Gouverneur Bancorp, Inc. 2024 Annual Report Review

Introduction

Gouverneur Bancorp, Inc., a Maryland corporation, completed its second-step conversion on October 31, 2023, transitioning from a mutual holding company structure to a stock holding company structure. This strategic move was accompanied by a public offering that raised $7.2 million. The company operates primarily through its subsidiary, Gouverneur Savings and Loan Association, and its limited-purpose subsidiary, GS&L Municipal Bank. This review delves into the company's 2024 10-K filing, analyzing its business operations, financial performance, and risk factors.

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Business Overview

Gouverneur Bancorp, Inc. operates in the financial services industry, primarily serving individuals and businesses in St. Lawrence, Jefferson, and Lewis Counties in New York. The company offers a range of financial products, including one- to four-family residential mortgage loans, commercial real estate loans, construction loans, and consumer loans. The company also provides deposit products and services through its five branch offices.

Key Business Developments

• Second-Step Conversion: The company completed its second-step conversion, raising $7.2 million through the sale of 723,068 shares of common stock.
• Acquisition of Citizens Bank of Cape Vincent: In September 2022, Gouverneur Bancorp acquired Citizens Bank of Cape Vincent, expanding its footprint and customer base.
• Formation of GS&L Municipal Bank: This subsidiary was formed to attract municipal deposits, which are a cost-effective source of funds.

Financial Performance

Income Statement Highlights

• Net Income: The company reported a net income of $539,000 for the fiscal year ended September 30, 2024, compared to $317,000 in 2023.
• Net Interest Income: Totaled $7.1 million, a decrease from $7.6 million in 2023, primarily due to increased interest expenses.
• Non-Interest Income: Increased significantly to $772,000 from $71,000 in 2023, driven by gains on swap agreements and securities sales.

Balance Sheet Highlights

• Total Assets: Decreased by $8.6 million to $197.3 million, primarily due to reductions in cash and cash equivalents and acquired loans.
• Total Loans: Net loans decreased slightly to $124.2 million, with a focus on residential mortgage lending.
• Deposits: Increased by $1.1 million to $159.9 million, with a notable rise in time deposits.

Cash Flow and Liquidity

• Operating Activities: Net cash used in operating activities was $3.0 million, a shift from $5.7 million provided in 2023.
• Investing Activities: Provided $6.8 million, primarily from securities sales and maturities.
• Financing Activities: Used $7.9 million, reflecting changes in deposit levels and Federal Home Loan Bank advances.

Risk Factors

Interest Rate Risk

The company's profitability is sensitive to changes in interest rates. A rising interest rate environment could compress interest rate spreads, negatively impacting net interest income.

Credit Risk

The allowance for credit losses increased to $1.1 million, reflecting potential risks in the loan portfolio. The company continues to monitor credit quality closely.

Regulatory and Compliance Risks

As a financial institution, Gouverneur Bancorp is subject to extensive regulation, which could impact its operations and financial performance.

Conclusion

Gouverneur Bancorp, Inc. has navigated a transformative year with its second-step conversion and strategic acquisitions. While the company faces challenges related to interest rate fluctuations and regulatory compliance, its focus on residential mortgage lending and municipal deposits positions it for potential growth. The company's financial performance in 2024 reflects a cautious but optimistic outlook, with improvements in net income and non-interest income. Investors should consider these factors when evaluating the company's future prospects.