About Gouverneur Bancorp

Gouverneur Bancorp, Inc. operates as the bank holding company for Gouverneur Savings and Loan Association that provides financial services to individuals and businesses. The company primarily originates its own loans and retain them in its portfolio. The company also occasionally purchases loans or participation interests in loans. The company also occasionally sells some of the longer-term fixed-rate one-to-four family mortgage loans that it originates in the secondary market based on prevailing market interest rate conditions, an analysis of the composition and risk of the loan portfolio, liquidity needs and interest rate risk management goals. Generally, loans are sold with recourse and with servicing retained, which enables the company to retain customer contact following the loan sale. The company conducts business through its branch offices located in Jefferson and St. Lawrence Counties in New York. The company’s principal business consists of originating one- to four-family residential real estate mortgage loans and, to a lesser extent, commercial real estate loans, construction loans and home equity loans and lines of credit. The company also offers commercial loans and consumer loans. The company offers a variety of retail deposits to the general public in the areas surrounding its main office and its branch offices. The company offers its customers a variety of deposit products with interest rates that are competitive with those of similar products offered by other financial institutions operating in its market area. The company also utilizes borrowings as a source of funds. The company’s revenues are derived primarily from interest on loans and, to a lesser extent, interest on investment securities and mortgage-backed securities. The company also generates revenues from other income, including deposit fees and service charges, realized gains on sales of securities, realized gains on sales of loans associated with loan production and realized gains on sales of other real estate owned. GS&L Municipal Bank The bank operates a limited-purpose wholly owned subsidiary, GS&L Municipal Bank that was formed as a New York-chartered limited purpose commercial bank. The bank formed GS&L Municipal Bank as a limited purpose commercial bank subsidiary because, under New York municipal laws, a New York-chartered savings and loan association. GS&L Municipal Bank has the power to receive deposits only to the extent of accepting for deposit the funds of the state of New York and its respective agents, authorities and instrumentalities, and local governments as defined in Section 10(a)(1) of the New York General Municipal Law. GS&L Municipal Bank’s purpose is to attract deposits from local municipalities. The bank and GS&L Municipal Bank are each regulated by the New York State Department of Financial Services and the Federal Deposit Insurance Corporation. Acquisition of Citizens Bank of Cape Vincent In 2022, the company acquired Citizens Bank of Cape Vincent, a New York-chartered stock commercial bank headquartered in Cape Vincent, New York and with additional branch offices located in Chaumont and La Fargeville, New York. Market Area The company operates branch offices located in Jefferson and St. Lawrence Counties in New York. The company considers its primary market area to be Jefferson and St. Lawrence Counties, where it maintains branch offices, as well as Lewis County, where it makes loans and accept deposits. These three counties, which are all predominately rural and comprised of many small towns and villages, are part of the North Country region in New York state. The North Country is the northernmost region of New York state, bordered by Lake Champlain to the east, the Adirondack Mountains to the south, the Mohawk Valley region to the southeast, the Canadian border to the north, and Lake Ontario and the St. Lawrence Seaway to the west. The northern part of the company’s primary market is situated on the St. Lawrence River, which forms the northern border of New York State and demarcates part of the international boundary between Canada and the United States, and includes private and public lands that are attractive vacation destinations. The economy of the company’s primary market area is fairly diversified with employment sectors ranging across a number of industries, including manufacturing, agriculture, retail trades, construction, mining, health care, colleges and universities, other education and government service, as well as tourism-related businesses along the St. Lawrence River. Fort Drum, a major U.S. Army military installation, is also located at the southern edge of the company’s primary market area within Jefferson County. Lending Activities The company’s loan portfolio consists primarily of one- to four-family residential mortgage loans. To a lesser extent, the company’s loan portfolio consists of commercial real estate loans, construction loans and home equity loans and lines of credit, as well as commercial loans and consumer loans. Substantially all of the company’s loans are secured by properties located within its local markets. One- to Four-Family Residential Loans: The company’s primary lending activity is the origination of mortgage loans to enable borrowers to purchase or refinance existing homes, including second vacation homes and cottages, in its market area. The company offers fixed-rate and adjustable-rate mortgage loans with terms up to 30 years. Borrower demand for adjustable-rate loans rather than fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, the difference between the interest rates and loan fees offered for fixed-rate mortgage loans and the initial period interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate mortgage loans (as opposed to adjustable interest rates) and adjustable-rate mortgage loans that can be originated or purchased at any time is largely determined by the demand for each in a competitive environment and the effect each has on the company’s interest rate risk. The company offers fixed-rate loans with terms of one to 30 years. The company’s adjustable-rate mortgage loans are based on one-, five- or 10-year amortization schedule. Interest rates and payments on its adjustable-rate mortgage loans adjust every one, five or 10 years. Interest rates and payments on the company’s adjustable-rate loans generally are adjusted to a rate that is based on the respective one-year Constant Maturity U.S. Treasury indices. The company requires all properties securing mortgage loans to be appraised by licensed independent appraisers from appraisal management companies. Commercial Real Estate Loans: The company offers fixed rate and adjustable-rate mortgage loans secured by commercial real estate, including multi-family residential real estate. The company’s commercial real estate and multi-family residential real estate loans are generally secured by office buildings, retail and mixed-use properties, apartment buildings, and owner-occupied properties used for businesses. The company originates commercial real estate loans with terms generally up to 20 years. Interest rates and payments on adjustable-rate loans adjust every one, five and ten years. Interest rates and payments on the company’s adjustable-rate commercial loans generally are adjusted to a rate typically equal to the current Prime Rate, plus a spread based on credit-worthiness and risk. Loans secured by commercial real estate and multi-family residential real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans. Construction and Land Loans: The company originates residential construction loans to individuals and purchase loans that finance the construction of owner-occupied residential dwellings for personal use, commercial construction loans for the development of projects including non-owner occupied residential dwellings, apartment buildings, single-family investment loans, as well as owner-occupied properties used for business, and commercial land loans for the purchase and development of raw land. The company’s residential construction loans generally provide for the payment of interest only during the construction phase, which can be up to 12 months. At the end of the construction phase, substantially all of the company’s loans automatically convert to permanent mortgage loans. Construction loans generally can be made with a maximum loan to value ratio of 80% of the appraised value with maximum terms of 30 years. The company’s commercial construction loans provide for payment of interest only during the construction phase and may, in the case of an apartment or commercial building, convert to a permanent mortgage loan upon the completion of construction. The company also requires periodic inspections of the property during the term of the construction loan. The company also offers land loans to individuals on approved residential building lots for personal use. The land loans in the company’s loan portfolio have terms of up to 15 years and to a maximum loan to value ratio of 65% of the appraised value. Home Equity Loans and Lines of Credit: The company offers home equity loans and lines of credit, which have adjustable rates of interest. These loans are originated with maximum loan-to-value ratios of 80% of the appraised value of the property, and the company requires that it has a second lien position on the property. The company also offers secured and unsecured lines of credit for well-qualified individuals and small businesses. Commercial Loans: These loans consist of operating lines of credit secured by general business assets and equipment. The operating lines of credit are generally short term in nature with interest rates tied to the Prime Rate plus and adjustments occurring daily, monthly, or quarterly based on the original contract. For adjustable loans, there is also an interest rate floor. The equipment loans are typically made with maturities of less than five years and are priced with a fixed interest rate. Longer repayments of up to 15 years can be made depending on the useful life of the equipment being financed. Consumer Loans: The company offers a variety of consumer loans to its customer base, which include loans for automobiles, motorcycles, campers, boats and other recreational vehicles, as well as personal secured and unsecured loans. Investment Activities The company has legal authority to invest in various types of liquid assets, including the U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. At September 30, 2023, the company’s investment portfolio consisted primarily of municipal securities with maturities of five to more than ten years, corporate bonds, and mortgage-backed securities issued by Fannie Mae, Freddie Mac or Ginnie Mae with stated final maturities of 30 years or less. Deposit Activities The vast majority of the company’s depositors are residents of Jefferson, Lewis and St. Lawrence counties in New York. Deposits are raised primarily from within the company’s primary market area through the offering of a broad selection of deposit instruments, including checking accounts, money market accounts, regular savings accounts, club savings accounts, certificate accounts and various retirement accounts. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit, and the interest rate among other factors. Regulation and Supervision The bank is a New York-chartered stock savings and loan association, and the bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation. The bank is subject to extensive regulation by the New York State Department of Financial Services, as its chartering agency, and by the Federal Deposit Insurance Corporation, as its primary federal regulator. The bank is required to file reports with, and is periodically examined by, the Federal Deposit Insurance Corporation and the New York State Department of Financial Services concerning its activities and financial condition, and must obtain regulatory approvals prior to entering into certain transactions, including, but not limited to, mergers with or acquisitions of other financial institutions. The bank is a member of the Federal Home Loan Bank of New York. The regulation and supervision of the bank establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of depositors and borrowers and, for purposes of the Federal Deposit Insurance Corporation, the protection of the deposit insurance fund. This regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. The bank is a savings association under the Home Owners’ Loan Act, as amended. As a result, the company is a savings and loan holding company and is required to comply with the rules and regulations of the Federal Reserve Board applicable to savings and loan holding companies. The company is also required to file certain reports with the Federal Reserve Board and is subject to examination by and the enforcement authority of the Federal Reserve Board. The company is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws. Any change in applicable laws or regulations, whether by the New York State Department of Financial Services, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the state of New York or Congress, could have a material adverse impact on the operations and financial performance of the company and the bank. In addition, the company and the bank are, and will continue to be, affected by the monetary and fiscal policies of various agencies of the United States Government, including the Federal Reserve Board. The bank derives its lending, investment, and other authority primarily from the applicable provisions of New York state banking law and the regulations of the New York State Department of Financial Services, as limited by Federal Deposit Insurance Corporation regulations. The Federal Deposit Insurance Corporation has extensive enforcement authority over insured state-chartered savings associations, including the bank. As an insured savings association, the bank must satisfy the qualified thrift lender, or QTL, test. Under the QTL test, the bank must maintain at least 65% of its portfolio assets in qualified thrift investments (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of every 12-month period. As of September 30, 2023, the bank satisfied the QTL test. The bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. Deposit accounts in the bank are insured up to a maximum of $250,000 for each separately insured depositor. The bank is also subject to provisions of the New York state banking law which imposes continuing and affirmative obligations upon banking institutions organized in New York State to serve the credit needs of its local community (the NYCRA), which are substantially similar to those imposed by the federal CRA. The bank’s latest NYCRA rating was Satisfactory. The bank is subject to the USA PATRIOT Act, which gave federal agencies additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act provided measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents, and parties registered under the Commodity Exchange Act. Interest and other charges collected or contracted for by the bank are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to state and federal laws applicable to credit transactions, such as the Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; and rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws. The deposit operations of the bank are also subject to, among others, the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; Check Clearing for the 21st Century Act (also known as Check 21), which gives substitute checks, such as digital check images and copies made from that image, the same legal standing as the original paper check; and Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. As a savings and loan holding company, the company is subject to Federal Reserve Board regulations, examinations, supervision, reporting requirements and regulations regarding its activities. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the bank. Pursuant to federal law and regulations and policy, a savings and loan holding company, such as the company, may generally engage in the activities permitted for financial holding companies under Section 4(k) of the Bank Holding Company Act (subject to applicable requirements, such as making an election to be treated as a financial holding company) and certain other activities that have been authorized for savings and loan holding companies by regulation. The company’s common stock is registered with the Securities and Exchange Commission and, as a result, the company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. The company is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System (the Federal Reserve Board). The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The company has policies, procedures and systems designed to comply with these regulations, and it reviews and documents such policies, procedures and systems to ensure continued compliance with these regulations. History Gouverneur Bancorp, Inc. was founded in 1892. The company was incorporated in 1999.