As filed with the Securities and Exchange Commission on December __, 1998
Registration No. 333-57845
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
POST-EFFECTIVE AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------
GOUVERNEUR BANCORP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
UNITED STATES 6035 REQUESTED
- -------------------------------- -------------------------- ------------------
(State or Other Jurisdiction (Primary Standard Industry (I.R.S. Employer
of Incorporation or Organization)Classification Code Number) Identification No.)
42 CHURCH STREET, GOUVERNEUR, NEW YORK 13642 TEL. NO. (315) 287-2600
------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code,
or Registrant's Principal Executive Offices)
RICHARD F. BENNETT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
42 CHURCH STREET, GOUVERNEUR, NEW YORK 13642
(315) 287-2600
---------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Please send copies of all communications to:
Jay L. Hack, Esq.
Clifford S. Weber, Esq.
Serchuk & Zelermyer, LLP
81 Main Street, White Plains, New York 10601
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [X]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Proposed Maximum Aggregate Amount of Registration
Securities Being Registered Registered Offering Price Offering Price (1) Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.01 Par Value 2,201,962 $5.00 $11,009,810 $3,336.00 (2)
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee.
(2) Previously paid with the filing of Form S-1 on June 26, 1998.
</TABLE>
<PAGE>
PROSPECTUS SUPPLEMENT
GOUVERNEUR BANCORP, INC.
(Proposed Holding Company for Gouverneur Savings and Loan Association)
1,449,000 SHARES OF COMMON STOCK - $5.00 PER SHARE
You are receiving this supplement because the appraisal of the
estimated value of the stock of the Company has been reduced by approximately
25%. The amount of stock offered has been reduced to a range of $5.4
million to $7.2 million, with a possible increase to $8.3 million
or a possible decrease to $4.2 million. This supplement amends and
should be read with the prospectus dated August 12, 1998.
FOR A DISCUSSION OF RISKS THAT YOU SHOULD CONSIDER BEFORE PURCHASING
COMMON STOCK, SEE "ADDITIONAL RISK FACTORS" ON PAGE ____ OF THIS SUPPLEMENT
AND "RISK FACTORS" ON PAGE 12 IN THE AUGUST 12 PROSPECTUS.
<TABLE>
<CAPTION>
====================================================================================================================================
ESTIMATED UNDERWRITING FEES AND OTHER ESTIMATED NET
PURCHASE PRICE EXPENSES(1) REORGANIZATION PROCEEDS(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share (at minimum) $5.00 $0.58 $4.42
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share (at midpoint) $5.00 $0.50 $4.50
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share (at maximum) $5.00 $0.43 $4.57
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share (15% above maximum) $5.00 $0.38 $4.62
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Total $5,355,000 $625,000 $4,730,000
- ------------------------------------------------------------------------------------------------------------------------------------
Midpoint Total $6,300,000 $625,000 $5,675,000
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Total $7,245,000 $625,000 $6,620,000
- ------------------------------------------------------------------------------------------------------------------------------------
15% Above Maximum(3) $8,331,750 $625,000 $7,706,750
====================================================================================================================================
<FN>
(1) Consists of estimated expenses of the Reorganization, including fees payable to First Albany Corporation. See "Pro Forma
Data" for a description of the assumptions used in these estimates. Actual fees and expenses may vary from the estimates.
(2) Actual net proceeds may be substantially different from estimated amounts.
(3) This row shows the effect of selling 15% more shares of Common Stock. The additional Common Stock may be sold without
re-solicitation of subscribers or any right of rescission.
</FN>
</TABLE>
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR ANY OTHER FEDERAL
AGENCY OR STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, OFFICE OR OTHER
AGENCY OR COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS SUPPLEMENT OR
THE AUGUST 12 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IMPORTANT NOTICE: IF YOU HAVE AN EXISTING ORDER AND YOU DO NOT WANT IT TO BE
CANCELED, YOU MUST RETURN THE ACCOMPANYING CONFIRMATION FORM NO LATER THAN
JANUARY ___, 1999. IF YOU DO NOT DO SO, THEN WE MUST CANCEL
YOUR ORDER AND RETURN YOUR PAYMENT TO YOU.
First Albany Corporation
The date of this supplement is December ___, 1998
<PAGE>
THE SHARES OF COMMON STOCK OF THE COMPANY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENT AGENCY.
This supplement is to be distributed only to people who have already received or
who are simultaneously receiving the August 12 prospectus. Capitalized terms
used in this supplement, unless defined in this supplement, have the meanings
described in the August 12 prospectus.
PLEASE NOTE THE FOLLOWING CHANGES AND NEW INFORMATION:
O The appraisal of the estimated value of the Common Stock of the
Company has been reduced by approximately 25%. As a result, the amount
of stock being offered has been reduced to a range of approximately
$5.4 million to $7.2 million, subject to further adjustment as
described below. The reduction in the appraisal was not caused by any
adverse change in the Bank's financial condition.
O The maximum amount of Common Stock which any person or group acting
together may purchase has been increased to $300,000, subject to
limits as described in this supplement.
O The Subscription and Community Offerings have been extended so that
they now expire on _______________, 1999 in order that people who did
not already submit orders to purchase Common Stock may do so. Part of
the Community Offering may be conducted through a syndicate of
broker/dealers arranged by First Albany Corporation.
O People who already submitted orders for Common Stock have the right to
increase, rescind, reduce or maintain their orders.
O If the amount of Common Stock ordered is less than $5,355,000, then
the Company may reduce the percentage of its stock which is sold to
Public Stockholders from 45% to not less than 35% and still complete
the Reorganization. This means that the Reorganization can be
completed if the Company receives orders for at least $4,165,000 of
Common Stock.
O The reduction in the amount of stock being sold may cause the Common
Stock not to qualify for listing on the Nasdaq SmallCap Market. If it
does not qualify, it will be traded on the Over the Counter Bulletin
Board. This may have an adverse effect on the market for the stock.
O The Bank had net income of $620,000 for the fiscal year ended
September 30, 1998.
FOR INFORMATION AND ASSISTANCE, CALL THE STOCK CENTER AT 315-287-4293
As of November 30, 1998, Keller and Company, Inc. revised its appraisal of
the estimated market value of the Common Stock of the Company. The revised
appraisal establishes a midpoint value of $14.0 million (resulting in an Amended
Valuation Range of from $11.9 million to $16.1 million) compared to a midpoint
of $18.5 million in the original appraisal. The Company is now offering from
$5,355,000 to $7,245,000 of Common Stock, subject to increase up to $8,331,750,
at $5.00 per share. In this supplement the term "Original Valuation Range" will
refer to the range from $15.7 million to $21.2 million described in the August
12 prospectus.
IF YOU HAVE AN EXISTING ORDER AND YOU DO NOT WANT TO CHANGE THAT ORDER, YOU
MUST RETURN THE CONFIRMATION FORM NO LATER THAN JANUARY ___, 1999, OR ELSE YOUR
ORDER WILL BE CANCELED. IF YOU WANT TO ORDER STOCK NOT ALREADY ORDERED, YOU MUST
COMPLETE A SUPPLEMENTAL ORDER FORM AND RETURN IT WITH PAYMENT IN FULL OR AN
AUTHORIZATION FOR WITHDRAWAL OF THE PURCHASE PRICE FROM A DEPOSIT ACCOUNT AT THE
BANK. Payments by authorized withdrawal from deposit accounts at the Bank will
continue to earn interest at the rate for that account until the Reorganization
is completed or terminated; these funds will otherwise be unavailable until such
time. Other payments will earn interest during that period at the Bank's
passbook rate, currently 3.5% per year.
Please read this supplement carefully
before deciding whether to purchase Common Stock.
2
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION, THE EFFECTS OF THE
NEW APPRAISAL AND OTHER INFORMATION
HOW CAN I ORDER STOCK NOW?
You can order stock by completing the Supplemental Order Form which is
being distributed with this supplement. The form must be returned to the Bank
with payment in full or with an authorization to withdraw the purchase price
from an account at the Bank. The order form should be returned to Gouverneur
Savings and Loan Association, 42 Church Street, Gouverneur, New York 13642 no
later than ______________, 19___. If you need any help completing the order form
or have any questions, call the stock information center at 315-287-4293. Please
read this supplement and the August 12 prospectus before deciding whether to
order any stock.
WHAT IF I DON'T WANT TO CHANGE MY EXISTING ORDER?
If you want your order to remain the same, you MUST return the Confirmation
Form no later than January ___, 1999, If you do not do that, then Securities and
Exchange Commission policy requires that the Company cancel your order and
return any payment you have made, or cancel the withdrawal authorization on your
account.
CAN I ORDER STOCK EVEN IF I DIDN'T SUBMIT AN ORDER IN THE ORIGINAL SUBSCRIPTION
OFFERING?
YES. You can submit an order even if you did not previously order Common
Stock.
HOW DO EXISTING SUBSCRIBERS INCREASE THEIR ORDERS?
If you have already ordered Common Stock and want to increase your order,
you must submit a Supplemental Order Form. Include only the new stock you want
to order on the Supplemental Order Form. Do not include the amount you have
already ordered. The Supplemental Order Form is being distributed with this
supplement.
WHAT WERE THE RESULTS OF THE VOTES TAKEN AT THE BANK'S SPECIAL MEETINGS OF
DEPOSITORS?
The depositors of the Bank first approved the conversion to a federal
savings association by a vote of 270,383 in favor and 20,425 against. The
depositors and borrowers of the Bank then approved the Plan of Reorganization by
a vote of 249,699 in favor and 20,864 against. The Bank has already become a
federal savings association in mutual form.
WHAT WERE THE RESULTS OF THE INITIAL SUBSCRIPTION AND COMMUNITY OFFERINGS?
The Company received orders for $4,668,465 of Common Stock in the
Subscription and Community Offerings, including an order for $566,100 of Common
Stock by the ESOP (based upon 8% of $7,076,250, which was 45% of the minimum of
the Original Valuation Range). Therefore, total orders were less than the
minimum amount of Common Stock offered and the Reorganization could not be
completed. On or about November 7, 1998, the Company offered existing
subscribers the opportunity to rescind their orders and receive a refund of
their subscriptions. As of November 27, 1998, the Company had received requests
for the rescission of $1.3 million of subscriptions. Those subscriptions have
been rescinded and refunds have been sent to subscribers.
3
<PAGE>
WHAT IS THE "AMENDED VALUATION RANGE"?
As of November 30, 1998, Keller and Company, Inc. updated its appraisal of
the pro forma market value of the Common Stock. The updated appraisal sets forth
an Amended Valuation Range for the Common Stock of $11.9 million at the minimum
and $16.1 million at the maximum, with a midpoint of $14.0 million. This is a
24.3% decrease from the appraisal of Keller and Company, Inc. as of June 5,
1998. The decrease was based principally on the changes in the market value of
common stock of financial institutions and the results of recent stock
conversions and mutual holding company reorganizations of other institutions.
Copies of Keller and Company, Inc.'s appraisal report and the updated appraisal
are available for inspection at the Bank's office.
WILL THE CHANGE IN THE VALUATION RANGE AFFECT WHO CONTROLS THE COMPANY?
No. A majority of the Common Stock of the Company will still be owned by
Cambray Mutual Holding Company. Therefore, Cambray Mutual Holding Company will
be able to control the outcome of all matters to be voted on by the Company
except for matters requiring more than a majority vote and matters which the OTS
requires be approved separately by the Public Stockholders.
The following chart shows who will own the Company, assuming that the
Reorganization is completed at the minimum of the Amended Valuation Range and
45% of the Company's Common Stock is sold to Public Stockholders. The chart
assumes that directors purchase $518,000 of Common Stock, which is the amount of
Common Stock which they intend to purchase.
WHO WILL OWN THE COMPANY?
(AT MINIMUM OF AMENDED VALUATION RANGE)
[PIE CHART--GRAPHICAL REPRESENTATION]
Shares owned by other members of the Public .... 37%
Shares owned by Cambray MHC .................... 55%
Shares owned by Directors and the ESOP ......... 8%
This chart does not show the effect of the implementation of the Restricted
Stock Plan or the Stock Option Plan after the Reorganization. Those plans would
increase the relative control of directors and the ESOP compared to other Public
Stockholders.
The decrease in the Original Valuation Range increases the percentage of
the Common Stock that will be owned by directors and the ESOP when compared to
the other Public Stockholders. For
4
<PAGE>
example, if directors had purchased $518,000 of Common Stock at the minimum of
the Original Valuation Range, then directors and the ESOP would have owned 6.89%
of the Common Stock outstanding, representing 15.3% of the Common Stock owned by
the Public Stockholders. With the same purchases at the minimum of the Amended
Valuation Range, directors and the ESOP will own 7.95% of the stock of the
Company, representing 17.67% of the stock owned by Public Stockholders. If the
Company sells only 35% of its Common Stock to Public Stockholders, directors and
the ESOP would own 20.4% of the stock owned by Public Stockholders at the
minimum of the Amended Valuation Range.
HOW HAS THE CHANGE IN THE ORIGINAL VALUATION RANGE AFFECTED THE AMOUNT OF STOCK
BEING OFFERED?
The reduction in the Original Valuation Range causes a reduction in the
amount of Common Stock to be issued by the Company and a reduction in the amount
of Common Stock being offered to depositors and the public. The following table
shows the effect of the change in the Original Valuation Range on the number of
shares to be issued and the number of shares to be sold to Public Stockholders.
This table assumes that 45% of the stock issued will be sold to depositors and
the public.
<TABLE>
<CAPTION>
===========================================================================================================================
Minimum Midpoint Maximum 15% Above Maximum
----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
Original Valuation Range............... $15,725,000 $18,500,000 $21,275,000 $24,466,250
AMENDED VALUATION RANGE................ $11,900,000 $14,000,000 $16,100,000 $18,515,000
Shares Owned by Cambray Mutual Holding Company:
-----------------------------------------------
Original Valuation Range............... 1,729,750 2,035,000 2,340,250 2,691,288
AMENDED VALUATION RANGE................ 1,309,000 1,540,000 1,771,000 2,036,650
Shares Owned by the Public Stockholders:
----------------------------------------
Original Valuation Range............... 1,415,250 1,665,000 1,914,750 2,201,962
AMENDED VALUATION RANGE................ 1,071,000 1,260,000 1,449,000 1,666,350
===========================================================================================================================
</TABLE>
UNDER WHAT CONDITIONS WOULD THE COMPANY SELL ONLY 35% OF IT STOCK TO PUBLIC
STOCKHOLDERS INSTEAD OF 45%?
If the Company receive orders for less than $5,355,000 of Common Stock (45%
of the minimum of the Amended Valuation Range), then the Company and the Bank
may complete the Reorganization by accepting all orders and selling less than
45% of the Common Stock of the Company to Public Stockholders. However, the
Company will do this only if it receives orders, including the order from the
ESOP, for at least $4,165,000 of Common Stock, which is 35% of the minimum of
the Amended Valuation Range. Cambray Mutual Holding Company will own the
remainder of the Common Stock of the Company. If the Company sells 35% of its
Common Stock and issues the rest to Cambray Mutual Holding Company, then the
total purchase price would be $4,165,000, estimated expenses would be $625,000
(or $0.75 per share) and estimated total net proceeds would be $3,540,000 (or
$4.25 per share). Cambray Mutual Holding Company would then own 65% of the
Company's Common Stock outstanding.
WHAT ARE SOME OF THE EFFECTS OF SELLING ONLY 35% OF THE COMMON STOCK TO
DEPOSITORS AND THE PUBLIC INSTEAD OF 45%?
The Company and the Bank may decide to complete the Reorganization by
accepting orders for less than 45% of the Common Stock of the Company, but not
less than 35%. The remainder of the Common Stock will be issued to Cambray
Mutual Holding Company. This would occur only at the minimum of the Amended
Valuation Range. If only 35% of the Common Stock is sold to Public Stockholders,
then Cambray Mutual Holding Company will own 65% of the Common Stock of the
5
<PAGE>
Company. The amount of additional capital raised in the Reorganization would
decrease. If only 35% of the Common Stock is sold to Public Stockholders and the
rest is issued to Cambray Mutual Holding Company, then the pro forma earnings
per share and the pro forma book value per share would be less than if 45% of
the Common Stock is sold to Public Stockholders.
WHAT EFFECT COULD THE REDUCTION IN THE ORIGINAL VALUATION RANGE HAVE ON THE
MARKET FOR THE COMMON STOCK?
The reduction in the Original Valuation Range reduces the number of shares
of Common Stock which will be sold to Public Stockholders. If the Bank completes
the Reorganization at the minimum of the Amended Valuation Range, less than
1,000,000 shares will be owned by persons other than Cambray Mutual Holding
Company and directors, officers and the ESOP. The Company's Common Stock would
then not qualify for listing on the Nasdaq SmallCap Market, and instead would be
traded on the Over the Counter ("OTC") Bulletin Board. The OTC Bulletin Board
generally has less trading volume and less liquidity than the Nasdaq SmallCap
Market. This may also discourage broker/dealers from making a market in the
Common Stock. Therefore, stockholders could have greater difficulty selling
their Common Stock and trading on the OTC Bulletin Board could adversely affect
the price of those shares. In general, unless the total shares sold to Public
Stockholders, including directors and the ESOP, exceeds 1,200,000 shares, then
the Company would not qualify for listing on the Nasdaq SmallCap Market. Even if
the number of shares sold exceeds that amount, the Company's Common Stock may
still not qualify for listing on the SmallCap Market if other conditions for
listing are not met, such as the requirements that there be at least three
market makers and at least 300 round lot owners.
HOW DOES THE REDUCTION IN THE AMOUNT OF COMMON STOCK BEING ISSUED AFFECT THE PRO
FORMA DATA DISCLOSED IN THE AUGUST 12 PROSPECTUS?
If the Company reduces the number of shares of Common Stock issued to
Public Stockholders and the Mutual Holding Company, then the pro forma net
income per share and pro forma book value per share would both increase. A
reduction in the amount of Common Stock sold to the Public Stockholders reduces
the pro forma total capital of the Bank and the Company. This generally reduces
total net income because lower capital means that the Company will have less
interest-free capital to invest.
The following graphs compare the pro forma earnings per share and the pro
forma book value per share at the Original and the Amended Valuation Range.
Information at the Original Valuation Range is as shown in the August 12
prospectus and is as of or for the six months ended March 31, 1998 (annualized).
Information at the Amended Valuation Range is as of or for the year ended
September 30, 1998 and is detailed below under the caption "Revised Pro Forma
Data." Pro forma book value per share for the Amended Valuation Range includes
$297,000 of capital, representing the increase in capital from March 31, 1998
through September 30, 1998. For a discussion of the assumptions used in
developing the data for these charts, please see the discussion and information
under the caption "Revised Pro Forma Data" in this supplement and "Pro Forma
Data" in the August 12 prospectus.
6
<PAGE>
PRO FORMA EARNINGS PER SHARE COMPARISON
[Bar Chart--Graphical Representation]
ANNUALIZED PRO FORMA EARNINGS PER SHARE
At 15%
At At At Above
Minimum Midpoint Maximum Maximum
AMOUNT SOLD
[ ] Original Valuation [ ] Amended Valuation
PRO FORMA BOOK VALUE PER SHARE COMPARISON
[Bar Chart--Graphical Representation]
PRO FORMA BOOK VALUE PER SHARE
($5.00 PER SHARE PURCHASE PRICE)
At 15%
At At At Above
Minimum Midpoint Maximum Maximum
[ ] Original Valuation [ ] Amended Valuation
7
<PAGE>
The number of shares sold in the Reorganization will depend upon the amount
of orders received as well as market and financial conditions when the
Reorganization is being consummated. The number of shares sold will affect the
price to book value ratio, price to earnings ratio, stockholders' equity per
share and net income per share of the Common Stock. See "Revised Capitalization"
and "Revised Pro Forma Data" in this supplement for more information.
MAY EXISTING SUBSCRIBERS INCREASE OR DECREASE THEIR ORDERS?
Existing subscribers may increase their orders and pay for the additional
Common Stock ordered by submitting a new order form for the additional stock
ordered. If existing subscribers want to decrease their orders in part but not
cancel their orders, they must submit the Confirmation Form no later than
January ___, 1999. If you want to cancel your order, you are not required to
taken any action. Your order will be automatically canceled on January ___, 1999
if you do not confirm it.
WHAT IS THE MAXIMUM AMOUNT OF COMMON STOCK THAT MAY BE ORDERED?
One person acting alone, and groups acting together, may order up to but
not more than $300,000 of Common Stock. However, in general, no person or group
acting together may purchase more than 5% of the Common Stock sold to Public
Stockholders, so the maximum amount which may be purchased may be less than
$300,000 if less than $6,000,000 of Common Stock is sold. The Board of Directors
may accept individual or group orders for more than 5% of the Common Stock sold,
but not more than $300,000 per person or group, provided that the total by which
all orders exceed 5% cannot exceed 10% of the stock sold to Public Stockholders.
For example, at the minimum of the Amended Valuation Range, if 45% of the
Common Stock is sold to Public Stockholders, the maximum purchase limit will be
$267,750. However, the Bank may allow purchases up to the $300,000 limit, but
the amount by which all those purchases exceed $267,750 can not, in total,
exceed $535,500 (10% of the amount sold). Any excess amounts received will be
refunded with interest, or the applicable withdrawal authorization will be
canceled, when the Reorganization is completed or discontinued.
HOW MANY SHARES OF COMMON STOCK DO DIRECTORS INTEND TO PURCHASE?
Directors intend to purchase $518,000 of Common Stock, as follows
(percentages are based on minimum of Amended Valuation Range):
Aggregate
Number Purchase Percent
Name Position of Shares Price of Shares
- ---- -------- --------- ---------- ---------
Richard F. Bennett President & CEO 19,600 $ 98,000 0.83%
Charles E. Graves Director 2,000 10,000 0.08
Richard E. Jones Director 2,000 10,000 0.08
Frank Langevin Director 30,000 150,000 1.26
Robert J. Leader Director 30,000 150,000 1.26
Carl Petitto Director 5,000 25,000 0.21
Larry A. Straw Director 15,000 75,000 0.63%
------- -------- ----
Total 103,600 $518,000 4.34%
======= ======== ====
8
<PAGE>
ADDITIONAL RISK FACTORS
Please consider carefully the matters presented below and in the "Risk
Factors" section at page 12 of the August 12 prospectus before deciding whether
to purchase Common Stock.
NEGATIVE GENERAL MARKET CONDITIONS AND THEIR EFFECT ON THE UPDATED APPRAISAL
The updated appraisal of Keller and Company, Inc. is based upon, among
other factors:
o Decreases in the market prices for publicly traded securities of
savings institutions and their holding companies;
o Decreased demand for initial public offerings of converting or
reorganizing savings institutions;
o Weaker after market performance for the common stock in recent
conversion and reorganization transactions; and
o Low market demand as reflected by the low level of subscriptions
received by the Company.
In addition, acquisition activity both in New York and in other comparable
market areas has declined, generally resulting in lower bank and thrift stock
prices as investors speculate that the level of acquisitions or the prices paid
in acquisitions will decline. Some proposed acquisitions have been terminated or
the terms revised as a result of recent market trends. All of these factors
could have a negative effect on the future market value of the Common Stock.
ADVERSE EFFECTS OF THE POTENTIAL REDUCTION IN AMOUNT OF STOCK SOLD ON
NASDAQ LISTING
Under the rules for listing on the Nasdaq SmallCap market, a company cannot
be listed unless, among other things, it has a public float of at least
1,000,000 shares. Public float is the number of shares outstanding, excluding
stock owned by Cambray Mutual Holding Company, the ESOP, and directors of the
Company. The reduction in the Original Valuation Range may result in the sale of
too few shares of Common Stock satisfy the 1,000,000 share requirement. If so,
the Company's Common Stock will not be listed on the Nasdaq SmallCap market and
will instead by quoted on the OTC Bulletin Board. Stocks quoted on the OTC
Bulletin Board generally have lower trading volume, greater spreads between bid
and asked prices, and fewer market makers than stock quoted on the Nasdaq
SmallCap market. These factors could make it more difficult for stockholders to
sell their Common Stock and could reduce the market price. In addition, the
reduced trading market on the OTC Bulletin Board could make it more difficult
for a person to acquire large amounts of Common Stock and could make it more
difficult for the Company to complete stock repurchase programs because
sufficient stock may not be available for purchase.
LOWER PRO FORMA EARNINGS PER SHARE AND BOOK VALUE PER SHARE IF REORGANIZATION
COMPLETED ABOVE THE MINIMUM OF THE AMENDED VALUATION RANGE
Although total orders for Common Stock received by the Company prior
to the reappraisal was less than 45% of the minimum of the Amended Valuation
Range, there will be a new solicitation which may result in a higher level of
orders. Market conditions at the time the Reorganization is consummated, the
amount of orders received, and regulatory considerations, may dictate that the
amount of Common Stock sold in the Reorganization will be more than 45% of the
minimum of the Amended Valuation Range, and could even exceed 45% of the minimum
of the Original Valuation Range. An increase in the amount of Common Stock sold
results in a decrease in the pro forma earnings per share and the pro forma book
value per share.
9
<PAGE>
EXTENSION OF TIME PERIOD TO COMPLETE REORGANIZATION
OTS regulations provide that the sale of the Common Stock must be completed
within 45 days after the termination of the Subscription Offering, unless such
period is extended by the OTS. As a result of the reduction in the Original
Valuation Range and the need to solicit additional orders for Common Stock, the
Company and the Bank have obtained from the OTS permission to extend the
Subscription Offering and the Community Offering until _______________, 1999.
All subscription rights of depositors will expire on that date unless there is
an additional extension of the Subscription Offering.
Based on the extension of the Subscription and Community Offering, the
period during which the sale of the Common Stock must be completed is extended
until ________________, 1999, or 45 days after the expiration of the extension
of the Subscription Offering. If the Company does not complete the sale of its
Common Stock by that date, either all funds received will be returned with
interest and withdrawal authorizations rescinded or, if the OTS has granted
another extension, all subscribers will again be given the right to continue,
increase, decrease or rescind their subscriptions. If you paid for stock by
authorizing a withdrawal from an account at the Bank, you will continue to earn
interest at the regular rate for that account until the Reorganization is
completed or terminated and if you paid for stock by check, your payment will
earn interest at the Bank's passbook account rate (3.5% per year). If payment is
by authorized withdrawal from an account at the Bank, the funds will continue to
earn interest at the rate applicable to that account.
SUBSCRIPTION BY THE ESOP
The Plan of Reorganization provides that the ESOP may subscribe for up to
8% of the Common Stock to be issued in the Reorganization. Based on the Amended
Valuation Range, the ESOP intends to purchase in the Reorganization an amount of
Common Stock equal to 8% of the Common Stock sold to Public Stockholders in the
Reorganization, or from $428,400 to $666,540 of Common Stock at the minimum and
15% above the maximum of the Amended Valuation Range if 45% of the Common Stock
is sold to Public Stockholders. If only 35% of the Common Stock is sold to
Public Stockholders at the minimum of the Amended Valuation Range, then the ESOP
intends to purchase $333,200 of Common Stock.
EXTENSION DOES NOT CHANGE SUBSCRIPTION PRIORITIES
The four priority categories described in the August 12 prospectus will
continue to govern the allocation of Common Stock if the amount of orders
received exceeds the amount of Common Stock being sold. Persons who submitted
orders prior to the date of this supplement will not have priority over new
subscribers. All persons in each subscription priority category will be treated
the same as all other persons in that category, regardless of whether
subscriptions are received before or after this supplement is distributed.
SYNDICATED COMMUNITY OFFERING
In order to complete the sale of the Common Stock, a portion of the
Community Offering may be conducted through a syndicate of broker/dealers
arranged by First Albany Corporation, as described at page 78 of the August 12
prospectus. If a syndicate of broker/dealers is used to sell a portion of the
Common Stock, the Company will be required to pay additional commissions not to
exceed 4.5% of the dollar amount of Common Stock sold through those
broker/dealers. This additional commission will increase expenses and reduce net
proceeds. Persons who purchase Common Stock through broker/dealers who are
members of the syndicate will be required to make whatever arrangements are
required by their broker/dealers in order to pay for Common Stock ordered, and
they will be required to submit whatever documentation their broker/dealers may
require. In the part of the Community Offering conducted
10
<PAGE>
through a syndicate of broker/dealers, there will be no preference to persons
residing in St. Lawrence, Jefferson and Lewis counties in New York.
USE OF PROCEEDS
Although Company cannot determine the actual net proceeds from the sale of
the Common Stock until the Reorganization is completed, the Company estimates
that the net proceeds will be between $4,730,000 and $6,620,000 ($7,706,750 if
the amount of Common Stock sold is increased to 15% above the maximum of the
Amended Valuation Range) if 45% of the Common Stock is sold to Public
Stockholders. If only 35% of the Common Stock of the Company is sold to Public
Stockholders, then the Company estimates that net proceeds will be $3,540,000.
These estimates are based upon the same assumptions described in the sections of
the August 12 prospectus titled "Pro Forma Data" and "Use of Proceeds," except
that the Company estimates that expenses of the Reorganization will increase
from $525,000 to $625,000 to cover the costs of the extended solicitation caused
by the amendment of the Valuation Range.
The Company does not expect that the change in the Valuation Range will
result in a change in the manner in which the Company will use the net proceeds
from the sale of the Common Stock. However, a decrease in the amount of Common
Stock sold to the Public Stockholders will reduce the amount needed to fund the
Company's loan to its ESOP, if the ESOP purchases its stock in the Subscription
Offering. At the minimum of the Amended Valuation Range, the Company expects
that the loan to the ESOP will be $428,400 if 45% of the Common Stock of the
Company is sold to Public Stockholders and $333,200 if only 35% of the Common
Stock is sold to Public Stockholders. At 15% above the maximum of the Amended
Valuation Range, the Company expects that the loan to the ESOP will be $666,540.
11
<PAGE>
REVISED CAPITALIZATION DISCLOSURE
The following table presents the historical capitalization (capital
accounts, deposits and borrowings) of the Bank at September 30, 1998 and the
estimated consolidated capitalization of the Company as though the
Reorganization had been completed on that date and 45% of the Company's Common
Stock is sold to Public Stockholders. The table is based on the same assumptions
described in the August 12 prospectus under "Pro Forma Data" and "Use of
Proceeds" and an estimated $100,000 increase in the expenses of the
Reorganization.
<TABLE>
<CAPTION>
Minimum Midpoint Maximum Maximum
2,380,000 2,800,000 3,220,000 3,703,000
Shares Issued Shares Issued Shares Issued Shares Issued
1,071,000 1,260,000 1,449,000 1,666,350
Historical Shares Sold Shares Sold Shares Sold Shares Sold
---------- ------------- ------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1) .................................. $ 46,382 $ 46,382 $ 46,382 $ 46,382 $ 46,382
Borrowings .................................... -- -- -- -- --
-------- -------- -------- -------- --------
Total deposits and borrowings ................. 46,382 46,382 46,382 46,382 46,382
======== ======== ======== ======== ========
Stockholders' equity:
Preferred Stock, $ 0.01 par value
1,000,000 shares authorized
(none outstanding) ...................... -- -- -- -- --
Common Stock, $ 0.01 par value (2)
9,000,000 shares authorized;
shares outstanding as shown ............... -- ` 24 28 32 37
Additional paid-in capital .................... -- 4,706 5,647 6,588 7,670
Retained earnings (3) ......................... 10,929 10,829 10,829 10,829 10,829
Net unrealized gain on securities, net of taxes 539 539 539 539 539
Less:
Common Stock acquired by ESOP (4) ........... -- (428) (504) (580) (667)
Common Stock acquired by RSP (5) ............ -- (214) (252) (290) (333)
-------- -------- -------- -------- --------
Total stockholders' equity .................... 11,468 15,456 16,287 17,118 18,075
-------- -------- -------- -------- --------
Total capitalization .................. $ 57,850 $ 61,838 $ 62,669 $ 63,500 $ 64,457
======== ======== ======== ======== ========
- ----------
<FN>
(1) Includes approximately $3.54 million of payments and withdrawal authorizations to purchase Common Stock.
(2) The effect of issuing additional Common Stock to satisfy the exercise of options under the intended Stock Option Plan is not
shown. See "Management of the Bank--Benefits--Stock Option Plan" in the August 12 prospectus.
(3) Estimated post-Reorganization information assumes that $100,000 is used to capitalize Cambray Mutual Holding Company.
(4) The Common Stock acquired by the ESOP (8% of the Common Stock to be sold to the Public Stockholders) is shown as a reduction of
stockholders' equity because it is assumed to be purchased with the proceeds of a loan from the Company. See "Management of the
Bank--Benefits--Employee Stock Ownership Plan" in the August 12 prospectus.
(5) Assumes that the Company repurchases 4% of the shares sold in the Reorganization to fund the Restricted Stock Plan at $5.00
per share. The purchase price is shown as a reduction of stockholders' equity. See "Risk Factors - Possible Dilution from
Stock Options and the Restricted Stock Plan," "Pro Forma Data" and "Management of the Bank--Benefits--Restricted Stock
Plan" in the August 12 prospectus.
</FN>
</TABLE>
12
<PAGE>
If the Company sells 35% of its Common Stock to Public Stockholders and
issues 65% to Cambray Mutual Holding Company at the minimum of the Amended
Valuation Range, then 833,000 shares of Common Stock will be sold to the Public
Stockholders. This will result in additional paid-in capital of $3,540,000, ESOP
stock purchases of $333,000 and assumed RSP stock purchases of $167,000, for
total pro forma stockholders' equity of $14,360.
REVISED PRO FORMA DATA
The table on the following page shows estimated information as though the
Reorganization had occurred in the past. The table shows estimated stockholders'
equity at September 30, 1998 as though the Reorganization had occurred on that
date and estimated net income for the 1998 fiscal year as though the
Reorganization had occurred at the beginning of the fiscal year. The data
contained in the tables, except for historical data, are based upon assumptions
and estimates, the most significant of which are described in the section of the
August 12 prospectus titled "Pro Forma Data." The following changes have been
made to those assumptions:
o Based upon declining market interest rates, the pre-tax rate of
interest used to estimate earnings on the proceeds available for
investment has been reduced from 5.39% to 4.50%. This reduces the net
income on the proceeds and increases the pro forma price to earnings
per share ratios.
o The expenses of the Reorganization have been increased by $100,000
based upon the Bank's estimate of additional expenses related to the
extension of the offering period and the continuing solicitation of
orders to purchase Common Stock.
The pro forma information regarding estimated net income and the pro forma
price to earnings ratio do not assume any leveraging of the new capital through
increased deposits or borrowings and the reinvestment of the proceeds of those
deposits or borrowings in interest-earning assets. The profitable leveraging of
the new capital would increase net income and decrease the price to earnings
ratio, all other things being equal, but there can be no assurance that the
additional capital can be leveraged successfully.
13
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended September 30, 1998
-------------------------------------------------------------------------------
$18,515,000
$11,900,000 $14,000,000 $16,100,000 Maximum
Minimum Midpoint Maximum Value,
Value Value Value as Adjusted
---------------- --------------- --------------- ---------------
1,071,000 1,260,000 1,449,000 1,666,350
Shares at Shares at Shares at Shares at
$5.00 $5.00 $5.00 $5.00
Per Share Per Share Per Share Per Share
(Minimum (Midpoint (Maximum (Super-
of Range) of Range) of Range) Maximum)
---------------- --------------- --------------- ---------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
GROSS PROCEEDS ............................. $ 5,355 $ 6,300 $ 7,245 $ 8,332
Less offering expenses ..................... (625) (625) (625) (625)
----------- ----------- ----------- -----------
Estimated net conversion proceeds ... 4,730 5,675 6,620 7,707
Less ESOP shares ........................... (428) (504) (580) (667)
Less Stock Programs shares ................. (214) (252) (290) (333)
----------- ----------- ----------- -----------
Estimated proceeds available
for investment (1) ................. $ 4,088 $ 4,919 $ 5,750 $ 6,707
=========== =========== =========== ===========
CONSOLIDATED NET INCOME:
Historical ........................... $ 620 $ 620 $ 620 $ 620
Pro forma adjustments:
Net income from proceeds ..... 110 133 155 181
ESOP (2) ..................... (26) (30) (35) (40)
Restricted Stock Plan (3) .... (26) (30) (35) (40)
----------- ----------- ----------- -----------
Pro forma net income ....... $ 678 $ 693 $ 705 $ 721
=========== =========== =========== ===========
NET INCOME PER SHARE (4):
Historical ........................... $ 0.27 $ 0.23 $ 0.20 $ 0.17
Pro forma adjustments:
Net income from proceeds ..... 0.05 0.05 0.05 0.05
ESOP (2) ..................... (0.01) (0.01) (0.01) (0.01)
Restricted Stock Plan (3) .... (0.01) (0.01) (0.01) (0.01)
----------- ----------- ----------- -----------
Pro forma net income ....... $ 0.30 $ 0.26 $ 0.23 $ 0.20
=========== =========== =========== ===========
PRO FORMA PRICE TO EARNINGS PER SHARE ...... 16.67x 19.23x 21.74x 25.00x
NUMBER OF SHARES ........................... 2,302,888 2,709,280 3,115,672 3,583,023
STOCKHOLDERS' EQUITY (BOOK VALUE):
Historical ........................ $ 11,368 $ 11,368 $ 11,368 $ 11,368
Estimated net conversion proceeds .. 4,730 5,675 6,620 7,707
Less common stock acquired by:
ESOP (2) ........................ (428) (504) (580) (667)
Restricted Stock Plan (3) ....... (214) (252) (290) (333)
----------- ----------- ----------- -----------
Pro forma .................... $ 15,456 $ 16,287 $ 17,118 $ 18,075
=========== =========== =========== ===========
STOCKHOLDERS' EQUITY PER SHARE:
Historical ...................... $ 4.78 $ 4.06 $ 3.53 $ 3.07
Estimated net conversion proceeds 1.99 2.03 2.06 2.08
Less common stock acquired by:
ESOP (2) ..................... (0.18) (0.18) (0.18) (0.18)
Restricted Stock Plan (3) .... (0.09) (0.09) (0.09) (0.09)
----------- ----------- ----------- -----------
Pro forma .................. $ 6.50 $ 5.82 $ 5.32 $ 4.88
=========== =========== =========== ===========
PRO FORMA PRICE TO BOOK VALUE .............. 76.92% 85.91% 93.98% 102.46%
NUMBER OF SHARES ........................... 2,380,000 2,800,000 3,220,000 3,703,000
MINORITY OWNERSHIP (5) ..................... 45.00% 45.00% 45.00% 45.00%
Notes appear on following page.
</TABLE>
14
<PAGE>
- ----------
(1) Estimated net proceeds available for investment consist of estimated net
proceeds from the sale of the Common Stock minus (i) the proceeds
attributable to the purchase by the ESOP; and (ii) the cost of the shares
covered by the Restricted Stock Plan, which, subject to receipt of
stockholder approval, are assumed to be purchased at a price of $5.00 per
share.
(2) The amount estimated to be borrowed by the ESOP from the Company is shown
as a reduction of stockholders' equity. ESOP expense is based upon
generally accepted accounting principles as described in accounting
Statement of Position 93-6. Generally accepted accounting principles
require that as and when shares pledged as security for an ESOP loan are
committed to be released from the loan (e.g., as the loan is repaid),
compensation expense is recorded based upon the fair value of the shares at
that time. The ESOP loan is assumed to have a term of ten years. It is
therefore assumed that one-tenth of the Common Stock acquired by the ESOP
is committed to be released from the lien of the ESOP loan each year, and
one-twentieth each six months. ESOP expense shown is equal to the number of
shares so committed to be released for the period, multiplied by the per
share fair value at that time, which is assumed to be $5.00 per share. All
shares released during the period are assumed to be outstanding for the
entire period for the purpose of calculating earnings per share and book
value per share. Shares not yet committed to be released are not deemed to
be outstanding for either purpose. See "Management of the Bank--Benefits--
Employee Stock Ownership Plan" in the August 12 prospectus.
(3) The shares purchased by the Company to fund the anticipated Restricted
Stock Plan are assumed to be purchased at the beginning of the periods
shown at $5.00 per share and immediately awarded to directors, officers and
employees. Because the shares are assumed to vest gradually over five
years, 20% of the purchase price is treated as an expense for the year. If
the Company uses authorized but unissued shares to fund the plan, the
interests of existing stockholders would be reduced by approximately 3.85%.
In such event, pro forma net income per share would be $0.30, $0.26, $0.23
and $0.21, and pro forma stockholders' equity per share would be $6.45,
$5.79, $5.30 and $4.87 at the minimum, midpoint, maximum and 15% above the
maximum of the Amended Valuation Range, respectively, for the year. If the
per share price paid to repurchase stock to fund the plan is greater than
$5.00 per share, then net income per share and stockholders' equity per
share would be lower. See "Management of the Bank--Benefits--Restricted
Stock Plan" in the August 12 prospectus.
(4) If the Stock Option Plan covering up to 10% of the stock issued in the
Reorganization is implemented and funded with newly issued stock, the
estimated net income and book value per share would be reduced because of
the additional shares that would be outstanding. The effect of the
implementation of a stock option plan can not be reasonably estimated
because the number of options that may be awarded cannot be determined; the
exercise price of the options will depend upon the market price on the date
the options are awarded; the options will vest gradually over five years;
and the exercise of options is at the discretion of the director, officer
or employee holding the option. See "Management of the Bank--Benefits--
Stock Option Plan" in the August 12 prospectus.
(5) If the Reorganization is completed at the minimum of the Amended Valuation
Range and the Company sells 35% of its Common Stock to the Public
Stockholders, with 65% being issued to Cambray Mutual Holding Company, then
the gross proceeds from the sale of the Common Stock would be $4,165,000.
The amount of Common Stock acquired by the ESOP and the Restricted Stock
Plan would be correspondingly reduced, as would the net proceeds available
for investment and the pro forma earnings from the net proceeds. However,
the estimated expenses of $625,000 would not be reduced. If 35% of the
Common Stock is sold to Public Stockholders at the minimum of the Amended
Valuation Range, then the ratio of the price to pro forma earnings per
share would be 17.24x and the offering price as a percentage of pro forma
book value per share would be 82.51%, using the same assumptions as were
used in the preceding table.
15
<PAGE>
REVISED REGULATORY CAPITAL COMPLIANCE INFORMATION
The table below shows the Bank's capital ratios at September 30, 1998 and
the related OTS minimum capital requirements. The table also shows approximately
what the capital ratios of the Bank would have been if the Reorganization had
taken place on September 30, 1998 (referred to as pro forma ratios), assuming
that the indicated number of shares were sold and assuming that 50% of the net
proceeds were paid to the Bank. The expected loan to the ESOP and the cost of
shares expected to be acquired by the Restricted Stock Plan are deducted from
pro forma regulatory capital, as is $100,000 expected to be used to capitalize
the Mutual Holding Company. See "Pro Forma Data" in the August 12 prospectus.
<TABLE>
<CAPTION>
Pro Forma Based Upon Net Proceeds at September 30, 1998
----------------------------------------------------------------------------
1,071,000 Shares 1,260,000 Shares 1,449,000 Shares
Historical at Sold (Minimum of Sold (Midpoint of Sold (Maximum of
September 30, 1998 Valuation Range) Valuation Range) Valuation Range)
----------------------- --------------------- ------------------- ---------------------
Percent of Percent of Percent of Percent of
Applicable Applicable Applicable Applicable
Amount Assets Amount Assets(2) Amount Assets(2) Amount Assets(2)
------- ----------- ------- ----------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital (1) ..... $11,468 19.3% $13,091 21.5% $13,450 21.9% $13,808 22.4%
======= ==== ======= ==== ======= ==== ======= ====
Tangible capital:
Capital Level ........ $10,929 18.7% $12,552 20.9% $12,911 21.4% $13,269 21.8%
Requirement (3) ...... 876 1.5% 901 1.5% 906 1.5% 912 1.5%
------- ---- ------- ---- ------- ---- ------- ----
Excess ............... $10,053 17.2% $11,651 19.4% $12,005 19.9% $12,357 20.3%
======= ==== ======= ==== ======= ==== ======= ====
Core capital:
Capital Level ........ $10,929 18.7% $12,552 20.9% $12,911 21.4% $13,269 21.8%
Requirement (3) ...... 1,753 3.0% 1,802 3.0% 1,813 3.0% 1,823 3.0%
------- ---- ------- ---- ------- ---- ------- ----
Excess ............... $ 9,176 15.7% $10,750 17.9% $11,098 18.4% $11,446 18.8%
======= ==== ======= ==== ======= ==== ======= ====
Risk-based capital:(4)
Capital level ........ $11,248 44.0% $12,880 49.1% $13,241 50.1% $13,601 51.2%
Requirement (3) ...... 2,044 8.0% 2,100 8.0% 2,112 8.0% 2,125 8.0%
------- ---- ------- ---- ------- ---- ------- ----
Excess ............... $ 9,204 36.0% $10.780 41.1% $11,129 42.1% $11,476 43.2%
======= ==== ======= ==== ======= ==== ======= ====
<CAPTION>
-----------------------
1,666,350 Shares Sold
(15% Above Maximum
of Valuation Range)
-----------------------
Percent of
Applicable
Amount Assets(2)
------ ------------
(Dollars in thousands)
<S> <C> <C>
GAAP Capital (1) ..... $14,222 22.9%
======= ====
Tangible capital:
Capital Level ........ $13,683 22.4%
Requirement (3) ...... 918 1.5%
------- ----
Excess ............... $12,765 20.9%
======= ====
Core capital:
Capital Level ........ $13,683 22.4%
Requirement (3) ...... 1,836 3.0%
------- ----
Excess ............... $11,847 19.4%
======= ====
Risk-based capital:(4)
Capital level ........ $14,017 52.4%
Requirement (3) ...... 2,139 8.0%
------- ----
Excess ............... $11,878 44.4%
======= ====
</TABLE>
- ----------
(1) Capital under generally accepted accounting principles includes the net
unrealized gain/loss, if any on available-for-sale securities, which is not
recognized as capital under OTS capital ratio rules. Total risk-based
capital includes the allowance for loan losses. See "Regulation--Regulation
of Federal Savings Associations--Capital Requirements."
(2) Risk-based capital ratios shown as a percentage of risk-weighted assets
($25,550,000 at September 30, 1998). Core and Tangible ratios shown as a
percentage of adjusted total assets ($58,438,000 at September 30, 1998).
(3) In order to be classified as "well-capitalized," the Bank must, in addition
to other requirements, have a ratio of core capital to risk-weighted assets
of at least 6.00%, a total risk-based capital ratio of at least 10.00% and
a ratio of core capital to total assets of at least 5.00%. See
"Regulation--Regulation of Federal Savings Associations--Capital
Requirements" and "--Prompt Corrective Action."
(4) Pro forma risk-based capital data assumes the net proceeds are invested in
assets that carry a risk-weighting equal to 43.1%, being the average risk
weight of the Bank's assets at September 30, 1998.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section provides updated financial information and discussions
regarding Gouverneur Savings and Loan Association for the fiscal year ended
September 30, 1998. Also included at the back of this supplement are the audited
Financial Statements of the Bank for fiscal 1998 and prior periods. The
following financial information and discussions should be read with the
Financial Statements and Notes to the Financial Statements included at the back
of this supplement beginning at page F-1 and should also be read with the
discussions under the caption "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" beginning at page 35 of the August 12
prospectus.
INTEREST RATE RISK EXPOSURE
As described at pages 41 and 42 of the August 12 prospectus, the OTS
prepares an analysis of the Bank's estimated interest rate risk exposure on a
quarterly basis. The analysis is based upon assumptions and models developed by
the OTS and believed to reasonably reflect the effect of changes in interest
rates on the net portfolio value of the Bank. The following table presents the
Bank's estimated NPV at September 30, 1998, and the estimated effect on NPV of
the specified interest rate changes, as calculated by the OTS. At September 30,
1998, the portfolio value of the Bank's assets as estimated by the OTS was $61.3
million. The following table should be read with the discussion beginning at
page 40 of the August 12 prospectus under the caption "Market Interest Rate Risk
Analysis."
<TABLE>
<CAPTION>
Hypothetical Change Estimated Estimated Change in Estimated Percentage
in Interest Rate Net Portfolio Value Net Portfolio Value Change in NPV(1)
- ------------------- ------------------- ------------------- --------------------
(Dollars in thousands)
<S> <C> <C> <C>
+4.00% $ 10,958 $ -2,369 -18%
+3.00% 11,787 -1,540 -12%
+2.00% 12,540 -788 -6%
+1.00% 13,035 -293 -2%
0.00% 13,327 -- --
-1.00% 13,769 +442 +3%
-2.00% 14,320 +993 +7%
-3.00% 15,013 +1,686 +13%
-4.00% $ 15,665 $ +2,338 +18%
<FN>
- ----------
(1) Calculated as the amount of change in the estimated NPV divided by the
estimated current NPV.
</FN>
</TABLE>
The above table indicates that in a rising interest rate environment, the
Bank's net portfolio value is expected to decrease, while the reverse is
expected in a declining interest rate environment. It is believed that these
changes in net portfolio value would be accompanied by a decline in net income
during periods of rising interest rates and an increase in net income during
periods of declining interest rates.
When comparing the OTS estimate of the effect of interest rate changes at
September 30, 1998 with the OTS estimate at March 31, 1998, the OTS estimates
that the negative effect on the Bank of increasing interest rates has been
reduced, while the positive effect of a decline in interest rates has been
increased. The Bank believes that this improvement may be partially the result
of increases in short term investments at September 30, 1998 due to the short
term investment of stock subscription proceeds, as discussed below.
17
<PAGE>
AVERAGE BALANCES, INTEREST RATES AND YIELDS
The following table presents, for the years ended September 30, 1998 and
1997, the average interest-earning assets and average interest-bearing
liabilities of the Bank by principal categories, the interest income or expense
for each category, and the resultant average yields earned or rates paid. No tax
equivalent adjustments were made. All average balances are daily average
balances. Non-interest-bearing checking accounts are included in the tables as a
component of non-interest-bearing liabilities. The information set forth in this
table should be read with the tables under the caption "Average Balances,
Interest Rates and Yields" at pages 37 and 38 of the August 12 prospectus.
<TABLE>
<CAPTION>
For the Year Ended September 30,
-----------------------------------------------------------------------------
1998 1997
--------------------------------------- ------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- ---------- --------- --------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans (1)......................................... $34,891 $3,256 9.33% $33,520 $3,183 9.50%
Securities (2).................................... 16,215 998 6.15 16,637 989 5.94
Other short-term investments...................... 1,607 82 5.10 2,028 103 5.08
------- ------ ---- ------- ------
Total interest-earning assets................... 52,713 4,336 8.23 52,185 4,275 8.19
------
Non-interest-earning assets....................... 2,492 2,259
------- -------
Total assets.................................... $55,205 $54,444
======= =======
Savings and club accounts (3)..................... $14,947 519 3.4 $15,115 527 3.49
Time certificates................................. 22,716 1,279 5.63 22,884 1,265 5.53
NOW and money market accounts..................... 5,547 109 1.97 5,411 104 1.92
------- ------ ---- ------- ------
Total interest-bearing liabilities.............. 43,210 1,907 4.41 43,410 1,896 4.37
Non-interest-bearing liabilities.................. 1,197 1,013
------- -------
Total liabilities............................... 44,407 44,423
Net worth......................................... 10,798 10,021
------- -------
Total liabilities and net worth................. $55,205 $54,444
======= =======
Net interest income/spread (4).................... $2,429 3.82% $2,379 3.82%
====== ==== ====== ====
Net earning assets/net interest margin (5)........ $ 9,503 4.61% $ 8,775 4.56%
======= ==== ======= ====
Ratio of average interest-earning assets
to average interest-bearing liabilities......... 1.22x 1.20x
==== ====
<FN>
- ----------
(1) Shown net of the allowance for loan losses. Average loan balances include non-accrual loans. Interest is recognized on
non-accrual loans only as and when received.
(2) Securities are included at amortized cost, with net unrealized gains or losses on securities available for sale included as a
component of non-earning assets. Securities include Federal Home Loan Bank of New York stock.
(3) Includes advance payments by borrowers for taxes and insurance (mortgage escrow deposits).
(4) The spread represents the difference between the weighted average yield on interest-earning assets and the weighted average
cost of interest-bearing liabilities.
(5) The net interest margin, also known as the net yield on average interest-earning assets, represents net interest income as a
percentage of average interest-earning assets.
</FN>
</TABLE>
18
<PAGE>
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
The following table shows changes in the dollar amount of interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities when comparing the year ended September 30, 1998
with the year ended September 30, 1997. It shows the amount of the change in
interest income or expense caused by either changes in outstanding balances
(volume) or changes in interest rates. The effect of a change in volume is
measured by applying the average rate during the first period to the volume
change between the two periods. The effect of changes in rate is measured by
applying the change in rate between the two periods to the average volume during
the first period. Changes attributable to both rate and volume, which cannot be
segregated, have been allocated proportionately to the change due to volume and
the change due to rate. The information set forth in this table should be read
with the table under the caption "Rate/Volume Analysis of Net Interest Income"
at page 39 of the August 12 prospectus.
Year Ended September 30,
1998 VS. 1997
---------------------------
Increase (Decrease) Due to:
Volume Rate Total
------ ---- -----
(In thousands)
INTEREST-EARNING ASSETS:
Loans........................................... $130 $(57) $ 73
Securities...................................... (26) 35 9
Other short-term investments.................... (21) 0 (21)
---- ---- ----
Total interest-earning assets................... $ 83 $(22) $ 61
==== ==== ====
INTEREST-BEARING LIABILITIES:
Savings and club accounts....................... $ (5) $ (3) $ (8)
Time certificates............................... (9) 23 14
NOW and money market accounts................... 2 3 5
---- ---- ----
Total interest-bearing liabilities.............. $(12) $ 23 $ 11
==== ==== ====
Net change in net interest income............... $ 95 $(45) $ 50
==== ==== ====
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997.
Total assets at September 30, 1998 were $59.3 million, an increase of $4.1
million, or 7.4%, from total assets of $55.2 million at September 30, 1997. The
increase was principally the result of the receipt and temporary investment just
prior to the end of the year of payments for subscriptions for the Company's
stock. Subscription funds received were invested by the Bank principally in
short term securities and interest-bearing deposits with other banks. The Bank
also had $620,000 of retained earnings during the year which provided additional
funds for investment.
At September 30, 1998, the Bank had received $3.54 million of stock
subscriptions, excluding the subscription from the ESOP. Of these subscriptions,
$1.97 million were paid for by funds received from subscribers and $1.57 million
were paid for by withdrawal authorizations from deposit accounts at the Bank.
Total deposits increased by $2.8 million during fiscal 1998. A portion of this
increase is represented by the $1.97 million in new funds paid for stock
subscriptions, while some or all of the remainder of the increase in deposits
may have been caused by new customer deposits into existing accounts which were
then used to cover withdrawal authorizations to pay for stock subscriptions.
19
<PAGE>
During fiscal 1998, the Bank experienced a $357,000 increase in loans, net,
as the Bank sought to market its loan products aggressively. The principal
components of the increase in loans were an $883,000 increase in auto loans and
a $396,000 increase in commercial non-mortgage loans. These increases were
partially offset by a decline in mortgage loans of $493,000. Construction
mortgage loans declined by $184,000 due to the unavailability of acceptable
construction loan opportunities and commercial mortgage loans declined by
$247,000. Commercial mortgage loans declined principally because commercial farm
mortgage loans amortized or refinanced and the Bank could not generate
sufficient other commercial mortgage loans due to competitive pressures.
Securities and other short-term investments increased by $3.7 million as the
Bank invested stock subscriptions in those asset categories on a short term
basis pending final resolution of the stock offering. Total net worth increased
by $731,000, represented by the retention of earnings during the 1998 fiscal
year of $620,000 and an increase in the unrealized gain on securities available
for sale of $111,000 as favorable market conditions improved the value of the
Bank's securities portfolio.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1997.
General. Net income for the 1998 fiscal year was $620,000, an increase of
$83,000, or 15.5%, over net income of $537,000 for fiscal 1997. The Bank
principally experienced normal fluctuations in income and expense categories,
with an increase in the average balance of loans being offset by a decline in
average yields earned on loans.
Interest Income. Interest income increased by $61,000 from fiscal 1997 to
fiscal 1998. This increase resulted principally from a $1.4 million, or 4.1%,
increase in the average balance of loans, which are the Bank's highest yielding
asset category. This is estimated to have contributed approximately $130,000 to
interest income. The increase in the average balance of loans was partially
offset by a $843,000 decline in the average balance of lower yielding securities
and other short-term investments, resulting in a net increase in average
interest-earning assets of $528,000.
The effect of the shift in the mix of interest-earning assets in favor of
higher-yielding loans and away from lower yielding securities investments was
slightly blunted by a decline in the average yield on loans from 9.50% for
fiscal 1997 to 9.33% for the fiscal 1998. This is estimated to have reduced
interest income by $57,000. The decline in average loan yield resulted from the
continuation of low market interest rates for residential one-to-four family
mortgage loans which caused some customers to refinance their loans at lower
rates while new loans were also being originated at relatively low rates. This
was coupled with increased competition for mortgage loans and tighter
underwriting standards adopted by the Bank. The Bank sought to reduce the
decline in yields by pursuing the origination of auto loans and commercial
loans, both mortgage and non-mortgage. The Bank experienced an increase of 21
basis points in its yield on securities investments because during 1997 the Bank
sought to improve the yield on its securities investments by shifting
investments away from lower yielding U.S. Treasury securities in favor of higher
yielding mortgage-backed securities and government agency securities. The effect
of this change in securities investment strategy was itself limited as the
yields on securities investments generally declined during fiscal 1998.
The investment of stock subscription proceeds in short-term investments did
not have a material effect on average balances because subscriptions were
received primarily during the last ten days of the fiscal year. However, in the
future, if the Reorganization is consummated, the Company anticipates that the
increase in capital resulting from the Reorganization will be invested,
initially, in short term investments which the Company expects will have lower
yields than the average current yield of the Bank's interest-earning assets.
Interest Expense. Interest expense increased by $11,000 from fiscal 1997 to
fiscal 1998. The slight increase represented the net effect of a decline in the
average balance of interest-bearing liabilities by $200,000, offset by an
increase in the Bank's cost of funds of 4 basis points. The decline in the
average balance is believed by the Bank to have been caused by competitive
pressures from other investment alternatives at a time of historically high
stock market values which motivated more depositors to seek non-deposit
investment vehicles for their deposited funds. The slight increase in the
average cost of funds, reflected almost exclusively in an increase in the
average rate paid on
20
<PAGE>
certificates of deposit, was caused by competitive pressures for deposits. The
stock subscriptions received by the Bank during the last few weeks of the 1998
fiscal year represented only a small component of the average balance of
interest-bearing liabilities for the year as a whole, and thus did not have a
significant effect on interest expense for the year.
Net Interest Income. The combined effect of the increase in interest income
and the lesser increase in interest expense was a $50,000, or 2.1%, increase in
net interest income. The Bank's reported spread remained the same at 3.82% as
the change in the mix of assets and the fluctuations in yields earned and rates
paid offset each other. The Bank's net interest margin increased by 5 basis
points from 4.56% to 4.61% as the Bank was able to invest its retained earnings
without a corresponding interest cost.
Provision for Loan Losses. The provision for loan losses results from
management's analysis of the adequacy of the Bank's allowance for loan losses.
If management determines that an increase in the allowance is warranted, then
the increase is accomplished through a provision for loan losses which is
charged as an expense on the Bank's income statement. The provision for loan
losses was $130,000 for fiscal 1998, compared to $250,000 for fiscal 1997. The
reason for the decline in the provision for loan losses was a reduction in the
level of net charge-offs from $326,000 in fiscal 1997 to $49,000 in fiscal 1998
as loan delinquencies improved. Because the decline in the provision was less
than the decline in charge-offs net of recoveries, the Bank's allowance for loan
losses increased from $403,000 at September 30, 1997 to $484,000 at September
30, 1998. Management believes the increase in the allowance is appropriate
because the Bank has pursued an increase in higher-risk auto loans and
commercial non-mortgage loans.
Non-interest Income. The Bank's non-interest income increased by $26,000
from $149,000 in fiscal 1997 to $175,000 in fiscal 1998, primarily because the
Bank had $23,000 of realized losses on the sale of securities during fiscal 1997
and no such losses during fiscal 1998. From time to time, the Bank sells debt
securities at a loss if the Bank believes that reinvestment alternatives will
allow the Bank to recoup the loss over a term shorter than the maturity of the
security sold. Other categories of non-interest income remained constant as the
Bank maintained consistent policies regarding service charges, safe deposit box
rentals and other categories of non-interest income throughout the periods.
Service charges on deposit accounts, a significant component of non-interest
income, are generally a function of the Bank's service charge policy, the volume
of deposit accounts and economic conditions which can affect sub-categories of
service charges such as fees for bounced checks. All three of these factors
remained relatively constant throughout fiscal 1997 and 1998, resulting in a
consistent level of service charge income.
Non-interest Expense. Non-interest expense increased by $68,000, or 4.8%,
from fiscal 1997 to fiscal 1998. Salaries and employee benefits expense
increased by $38,000, or 6.2%, due to normal in officer and employee salaries
and the addition of business development and loan officers to pursue business
development, new loan opportunities and past due account collection. This
increase was partially offset by a decline in deposit insurance premiums from
$41,000 to $27,000 related to statutory changes in the assessment of deposit
insurance premiums which became effective during the end of fiscal 1996 and the
early part of fiscal 1997. Other variations in non-interest expense resulted
from normal period to period fluctuations in activity.
Income Taxes. Income tax expense increased from $335,000 for fiscal 1997 to
$380,000 for fiscal 1998. The increase corresponded to the increase in net
income as the Bank's effective tax rate remained relatively constant.
LIQUIDITY AND CAPITAL
The Bank's primary sources of funds are deposits and proceeds from the
principal and interest payments on loans and securities. While maturities and
scheduled principal payments on loans and securities are predictable sources of
funds, deposit outflows and loan prepayments are greatly influenced by general
interest rates, economic conditions and competition.
21
<PAGE>
The primary investing activity of the Bank is the origination of
residential one-to-four family mortgage loans and the purchase of
mortgage-backed and debt securities. During the year ended September 30, 1998,
the Bank's loan originations totaled $8.4 million. However, loans, net, after
payments and charge-offs, increased by $438,000 during fiscal 1998. Investment
and mortgage-backed securities, excluding the effect of unrealized gains and
losses, increased by $1.4 million during fiscal 1998.
The Bank monitors its liquidity position on a regular basis. Excess
short-term liquidity is invested in overnight federal funds sold. If the Bank
requires funds beyond its ability to generate them internally, the Bank can
borrow needed funds, but has not needed to use borrowings as a source of
liquidity. In addition to borrowings, the Bank believes that it has the ability,
through adjusting its pricing of certificates of deposit, to increase its liquid
assets by attracting additional deposits if needed.
Loan commitments totaled $1.2 million at September 30, 1998, and the Bank
had $221,000 of unused lines of credit outstanding. Management anticipates that
the Bank will have sufficient funds to meet its current loan commitments.
Certificates of deposit which are scheduled to mature in one year or less from
September 30, 1998 totaled $17.2 million. The Bank may elect to allow some of
those deposits to leave the Bank if it can reduce its cost of funds by doing so
without adversely affecting liquidity. However, management anticipates that the
Bank will be able to retain substantially all of such deposits if the Bank needs
to do so to fund loans and other investments.
At September 30, 1998, the Bank exceeded all regulatory capital
requirements of the OTS applicable to it, with Tier I capital of $10.9 million,
or 18.7% of average assets and 42.9% of risk-weighted assets and with total
risk-based capital of $11.2 million, or 44.1% of risk-weighted assets. The Bank
also had tangible capital of $10.9 million, or 18.7% of average tangible assets.
The Bank was classified as "well capitalized" at September 30, 1998 under OTS
regulations.
The Bank is subject to mandatory liquidity ratio requirements of the OTS.
The Bank is required to maintain liquid assets equal to 4% on withdrawable
accounts. Liquidity for these purposes is measured on a monthly average basis
and the Bank had a liquidity ratio of 36.7% for the month of September 1998.
* * * * * * *
22
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report ................................................F-1
Statements of Financial Condition at September 30, 1998 and 1997.............F-2
Statements of Income for the Years Ended
September 30, 1998, 1997 and 1996..........................................F-3
Statements of Net Worth for the Years Ended
September 30, 1998, 1997 and 1996..........................................F-4
Statements of Cash Flows for the Years Ended
September 30, 1998, 1997 and 1996..........................................F-5
Notes to Financial Statements................................................F-6
All financial statement schedules are omitted because the required
information is not applicable or is included in the Financial Statements or
related Notes.
The Financial Statements of the Company have been omitted because the
Company has not yet issued any stock, has no assets, no liabilities and has not
conducted any business other than of an organizational nature.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Gouverneur Savings and Loan Association:
We have audited the accompanying statements of financial condition of Gouverneur
Savings and Loan Association as of September 30, 1998 and 1997, and the related
statements of income, net worth and cash flows for each of the years in the
three-year period ended September 30, 1998. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gouverneur Savings and Loan
Association as of September 30, 1998 and 1997, and the results of its operations
and its cash flows for each of the years in the three-year period ended
September 30, 1998 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Syracuse, New York
November 30, 1998
F-1
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Statements of Financial Condition
September 30, 1998 and 1997
(In thousands)
ASSETS 1998 1997
-------- ------
Cash and due from banks $ 1,179 1,283
Interest-bearing deposits with other banks 3,255 1,203
Securities available-for-sale, at fair value 10,546 7,903
Securities held-to-maturity (fair value of
in 1998 and $8,636 in 1997) 7,787 8,660
Loans, net of deferred fees 35,691 35,253
Less allowance for loan losses (484) (403)
-------- ------
Net loans 35,207 34,850
Premises and equipment, net 288 268
Federal Home Loan Bank stock, at cost 379 375
Accrued interest receivable 346 295
Real estate owned 51 157
Other assets 369 178
-------- ------
Total assets $ 59,337 55,172
======== ======
LIABILITIES AND NET WORTH
Liabilities:
Deposits:
Demand accounts 210 113
Savings and club accounts 17,302 14,878
Time certificates 23,578 22,843
NOW and money market accounts 5,292 5,742
-------- ------
Total deposits 46,382 43,576
Advance payments by borrowers for property
taxes and insurance 105 45
Other liabilities 1,382 862
-------- ------
Total liabilities 47,869 44,483
-------- ------
Commitments and contingencies (note 10)
Net worth:
Retained earnings - substantially restricted 10,929 10,309
Net unrealized gain on securities, net of taxes 539 380
-------- ------
Total net worth 11,468 10,689
-------- ------
Total liabilities and net worth $ 59,337 55,172
======== ======
See accompanying notes to financial statements.
F-2
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Statements of Income
Years ended September 30, 1998, 1997 and 1996
(In thousands)
1998 1997 1996
--------- ----- -----
Interest income:
Loans $ 3,256 3,183 3,145
Securities 998 989 1,052
Other short-term investments 82 103 141
--------- ----- -----
Total interest income 4,336 4,275 4,338
--------- ----- -----
Interest expense on deposits 1,907 1,896 1,980
--------- ----- -----
Net interest income 2,429 2,379 2,358
Provision for loan losses 130 250 --
--------- ----- -----
Net interest income after
provision for loan losses 2,299 2,129 2,358
--------- ----- -----
Non-interest income:
Service charges 52 52 48
Net loss on sale of securities -- (23) --
Other 123 120 117
--------- ----- -----
Total non-interest income 175 149 165
--------- ----- -----
Non-interest expenses:
Salaries and employee benefits 647 609 662
Directors fees 59 60 58
Building, occupancy and equipment 173 163 162
Data processing 84 78 79
Postage and supplies 77 64 59
Professional fees 43 48 57
Deposit insurance premium 27 41 376
Real estate owned 132 149 133
Other 232 194 188
--------- ----- -----
Total non-interest expenses 1,474 1,406 1,774
--------- ----- -----
Income before income tax expense 1,000 872 749
Income tax expense 380 335 297
--------- ----- -----
Net income $ 620 537 452
========= ===== =====
See accompanying notes to financial statements.
F-3
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Statements of Net Worth
Years ended September 30, 1998, 1997 and 1996
(In thousands)
NET UNREALIZED
RETAINED GAIN ON
EARNINGS SECURITIES TOTAL
-------- --------------- -------
Balance at September 30, 1995 $ 9,320 146 9,466
Net income 452 -- 452
Changes in net unrealized gain on
securities, net of taxes of $50 -- 75 75
------- --- ------
Balance at September 30, 1996 9,772 221 9,993
Net income 537 -- 537
Changes in net unrealized gain on
securities, net of taxes of $109 -- 159 159
------- --- ------
Balance at September 30, 1997 10,309 380 10,689
------- --- ------
Net income 620 -- 620
Changes in net unrealized gain on
securities, net of taxes of $105 -- 159 159
------- --- ------
Balance at September 30, 1998 $10,929 539 11,468
======= === ======
See accompanying notes to financial statements.
F-4
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows
Years ended September 30, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 620 537 452
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 59 58 66
(Increase) decrease in accrued interest receivable (51) 18 (8)
Provision for loan losses 130 250 --
Net losses on sales of securities -- 23 --
Net losses (gains) on sale of real estate owned 46 41 --
Net amortization (accretion) of premiums/discounts 4 3 (24)
Increase (decrease) in other liabilities 476 (104) 338
Deferred income taxes (61) 134 (57)
Decrease (increase) in other assets (191) (110) 7
------- ----- -----
Net cash provided by operating activities 1,032 850 774
Cash flows from investing activities:
Decrease (increase) in time deposits with other banks -- 500 2,800
Net increase (decrease) in loans (601) (2,350) (772)
Proceeds from sales of securities available-for-sale -- 3,431 1,182
Proceeds from maturities and principle
reductions of securities available-for-sale -- 2,500 3,000
Purchases of securities available-for-sale (2,378) (2,767) (4,301)
Purchases of securities held-to-maturity (2,318) (4,738) (1,773)
Proceeds from maturities and principle
reductions of securities held-to-maturity 3,256 1,486 853
Proceeds from sale of real estate owned 174 160 303
Additions to premises and equipment (79) (32) (68)
(Purchase) sale of FHLB stock (4) (37) 10
------- ----- -----
Net cash provided (used) by investing activities (1,950) (1,847) 1,234
------- ----- -----
Cash flows from financing activities:
(Decrease) increase in deposits 2,806 73 (692)
Increase (decrease) in advance payments by
borrowers for property taxes and insurance 60 (29) (100)
------- ----- -----
Net cash provided (used) by financing activities 2,866 44 (792)
------- ----- -----
Net increase (decrease) in cash and cash equivalents 1,948 (953) 1,216
Cash and cash equivalents at beginning of period 2,486 3,439 2,223
------- ----- -----
Cash and cash equivalents at end of period $ 4,434 2,486 3,439
======= ===== =====
Supplemental disclosure of cash flow information:
Non-cash investing activities:
Additions to real estate owned $ 114 208 322
Cash paid during the year for:
Interest 1,907 1,896 1,980
Income taxes 25 384 355
======= ===== =====
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
(1) BUSINESS
Gouverneur Savings and Loan Association (the "Bank") is organized under the
laws of New York. The Bank is subject to regulation by the New York State
Banking Department and the Office of Thrift Supervision (OTS) as a mutual
savings and loan association. The Bank's lending activity is concentrated
in St. Lawrence County and surrounding areas.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The financial statements have been prepared in conformity with
generally accepted accounting principles. Certain prior year amounts
have been reclassified to conform to the current year's
classifications. A description of the significant accounting policies
is presented below. In preparing the financial statements, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ from those
estimates.
(b) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include vault cash and amounts due from
banks which represents short-term highly liquid investments.
(c) SECURITIES
The Bank classifies its debt securities as either available-for-sale
or held-to-maturity as the Bank does not hold any securities
considered to be trading. Equity securities are classified as
available-for-sale. Held-to-maturity securities are those debt
securities the Bank has the ability and intent to hold until maturity.
All other debt securities are classified as available-for-sale.
Available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost. Unrealized
holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and reported
as a separate component of net worth until realized. Transfers of
securities between categories are recorded at fair value at the date
of transfer.
F-6
(Continued)
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
A decline in the fair value of an available-for-sale or
held-to-maturity security that is deemed to be other than temporary
results in a charge to earnings resulting in the establishment of a
new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to yield using the interest method.
Dividend and interest income are recognized when earned. Realized
gains and losses on securities are included in earnings and are
calculated using the specific identification method, for determining
the cost of the securities sold.
(d) LOANS
Loans are reported at the principal amount outstanding, net of
deferred fees. Fees and certain direct origination costs related to
lending activities are recognized using the interest method over the
contractual lives of the loans. Management has the ability and intent
to hold its loans to maturity.
Interest on loans is accrued and included in income at contractual
rates applied to the principal outstanding. The accrual of interest on
loans (including impaired loans) is generally discontinued and
previously accrued interest is reversed or an allowance is established
when loan payments are 90 days or more past due or when, by the
judgment of management, collectibility becomes uncertain. The
allowance is established by a charge to interest income equal to all
interest previously accrued. Subsequent recognition of income occurs
only to the extent that payment is received. Loans are returned to an
accrual status when both principal and interest are current and the
loan is determined to be performing in accordance with the applicable
loan terms.
(e) ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses consists of the provision charged to
operations based upon past loan loss experience, management's
evaluation of the loan portfolio under current economic conditions and
such other factors that require current recognition in estimating loan
losses. Loan losses and recoveries of loans previously written-off are
charged or credited to the allowance as incurred or realized,
respectively.
Management believes that the allowance for loan losses is adequate.
Management uses presently available information to recognize losses on
loans; however, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses and may
require the Bank to recognize additions to the allowance based on
their judgment of information available to them at the time of their
examination.
F-7
(Continued)
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
The Bank estimates losses on impaired loans based on the present value
of expected future cash flows (discounted at the loan's effective
interest rate) or the fair value of the underlying collateral if the
loan is collateral dependent. An impairment loss exists if the
recorded investment in a loan exceeds the value of the loan as
measured by the aforementioned methods. A loan is considered impaired
when it is probable that the Bank will be unable to collect all
amounts due according to the contractual terms of the loan agreement.
Generally, all commercial mortgage loans and commercial loans in a
delinquent payment status (90 days or more delinquent) are considered
impaired. Residential mortgage loans, consumer loans, home equity
lines of credit and education loans are evaluated collectively since
they are homogenous and generally carry smaller individual balances.
Impairment losses are included as a component of the allowance for
loan losses. The Bank recognizes interest income on impaired loans
using the cash basis of income recognition. Cash receipts on impaired
loans are generally applied according to the terms of the loan
agreement, or as a reduction of principal, based upon management
judgment and the related factors discussed above.
(f) REAL ESTATE OWNED
Real estate acquired in settlement of loans is carried at the lower of
the unpaid loan balance or fair value less estimated costs to sell.
Write-downs from the unpaid loan balance to fair value at the time of
foreclosure are charged to the allowance for loan losses. Subsequent
write-downs to fair value, net of disposal costs, are charged to other
expenses.
(g) PREMISES AND EQUIPMENT
Land is carried at cost and buildings and improvements and furniture
and equipment are carried at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the
estimated useful lives of the assets (3-39 years for building and
improvements; 3-7 years for furniture and equipment).
(h) EMPLOYEE BENEFIT PLANS
The Bank has a defined contribution 401(k) Retirement Plan (the Plan)
for all eligible salaried employees. Employees are permitted to
contribute up to 15% of base pay to the Retirement Plan, subject to
certain limitations. The Bank contributes 2% of each eligible
employee's salary. Additional Bank contributions to the Plan are
determined annually by the Board of Directors.
F-8
(Continued)
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
(i) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that
includes the enactment date.
(j) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank does not engage in the use of derivative financial instruments.
The Bank's off-balance sheet financial instruments are limited to
commitments to extend credit.
(3) SECURITIES
Securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities $5,499 28 -- 5,527
Mortgage-backed securities:
FHLMC 256 2 -- 258
Municipal securities 256 3 -- 259
Corporate equity securities 17 871 -- 888
Mutual funds 3,619 -- (5) 3,614
------ --- -- ------
$9,647 904 (5) 10,546
====== === == ======
Held-to-maturity:
Mortgage-backed securities:
FHLMC 4,030 42 (2) 4,070
FNMA 1,925 9 (1) 1,933
GNMA 1,752 12 -- 1,764
Other securities 10 10 -- 20
------ --- -- ------
$7,717 73 (3) 7,787
====== === == ======
(Continued)
F-9
</TABLE>
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities $2,998 9 -- 3,007
Corporate equity securities 17 614 -- 631
Mutual funds 4,253 12 -- 4,265
------ --- -- -----
$7,268 635 -- 7,903
====== === == =====
Held-to-maturity:
Mortgage-backed securities:
FHLMC 5,375 1 14 5,362
FNMA 2,547 1 22 2,526
GNMA 728 1 -- 729
Other securities 10 9 -- 19
------ --- -- -----
$8,660 12 36 8,636
====== === == =====
</TABLE>
The following table presents the carrying value and fair value of debt
securities based on the earlier of call or maturity date at September 30, 1998
(in thousands):
AMORTIZED FAIR
COST VALUE
--------- -----
Available-for-sale:
Due within one year $ 500 500
Due after one year through five years 4,255 4,279
Due after five years through ten years 1,000 1,007
Due after ten years 256 258
------ -----
$6,011 6,044
====== =====
Held-to-maturity:
Due after one year through five years 4,558 4,593
Due after five years through ten years 1,450 1,463
Due after ten years 1,699 1,711
------ -----
$7,707 7,767
====== =====
(Continued)
F-10
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
The amortized cost and fair value of mortgage-backed securities are
presented by contractual maturity in the preceding table. Expected
maturities will differ from contractual maturities because borrowers may
have the right to prepay obligations without prepayment penalties.
Gross gains of $0 were realized on sales of securities in 1998 and 1996 and
$20,000 in 1997, and gross losses of $0, $43,000 and $400 were realized on
sales of securities in 1998, 1997, and 1996, respectively.
(4) LOANS RECEIVABLE
Loans are summarized as follows (in thousands):
1998 1997
-------- ------
First mortgage loans:
One to four family residential $ 28,834 28,896
Commercial 1,578 1,825
Construction 124 308
-------- ------
30,536 31,029
-------- ------
Other loans:
Commercial 477 81
Automobile 2,166 1,283
Home equity 835 823
Passbook 323 475
Other 1,384 1,613
-------- ------
5,185 4,275
-------- ------
Total loans 35,721 35,304
Less:
Net deferred fees 30 51
-------- ------
$ 35,691 35,253
======== ======
(Continued)
F-11
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
Changes in the allowance for loan losses are summarized as follows (in
thousands):
1998 1997 1996
----- ---- ----
Balance at beginning of
period $ 403 479 602
Provision charged to
operations 130 250 --
Recoveries 85 40 48
Loans charged off (134) (366) (171)
----- --- ---
Balance at end of period $ 484 403 479
===== === ===
Management believes it has no impaired loans at September 30, 1998 and
1997.
The principal balances of loans not accruing interest amounted to
approximately $259,000 and $565,000 at September 30, 1998 and 1997,
respectively. The interest income foregone for non-accruing loans was
approximately $11,000, $24,000 and $36,000 during the years ended September
30, 1998, 1997 and 1996, respectively.
In the ordinary course of business, the Bank has and expects to continue to
have transactions, including borrowings, with its officers and directors.
In the opinion of management, such transactions were on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time of comparable transactions with other persons and did not involve
more than a normal risk of collectibility or present any other unfavorable
features to the Bank. Loans to such borrowers at September 30, 1998 and
1997 were $290,000 and $390,000, respectively.
(5) PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows (in thousands):
1998 1997
---- ----
Land $ 30 30
Buildings and improvements 472 465
Furniture and equipment 405 336
----- ---
907 831
Less accumulated depreciation and
amortization 619 563
----- ---
$ 288 268
===== ===
(Continued)
F-12
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
Depreciation and amortization expense amounted to $59,000, $58,000 and
$66,000 during the years ended September 30, 1998, 1997 and 1996,
respectively.
(6) ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows (in thousands):
1998 1997
---- ----
Loans $213 235
Securities 150 80
Reserve for uncollected interest (17) (20)
---- ---
$346 295
==== ===
(7) DEPOSITS
At September 30, 1998 and 1997, the aggregate amounts of time deposits in
denominations of $100,000 or more were approximately $2,790,000 and
$3,054,000, respectively. Deposit balances in excess of $100,000 are not
insured by the FDIC.
Contractual maturities of time certificates are summarized as follows (in
thousands):
SEPTEMBER 30
---------------------------
1998 1997
-------- ------
Within one year $ 17,207 17,014
One through two years 4,752 4,699
Two through three years 1,473 853
Three through four years 146 277
-------- ------
Total time certificates $ 23,578 22,843
======== ======
(Continued)
F-13
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
Interest expense on deposits is summarized as follows (in thousands):
1998 1997 1996
------ ----- -----
Savings and club accounts $ 519 527 544
Time certificates 1,279 1,265 1,314
NOW accounts and money
market accounts 109 104 122
------ ----- -----
$1,907 1,896 1,980
====== ===== =====
(8) INCOME TAXES
Income taxes were allocated as follows (in thousands):
1998 1997 1996
---- ---- ----
Income before income tax
expense $380 335 297
Changes in net worth, for
changes in unrealized
gains on securities 105 109 50
---- --- ---
$485 444 347
==== === ===
The components of income tax expense attributable to income from operations
are (in thousands):
1998 1997 1996
----- ---- ----
Current:
Federal $ 356 168 290
State 85 33 64
----- ---- ----
441 201 354
----- ---- ----
Deferred:
Federal (53) 106 (46)
State (8) 28 (11)
----- ---- ----
(61) 134 (57)
----- ---- ----
$ 380 335 297
===== ==== ====
(Continued)
F-14
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
Actual tax expense attributable to income before income taxes differed from
"expected" tax expense, computed by applying the U.S. Federal statutory tax
rate of 34% to income before income tax as follows (in thousands):
1998 1997 1996
----- ---- ---
Computed "expected" tax
expense $ 340 296 255
Increase (decrease) in
income taxes resulting
from:
State taxes, net of
Federal tax benefits 51 40 35
Other items, net (11) (1) 7
----- ----- -----
$ 380 335 297
===== ===== =====
Effective tax rate 38.00% 38.42% 39.65%
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are (in
thousands):
1998 1997
----- ----
Deferred tax assets:
Allowance for loan losses $ 194 161
Net deferred loan fees 12 21
Accrued expenses 75 54
Other 9 9
----- ----
Total gross deferred tax assets 290 245
----- ----
Deferred tax liabilities:
Accumulated depreciation on premises
and equipment 18 26
Accrued interest receivable 138 118
Unrealized gains on available-for-sale
securities 360 255
Prepaid expenses 7 35
----- ----
Total gross deferred tax
liabilities 523 434
----- ----
Net deferred tax assets
(liabilities) $(233) (189)
===== ====
(Continued)
F-15
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
Realization of deferred tax assets is dependent upon the generation of
future taxable income or the existence of sufficient taxable income within
the carryback period. A valuation allowance is provided when it is more
likely than not that some portion of the deferred tax assets will not be
realized. In assessing the need for a valuation allowance, management
considers the scheduled reversal of the deferred tax liabilities, the level
of historical taxable income and projected future taxable income over the
periods in which the temporary differences comprising the deferred tax
assets will be deductible. Management believes that no valuation allowance
is necessary.
Included in retained earnings at September 30, 1998 is approximately
$1,274,000 representing aggregate provisions for loan losses taken under
the Internal Revenue Code. Use of these reserves to pay dividends in excess
of earnings and profits or to redeem stock, or if the institution fails to
qualify as a bank for Federal income tax purposes, would result in taxable
income to the Bank.
(9) RETIREMENT PLAN
The Bank adopted a 401(k) Retirement Plan (the Plan) effective July 1,
1997. The Plan covers all employees who are at least 21 years of age with
one or more years of service. The Bank's basic monthly contribution to the
plan is 2% of employees salary. Additional Bank contributions to the plan
are determined annually by the Board of Directors. Participants may make
voluntary contributions to the Plan up to 15% of their compensation.
Effective August 1, 1997, the Board of Directors of the Bank voted to
convert the existing profit sharing plan into the new 401(k) plan. The
profit sharing plan covered substantially all of the Bank's employees and
contributions were made at the Bank's discretion.
Costs charged to expense for the 401(k) Retirement Plan and Profit Sharing
Plan are as follows (in thousands):
1998 1997 1996
---- ---- ----
401(k) Retirement Plan $40 7 --
Profit Sharing Plan -- 34 51
--- -- ---
$40 41 51
=== == ===
(Continued)
F-16
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
(10) COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit and
involve, to varying degrees, elements of credit, market and interest rate
risk in excess of the amounts recognized in the consolidated balance sheet.
Credit risk represents the accounting loss that would be recognized at the
reporting date if obligated counterparties failed completely to perform as
contracted. Market risk represents risk that future changes in market
prices make financial instruments less valuable.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The Bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's evaluation of the customer's financial
position. Collateral held varies, but may include real estate, accounts
receivable, inventory, property, plant and equipment and income-producing
commercial properties. Substantially all commitments to extent credit, if
exercised, will represent loans secured by real estate.
Commitments to originate fixed and adjustable rate loans are as follows (in
thousands):
1998 1997
------ ----
Fixed rate
7.00 - 7.99% $ 288 --
8.00 - 8.99% 746 571
9.00 - 9.99% 99 --
11.00 - 11.99% 109 --
------ ---
Total fixed rate 1,242 571
Adjustable rate -- --
------ ---
Total commitments to originate loans $1,242 571
====== ===
Unused lines of credit, which includes home equity, consumer and
commercial, amounted to $221,000 and $257,000 at September 30, 1998 and
1997, respectively.
(Continued)
F-17
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments is represented
by the contractual or notional amount of these instruments. The Bank uses
the same credit policies in making commitments as it does for on-balance
sheet instruments. The Bank controls its credit risk through credit
approvals, limits, and monitoring procedures.
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, the aggregate amount involved in
such proceedings is not material to the financial condition or results of
operations of the Bank.
(11) CONCENTRATIONS OF CREDIT
A substantial portion of the Bank's loans are mortgages in Central New York
State. Accordingly, the ultimate collectibility of a substantial portion of
the Bank's loan portfolio is susceptible to changes in market conditions in
this area. A majority of the Bank's loan portfolio is secured by real
estate.
The Bank's concentrations of credit risk are disclosed in the schedule of
loan classifications. Other than general economic risks, management is not
aware of any material concentrations of credit risk to any industry or
individual borrower.
(12) REGULATORY MATTERS
In 1996 the Government mandated a one-time assessment related to the
recapitalization of the SAIF insurance fund. Of the total deposit insurance
premium in 1996, the SAIF assessment amounted to $275,000.
The Bank is subject to various regulatory capital requirements administered
by its primary federal regulator, the Office of Thrift Supervision (OTS).
Failure to meet the minimum regulatory capital requirements can initiate
certain mandatory, and possible additional discretionary actions by
regulators, that if undertaken, could have a direct material effect on the
Bank and the financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines involving quantitative measures
of the Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification under the prompt corrective action guidelines
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
(Continued)
F-18
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of: total risk-based
capital and Tier I capital to risk-weighted assets (as defined in the
regulations), Tier I capital to adjusted tangible assets (as defined), and
tangible capital to tangible assets (as defined). As discussed in greater detail
below, as of September 30, 1998, the Bank met all of the capital adequacy
requirements to which it is subject.
As of October 27, 1997, the most recent notification from the OTS, the Bank was
categorized as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank has to
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as disclosed in the table below. There are no conditions or events since the
most recent notification that management believes have changed the Bank's prompt
corrective action category.
The following is a reconciliation of the Bank's GAAP and Regulatory capital at
September 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
GAAP TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL % CAPITAL % CAPITAL %
------- -------- ----- ------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
As of September 30, 1998 $11,468 11,468 11,468 11,468
- ------------------------
Regulatory capital adjustments
Allowance for loan losses (up
to 1.25% of risk
weighted assets) 321
Net unrealized gain on
securities available
for sale (539) (539) (539)
------- ------ ------
Total regulatory capital 10,929 18.7% 10,929 18.7% 11,250 44.1%
Regulatory capital requirement 876 1.5% 1,753 3.0% 2,040 8.0%
------- ------ ------
Regulatory capital excess $10,053 9,176 9,210
======= ====== ======
</TABLE>
(Continued)
F-19
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
<TABLE>
<CAPTION>
GAAP TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL % CAPITAL % CAPITAL %
------- -------- ----- ------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
As of September 30, 1997 $10,689 10,689 10,689 10,689
- ------------------------
Regulatory capital adjustments
Allowance for loan losses (up
to 1.25% of risk
weighted assets) 306
Net unrealized gain on
securities available
for sale (380) (380) (380)
------- ------ ------
Total regulatory capital 10,309 18.9% 10,309 18.9% 10,615 43.4%
Regulatory capital requirement 818 1.5% 1,636 3.0% 1,956 8.0%
------- ------ ------
Regulatory capital excess $ 9,491 8,673 8,659
======= ====== ======
</TABLE>
(Continued)
F-20
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
The following is a summary of the Bank's actual capital amounts and ratios
compared to the OTS minimum capital adequacy requirements and the OTS
requirements for classification as a well capitalized institution under
prompt corrective action provisions (in thousands):
<TABLE>
<CAPTION>
To be classified as
well-capitalized under
Minimum capital prompt corrective
Actual adequacy requirements action provisions
-------------------- ---------------------------------- -----------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------- ----- ------ ----------------------- ------ ----------------------
September 30, 1998
- ------------------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk (greater than/equal to) (greater than/equal to)
weighted assets) $ 11,250 44.1% 2,040 8.0% 2,550 10.0%
Tier 1 Capital (to risk (greater than/equal to) (greater than/equal to)
weighted assets) 10,929 42.9 1,020 4.0 1,530 6.0
Core Capital (to adjusted (greater than/equal to) (greater than/equal to)
tangible assets) 10,929 18.7 1,753 3.0 2,921 5.0
Tangible Capital (to (greater than/equal to)
tangible assets) 10,929 18.7 876 1.5 -- NA
September 30, 1997
- ------------------
Total capital (to risk (greater than/equal to) (greater than/equal to)
weighted assets) $ 10,615 43.4% 1,956 8.0% 2,446 10.0%
Tier 1 Capital (to risk (greater than/equal to) (greater than/equal to)
weighted assets) 10,309 42.2 978 4.0 1,467 6.0
Core Capital (to adjusted (greater than/equal to) (greater than/equal to)
tangible assets) 10,309 18.9 1,636 3.0 2,727 5.0
Tangible Capital (to (greater than/equal to)
tangible assets) 10,309 18.9 818 1.5 -- NA
(Continued)
F-21
</TABLE>
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments:
Cash and cash equivalents: The fair values are considered to
approximate the carrying values, as reported in the balance sheet.
Securities: Fair values of securities are based on exchange quoted
market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of similar
instruments.
Loans: For variable rate loans that reprice frequently and loans due
on demand with no significant change in credit risk, fair values are
considered to approximate carrying values. The fair values for certain
mortgage loans (e.g., one-to-four family residential) and other
consumer loans are based on quoted market prices of similar loans sold
on the secondary market, adjusted for differences in loan
characteristics. The fair values for other loans (e.g., commercial
real estate and rental property mortgage loans) are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
rating. The carrying amount of accrued interest approximates its fair
value.
FHLB Stock: The carrying value of this instrument, which is redeemable
at par, approximates fair value.
Off-balance-sheet instruments: Fair values for the Bank's
off-balance-sheet instruments (lines of credit and commitments to fund
loans) are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing. The fair value of these
financial instruments is immaterial and has therefore been excluded
from the table below.
Deposits: The fair values of demand, savings, club, NOW and money
market accounts are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). Fair
values for fixed-rate time certificates are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on these products to a schedule of aggregated expected
monthly maturities on time deposits.
(Continued)
F-22
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
The estimated carrying values and fair values of the Bank's financial
instruments are as follows (in thousands):
September 30,
----------------------------------------
1998 1997
------------------- ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ------ -------- ------
Financial assets:
Cash, cash equivalents $ 4,434 4,434 2,486 2,486
Securities 18,263 18,333 16,563 16,539
Loans, net 35,207 35,782 34,850 35,464
FHLB stock 379 379 375 375
Financial liabilities:
Deposits:
Demand accounts 210 210 113 113
Savings and club
accounts 17,302 17,302 14,883 14,883
Time certificates 23,578 23,600 22,843 22,906
NOW and money
market accounts 5,292 5,292 5,742 5,742
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
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.
(14) PLAN OF REORGANIZATION AND STOCK ISSUANCE
On April 20, 1998, the Board of Directors of Gouverneur Savings and Loan
Association (the "Bank") unanimously adopted a plan of reorganization
pursuant to which the Bank will reorganize so that it becomes a direct or
indirect subsidiary of a federally-chartered mutual holding company. It is
anticipated that upon consummation of the reorganization, the federal
mutual holding company will own a majority of the stock of a business
corporation which will itself own 100% of the stock of the Bank. It is
contemplated that a minority interest in the business corporation will be
offered to certain depositors of the Bank, an employee stock ownership plan
for the Bank and, if shares remain unsold, to the general public with a
preference to persons residing in St. Lawrence County, New York.
(Continued)
F-23
<PAGE>
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1998 and 1997
Upon consummation of the reorganization, each depositor of the Bank will
have a deposit account in the resulting reorganized Bank and any membership
interest of such depositor in the Bank will be converted into a membership
interest in the mutual holding company. It is intended that the
reorganization transaction be structured, for the purpose of Federal and
state taxation, as one or more tax-free reorganizations or tax-free
contributions of capital.
The costs of the reorganization are being deferred and will reduce the
proceeds from the sale of the minority interest. If the reorganization is
not completed, all costs will be charged to expense. Deferred
reorganization expenses at September 30, 1998 were $314,000.
F-24
<PAGE>
Part II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
SEC registration fees ............................................ $ 3,336
NASD filing fee (1) .............................................. 1,600
NASDAQ National Market Listing Fee(1) ............................ 6,000
OTS filing fees .................................................. 19,600
Underwriter's legal fees ......................................... 30,000
Printing, postage and mailing .................................... 75,000
Legal fees and expenses - issuer's counsel ....................... 125,000
Accounting fees and expenses ..................................... 85,000
Marketing agent fees and commissions ............................. 155,000
Appraiser's fees and expenses (including business plan) .......... 24,500
Transfer agent and registrar fees and expenses ................... 4,000
Stock Certificate printing ....................................... 3,000
Blue Sky filing fees and related expenses ........................ 8,000
Miscellaneous .................................................... 84,964
--------
TOTAL ............................................................ $625,000
--------
(1) Actual expenses based upon the registration of 2,201,962 shares at $5.00 per
share as originally contemplated. All other expenses are estimated.
Item 14. Indemnification of Directors and Officers.
The directors and officers of the Company are entitled to indemnification
against certain liabilities in accordance with the provisions of section 545.121
of the regulations of the Office of Thrift Supervision, which generally provide
that directors, officers and employees are entitled to indemnification against
liability, costs and expenses arising out of any action brought or threatened
because such person is or was a director, officer or employee of the Company.
Indemnification is permitted if a final judgment on the merits is rendered in
favor of the indemnified person. If there is a settlement or a final judgment
against the indemnified person, then indemnification is permitted only if a
majority of the Company's disinterested directors determines that the
indemnified person was acting in good faith within the scope of his or her
employment or authority as he or she could have reasonably believed under the
circumstances was in the best interests of the Company or its stockholders.
Item 15. Recent Sales of Unregistered Securities.
None.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
The exhibits filed as part of this Registration Statement are as follows:
(a). List of Exhibits. (Filed herewith unless otherwise noted.)
Exhibit No. Description
1.1 Engagement Letter (proposal for marketing agent services, including
indemnification letter), dated April 6, 1998 between Gouverneur
Savings and Loan Association and First Albany Corporation.*
1.2 Form of Agency Agreement*
2.1 Plan of Mutual Holding Company Reorganization and Stock Issuance of
Gouverneur Savings and Loan Association*
3.1 Federal Stock Charter of Gouverneur Bancorp, Inc.*
3.2 Bylaws of Gouverneur Bancorp, Inc.*
3.3 Federal Stock Charter of Gouverneur Savings and Loan Association*
3.4 Federal Stock Bylaws of Gouverneur Savings and Loan Association*
4.1 Form of Stock Certificate of Gouverneur Bancorp, Inc.*
5.1 Opinion of Serchuk & Zelermyer, LLP regarding legality*
8.1 Opinion of Serchuk & Zelermyer, LLP regarding federal and state
taxation*
8.2 Opinion of Keller & Company, Inc. regarding Subscription Rights*
10.1 Employee Stock Ownership Plan of Gouverneur Bancorp, Inc.*
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Serchuk & Zelermyer, LLP*
23.3 Consent of Keller & Company, Inc.*
24.1 Power of Attorney*
27.1 Financial Data Schedule*
99.1 Appraisal Report of Keller & Company, Inc.
(updated report submitted separately by paper filing)
99.2 Form of Marketing Materials to be used in connection with the
Offerings*
99.3 Additional Marketing Materials*
99.4 Supplemental Marketing Materials
- ----------
* Previously filed
Financial Statement Schedules
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
II-2
<PAGE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities registered which remain unsold at the termination of the
Offering.
The undersigned Registrant hereby undertakes to provide to the agent at the
closing specified in the Agency Agreement, certificates in such denominations
and registered in such names as required by the agent to permit prompt delivery
to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense in connection
with the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
For purpose of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon the Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 3 to Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
Town and Village of Gouverneur, State of New York, on December 18, 1998.
Gouverneur Bancorp, Inc.
By: /s/ Richard F. Bennett
----------------------------
Richard F. Bennett
President and Chief Executive
Officer
(duly authorized officer)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 3 to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Name and Signature Title Date
- ------------------ ----- ----
/s/Richard F. Bennett President, Chief December 18, 1998
- ------------------------ Executive Officer and
Richard F. Bennett Director
(Principal Executive
Officer)
/s/Kay McIntosh Treasurer December 18, 1998
- ------------------------ (Principal Financial and
Kay McIntosh Accounting Officer)
/s/Richard F. Bennett As attorney for named December 18, 1998
- ------------------------ directors
Richard F. Bennett, as Power of
Attorney for* Charles E. Graves,
Robert J. Leader, Larry D. Straw,
Frank Langevin, Richard Jones
and Carl Pettito
* Pursuant to Power of Attorney previously filed as Exhibit 24.1 to the
Registration Statement on Form S-1.
II-4
<PAGE>
TABLE OF EXHIBITS
(Filed herewith unless otherwise noted)
Exhibit
No. Description
1.1 Engagement Letter (proposal for marketing agent services, including
indemnification letter), dated April 6, 1998 between Gouverneur
Savings and Loan Association and First Albany Corporation.*
1.2 Form of Agency Agreement*
2.1 Plan of Mutual Holding Company Reorganization and Stock Issuance of
Gouverneur Savings and Loan Association*
3.1 Federal Stock Charter of Gouverneur Bancorp, Inc.*
3.2 Bylaws of Gouverneur Bancorp, Inc.*
3.3 Federal Stock Charter of Gouverneur Savings and Loan Association*
3.4 Federal Stock Bylaws of Gouverneur Savings and Loan Association*
4.1 Form of Stock Certificate of Gouverneur Bancorp, Inc.*
5.1 Opinion of Serchuk & Zelermyer, LLP regarding legality*
8.1 Opinion of Serchuk & Zelermyer, LLP regarding federal and state
taxation*
8.2 Opinion of Keller & Company, Inc. regarding Subscription Rights*
10.1 Employee Stock Ownership Plan of Gouverneur Bancorp, Inc.*
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Serchuk & Zelermyer, LLP*
23.3 Consent of Keller & Company, Inc.*
24.1 Power of Attorney*
27.1 Financial Data Schedule*
99.1 Appraisal Report of Keller & Company, Inc.
(updated report submitted separately by paper filing)
99.2 Form of Marketing Materials to be used in connection with the
Offerings*
99.3 Additional Marketing Materials*
99.4 Supplemental Marketing Materials
- ----------
* Previously filed
Confirmation Form
If you want to continue your order for stock of Gouverneur Bancorp, Inc., you
must sign this form and return it to Gouverneur Savings and Loan Association, 42
Church Street, Gouverneur, New York 13642 so that it is received no later than
January ___, 1999. By signing this form, you acknowledge that you have received
the Prospectus Supplement dated December ____, 1998.
This form must be signed by at least one of the original subscribers who signed
the original order form for the purchase of stock.
I/we _____________________________ [fill in your name(s)] request that my/our
order for common stock of Gouverneur Bancorp, Inc. as previously submitted be
continued. I/we understand that once this form is submitted, the order cannot be
changed or canceled before _____________________, 1999. Subscription funds will
continue to earn interest as described in the prospectus. For questions or help
in completing this form, please call 315-287-4293.
This form applies to all orders submitted by the person(s) signing below,
including orders submitted as trustee, custodian or in any representative
capacity as well as individual and joint orders.
------------------------------------
Signature of at least one subscriber
------------------------------------
Print name signed above
------------------------------------
Daytime telephone number
(in case there are any questions)
THE SHARES OF COMMON STOCK OF THE COMPANY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENT AGENCY.
<PAGE>
Questions and Answers About Our Revised Stock Offering
GOUVERNEUR SAVINGS AND LOAN ASSOCIATION
* * * * * *
GOUVERNEUR BANCORP, INC.
URGENT NOTICE: IF YOU HAVE AN ORDER
AND YOU DO NOT WANT IT TO BE AUTOMATICALLY CANCELED,
YOU MUST RETURN A CONFIRMATION FORM NO LATER THAN JANUARY ___, 1999.
<PAGE>
QUESTIONS AND ANSWERS ABOUT OUR REVISED OFFERING
WHY DID THE BANK CHANGE THE OFFERING?
We changed the offering because prices for bank and savings institution
stocks declined and because we did not receive orders for enough stock.
WHAT WAS CHANGED?
We reduced the amount of stock we are selling because the estimated value
of the stock as determined by an independent appraiser has declined.
DOES THE REDUCED APPRAISAL MEAN THE STOCK IS LESS ATTRACTIVE?
NO! We don't believe that this is a less attractive deal for stockholders.
It is a little like a pie cut up into slices. The slices are like shares of
stock Under the revised offering, the pie is cut into fewer slices (less shares)
so each slice is larger. However, the price for the larger slice is the same as
the price for the smaller slice under the original terms of the offering.
CAN YOU TRANSLATE THIS INTO DOLLARS?
In the original Prospectus, we disclosed "pro forma" earnings per share and
"pro forma" book value per share. These were estimates. We have now prepared new
"pro forma" data based on the reduced appraisal, reduced estimated earnings
because interest rates have declined, increased expenses and our financial
results through September 30, 1998. At the minimum of the Valuation Range, the
pro forma earnings per share have increased from $0.21 to $0.29 and the pro
forma book value per share has increased from $5.31 to $6.47. These are
estimates and should not be used to predict future results. However, they may
help to compare the original and the amended value.
The following tables show estimated pro forma earnings per share and net
income per share data comparing the original valuation with the amended
valuation. For a description of the assumptions used, see page ___ of the
Prospectus Supplement dated December ___, 1998.
EARNINGS PER SHARE COMPARISON
[Bar Chart - - Graphical Representation]
ANNUALIZED PRO FORMA EARNINGS PER SHARE
At At At At 15% Above
Minimum Midpoint Maximum Maximum
Amount Sold
[ ]Original Valuation [ ] Amended Valuation
<PAGE>
BOOK VALUE PER SHARE COMPARISON
[Bar Chart - - Graphical Representation]
PRO FORMA BOOK VALUE PER SHARE
($5.00 per share purchase price)
At At At At 15% Above
Minimum Midpoint Maximum Maximum
[ ]Original Valuation [ ] Amended Valuation
I WANT TO BUY STOCK. WHAT DO I DO?
If you don't already have an order, you must submit a Supplemental Order
Form. You must pay for the new order with a check, money order or with a
withdrawal authorization from an account at our Bank. The deadline for
submitting orders is 5:00 pm on February ___, 1999. The order must be submitted
to the Bank at 42 Church Street, Gouverneur, New York 13642.
I HAVE ALREADY SUBSCRIBED FOR STOCK. DO I HAVE TO DO ANYTHING?
If you do not want to change your order, you must submit a Confirmation
Form no later than January ___, 1999. If you want to increase your order, please
submit a Supplemental Order Form for the increased amount.
I WANT TO RESCIND MY ORDER. WHAT DO I DO?
You do not have to do anything. If you do not confirm your order by January
___, 1999, your order will be canceled. Any money you pay will be refunded and
any withdrawal authorization will be canceled.
HOW MUCH STOCK WILL BE SOLD?
We don't know yet. There is a range from $5.3 million to $7.2 million, with
a possible increase to $8.3 million. We may sell any amount within that range
depending upon the number of orders received, market conditions, decisions of
the Office of Thrift Supervision, and other factors.
HOW CAN I GET MORE INFORMATION?
There is a Supplement dated December __, 1998 which gives detailed
information about the changes. It also includes recent financial information.
Read it before you decide whether to purchase stock.
IF I HAVE ANY QUESTIONS, WHO SHOULD I CONTACT?
If you have questions, you can call us at our Stock Center at 315-287-4293.
You can also visit the Stock Center at our main office at 42 Church Street in
Gouverneur.
<PAGE>
WILL MY SUBSCRIPTION FUNDS EARN INTEREST WHILE THE OFFERING IS IN PROGRESS?
YES! If you pay by check, you will earn interest at 3.5% per year until the
offering is completed or canceled. If you authorize a withdrawal from an account
at the Bank, the money will continue to earn interest at the rate for that
account.
CAN I REVOKE MY NEW ORDER?
New orders cannot be revoked unless the offering is not completed by
____________, 1999.
HOW ABOUT FDIC INSURANCE?
The Common Stock of Gouverneur Bancorp, Inc. is not a deposit or an account
and is not insured by the FDIC or any other government agency.
WHAT IS FIRST ALBANY'S ROLE IN THE REORGANIZATION?
First Albany is an investment banking firm that is helping Gouverneur
Savings and Loan to sell the stock of Gouverneur Bancorp, Inc. First Albany also
expects to be a market maker in the stock of Gouverneur Bancorp after the
Reorganization.
Important Reminder - If you have an existing order and you do not want to
cancel, you must return the Confirmation Form no later than January ___, 1999.
If you need any help with the Confirmation Form, call us at 315-287-4293.
<PAGE>
Dear Stock Subscriber:
We want to thank you for your subscription to buy stock of Gouverneur
Bancorp, Inc. We also want you to know that the appraisal used to determine the
amount of stock we are selling has been reduced. We believe that this reduction
means that the stock of Gouverneur Bancorp, Inc. will provide greater benefit to
subscribers.
UNDER SECURITIES AND EXCHANGE COMMISSION POLICY, WE MUST CANCEL YOUR ORDER
AND RETURN YOUR SUBSCRIPTION FUNDS (OR CANCEL ANY WITHDRAWAL AUTHORIZATION FROM
YOUR ACCOUNT AT OUR BANK) IF YOU DO NOT CONFIRM YOUR ORDER. THEREFORE, IF YOU
WANT YOUR ORDER TO REMAIN EFFECTIVE, YOU MUST RETURN THE ENCLOSED CONFIRMATION
FORM NO LATER THAN JANUARY __, 1999. THE FORM CAN BE MAILED IN THE ENCLOSED
ENVELOPE (NO POSTAGE NECESSARY) OR HAND DELIVERED TO OUR BANK. IF YOU DO NOT
RETURN THE FORM, YOUR ORDER WILL BE CANCELED.
Details regarding the reduction in the appraisal and other important
information, including our financial statements for the fiscal year ended
September 30, 1998, are included in the enclosed Prospectus Supplement dated
December __, 1998. Please read the supplement and the original prospectus dated
August 12, 1998 carefully before you make a decision to purchase stock. We have
enclosed a question and answer brochure that you may find helpful.
You may also increase your order. If you want to increase your order, you
must submit a new order form for the additional stock. A copy of the order form
is enclosed for your convenience. The deadline for submitting the new order form
is January __, 1999.
If you have any questions, you may wish to attend our informational meeting
scheduled for Tuesday, January 5, 1999. Please refer to the enclosed meeting
invitation for the location and time. You may also call our stock information
center at 315-287-4293.
Sincerely:
/s/
- -----------------------------
Richard F. Bennett
President and CEO
This letter is neither an offer to sell nor a solicitation of an offer to
buy the common stock of Gouverneur Bancorp, Inc. The offer is made only by the
Prospectus and Prospectus Supplement. The common stock of Gouverneur Bancorp,
Inc. is not a savings account or a deposit, and will not be insured by the
Federal Deposit Insurance Corporation or any other government agency. The common
stock is subject to investment risks, including possible loss of principal
invested.
<PAGE>
Dear Community Member:
As you may be aware we did not receive sufficient subscriptions to close
our offering of the common stock of Gouverneur Bancorp, Inc. When we began, we
could not predict the turmoil that would occur in the stock market in the late
summer and early fall of 1998. This volatility resulted in our inability to
close the offering at the minimum range. After a review of the current market
conditions, the Board of Directors has decided to proceed with the stock
offering.
In accordance with The Plan of Reorganization, our independent appraiser
has reduced the appraisal of Gouverneur Bancorp, Inc, resulting in a reduction
in the amount of stock we are selling. We believe that this reduction means the
stock of Gouverneur Bancorp, Inc. will provide greater benefit to subscribers.
The purchase price remains $5.00 per share.
Details regarding the reduction in the appraisal and other important
information, including our financial statements for the fiscal year ended
September 30, 1998, are included in the enclosed Prospectus Supplement dated
December __, 1998. Please read the supplement and the original prospectus dated
August 12, 1998, carefully before you make a decision to purchase stock. We have
enclosed a question and answer brochure that you may find helpful.
If you wish to place an order for stock, please complete the enclosed order
form and return it, along with your payment or withdrawal authorization, to the
Gouverneur Bancorp Stock Information Center by 3:00 p.m. Eastern time on January
29,1999.
If you have any questions, you may wish to attend our informational meeting
scheduled for Tuesday, January 5, 1999. Please refer to the enclosed meeting
invitation for the location and time. You may also call our stock information
center at 315-287-4293.
Sincerely:
/s/
- ---------------------------------
Richard F. Bennett
President and CEO
This letter is neither an offer to sell nor a solicitation of an offer to
buy the common stock of Gouverneur Bancorp, Inc. The offer is made only by the
Prospectus and Prospectus Supplement. The common stock of Gouverneur Bancorp,
Inc. is not a savings account or a deposit, and will not be insured by the
Federal Deposit Insurance Corporation or any other government agency. The common
stock is subject to investment risks, including possible loss of principal
invested.
<PAGE>
PROSPECT INVITATION
The Directors and Officers
of
Gouverneur Savings and Loan Association
cordially invite you to attend a brief
presentation regarding the stock offering of
Gouverneur Bancorp, Inc., our proposed holding company.
Please join us at:
Place
Address
Date
at ____ p.m.
Hors d'oeuvres will be served.
Space is limited so Please call (315) 287-4293 if you plan to attend.
<PAGE>
Logo
Stock Offering Expires
12:00 Noon
February ___, 1999
Stock Center
(Holding Company for Gouverneur Savings and 42 Church Street
Loan Association) Gouverneur, NY 13642
(315) 287-4293
SUPPLEMENTAL STOCK ORDER FORM
- --------------------------------------------------------------------------------
NUMBER OF SHARES
- --------------------------------------------------------------------------------
Number of Shares Purchase Price Total Payment Due
- --------------- -----------------
X $5.00
The minimum number of shares that may be subscribed for is 25 and the maximum
number is 60,000 shares per individual or per account. The limit for any person
together with their associates or persons acting in concert in the
Reorganization is 60,000 shares. Management has the discretion to increase or
decrease the purchase limit within regulations. ORDERS OF $25,000 OR MORE MUST
BE PAID BY GOUVERNEUR SAVINGS AND LOAN ASSOCIATION ACCOUNT WITHDRAWALS,
CERTIFIED FUNDS, CASHIER'S CHECK OR MONEY ORDER.
- --------------------------------------------------------------------------------
METHOD OF PAYMENT
- --------------------------------------------------------------------------------
/ / Enclosed is a check or money order made Do not mail cash. Please
payable to GOUVERNEUR BANCORP, take cash payment in person
INC. for $____________ to any Gouverneur Savings and
Loan Association office
/ / I authorize Gouverneur Savings and Loan Association to withdraw the
indicated amounts from the following Gouverneur Savings and Loan
Association accounts, and understand that the amounts will not otherwise be
available for withdrawal.
Account Number Amount
- ------------------------------------- ----------------------------------
$
- ------------------------------------- ----------------------------------
- ------------------------------------- ----------------------------------
$
- ------------------------------------- ----------------------------------
- ------------------------------------- ----------------------------------
$
- ------------------------------------- ----------------------------------
- ------------------------------------- ----------------------------------
$
----------------------------------
To withdraw from an account with check
writing privileges, please write a check.
(Call the Stock Center for IRA transactions.)
There will be no penalty for early
withdrawals of funds used to order stock.
- --------------------------------------------------------------------------------
PURCHASER INFORMATION
- --------------------------------------------------------------------------------
/ / Check here if you are a director, officer or employee of Gouverneur Savings
and Loan Association or a member of their immediate families.
/ / Check here if you were a depositor on March 31, 1997, June 30, 1998 or
July 31,1998. If you check this box, please enter all your account
information for each of these dates below: (If you need additional space,
please attach a separate sheet.)
Name(s) on Accounts Account Number
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
Name(s) on Accounts Account Number
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
- ---------------------------- -------------------------
/ / I am not acting in concert with any other persons purchasing stock in the
Reorganization nor are any of my associates purchasing stock.
/ / I am acting in concert with the following purchasers and/or the following
purchasers are my associates: _______________, ________________,
_________________.
- --------------------------------------------------------------------------------
STOCK REGISTRATION
- --------------------------------------------------------------------------------
Please review the guidelines enclosed with this form. Print the name(s) in
which you want the stock registered and the mailing address for the
registration. Names must appear exactly as on your account at Gouverneur Savings
and Loan Association if you are subscribing as an Eligible Account Holder,
Supplemental Account Holder or Other Depositor. SUBSCRIPTION RIGHTS ARE NOT
TRANSFERABLE.
Form of ownership: Please check one.
/ / Individual / / Tenants in common / / Uniform Transfers to
Minors Act
/ / Joint Tenants / / Corporation or / / Uniform Gifts to Minors
partnership Act
/ / Other _________________ / / Fiduciary _____________
please specify adoption date
Tenants in common
- ---------------------------------------- -------------------------------------
Name Social Security or Tax I.D. No.
- ---------------------------------------- -------------------------------------
- ---------------------------------------- -------------------------------------
Name Evening Telephone
- ---------------------------------------- -------------------------------------
- ---------------------------------------- -------------------------------------
Street Address Daytime Telephone
- ---------------------------------------- -------------------------------------
- ---------------------------------------- -------------------------------------
City State Zip County of Residence
- ---------------------------------------- -------------------------------------
- --------------------------------------------------------------------------------
NASD AFFILIATION
- --------------------------------------------------------------------------------
/ / Check here and initial at the end of this paragraph if you are a member
of the NASD or a person associated with an NASD member or a partner with a
securities brokerage firm or a member of the immediate family of any such
person to whose support such person contributes directly or indirectly or
if you have an account in which an NASD member or person associated with an
NASD member has a beneficial interest. In accordance with the conditions
for an exception from the NASD Interpretation With Respect to Free Riding
and Withholding, I agree (i) not to sell, transfer or hypothecate this
stock for a period of 90 days following issuance and (ii) to report this
subscription in writing to the applicable NASD member I am associated with
within one day of payment of the stock. _____________________(Initial)
<PAGE>
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENTS
- --------------------------------------------------------------------------------
To purchase stock in the Subscription Offering, this fully completed Stock Order
Form must be actually received by Gouverneur Savings and Loan Association no
later than 12:00 noon, New York Time on February ___, 1999, unless extended,
otherwise this Stock Order Form and all subscription rights will be void.
Completed Stock Order Forms, together with the required payment or withdrawal
authorization and signed Certification, may be delivered to Gouverneur Savings
and Loan Association or may be mailed to the Post Office Box indicated on the
enclosed business reply envelope. ALL RIGHTS EXERCISABLE HEREUNDER ARE NOT
TRANSFERABLE AND SHARES PURCHASED UPON EXERCISE OF SUCH RIGHTS MUST BE PURCHASED
FOR THE ACCOUNT OF THE PERSON EXERCISING SUCH RIGHTS. The undersigned certifies
that this stock order is for my account only and there is no agreement or
understanding regarding the transfer of my subscription rights or any further
sales or transfer of these shares. If there is any such agreement or
understanding, this subscription may be canceled by Gouverneur Savings and Loan
Association.
It is understood that this Stock Order Form will be accepted in accordance with,
and subject to, the terms and conditions of the Plan of Mutual Holding Company
Reorganization and Stock Issuance of Gouverneur Savings and Loan Association
described in the Prospectus dated August 12, 1998 and the Prospectus Supplement
dated ____________, 1998, receipt of which is hereby acknowledged at least 48
hours prior to delivery of this Stock Order Form to Gouverneur Savings and Loan
Association. If the minimum shares cannot be sold, all orders will be cancelled
and funds received as payment, with accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Gouverneur Bancorp, Inc., this
Stock Order Form may not be modified, withdrawn or canceled (unless the
Reorganization is not completed by ____________, 1999) and if Gouverneur Savings
and Loan Association has been given authorization to withdraw a specified amount
from deposit accounts at Gouverneur Savings and Loan Association as payment
shares, the amount authorized for withdrawal shall not otherwise be available
for withdrawal by the undersigned. I ACKNOWLEDGE THAT THIS SECURITY IS NOT A
DEPOSIT OR ACCOUNT AND IS NOT INSURED OR GUARANTEED BY THE SAVINGS ASSOCIATION
INSURANCE FUND, THE FDIC OR THE FEDERAL GOVERNMENT.
Under penalty of perjury, I certify that the Social Security or Tax ID Number on
this Stock Order Form is true, correct and complete and that I am not subject to
back-up withholding.
- --------------------------------------------------------------------------------
SIGN BELOW (YOU MUST ALSO READ AND SIGN THE CERTIFICATION BELOW TO PURCHASE
STOCK).
- --------------------------------------------------------------------------------
Sign and date the form. When purchasing as a custodian, corporate officer, etc.,
include your full title. An additional signature is required only when payment
is by withdrawal from an account that requires more than one signature to
withdraw funds. YOUR ORDER WILL BE FILLED IN ACCORDANCE WITH THE PROVISIONS OF
THE PROSPECTUS. THIS ORDER IS NOT VALID IF NOT SIGNED ON THE FRONT AND BACK.
IF YOU NEED HELP COMPLETING THIS FORM, YOU MAY CALL THE STOCK CENTER AT (315)
287-4293
- --------------------------------------------------------------------------------
SIGN HERE AND BELOW
x
------------------------------------------------------
Authorized Signature Title(if applicable) Date
[ logo ] x
------------------------------------------------------
Authorized Signature Title(if applicable) Date
CERTIFICATION: I/WE ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR AN
ACCOUNT AND IS NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY GOUVERNEUR
SAVINGS AND LOAN ASSOCIATION OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or guaranteed, or is
as safe as an insured deposit, I/we should call the Office of Thrift Supervision
Regional Director, Northeast Regional Office, at (201) 413-1000.
I/We further certify that before purchasing the common stock, par value $0.01
per share, of Gouverneur Bancorp, Inc., I/we received a prospectus that contains
disclosure concerning the nature of the security being offered and describes the
risks involved in the investment, including, among others, (1) Interest Rate
Risk; (2) Geographic Concentration of Loans; (3) Limited Opportunities for
Growth in the Bank's Market Area; (4) Competition; (5) Lending Risks; (6) Year
2000 Compliance; (7) Reliance on Chief Executive Officer; (8) Reduction in
Return on Equity; Investment of Proceeds; (9) Increased Compensation and Other
Expenses after the Reorganization; (10) The Mutual Holding Company Structure;
(11) Absence of Market for Common Stock; (12) Possible Increase in the Valuation
Range and Number of Shares to be Issued; (13) Possible Dilution from Stock
Options and the Restricted Stock Plan; (14) Possible Adverse Income Tax
Consequences of the Distribution of Subscription Rights and (15) Regulation of
Financial Institutions. See "Risk Factors" on pages 13 through 18 of the
Prospectus. I/we further certify that I/we received and read a Prospectus
Supplement dated ______________ which described additional risks including: (1)
Negative General Market Conditions and Their Effect on the Updated Appraisal;
(2) Adverse Effects of the Potential Reduction in Amount of Stock Sold on Nasdaq
Listing and (3) Lower Pro Forma Earnings Per Share and Book Value Per Share if
Reorganization Completed Above the Minimum of the Amended Valuation Range
appearing under the caption "Additional Risk Factors" on page 9 of the
Supplement.
SIGNATURE: _____________________ SIGNATURE: ____________________
PRINT NAME:_____________________ PRINT NAME:____________________
