall level of interest rates,
the interest rates and products offered by the Bank and its local
competitors and other factors. The Bank closely monitors its liquidity
position on a daily basis. In the event the Bank should require funds
beyond its ability to generate them internally, additional sources of funds
are available through FHLB advances. The Bank has total borrowing capacity
of approximately $69.4 million at March 31, 2000 at which time the Bank had
$20.3 million of outstanding FHLB borrowings.
Outstanding commitments for all loans totaled $3.0 million at March
31, 2000. Management of the Bank anticipates that it will have sufficient
funds available to meet its current loan commitments. Certificates of
deposit which are scheduled to mature in one year or less from March 31,
2000 totaled $32.8 million. From March 31, 1999 to March 31, 2000, the
Bank experienced a 78.8% retention rate of funds maturing from certificates
of deposit. It has been and will continue to be a priority of management to
retain time deposits. The Bank relies primarily on competitive rates,
customer service, and long-standing relationships with customers to retain
deposits. From time to time, the Bank will also offer competitive special
products to its customers to increase retention. Based upon the Bank's
experience with deposit retention and current retention strategies,
management believes that, although it is not possible to predict future
terms and conditions upon renewal, a significant portion of such deposits
will remain with the Bank.
At March 31, 2000, the Bank exceeded all of its regulatory capital
requirements with a leverage capital level of $7.7 million, or 11.1% of
adjusted assets, which is above the required level of $2.8 million, or
4.0%, and risk-based capital of $8.4 million, or 12.0% of adjusted assets,
which is above the required level of $5.6 million, or 8.0%.
The capital injection from the Conversion significantly increased
liquidity and capital resources. Over time, the initial level of liquidity
will be reduced as net proceeds are utilized for general corporate
purposes, including the funding of lending activities and the expansion of
facilities.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of
business. Such routine legal proceedings, in the aggregate, are believed
by management to be immaterial to the Company's financial condition or
results of operation.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
2.1 Plan of Conversion of The Massachusetts Co-operative Bank (1)
3.1 Certificate of Incorporation of Massachusetts Fincorp, Inc. (1)
3.2 Bylaws of Massachusetts Fincorp, Inc. (2)
4.0 Draft Stock Certificate of Massachusetts Fincorp, Inc. (1)
11.0 Statement Re: Computation of Per Share Earnings
27.0 Financial Data Schedule
<FN>
--------------------
<F1> Incorporated by reference into this document from the Exhibits
filed with the Registration Statement on Form SB-2, and any
amendments thereto, Registration No. 333-60237.
<F2> Incorporated by reference into this document from the Form 8-K
as filed on February 3, 2000.
</FN>
</TABLE>
(b) Reports on Form 8-K
* On January 11, 2000, the Company filed a Form 8-K reporting
the resignation of John B. Byrne from the Company's Board
of Directors. A press release making the announcement was
filed by exhibit.
* On January 14, 2000, the Company filed a Form 8-K reporting
the date and location of the 2000 Annual Meeting and that
the Board of Directors amended the Company's Bylaws. Press
releases making the announcement were filed by exhibit.
* On January 24, 2000, the Company filed a Form 8-K
announcing John J. Sousa Jr.'s appointment to the Board of
Directors. The press release making this announcement was
filed by exhibit.
* On February 3, 2000, the Company filed a Form 8-K reporting
that the Board of Directors amended Corporation's Bylaws.
A press release making the announcement was filed by
exhibit.
* On March 2, 2000, the Company filed a Form 8-K reporting
the appointment of Paul C. Green to Treasurer and Renee R.
Czajkowski to Corporate Secretary resulting from the
resignation of Ruth J. Rogers, Chief Financial Officer,
Treasurer and Corporate Secretary of the Company. The
press release making this announcement was filed by
exhibit.
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MASSACHUSETTS FINCORP, INC.
Date: May 5, 2000 By: /s/Paul C. Green
---------------------
Paul C. Green
President, Chief Executive
Officer and Treasurer
(principal executive,
accounting and financial officer)
Exhibit 11
Statement Re: Computation of Per Share Earnings
Basic earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding for the period. ESOP
shares released or committed to be released are considered outstanding
while unallocated ESOP shares are not considered outstanding. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company. Options to purchase
51,537 shares of common stock outstanding at March 31, 2000 were not
included in the computation of common shares outstanding for purposes of
computing diluted earnings per share because the exercise price of the
options exceeded the market price and thus the effect would have been anti-
dilutive. The following table presents the basic and diluted earnings per
share computation for the three months ended:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Basic and Diluted
Net income $ 8,913 $166,321
Weighted-average shares outstanding 545,481 545,481
Less net effect of unallocated ESOP shares (34,364) (38,728)
---------------------------
Weighted average shares outstanding as adjusted 511,117 506,753
===========================
Earnings per share - basic and diluted $ 0.02 $ 0.33
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001066170
<NAME> MASSACHUSETTS FINCORP, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,359
<INT-BEARING-DEPOSITS> 166
<FED-FUNDS-SOLD> 670
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,523
<INVESTMENTS-CARRYING> 521
<INVESTMENTS-MARKET> 510
<LOANS> 85,344
<ALLOWANCE> 680
<TOTAL-ASSETS> 106,833
<DEPOSITS> 76,153
<SHORT-TERM> 0
<LIABILITIES-OTHER> 741
<LONG-TERM> 20,349
0
0
<COMMON> 5
<OTHER-SE> 9,585
<TOTAL-LIABILITIES-AND-EQUITY> 106,833
<INTEREST-LOAN> 1,599
<INTEREST-INVEST> 238
<INTEREST-OTHER> 26
<INTEREST-TOTAL> 1,862
<INTEREST-DEPOSIT> 697
<INTEREST-EXPENSE> 1,022
<INTEREST-INCOME-NET> 841
<LOAN-LOSSES> 4
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 878
<INCOME-PRETAX> 17
<INCOME-PRE-EXTRAORDINARY> 17
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
<YIELD-ACTUAL> 7.68
<LOANS-NON> 92
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 596
<CHARGE-OFFS> 0
<RECOVERIES> 80
<ALLOWANCE-CLOSE> 680
<ALLOWANCE-DOMESTIC> 680
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
