Gouverneur Bancorp Announces Fiscal 2023 First Quarter Results

GOUVERNEUR, N.Y., Feb. 16, 2023 (GLOBE NEWSWIRE) -- Faye C. Waterman, President and Chief Executive Officer of Gouverneur Bancorp, Inc. (OTC Pink: GOVB) (the “Company”), the holding company for Gouverneur Savings and Loan Association (the “Bank”), announced today results for the first quarter of fiscal year 2023 ended December 31, 2022.

A Note to our Shareholders: On September 16, 2022, the acquisition of Citizens Bank of Cape Vincent (“CBCV”) was consummated, adding three additional full-service branches, in Cape Vincent, Chaumont, and LaFargeville. The Bank also established GS&L Municipal Bank, a subsidiary limited purpose municipal bank, to service the deposit needs of the area’s municipalities. As a result, fiscal year 2022 saw a rise in professional fees and other merger related expenses due to costs associated with the completion of the merger. The increased costs incurred by the merger include due diligence, financial and legal services. The acquisition also resulted in an additional $37.30 million in acquired loans and $76.14 million in deposits being added to the balance sheet in September 2022, and $29.6 million in available for sale securities being added to GS&L Municipal Bank at that time. The financial information presented in this release as of December 31, 2022, and for the quarter ended December 31, 2022, reflects the Company’s results of operations after giving effect to the acquisition of CBCV. The results of operations for CBCV are not reflected in the Company’s results of operations for any prior periods.

To supplement our financial information, which is prepared and presented in accordance with generally accepted accounting principles in the United States of America, or 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. 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 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 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

Net income for the first quarter of fiscal year 2023 was $47,000 or $0.02 per basic and diluted share, compared to $211,000, or $0.10 per basic and diluted share, in the first quarter of fiscal year 2022. The earnings resulted in an annualized return on average assets of 0.09%, a decrease from 1.16% at September 30, 2022, while the annualized return on average equity decreased to 0.74% for the quarter ended December 31, 2022, from 5.79% for at September 30, 2022. Earnings for the first quarter of fiscal year 2023 were impacted by a decrease in the unrealized gain on swap agreement market values.

Adjusted net income for the quarter ended December 31, 2022, which excludes the unrealized loss on the swap agreements, increased 7,720.00% to $391,000 or $0.193 per basic and diluted share, compared to $5,000, or $0.003 per basic and diluted share, in the quarter ending December 31, 2021. The earnings resulted in an annualized return on average assets of 0.75%, an increase from (0.13)% at fiscal 2022 year-end, while the annualized return on average equity increased from (0.67)% to 6.15% for the same period. As noted earlier in this press release, earnings for fiscal year 2022 were impacted by fees associated with the completion of our acquisition of CBCV. Total net income and adjusted net income for the first quarter of fiscal year 2023 were impacted by the acquisition of CBCV and the formation of GS&L Municipal Bank.

Interest income on loans increased $495,000, or 50.15%, from $987,000 for the quarter ended December 31, 2021 to $1.48 million for the quarter ended December 31, 2022. Total interest income increased $936,000, or 86.83%, from $1.08 million to $2.01 million during that time.

Interest expense on deposits decreased $59,000, from $83,000 at December 31, 2021 to $24,000 at December 31, 2022. Interest expense incurred on borrowings from the Federal Home Loan Bank, $-0- at the end of December 2021, increased to $6,000 with $3.70 million in borrowings added in December 2022, resulting in a total interest expense of $30,000 and $83,000, respectively.

Interest spread, the difference between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities, was 4.28% at December 31, 2022 and 3.31% at December 31, 2021.

Non-interest income decreased $641,000, from $451,000 in December 2021 to $(190,000) in December 2022. This includes the unrealized market value gain (loss) on swap agreements held with FHLBNY of $(436,000) and $261,000 for the first quarters of fiscal year 2023 and 2022, respectively.

Adjusted non-interest income for the quarter ended December 31, 2022, which excludes the non-cash unrealized market value gain on swap agreements held with FHLBNY, increased $56,000 to $246,000, compared to the quarter ended December 31, 2021, of $190,000.

Total assets decreased $8.05 million, or 3.78%, from $213.02 million at September 30, 2022 to $204.97 million at December 31, 2022. Asset composition includes non-performing assets of 0.48% of total assets, an increase from the September 2022 figure of 0.33% while securities available for sale increased by $422,000, or 0.85%, from $49.65 million to $50.07 million over the same period.

Net loans decreased $561,000, or 0.45%, from $125.11 million to $124.55 million over the same period. The Bank had $15,000 in provision for loan losses during the first quarter of fiscal 2023, a decrease from a $16,000 provision made in the same period of the 2022 fiscal year. Non-performing assets were $974,000 at December 31, 2022, compared to $693,000 at September 30, 2022. The allowance for loan losses was $634,000 or 0.73% of total loans outstanding, excluding loans held for sale and acquired loans, at December 31, 2022, as compared to $621,000 or 0.71% at September 30, 2022. Foreclosed real estate was $52,000 and $75,000 at December 31, 2022 and September 30, 2022, respectively.

Deposits decreased $13.62 million, or 7.41%, to $170.33 million at December 31, 2022 from $183.95 million at September 30, 2022. The Bank currently holds no brokered deposits and $3.70 million in advances from FHLB.

Shareholders’ equity was $26.13 million at December 31, 2022, representing an increase of 5.25% from the September 30, 2022 balance of $24.83 million. The Company’s book value was $12.86 and $12.22 per common share based on 2,383,610 shares issued and 2,031,377 shares outstanding at December 31, 2022 and September 30, 2022, respectively.

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 non-interest income (loss). Activity in Fiscal year 2023 resulted in an unrealized loss on the fair market value of these swaps due to a decrease in longer term U.S. Treasury bond rates. While the swaps market value will continue to 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.

During the first quarter of fiscal year 2023, the market value of the swaps decreased, resulting in an unrealized loss in market value of $436,000 for the quarter. 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 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 the interest income earned on the swap 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 (Benefit) We define Adjusted Income Tax Benefit 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, 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, our ability to successfully integrate acquired businesses into our operations and to realize estimated cost savings in connection with acquisitions and business combination transactions, 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.