Gouverneur Bancorp Announces Fiscal 2022 Second Quarter and Six Months Results

GOUVERNEUR, N.Y., April 27, 2022 (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 second quarter of fiscal year 2022 ended March 31, 2022.

A Note to our Shareholders: As announced through a press release issued on January 6, 2022, Cambray Mutual Holding Company (the “MHC”), the Company, the Bank and Citizens Bank of Cape Vincent (“CBCV”) announced the signing of a definitive merger agreement pursuant to which CBCV will merge with and into the Bank, with the Bank as the surviving institution with total assets estimation of $210 million. The Bank will add three additional offices for a total of five as we expand our footprint upon the merger completion. As a result, the first half of fiscal year 2022 saw a rise in professional fees compared to the same period in fiscal year 2021 due to costs associated with the merger agreement. Professional fees increased $281,000, from $144,000 at March 31, 2021 to $425,000 at March 31, 2022, impacting earnings for the current fiscal year. The increased costs incurred by the merger include due diligence, application fees, financial and legal services. These merger related expenses are expected to continue until the merger closing date, anticipated for late third quarter of fiscal year 2022.

To supplement our second quarter financial information, which is prepared and presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), we used the following non-GAAP financial measures: Adjusted Non-interest Income, Adjusted Earnings Before Income Tax (AEBIT), Adjusted Income Tax, and Adjusted Net Income. This financial information is not intended to be considered as a substitute for the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures as a tool in financial and operational decision making and evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide important supplemental information regarding our performance by excluding from non-interest income the non-cash measurement of the unrealized gains or losses in market value on swap agreements held with Federal Home Loan Bank of New York (“FHLBNY”), which fluctuates monthly and may not be indicative of our recurring operating results.

We believe that both management and investors benefit from these non-GAAP financial reports when assessing current performance and while planning, forecasting, and analyzing future periods. These non-GAAP financial measures also assist with management’s comparisons to historical performance. We believe these non-GAAP financial measures are also useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they help investors analyze the health of our business.

In light of a number of limitations related to the use of these non-GAAP financial measures, we provide specific information regarding the GAAP amounts excluded from the non-GAAP financial measures and evaluate these non-GAAP financial measures together with their relevant financial measures in accordance with GAAP.

Certain non-GAAP financial metrics related to adjustments to total liabilities and shareholder’s equity resulting from the exclusion of the non-cash measurement of the unrealized gains or losses in market value on swap agreements held with FHLBNY have been omitted from this release as they are immaterially different from their relevant GAAP financial metrics as disclosed herein.

For more information on these non-GAAP financial measures, please see and “Reconciliation of Non-GAAP Income” and “Definitions of Non-GAAP Measures” included later in this release.

Financial and Operational Metrics

	For the Quarter Ending									For the Six Months Ending
	03/31/22					03/31/21				03/31/22				03/31/21
Statement of Earnings	(In Thousands)									(In Thousands)
Interest Income	$	1,082				$	1,116			$	2,160			$	2,277
Interest Expense		75					89				158				198
Net Interest Income		1,007					1,027				2,002				2,079
Provision for Loan Loss		15					15				31				15
Net Interest Income After Provision for Loan Loss		992					1,012				1,971				2,064
Non-interest Income		998					896				1,450				1,452
Non-interest Expenses		1,295					1,226				2,489				2,557
Income Before Income Tax		695					682				932				959
Income Tax		120					117				145				152
Net Income	$	575				$	565			$	787			$	807
Adjusted Statement of Earnings
Interest Income	$	1,082				$	1,116			$	2,160			$	2,277
Interest Expense		75					89				158				198
Net Interest Income		1,007					1,027				2,002				2,079
Provision for Loan Loss		15					15				31				15
Net Interest Income After Provision for Loan Loss		992					1,012				1,971				2,064
Non-interest Income		998					896				1,450				1,452
Deduct: Unrealized gain on swap agreement		832					682				1,093				917
Adjusted Non-interest Income (1)		166					214				357				535
Non-interest Expenses		1,295					1,226				2,489				2,557
Adjusted Earnings (Losses) Before Income Tax (1)		(137		)			0				(161	)			42
Income Tax		120					117				145				152
Deduct: change in EBIT tax calculation per income adjustment		175					142				229				192
Adjusted Income Tax (Benefit) (1)		(55		)			(25	)			(84	)			(40	)
Adjusted Net Income (Loss) (1)	$	(82		)		$	25			$	(77	)		$	82

(1)

“Adjusted Non-interest Income”, “Adjusted Earnings Before Income Tax”, “Adjusted Income Tax”, and “Adjusted Net Income” are non-GAAP measures. See “Definitions of Non-GAAP Measures” and “Reconciliation of Non-GAAP Measures” sections herein for an explanation and reconciliation of non-GAAP measures used throughout this release.

							Reconciliation to Non-GAAP Net Income
							(in thousands)
					For the Quarter Ending:									For the Six Months Ending:
					03/31/22					03/31/21				03/31/22				03/31/21
Net Income					$	575				$	565			$	787			$	807
Deduct: Unrealized gain on swap agreement						832					682				1,093				917
Deduct: Change in EBIT tax calc. per income adjustment						(175		)			(142	)			(229	)			(192	)
Adjusted Net Income (Loss)					$	(82		)		$	25			$	(77	)		$	82

Net income: for year to date fiscal year 2022, after a $31,000 provision for loan loss, the Company reported a net gain of $787,000, or $0.39 per diluted share, compared to $807,000, or $0.40 per diluted share, in the first half of fiscal year 2021. The earnings resulted in an annualized return on average assets (net income divided by average assets), (“ROA”) and annualized return on average equity (net income divided by average equity), (“ROE”) decrease from the March 2021 figure of 1.29% and 6.00%, respectively, to 1.22%, and 5.81%, respectively.

Adjusted net income for the six months ending March 31, 2022 decreased 193.90% to $(77,000) or $(0.04) per diluted share, compared to $82,000, or $0.04 per diluted share, for the six months ending March 31, 2021. The adjusted earnings resulted in an annualized ROA of -0.12%, a decrease from 0.13% at March 2021 fiscal year to date while the ROE decreased from 0.62% to -0.57% for the same period.

Net interest spread, the difference between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities, was 3.40% at March 31, 2022 and 3.67% at March 31, 2021.

Total assets decreased $4.65 million, or 3.45%, from $134.73 million at September 30, 2021 to $130.08 million at March 31, 2022. Securities available for sale decreased by $3.21 million, or 13.05%, from $24.61 million to $21.40 million over the same period. Net loans increased by $1.60 million from September 2021 to March 2022. The Bank made a $31,000 provision for loan loss the first six months of fiscal 2022, an increase from the $15,000 provision made in the same period of the 2021 fiscal year. The Bank continued its success with their secondary market mortgage program with FHLBNY after a strong performance in fiscal year 2021. Sold loan volume increased $400,000, from $13.20 million at September 30, 2021 to $13.60 million at March 31, 2022. The Bank recognized $36,000 of fee income from the program over the same period.

Deposits: While decreasing $479,000, or 0.48%, to $100.27 million at March 31, 2022 from $100.75 million at September 30, 2021, deposits still remain well above pre-pandemic average levels of $80.67 million at March 31, 2020. The Bank currently holds no advances from FHLB.

Shareholders’ equity was $26.21 million at March 31, 2022, representing a decrease of 3.68% from the September 30, 2021 balance of $27.21 million. The Company’s book value was $12.90 per common share based on 2,383,610 shares issued and 2,031,377 shares outstanding at March 31, 2022. On March 31, 2022, the Company paid a semi-annual cash dividend of $0.10 per share to all shareholders of record on March 15, 2022.

Non-GAAP Financial Measures

The Company has numerous interest rate swap agreements (“swaps”) with FHLBNY as a means to hedge the cost of certain borrowings and to increase the interest rate sensitivity of certain assets. The accounting for changes in the fair market value of these swaps (unrealized gains or losses) is currently recognized in earnings as other operating income (loss). Activity in Fiscal year 2021 had resulted in an unrealized gain on the fair market value of these swaps due to a rise in longer term U.S. Treasury bond rates.

During the first half of Fiscal year 2022, the market value of the swaps continued to rise, resulting in a total unrealized gain in market value of $1,093,000 for the first and second quarters. Management feels that by eliminating these fluctuations in market value from the GAAP statements, it is able to provide a more accurate picture of the Company’s financial and operational results.

While the swaps market value will fluctuate with long term bond rates and projected short-term rates, the Company has both the intent and ability to hold these swaps to maturity regardless of the changes in market condition, liquidity needs or changes in general economic conditions. Meanwhile, the Company continues to mitigate its interest rate risk through the agreements.

Definitions of Non-GAAP Measures

Adjusted Non-Interest Income We define Adjusted Non-Interest Income as total non-interest earnings excluding certain items that may not be indicative of our recurring business operating results. Adjusted non-interest income excludes from other non-interest income the non-cash measurement of the unrealized gains or losses in market value on swap agreements.

Adjusted Earnings Before Income Tax We define AEBIT as net income (loss) before income tax, excluding certain items that may not be indicative of our recurring business operating results. AEBIT excludes from total earnings before income tax the non-cash measurement of the unrealized gains or losses in market value on swap agreements.

We have included AEBIT because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those related to operating expenses. Accordingly, we believe that AEBIT provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. In addition, it provides a useful measure for period-to-period comparisons of our business as it removes the effect of certain non-cash items with variable unrealized gains and losses. AEBIT is not meant as a substitute for the related financial information prepared in accordance with GAAP.

Adjusted Income Tax We define Adjusted Income Tax as the income tax calculated from the adjusted earnings before income tax.

Adjusted Net Income We define Adjusted Net Income as net income less certain items that may not be indicative of our recurring business operating results. Adjusted Net Income excludes the non-cash measurement of the unrealized gains or losses in market value on swap agreements held with FHLBNY and the subsequent recalculation of associated income tax. Adjusted Net Income should be considered a supplement, and not a substitute for, net income prepared in accordance with GAAP.

Forward-Looking Statements

The Company, 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 of 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 Faye C. Waterman, President and Chief Executive Officer, at (315) 287-2600.