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 March 31, 2007

                                       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 [ ]

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

                                                       Outstanding at
             Class                                       May 5, 2007
  -----------------------------                          -----------
  Common Stock, par value $ .01                           2,300,059

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
          March 31, 2007 and September 30, 2006                               3

          Consolidated Statements of Income for the three and
          six months ended March 31, 2007 and 2006                            4

          Consolidated Statements of Shareholders' Equity for the
          six months ended March 31, 2007 and 2006                            5

          Consolidated Statements of Cash Flows for the six months ended
          March 31, 2007 and 2006                                             7

          Notes to Consolidated Financial Statements                          8

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.                                             14

Item 3.   Controls and Procedures                                            25

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                  25

Item 4.   Submission of Matters to a Vote of Security Holders                26

Item 6.   Exhibits                                                           26

SIGNATURES                                                                   27

EXHIBITS                                                                     28


                                       2
<PAGE>
<TABLE>
<CAPTION>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

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

                                                                                            March 31,       September 30,
                                                                                              2007              2006
                                                                                         --------------    --------------
<S>                                                                                      <C>               <C>
Assets:
Cash and due from banks                                                                  $        1,849    $        2,308
Interest-bearing deposits in bank                                                                 1,829               162
                                                                                         --------------    --------------
                         Total cash and cash equivalents                                          3,678             2,470

Securities available-for-sale                                                                     9,205             9,845
Securities held-to-maturity (fair value 2007: $87: 2006: $93)                                        86                92

Loans, held for sale                                                                              2,133             2,160

Loans receivable, net of allowance for loan losses 2007: $921: 2006: $948                       106,954           105,642

Investment in Federal Home Loan Bank stock, at cost                                               1,791             1,773
Investment in life insurance                                                                      3,703             3,631
Premises and equipment, net                                                                       3,105             2,225
Accrued interest receivable and other assets                                                      1,813             2,237
                                                                                         --------------    --------------
                         Total assets                                                    $      132,468    $      130,075
                                                                                         ==============    ==============
Liabilities:
Deposits:   Non-interest-bearing demand                                                  $        3,924    $        3,493
            NOW and money market                                                                 12,330            11,966
            Savings                                                                              18,733            19,342
            Time                                                                                 39,409            37,662
                                                                                         --------------    --------------
                         Total deposits                                                          74,396            72,463

Advances from the Federal Home Loan Bank of New York                                             35,650            35,250
Other liabilities                                                                                 2,226             2,507
                                                                                         --------------    --------------
                         Total liabilities                                                      112,272           110,220
                                                                                         --------------    --------------

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                                                                        4,861             4,847
Retained earnings                                                                                15,639            15,398
Treasury stock, at cost, 2007: 85,481 shares: 2006: 91,956 shares                                  (433)             (466)
Accumulated other comprehensive income                                                              217               234
Unearned common stock held by Management Recognition Plan                                            --               (44)
Unallocated common stock held by Employee Stock Ownership Plan                                     (112)             (138)
                                                                                         --------------    --------------
                         Total shareholders' equity                                              20,196            19,855
                                                                                         --------------    --------------
                         Total liabilities and shareholders' equity                      $      132,468    $      130,075
                                                                                         ==============    ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>

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

                                                                       Three Months Ended          Six Months Ended
                                                                            March 31,                  March 31,
                                                                     -----------------------   -----------------------
                                                                        2007         2006         2007         2006
                                                                     ----------   ----------   ----------   ----------
<S>                                                                  <C>          <C>          <C>          <C>
Interest income:
---------------
     Loans                                                           $    1,878   $    1,694   $    3,731   $    3,375
     Securities - taxable                                                   113          116          233          242
                  non-taxable                                                13           13           25           25
     Other short-term investments                                            16            5           25            9
                                                                     ----------   ----------   ----------   ----------
           Total interest income                                          2,020        1,828        4,014        3,651
                                                                     ----------   ----------   ----------   ----------
Interest expense:
----------------
     Deposits                                                               532          361        1,050          704
     Borrowings - short term                                                132          155          271          352
     Borrowings - long term                                                 297          244          587          431
                                                                     ----------   ----------   ----------   ----------
           Total interest expense                                           961          760        1,908        1,487
                                                                     ----------   ----------   ----------   ----------

           Net interest income                                            1,059        1,068        2,106        2,164
     Provision for loan losses                                               --           25           15           50
                                                                     ----------   ----------   ----------   ----------
           Net interest income after provision for loan losses            1,059        1,043        2,091        2,114
                                                                     ----------   ----------   ----------   ----------
Non-interest income:
-------------------
     Service charges                                                         55           50          107          114
     Realized gain on sales of securities - AFS                              --           98           --           98
     Realized gain on sales of loans held for sale                           --           --           --            7
     Life insurance death benefit                                            --           62           --           62
     Earnings on investment in life insurance                                38           36           72           67
     Realized gain on foreclosed assets, net                                 20           20           17           52
     Other                                                                   47           56          110           99
                                                                     ----------   ----------   ----------   ----------
           Total non-interest income                                        160          322          306          499
                                                                     ----------   ----------   ----------   ----------
Non-interest expenses:
----------------------
     Salaries and employee benefits                                         461          407          915          815
     Directors fees                                                          46           58           98          101
     Occupancy and equipment                                                162          135          262          240
     Data processing                                                         31           31           62           61
     Postage and supplies                                                    44           37           79           67
     Professional fees                                                       62           52          121          113
     Other                                                                  137           80          254          194
                                                                     ----------   ----------   ----------   ----------
           Total non-interest expenses                                      943          800        1,791        1,591
                                                                     ----------   ----------   ----------   ----------

           Income before income tax expense                                 276          565          606        1,022

Income tax expense                                                           93          179          207          341
                                                                     ----------   ----------   ----------   ----------

     Net income                                                      $      183   $      386   $      399   $      681
                                                                     ==========   ==========   ==========   ==========

Earnings per common share - basic                                    $     0.08   $     0.17   $     0.18   $     0.30
Earnings per common share - diluted                                  $     0.08   $     0.17   $     0.17   $     0.30
</TABLE>


See accompanying notes to consolidated financial statements

                                       4
<PAGE>
<TABLE>
<CAPTION>

                     GOUVERNEUR BANCORP, INC AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                         Six months ended March 31, 2007
                  (In thousands, except share data) (Unaudited)
                                                                                                   Unearned  Unallocated
                                                                                      Accumulated   Common     Common
                                                   Additional                            Other       Stock     Stock
                                          Common    Paid-in     Retained   Treasury  Comprehensive    held      held
                                          Stock     Capital     Earnings    Stock       Income       by MRP    by ESOP    Total
                                         --------   --------    --------   --------    ---------    --------   ------    --------
<S>                                     <C>        <C>         <C>        <C>         <C>          <C>        <C>       <C>
Balance at September 30, 2006            $     24   $  4,847    $ 15,398   $   (466)   $     234    $    (44)  $ (138)   $ 19,855

Comprehensive income:
   Net income                                                        399                                                      399
   Change in net unrealized gain on
      securities available for sale,
      net of reclassification
      adjustment and tax effects                                                             (17)                             (17)
                                                                                                                         --------

      Total comprehensive income                                                                                              382
                                                                                                                         --------
Allocation of ESOP shares (5,155 shares)                  38                                                       26          64
Adoption of SFAS 123(R)                                  (44)                                             44                   --
Amortization of MRP shares                                19
                                                                                                                               19
Amortization of stock option grants                        3                                                                    3
Exercise of stock options (6,475 shares)                  (2)                    33                                            31
Cash dividends declared, $0.16 per share                            (158)                                                    (158)
                                         --------   --------    --------   --------    ---------    --------   ------    --------

Balance at March 31, 2007                $     24   $  4,861    $ 15,639   $   (433)   $     217    $     --   $ (112)   $ 20,196
                                         ========   ========    ========   ========    =========    ========   ======    ========
</TABLE>

See accompanying notes to consolidated financial statements

                                       5

<PAGE>
<TABLE>
<CAPTION>

                     GOUVERNEUR BANCORP, INC AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                         Six months ended March 31, 2006
                  (In thousands, except share data) (Unaudited)
                                                                                                 Unallocated  Unallocated
                                                                                    Accumulated     Common      Common
                                                    Additional                         Other        Stock       Stock
                                          Common     Paid-in   Retained   Treasury  Comprehensive   held         held
                                           Stock     Capital   Earnings    Stock      Income        by MRP      by ESOP     Total
                                         --------   --------   --------   --------    --------   -----------    -------    --------
<S>                                   <C>        <C>        <C>        <C>         <C>        <C>            <C>        <C>
Balance at September 30, 2005            $     24   $  4,739   $ 14,392   $   (499)   $    272   $       (67)   $  (186)   $ 18,675

Comprehensive income:
   Net income                                                       681                                                         681
   Change in net unrealized gain on
      securities available for sale,
      net of reclassification
      adjustment and tax effects                                                          (101)                                (101)
                                                                                                                           --------

     Total comprehensive income                                                                                                 580
                                                                                                                           --------

Allocation of ESOP shares (4,785 shares)                  32                                                         24          56
Amortization of MRP shares                                12                                               8                     20
Exercise of stock options (6,650 shares)                  (2)                    33                                              31
Cash dividends declared, $0.15 per share                           (147)                                                       (147)
                                         --------   --------   --------   --------    --------   -----------    -------    --------

Balance at March 31, 2006                $     24   $  4,781   $ 14,926   $   (466)   $    171   $       (59)   $  (162)   $ 19,215
                                         ========   ========   ========   ========    ========   ===========    =======    ========
</TABLE>

See accompanying notes to consolidated financial statements


                                       6
<PAGE>
<TABLE>
<CAPTION>

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

                                                                                Six Months Ended
                                                                                    March 31,
                                                                          ----------------------------
                                                                              2007            2006
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
Cash flows from operating activities:
   Net Income                                                             $        399    $        681
   Adjustments to reconcile net income to net cash provided by
    operating activities:
       Provision for loan losses                                                    15              50
       Depreciation                                                                 64              57
       Net amortization of securities premiums and discounts                        --               6
       Net realized gains on sales of securities - AFS                              --             (98)
       Proceeds from sales of loans held for sale                                   --           1,232
       Net realized gains on sales of loans                                         --              (7)
       Life insurance death benefit                                                 --             (62)
       Earnings on bank owned life insurance                                       (72)            (67)
       Allocated and earned shares of SOP, ESOP and MRP                             86              76
       Net realized gain on sale of foreclosed assets                              (17)            (52)
       Decrease in accrued interest receivable and other assets                    451              29
       Decrease in accrued interest payable and other liabilities                 (269)           (919)
                                                                          ------------    ------------
                    Net cash provided by operating activities                      657             926
                                                                          ------------    ------------

Cash flows from investing activities:
   Net increase in loans                                                        (1,499)         (3,855)
   Proceeds from sales of securities AFS                                            --             192
   Proceeds from maturities and principal reductions of securities AFS           1,112             780
   Purchases of securities AFS                                                    (501)            (25)
   Proceeds from maturities and principal reductions of securities HTM               6               9
   Proceeds from the sale of foreclosed assets                                     189              13
   Additions to premises and equipment                                            (944)            (60)
   (Purchases) redemptions of Federal Home Loan Bank stock                         (18)            114
                                                                          ------------    ------------
                    Net cash used in investing activities                       (1,655)         (2,832)
                                                                          ------------    ------------

Cash flows from financing activities:
   Net increase in deposits                                                      1,933           6,323
   Proceeds (repayments) from FHLB advances                                        400          (2,050)
   Exercise of stock options                                                        31              31
   Cash dividends paid                                                            (158)           (147)
                                                                          ------------    ------------
                    Net cash provided by financing activities                    2,206           4,157
                                                                          ------------    ------------

   Net increase in cash and cash equivalents                                     1,208           2,251
   Cash and cash equivalents at beginning of period                              2,470           2,666
                                                                          ------------    ------------

   Cash and cash equivalents at end of period                             $      3,678    $      4,917
                                                                          ============    ============

Non-cash investing activities:
   Additions to foreclosed assets                                         $        199    $         20
Cash paid during the period for:
   Interest                                                                      1,884           1,490
   Income taxes                                                                    243             335
</TABLE>

See accompanying notes to consolidated financial statements.

                                       7
<PAGE>

                     GOUVERNEUR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

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

         The accompanying unaudited consolidated 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 March 31, 2007 and September 30, 2006
         and for the three and six month periods ended March 31, 2007 and 2006.
         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 six month periods ended March
         31, 2007 and 2006. The results of operations for the three month and
         six month periods ended March 31, 2007 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 statement of condition for September 30,
         2006 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 2006
         consolidated financial statements, including the notes thereto included
         in the Company's Annual Report on Form 10-KSB.

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

         Basic earnings per common share represents income available to common
         shareholders divided by the weighted average number of common shares
         outstanding during the period. Unearned ESOP and MRP shares are not
         included in the weighted average number of shares outstanding. Diluted
         earnings per share reflects additional common shares that would have
         been outstanding if dilutive potential common shares had been issued,
         as well as any adjustment to income that would result from the assumed
         issuance. Potential common shares that may be issued by the Company
         relate solely to unearned MRP shares and outstanding stock options and
         are determined using the treasury stock method.


                                       2
<PAGE>

         Basic and diluted earnings per share for the three-month and six month
         periods ending March 31, 2007 and 2006 were computed as follows:

                      (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                              Three Months Ended        Six Months Ended
                                                                   March 31,                March 31,
                                                           -----------------------   -----------------------
                                                              2007          2006        2007         2006
                                                           ----------   ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>          <C>
Basic earnings per share:
Net income                                                 $      183   $      386   $      399   $      681
                                                           ==========   ==========   ==========   ==========

Weighted average common shares outstanding                      2,266        2,243        2,264        2,240
                                                           ==========   ==========   ==========   ==========
Basic earnings per share                                   $     0.08   $     0.17   $     0.18   $     0.30
                                                           ==========   ==========   ==========   ==========
Diluted earnings per share:
Net income                                                 $      183   $      386   $      399   $      681
                                                           ==========   ==========   ==========   ==========

Weighted average common shares outstanding                      2,266        2,243        2,264        2,240
Additional potentially dilutive securities
      (equivalent in common stock)
          common stock options and unearned MRP shares             28           26           29           26
                                                           ----------   ----------   ----------   ----------
Diluted weighted average common shares outstanding              2,294        2,269        2,293        2,266
                                                           ==========   ==========   ==========   ==========
Diluted earnings per share                                 $     0.08   $     0.17   $     0.17   $     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 six month periods ended March 31, 2007 and
         2006 is as follows: (In thousands)
<TABLE>
<CAPTION>

                                                              Three Months Ended        Six Months Ended
                                                                   March 31,                March 31,
                                                           -----------------------   -----------------------
                                                              2007          2006        2007         2006
                                                           ----------   ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>          <C>
Unrealized holding losses arising
   during the period                                       $      (48)  $      (95)  $      (29)  $      (70)

Reclassification adjustment for gains realized in
   Net income during period                                        --          (98)          --          (98)
                                                           ----------   ----------   ----------   ----------

Net unrealized losses                                             (48)        (193)         (29)        (168)
Tax effect                                                         19           77           12           67
                                                           ----------   ----------   ----------   ----------

Other comprehensive loss, net of tax                       $      (29)  $     (116)  $      (17)  $     (101)
                                                           ==========   ==========   ==========   ==========
</TABLE>


                                       9
<PAGE>

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

         The Company has a Stock Option Plan ("SOP") and a Management
         Recognition Plan ("MRP") for directors, officers and key employees.
         Both plans are described in Note 12 to the Company's Consolidated
         Financial Statements included in its Annual Report on Form 10-KSB, for
         the fiscal year ended September 30, 2006. Through September 30, 2006,
         the Company accounted for its SOP using the intrinsic value method set
         forth in Accounting Principles Board Opinion No. 25, "Accounting for
         Stock Issued to Employees," ("APB No. 25") and related interpretations.
         Under APB No. 25, generally, when the exercise price of the Company's
         stock options equaled the market price of the underlying stock on the
         date of the grant, no compensation expense was recognized. The Company
         adopted SFAS No. 123R, using the modified-prospective transition
         method, beginning on October 1, 2006 and, therefore, began to expense
         the fair value of all options over their remaining vesting periods to
         the extent the options were not fully vested as of the adoption date
         and began to expense the fair value of all stock options granted
         subsequent to September 30, 2006, over their vesting periods.

         SFAS 123R also requires the benefits of realized tax deductions in
         excess of previously recognized tax benefits on stock-based
         compensation expense to be reported as a financing cash flow (none for
         the three and six month periods ended March 31, 2007) rather than an
         operating cash flow, as previously required. In accordance with Staff
         Accounting Bulletin ("SAB") No. 107, the Company classified share-based
         compensation within non-interest expenses to correspond with the same
         line item as the cash compensation paid to employees and directors.

         Both employee and non-employee director options generally vest over a
         five-year service period. Compensation expense recognized for all
         option grants is net of estimated forfeitures and is recognized over
         the awards' respective vesting periods. The fair values of all option
         grants were estimated using the Black-Scholes option pricing model. We
         recognize compensation expense for the fair values of these awards,
         which have graded vesting, on a straight-line basis over the vesting
         period of the awards. No options were granted in the six-month periods
         ending March 31, 2006 or 2007.

         The Company awarded 1,700 shares of stock under the MRP to one director
         during the six month period ended March 31, 2007. The aggregate expense
         for these shares, which have a five-year vesting period, is expected to
         be approximately $13,000 and will be expensed ratably over the vesting
         period.

         During the six months ended March 31, 2007, the Company recorded
         $22,000 of share-based compensation expense, which was comprised of
         $3,000 for stock option expense and $19,000 for MRP expense. The
         Company estimates it will record share-based compensation expense of
         approximately $39,000 in fiscal 2007.


                                       10
<PAGE>
The following table illustrates the impact of share-based compensation on net
income and earnings per share:
<TABLE>
<CAPTION>

                                                                    Three Months Ended            Six Months Ended
                                                                       March 31, 2007              March 31, 2007
                                                                ---------------------------   ---------------------------
                                                                                Impact of                      Impact of
                                                                               Share-Based                    Share-Based
                                                                              Compensation                   Compensation
(In thousands, except per share data)                            As Reported     Expense       As Reported      Expense
--------------------------------------                          ------------   ------------   ------------   ------------
<S>                                                             <C>            <C>            <C>            <C>
Net income                                                      $        183   $          7   $        399   $         13

Earnings per share:
    Basic                                                       $       0.08   $       0.00   $       0.18   $       0.00
    Diluted                                                     $       0.08   $       0.00   $       0.17   $       0.01
</TABLE>

A summary of the Company's stock option activity and related information for its
stock option plan for the six months ended March 31, 2007, was as follows:

<TABLE>
<CAPTION>

                                                                                               Weighted
                                                                                Weighted        Average       Aggregate
                                                                                Average        Remaining      Intrinsic
                                                                                Exercise      Contractual       Value
                                                                   Options        Price           Term         (000's)
                                                                ------------   ------------   ------------   ------------
<S>                                                             <C>            <C>            <C>            <C>
Outstanding at September 30, 2006                                     49,625   $       5.62
      Exercised                                                       (6,475)          4.79
                                                                ------------   ------------

Outstanding at March 31, 2007                                         43,150   $       5.75      3.1 years   $        268
                                                                ============   ============   ============   ============

Exercisable at March 31, 2007                                         41,150   $       5.57      3.0 years   $        263
                                                                ============   ============   ============   ============
</TABLE>

At both March 31, 2007 and September 30, 2006, there were 2,000 non-vested
options having a weighted average fair value of $3.36 per option. These options
will vest on April 23, 2007. There will be no future expenses for these options
as they have been fully expensed at March 31, 2007.

A summary of the status of the Company's MRP shares as of March 31, 2007 and
changes during the six months ended March 31, 2007, is presented below:
<TABLE>
<CAPTION>

                                                                                 Weighted
                                                                 Restricted      Average
                                                                  Shares        Grant Date
                                                                  (000's)       Fair Value
                                                                ------------   ------------
<S>                                                                     <C>     <C>
Non-vested at September 30, 2006                                       9,920   $      12.33
      Granted                                                          1,700          12.50
      Vested                                                              --             --
                                                                ------------   ------------

Non-vested at March 31, 2007                                          11,620   $      12.36
                                                                ============   ============
</TABLE>

Expected future compensation expense relating to the non-vested MRP shares at
March 31, 2007 is $118,000 and will be expensed over a weighted average period
of 3.6 years.

For purposes of pro forma disclosures, the estimated fair value of the stock
options and MRP shares were amortized to expense over their assumed vesting
periods. 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 all stock-related compensation:

                                       11
<PAGE>
<TABLE>
<CAPTION>

                                                                   Three Months Ended  Six Months Ended
         (In thousands, except per share data)                        March 31, 2006   March 31, 2006
         -------------------------------------                       ---------------   ---------------
<S>                                                                  <C>               <C>
         Net income, as reported                                     $           386   $           681

         Total stock-based compensation expense determined
            under fair value method for all awards, net of taxes                  (7)              (15)
         Reclassification adjustment for gains realized in
         Amounts included in determination of net income,
            net of taxes                                                           6                12
                                                                     ---------------   ---------------
          Pro forma net income                                       $           385   $           678

                                                                     ===============   ===============
         Earnings per share:
            Basic - as reported                                      $          0.17   $          0.30
            Basic - pro forma                                                   0.17              0.30
            Diluted - as reported                                    $          0.17   $          0.30
            Diluted - pro forma                                                 0.17              0.30

</TABLE>

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

         Outstanding letters of credit written are conditional commitments
         issued by the Company to guarantee the performance of 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 had five standby letters of credit totaling $45,000 as of
         March 31, 2007.

         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 and the
         enforcement of personal guarantees would be sufficient to cover the
         maximum potential amount of future payments required under the
         corresponding guarantees.

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

         Cambray Mutual Holding Company ("Cambray MHC"), the Company's parent
         mutual holding company, held 1,311,222 shares, or 57.0%, of the
         Company's issued and outstanding common stock, and shareholders other
         than Cambray MHC held 989,037 shares, or 43.0%, of such stock at March
         31, 2007. Cambray MHC filed a notice with the Office of Thrift
         Supervision ("OTS") to waive its right to receive cash dividends during
         the 2007 calendar year. The Company announced a cash dividend to
         shareholders of record as of March 15, 2007 of $0.16 per share of
         common stock, which was paid on March 31, 2007 to all public
         shareholders.

         Cambray MHC waived receipt of the current and several past dividends
         paid by the Company. The dividends are considered as restrictions on
         the retained earnings of the Company. As of March 31, 2007 and
         September 30, 2006, the aggregate retained earnings restricted for cash
         dividends waived were $1,718,000 and $1,508,000, respectively.

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

         In September 2006, the Financial Accounting Standards Board ("FASB")
         issued Statement of Financial Accounting Standards ("SFAS") No. 157,
         "Fair Value Measurements," which defines fair value, establishes a
         framework for measuring fair value under U.S. GAAP, and expands
         disclosures about fair value measurements. SFAS No. 157 applies to
         other accounting pronouncements that require or permit fair value
         measurements. The new guidance is effective for financial statements
         issued for fiscal years beginning after November 15, 2007, and for

                                       12
<PAGE>

         interim periods within those fiscal years. We are currently evaluating
         the potential impact, if any, of the adoption of FASB Statement No. 157
         on our consolidated financial position, results of operations and cash
         flows.

         On September 29, 2006, the FASB issued SFAS No. 158, "Employers'
         Accounting for Defined Benefit Pension and Other Postretirement Plans,"
         which amends SFAS Nos. 87 and 106 to require recognition of the
         overfunded or underfunded status of pension and other postretirement
         benefit plans on the balance sheet. Under SFAS 158, gains and losses,
         prior service costs and credits, and any remaining transition amounts
         under SFAS Nos. 87 and 106 that have not yet been recognized through
         net periodic benefit cost will be recognized in accumulated other
         comprehensive income, net of tax effects, until they are amortized as a
         component of net periodic cost. The measurement date - the date at
         which the benefit obligation and plan assets are measured - is required
         to be the Company's fiscal year end. SFAS 158 is effective for publicly
         held companies for fiscal years ending after December 15, 2006, except
         for the measurement date provisions, which are effective for fiscal
         years ending after December 15, 2008. The Company is currently
         analyzing the effects of SFAS 158 but does not expect its
         implementation will have a significant impact on the Company's
         consolidated financial conditions or results of operations.

         In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
         for Financial Assets and Financial Liabilities-Including an amendment
         of FASB Statement No. 115." SFAS No. 159 permits entities to choose to
         measure many financial instruments and certain other items at fair
         value. Unrealized gains and losses on items for which the fair value
         option has been elected will be recognized in earnings at each
         subsequent reporting date. SFAS No. 159 is effective for our Company
         October 1, 2008. The Company is evaluating the impact that the adoption
         of SFAS No. 159 will have on our consolidated financial statements.

         In September 2006, the FASB issued FASB Staff Position AUG AIR-l,
         "Accounting for Planned Major Maintenance Activities," which is
         effective for fiscal years beginning after December 15, 2006. This
         position statement eliminates the accrue-in-advance method of
         accounting for planned major maintenance activities. We do not expect
         this pronouncement to have a significant impact on the determination or
         reporting of our financial results.

         In July 2006, the Financial Accounting Standards Board (FASB) issued
         FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes
         - an interpretation of FASB Statement No. 109" (FIN 48), which
         clarifies the accounting for uncertainty in tax positions. This
         Interpretation requires that companies recognize in their financial
         statements the impact of a tax position, if that position is more
         likely than not of being sustained on audit, based on the technical
         merits of the position. The provisions of FIN 48 are effective for
         fiscal years beginning after December 15, 2006, with the cumulative
         effect of the change in accounting principle recorded as an adjustment
         to opening retained earnings. We are currently evaluating the impact of
         adopting FIN 48 on our financial statements.

         On September 7, 2006, the Task Force reached a conclusion on EITF Issue
         No. 06-5, "Accounting for Purchases of Life Insurance - Determining the
         Amount That Could Be Realized in Accordance with FASB Technical
         Bulletin No. 85-4, Accounting for Purchases of Life Insurance" ("EITF
         06-5"). The scope of EITF 06-5 consists of six separate issues relating
         to accounting for life insurance policies purchased by entities
         protecting against the loss of "key persons." The six issues are
         clarifications of previously issued guidance on FASB Technical Bulletin
         No. 85-4. EITF 06-5 is effective for fiscal years beginning after
         December 15, 2006. The Company does not expect it to have a material
         impact on the Company's consolidated financial statements.

         In March 2007, the FASB ratified Emerging Issues Task Force Issue No.
         06-10 "Accounting for Collateral Assignment Split-Dollar Life Insurance
         Agreements" (EITF 06-10). EITF 06-10 provides guidance for determining
         a liability for the postretirement benefit obligation as well as
         recognition and measurement of the associated asset on the basis of the
         terms of the collateral assignment agreement. EITF 06-10 is effective

                                       13
<PAGE>

         for fiscal years beginning after December 15, 2007. The Company is
         currently assessing the impact of EITF 06-10 on its consolidated
         financial position and results of operations.

         In March 2007, the FASB ratified EITF Issue No. 06-11, "Accounting for
         Income Tax Benefits of Dividends on Share-Based Payment Awards." EITF
         06-11 requires companies to recognize the income tax benefit realized
         from dividends or dividend equivalents that are charged to retained
         earnings and paid to employees for nonvested equity-classified employee
         share-based payment awards as an increase to additional paid-in
         capital. EITF 06-11 is effective for fiscal years beginning after
         September 15, 2007. The Company does not expect EITF 06-11 will have a
         material impact on its financial position, results of operations or
         cash flows.

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 Form 10-QSB or in any press releases, public
announcements, filings with the Securities and Exchange Commission 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
regarding 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, our asset
quality 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;

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.

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

                                       14
<PAGE>

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 assets 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 purchased
from deposit brokers and funds borrowed from the Federal Home Loan Bank
("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 Deposit Insurance
Fund of the Federal Deposit Insurance Corporation ("FDIC"), and the Bank is
subject to regulation by the FDIC and the OTS.

Recent Developments

         On February 20, 2007, the new branch office building in Gouverneur
opened for business. Bank personnel used the President's holiday weekend to move
furniture and equipment from the old branch office into the new building. Some
renovations will be done to the old branch office building before the accounting
staff is moved from the current executive offices building. Mr. Bennett,
President and CEO, has moved his office from the executive office building to
the new branch office building. Once the accounting personnel are relocated to
the old branch office, the executive office building, with a carrying value of
$103,000, will be razed and used for additional parking.

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, 2006) 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 for loan losses charged against income. In
determining the allowance for loan losses, management makes significant
estimates and, accordingly, has identified this policy as 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.

                                       15
<PAGE>

Average Balances, Interest Rates and Yields

            The following tables present, for the periods indicated, the average
interest-earning assets and average interest-bearing liabilities by principal
categories, the interest income or expense for each category, and the resultant
average yields earned or rates paid. No tax equivalent adjustments were made.
All average balances are daily average balances. Non-interest-bearing checking
accounts are included in the tables as a component of non-interest-bearing
liabilities.
<TABLE>
<CAPTION>

                                                                    For the three months Ended March 31,
                                                                 2007                                  2006
                                                 ------------------------------------   ------------------------------------
                                                                              (Dollars in thousands)

                                                   Average                    Yield/      Average                   Yield/
                                                   Balance     Interest      Cost (6)     Balance     Interest     Cost (6)
                                                 ----------   ----------   ----------   ----------   ----------   ----------
<S>                                              <C>          <C>                <C>    <C>          <C>                <C>
Loans, net (1)                                   $  109,269   $    1,878         6.97%  $  102,468   $    1,694         6.70%
Securities (2)                                       10,850          126         4.71%      11,794          129         4.44%
Other short-term investments                          1,278           16         5.08%         395            5         5.13%
                                                 ----------   ----------                ----------   ----------
   Total interest-earning assets                    121,397        2,020         6.75%     114,657        1,828         6.47%
                                                              ----------                             ----------
Non-interest-earning assets                          10,515                                  8,730
                                                 ----------                             ----------
   Total assets                                  $  131,912                             $  123,387
                                                 ==========                             ==========

Savings and club accounts (3)                    $   18,759           47         1.02%  $   19,632           50         1.03%
Time certificates                                    39,090          448         4.65%      31,525          279         3.59%
NOW and money market accounts                        12,085           37         1.24%      11,794           32         1.10%
Borrowings                                           35,868          429         4.85%      37,115          399         4.36%
                                                 ----------   ----------                ----------   ----------
   Total interest-bearing liabilities               105,802          961         3.68%     100,066          760         3.08%
                                                              ----------                             ----------
Non-interest-bearing liabilities                      5,889                                  4,251
                                                 ----------                             ----------
   Total liabilities                                111,691                                104,317
Shareholders' equity                                 20,221                                 19,070
                                                 ----------                             ----------
   Total liabilities and
      shareholders' equity                       $  131,912                             $  123,387
                                                 ==========                             ==========

Net interest income/spread (4)                                $    1,059         3.07%               $    1,068         3.39%
                                                              ==========   ==========                ==========   ==========
Net earning assets/net interest margin (5)       $   15,595                      3.54%  $   14,591                      3.78%
                                                 ==========                ==========   ==========                ==========

Ratio of average interest-earning
   Assets to average interest-bearing
    liabilities                                        1.15x                                  1.15x
                                                 ==========                             ==========
</TABLE>

Notes appear on following page

                                       16
<PAGE>
<TABLE>
<CAPTION>

Average Balances, Interest Rates and Yields (continued)

                                                                    For the six months Ended March 31,
                                                                 2007                                  2006
                                                 ------------------------------------   ------------------------------------
                                                                              (Dollars in thousands)

                                                   Average                    Yield/      Average                   Yield/
                                                   Balance     Interest      Cost (6)     Balance     Interest     Cost (6)
                                                 ----------   ----------   ----------   ----------   ----------   ----------
<S>                                              <C>          <C>                <C>    <C>          <C>                <C>
Loans, net (1)                                   $  108,975   $    3,731         6.87%  $  101,801   $    3,375         6.65%
Securities (2)                                       10,985          258         4.71%      12,044          267         4.45%
Other short-term investments                            991           25         5.06%         310            9         5.82%
                                                 ----------   ----------                ----------   ----------
   Total interest-earning assets                    120,951        4,014         6.66%     114,155        3,651         6.41%
                                                              ----------                             ----------
Non-interest-earning assets                          10,335                                  8,711
                                                 ----------                             ----------
   Total assets                                  $  131,286                             $  122,866
                                                 ==========                             ==========

Savings and club accounts (3)                    $   19,009           97         1.02%  $   19,702          100         1.02%
Time certificates                                    38,725          878         4.55%      31,209          538         3.46%
NOW and money market accounts                        12,081           75         1.25%      11,888           66         1.11%
Borrowings                                           35,642          858         4.83%      36,893          783         4.26%
                                                 ----------   ----------                ----------   ----------
   Total interest-bearing liabilities               105,457        1,908         3.63%      99,692        1,487         2.99%
                                                              ----------                             ----------
Non-interest-bearing liabilities                      5,717                                  4,230
                                                 ----------                             ----------
   Total liabilities                                111,174                                103,922
Shareholders' equity                                 20,112                                 18,944
                                                 ----------                             ----------
   Total liabilities and
      shareholders' equity                       $  131,286                             $  122,866
                                                 ==========                             ==========

Net interest income/spread (4)                                $    2,106         3.03%               $    2,164         3.42%
                                                              ==========   ==========                ==========   ==========
Net earning assets/net interest margin (5)
                                                 $   15,494                      3.49%  $   14,463                      3.80%
                                                 ==========                ==========   ==========                ==========
Ratio of average interest-earning
   assets to average interest-bearing
   liabilities                                         1.15x                                  1.15x
                                                 ==========                             ==========
</TABLE>

(1)  Shown net of the allowance for loan losses. Average loan balances include
     non-accrual loans and loan held for sale. Interest is recognized on
     non-accrual loans only as and when received.
(2)  Securities are included at amortized cost, with net unrealized gains or
     losses on securities available for sale included as a component of
     non-earning assets. Securities include FHLB stock.
(3)  Include advance payments by borrowers for taxes and insurance (mortgage
     escrow deposits).
(4)  The spread represents the difference between the weighted average yield on
     interest-earning assets and the weighted average cost of interest-bearing
     liabilities.
(5)  The net interest margin, also known as the net yield on average
     interest-earning assets, represents net interest income as a percentage of
     average interest-earning assets.
(6)  Yields are not computed on a tax equivalent basis. Yields and costs are
     computed based upon the actual number of days in the period annualized to a
     365-day year.

                                       17
<PAGE>

Rate Volume Analysis of Net Interest Income

         One method of analyzing net interest income is to consider how changes
in average balances and average rates from one period to the next affect net
interest income. The following table shows changes in the dollar amount of
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. It shows the amount of the change in
interest income or expense caused by either changes in outstanding balances
("volume") or changes in interest rates ("rate"). The effect of a change in
volume is measured by multiplying the average rate during the first period by
the volume change between the two periods. The effect of a change in interest
rates is calculated by multiplying the change in rate between the two periods by
the average volume during the first period. Changes attributable to both rate
and volume, which cannot be segregated, have been allocated proportionately to
the change due to volume and the change due to rate.
<TABLE>
<CAPTION>

                                               Three months ended March 31,                  Six months ended March 31,
                                       ------------------------------------------   ------------------------------------------
                                                     2007 vs. 2006                                 2007 vs. 2006
                                       ------------------------------------------   ------------------------------------------
                                              Increase (Decrease) Due To:                   Increase (Decrease) Due To:
                                       ------------------------------------------   ------------------------------------------
                                         Volume           Rate           Total        Volume           Rate           Total
                                       ------------   ------------   ------------   ------------   ------------   ------------
                                                                        (Dollars in thousands)
<S>                                    <C>            <C>            <C>            <C>                     <C>   <C>
Interest-earning assets:

Loans                                  $        114   $         70   $        184   $        242            114   $        356
 Securities                                     (11)             8             (3)           (24)            15             (9)
 Other short-term investments                    11             --             11             17             (1)            16
                                       ------------   ------------   ------------   ------------   ------------   ------------
   Total interest-earning assets                114             78            192            235            128            363
                                       ------------   ------------   ------------   ------------   ------------   ------------

Interest-bearing liabilities:

 Savings and club accounts                       (2)            (1)            (3)            (3)            --             (3)
 Time certificates                               76             93            169            147            193            340
 NOW and money market accounts                    1              4              5              1              8              9
 Borrowings                                     (14)            44             30            (27)           102             75
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Total interest-bearing liabilities             61            140            201            118            303            421
                                       ------------   ------------   ------------   ------------   ------------   ------------

Net change in net interest income      $         53   $        (62)  $         (9)  $        117   $       (175)  $        (58)
                                       ============   ============   ============   ============   ============   ============
</TABLE>

Comparison of Financial Condition at March 31, 2007 and September 30, 2006.

         Total assets at March 31, 2007 were $132.5 million, an increase of $2.4
million, or 1.8%, from $130.1 million at September 30, 2006. Net loans increased
by $1.4 million, or 1.3%, from $105.6 million to $107.0 million. The increase in
loans resulted from increases of $2.9 million in residential real estate loans,
$0.1 million in other commercial loans, combined with decreases of $0.4 million
in commercial real estate loans and $1.2 million in other consumer loans. The
decrease in other consumer loans was mainly caused by a decrease in automobile
loans.

         Borrowed funds from FHLB, consisting of advances and security
repurchase obligations, were $35.7 million on March 31, 2007, up from $35.3
million at September 30, 2006. Brokered deposits totaled $5.7 million at March
31, 2007, up $1.7 million from $4.0 million on September 30, 2006. Total
deposits increased $1.9 million, or 2.6%, during the six months from $72.5
million to $74.4 million, including the increase in brokered deposits. Increases
in demand deposits, NOW and money market accounts and time deposits, including
brokered deposits, by $0.4 million, $0.3 million and $1.7 million, respectively,
more than offset a decrease of $0.6 million in savings and club accounts.

                                       18
<PAGE>

         Shareholders' equity increased $341,000 for the six months ended March
31, 2007, as net income of $399,000 combined with increases of $86,000 from the
stock-based compensation (ESOP and MRP shares and stock options) and $31,000
from exercised options, more than offset a decrease of $17,000 in the fair
value, net of taxes, in the available-for-sale securities portfolio and $158,000
for a cash dividend paid to public shareholders on March 31, 2007. Treasury
stock was used to supply the 6,475 shares we needed in the first six months of
fiscal 2007 when several directors and one employee exercised some of their
vested stock options.

         At March 31, 2007, non-performing assets totaled $582,000, or 0.50% of
total assets, as compared to $691,000, or 0.53% of total assets at September 30,
2006. Non-performing loans decreased by $144,000 from $680,000, or 0.64% of
total loans, to $536,000, or 0.44% of total loans, over the same period. A
summary of the Company's non-performing assets and related ratios follows:

                                                      March 31,   September 30,
         Non-performing assets                          2007           2006
         ---------------------                      ------------   ------------
         Non-accrual loans
         Residential mortgages
             and home equity loans                  $        288   $        183
         Commercial mortgages                                246            247
         Consumer other                                        2             22
         Commercial other                                     --             --
                                                    ------------   ------------
             Total non-accrual loans                         536            452

         Residential mortgage loans over 90
           Days delinquent and still accruing                 --            228
                                                    ------------   ------------
             Total non-performing loans                      536            680

         Foreclosed real estate                               42             --
         Other repossessed assets                              4             11
                                                    ------------   ------------
           Total non-performing assets              $        582   $        691
                                                    ============   ============

         Non-performing loans to total loans                0.50%          0.64%

         Non-performing assets to total assets              0.44%          0.53%

         The Company had no loans more than 90 days delinquent and still
accruing at March 31, 2007 and $228,000 of such loans at September 30, 2006.

         Of the four non-accrual residential mortgages, two loans to one
borrower totaling $91,000 are currently in foreclosure proceedings and one loan
in the amount of $70,000 is in bankruptcy proceedings.

         The non-accrual balance in commercial mortgages consists of one loan.

         Management believes that each of these non-performing loans is
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 the
$27,000 decrease in the loan loss allowance is appropriate at this time based on
the history of losses in the loan portfolio over the past six years.

                                       19
<PAGE>

Comparison of Results of Operations for the Three Months Ended March 31, 2007
and 2006.

         General. Our net income for the three months ended March 31, 2007 was
$183,000, a decrease of $203,000, or 52.6%, over net income of $386,000 for the
same period last year. The decrease in net income resulted from the combination
of the following factors:

         1.       net interest income decreased by $9,000, as interest income
                  increased $192,000 and interest expense increased by $201,000,

         2.       non-interest income decreased by $162,000 over last year's
                  period,

         3.       the provision for loan losses decreased by $25,000 for the
                  second quarter of this fiscal year versus last fiscal year,

         4.       non-interest expense increased $143,000 in the three month
                  period this year compared to last year's period, and

         5.       income tax expense decreased $86,000.

         Basic and diluted earnings per share were both $0.08, respectively for
this year's quarter versus $0.17 for both measures in last year's quarter.

         An analysis of the information shown previously in the Average
Balances, Interest Rates and Yields table for three months and in the related
Rate Volume Analysis of Net Interest Income table follows:

         Interest Income. Results for the three months ended March 31, 2007 show
that interest income increased by $192,000, or 10.5%, from $1,828,000 for the
three months ended March 31, 2006 to $2,020,000 at March 31, 2007. Interest
income increased $114,000 due to an increase in the average balance of
interest-earning assets, primarily loans, from $114.7 million to $121.4 million,
while interest income increased $78,000 due to an increase in the average rate
earned on interest-earning assets, from 6.47% to 6.75%.

         Interest income on loans increased $184,000, or 10.9%, for the second
quarter of fiscal 2007 compared to the second quarter of fiscal 2006. The growth
in the average balance resulted in an increase in interest income of $114,000,
while an increase of 0.27% in the average interest rate on loans increased
interest income by $70,000.

         Loan growth from April 1, 2006 through March 31, 2007 was very good as
indicated by the growth of the average balance of loans from the three months
ended March 31, 2006 by $6.8 million to the three months ended March 31, 2007.
However, nearly all of the growth occurred from April 1, 2006 through December
31, 2006 since the average balance of loans for the three months ended March 31,
2007 increased only $0.6 million to $109.3 million from $108.7 million for the
three months ended December 31, 2006. This slow down in loan growth has been
deliberate as we increased our loan rates in response to an increase in funding
costs. The current interest rate environment is characterized by an inverted
yield curve, meaning that the interest rates at the short end of the curve, from
overnight investments to one-year maturities, are higher than rates on
maturities from one to ten years. In this environment, loan arbitrage
opportunities, in which we match borrowings against mortgage loans are no longer
as attractive as those we created in prior periods which continue to produce
income even though the spread has narrowed. We have therefore decided not to
grow the loan portfolio by growing borrowings until funding costs stabilize and
margins begin expanding, and instead, will invest available funds in liquid
assets, mainly our investment portfolio. We are reducing our lending activity to
preserve our external funding capabilities for when margins improve. We expect
that when short-term interest rates are adjusted downward resulting in a
positive yield curve, new arbitrage opportunities will become available and we
will look to grow the loan portfolio more aggressively.

                                       20
<PAGE>

         Interest income on securities and other short-term investments was
$142,000 for the three months ended March 31, 2007 and $134,000 for the three
months ended March 31, 2006.

         Interest Expense. Interest expense increased by $201,000, or 26.4%,
from $760,000 for the three months ended March 31, 2006 to $961,000 for the
three months ended March 31, 2007. Interest expense increased $61,000 due to an
increase in the average balance of interest-bearing liabilities and $140,000 due
to an increase in the average rate paid on interest-bearing liabilities. Average
interest-bearing liabilities increased from $100.1 million last year to $105.8
million this year, mainly as a result of additional brokered time deposits. The
average rate paid on interest-bearing liabilities increased from 3.08% to 3.68%
over the same period.

         For the second quarter of the 2007 fiscal year, the average balances
increased for time certificates and NOW and money market accounts by $7.6
million and $0.3 million, respectively, over the average balances for the second
quarter of the 2006 fiscal year and increased interest expense by $76,000 and
$1,000, respectively. Over the same period, decreases in the balances of savings
and club accounts and borrowings by $0.8 million and $1.2 million, respectively,
reduced interest expense by $2,000 and $14,000. Increases in the average rate
paid on time certificates by 1.06%, on NOW and money market accounts by 0.14%
and on borrowings by 0.49%, increased interest expense by $93,000, $4,000 and
$44,000, respectively.

         Net Interest Income. The net result of the increases in interest income
and interest expense was a $9,000 decrease in net interest income. Our interest
rate spread (the difference between the average rate we earn on interest-earning
assets and the average rate we pay on interest-bearing deposits and borrowings)
decreased by 32 basis points (0.32%) from 3.39% for the three months ended March
31, 2006 to 3.07% for the three months ended March 31, 2007, while our net
interest margin (net interest income divided by average earning assets)
decreased by 24 basis points (0.24%) from 3.78% to 3.54% for the same time
frame.

         Interest rate spread, the difference between the average rate we earn
on our interest-earning assets and the cost of our interest-bearing liabilities,
continues to decrease even as the Federal Reserve has paused from raising
short-term interest rates as interest-bearing liabilities continue to price
higher at maturity. The yield curve remains inverted with 6 month and one-year
treasury rates higher than two-year treasury rates. Our growth in loans over the
past few years has helped to buffer the impact of the decrease in spread.
However, our margins will continue to be squeezed as deposit and borrowing costs
rise with the shorter-term rates and mortgage rates do not ratchet up
accordingly.

      The ratio of average interest-earning assets to average interest-bearing
liabilities was 1.15 times for each period.

      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. 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 March 31, 2007, we provided no accruals for
loan losses, compared to $25,000 in the same quarter last year. At March 31,
2007 and 2006, the ratio of our loan allowance to total loans was 0.86% and
0.89%, respectively. On December 31, 2006 the allowance was $931,000, or 0.87%
of total loans, and we determined at the end of the second quarter that the
appropriate level for the allowance was $921,000. We had charge-offs during the
quarter of $15,000 and recoveries of $5,000, so no provision was necessary to
reach the desired level for the allowance. Our level of non-accruing loans,
loans 90 days past due and still accruing and restructured loans was $536,000,
or 0.50% of total loans at March 31, 2007 compared to $821,000, or 0.76% of
total loans at December 31, 2006. Management feels that these loans are
adequately secured and do not require any adjustment to the allowance for loan
losses at this time.

                                       21
<PAGE>

         Non-interest Income. Our non-interest income decreased by $162,000, or
50.3%, from $322,000 in the second quarter of fiscal 2006 to $160,000 in the
second quarter of fiscal 2007, due to $62,000 in income from life insurance
policies and a $98,000 realized gain on the sale of available for sale
securities in last year's quarter as compared to no income for either category
in this year's quarter. The other items comprising non-interest income decreased
by $2,000 from last year's $162,000 to $160,000 this year.

         Non-interest Expenses. Non-interest expenses increased $143,000, or
17.9%, from $800,000 during the fiscal 2006 quarter to $943,000 in the fiscal
2007 quarter. This increase was primarily the result of increases in salaries
and benefits of $54,000, occupancy and equipment of $27,000 and other expenses
of $57,000.

         Salaries and employee benefits increased due to increases of $8,000 in
salaries, $20,000 in health insurance costs, $12,000 in ESOP, MRP and SOP
expenses and $14,000 due to a decrease in deferred costs of loan origination.
The increase in health insurance costs resulted from a credit of $20,000 in last
year's second quarter due to a change in our health insurance coverage last year
which eliminated the accrued self-insured liability. Occupancy and equipment
expenses reflect the addition of the cost of the new branch office in
Gouverneur. Increases in other expenses resulted primarily from increases in
contributions of $23,000, advertising and promotion of $7,000, telephone of
$7,000, AMEX fees of $17,000 and seminars of $4,000. A pledged donation to a
local hospital represents the increase in contributions. Advertising and
promotions expenses reflect additional promotion for the new office. AMEX fees
were expensed in the second quarter in fiscal 2007 and in the third quarter in
fiscal 2006.

         At March 31, 2007, we had thirty-one full-time and four part-time
employees, compared to thirty-three full-time and two part-time employee at
March 31, 2006.

         Income tax expense. Our income tax expense decreased by $86,000 to
$93,000 from $179,000, or 48.0%, comparing the second quarter of fiscal 2007 to
the same quarter of fiscal 2006. The decreased expense was the result of income
before income tax decreasing by $289,000, or 51.1%, from last year's $565,000 to
this year's $276,000.

Comparison of Results of Operations for the Six Months Ended March 31, 2007 and
2006.

         General. Our net income for the six months ended March 31, 2007 was
$399,000, a decrease of $282,000, or 41.4%, from last year's net income of
$681,000. The following operating results combined to produce the decrease:

         1.       net interest income decreased $58,000 as interest income
                  increased $363,000 and interest expense increased $421,000,

         2.       non-interest income decreased by $193,000,

         3.       the provision for loan losses decreased by $35,000,

         4.       non-interest expense increased by $200,000 and

         5.       income taxes decreased by $134,000.

         Basic and diluted earnings per share were $0.18 and $0.17,
respectively, for the first six months of this fiscal year versus $0.30 for both
measures for the same period last year.

                                       22
<PAGE>

         An analysis of the information shown previously in the Average
Balances, Interest Rates and Yields table for six months and in the related Rate
Volume Analysis of Net Interest Income table follows:

         Interest Income. Interest income increased by $363,000, or 9.9%, from
$3,651,000 to $4,014,000 from the six months ended March 31, 2006 to the six
months ended March 31, 2007. Average interest-earning assets increased $6.8
million, from $114.2 million to $121.0 million, or 6.0%, resulting in a $235,000
increase in interest income, while an increase of 25 basis points (0.25%) in the
average rate earned on interest earning assets increased interest income by
$128,000 for the first six months of fiscal year 2007 as compared to the same
period last year.

         Interest income on loans increased $356,000. An increase in the average
balance of loans of $7.2 million, or 7.1%, from $101.8 million last year to
$109.0 million this year resulted in an increase of $242,000 in interest income,
while an increase of 22 basis points (0.22%) in the average rate earned on loans
increased interest income by $114,000.

         Interest income on securities and other short-term investments
increased by $7,000.

         Interest Expense. Interest expense increased $421,000 from the first
half of 2006 to the first half of 2007. The increase in the average balance of
interest-bearing liabilities by $5.8 million, or 5.8%, from $99.7 million last
year to $105.5 million this year, resulted in an increase of $118,000 in
interest expense, while an increase in the average rate we paid on
interest-bearing liabilities by 64 basis points (0.64%), from 2.99% in 2006 to
3.63% in 2007, increased interest expense by $303,000.

         Interest expense increased by $75,000 on borrowings from FHLB from
fiscal 2006 to fiscal 2007. A decrease in the average balance of borrowings of
$1.2 million, or 3.3%, from $36.9 million at March 31, 2006 to $35.7 million at
March 31, 2007 decreased interest expense $27,000, while an increase in the
average interest rate on borrowings by 57 basis points (0.57%) from 4.26% in the
first half of last fiscal year to 4.83% for the first half of this fiscal year
increased interest expense by $102,000.

         Interest expense increased by $340,000 on time certificates from the
first half of 2006 to the first half of 2007. An increase in the average balance
of time certificates by $7.5 million, or 24.0%, from $31.2 million at March 31,
2006 to $38.7 million at March 31, 2007 increased interest expense $147,000,
while an increase in the average interest rate on time certificates by 109 basis
points (1.09%) from 3.46% in the first half of last fiscal year to 4.55% for the
first half of this fiscal year increased interest expense by $193,000. The
average balance of brokered deposits increased by $5.2 million from $0.1 million
during the six months ended March 31, 2006 to $5.3 million during the six months
ended March 31, 2007. Brokered deposits are reported in time certificates.

         Net Interest Income. Overall, the net effect of the increases in
interest income and interest expense was a $58,000 decrease in net interest
income. Our interest rate spread (the difference between the average rate we
earn and the average rate we pay) decreased by 39 basis points (0.39%) from
3.42% last year to 3.03% this year. Our net interest margin was 3.49% in the
first half of fiscal 2007, down from 3.80% in the first half of fiscal 2006.

         The ratio of average interest-earning assets to average
interest-bearing liabilities was 1.15 times in both the first half of 2006 and
2007.

         Provision for Loan Losses. For the six-month period ended March 31,
2007, we provided $15,000 for loan losses compared to $50,000 in the same period
ended March 31, 2006. At March 31, 2007 and 2006 the ratio of our loan loss
allowance to total loans was 0.86% and 0.89%, respectively. As disclosed in the
comparative discussion of result of operations for three months, our level of
non accruing loans, loans 90 days past due and still accruing and restructured

                                       23
<PAGE>

loans was $536,000, or 0.50% of total loans at March 31, 2007 compared to
$680,000, or 0.64% of total loans on September 30, 2006. 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 $193,000 lower this
year, decreasing to $306,000 for the first six months versus $499,000 for the
same period in 2006. The decrease resulted from $62,000 in death benefit income
on life insurance policies and $98,000 in gains on sale of securities held for
sale realized in the prior period (no comparable amounts in the current period)
and a decrease of $35,000 in realized gains on foreclosed assets.

         Non-interest Expense. Non-interest expenses increased by $200,000 to
$1.8 million for the first six months of fiscal 2007 compared to $1.6 million
for fiscal 2006. Increases of $100,000 in salaries and employee benefits,
$22,000 in occupancy and equipment and $60,000 in other non-interest expense
were primarily responsible for the increase in non-interest expenses. The
increase in salaries and employee benefits was composed of increases of $14,000
in salaries, $47,000 in health benefits, $15,000 in stock-based compensation and
$9,000 in payroll taxes and a $14,000 decrease in deferred costs of loan
originations, which is a reduction to salaries and employee benefits, as a
result of fewer mortgage and commercial loans being booked. Last year, health
insurance costs were reduced by $40,000 due to a change eliminating the
self-insured portion liability. Professional fees includes $10,000 in costs
incurred for compliance with the Sarbanes-Oxley Act of 2002, Section 404
requiring management of public companies to assess and report on the
effectiveness of their internal controls over financial reporting. As a small
business filer, we are required to comply by September 30, 2008. We expect
expenses between $30,000 and $40,000 will be incurred this fiscal year.

         Income tax expense. Our income tax expense decreased $134,000, or
39.3%, from $341,000 last year to $207,000 this year. The decreased expense was
the result of lower income before income tax, which decreased $416,000, or
40.7%, from $1,022,000 for the first half of last year to $606,000 for the first
half of this year.

Liquidity

         Our primary sources of funds are deposits, borrowings from the FHLB,
brokered deposits 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 and brokered deposits. However, general economic
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.

         During the six months ended March 31, 2007, we increased our cash and
cash equivalents by $1.2 million. We originated $10.7 million of new loans
during the six months ended March 31, 2007. Loans, net, after payments,
charge-offs and transfers to foreclosed real estate, increased by $1.3 million
during the period.

         Deposits increased by $1.9 million during the six months ended March
31, 2007. Purchased brokered deposits accounted for $1.7 million of this
increase. 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 borrowings from FHLB by $400,000 during the six months
ended March 31, 2007.

         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 or purchase brokered deposits,
although the cost of borrowing money or purchasing brokered deposits is normally
higher than the average cost of deposits. As a member of the FHLB, the Bank can
arrange to borrow an additional $16.3 million against our one-to four-family
mortgages. We have used borrowed funds and brokered deposits to help us leverage

                                       24
<PAGE>

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 seek to maintain a
liquidity ratio of between 5% and 15%. At March 31, 2007, the ratio was 5.7%.

Off Balance Sheet Arrangements

         We had $2.0 million in outstanding commitments to make loans at March
31, 2007, along with $4.5 million of unused home equity, commercial and
overdraft lines of credit. We also have a commitment to sell the $2.1 million
guaranteed portion of a USDA guaranteed loan we originated. We are awaiting USDA
approval for the sale. We anticipate that we will have enough funds to meet our
current loan commitments and to fund draws on the lines of credit through the
normal turnover of our loan and securities portfolios. At March 31, 2007, we had
$32.2 million of time certificates scheduled to mature within one year,
including $5.6 million of purchased brokered deposits. 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 us as a
savings and loan holding company. At March 31, 2007, the Bank exceeded all
regulatory capital requirements of the OTS applicable to it, with Tier I capital
of $19.7 million, or 14.9% of adjusted total assets and with risk-based capital
of $20.6 million, or 26.7% of risk-weighted assets. The Bank also had tangible
capital of $19.7 million, or 14.9% of tangible assets. The Bank was classified
as "well capitalized" at March 31, 2007 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
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 March 31, 2007,
and they have concluded that 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 other factors that could significantly affect our
internal controls during the quarter ended March 31, 2007, 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 its
consolidated financial condition or results of operations.


                                       25
<PAGE>

Item 4.  Submission of Matters to a Vote of Security Holders

At the annual meeting of stockholders held on February 13, 2007, the Company's
stockholders (i) elected three directors, Richard E. Jones, Frank Langevin and
F. Toby Morrow, each to serve for a three-year term to expire at the annual
meeting of stockholders to be held in 2010 and (ii) ratified the appointment of
Beard Miller Company LLP as the independent registered public accountants for
the fiscal year ending September 30, 2007. The terms of office of directors
Richard F. Bennett, Robert J. Leader, Timothy J. Monroe and Joseph C. Pistolesi
all continued after the annual meeting.

Of the 2,297,759 shares entitled to vote on proposition (i) at the meeting, a
total of 2,169,042 shares (94.40%) voted as follows:

         (i) ELECTION OF DIRECTORS:

                                     For            %       Withheld        %
                                   ---------      -----     --------      ----
         Richard E. Jones          2,122,432       97.9       46,610       2.1
         Frank Langevin            2,053,655       94.7      115,387       5.3
         F. Toby Morrow            2,114,132       97.5       54,910       2.5

Of the 2,297,759 shares entitled to vote on proposition (ii) at the meeting, a
total of 2,169,042 shares (94.40%) voted as follows:

         (ii) RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS:

              For           %        Against        %       Abstain        %
            ---------     ----      ---------      -----    --------      ----
            2,159,289     99.5        8,551        0.4        1,202       0.1

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



                                       26
<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: May 11, 2007                    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)


                                       27