FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ___________________
Commission file number 000-24761
GOUVERNEUR BANCORP, INC.
(Exact name of registrant as specified in its charter)
UNITED STATES 04-3429966
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
42Church Street, Gouverneur, New York 13642
(Address of principal executive offices)
Registrant's telephone number, including area code: (315) 287-2600
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 dutring the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
As of April 30, 1999 there were 2,384,040 shares outstanding.
<PAGE>
GOUVERNEUR BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Consolidated Statements of Financial Condition at March 31,
1999 and September 30, 1998 4
Consolidated Statements of Income for the three and six month
periods ended March 31, 1999 and March 31, 1998 5
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for the six months ended March 31, 1999 6
Consolidated Statements of Cash Flows for the six months ended
March 31, 1999 and 1998 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 6. Exhibits and Reports on Form 8-K 23
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements presented in this Form 10-Q beginning on the following
page reflect the consolidated financial condition and results of operations of
the Gouverneur Bancorp, Inc. ("We" or the "Company") and its subsidiary
Gouverneur Savings and Loan Association (the "Bank") for periods on and after
March 23, 1999. Financial statements presented for periods before March 23, 1999
are for the Bank.
3
<PAGE>
<TABLE>
<CAPTION>
GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
(Unaudited)
MARCH 31 SEPTEMBER 30
1999 1998
-------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,033 $ 1,179
Interest-bearing deposits with other financial institutions 1,765 3,255
Securities available for sale, at fair value 12,982 10,546
Securities held to maturity, fair value of
$7,002 in 1999 and $7,787 in 1998 7,009 7,717
Loans, net of deferred fees 39,217 35,691
Allowance for loan losses (533) (484)
-------- --------
Loans, net 38,684 35,207
Bank premises and equipment, net 269 288
Federal Home Loan Bank stock, at cost 386 379
Accrued interest receivable 359 346
Real estate owned 70 51
Other assets 55 369
-------- --------
Total assets $ 62,612 $ 59,337
======== ========
LIABILITIES
Deposits: Non-interest bearing $ 222 $ 210
Interest bearing 44,731 46,172
-------- --------
Total deposits 44,953 46,382
Advance payments by borrowers for property taxes
and insurance 189 105
Other liabilities 1,589 1,382
-------- --------
Total liabilities 46,731 47,869
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value per share;
authorized 1,000,000 shares, issued: none -- --
Common stock, $.01 par value per share;
authorized 9,000,000 shares, issued:2,384,040 24 --
Additional paid in capital 4,555 --
Retained earnings 11,145 10,929
Accumulated other comprehensive income 586 539
Unallocated shares of Employee Stock Ownership Plan
(ESOP) 85,825 shares in 1999 (429) --
-------- --------
Total shareholders' equity 15,881 11,468
-------- --------
Total liabilities & shareholders' equity $ 62,612 $ 59,337
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31 MARCH 31
INTEREST INCOME 1999 1998 1999 1998
- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans $ 871 $ 811 $ 1,699 $ 1,622
Securities 272 235 551 483
Other short-term investments 16 22 46 38
---------- ---------- ---------- ----------
Total interest income 1,159 1,068 2,296 2,143
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 489 460 1,003 936
Borrowings 4 -- 4 --
---------- ---------- ---------- ----------
Total interest expense 493 460 1,007 936
---------- ---------- ---------- ----------
Net interest income 666 608 1,289 1,207
Provision for loan losses 11 42 44 85
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 655 566 1,245 1,122
Non-interest income:
Service charges 14 10 31 24
Net gain on sale of securities 4 -- 4 --
Other 37 30 79 60
---------- ---------- ---------- ----------
Total non-interest income 55 40 114 84
Non-interest expenses:
Salaries and employee benefits 191 149 391 312
Directors fees 16 16 35 30
Building, occupancy and equipment 59 46 113 89
Data processing 23 21 46 41
Postage and supplies 23 16 41 38
Professional fees 13 12 34 23
Deposit insurance premium 7 7 14 14
Real estate owned 16 31 47 51
Other 59 47 130 94
---------- ---------- ---------- ----------
Total non-interest expenses 407 345 851 692
Income before income taxes 303 261 508 514
Income taxes 114 98 192 208
---------- ---------- ---------- ----------
NET INCOME $ 189 $ 163 $ 316 $ 306
========== ========== ========== ==========
BASIC EARNINGS PER SHARE (See Note 3) N/A N/A N/A N/A
Weighted average shares outstanding 2,298,215 N/A 2,298,215 N/A
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (In
thousands, except share data)
(Unaudited)
Accumulated
Additional Other Unallocated
Common Paid-in Retained Comprehensive ESOP
Stock Capital Earnings Income Shares Total
<S> <C> <C> <C> <C> <C> <C>
Balances at
September 30, 1998 $ -- $ -- $ 10,929 $ 539 $ -- $ 11,468
Net proceeds from issuance
of 1,072,818 shares of
common stock 11 4,568 4,579
Common stock acquired by
ESOP (85,825 shares) (429) (429)
Initial capital contribution
and issuance of shares
to Cambray MHC
(1,311,222 shares) 13 (13) (100) (100)
Comprehensive Income:
Change in net unrealized gain
(Loss) on available-for-sale
securities, net of tax 47 47
Net Income 316 316
--------
Total Comprehensive Income 363
-------- -------- -------- -------- ------- --------
Balances at
March 31, 1999 $ 24 $ 4,555 $ 11,145 $ 586 ($ 429) $ 15,881
======== ======== ======== ======== ======= ========
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
(Unaudited)
SIX MONTHS ENDED
MARCH 31
1999 1998
------- -------
OPERATING ACTIVITIES
Net income $ 316 $ 306
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 33 29
Increase in accrued interest receivable (13) (6)
Provision for loan losses 44 85
Net gains on sales of securities (4) --
Net (gain) loss on sale of real estate owned (12) 2
Net amortization (accretion) of premiums/discounts 3 3
Decrease other liabilities 176 (7)
Decrease in other assets 314 90
------- -------
Net cash provided by operating activities 857 502
------- -------
INVESTING ACTIVITIES
Net (increase) decrease in loans (3,573) 405
Proceeds from sales of securities available-for-sale 504 836
Proceeds from maturities and principal reductions of
securities available-for-sale 1,500 1,000
Purchases of securities available-for-sale (4,358) (2,353)
Purchases of securities held-to-maturity (695) (714)
Proceeds from maturities and principal reductions of
securities held-to-maturity 1,400 2,249
Proceeds from sale of real estate owned 45 47
Additions to premises and equipment (14) (49)
(Purchase) of FHLB stock (7) (4)
------- -------
Net cash (used) provided by investing activities (5,198) 1,417
------- -------
FINANCING ACTIVITIES
Net decrease in deposits (1,429) (658)
Net increase in advance payments by
borrowers for property taxes and insurance 84 71
Net proceeds from issuance of common stock 4,579 --
Purchase of shares of common stock by ESOP (429) --
Initial capital contribution to Cambray MHC (100) --
------- -------
Net cash provided (used) by financing activities 2,705 (587)
------- -------
Net (decrease) increase in cash and
cash equivalents (1,636) 1,332
Cash and cash equivalents at beginning of period 4,434 2,486
------- -------
Cash and cash equivalents at end of period $ 2,798 $ 3,818
======= =======
Supplemental disclosure of cash flow information
Non-cash investing activities:
Additions to real estate owned 52 68
Cash paid during the period for:
Interest 1,007 936
Income taxes 404 --
See accompanying notes to consolidated financial statements
7
<PAGE>
GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS
Gouverneur Bancorp, Inc. (the Company) operates as a savings
and loan holding company. Its only subsidiary is Gouverneur
Savings and Loan Association (the Bank). The consolidated
financial statements include the accounts of the Company and
its wholly owned subsidiary, the Bank. All material
intercompany accounts and transactions have been eliminated in
the consolidation.
2. BASIS OF PRESENTATION
The consolidated financial statements included herein reflect
all adjustments which are, in the opinion of management, of a
normal recurring nature and necessary to present fairly the
Company's financial position as of March 31, 1999 and
September 30, 1998, and results of operations for the three
and six month periods ended March 31, 1999 and 1998. The
statements of shareholders' equity and cash flows are for the
six months ended March 31, 1999 and 1998.
3. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income
available to common shareholders by the weighted average
number of shares outstanding during the period. Prior to the
mutual holding company reorganization of the Bank, which
occurred on March 23, 1999, earnings per share are not
applicable as neither the Company nor the Bank had shares
outstanding. Earnings per share was $0.01 for earnings from
March 23, 1999, to the end of the reporting period based upon
the weighted average number of shares outstanding for the
period. The income included in the computation is based on the
actual results of operations only for the post-conversion
period. Unallocated shares held by the Company's ESOP are not
included in the weighted average number of shares outstanding.
4. IMPACT OF NEW ACCOUNTING STANDARDS
On October 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 130,
REPORTING COMPREHENSIVE INCOME. This statement establishes
standards for reporting and display of comprehensive income
and its components. At the Company, comprehensive income
represents net income plus other comprehensive income, which
consists of the net change in unrealized gains or losses on
securities available for sale for the period. Accumulated
other comprehensive income represents the net unrealized gains
or losses on securities available for sale as of the balance
sheet dates, net of the related tax effect. Prior year
consolidated financial statements have been reclassified to
conform to the requirements of SFAS 130.
A summary of unrealized gains and reclassification
adjustments, net of tax, of available-for-sale securities for
the six-month periods ended March 31, 1999 and 1998 follows:
8
<PAGE>
1999 1998
---- ----
Unrealized holding gains arising during
the period net of tax (pre-tax
amount of $82,000 and $213,000) $ 49 $128
Reclassification adjustment for gains
realized in net income during the
period, net of tax (pre-tax amount of $4,000 and $0) (2) --
----- ----
Change in net unrealized gains on securities $ 47 $128
Effective October 1, 1998, the Company adopted the provisions of SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No.
131 requires publicly-held companies to report financial and other information
about key revenue-producing segments of the entity for which such information is
available and is utilized by the chief operation decision maker. Specific
information to be reported for individual segments includes profit or loss,
certain revenue and expense items and total assets. A reconciliation of segment
financial information to amounts reported in the financial statements is also
provided. The Company has determined that it has no reportable segments and
therefore the adoption of SFAS No. 131 caused no significant change in the
Company's reporting.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
We were formally chartered by the Office of Thrift Supervision (the
"OTS") on March 23, 1999. On that date, the Bank completed a mutual holding
company reorganization so that it became our wholly owned subsidiary. We then
sold 45% of our common stock (1,072,818 shares) to the public for $5.00 per
share and issued 55% of our common stock (1,311,222 shares) to Cambray Mutual
Holding Company ("Cambray MHC") without any cash payment. Cambray MHC is a
mutual holding company also chartered by the OTS. As part of the reorganization,
the Bank contributed $100,000 to Cambray MHC as its initial capital. We received
$4.8 million of net proceeds from the sale of our stock. We used one half of the
net proceeds to acquire all the Bank's common stock.
OTS regulations require that Cambray MHC own a majority of our
outstanding stock. In order to dispose of that stock, OTS regulations require,
in most instances, that the depositors of the Bank must approve the transaction
in which the sale will occur, and then the shares must first be offered to those
depositors.
The Bank has been and continues to be a community oriented financial
institution offering a variety of financial services. The Bank attracts deposits
from the general public and uses those deposits, together with other funds, to
make loans and other investments. Most of the loans are one to four family
residential mortgages. The Bank also makes consumer (including home equity lines
of credit), commercial, and multi-family real estate and other loans. Most of
the loans are in the Bank's primary market area, which is southern St. Lawrence
and northern Jefferson and Lewis counties in New York State. The Bank's deposit
accounts are insured by the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation ("FDIC"), and the Bank is subject to
regulation by the FDIC and the OTS.
Our profitability depends, to a large extent, on our net interest
income, which is the difference between the interest we receive on our interest
earning assets, such as loans and investments, and the interest we pay on
interest bearing liabilities. Other categories of expenses generally include the
provision for loan losses, salaries and employee benefits costs, net expenses on
real estate owned and various other categories of operational expenses. External
factors, such as general economic and competitive conditions, particularly
changes in interest rates, government policies and actions of regulatory
authorities, can also have a substantial effect on profitability.
ANALYSIS OF NET INTEREST INCOME
Net interest income, the Bank's primary income source, depends
principally upon (i) the amount of interest-earning assets that the Bank can
maintain based upon its funding sources; (ii) the relative amounts of
interest-earning assets versus interest-bearing liabilities; and (iii) the
difference between the yields earned on those assets and the rates paid on those
liabilities. Non-performing loans adversely affect net interest income because
they must still be funded by interest-bearing liabilities, but they do not
provide interest income. Furthermore, when the Bank designates an asset as
non-performing, all interest which has been accrued but not actually received is
deducted from current period income, further reducing net interest income.
10
<PAGE>
AVERAGE BALANCES, INTEREST RATES AND YIELDS
The following tables present, for the periods indicated, the average
interest-earning assets and average interest-bearing liabilities 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.
<TABLE>
<CAPTION>
For the Six Months Ended March 31,
---------------------------------------------------------------
1999 1998
------------------------------- ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost (6) Balance Interest Cost (6)
------- -------- -------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans (1) $36,824 $ 1,699 9.25% $34,763 $ 1,622 9.36%
Securities (2) 18,361 551 6.02% 15,555 483 6.23%
Other short-term investments 1,943 46 4.75% 1,499 38 5.08%
------- ------- ------- -------
Total interest-earning assets 57,128 2,296 8.06% 51,817 2,143 8.29%
Non-interest-earning assets 2,905 2,223
------- -------
Total assets $60,033 $54,040
======= =======
Savings and club accounts (3) $17,482 299 3.43% $14,630 254 3.48%
Time certificates 23,722 647 5.47% 22,454 628 5.61%
NOW and money market accounts 5,777 57 1.98% 5,446 54 1.99%
Borrowings 159 4 5.05% -- -- --
------- ------- ------- -------
Total interest-bearing liabilities 47,140 1,007 4.28% 42,530 936 4.41%
Non-interest-bearing liabilities 1,313 1,003
------- -------
Total liabilities 48,453 43,533
Equity 11,580 10,507
------- -------
Total liabilities and equity $60,033 $54,040
=======
Net interest income/spread (4) $ 1,289 3.78% $ 1,207 3.88%
------- ======= ======== ======= ======= ====
Net earning assets/net interest margin (5) $ 9,988 4.53% $ 9,287 4.67%
======= ======== ======= ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.21x 1.22x
NOTES APPEAR ON FOLLOWING PAGE.
</TABLE>
11
<PAGE>
AVERAGE BALANCES, INTEREST RATES AND YIELDS (CONTINUED)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
---------------------------------------------------------------
1999 1998
------------------------------- ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost (6) Balance Interest Cost (6)
------- -------- -------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans (1) $37,541 871 9.41% $34,540 $ 811 9.52%
Securities (2) 19,365 272 5.70% 15,273 235 6.24%
Other short-term investments 1,483 16 4.38% 1,755 22 5.08%
------- ------- ------- -------
Total interest-earning assets 58,389 1,159 8.05% 51,568 1,068 8.40%
Non-interest-earning assets 2,296 2,161
------- -------
Total assets $60,685 $53,729
======= =======
Savings and club accounts (3) $17,532 147 3.40% $14,410 125 3.52%
Time certificates 23,696 314 5.37% 22,330 308 5.59%
NOW and money market accounts 5,786 28 1.96% 5,388 27 2.03%
Borrowings 322 4 5.04% -- -- --
------- ------- ------- -------
Total interest-bearing liabilities 47,336 493 4.22% 42,530 460 4.43%
Non-interest-bearing liabilities 1,519 864
------- -------
Total liabilities 48,855 42,992
Equity 11,830 10,737
------- -------
Total liabilities and equity $60,685 $53,729
=======
Net interest income/spread (4) $ 666 3.83% $ 608 3.97%
------- ======= ======== ======= ======= ====
Net earning assets/net interest margin (5) $11,053 4.63% $ 9,440 4.78%
======= ======== ======= ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.23x 1.22x
(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.
(6) Yields and related ratios for the six month periods have been annualized when appropriate.
</TABLE>
12
<PAGE>
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
One method of analyzing net interest income is to consider how changes
in average balances and average rates from one period to the next affect 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. 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.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
--------------------------- ---------------------------
1999 VS. 1998 1999 VS. 1998
------------- -------------
Increase (Decrease) Due To: Increase (Decrease) Due To:
Volume Rate Total Volume Rate Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $ 95 $ (18) $ 77 $ 69 $ (9) $ 60
Securities 85 (17) 68 59 (22) 37
Other short-term investments 11 (3) 8 (3) (3) (6)
----- ----- ----- ----- ----- -----
Total interest-earning assets 191 (38) 153 125 (34) 91
===== ===== ===== ===== ===== =====
INTEREST-BEARING LIABILITIES:
Savings and club accounts 49 (4) 45 27 (5) 22
Time certificates 35 (16) 19 18 (12) 6
NOW and money market accounts 3 -- 3 2 (1) 1
Borrowings 4 -- 4 4 -- 4
----- ----- ----- ----- ----- -----
Total interest-bearing liabilities 91 (20) 71 51 (18) 33
===== ===== ===== ===== ===== =====
Net change in net interest income $ 100 $ (18) $ 82 $ 74 $ (16) $ 58
===== ===== ===== ===== ===== =====
</TABLE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1999 AND SEPTEMBER 30, 1998.
Our total assets increased $3.3 million from $59.3 million at September
30, 1998 to $62.6 million at March 31, 1999. The principal reason was the sale
of 45% of our common stock as part of the mutual holding company reorganization
of the Bank. At September 30, 1998, we held $3.54 million of stock subscriptions
for our stock offering, including $1.97 million of funds paid by subscribers and
$1.57 million in withdrawal authorizations from existing accounts. From November
1998 through February 1999, part of these subscriptions were canceled and we
refunded the related payments. By the end of March, 1999, we received additional
stock subscriptions and we completed the stock sale. We received net new funds
of approximately $4.2 million, after deducting expenses and our $429,000 loan to
our Employee Stock Ownership Plan. The Employee Stock Ownership Plan used the
loan to buy 8% of the stock we sold.
During the six months from September 30, 1998 through March 31, 1999,
we actively pursued an increase in our loan portfolio because loans generally
have higher yields than securities investments. As a result of our efforts, we
were able to increase our loans, net, by $3.5 million. If we had not had the
stock offering, our level of securities and other short term investments would
have declined because we would have used the proceeds of those investments to
fund the new loans. However, the stock subscriptions which we received, and
which became part of our capital
13
<PAGE>
when we completed the reorganization on March 23, could not be invested
immediately in loans. Therefore, during the first six months of this fiscal
year, we also had a $2.4 million increase in securities available for sale. We
reduced our securities classified as held to maturity by $708,000 because all
new securities purchases were classified at available for sale to increase
flexibility in dealing with our securities portfolio.
During the first six months of the fiscal year, we had a $1.4 million
decline in deposits. The reason for this decline was that some of our
stockholders purchased their stock with deposits which were at the Bank on
September 30, 1998. When we completed the reorganization on March 23, 1999,
these customers used their deposits to pay for stock, and the funds became
capital rather than deposits. In addition, on September 30, 1998, we were
holding some stock subscriptions which were later canceled. The subscriptions
had been classified as deposits pending the completion of the reorganization,
and thus the cancellation of the subscriptions resulted in an additional
decrease in deposits. We believe that if we exclude the effect of the deposit
inflows and outflows related to the reorganization, total deposits would have
increased during the six months ended March 31, 1999.
We increased our total capital by $4.4 million during the first six
months of the fiscal year. This increase was caused almost entirely by $4.2
million of net stock sale proceeds, plus retained earnings of $216,000. During
the six month period, we had total earnings of $316,000, but the Bank used
$100,000 to capitalize Cambray Mutual Holding Company, which owns 55% of our
stock, resulting in the net increase in retained earnings of $216,000.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND 1998.
GENERAL. Our net income for the three months ended March 31, 1999 was
$189,000, an increase of $26,000, or 16%, over our net income for the same
period last year. The primary reasons for the increase in net income were an
increase in our size, which provided a higher level of average earning assets,
and a decrease in our provision for loan losses. However, increases in other
operating expenses, primarily salaries and employee benefits expense, offset a
portion of the two positive factors.
INTEREST INCOME. Interest income increased by $91,000, or 8.5%, from
the three months ended March 31, 1998 to the three months ended March 31, 1999.
We generated the increase entirely as a result of efforts to increase our level
of interest-earning assets. Average interest-earning assets increased from $51.6
million for the 1998 quarter to $58.4 million for the 1999 quarter. We were able
to generate this increase through the active solicitation of loans and the
hiring of additional loan origination staff. The increase in the average balance
of loans would have been accompanied by a decrease in the average balance of
other interest-earning assets if our total sources of funds had remained level.
However, we invested the stock subscriptions we held pending completion of the
reorganization, and then the additional capital raised in the reorganization, in
securities and other short term investments. Therefore, the average balance of
those investments, and the interest earned on them, also increased.
The average interest rate we earned on our loans and securities was 35
basis points (0.35%) lower in this year's quarter than last year, with the
average rate earned on loans decreasing by 11 basis points and the average rate
earned on securities decreasing by 54 basis points. The reason for these
decreases in average rates was that market interest rates generally declined, so
that new loans and securities tended to be originated at lower rates than the
existing loans and securities in our portfolios and the rates earned on
adjustable rate loans and securities declined. We worked to limit the effect of
the decline in interest rates by originating commercial and consumer loans with
higher rates than residential mortgage loans. Also adding to the lower average
rate earned on our total earning assets was the fact that we received funds to
purchase our stock more rapidly than we were able to increase our level of
loans. We invested the new funds in lower yielding securities and other short
term investments pending redeployment, as opportunities arise, in higher
yielding loans. However, we cannot guaranty that we will be able to find
acceptable prudent loan opportunities which will allow us to increase our yields
earned.
Overall, we estimate that the increase in the average volume of
interest-earning assets caused a $125,000 increase in interest income, while the
decrease in interest rates resulted in a $34,000 decrease in interest income.
14
<PAGE>
It is important to remember that we did not complete the Reorganization
until March 23, 1999, so the increase in capital from the Reorganization was
present only for nine days in the 1999 quarter. We did not receive a substantial
part of the funds used to purchase the stock until late February or March of
1999. Since the funds were only available for investment for part of the
quarter, they only had a partial quarter's effect on average assets available
for investment.
INTEREST EXPENSE. As in the case of interest income, interest expense
also increased from the 1998 to the 1999 quarter as a result of an increase in
the average volume of interest bearing liabilities. The increase in the volume
of interest-bearing liabilities was a result of our efforts to increase deposits
and thus provide funds so we could grow our assets. However, the increase in
interest expense was only $33,000, compared to the $91,000 increase in interest
income. The interest expense increase was less than the interest earnings
increase because average capital increased by $1.1 million between the two
quarters and because the rate earned on the new assets was more than the rate
paid on the new liabilities. We estimate that the increase in the volume of
interest-bearing liabilities caused a $51,000 increase in interest expense while
a decrease in our average cost of funds caused an $18,000 decline in interest
expense.
Please remember that we paid interest on stock subscriptions from the
day we received them until we completed the reorganization. They became part of
our capital and ceased bearing interest for only the last nine days of March
1999. Capital has no interest cost. In future periods, we anticipate that the
percentage of our earning assets that are funded by interest-bearing liabilities
should be lower than before the reorganization, until we are able to leverage
the new capital through additional growth.
NET INTEREST INCOME. The net effect of the increase in interest income
and the lower increase in interest expense was a $58,000 increase in net
interest income. This increase was the result of our growth, partially reduced
by a reduction of our interest rate spread, representing the difference between
the average rate we earned and the average rate we paid. Our spread decreased by
14 basis points from 3.97% for the 1998 quarter to 3.83% for the 1999 quarter
for a number of reasons. The percentage of our assets invested in loans versus
securities and other short term investments declined because we were only
gradually able to deploy new funds in loans. This reduced spread because loans
generally have higher yields than our other investments. In addition, the
average yield on our loans declined due to generally declining interest rates
and our decision to impose stricter loan underwriting requirements. Our cost of
funds declined more slowly because we maintained slightly higher than market
interest rates in order to retain and grow deposits. These higher rates were
necessary to maintain a competitive edge at a time when other investments, such
as the stock market, were perceived by many people, including some of our
customers, as providing opportunities for higher yields.
Our net interest margin (also known as the net yield on average
interest-earning assets) declined by 15 basis points for the same reasons and
because our increase in average capital between the two periods was at
approximately the same rate as the increase in average earning assets. In future
periods, until we can leverage our increased capital, we anticipate that our net
interest margin will increase because of the increase in the portion of our
earning assets that will be funded by non-interest-bearing capital.
PROVISION FOR LOAN LOSSES. The provision for loan losses results from
our analysis of the adequacy of the allowance for loan losses. If we believe
that the allowance should be higher, then we increase it with a provision for
loan losses which is an expense on our income statement. However, our assessment
of the adequacy of the allowance is always speculative, based upon what we
expect to occur in the future with our loan portfolio, especially default rates
and the level of losses when our customers do not repay their loans. This
requires estimates of many future events, such as future interest rates, the
health of the local and national economy and the effects of government policies.
If our predictions about the future are inaccurate, then increases in the
allowance may be necessary in future
15
<PAGE>
periods even if the level of our loan portfolio remains the same. Furthermore,
the Office of Thrift Supervision may disagree with our judgments regarding the
potential risks in our loan portfolio and could require us to increase the
allowance in the future.
For the three months ended March 31, 1999, we provided $11,000 for
possible loan losses, compared to $42,000 in the same quarter last year. We
reduced the provision principally because we had a net recovery after
charge-offs of $2,000 for the 1999 quarter compared to net charge-offs of $3,000
for the same quarter the prior year. We had also had a net recovery during the
quarter ended December 31, 1998. Therefore, it was not necessary for us to make
a provision for loan losses to replenish the allowance. Furthermore, our level
of non-accruing loans (generally loans past due 90 days or more) was $233,000 at
March 31, 1999 compared to $348,000 at March 31, 1998. At March 31, 1999, our
allowance was $533,000, or 1.36% of total loans, compared to $464,000, or 1.34%
of total loans at March 31, 1998.
NON-INTEREST INCOME. Our non-interest income increased by $15,000 from
the 1998 to the 1999 quarter. The increase was principally the result of
increased size of our institution as a whole, which generated more transaction
fees. We also implemented more rigorous policies regarding the collection and
non-waiver of account-related charges.
NON-INTEREST EXPENSES. Our non-interest expenses increased by $62,000
from the 1998 to the 1999 quarter. The primary reason for this increase was an
increase in staff to generate loan growth, which caused a $42,000 increase in
salaries and employee benefits expense. By the end of the 1999 quarter, we had
20 full time and one part time employees, compared to 16 full time and 2 part
time employees at the end of March 1998. We believe that we have begun to reap
the benefits of the increase in the level of employees as the increase in loans
shows. However, we believe that our existing employee group can support
additional growth. We also believe that the reorganization itself caused a
temporary disruption in employee productivity as we allocated employees to tasks
necessary to complete the reorganization.
INCOME TAX EXPENSE. Our income tax expense increased by $16,000, or
16%, from the 1998 to the 1999 quarter. The increase corresponded to a 16%
increase in income before taxes.
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND
1998.
GENERAL. Our net income for the six months ended March 31, 1999 was
$316,000, an increase of $10,000, or 3.3%, over our net income for the same
period last year. The primary reason for the increase in net income was the
increase in our size, as discussed above, coupled with a decrease in our
provision for loan losses and a slight reduction in our effective tax rate.
Partially offsetting these improvements were an increase in salaries and
employee benefits expense and an increase in other general operating expenses.
INTEREST INCOME. Interest income increased by $153,000, or 7.1%, from
the six months ended March 31, 1998 to the six months ended March 31, 1999. We
generated the increase through our efforts to increase our interest-earning
assets. Average interest-earning assets increased from $51.8 million for the
1998 period to $57.1 million for the 1999 period. The factors which enabled us
to generate the increase were the same as discussed above in the quarterly
comparison. Our $2.1 million increase in the average balance of loans between
the 1998 and the 1999 quarters did not cause a decline in the average balance of
other interest-earning investments. This was because our growth efforts
generated a $4.6 million increase in average interest-bearing deposits and a
$1.0 million increase in average capital, which provided funds for investment.
As a result, we increased our average securities investments by $2.8 million.
The average interest rate we earned on our loans and securities was 23 basis
points (0.23%) lower during the first six months of this fiscal year than during
the same period last year. The reason for the decrease was the same as discussed
above in the quarterly period comparison.
16
<PAGE>
Overall, we estimate that the increase in the average volume of
interest-earning assets caused a $191,000 increase in interest income, while the
decrease in interest rates resulted in a decrease in interest income by
approximately $38,000.
INTEREST EXPENSE. As in the case of interest income, interest expense
also increased from the 1998 to the 1999 periods as a result of an increase in
the average volume of interest-bearing liabilities as we sought funds to grow
our assets. However, for the reasons we explained above in the discussion of the
three month comparison, the increase in interest expense was only $71,000,
compared to a $153,000 increase in interest income. The average rate paid on
deposits and other liabilities declined by 13 basis points between the periods
as generally lower market interest rates allowed us to decrease our rates on
certificates of deposit. At the same time, our average capital increased $1.1
million, which provided us with an increase in zero cost funding sources.
NET INTEREST INCOME. The net effect of the increase in interest income
and the lower increase in interest expense was an $82,000 increase in net
interest income. As discussed above, this increase was the result of growth,
partially offset by a reduction of our interest rate spread. The spread
reduction was generally caused by the same factors discussed above in the
quarterly comparison.
PROVISION FOR LOAN LOSSES. For the six months ended March 31, 1999, we
provided $44,000 for possible loan losses, compared to $85,000 in the same
period last year. We reduced the provision principally because our level of
non-accruing loans had declined as discussed above and because during the 1999
period our recoveries on loans previously charged off exceeded our loan losses
by $5,000. This net recovery plus the $44,000 provision allowed us to increase
the allowance by $49,000, or 10.1%, during the first six months of fiscal 1999
compared to an increase in our loan portfolio, net of 9.9%.
NON-INTEREST INCOME. Our non-interest income increased by $30,000 from
the 1998 to the 1999 periods. The increase was the result of an increase in
account fees for the same reasons discussed above regarding the three month
period.
NON-INTEREST EXPENSES. Our non-interest expenses increased by $159,000
from the 1998 to the 1999 periods. The primary reason for this increase was the
increase in staff discussed above, which was the primary cause of a $79,000
increase in salaries and employee benefits expense. A number of other categories
of non-interest expense also increased because of our efforts to increase our
size.
INCOME TAX EXPENSE. Our income tax expense decreased by $16,000, or 8%,
from the 1998 to the 1999 periods. The decrease was more than the $6,000
decrease in pre-tax income because of a slight shift in our tax accruals and the
resolution of uncertainties.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of funds are deposits and proceeds from the
principal and interest payments on loans and securities. Maturities and
scheduled principal payments on loans and securities are predictable sources of
funds. However, general economic conditions and interest rate conditions can
cause increases or decreases in deposit outflows and loan prepayments which can
also affect the level of funds we have available for investment.
In general, we manage our liquidity by maintaining a sufficient level
of short term investments so that funds are normally available for investment in
loans when needed. During the six months ended March 31, 1999, we reduced our
cash and cash equivalents by $1.6 million. The primary reason for the reduction
was that we invested available funds in loans and securities investments, so
that our net increases in those investments exceeded the net cash we received
from our stock offering minus a reduction in deposits. We originated $8.9
million of new loans during the six months ended March 31, 1999. However, loans,
net, after payments, charge-offs and transfers to real estate owned, increased
by $3.5 million during the period.
17
<PAGE>
Deposits decreased by $1.4 million during the six months ended March
31, 1999. As we discussed above, we believe the decrease was primarily caused by
the use of deposits to purchase stock and by the cancellation of some stock
subscriptions which had been carried as deposits on September 30, 1998. In
addition to factors within our control, such as our deposit pricing strategies
and our marketing efforts, deposit flows are affected by the level of general
market interest rates, the availability of alternate investment opportunities,
general economic conditions, and other factors outside our control.
We monitor our liquidity regularly. Excess liquidity is invested in
overnight federal funds sold and other short term investments. If we need
additional funds, we can borrow those funds, although the cost of borrowing
money is normally higher than the average cost of deposits. As a member of the
Federal Home Loan Bank of New York, the Bank can arrange to borrow in excess of
$10 million, but to do so it must provide appropriate collateral and satisfy
other requirements for Federal Home Loan Bank borrowings. We have not needed to
use borrowings to fund deposit outflows or new loans in the past. However, in
the future, we anticipate that we will use borrowed funds to help us leverage
the capital we received from our stock sale. In addition to borrowings, we
believe that, if we need to do so, we can attract additional deposits by
increasing the rates we offer.
We had $1.9 million of outstanding commitments to make loans at March
31, 1999, along with $435,000 of unused home equity, commercial and overdraft
lines of credit. We anticipate that we will have enough funds to meet our
current loan commitments and to fund drawn downs on the lines of credit through
the normal turnover of our loan and securities portfolios and the re-investment
of short term investments in longer term assets when opportunities arise. At
March 31, 1999, we had $12.3 million of certificates of deposit which are
scheduled to mature in one year. We anticipate that we can retain substantially
all of those deposits if we need to do so to fund loans and other investments as
part of our efforts to grow and leverage our new capital.
The OTS has minimum capital ratio requirements which apply to the Bank,
but there are no comparable minimum capital requirements that apply to us as a
savings and loan holding company. At March 31, 1999, the Bank exceeded all
regulatory capital requirements of the OTS applicable to it, with Tier I capital
of $13.5 million, or 21.78% of average assets and 47.29% of risk-weighted assets
and with total risk-based capital of $13.9 million, or 48.55% of risk-weighted
assets. The Bank also had tangible capital of $13.5 million, or 21.79% of
average tangible assets. The Bank was classified as "well capitalized" at March
31, 1998 under OTS regulations.
OTS regulations require that the Bank maintain liquid assets equal to
4% of withdrawable accounts. This ratio is measured on a monthly average basis.
The Bank had a liquidity ratio of 35.1% for March 1999.
YEAR 2000 COMPLIANCE
Our progress on becoming Year 2000 compliant is continuing as
scheduled. We have continued to review and test all our own systems while we
also analyze the potential adverse effects on us if major suppliers, such as
telephone and electric utility companies, are not Year 2000 compliant. Thus far,
we have not identified any material risks in any of our own systems and we have
received reasonable assurances that our material outside vendors will be able to
continue to provide services to us. We have completed all testing of the primary
systems of our principal data processing provider and no problems have been
discovered. We have also completed testing of all in house systems and the test
results were satisfactory. We have developed contingency plans to move to a
manual system in the event of an emergency. Although we would certainly rather
not do so, we know from our recent experience with a severe ice storm that shut
down power in the area that we can operate for at least five days using entirely
manual systems.
18
<PAGE>
We are also participating in customer awareness programs to let people
know that we are Year 2000 compliant in order to avoid large deposit withdrawals
in anticipation of year end brought on by customer panic. Although we are
working to avoid the adverse effects of such panic, it is substantially out of
our control. Non-compliance by a local utility, for example, may not only have
an adverse direct effect on our ability to conduct business, but may also create
local panic which could affect our liquidity. However, we anticipate that we
will be able to satisfy customer demands for cash if necessary through the use
of our liquid assets.
FORWARD-LOOKING STATEMENTS
When we use words or phrases like "will probably result," "we expect,"
"will continue," "we anticipate," "estimate," "project," "should cause" or
similar expressions in this 10-Q or in any press releases, public announcements,
filings with the Securities and Exchange Commission or other disclosures, we are
making "forward-looking statements" as described in the Private Securities
Litigation Reform Act of 1995. In addition, certain information we will provide
in the future on a regular basis, such as analysis of the adequacy of our
allowance for loan losses or an analysis of the interest rate sensitivity of our
assets and liabilities, is always based on predictions of the future. From time
to time, we may also publish other forward-looking statements anticipated
financial performance, business prospects, and similar matters.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. We want you to know that a variety of
future events could cause our actual results and experience to differ materially
from what was anticipated in our forward-looking statements. Some of the risks
and uncertainties that may affect our operations, performance, development and
results, the interest rate sensitivity of our assets and liabilities, and the
adequacy of our allowance for loan losses, include:
o local, regional, national or global economic conditions which could cause an
increase in loan delinquencies, a decrease in property values, or a change
in the housing turnover rate;
o the failure of our customers or major suppliers to have computers and other
systems which are Year 2000 compliant;
o changes in market interest rates or changes in the speed at which market
interest rates change;
o changes in laws and regulations affecting us;
o changes in competition; and
o changes in consumer preferences.
Please do not rely unduly on any forward-looking statements, which are
valid only as of the date made. Many factors, including those described above,
could affect our financial performance and could cause our actual results or
circumstances for future periods to differ materially from what we anticipate or
project. We have no obligation to update any forward-looking statements to
reflect future events which occur after the statements are made.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
QUALITATIVE ANALYSIS. We try to avoid taking undue interest rate risk
while satisfying customer demand for loans. Substantially all of our residential
mortgage loans have fixed interest rates and terms of up to 25 years. Adjustable
residential mortgage loans are not in demand during the current low interest
rate conditions and they represent only a very small part of our residential
mortgage loan portfolio. Therefore, in a rising interest rate environment, we
expect that the yields on our residential mortgage loan portfolio will increase
relatively slowly, as loans are repaid and the payments are reinvested, while
our cost of funds will rise more rapidly. In order to reduce this risk, we have
19
<PAGE>
adopted a multi-part strategy. First, we are working to originate higher levels
of automobile loans, home equity lines of credit, and commercial loans which
tend to have shorter terms or adjustable rates. Second, we have concentrated our
securities investments in short-term or adjustable-rate securities. U.S.
Treasury and federal agency securities are purchased with terms to maturity that
generally do not exceed two years. Most of our mortgage-backed securities have
adjustable rates or relatively short terms with balloon payments. We also try to
cushion our operations against interest rate fluctuations by preserving a loyal
customer base through paying above market rates on savings and club account
deposits during present periods of low interest rates. We believe this may cause
our customers to be less likely to shift their funds to high rate deposit
products as interest rates rise.
Interest rate pricing and interest rate risk strategy objectives are
implemented, in the first instance, by an internal committee which meets weekly
to review and assess deposit and loan pricing. The OTS prepares a quarterly
interest-rate sensitivity report for the Bank based upon its asset and liability
profile which seeks to estimate the effect of interest rate changes on the net
value of the Bank's assets and liabilities. This report is reviewed with the
Board of the Bank quarterly
QUANTITATIVE ANALYSIS. The OTS report seeks to estimate how changes in
interest rates will affect the Bank's "net portfolio value." Net portfolio
value, or "NPV," akin to net worth, represents the net present value of the
Bank's cash flow from assets, liabilities and off balance sheet items. Each
calendar quarter, the OTS calculates the Bank's estimated NPV and the estimated
effect on NPV of instantaneous and permanent 1% to 4% (100 to 400 basis point)
increases and decreases in market interest rates. The calculations are based
upon the OTS's assumptions regarding loan prepayments rates, deposit turnover
and other factors affecting the repricing of assets and liabilities. The OTS
does not include in its analysis any assets held by Gouverneur Bancorp, Inc.
which are not owned by the Bank.
The following table presents the Bank's estimated NPV at December 31,
1998, and the estimated effect on NPV of the specified interest rate changes, as
calculated by the OTS. At December 31, 1998, the portfolio value of the Bank's
assets as estimated by the OTS was $62.1 million. The December 31, 1998 report
is the most recent OTS report that the Bank has received.
<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> <C>
+4.00% $10,886 $ -2,690 -20%
+3.00% 11,776 -1,799 -13%
+2.00% 12,593 -982 -7%
+1.00% 13,222 -353 -3%
0.00% 13,575 -- --
-1.00% 14,072 +497 +4%
-2.00% 14,600 +1,025 +8%
-3.00% 15,299 +1,724 +13%
-4.00% $15,953 $ +2,377 +18%
</TABLE>
(1) Calculated as the amount of estimated change in NPV divided by the estimated
current NPV.
The above table indicates that in a rising interest rate environment,
the Bank's net portfolio value should decrease, while net portfolio value should
increase in a declining interest rate environment. These changes in net
portfolio value should 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. However, these expected changes in net income may not
occur for many reasons including, among others, the possibility that we may
decide not to reduce the rates we offer on our deposits when interest rates
decline in order to retain and increase our deposit base.
20
<PAGE>
We have initially invested the new capital we received in the
Reorganization in short term securities and other short term investments. Those
short term investments should reduce our exposure to market interest rate
increases because as interest rates increase, the short term investments will
mature more quickly than long term loans and the proceeds can then be reinvested
at the higher market interest rates. However, the short term investments
normally earn interest at lower rates than loans. Therefore, we are working to
find acceptable loan opportunities to reinvest our capital. Reinvestment in
loans, if they have fixed rates and long terms to maturity, would have the
effect of increasing our exposure to increases in market interest rates.
There are shortcomings in the methodology used by the OTS to calculate
changes in NPV. In order to estimate changes in NPV, the OTS makes assumptions
about repayment and turnover rates which may not turn out to be correct. The NPV
table assumes that the composition of the Bank's interest sensitive assets and
liabilities existing at the beginning of a period remain constant over the
period being measured. So, for example, the NPV analysis assumes that the ratio
of adjustable versus fixed-rate loans or short-term loans versus long-term loans
remains the same and that interest rates will change equally for both long term
and short term assets. Therefore, although the OTS NPV analysis provides the
Board of the Bank with an indication of the Bank's interest rate risk exposure,
it does not provide a precise forecast of the effect of changes in market
interest rates on net interest income.
21
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, the Company and the Bank are
subject to legal actions which involve claims for monetary relief. Management,
based on advice of counsel, does not believe that any currently known legal
actions, individually or in the aggregate, will have a material effect on its
consolidated financial condition or results of operation.
Item 2. Changes in Securities and Use of Proceeds
We engaged in an offering of our stock, as we have described above,
during the period covered by this report. The following is information about
that offering.
Effective date of Registration Statement: August 12, 1998
Commission File No.: 333-57845
Date offering commenced: August 17, 1998
The offering terminated on March 23, 1999. Less than all the securities
registered were sold.
The managing underwriter was First Albany Corporation.
All securities registered were common stock, par value $0.01 per share.
The number of shares originally registered was 1,834,969. The number of
shares registered was subsequently increased to 2,201,962 shares because of a
reduction in the offering price
The aggregate price of the offering amount registered was $11,009,814.
1,072,818 shares were sold at $5.00 per share.
The aggregate price of the 1,072,818 shares sold was $5,364,090.
Total expenses incurred were approximately $785,000, including $207,000
paid to underwriters (including approximately $72,000 of sales commissions on
shares sold through a syndicate of broker-dealers) and $568,000 for other
expenses. The amount paid for "other expenses" includes estimates of certain
items for which bills have not yet been received. None of these expenses were
paid directly or indirectly to our directors or officers or their associates,
persons owning ten percent or more of any class of our equity securities, or to
our affiliates.
The net offering proceeds were $4.6 million after deducting expenses.
We intend to use as working capital in the ordinary course of its
business. Initially, we have invested those the net proceeds in short-term
liquid assets or deposits with the Bank. We lent $429,000 of the net proceeds to
our Employee Stock Ownership Plan to purchase 85,825 shares of our common stock
and one-half of the net proceeds was used to purchase all the stock of the Bank.
22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3.1) Federal Stock Charter of Gouverneur Bancorp, Inc. as
formally issued by the Office of Thrift Supervision on
March 23, 1999 (incorporated by reference to Exhibit
3.1 to the pre-effective amendment no. 1 to Gouverneur
Bancorp, Inc.'s registration statement on Form S-1
filed on August 5, 1998 (File No. 333-57845)).
(3.2) Bylaws of Gouverneur Bancorp, Inc. (incorporated by
reference to Exhibit 3.2 to the pre-effective
amendment no. 1 to Gouverneur Bancorp, Inc.'s
registration statement on Form S-1 filed on August 5,
1998 (File No. 333-57845)).
(1) Financial Data Schedule (included only in EDGAR filings).
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
Gouverneur Bancorp, Inc.
Date: May 14, 1999 By: /s/ RICHARD F. BENNETT
-------------------------------------------
President and Chief Executive Officer
(principal financial officer and
officer duly authorized to sign on
behalf of the registrant)
23
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
3.1 Federal Stock Charter of Gouverneur Bancorp, Inc. as formally
issued by the Office of Thrift Supervision on March 23, 1999
(incorporated by reference to Exhibit 3.1 to the pre-effective
amendment no. 1 to Gouverneur Bancorp, Inc.'s registration
statement on Form S-1 filed on August 5, 1998 (File No.
333-57845))
3.2 Bylaws of Gouverneur Bancorp, Inc. (incorporated by reference
to Exhibit 3.2 to the pre-effective amendment no. 1 to
Gouverneur Bancorp, Inc.'s registration statement on Form S-1
filed on August 5, 1998 (File No. 333-57845))
27 Financial Data Schedule (included only in EDGAR filings)
24
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The Schedule contains summary financial information extracted from the
financial statements for the six month ending March 31, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001063942
<NAME> GOUVERNEUR BANCORP, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,033
<INT-BEARING-DEPOSITS> 1,765
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,982
<INVESTMENTS-CARRYING> 7,009
<INVESTMENTS-MARKET> 7,002
<LOANS> 39,217
<ALLOWANCE> 533
<TOTAL-ASSETS> 62,612
<DEPOSITS> 44,953
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,778
<LONG-TERM> 0
0
0
<COMMON> 24
<OTHER-SE> 15,857
<TOTAL-LIABILITIES-AND-EQUITY> 62,612
<INTEREST-LOAN> 1,699
<INTEREST-INVEST> 551
<INTEREST-OTHER> 46
<INTEREST-TOTAL> 2,296
<INTEREST-DEPOSIT> 1,003
<INTEREST-EXPENSE> 4
<INTEREST-INCOME-NET> 1,289
<LOAN-LOSSES> 44
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 851
<INCOME-PRETAX> 508
<INCOME-PRE-EXTRAORDINARY> 508
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 316
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
<YIELD-ACTUAL> 4.53
<LOANS-NON> 233
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 484
<CHARGE-OFFS> 21
<RECOVERIES> 26
<ALLOWANCE-CLOSE> 533
<ALLOWANCE-DOMESTIC> 533
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
