Gouverneur Bancorp Announces Fiscal 2021 Results
GOUVERNEUR, N.Y., Dec. 09, 2021 (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 its fiscal year ended September 30, 2021.
A Note to our Shareholders: Following the temporary business disruptions of the COVID-19 outbreak early in the fiscal year, the Bank finished with a solid performance. In partnership with Pursuit (formally NYBDC), the Bank processed $814,000 in PPP loans in fiscal year 2021 to twenty-three small business customers that were struggling financially due to virus restrictions. There was a decrease in interest and fees during the first half of the fiscal year due to economic conditions caused by the pandemic, however there was an increase in loan applications and deposit accounts throughout the year. Gouverneur Savings & Loan Association remains dedicated to serving the needs of our communities as business slowly returns to normal.
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 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 Year Ending | ||||||||
| 2021 | 2020 | |||||||
| Statement of Earnings | (In Thousands) | |||||||
| Interest Income | $ | 4,467 | $ | 5,012 | ||||
| Interest Expense | 365 | 522 | ||||||
| Net Interest Income | 4,102 | 4,490 | ||||||
| Provision for Loan Loss | 18 | 58 | ||||||
| Net Interest Income After Provision for Loan Loss | 4,084 | 4,432 | ||||||
| Non-interest Income (Loss) | 2,093 | (191 | ) | |||||
| Non-interest Expenses | 4,991 | 4,879 | ||||||
| Income (Loss) Before Income Tax | 1,186 | (638 | ) | |||||
| Income Tax (Benefit) | 119 | (257 | ) | |||||
| Net Income (Loss) | $ | 1,067 | $ | (381 | ) | |||
| Adjusted Statement of Earnings | ||||||||
| Interest Income | $ | 4,467 | $ | 5,012 | ||||
| Interest Expense | 365 | 522 | ||||||
| Net Interest Income | 4,102 | 4,490 | ||||||
| Provision for Loan Loss | 18 | 58 | ||||||
| Net Interest Income After Provision for Loan Loss | 4,084 | 4,432 | ||||||
| Non-interest Income (Loss) | 2,093 | (191 | ) | |||||
| Deduct: Unrealized gain (loss) on swap agreement | 943 | (1,062 | ) | |||||
| Adjusted Non-interest Income (1) | 1,150 | 871 | ||||||
| Non-interest Expenses | 4,991 | 4,879 | ||||||
| Adjusted Earnings Before Income Tax (1) (“AEBIT”) | 243 | 424 | ||||||
| Income Tax (Benefit) | 119 | (257 | ) | |||||
| Deduct: Change in EBIT tax calc. per income adj. | (198 | ) | 223 | |||||
| Adjusted Income Tax (Benefit)(1) | (79 | ) | (34 | ) | ||||
| Adjusted Net Income (1) | $ | 322 | $ | 458 | ||||
(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.
| Reconciliation to Non-GAAP Net Income | ||||||
| For the fiscal years ending 2021 and 2020 | ||||||
| (in thousands) | ||||||
| 2021 | 2020 | |||||
| Net Income (Loss) | $ | 1,067 | $ | (381 | ) | |
| (Addback) Deduct: Unrealized gain (loss) on swap agreement | 943 | (1,062 | ) | |||
| Addback (Deduct): Change in EBIT tax calc. per income adj. | 198 | (223 | ) | |||
| Adjusted Net Income | $ | 322 | $ | 458 | ||
Total revenue (net interest income plus non-interest income) for fiscal year 2021 was $6.20 million, an increase of $1.90 million over the 2020 fiscal year-end total of $4.30 million. The Bank remains well-capitalized with a core capital ratio of 19.76%, an increase of 0.65% from 2020.
Total adjusted revenue (net interest income plus adjusted non-interest income) for fiscal year 2021 was $5.25 million, a decrease of $110,000 over the 2020 fiscal year-end total of $5.36 million.
Net income (loss) for the fiscal year ended September 30, 2021 increased 380.05% to $1,067,000 or $0.53 per diluted share, compared to $(381,000), or $(0.18) per diluted share, in fiscal 2020. The earnings resulted in a return on average assets of 0.83%, an increase from (0.30)% in fiscal 2020, while the return on average equity increased to 3.93% for the year ended September 30, 2021, from (1.30)% for the year ended September 30, 2020.
Adjusted net income for the fiscal year ended September 30, 2021 decreased 29.69% to $322,000 or $0.16 per diluted share, compared to $458,000, or $0.22 per diluted share, in fiscal 2020. The earnings resulted in a return on average assets of 0.25%, a decrease from 0.35% in fiscal 2020, while the return on average equity decreased to 1.19% for the year ended September 30, 2021, from 1.57% for the year ended September 30, 2020.
Interest income on loans decreased $570,000 in fiscal 2021, from $ 4.69 million at September 30, 2020 to $4.12 million at September 30, 2021. Total interest income decreased $545,000, or 10.87%, from $5.01 million to $4.47 million.
Interest expense on deposits increased $15,000, from $322,000 at September 30, 2020 to $337,000 at September 30, 2021. Interest expense incurred on borrowings from the Federal Home Loan Bank, $200,000 at the end of fiscal 2020, decreased $172,000, to $28,000 at the end of fiscal 2021, resulting in a total interest expense of $365,000.
Interest spread, the difference between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities, was 3.54% in fiscal 2021 and 3.84% in fiscal 2020.
Non-interest income (loss) increased $2,284,000 from ($191,000) in fiscal year 2020 to $2,093,000 in fiscal 2021. This includes the unrealized market value gain (loss) on swap agreements held with FHLBNY of $943,000 and ($1.06) million for 2021 and 2020, respectively. The Bank continued its success with their secondary market mortgage program with FHLBNY. As loan volume increased, fee income increased $76,000 from $93,000 in fiscal year 2020 to $169,000 in fiscal 2021.
Adjusted non-interest income increased $279,000, from $871,000 in fiscal year 2020 to $1,150,000 in fiscal 2021. The adjustment excludes the unrealized market value gain (loss) on swap agreements held with FHLBNY.
Total non-interest expense increased $112,000 from $4.88 million at the end of September 2020 to $4.99 million at the end of September 2021. Salary and employee benefits expense decreased from the 2020 level due to unfilled staff vacancies and several retirements during the fiscal year. Directors’ fees increased $18,000 with the addition of a full-time director while data processing remained at the same expense level. Building, occupancy and equipment experienced a modest increase while foreclosed assets decreased $20,000. Other non-interest expenses increased $214,000 mainly due to adjustments to SERP cost components. The components of non-interest expense are presented in the table below.
| For the year ended | ||||||
| September 30, | ||||||
| 2021 | 2020 | |||||
| (In thousands) | ||||||
| Salaries and employee benefits | $ | 2,628 | $ | 2,743 | ||
| Directors’ fees | 256 | 238 | ||||
| Data processing | 261 | 261 | ||||
| Building, occupancy and equipment | 632 | 617 | ||||
| Foreclosed assets, net | 71 | 91 | ||||
| Other non-interest expense | 1,143 | 929 | ||||
| Non-interest expense | $ | 4,991 | $ | 4,879 | ||
Net loans decreased $530,000, or 0.61%, from $86.88 million to $86.35 million over the same period. The Bank made a $18,000 provision for loan losses in fiscal 2021, a decrease from the $58,000 provision made in the 2020 fiscal year. Non-performing assets were $646,000 at September 30, 2021, compared to $1.29 million at September 30, 2020. Net charge-offs, currently $30,000, decreased for the 2021 fiscal year from $64,000 for the year ended September 30, 2020. The allowance for loan losses was $620,000 or 0.72% of total loans outstanding at September 30, 2021 as compared to $631,000 or 0.72% at September 30, 2020.
Deposits increased $9.59 million, or 10.52%, to $100.75 million at September 30, 2021 from $91.16 million at September 30, 2020. The Bank currently holds no brokered deposits. Advances from the FHLB decreased $3.0 million with no current balance at fiscal year-end as the need for the Company to fund its loan portfolio with low-cost FHLB borrowings decreased.
Total assets increased $5.46 million, or 4.22%, from $129.27 million at September 30, 2020 to $134.73 million at September 30, 2021. Asset composition includes non-performing assets of 0.49% of total assets, a decrease from the 2020 figure of 1.01%.
Shareholders’ equity was $27.21 million at September 30, 2021, representing an increase of 2.19% from the September 30, 2020 balance of $26.63 million. The Company’s book value was $13.40 per common share based on 2,383,610 shares issued and 2,031,377 shares outstanding at September 30, 2021 versus $13.11 per common share based on 2,383,610 shares issued with 2,031,377 shares outstanding on September 30, 2020. The Company paid cash dividends totaling $0.24 per share to all public holders of our stock, during the fiscal year ending September 30, 2021.
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. Activity in Fiscal year 2020 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. The accounting for changes in the fair market value of these swaps (unrealized losses) was recognized in earnings as non-interest loss. This decline was considered temporary. 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 Fiscal year 2021, the market value of the swaps rebounded, resulting in an unrealized gain in market value of $943,000 as the world emerged from the COVID-19 pandemic and bond prices rose. 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 fluctuate with long term bond rates and projected short-term rates, 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 non-interest income (loss) 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 evaluation 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.
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