GOUVERNEUR, N.Y., Jan. 27, 2022 (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 the first quarter of fiscal year 2022 ended December 31, 2021.
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. As a result, the first quarter 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 $90,000, from $72,000 at December 31, 2020 to $162,000 at December 31, 2021. The increased costs incurred by the merger include due diligence, financial and legal services. The regulatory applications are in process and we anticipate closing by the end of the second quarter of fiscal year 2022.
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
For the Quarter Ending
12/31/21
12/31/20
Statement of Earnings
(In Thousands)
Interest Income
$
1,078
$
1,161
Interest Expense
83
109
Net Interest Income
995
1,181
Provision for Loan Loss
16
-
Net Interest Income After Provision for Loan Loss
979
1,052
Non-interest Income
451
556
Non-interest Expenses
1,194
1,331
Income Before Income Tax
236
277
Income Tax
25
35
Net Income
$
211
$
242
Adjusted Statement of Earnings
Interest Income
$
1,078
$
1,161
Interest Expense
83
109
Net Interest Income
995
1,052
Provision for Loan Loss
16
-
Net Interest Income After Provision for Loan Loss
979
1,052
Non-interest Income
451
556
Deduct: Unrealized gain on swap agreement
261
235
Adjusted Non-interest Income (1)
190
321
Non-interest Expenses
1,194
1,331
Adjusted Earnings Before Income Tax (1) (“AEBIT”)
(25
)
42
Income Tax
25
35
(Addback) Deduct: change in EBIT tax calc. per income adj.
(55
)
(50
)
Adjusted Income Tax (Benefit)(1)
(30
)
(15
)
Adjusted Net Income (1)
$
5
$
57
Reconciliation to Non-GAAP Net Income
(in thousands)
For the Quarter Ending:
(In Thousands)
12/31/21
12/31/20
Net Income
$
211
$
242
Deduct: Unrealized gain on swap agreement
261
235
Addback (Deduct): Change in EBIT tax calc. per income adj.
(55
)
(50
)
Adjusted Net Income(1)
$
5
$
57
(1) “Adjusted Non-interest 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 2022 was $211,000 or $0.10 per diluted share, compared to $242,000, or $0.12 per diluted share, in the first quarter of fiscal year 2021. The earnings resulted in an annualized return on average assets of 0.64%, a decrease from 0.83% at September 30, 2021, while the annualized return on average equity decreased to 3.06% for the quarter ended December 31, 2021, from 3.93% for at September 30, 2021.
Adjusted net income for the quarter ended December 31, 2021 decreased 91.23% to $5,000 or $0.003 per diluted share, compared to $57,000, or $0.03 per diluted share, in the quarter ending December 31, 2020. The earnings resulted in an annualized return on average assets of 0.02%, a decrease from 0.25% at fiscal 2021 year-end, while the annualized return on average equity decreased from 1.19% to 0.07% for the same period. As noted earlier in this press release, earnings for the first quarter of fiscal year 2022 were impacted by fees associated with the merger agreement.
Interest income on loans decreased $87,000, or 8.10%, from $1,074,000 for the quarter ended December 31, 2020 to $987,000 for the quarter ended December 31, 2021. Total interest income decreased $83,000, or 7.15%, from $1.16 million to $1.08 million during that time.
Interest expense on deposits decreased $6,000, from $89,000 at December 31, 2020 to $83,000 at December 31, 2021. Interest expense incurred on borrowings from the Federal Home Loan Bank, $20,000 at the end of December 2020, decreased $20,000, to $-0- with currently no borrowings at the end of December 2021, resulting in a total interest expense of $109,000 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 3.31% at December 31, 2021 and 3.64% at December 31, 2020.
Non-interest income decreased $105,000, from $556,000 in December 2020 to $451,000 in December 2021. This includes the unrealized market value gain on swap agreements held with FHLBNY of $261,000 and $235,000 for the first quarters of fiscal year 2022 and 2021, respectively.
Adjusted non-interest income for the quarter ended December 31, 2021, which excludes the non-cash unrealized market value gain on swap agreements held with FHLBNY, decreased $131,000 compared to the quarter ended December 31, 2020.
Total assets decreased $1.97 million, or 1.46%, from $134.73 million at September 30, 2021 to $132.76 million at December 31, 2021. Asset composition includes non-performing assets of 0.69% of total assets, an increase from the September 2021 figure of 0.48% while securities available for sale decreased by $360,000, or 1.46%, from $24.61 million to $24.25 million over the same period.
Net loans increased $1.52 million, or 1.77%, from $86.35 million to $87.87 million over the same period. The Bank’s portfolio continues to perform well after a strong fiscal year 2021. The Bank had $16,000 in provision for loan losses during the first quarter of fiscal 2022, an increase from no provision made in the same period of the 2021 fiscal year. Non-performing assets were $910,000 at December 31, 2021, compared to $646,000 at September 30, 2021. The allowance for loan losses was $609,000 or 0.69% of total loans outstanding at December 31, 2021 as compared to $620,000 or 0.72% at September 30, 2021. Foreclosed real estate was $241,000 and $276,000 at December 31, 2021 and September 30, 2021, respectively. The Bank continued its success with their secondary market mortgage program with FHLBNY after a strong performance in fiscal year 2021. Loan volume increased $371,000, from $13.20 million at September 30, 2021 to $13.57 million at December 31, 2021. The Bank recognized $21,000 of fee income from the program over the same period.
Deposits decreased $1.15 million, or 1.14%, to $99.60 million at December 31, 2021 from $100.75 million at September 30, 2021. The Bank currently holds no brokered deposits or advances from FHLB.
Shareholders’ equity was $27.60 million at December 31, 2021, representing an increase of 1.41% from the September 30, 2021 balance of $27.21 million. The Company’s book value was $13.59 and $13.40 per common share based on 2,031,377 shares outstanding at December 31, 2021 and September 30, 2021, 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 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. 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 2022, the market value of the swaps continued to rise, resulting in an unrealized gain in market value of $261,000 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, 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.
