Gouverneur Bancorp Announces Fiscal 2021 First Quarter Results

GOUVERNEUR, N.Y., Jan. 26, 2021 (GLOBE NEWSWIRE) -- Charles C. Van Vleet Jr., 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 the first quarter of fiscal year 2021 ended December 31, 2020.

A Note to our Shareholders: The COVID-19 outbreak continues to cause minor business disruptions as our lobbies remain closed for all but prearranged appointments. The Bank continues to experience a decrease in interest and fees which negatively impacts its operating results and financial condition. The disruption is expected to be temporary, and management is confident that its current liquidity and capital position is strong enough to rebound from any negative budgetary pressure resulting from the pandemic. Meanwhile, Gouverneur Savings & Loan Association remains dedicated to serving the needs of our communities by offering our neighbors and customers relief through our GS&L COVID-19 Assistance Program. It is also partnered with Pursuit (formerly NYBDC) and will once again offer PPP loans to those small business customers that are struggling financially due to virus restrictions. Staff continues to work diligently with customers to design a solution to meet their specific needs.

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 Other Operating Income, Adjusted Earnings Before Income Tax (AEBIT), Adjusted Income Tax, 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 other operating income, the non-cash measurement of the unrealized gains or losses in market value on swap agreements held with 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 measures facilitate management’s internal comparisons to our historical performance. We believe these adjusted 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.

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 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 Quarter Ending
	12/31/20				12/31/19
Statement of Earnings	(In Thousands)
Interest Income	$	1,161			$	1,318
Interest Expense		109				137
Net Interest Income		1,052				1,181
Provision for Loan Loss		-				-
Net Interest Income After Provision for Loan Loss		1,052				1,181
Other Operating Income		556				604
Other Operating Expense		1,331				1,337
Income Before Income Tax		277				448
Income Tax		35				69
Net Income	$	242			$	379
Adjusted Statement of Earnings
Interest Income	$	1,161			$	1,318
Interest Expense		109				137
Net Interest Income		1,052				1,181
Provision for Loan Loss		-				-
Net Interest Income After Provision for Loan Loss		1,052				1,181
Other Operating Income		556				604
Deduct: Unrealized gain on swap agreement		235				327
Adjusted Other Operating Income (1)		321				277
Other Operating Expense		1,331				1,337
Adjusted Earnings Before Income Tax (1) (“AEBIT”)	$	42			$	121
	For the Quarter Ending
	12/31/20				12/31/19
	(In Thousands)
Income Tax	$	35			$	69
(Addback) Deduct: change in EBIT tax calc. per income adj.		(50	)			68
Adjusted Income Tax (Benefit)(1)		(15	)			1
Adjusted Net Income (1)	$	57			$	120

Reconciliation to Non-GAAP Net Income
(in thousands)
				For the Quarter Ending:
				(In Thousands)
				12/31/20				12/31/19
Net Income (Loss)				$	242			$	379
Deduct: Unrealized gain on swap agreement					235				327
Addback (Deduct): Change in EBIT tax calc. per income adj.					(50	)			68
Adjusted Net Income(1)				$	57			$	120
(1)		“Adjusted Other Operating Income”, “Adjusted Earnings Before Income Tax”, Adjusted Income Tax (Benefit)”, 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.

Net income for the first quarter of fiscal year 2021 was $242,000 or $0.12 per diluted share, compared to $379,000, or $0.17 per diluted share, in the first quarter of fiscal year 2020. The earnings resulted in an annualized return on average assets of 0.76%, an increase from (0.30)% at September 30, 2020, while the annualized return on average equity increased to 3.58% for the quarter ended December 31, 2020, from (1.30)% for at September 30, 2020.

Adjusted net income for the quarter ended December 31, 2020 decreased 52.50% to $57,000 or $0.03 per diluted share, compared to $120,000, or $0.06 per diluted share, in the quarter ending December 31, 2019. The earnings resulted in an annualized return on average assets of 0.18%, a decrease from 0.35% at fiscal 2020 year-end, while the annualized return on average equity decreased from 1.57% to 0.84% for the same period.

Interest income on loans decreased $115,000, or 9.67%, from $1,189,000 for the quarter ended December 31, 2019 to $1,074,000 for the quarter ended December 31, 2020. Total interest income decreased $157,000, or 11.91%, from $1.32 million to $1.16 million during that time.

Interest expense on deposits increased $10,000, from $79,000 at December 31, 2019 to $89,000 at December 31, 2020. Interest expense incurred on borrowings from the Federal Home Loan Bank, $58,000 at the end of December 2019, decreased $38,000, to $20,000 at the end of December 2020, resulting in a total interest expense of $137,000 and $109,000, respectively.

Interest spread, the difference between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities, was 3.64% at December 31, 2020 and 4.05% at December 31, 2019.

Other operating income decreased $48,000, from $604,000 in December 2019 to 556,000 in December 2020. This includes the unrealized market value gain on swap agreements held with FHLBNY of $235,000 and $327,000 for the first quarters of fiscal year 2021 and 2020, respectively.

Adjusted other operating income for the quarter ended December 31, 2020, which excludes the non-cash unrealized market value gain on swap agreements held with FHLBNY, increased $44,000 compared to the quarter ended December 31, 2019.

Total assets decreased $1.99 million, or 1.54%, from $129.26 million at September 30, 2020 to $127.27 million at December 31, 2020. Asset composition includes non-performing assets of 0.67% of total assets, a decrease from the September 2020 figure of 1.01% while securities available for sale increased by $0.39 million, or 1.89%, from $20.45 million to $20.84 million over the same period.

Net loans decreased $143,000, or 0.16%, from $86.88 million to $86.73 million over the same period. The Bank made no provision for loan losses in this first quarter of fiscal 2021, a decrease from the $58,000 provision made in the same period of the 2020 fiscal year. Non-performing assets were $0.84 million at December 31, 2020, compared to $1.29 million at September 30, 2020. The allowance for loan losses was $607,000 or 0.70% of total loans outstanding at December 31, 2020 as compared to $631,000 or 0.72% at September 30, 2020. Foreclosed real estate was $420,000 and $368,000 at December 31, 2020 and September 30, 2020, respectively.

Deposits decreased $2.90 million, or 3.18%, to $88.26 million at December 31, 2020 from $91.16 million at September 30, 2020. The Bank currently holds no brokered deposits. Advances from the FHLB remained constant at $3.0 million over the same period.

Shareholders’ equity was $27.04 million at December 31, 2020, representing an increase of 1.52% from the September 30, 2020 balance of $26.63 million. The Company’s book value was $13.31 and $13.11 per common share based on 2,031,377 shares outstanding at December 31, 2020 and September 30, 2020, respectively.

Non-GAAP Financial Measures

The Company has numerous interest rate swap agreements (“swaps”) with Federal Home Loan Bank of New York (“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 2020 had resulted in an unrealized loss on the fair market value of these swaps due to a decline in longer term U.S. Treasury bond rates. This decline in the fair value of the swaps was considered temporary. 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 2021, the market value of the swaps rebounded, resulting in an unrealized gain in market value of $235,000 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 Other Operating Income We define Adjusted Other Operating Income as total non-interest earnings excluding certain items that may not be indicative of our recurring business operating results. Adjusted other operating 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, 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.