UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

       For the quarterly period ended June 30, 2005

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

       For the transition period from _______________ to ___________________

                        Commission file number 001-14910

                            GOUVERNEUR BANCORP, INC.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

               United States                              04-3429966
      -------------------------------                  ----------------
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)

                  42 Church Street, Gouverneur, New York 13642
                  --------------------------------------------
                    (Address of principal executive offices)

                    Issuer's telephone number (315) 287-2600

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                                 Yes [X] No [ ]

                                                             Outstanding at
           Class                                             August 2, 2005
           -----                                             --------------
Common Stock, par value $ .01                                   2,284,234

Transitional Small Business Disclosure Format (check one):
                                 Yes [ ] No [X]
<PAGE>

                            GOUVERNEUR BANCORP, INC.
                                   FORM 10-QSB
                                TABLE OF CONTENTS



PART 1 - FINANCIAL INFORMATION                                              Page
------------------------------                                              ----

Item 1.  Financial Statements - Unaudited

         Consolidated Statements of Financial Condition at June 30, 2005
         and at September 30, 2004                                            3

         Consolidated Statements of Income for the three and nine months
         ended June 30, 2005 and 2004                                         4

         Consolidated Statements of Shareholders' Equity for the nine
         months ended June 30, 2005 and 2004                                  5

         Consolidated Statements of Cash Flows for the nine months ended
         June 30, 2005 and 2004                                               7

         Notes to Consolidated Financial Statements                           8

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.                                          11

Item 3.  Controls and Procedures                                             20

PART II - OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings                                                   21

Item 6.  Exhibits                                                            21

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                     GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                  (In thousands, except share data) (Unaudited)

<TABLE>
<CAPTION>
                                                                              June 30,      September 30,
                                                                                2005            2004
                                                                            ------------    ------------
<S>                                                                         <C>             <C>
Assets:
Cash and due from banks                                                     $      2,716    $      1,817
Interest-bearing deposits in bank                                                    564             898
                                                                            ------------    ------------
                Total cash and cash equivalents                                    3,280           2,715

Securities available-for-sale                                                     11,572          13,797
Securities held-to-maturity (fair value 2005: $188: 2004: $248)                      186             251

Loans, held for sale                                                               2,223              --

Loans receivable, net of allowance for loan losses: 2005 $839: 2004 $755          92,899          80,159

Investment in Federal Home Loan Bank stock, at cost                                1,650           1,150
Investment in life insurance                                                       3,681           3,582
Premises and equipment, net                                                        1,574           1,493
Accrued interest receivable and other assets                                       1,064           1,022
                                                                            ------------    ------------
                Total assets                                                $    118,129    $    104,169
                                                                            ============    ============

Liabilities:
Deposits: Non-interest-bearing demand                                       $      1,849    $      1,327
          NOW and money market                                                    12,199          10,710
          Savings                                                                 20,178          20,038
          Time                                                                    29,712          29,523
                                                                            ------------    ------------
                Total deposits                                                    63,938          61,598

Advances from the Federal Home Loan Bank                                          33,000          23,000
Other liabilities                                                                  2,613           1,621
                                                                            ------------    ------------
                Total liabilities                                                 99,551          86,219
                                                                            ------------    ------------

Shareholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued             --              --
Common stock, $.01 par value,  9,000,000 shares authorized; 2,384,040
  shares issued                                                                       24              24
Additional paid-in capital                                                         4,707           4,642
Retained earnings                                                                 14,232          13,632
Treasury Stock, at cost, (shares 2005: 99,806: 2004 100,931)                        (505)           (511)
Accumulated other comprehensive income                                               369             451
Unearned common stock held by Management Recognition Plan                            (51)            (57)
Unallocated common stock held by Employee Stock Ownership Plan                      (198)           (231)
                                                                            ------------    ------------
                Total shareholders' equity                                        18,578          17,950
                                                                            ------------    ------------
                Total liabilities and shareholders' equity                  $    118,129    $    104,169
                                                                            ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                     GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                (In thousands, except per share data) (Unaudited)

<TABLE>
<CAPTION>
                                                   Three Months Ended        Nine Months Ended
                                                        June 30,                  June 30,
                                                -----------------------   ------------------------
                                                   2005         2004         2005          2004
                                                ----------   ----------   ----------    ----------
<S>                                             <C>          <C>          <C>           <C>
Interest income:
----------------
Loans                                           $    1,500   $    1,203   $    4,296    $    3,571
Securities-taxable                                     119          120          346           398
          -non-taxable                                  12            9           36            24
Other short-term investments                             9            4           24            11
                                                ----------   ----------   ----------    ----------
     Total interest income                           1,640        1,336        4,702         4,004

Interest expense:
-----------------
Deposits                                               285          251          814           753
Borrowings - short term                                103           17          232            78
Borrowings - long term                                 171          137          509           382
                                                ----------   ----------   ----------    ----------
     Total interest expense                            559          405        1,555         1,213
                                                ----------   ----------   ----------    ----------

     Net interest income                             1,081          931        3,147         2,791
Provision for loan losses                               30           35          100            85
                                                ----------   ----------   ----------    ----------
     Net interest income after provision
         for loan losses                             1,051          896        3,047         2,706

Non-interest income:
--------------------
Service charges                                         52           47          143           130
Realized gain on sales of securities                    --           --           96            80
Realized loss on sales of loans                         --           --          (17)           --
Earnings on investment in life insurance                30           31           99            59
Other                                                   34           26          108            86
                                                ----------   ----------   ----------    ----------
     Total non-interest income                         116          104          429           355

Non-interest expenses:
----------------------
Salaries and employee benefits                         427          320        1,263         1,041
Directors fees                                          36           26           99            72
Occupancy and equipment                                 98           87          285           257
Data processing                                         34           34          104            99
Postage and supplies                                    29           22           80            67
Professional fees                                       54           34          158           115
Foreclosed assets, net                                   2            3           (7)           23
Other                                                   97           90          333           309
                                                ----------   ----------   ----------    ----------
     Total non-interest expenses                       777          616        2,315         1,983
                                                ----------   ----------   ----------    ----------

     Income before income tax expense                  390          384        1,161         1,078
Income tax expense                                     144          145          425           409
                                                ----------   ----------   ----------    ----------
     Net income                                 $      246   $      239   $      736    $      669
                                                ==========   ==========   ==========    ==========

Earnings per common share - basic               $     0.11   $     0.11   $     0.33    $     0.30
Earnings per common share - diluted             $     0.11   $     0.11   $     0.33    $     0.30
</TABLE>

See accompanying notes to consolidated financial statements

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                              GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                  Nine months ended June 30, 2005
                                           (In thousands, except share data) (Unaudited)


                                                                Accumulated     Unearned       Unallocated
                                      Additional                  Other          common          common
                            Common     paid-in     Retained    Comprehensive    stock held      stock held     Treasury
                             Stock     capital     earnings       Income         by MRP          by ESOP        stock        Total
                           --------   ----------   --------    ------------    ------------    ------------    --------    --------
<S>                        <C>        <C>          <C>         <C>             <C>             <C>             <C>         <C>
Balance at
September 30, 2004         $     24   $    4,642   $ 13,632    $        451    $        (57)   $       (231)   $   (511)   $ 17,950

Comprehensive income:
   Net income                                           736                                                                     736
   Change in net
      unrealized gain
      on securities
      available for
      sale, net of
      reclassification
      adjustment and
      tax effects                                                       (82)                                                    (82)
                                                                                                                           --------

Total comprehensive income                                                                                                      654
                                                                                                                           --------

Allocation of ESOP
  (6,743 shares)                              63                                                         33                      96

Amortization of MRP                                                                       6                                       6
Exercise of stock options
  (1,125 shares)                               2                                                                      6           8

Cash dividends declared
   ($0.14 per share)                                   (136)                                                                   (136)

                           --------   ----------   --------    ------------    ------------    ------------    --------    --------
Balance at June 30, 2005   $     24   $    4,707   $ 14,232    $        369    $        (51)   $       (198)   $   (505)   $ 18,578
                           ========   ==========   ========    ============    ============    ============    ========    ========
</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>
                                               GOUVERNEUR BANCORP, INC AND SUBSIDIARY
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                  Nine months ended June 30, 2004
                                           (In thousands, except share data) (Unaudited)

                                                                Accumulated     Unearned       Unallocated
                                      Additional                  Other          common          common
                            Common     paid-in     Retained    Comprehensive    stock held      stock held     Treasury
                             Stock     capital     earnings       Income         by MRP          by ESOP        stock        Total
                           --------   ----------   --------    ------------    ------------    ------------    --------    --------
<S>                        <C>        <C>          <C>         <C>             <C>             <C>             <C>         <C>
Balance at
  September 30, 2003       $     24   $    4,577   $ 13,365    $        487    $        (85)   $       (274)   $   (537)   $ 17,557

Comprehensive income:
   Net income                                           669                                                                     669
   Change in net
      unrealized gain
      on securities
      available for
      sale, net of taxes                                               (203)                                                   (203)
                                                                                                                           --------

     Total comprehensive
        income                                                                                                                  466
                                                                                                                           --------

Allocation of ESOP
  (6,258 shares)                              46                                                         32                      78

Amortization of MRP                                                                      21                                      21
Exercise of stock options
  (5,225 shares)                               1                                                                     26          27

Cash dividends declared
   ($0.13 per share)                                   (296)                                                                   (296)
                           --------   ----------   --------    ------------    ------------    ------------    --------    --------

Balance at June 30, 2004   $     24   $    4,624   $ 13,738    $        284    $        (64)   $       (242)   $   (511)   $ 17,853
                           ========   ==========   ========    ============    ============    ============    ========    ========
</TABLE>

See accompanying notes to consolidated financial statements

                                       6
<PAGE>

                     GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands) (Unaudited)

<TABLE>
<CAPTION>
                                                                                 Nine Months Ended
                                                                                     June 30,
                                                                             ------------------------
                                                                                2005          2004
                                                                             ----------    ----------
<S>                                                                          <C>           <C>
Cash flows from operating activities:
 Net Income                                                                  $      736    $      669

 Adjustments to reconcile net income to net cash provided by
    operating activities:
       Provision for loan losses                                                    100            85
       Depreciation                                                                  90            92
       Net amortization of securities premiums and discounts                         18            52
       Net realized gains on sales of securities                                    (96)          (80)
       Net realized losses on sales of loans                                         17            --
       Earnings on bank owned life insurance                                        (99)          (59)
       Allocated and earned shares of ESOP and MRP                                  102            99
       Net realized gain on sale of foreclosed assets                               (14)           --
       (Increase) decrease in accrued interest receivable and other assets          (69)           72
       Increase in accrued interest payable and other liabilities                 1,046             9
                                                                             ----------    ----------
                    Net cash provided by operating activities                     1,831           939
                                                                             ----------    ----------

Cash flows from investing activities:
 Net increase in loans                                                          (16,400)       (9,301)
 Proceeds from sales of loans                                                     1,241            --
 Purchases of loans                                                                  --          (609)
 Proceeds from sales of securities AFS                                              211         7,080
 Proceeds from maturities and principal reductions of securities AFS              1,974         4,452
 Purchases of securities AFS                                                        (18)       (7,903)
 Proceeds from maturities and principal reductions of securities HTM                 65            62
 Proceeds from sales of foreclosed assets                                           120            --
 Additions to premises and equipment                                               (171)          (23)
 Proceeds from sale of premises and equipment                                        --             3
 Purchase of Federal Home Loan Bank stock                                          (500)         (290)
 Purchase of investment in life insurance                                            --        (3,500)
                                                                             ----------    ----------
                    Net cash used in investing activities                       (13,478)      (10,029)
                                                                             ----------    ----------

Cash flows from financing activities:
 Net increase in deposits                                                         2,340         2,100
 Net proceeds from FHLB advances                                                 10,000         5,800
 Exercise of stock options                                                            8            27
 Cash dividends paid                                                               (136)         (296)
                                                                             ----------    ----------
                    Net cash provided by financing activities                    12,212         7,631
                                                                             ----------    ----------

 Net decrease in cash and cash equivalents                                          565        (1,459)
 Cash and cash equivalents at beginning of period                                 2,715         4,288
                                                                             ----------    ----------

Cash and cash equivalents at end of period                                   $    3,280    $    2,829
                                                                             ==========    ==========

Non-cash investing activities:
 Additions to foreclosed assets                                              $       79    $      137
Cash paid during the period for:
 Interest                                                                         1,502         1,215
 Income taxes                                                                       385           329
</TABLE>

See accompanying notes to consolidated financial statements.

                                       7
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.       Basis of Presentation
         ---------------------

         The accompanying unaudited financial statements include the accounts of
         Gouverneur Bancorp, Inc. (the "Company") and Gouverneur Savings and
         Loan Association (the "Bank"), the wholly owned and only subsidiary of
         the Company, as of June 30, 2005 and September 30, 2004 and for the
         three and nine month periods ended June 30, 2005 and 2004. All material
         intercompany accounts and transactions have been eliminated in this
         consolidation. These statements were prepared in accordance with
         instructions for Form 10-QSB and, therefore, do not include information
         or footnotes necessary for a complete presentation of financial
         condition, results of operations, and cash flows in conformity with
         generally accepted accounting principles in the United States of
         America.

         In the opinion of management, all adjustments, consisting of only
         normal recurring adjustments or accruals, which are necessary for a
         fair presentation of the consolidated financial statements have been
         made at and for the three month and the nine month periods ended June
         30, 2005 and 2004. The results of operations for the three month and
         nine month periods ended June 30, 2005 are not necessarily indicative
         of the results which may be expected for an entire fiscal year or other
         interim periods.

         The data in the consolidated statements of condition for September 30,
         2004 was derived from the Company's annual report on Form 10-KSB. That
         data, along with the interim financial information presented in the
         consolidated statements of financial condition, income, shareholders'
         equity and cash flows should be read in conjunction with the 2004
         consolidated financial statements, including the notes thereto included
         in the Company's 2004 Annual Report on Form 10-KSB.

2.       Earnings Per Common Share
         -------------------------

         Basic earnings per share is calculated by dividing net income available
         to common shareholders by the weighted average number of shares
         outstanding during the period. Unallocated shares held by the Company's
         Employee Stock Ownership Plan ("ESOP") are not included in the weighted
         average number of shares outstanding. Unearned shares held by the
         Company's Management Recognition Plan ("MRP") are not included in the
         weighted average number of outstanding shares. Diluted earnings per
         share reflects additional common shares that would have been
         outstanding if dilutive potential common shares had been issued (for
         example, through the exercise of common stock options), as well as any
         adjustment to income that would result from the assumed issuance.

                                       8
<PAGE>

         Basic and diluted earnings per share for the three-month and nine month
         periods ending June 30, 2005 and 2004 were computed as follows:

                                          (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                    Three Months Ended         Nine Months Ended
                                                                          June 30,                  June 30,
                                                                  -----------------------   -----------------------
         Basic earnings per share:                                   2005         2004         2005         2004
                                                                  ----------   ----------   ----------   ----------
<S>                                                               <C>          <C>          <C>          <C>
         Net income                                               $      246   $      239   $      736   $      669
         Weighted average common shares outstanding                    2,230        2,217        2,227        2,212
                                                                  ----------   ----------   ----------   ----------
         Basic earnings per share                                 $     0.11   $     0.11   $     0.33   $     0.30
                                                                  ==========   ==========   ==========   ==========


                                                                    Three Months Ended         Nine Months Ended
                                                                          June 30,                  June 30,
                                                                  -----------------------   -----------------------
         Diluted earnings per share:                                 2005         2004         2005         2004
                                                                  ----------   ----------   ----------   ----------
         Net income                                               $      246   $      239   $      736   $      669
         Weighted average common shares outstanding                    2,230        2,217        2,227        2,212
         Additional potentially dilutive securities from common
            stock options (equivalent in common stock)                    33           32           35           32
                                                                  ----------   ----------   ----------   ----------
         Diluted weighted average common shares outstanding            2,263        2,249        2,262        2,244
                                                                  ----------   ----------   ----------   ----------
         Diluted earnings per share                               $     0.11   $     0.11   $     0.33   $     0.30
                                                                  ==========   ==========   ==========   ==========
</TABLE>

3.       Comprehensive Income
         --------------------

         Comprehensive income, presented in the consolidated statements of
         shareholders' equity, consists of net income and the net change for the
         period in after-tax unrealized gains or losses on securities available
         for sale. Accumulated other comprehensive income in the consolidated
         statements of financial condition represents the net unrealized gains
         or losses on securities available for sale as of the reporting dates,
         net of related tax effect.

         A summary of the unrealized gains (losses) and reclassification
         adjustments of securities available for sale and the related tax
         effects for the three and nine month periods ended June 30, 2005 and
         2004 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                          Three Months Ended          Nine Months Ended
                                                                June 30,                   June 30,
                                                       ------------------------    ------------------------
                                                          2005          2004          2005          2004
                                                       ----------    ----------    ----------    ----------
<S>                                                    <C>           <C>           <C>           <C>
   Unrealized holding gains (losses) arising
      during the period                                $      119    $     (382)   $      (40)   $     (258)

   Reclassification adjustment for gains realized in
      net income during period                                 --            --           (96)          (80)
                                                       ----------    ----------    ----------    ----------
                                                              119          (382)         (136)         (338)
   Tax effect                                                 (48)          153            54           135
                                                       ----------    ----------    ----------    ----------

   Other comprehensive income (loss), net of tax       $       71    $     (229)   $      (82)   $     (203)
                                                       ==========    ==========    ==========    ==========
</TABLE>

                                       9
<PAGE>

4.       Stock Option and Management Recognition Plans
         ---------------------------------------------

         The Company has a Stock Option Plan ("SOP") and the MRP for directors,
         officers and key employees. The Company accounts for stock options
         granted under the SOP and MRP in accordance with the provisions of
         Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
         Issued to Employees", and related interpretations. The Company provides
         pro forma net income and pro forma earnings per share disclosures for
         employee stock options grants as if the fair-value-based method defined
         in Statement of Financial Accounting Standards (SFAS) No. 123,
         "Accounting for Stock-Based Compensation", had been applied. The fair
         value of the shares awarded, under the MRP, measured as of the grant
         date, is recognized as unearned compensation (a component of
         shareholders' equity) and amortized to compensation expense over the
         vesting period.

         The following table illustrates the effect on net income and earnings
         per share if the Company had applied the fair value recognition
         provisions of SFAS No. 123 to stock-based compensation (in thousands,
         except per share data):

<TABLE>
<CAPTION>
                                                                     Three Months Ended           Nine Months Ended
                                                                           June 30,                    June 30,
                                                                   ------------------------    ------------------------
                                                                      2005          2004          2005          2004
                                                                   ----------    ----------    ----------    ----------
<S>                                                                <C>           <C>           <C>           <C>
         Net income, as reported                                   $      246    $      239    $      736    $      669

         Total stock-based compensation expense determined
            under fair value method for all awards, net of taxes           (5)          (18)           (8)          (30)
         Reclassification adjustment for gains realized in
         Amounts included in determination of net income,
            net of taxes                                                    1             4             3            12
                                                                   ----------    ----------    ----------    ----------
          Pro forma net income                                     $      242    $      225    $      731    $      651
                                                                   ==========    ==========    ==========    ==========

         Earnings per share:
            Basic - as reported                                    $     0.11    $     0.11    $     0.33    $     0.30
            Basic - pro forma                                            0.11          0.10          0.33          0.29
            Diluted - as reported                                  $     0.11    $     0.11    $     0.33    $     0.30
            Diluted - pro forma                                          0.11          0.10          0.32          0.29
</TABLE>


5.       Commitments and Contingencies
         -----------------------------

         Outstanding letters of credit written are conditional commitments
         issued by the Company to guarantee the performance by a customer to a
         third party. The Company's exposure to credit loss in the event of
         nonperformance by the other party to the financial instrument for
         standby letters of credit is represented by the contractual amount of
         those instruments. The Bank uses the same credit policies in making
         conditional obligations as it does for on-balance sheet instruments.
         The Company has one standby letter of credit in the amount of $7,500 as
         of June 30, 2005.

         The credit risk involved in issuing letters of credit is essentially
         the same as that involved in extending other loan commitments. The
         Company requires collateral and personal guarantees supporting these
         letters of credit as deemed necessary. Management believes that the
         proceeds obtained through a liquidation of such collateral in the event
         of a default, and the enforcement of personal guarantees would be
         sufficient to cover the maximum potential amount of future payments
         required under the corresponding guarantees.

                                       10
<PAGE>

6.       Dividend Restrictions
         ---------------------

         Cambray Mutual Holding Company ("Cambray MHC"), the Company's parent
         mutual holding company, held 1,311,222 shares, or 57.4%, of the
         Company's issued and outstanding common stock, and shareholders other
         than Cambray MHC held 973,012 shares or 42.6% of such stock at June 30,
         2005. Cambray MHC has filed a notice with the Office of Thrift
         Supervision ("OTS") to waive its right to receive cash dividends during
         the 2005 calendar year. The Company paid a cash dividend on March 31,
         2005 to all public shareholders.

         Cambray MHC waived receipt of several past dividends, paid by the
         Company. The dividends waived are considered as a restriction on the
         retained earnings of the Company. As of June 30, 2005 and September 30,
         2004, the aggregate retained earnings restricted for cash dividends
         waived were $931,000 and $747,000, respectively.

7.       Recently Issued Accounting Standards
         ------------------------------------

         In December 2004, the Financial Accounting Standards Board issued
         Statement No. 123(R), "Share-Based Payment". Statement No. 123(R)
         revised Statement No. 123, "Accounting for Stock-Based Compensation",
         and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
         Employees", and its related implementation guidance. Statement No.
         123(R) will require compensation costs related to share-based payment
         transactions to be recognized in the financial statements (with limited
         exceptions). The amount of compensation cost will be measured based on
         the grant-date fair value of the equity or liability instruments
         issued. Compensation cost will be recognized over the period that an
         employee provides service in exchange for the award. The statement is
         effective for the Company as of October 1, 2006. The Company is
         evaluating the impact that the adoption will have on the consolidated
         financial statements.


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Forward-Looking Statements

      When we use words or phrases like "will probably result," "we expect,"
"will continue," "we anticipate," "estimate," "project," "should cause" or
similar expressions in this 10-QSB or in any press releases, public
announcements, filings with the Securities and Exchange Commission ("SEC") or
other disclosures, we are making "forward-looking statements" as described in
the Private Securities Litigation Reform Act of 1995. In addition, certain
information we will provide in the future on a regular basis, such as analysis
of the adequacy of our allowance for loan losses or an analysis of interest rate
sensitivity of our assets and liabilities, is always based on predictions of the
future. From time to time, we may also publish other forward-looking statements
addressing anticipated financial performance, business prospects, and similar
matters.

      The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. We want you to know that a variety of
future events could cause our actual results and experience to differ materially
from what was anticipated in our forward-looking statements. Some of the risks
and uncertainties that may affect our operations, performance, development and
results, the interest rate sensitivity of our assets and liabilities, and the
adequacy of our allowance for loan losses, include:

o     Local, regional, national or global economic conditions which could cause
      an increase in loan delinquencies, a decrease in property values, or a
      change in the housing turnover rate;

o     Changes in market interest rates or changes in the speed at which market
      interest rates change;

                                       11
<PAGE>

o     Changes in laws and regulations affecting us;

o     Changes in competition; and

o     Changes in consumer preferences.

      Please do not rely unduly on any forward-looking statements, which are
valid only as of the date made. Many factors, including those described above,
could affect our financial performance and could cause our actual results or
circumstances for future periods to differ materially from what we anticipate or
project. We have no obligation to update any forward-looking statements to
reflect future events which occur after the statements are made.

Critical Accounting Policies

      Note 2 to the consolidated financial statements of the Company (included
in Item 7 of the Annual Report on Form 10-KSB of the Company for the year ended
September 30, 2004) lists significant accounting policies used in development
and presentation of its financial statements. This discussion and analysis, the
significant accounting policies, and other financial statement disclosures
identify and address key variables and other qualitative and quantitative
factors that are necessary for an understanding and evaluation of the Company's
results of operations. The following accounting policy is the one identified by
management to be critical to the results of operations:

      Allowance for Loan Losses. The allowance for loan losses is the estimated
amount considered adequate to cover credit losses inherent in the outstanding
loan portfolio at the balance sheet date. The allowance is established through
the provision of loan losses charged against income. In determining the
allowance for loan losses, management makes significant estimates and,
accordingly, has identified this policy as probably the most critical for the
Company.

      Management performs a monthly evaluation of the adequacy of the allowance
for loan losses. Consideration is given to a variety of factors in establishing
this estimate, including, but not limited to, current economic conditions,
diversification of the loan portfolio, delinquency statistics, results of
internal loan reviews, borrowers' actual or perceived financial and managerial
strengths, the adequacy of the underlying collateral (if collateral dependent),
the present value of future cash flows and other relevant factors. This
evaluation is inherently subjective, as it requires material estimates that may
be susceptible to significant change, including the amounts and timing of future
cash flows expected to be received on impaired loans.

      The analysis has two components, specific and general allocations.
Collateral values discounted for market conditions and selling costs are used to
establish specific allocations. The Bank's historical loan loss experience,
delinquency rates and general economic conditions are used to establish general
allocations for the remainder of the portfolio.

      Management monitors the adequacy of the allowance for loan losses on an
ongoing basis and reports its adequacy assessment quarterly to the Board of
Directors, and the Audit Committee.

                                       12
<PAGE>

General

      The Company conducts no income generating activities other than holding
the stock of the Bank and a loan to the ESOP used to purchase shares of Company
common stock for the participants. Consequently, the net income of the Company
is derived primarily from its investment in the Bank. The Bank's net income
depends, to a large extent, on its net interest income, which is the difference
between interest earned on its interest earning assets, such as loans and
investments, and the cost of funds, consisting of interest paid on interest
bearing liabilities, such as deposits and borrowings. The Bank's net income is
also affected by the provision for loan losses, as well as by the amount of
other income, including income from fees and service charges, net gains and
losses on sales of investments and operating expenses such as salaries and
employee benefits costs, net expenses on foreclosed real estate and various
categories of operational expenses. External factors, such as general economic
and competitive conditions, particularly changes in interest rates, government
policies and actions of regulatory authorities, can have a substantial effect on
profitability.

      The Bank has been and continues to be a community oriented financial
institution offering a variety of financial services. The Bank attracts deposits
from the general public and uses those deposits together with funds borrowed
from the Federal Home Loan Bank of New York ("FHLB"), to make loans and other
investments. Most of the loans are one to four family residential mortgages made
to residents in the Bank's primary market area, southern St. Lawrence and
northern Jefferson and Lewis counties in New York State. The Bank's deposit
accounts are insured by the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation ("FDIC"), and the Bank is subject to
regulation by the FDIC and the OTS.

Recent Developments

      We have committed to expand the Bank's facilities at our main office in
Gouverneur, to provide contiguous office space and improved drive-up services.
We are evaluating several alternative designs, with a view towards completing
the project efficiently and with minimal disruption to Bank operations and
customer service. Based upon our estimate of the time it will take for us to
select the best design, we believe that construction will probably not begin
until the spring of 2006.

Comparison of Financial Condition at June 30, 2005 and September 30, 2004.

      During the nine months from September 30, 2004 through June 30, 2005,
total assets increased $13.9 million, or 13.34%, from $104.2 million to $118.1
million. Net loans increased by $14.9 million, or 18.58%, from $80.2 million to
$95.1 million during the same period. The increase in loans resulted from
increases of $10.7 million in residential real estate loans, $4.0 million in
commercial real estate loans, including a $2.5 million USDA loan we originated,
90% of which is shown as held for sale on the Consolidated Statements of
Financial Condition, and $1.0 million in other consumer loans, including $0.4
million in car loans, combined with a decrease of $0.8 million in other
commercial loans. The decrease in other commercial loans was the result of the
sale of the fixed rate portion of the United States Department of Agriculture
("USDA") guaranteed loans totaling $1.3 million during this fiscal year. The
balance of USDA guaranteed loans was $1.6 million at June 30, 2005.

      FHLB borrowings, consisting of advances and security repurchase
obligations, increased by $10.0 million, from $23.0 million at September 30,
2004 to $33.0 million at June 30, 2005. These funds, along with the proceeds
from the sale of the USDA loans mentioned previously, a $2.3 million reduction
in the securities portfolio from maturities and principal repayments and an
increase in deposits of $2.3 million provided the funds for the additional
growth in loans and the purchase of $0.5 million in FHLB stock required for the
additional borrowing. The increase of $10.0 million in borrowings is consistent
with management's strategy to fund loans when our deposit base is not sufficient
alone. However, the balance of our borrowings may reach a level where management
will no longer use borrowings to fund loan growth. In that case, it will be
necessary to either reduce the growth of the loan portfolio or increase deposits
to a level to support the loan growth. We have implemented a program to increase
deposits to provide a source of funding to help meet the increased loan demand.

                                       13
<PAGE>

The two new offices in Alexandria Bay and Clayton continue to generate strong
loan demand resulting in the growth of the loan portfolio.

      As mentioned earlier, deposits increased $2.3 million, or 3.7%, from $61.6
million to $63.9 million during the past nine months. Balances for non-interest
checking, savings, NOW and money market accounts and time deposits increased
$0.5 million, $0.1 million, $1.5 million and $0.2 million respectively.

      Shareholders' equity increased by $628,000 during the first nine months of
this fiscal year, as net income of $736,000 combined with increases of $102,000
from the allocation of ESOP and MRP shares and $8,000 from the issuance of
treasury stock, more than offset the payment of a cash dividend of $136,000 to
our shareholders and a decrease of $82,000 in the fair value, net of taxes, in
the available-for-sale securities portfolio. Treasury stock was used to supply
1,125 shares needed in December 2004 when one director exercised some of his
vested stock options.

      At June 30, 2005, non-performing assets were 0.35% of total assets, down
from 0.42% at September 30, 2004. Non-performing loans decreased from 0.47% of
total loans to 0.43% over the same period. A summary of the Company's
non-performing assets and related ratios follows (dollars in thousands):


                                               June 30,    September 30,
        Non-performing assets                    2005          2004
        ---------------------                 ----------    ----------

        Non-accrual loans
        -----------------
        Residential mortgages
            and home equity loans             $       55    $      247
        Commercial mortgages                          79            --
        Consumer other                                65             5
                                              ----------    ----------
                                                     199           252

        Restructured commercial mortgage             207           104
        Restructured commercial other                 --            24
                                              ----------    ----------
            Total non-performing loans               406           380

        Foreclosed real estate                        26            53
        Other repossessed assets                       9             9
                                              ----------    ----------
          Total non-performing assets         $      441    $      442
                                              ==========    ==========


        Non-performing loans to total loans         0.43%         0.47%


        Non-performing assets to
             total assets                           0.35%         0.42%


      The Company had no loans more than 90 days delinquent and accruing at June
30, 2005 or September 30, 2004.

      All three residential mortgages totaling $55,000 in non-accrual loans are
in foreclosure. Loans for three borrowers totaling $79,000, including two
borrowers in bankruptcy proceedings, make up the commercial mortgages in
non-accrual, while two borrowers in bankruptcy proceedings have five loans
totaling $65,000 in the consumer other non-accrual category. One borrower
comprised the restructured commercial mortgage category total of $207,000.

                                       14
<PAGE>

      Management believes that these non-performing loans are adequately secured
by collateral. Further, management is not aware of any factors common to these
loans, which caused their non-performance or any developments that suggest an
upward trend in delinquencies. Accordingly, while we will continue to monitor
asset quality, management has determined that an $84,000 increase in the loan
loss allowance is appropriate for the increase in the size of the loan portfolio
for the nine months ended June 30, 2005. Since most of our growth is in
residential mortgages, which have a lower degree of risk than consumer and
commercial loans we believe that the $84,000 increase in the allowance is
justified.

Comparison of Results of Operations for the Three Months Ended June 30, 2005 and
2004.

      General. Our net income for the three months ended June 30, 2005 was
$246,000, an increase of $7,000, or 2.9%, from last year's net income of
$239,000 for the same period. The increase in net income was the result of the
combination of the following factors:

      1.    net interest income increased by $150,000 as interest income
            increased $304,000, mainly due to the growth in loans, and interest
            expense increased $154,000,

      2.    non-interest income grew by $12,000 over last year's period,

      3.    the provision for loan losses decreased by $5,000 for the third
            quarter of this fiscal year versus last fiscal year,

      4.    non-interest expense increased by $161,000 in the three month period
            this year compared to last year's period and

      5.    income taxes decreased $1,000.

      Basic and diluted earnings per share were $0.11 for this year's quarter
versus $0.11 for both measures in last year's quarter.

      Interest Income. Interest income increased $304,000, or 22.75%, from
$1,336,000 for the three months ended June 30, 2004 to $1,640,000 for the three
months ended June 30, 2005. An increase of 27 basis points (0.27%) in the
average interest rate earned on our interest-earning assets resulted in an
increase of $21,000 in interest income, while a $15.7 million increase in the
average balance of interest-earning assets resulted in an increase of $283,000
in interest income.

      Interest income on loans increased by $297,000, or 24.69%. The yield on
loans was 6.63% for the three month periods ending June 30, 2004 and 2005
resulting in no change in interest income due to rates, while an increase of
$18.0 million in the average balance of loans from $72.7 million to $90.7
million resulted in an increase of $297,000 in interest income.

      Interest income on securities and other short-term investments increased
by $7,000, or 5.26% for the quarter ended June 30, 2005 versus the quarter ended
June 30, 2004. An increase in the yields on our securities portfolio of 42 basis
points, or 0.42% from 3.65% in last year's quarter to 4.07% in this year's
quarter resulted in an increase of $14,000 in interest income while a decrease
of $1.2 million in the average balance of securities over the same period
reduced interest income by $12,000. A 203 basis point, or 2.03% increase in the
average interest rate earned on other short-term investments increased interest
income by $7,000, while a decrease of $1.0 million in the average balance of
other short-term investments decreased interest income by $2,000.

      Interest Expense. Interest expense increased $154,000, or 38.02%, in the
third quarter of fiscal 2005 versus fiscal 2004. An increase of 34 basis points
(0.34%) in the average rate we paid on interest-bearing liabilities from 2.11%
last year to 2.45% this year resulted in an increase of $32,000 in interest
expense, while an increase of $14.5 million from $77.0 million to $91.5 million
in the average balance of interest-bearing liabilities resulted in a $122,000
increase in interest expense.

                                       15
<PAGE>

      Interest expense remained the same on savings and club accounts as an
increase in the average rate paid of 2 basis points, (0.02%) from 1.03% in last
year's quarter to 1.05% in this year's quarter increased interest expense by
$1,000, while a decrease of $0.4 million in the average balance from $20.6
million last year to $20.2 million this year decreased interest expense by
$1,000. Interest expense increased on NOW and money accounts, time deposits and
borrowed funds by $14,000, $20,000 and $120,000, respectively. The average rate
we paid on NOW and money market accounts increased by 41 basis points, or 0.41%,
resulting in a $12,000 increase in interest expense, while an increase of $1.3
million in the average balance of NOW and money market accounts resulted in a
$2,000 increase in interest expense. An increase of 19 basis points, or 0.19%,
in the average rate we paid on time deposits increased interest expense by
$14,000, while an increase in the average balance of time deposits of $0.8
million resulted in an increase of $6,000 in interest expense. The cost of our
borrowed funds increased by 12 basis points, or 0.12%, resulting in an increase
of $5,000 in interest expense, while an increase in the average balance of
borrowed funds of $12.7 million resulted in an increase of $115,000 in interest
expense.

      Net Interest Income. Our net interest income increased by $150,000 for the
three month period ending June 30, 2005 as compared to the three month period
ending June 30, 2004, as interest income increased by $304,000 and interest
expense increased by $154,000, as described above.

      Our interest rate spread (the difference between the average rate we earn
and the average rate we pay) decreased by 7 basis points, or 0.07%, from 3.89%
in last year's quarter to 3.82% in this year's quarter. Also, net interest
margin decreased by 5 basis points to 4.13% in the third fiscal quarter of 2005,
down from 4.18% for the fiscal third quarter of 2004.

      Average capital represented 17.5% of average interest-earning assets for
the quarter ended June 30, 2005, while it represented 20.0% of average
interest-earning assets for the same quarter last year. The decrease in the
capital ratio, which reflects an increase in leverage, reflects that our growth
in interest-earning assets from the last fiscal year has been greater than our
equity growth for the same period. Our ratio of average interest-earning assets
to average interest-bearing liabilities decreased from 1.16 times in 2004 to
1.15 times in 2005.

      Provision for Loan Losses. The provision for loan losses results from our
analysis of the adequacy of the allowance for loan losses. If we believe that
the allowance should be higher, then we increase it, with a charge to provision
for loan losses, which is an expense on our income statement. In determining the
appropriate provision for loan losses, management considers the level of and
trend in non-performing loans, the level of and trend in net loan charge-offs,
the dollar amount and mix of the loan portfolio, as well as general economic
conditions and real estate trends in the Company's market area, which can impact
the inherent risk of loss in the Company's portfolio. Furthermore, the OTS may
disagree with our judgments regarding the risks in our loan portfolio and could
require us to increase the allowance in the future.

      For the three months ended June 30, 2005, we provided $30,000 for loan
losses, compared to $35,000 in the same quarter last year. At June 30, 2005, the
ratio of our loan loss allowance to total loans was 0.88% as compared to 0.96%
on June 30, 2004. On March 31, 2005, the allowance was $810,000, or 0.91% of
total loans, and we determined at the end of the third quarter that the
appropriate level for the allowance was $839,000. We had charge-offs during the
quarter of $7,000 and recoveries of $6,000, so a $30,000 provision was necessary
to reach the desired level for the allowance.

      Our level of non-accruing loans, loans 90 days and still accruing and
restructured loans was $406,000, or 0.43% of total loans at June 30, 2005
compared to $435,000, or 0.49% of total loans at March 31, 2005. The decrease of
the ratio of the loan loss allowance to total loans from 0.91% at March 31, 2005
to 0.87% at June 30, 2005 is justified by the fact that 71.8% of the growth in
the loan portfolio was in residential mortgages.

      Non-interest Income. Our non-interest income was $12,000 higher in the
2005 quarter versus the 2004 quarter. Service charges and other income increased
by $5,000 and $8,000 in the third quarter of this year as compared to last
year's quarter.

                                       16
<PAGE>

      Non-interest Expenses. Our non-interest expenses increased by $161,000
from the 2004 fiscal quarter to this year's quarter. This increase was primarily
due to increased costs of $107,000 for salaries and employee benefits, $10,000
in directors fees, $11,000 in building, occupancy and equipment and $20,000 in
other professional fees. The increase in salaries and employee benefits expense
resulted from performance increases to our employees, the hiring of a commercial
loan officer and an assistant treasurer and increased costs in health care
benefits. Directors fees have increased as the result of increases in meeting
fees, the first since fiscal 2000, and an increase in the number of loan
committee meetings. The increase in professional fees represents additional
costs for both our independent public accountants and internal audit firm, as
well as increased legal costs for various matters. Some of this increase is the
result of working to conform to the requirements of the Sarbanes-Oxley Act of
2002, Section 404 ("SOX 404").

      Beginning on September 30, 2006, the Company will be required to comply
with Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires the
management of public companies to assess and report on the effectiveness of
their internal controls over financial reporting. Based upon information we have
received from our independent auditors and the experience of companies who,
because of their market capitalization, have been required to comply with
Section 404 earlier than we, we anticipate that our internal and external audit
and related fees will increase as we put in place the systems, policies and
procedures necessary to comply with Section 404. While we cannot quantify the
compliance costs at this time, we expect that such costs will materially and
permanently increase our non-interest expense.

      In December 2004, the SEC announced its establishment of the Securities
and Exchange Commission Advisory Committee on Smaller Public Companies, to
assist the SEC in evaluating the current securities regulatory system relating
to smaller public companies, including the rules relating to internal control
reporting. On April 13, 2005, the SEC conducted a public roundtable discussion
in which investors, officers of major American corporations, attorneys
representing public companies, finance professionals and others discussed
Section 404 compliance issues, including compliance costs. However, the SEC has
not taken or announced that it will take any steps to reduce such costs and it
is not known at this time whether it will ever take such action.

      At June 30, 2005 we had thirty-three full-time and one part-time employees
compared to June 30, 2004 when we had thirty-one full-time and three part-time
employees.

      Income tax expense. Our income tax expense decreased by $1,000, or 0.7%,
comparing the third quarter of fiscal 2005 to the same quarter of fiscal 2004.

Comparison of Results of Operations for the Nine Months Ended June 30, 2005 and
2004.

      General. Our net income for the nine months ended June 30, 2005 was
$736,000, an increase of $67,000 from last year's $669,000, or 10.0%. The
following operating results combined to produce the increase:

      1.    net interest income increased by $356,000 as interest income
            increased and interest expense decreased,

      2.    provision for loan losses increased by $15,000,

      3.    non-interest income improved by $74,000,

      4.    non-interest expenses increased $332,000 and

      5.    income taxes increased by $16,000 as a result of the increase in
            pre-tax income.

      Basic earnings per common share and diluted earnings per common share were
each $0.33 for the first nine months of this fiscal year and $0.30 for the first
nine months of last fiscal year.

                                       17
<PAGE>

      Interest Income. Interest income increased by $698,000, or 17.43%, from
$4,004,000 for the nine months ended June 30, 2004 to $4,702,000 for the nine
months ended June 30, 2005. Average interest-earning assets increased $14.4
million from $87.8 million for the first nine months of fiscal year 2005 to
$102.2 million for the same period this year. The increase was the result of a
$17.0 million increase in the average balance of loans from $70.3 million in
fiscal 2005 to $87.3 million in fiscal 2005, partially offset by decreases in
securities and other investments of $2.6 million from $17.5 million last year to
$14.9 million this year.

      The average interest rate we earned on our interest-earning assets was 6
basis points (0.06%) higher in the first nine months this year than last year as
the average rate rose from 6.09% last year to 6.15% this year. The average rate
earned on loans fell 21 basis points (0.21%) from 6.79% last year to 6.58% this
year, while the average rate earned on securities increased by 17 basis points,
or 0.17%, from 3.62% last year to 3.79% this year, and the average rate on other
short-term investments, primarily FHLB deposits, increased by 150 basis points
(1.50%) from 0.78% to 2.28%.

      The decrease in the average interest rate earned on loans resulted in a
decrease of $48,000 in interest income, while the increase in average loan
balance increased interest income by $773,000, resulting in a $725,000 increase
in interest income for the loan portfolio.

      For securities and other short-term investments, an increase in interest
rates earned resulted in an increase in interest income of $24,000, while a
decrease in the average balances decreased interest income by $51,000 resulting
in a net decrease of $27,000 in interest income.

      Overall, the changes in the average interest rates reduced interest income
by $24,000, while the increase in the volume of interest-earning assets produced
a $722,000 increase in interest income, for a net increase of $698,000 in
interest income.

      Interest Expense. Interest expense increased by $342,000 from $1,213,000
for the first nine months of 2004 to $1,555,000 for the first nine months of
2005 mainly the result of an increase in average interest-bearing liabilities.
An increase of 15 basis points (0.15%) in the average rate we paid on
interest-bearing liabilities from 2.18% in 2004 to 2.33% in 2005 increased
interest expense by $19,000, while an increase in the average balance of
interest-bearing liabilities of $14.8 million, from $74.4 million at June 30,
2004 to $89.2 million at June 30, 2005, resulted in additional interest expense
of $323,000.

      Interest expense increased on savings and club accounts, NOW and money
market accounts, time deposits and borrowings by $1,000, $34,000, $26,000 and
$281,000, respectively, for the nine months ending June 30, 2005 versus the nine
months ending June 30, 2004. These increases were comprised of the following
components:

      1.    the average rate we paid on savings and club accounts increased by 1
            basis points (0.01%) from 1.03% to 1.04%, resulting in an increase
            of $1,000 in interest expense, while an increase of $0.1 million in
            the average balance of these accounts, from $19.9 million to $20.0
            million, resulted in no change in interest expense,

      2.    the average rate we paid on NOW and money market accounts increased
            by 27 basis points (0.27%) from 0.64% to 0.91%, resulting in an
            increase of $22,000 in interest expense, while an increase of $2.1
            million, from $9.6 million to $11.7 million in the average balance
            of these accounts increased interest expense by $12,000, and

      3.    the average interest rate on time deposits increased 3 basis points
            (0.03%) from 2.59% to 2.62%, resulting in a $7,000 increase in
            interest expense, while a $1.0 million increase in the average
            balance of time deposits, from $28.5 million to $29.5 million,
            increased interest expense by $19,000.

                                       18
<PAGE>

      4.    A decrease of 21 basis points (0.21%), from 3.75% to 3.54% on the
            average rate we paid on borrowed funds decreased interest expense by
            $11,000, while an increase of $11.6 million in the average amount of
            those borrowings, from $16.4 million to $28.0 million, increased
            interest expense by $292,000 and resulted in a net increase of
            $281,000.

      Net Interest Income. The net effect of the increases in interest income
and interest expense was a $356,000 increase in net interest income from the
first nine months of the 2004 fiscal year to the first nine months of the 2005
fiscal year. Our interest rate spread (the difference between the average rate
we earn and the average rate we pay) decreased by 9 basis points (0.09%) from
3.91% last year to 3.82% this year. Net interest margin decreased by 13 basis
points to 4.12%, for the first nine months of fiscal 2005, down from 4.25% for
the first nine months of fiscal 2004.

      Average capital represented 17.8% of average interest-earning assets for
the nine months ended June 30, 2005, while it represented 20.2% of average
interest-earning assets for the same period in 2004. Our ratio of average
interest-earning assets to average interest-bearing liabilities decreased from
1.18 times in 2005 to 1.15 times in 2004.

      Provision for Loan Losses. Year to date, we had charge-offs of $84,000 and
recoveries of $68,000. We provided $100,000 for loan losses for the first nine
months this fiscal year as compared to $85,000 for the first nine months of the
past fiscal year. At June 30, 2005 and 2004 the ratio of our loan loss allowance
to total loans was 0.87% and 0.96%, respectively. As disclosed in the comparison
of financial condition discussion, our level of non-accruing loans, loans 90
days and still accruing and restructured loans was $406,000, or 0.43% of total
loans at June 30, 2005 compared to $380,000, or 0.47% of total loans at
September 30, 2004. Management feels that these loans are adequately secured and
do not require any adjustment to the allowance for loan losses.

      Non-interest Income. Our non-interest income was $74,000 higher for the
first nine months of this year versus the same period last year. The increase
was the result of increases of $40,000 in earnings on investment life insurance,
$16,000 in realized gains on sales of securities, $13,000 in service charges and
$22,000 in other non-interest income, offset in part by a $17,000 loss on sales
of loans.

      Non-interest Expense. Non-interest expenses increased by $332,000 for the
first nine months of fiscal 2005 compared to fiscal 2004. Increases in salaries
& benefits, directors fees, occupancy and equipment cost, postage and supplies,
professional fees and other non-interest expense of $222,000, $17,000, $28,000,
$13,000, $43,000 and $ 24,000 respectively, partially offset by a decrease of
$30,000 in the cost of foreclosed assets accounted for most of the increase. The
increase in salaries and benefits is the result of three factors; first,
performance increases in salaries for our employees; second, last year's hiring
of a commercial loan officer and an assistant treasurer; and third, increased
costs in health care benefits. Directors fees have increased as the result of
increases in meeting fees, the first since fiscal 2000, and an increase in the
number of loan committee meetings. The increase in professional fees represents
additional costs for both our independent public accountants and internal audit
firm. Some of this increase is the result of working to conform to the
requirements of SOX 404.

      Income tax expense. Our income tax expense year-to-date increased by
$16,000, or 3.9%, from $409,000 last year to $425,000 this year. The increased
expense was the result of higher income before income tax of $83,000, or 7.7%,
from $1,078,000 for the first nine months last fiscal year to $1,161,000 for the
first nine months of this fiscal year. Our effective tax rate was 36.6% for the
nine months ended June 30, 2005 compared to 37.9% for the same period in 2004.

Liquidity and Capital Resources

      Our primary sources of funds are deposits, borrowings from the Federal
Home Loan Bank, and proceeds from the principal and interest payments on loans
and securities. Scheduled maturities and principal payments on loans and
securities are predictable sources of funds. We can also control the funds
available from borrowings to a certain extent. However, general economic

                                       19
<PAGE>

conditions and interest rate conditions can cause increases or decreases in
deposit outflows and loan pre-payments, which can also affect the level of funds
we have available for investment.

      In general, we manage our liquidity by maintaining a sufficient level of
short-term investments so funds are readily available for investment in loans
when needed. During the nine months ended June 30, 2005, we increased our cash
and cash equivalents by $565,000. We have originated $31.3 million of new loans.
However, loans, net, after payments, charge-offs and transfers to foreclosed
real estate, increased by $16.4 million over this period.

      Deposits increased by $2.3 million during the nine months ended June 30,
2005. In addition to factors within our control, such as our deposit pricing
strategies and our marketing efforts, deposit flows are affected by the level of
general market interest rates, the availability of alternate investment
opportunities, general economic conditions, and other factors outside our
control. We increased our borrowings by $10.0 million during this same period.

      We monitor our liquidity regularly. Excess liquidity is invested in
overnight federal funds sold and other short-term investments. If we need
additional funds, we can borrow those funds, although the cost of borrowing
money is normally higher than the average cost of deposits. As a member of the
Federal Home Loan Bank of New York, the Bank can arrange to borrow an additional
$13.5 million against our one to four family first mortgage portfolio. We have
used borrowed funds to help us leverage capital we received from our stock sale,
but have not needed borrowings to cover liquidity shortfalls. In addition to
borrowings, we believe that, if we need to do so, we can attract additional
deposits by increasing the rates we offer.

      We measure liquidity on a monthly basis and want to maintain a liquidity
ratio of between 5% and 15%. At June 30, 2005, the ratio was 8.10% as compared
to 8.15% on June 30, 2004.

Off Balance Sheet Arrangements

      The Company's financial statements do not reflect off-balance sheet
arrangements that are made in the normal course of business. These off-balance
sheet arrangements consist of unfunded loans.

      We had $3.5 million in outstanding commitments to make loans at June 30,
2005, along with $3.9 million of unused home equity, commercial and overdraft
lines of credit. We also have a commitment to sell the $2.2 million guaranteed
portion of a USDA guaranteed loan we originated. We are awaiting final USDA
approval for the sale. We anticipate that we will have enough liquid funds to
meet our current loan commitments, purchase commitments and to fund draws on the
lines of credit through the normal turnover of our loan and securities
portfolios. At June 30, 2005, we had $18.6 million of time certificates
scheduled to mature within one year. We anticipate that we can retain
substantially all of those deposits if we need to do so to fund loans and other
investments as part of our efforts to grow and leverage our capital.

Capital Resources

      The OTS has minimum capital ratio requirements applying to the Bank, but
there are no comparable minimum capital requirements that apply to the Company
as a savings and loan holding company. At June 30, 2005, the Bank exceeded all
regulatory capital requirements of the OTS applicable to it, with Tier I capital
of $18.0 million, or 15.3% of average assets and with total risk-based capital
of $18.8 million, or 27.6% of risk-weighted assets. The Bank also had tangible
capital of $18.0 million, or 15.3% of average tangible assets. The Bank was
classified as "well capitalized" at June 30, 2005 under OTS regulations.

Item 3.  Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The term "disclosure
controls and procedures" is defined in Rule 13a-14(c) of the Securities Exchange
Act of 1934, or (the "Exchange Act"). This term refers to the controls and

                                       20
<PAGE>

procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files under the Exchange Act is
recorded, processed, summarized and reported within required time periods. Our
Chief Executive Officer and our Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures as of June 30, 2005, and
they have concluded as of that date, our disclosure controls and procedures were
effective at ensuring that required information will be disclosed on a timely
basis in our reports filed under the Exchange Act.

(b) Changes in Internal Controls. There were no significant changes to our
internal controls or in the other factors that could significantly affect our
internal controls during the quarter ended June 30, 2005, including any
corrective actions with regard to significant deficiencies and material
weakness.


                           PART II - OTHER INFORMATION

      Item 1. Legal Proceedings

      In the ordinary course of business, the Company and the Bank are subject
to legal actions, which involve claims for monetary relief. Management, based on
the advice of counsel, does not believe that any currently known legal actions,
individually or in the aggregate, will have a material effect on the Company's
consolidated financial condition or results of operations.

      Item 6.  Exhibits

                  31.1     Certification of Principal Executive Officer pursuant
                           to Rule 13a - 14(a)/15d - 14(a)

                  31.2     Certification of Principal Financial Officer pursuant
                           to Rule 13a - 14(a)/15d - 14(a)

                  32.1     Certification of Principal Executive Officer pursuant
                           to Section 1350

                  32.2     Certification of Principal Financial Officer pursuant
                           to Section 1350

                                       21
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                  Gouverneur Bancorp, Inc.


Date: August 5, 2005              By: /s/ RICHARD F. BENNETT
                                      ------------------------------------------
                                      Richard F. Bennett
                                      President and Chief Executive Officer
                                      (principal executive officer and officer
                                      duly authorized to sign on behalf of the
                                      registrant)

                                  By: /s/ ROBERT J. TWYMAN
                                      ------------------------------------------
                                      Robert J. Twyman
                                      Vice President and Chief Financial Officer
                                      (principal financial officer duly
                                      authorized to sign on behalf of the
                                      registrant)

                                       22