Gouverneur Bancorp Announces Fiscal 2022 Results

GOUVERNEUR, N.Y., Jan. 23, 2023 (GLOBE NEWSWIRE) -- Faye C. Waterman, President and Chief Executive Officer of Gouverneur Bancorp, Inc. (OTC Pink: GOVB) (the “Company”) holding company for Gouverneur Savings and Loan Association (the “Bank”), announced today results for its fiscal year ended September 30, 2022.

A Note to our Shareholders: Customers are GS&L’s number one priority. In January 2022 we announced the planned acquisition of Citizens Bank of Cape Vincent (“CBCV”), as a plan to expand our footprint in Jefferson County. On September 16, 2022, the acquisition was consummated, adding three additional full-service branches, in Cape Vincent, Chaumont, and LaFargeville. The Bank also established a subsidiary limited purpose municipal bank to service the deposit needs of the area’s municipalities.

We appreciate the opportunity to serve your financial needs. GS&L offers a vast selection of deposit and lending programs, with planned enhancements in technology and I-Banking services. We take pride in knowing our customers; we support and live in the communities we serve.

To supplement our financial information, which is prepared and presented in accordance with accounting principles generally accepted in the United States of America, or US GAAP, we used the following non-GAAP financial measures: Adjusted Non-interest Income, Adjusted Earnings Before Income Tax (AEBIT), Adjusted Income Tax (Benefit), and Adjusted Net Income (Loss). The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our recurring business operating results. The financial information excludes 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”).

We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance. We believe these non-GAAP financial measures are 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 are used by our institutional investors and the analyst community to help them analyze the health of our business.

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

For more information on these non-GAAP financial measures, please see the section titled “Definitions of Non-GAAP Measures” and “Reconciliations of Non-GAAP Measures” included at the end of this release.

Financial and Operational Metrics

	For the Year Ending
		2022					2021
Statement of Earnings	(In Thousands)
Interest Income	$	4,547				$	4,467
Interest Expense		268					365
Net Interest Income		4,279					4,102
Provision for Loan Loss		61					18
Net Interest Income After Provision for Loan Loss		4,218					4,084
Non-interest Income		2,805					2,093
Non-interest Expenses		5,104					5,007
Income Before Income Tax		1,919					1,170
Income Tax (Benefit)		392					(86	)
Net Income	$	1,527				$	1,256
Adjusted Statement of Earnings
Interest Income	$	4,547				$	4,467
Interest Expense		268					365
Net Interest Income		4,279					4,102
Provision for Loan Loss		61					18
Net Interest Income After Provision for Loan Loss		4,218					4,084
Non-interest Income		2,805					2,093
Deduct: Unrealized gains on swap agreement		2,158					943
Adjusted Non-interest Income (1)		647					1,150
Non-interest Expenses		5,104					5,007
Adjusted Earnings (Loss) Before Income Tax (1) (“AEBIT”)		(239		)			227
Income Tax (Benefit)		392					(86	)
Deduct: Change in EBIT tax calc. per income adj.		453					198
Adjusted Income Tax (Benefit)(1)		(61		)			(284	)
Adjusted Net Income (Loss) (1)	$	(178		)		$	511

(1)	“Adjusted Non-interest Income”, “Adjusted Earnings (Loss) Before Income Tax”, Adjusted Income Tax (Benefit)”, and “Adjusted Net Income (Loss)” are non-GAAP measures. See “Definitions of Non-GAAP
(2)	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 (Loss)
For the fiscal years ending 2022 and 2021
(in thousands)
		2022				2021
Net Income	$	1,527			$	1,256
Deduct: Unrealized gain on swap agreement		2,158				943
Addback: Change in EBIT tax calc. per income adj.		453				198
Adjusted Net Income (Loss)	$	(178	)		$	511

Total revenue (net interest income plus non-interest income) for fiscal year 2022 was $7.08 million, an increase of $0.88 million over the 2021 fiscal year-end total of $6.20 million. The Bank remains well-capitalized after the acquisition of CBCV with a core capital ratio of 15.79%, a decrease of 3.97% from 2021.

Total adjusted revenue (net interest income plus adjusted non-interest income) for fiscal year 2022 was $4.93 million, a decrease of $326,000 over the 2021 fiscal year-end total of $5.25 million.

Net income for the fiscal year ended September 30, 2022 increased 21.58% to $1,527,000 or $0.75 per basic and diluted share, compared to $1,256,000, or $0.62 per basic and diluted share, in fiscal 2021. The earnings resulted in a return on average assets of 1.16%, an increase from 0.98% in fiscal 2021, while the return on average equity increased to 5.79% for the year ended September 30, 2022, from 4.62% for the year ended September 30, 2021.

Adjusted net income (loss) for the fiscal year ended September 30, 2022 decreased 134.85% to $(178,000) or $(0.09) per basic and diluted share, compared to $511,000, or $0.25 per basic and diluted share, in fiscal 2021. The earnings resulted in a return on average assets of (0.13)%, a decrease from 0.40% in fiscal 2021, while the return on average equity decreased to (0.67)% for the year ended September 30, 2022, from 1.88% for the year ended September 30, 2021. Total net income and adjusted net income were impacted by the acquisition of CBCV, which added $558,000 in other operating expenses.

Interest income on loans decreased $101,000 in fiscal 2022, from $4.12 million at September 30, 2021 to $4.01 million at September 30, 2022. Total interest income increased $80,000, or 1.79%, from $4.47 million to $4.55 million.

Interest expense on deposits decreased $73,000, from $337,000 at September 30, 2021 to $264,000 at September 30, 2022. Interest expense incurred on borrowings from the Federal Home Loan Bank, $28,000 at the end of fiscal 2021, decreased $24,000, to $4,000 at the end of fiscal 2022, resulting in a total interest expense of $268,000.

Interest spread, the difference between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities, was 3.55% in fiscal 2022 and 3.54% in fiscal 2021.

Non-interest income increased $712,000 from $2,093,000 in fiscal year 2021 to $2,805,000 in fiscal 2022. This includes the unrealized market value gain on swap agreements held with FHLBNY of $2,158,000 and $943,000 for 2022 and 2021, respectively. Service charge income increased from $235,000 in fiscal year 2021 to $278,000 in fiscal 2022.

Adjusted non-interest income decreased $503,000, from $1,150,000 in fiscal year 2021 to $647,000 in fiscal 2022. The adjustment excludes the unrealized market value gain on swap agreements held with FHLBNY. Earnings on the deferred fees plan decreased $191,000 and earnings on new originations in the secondary market declined $118,000 in 2022, contributing to the total decrease. There was also a one-time 2021 payment from life insurance death benefits of $160,000.

Total non-interest expense increased $97,000 from $5.01 million at the end of September 2021 to $5.10 million at the end of September 2022. Salary and employee benefits expense decreased from the 2021 level due to unfilled staff vacancies and several retirements during the fiscal year. Directors’ fees increased $18,000 with the addition of a full-time director while data processing remained at a comparable expense level. Building, occupancy and equipment experienced a $16,000 increase while foreclosed assets decreased $40,000. Other non-interest expenses dipped slightly while expenses related to the acquisition of CBCV added $558,000 in other operating expense. The components of non-interest expense are presented in the table below.

		For the year ended
		September 30,
		2022				2021
		(In thousands)
Salaries and employee benefits	$	2,291			$	2,628
Directors’ fees		274				256
Data processing		265				261
Building, occupancy and equipment		648				632
Foreclosed assets, net		31				71
Merger related expenses		558				-
Other non-interest expense		1,037				1,159
Non-interest expense	$	5,104			$	5,007

Net loans increased $38.76 million, or 44.89%, from $86.35 million to $125.11 million over the same period. The Bank made a $61,000 provision for loan losses in fiscal 2022, an increase from the $18,000 provision made in the 2021 fiscal year. Non-performing assets were $693,000 at September 30, 2022, compared to $646,000 at September 30, 2021. Net charge-offs, currently $60,000, increased for the 2022 fiscal year from $29,000 for the year ended September 30, 2021. The allowance for loan losses was $621,000 or 0.71% of total loans outstanding, excluding loans held for sale and acquired loans, at September 30, 2022 as compared to $620,000 or 0.72% at September 30, 2021.

Deposits increased $83.20 million, or 82.57%, to $183.95 million at September 30, 2022 from $100.75 million at September 30, 2021 due in part to the addition of $76.14 million in deposits resulting from the acquisition of CBCV. The Bank holds no brokered deposits or advances from the FHLB at fiscal year-end as the need for the Company to fund its loan portfolio with low-cost FHLB borrowings decreased.

Total assets increased $78.10 million, or 57.88% with the acquisition of CBCV, from $134.92 million at September 30, 2021 to $213.02 million at September 30, 2022. Asset composition includes non-performing assets of 0.33% of total assets, a decrease from the 2021 figure of 0.48%.

Shareholders’ equity was $24.83 million at September 30, 2022, representing an acquisition-related decrease of 9.39% from the September 30, 2021 balance of $27.40 million. The Company’s book value was $12.22 per common share based on 2,383,610 shares issued and 2,031,377 shares outstanding at September 30, 2022 versus $13.49 per common share based on 2,383,610 shares issued with 2,031,377 shares outstanding on September 30, 2021. The Company paid cash dividends totaling $0.16 per share to all public holders of our stock, during the fiscal year ending September 30, 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. Activity in Fiscal year 2021 resulted in an unrealized gain in market value of $943,000 as the world emerged from the COVID-19 pandemic and bond prices rose. The market value continued to increase with a September 30, 2022 total unrealized gain of $2,158,000. Management feels that by eliminating these fluctuations in market value from the GAAP statements, it is able to provide a more accurate picture of 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 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 non-interest income the non-cash measurement of the unrealized gains or losses in market value on swap agreements.

Adjusted Earnings (Loss) 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 (Benefit) We define Adjusted Income Tax (Benefit) as the income tax calculated from the adjusted earnings before income tax. The marginal tax rate of 21% is applied to the non-cash measurement of the unrealized gains or losses in market value on swap agreements that are excluded from Adjusted Non-Interest Income.

Adjusted Net Income (Loss) We define Adjusted Net Income (Loss) as net income less certain items that may not be indicative of our recurring business operating results. Adjusted Net Income (Loss) 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 (Loss) should be considered a supplement, and not a substitute for, net income prepared in accordance with GAAP.

Forward-Looking Statements

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