GOUVERNEUR, N.Y., May 05, 2023 (GLOBE NEWSWIRE) -- Gouverneur Bancorp, Inc. (OTC Pink: GOVB) (the "Company"), the holding company for Gouverneur Savings and Loan Association (the "Bank"), today announced the results for the second quarter of fiscal year 2023 ended March 31, 2023.
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 March 31, 2023, and for the quarter ended March 31, 2023, 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 (Loss) 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 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
| For the Quarter Ending | For the Six Months Ending | |||||||||||||||
| 03/31/23 | 03/31/22 | 03/31/23 | 03/31/22 | |||||||||||||
| Statement of Earnings | (In Thousands) | (In Thousands) | ||||||||||||||
| Interest Income | $ | 2,018 | $ | 1,082 | $ | 4,032 | $ | 2,159 | ||||||||
| Interest Expense | 69 | 75 | 99 | 157 | ||||||||||||
| Net Interest Income | 1,949 | 1,007 | 3,933 | 2,002 | ||||||||||||
| Provision for Loan Loss | 47 | 15 | 62 | 31 | ||||||||||||
| Net Interest Income After Provision for Loan Loss | 1,902 | 992 | 3,871 | 1,971 | ||||||||||||
| Non-interest Income (Loss) | (181 | ) | 998 | (371 | ) | 1,450 | ||||||||||
| Non-interest Expenses | 1,840 | 1,295 | 3,608 | 2,489 | ||||||||||||
| Income (Loss) Before Income Tax | (119 | ) | 695 | (108 | ) | 932 | ||||||||||
| Income Tax (Benefit) | (72 | ) | 120 | (108 | ) | 145 | ||||||||||
| Net Income (Loss) | $ | (47 | ) | $ | 575 | $ | - | $ | 787 | |||||||
| Adjusted Statement of Earnings | ||||||||||||||||
| Interest Income | $ | 2,018 | $ | 1,082 | $ | 4,032 | $ | 2,159 | ||||||||
| Interest Expense | 69 | 75 | 99 | 157 | ||||||||||||
| Net Interest Income | 1,949 | 1,007 | 3,933 | 2,002 | ||||||||||||
| Provision for Loan Loss | 47 | 15 | 62 | 31 | ||||||||||||
| Net Interest Income After Provision for Loan Loss | 1,902 | 992 | 3,871 | 1,971 | ||||||||||||
| Non-interest Income (Loss) | (181 | ) | 998 | (371 | ) | 1,450 | ||||||||||
| (Addback) Deduct: Unrealized gain (loss) on swap agreement | (387 | ) | 832 | (823 | ) | 1,093 | ||||||||||
| Adjusted Non-interest Income(1) | 206 | 166 | 452 | 357 | ||||||||||||
| Non-interest Expenses | 1,840 | 1,295 | 3,608 | 2,489 | ||||||||||||
| Adjusted Earnings (Loss) Before Income Tax(1) | 268 | (137 | ) | 715 | (161 | ) | ||||||||||
| Income Tax (Benefit) | (72 | ) | 120 | (108 | ) | 145 | ||||||||||
| Deduct (Addback): change in EBIT tax calculation per income adjustment | (81 | ) | 175 | (173 | ) | 229 | ||||||||||
| Adjusted Income Tax (Benefit)(1) | 9 | (55 | ) | 65 | (84 | ) | ||||||||||
| Adjusted Net Income (Loss)(1) | $ | 259 | $ | (82 | ) | $ | 650 | $ | (77 | ) | ||||||
| (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 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: | ||||||||||||||
| 03/31/23 | 03/31/22 | 03/31/23 | 03/31/22 | ||||||||||||
| Net Income (Loss) | $ | (47 | ) | $ | 575 | $ | - | $ | 787 | ||||||
| (Addback) Deduct: Unrealized gain (loss) on swap agreement | (387 | ) | 832 | (823 | ) | 1,093 | |||||||||
| Addback (Deduct): Change in EBIT tax calc. per income adjustment | 81 | (175 | ) | 173 | (229 | ) | |||||||||
| Adjusted Net Income (Loss) | $ | 259 | $ | (82 | ) | $ | 650 | $ | (77 | ) | |||||
Net income: for year to date fiscal year 2023, after a $62,000 provision for loan loss, the Company reported no income, or $0.00 per basic and diluted share, compared to $787,000, or $0.39 per basic & diluted share, in the first half of fiscal year 2022. 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 31, 2022 figure of 1.22% and 5.81%, respectively, to 0.00%, and 0.00%, respectively.
Adjusted net income for the six months ending March 31, 2023 increased 949.67% to $650,000 or $0.32 per basic and diluted share, compared to $(77,000), or $(0.04) per basic and diluted share, for the six months ending March 31, 2022. The adjusted earnings resulted in an annualized ROA of 0.63%, an increase from -0.12% for the six months ended March 31, 2022 while the ROE increased from -0.57% to 5.11% 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 4.30% at March 31, 2023 and 3.40% at March 31, 2022.
Total assets decreased $7.82 million, or 3.67%, from $213.02 million at September 30, 2022 to $205.20 million at March 31, 2023. Securities available for sale decreased by $198,000, or 0.40%, from $49.65 million to $49.45 million over the same period. Net loans decreased by $716,000 from September 2022 to March 2023. The Bank made a $62,000 provision for loan loss the first six months of fiscal 2023, an increase from the $31,000 provision made in the same period of the 2022 fiscal year.
Deposits decreased $18.05 million, or 9.82%, to $165.90 million at March 31, 2023 from $183.95 million at September 30, 2022. The Bank currently holds no brokered deposits and $8.90 million in advances from FHLB.
Shareholders' equity was $26.34 million at March 31, 2023, representing an increase of 6.08% from the September 30, 2022 balance of $24.83 million. The Company's book value was $12.97 per common share based on 2,383,608 shares issued and 2,031,377 shares outstanding at March 31, 2023. On March 31, 2023, the Company paid a semi-annual cash dividend of $0.10 per share to all shareholders of record as of March 15, 2023.
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 2022 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 2023, the market value of the swaps decreased, resulting in an unrealized loss in market value of $823,000 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 (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, our ability to successfully integrate acquired businesses into our operations and to realize estimated cost savings in connection with acquisitions and business combination transactions, our ability to effectively manage our liquidity, changes in deposit flows, adverse changes in the securities markets, legislative changes or changes in government regulations, changes in accounting principles, changes in the quality or composition of the loan and investment portfolios the effect of war, acts of terrorism or civil unrest and the impact of pandemics such as the recent COVID-19 pandemic. 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.
