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GOUVERNEUR, N.Y., Jan. 25, 2019 (GLOBE NEWSWIRE) -- Gouverneur Bancorp, Inc. (OTC Pink: GOVB) (the “Company”) holding company for Gouverneur Savings and Loan Association (the “Bank”), today announced the results for the first quarter of fiscal year 2019 ended December 31, 2018.
For the first quarter of fiscal year 2019, the Company reported a net loss of $120,000, or -$0.06 per diluted share, as a result of a $517,000 decline in the unrealized gain on the market value of interest rate swap agreements (“swaps”) held with Federal Home Loan Bank of New York (“FHLBNY”). Excluding the decline in unrealized gain on the swaps, the first quarter net income remained strong at a positive $299,000, or $0.14 per diluted share.
The swaps, which currently have a lifetime unrealized gain of $315,000, decreased in fair market value from the fiscal 2018 year-end unrealized gain of $832,000 due to the December 2018 decline in longer term U.S. Treasury bond rates. The Company entered into the swap agreements to hedge the cost of certain borrowings and to increase the interest rate sensitivity of certain assets. The accounting for changes in the fair value of these swaps is currently recognized in earnings as non-interest income. While the swaps market value will continue to fluctuate with long term bond rates and projected short term rates, the Company continues to mitigate its interest rate risk and benefit from a positive net inflow of interest income earned on the swap agreements.
The annualized return on average assets (net income divided by average assets), (“ROA”) and the annualized return on average equity (net income divided by average equity), (“ROE”) decreased to -0.37% and -1.59%, respectively. With the exclusion of the swaps unrealized market value adjustment, the ROA increased from 0.91% at 2018 fiscal year end to the current 0.92% while the ROE decreased slightly from 3.97% to 3.95% for the same period.
Total assets decreased by $1.25 million, or 0.95% from $131.90 million at September 30, 2018 to $130.65 million at December 31, 2018. Net loans decreased $0.87 million, or 0.91%, from $95.63 million to $94.76 million over the same period while securities available for sale decreased by $0.59 million, or 3.80%, from $15.62 million to $15.03 million.
Commenting on the quarter’s results, Mr. Charles C. Van Vleet, the Company’s President and Chief Executive Officer, said, “As with many financial institutions across the country, the Bank took a negative adjustment to the market value of its swap agreements due to December’s sudden Treasury market decline. While the accounting mark to market requirement may distort the Company’s reported earnings, the underlying interest rate risk management benefits are substantial. The decline in market value is regarded as temporary and we anticipate the market value of the swaps to recover as long term rates rise. The Bank continues to have a strong capital position, allowing it to rank highly within its peer group.”
Net interest income decreased $35,000, or 2.65%, from $1,319,000 for the quarter ended December 31, 2017 to $1,284,000 for the quarter ended December 31, 2018. Interest income decreased $25,000, or 1.73%, while interest expense increased $10,000, or 7.87% over the same period. Non-interest income decreased from $441,000 to -$410,000 due to the decrease in the swap market value. Excluding the decrease in the unrealized market value gain on the swaps, non-interest income decreased $134,000, or 55.60% to $107,000 for the quarter ended December 31, 2018 compared to $241,000 for the quarter ended December 31, 2017, while non-interest expense decreased $101,000 over the same period.
Non-performing loans were $2,041,000 at December 31, 2018 compared to $1,436,000 at September 30, 2018. There was a $10,000 loan loss provision for the quarter ended December 31, 2018. The allowance for loan losses was $771,000 or 0.81% of total gross loans outstanding at December 31, 2018. Foreclosed real estate was $528,000 and $575,000 at December 31, 2018 and September 30, 2018, respectively.
Deposits decreased $2.15 million or 2.54%, to $82.47 million at December 31, 2018 from $84.62 million at September 30, 2018. Advances from the FHLB remained constant at $12.00 million.
Shareholders’ equity was $30.05 million at December 31, 2018, an increase of $10,000 over the September 30, 2018 balance of $30.04 million. The book value of Gouverneur Bancorp, Inc. was $13.80 per common share based on 2,176,908 shares outstanding at each period end.
The Company, which is headquartered in Gouverneur, New York, is the holding company for Gouverneur Savings and Loan Association. Founded in 1892, the Bank is a New York State chartered savings and loan association offering a variety of banking products and services to individuals and businesses in its primary market area in St. Lawrence, Lewis and Jefferson Counties in New York State.
Statements in this news release contain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs of management as well as assumptions made using information currently available to management. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties and assumptions. These risks and uncertainties include among others, the impact of changes in market interest rates and general economic conditions, changes in government regulations, changes in accounting principles and the quality or composition of the loan and investment portfolios. Therefore, actual future results may differ significantly from results discussed in the forward-looking statements.
For more information, contact Charles C. Van Vleet Jr., President and Chief Executive Officer, at (315) 287-2600.