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

                                   FORM 10-KSB

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

                  For the fiscal year ended September 30, 2002

                        Commission file number 001-14910

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

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

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

                                 (315) 287-2600
                 -----------------------------------------------
                 Issuer's telephone number, including area code:

           Securities Registered Pursuant to Section 12(b) of the Act:

                     Common Stock, par value $0.01 per share

           Securities Registered Pursuant to Section 12(g) of the Act:

                                      None

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 [ ].

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

Gouverneur Bancorp, Inc.'s revenues for the fiscal year ended September 30, 2002
were $5,904,642.

The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the average of the final closing price of
such stock on December 12, 2002, was approximately $7,211,402. (The exclusion
from such amount of the market value of the shares owned by any person shall not
be deemed an admission by the registrant that such person is an affiliate of the
registrant.)

As of December 12, 2002, there were 2,276,759 issued and outstanding shares of
the Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part II of Form 10-KSB - Annual Report to Stockholders for the fiscal year ended
September 30, 2002.
Part III of Form 10-KSB - Portions of Proxy Statement for 2002 Annual Meeting of
Stockholders.

Transitional Small Business Disclosure Format. YES [ ]. NO [ X ].
<PAGE>

                                     PART I

Item 1.  Description of Business

General

         Gouverneur Bancorp, Inc. ("We" or the "Company") is a corporation
organized under the laws of the United States in March 1999, in connection with
the reorganization of its wholly owned subsidiary, Gouverneur Savings and Loan
Association (the "Bank"), into a mutual holding company structure. The Company's
assets consist primarily of all the outstanding capital stock of the Bank, and
cash of $337,000 at September 30, 2002, representing a portion of the net
proceeds of the Company's stock offering completed March 23, 1999. The Company's
principal business is the ownership of the Bank. At September 30, 2002, Cambray
Mutual Holding Company ("Cambray MHC"), the Company's parent mutual holding
company, held 1,311,222 shares or 57.6% of the Company's issued and outstanding
common stock, and shareholders other than Cambray MHC held 965,537 shares, or
42.4% of the issued and outstanding common stock. The Company is a savings and
loan holding company registered with the Office of Thrift Supervision ("OTS")
and subject to regulation under federal banking laws and regulations. In this
document, references to the Company include the Bank, unless the context denotes
otherwise. The terms "Registrant", "we", "our" or similar terms refer to
Gouverneur Bancorp, Inc.

         The Company's business consists of gathering deposits from the general
public within its market area and investing those deposits primarily in loans,
debt obligations issued by the U.S. Government and its agencies, and
mortgaged-backed securities. The Company's loans are mainly residential mortgage
loans secured by one-to-four family residences with the balance of the portfolio
composed of commercial mortgage loans, other consumer loans (mostly automobile
loans), and other non-real estate commercial loans. Due primarily to
historically low interest rates combined with a highly competitive mortgage
market, real estate loans declined by $0.7 million from $43.7 million at
September 30, 2001 to $43.0 million at September 30, 2002 as their percentage of
total loans rose by 0.74% from 78.02% last year to 78.76% this year. Management
has determined that since we are a portfolio lender, making long-term fixed-rate
loans in the current interest rate environment could be detrimental to the Bank,
and therefore, has decided not to compete with the secondary market lenders.
This has resulted in a decrease in our mortgage loan portfolio. Other loans,
both consumer and commercial, also decreased by $0.7 million from $12.3 million
last year to $11.6 million this year.

         The Company's revenues come principally from interest on loans and
securities. The Company's primary sources of funds are deposits, borrowings from
the Federal Home Loan Bank of New York ("FHLBNY") and proceeds from principal
and interest payments on loans and investment securities. At September 30, 2002,
the Company had $85.1 million in assets, $52.8 million in deposits and $17.2
million in total equity, as compared with last year's balances of $82.9 million,
$47.7 million and $16.7 million respectively.

         The Company's offices are located at 42 Church Street, Gouverneur, New
York 13642. Our telephone number is (315) 287-2600.

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 annual report or in any press releases, public
announcements, filings with the Securities and Exchange Commission (the "SEC")
or other disclosures, we are making "forward-looking statements" as described in
the Private Securities Litigation Reform Act of 1995. In addition, certain
information we provide, such as analysis of the adequacy of our allowance for
loan losses or an analysis of the 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 about 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 we anticipate when we make our forward-looking statements. Some of the
risks and uncertainties that may affect our operations, performance, development
and results, the interest rate sensitivity of our assets and liabilities, and

                                        2
<PAGE>

the adequacy of our allowance for loan losses, include, without limitation: (i)
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; (ii) changes in market interest rates or changes in
the speed at which market interest rates change; (iii) changes in laws and
regulations affecting us; changes in competition; and 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.

Market Area

         The Bank, a community oriented savings and loan association which was
chartered in 1892, has been headquartered in the Town and Village of Gouverneur
since its formation. Its deposits are insured up to the applicable limits by the
Federal Deposit Insurance Corporation ("FDIC"). Through the Bank's two full
service branch offices and one lending office, the Company services a primary
market area consisting of southern St. Lawrence County and northern Jefferson
and Lewis Counties in New York State. Based on the 2000 Census, the Company
estimates that the population in this market area is approximately 100,000. The
Company's market area is predominately rural with many small towns. The
population of the service area works in diverse industries, including
manufacturing, agriculture, retail trades, construction, mining, health care,
education and government service. The largest private employers in the market
area are a mining company and a paper mill. Another mining operation has been
closed for about a year and has cost the local economy 100 jobs. A second paper
mill within our service area, which closed two years ago, has been purchased and
is expected to open soon and employ between 100 and 115 people when it reaches
full operation.

         Fort Drum, a major military installation, is located at the southern
edge of the Company's primary market area. The market area for our Alexandria
Bay and Clayton offices is dominated by tourist related businesses along the St.
Lawrence River. The two largest resort hotels are year round businesses, while
most others are seasonal and service the expanded spring and summer population.
Most of the full-time residents are employed in Watertown, NY, the largest city
in the three county area with a population of about 30,000, and the county seat
for Jefferson County. The New York State Department of Transportation and
Jefferson County offices are both located in Watertown and are major empoloyers.
There are several small to medium sized manufacturers, including paper mills.
Watertown provides the major retail shopping center for the three counties and
also attracts shoppers from Canada who enter the United States via the Thousand
Islands Bridge and travel approximately 30 miles to Watertown. The Company
estimates that its share of the residential mortgage lending market in its
market area is approximately 10% to 15%. We estimate that our share of all bank
deposits in our market area is approximately 25%.

         Economic and demographic conditions in the Company's market area may
make implementation of the Company's operating strategy more difficult. Per
capita income and median home values are below New York State and national
levels in our market area. Unemployment in each of the three counties in the
Company's market area is higher than statewide and national unemployment rates.
A year ago, a mining company located in the Company's market area shut down its
facility which adversely affected the local economy. At this time, it is not
known if this is a temporary situation caused by market forces in the zinc
industry, or whether it will become permanent. Some of its employees have chosen
to relocate to mining operations in the mid-west United States due to the
uncertainty that exists. A major, ongoing expansion of the Fort Drum facility
may improve local economic conditions. However, since Fort Drum is on the edge
of our market area the expansion may not benefit the Company. Furthermore, the
local population is showing little or no growth, as the 2000 Census showed less
than a 1.0% increase in the area since 1990, versus the statewide average of
5.5%. These conditions are believed to extend to communities adjoining the
Company's market area as well. In order to grow the Bank by expanding its
customer base, in August, 1999, the Company opened a lending office in
Alexandria Bay, New York on the St. Lawrence River to pursue lending
opportunities in adjoining communities. In August 2002, we closed the existing
leased lending office and moved that operation to our newly constructed full
service branch office in Alexandria Bay. At the same time, to enhance our
presence along the St. Lawrence River, we opened a new lending office in
Clayton, New York, approximately ten miles west of Alexandria Bay.

                                        3
<PAGE>

Competition

         The Company's principal competitors for deposits are other savings and
loan associations, savings banks, commercial banks and credit unions in the
Company's market area, as well as money market mutual funds, insurance companies
and securities brokerage firms, many of which are substantially larger in size
than the Company. The Company's competition for loans comes principally from
savings banks, savings and loan associations, commercial banks, mortgage
bankers, finance companies and other institutional lenders. Direct or indirect
competition for loans from nationally recognized secondary market lenders has
increased in recent years, having the effect of both reducing the Company's
market share and driving down the interest rates it can earn on residential
mortgages. The Company's principal methods of competition include loan and
deposit pricing, flexible underwriting which permits variation from secondary
market underwriting requirements when believed appropriate, maintaining close
ties with its local community, advertising and marketing programs and providing
personalized services.

         The Company faces competition from other financial institutions which
may have much greater financial and marketing resources. However, the Company
believes it benefits from its community bank orientation as well as its
relatively high core deposit base. Recent acquisitions of other banks in central
New York by larger institutions may have also given the Company a competitive
edge among those local residents who prefer doing business with a local company.

Lending Activities

         Loan Portfolio Composition. The Company's loans consist primarily of
mortgage loans secured by one-to-four family residences. At September 30, 2002,
the Company had total loans of $54.6 million, of which $36.5 million, or 66.8%,
were one-to-four family first lien residential mortgage loans. The Company had
an additional $1.9 million of home equity loans and home equity lines of credit
outstanding, or 3.5% of total loans, secured by subordinate liens on one-to-four
family residences. In recent years, the Company had focused on increasing its
level of other consumer loans, commercial loans and commercial mortgage loans to
expand its business, increase its yields and improve interest rate sensitivity.
However, due to reduced demand for other consumer loans, mainly automobile
loans, and a change in policy regarding commercial loans, the Company has
re-focused its efforts on growing the residential mortgage portfolio. That point
has been emphasized as we opened a full service office in Alexandria Bay and a
lending office in Clayton. Our increased presence along the St. Lawrence will be
used to grow the Bank in the residential mortgage market, including vacation
home lending.

         During the past year, new car loan opportunities have been reduced due
to the availability of manufacturers' low rate financing programs. In addition,
a popular auto lending program we offered with terms similar to leasing has
ended. The program stopped because the insurance company, which guaranteed the
value of the vehicle at the conclusion of the loan, has discontinued its
participation in the program. We are looking to replace that company with
another insurer, but we are not currently making those loans. The Company's
portfolio of other consumer loans, for the most part auto loans, decreased by
$0.3 million from last year's total of $10.7 million to $10.4 million this year,
to 19.0% of total loans this year versus 19.2% last year. The Company's ratio of
net loans to total assets decreased from 67.3% last year to 63.9% at September
30, 2002.

         The Board has decided not to pursue commercial lending opportunities
until such time as a commercial lending officer can be added to the staff due to
the additional risks involved in commercial lending. We have had difficulty
setting a timetable for filling the position, realizing the challenge of
securing a qualified person in our local market area. At September 30, 2002,
commercial loans totaled $5.2 million, of which $4.0 million were commercial
mortgage loans and $1.2 million were other commercial loans. Commercial loans
were down $0.9 million from $6.1 million last year, as commercial mortgages
decreased by $0.5 million from $4.5 million and other commercial loans fell by
$0.4 million from $1.6 million.

         Interest rates earned on the Company's loans are affected by the demand
for loans, the supply of money available for lending and the rates offered by
competitors. These factors are in turn affected by, among other things, economic
conditions, monetary policies of the federal government, and legislative tax
policies.

                                        4
<PAGE>

Loan Portfolio Composition

The following table sets forth the composition of the Company's mortgage and
other loan portfolios in dollar amounts and in percentages at the dates
indicated.

<TABLE>
<CAPTION>
                                                                         At September 30,
                              ------------------------------------------------------------------------------------------------------

                                     2002                 2001                 2000                 1999                 1998
                                     ----                 ----                 ----                 ----                 ----
                                         Percent              Percent              Percent              Percent              Percent
                               Amount   of Total    Amount   of Total    Amount   of Total    Amount   of Total    Amount   of Total
                              --------  --------   --------  --------   --------  --------   --------  --------   --------  --------
                                                                      (Dollars in thousands)

<S>                           <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
Real estate loans:
 Residential - first lien ..  $ 36,459    66.77%   $ 36,997    66.04%   $ 36,640    67.13%   $ 33,320    71.50%   $ 28,834    80.71%
 Home equity ...............     1,934     3.54%      1,153     2.06%        791     1.45%        771     1.65%        835     2.34%
 Construction ..............       662     1.21%      1,073     1.92%        331     0.61%        296     0.64%        124     0.35%
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------
  Total Residential mortgage    39,055    71.52%     39,223    70.02%     37,762    69.19%     34,387    73.79%     29,793    83.40%

 Commercial mortgage .......     3,951     7.24%      4,482     8.00%      4,593     8.41%      3,748     8.04%      1,578     4.42%
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------

 Total real estate loans ...    43,006    78.76%     43,705    78.02%     42,355    77.60%     38,135    81.83%     31,371    87.82%


Other loans:
 Automobile loans ..........     8,080    14.79%      8,442    15.06%      8,594    15.75%      5,306    11.38%      2,166     6.06%
 Other consumer loans ......     2,270     4.16%      2,304     4.12%      2,448     4.48%      2,456     5.27%      1,707     4.78%
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------
  Total consumer other .....    10,350    18.95%     10,746    19.18%     11,042    20.23%      7,762    16.65%      3,873    10.84%

 Commercial other ..........     1,248     2.29%      1,570     2.80%      1,181     2.17%        707     1.52%        477     1.34%
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------

Total other loans ..........    11,598    21.24%     12,316    21.98%     12,223    22.40%      8,469    18.17%      4,350    12.18%

Total loans ................    54,604   100.00%     56,021   100.00%     54,578   100.00%     46,604   100.00%     35,721   100.00%
                              --------             --------             --------             --------             --------

 Deferred loan costs (fees),
  net ......................       412                  413                  382                  187                  (30)
 Allowance for loan losses .      (671)                (655)                (663)                (620)                (484)
                              --------             --------             --------             --------             --------

Total loans, net ...........  $ 54,345             $ 55,779             $ 54,297             $ 46,171             $ 35,207
                              ========             ========             ========             ========             ========
</TABLE>

                                        5
<PAGE>

                           Residential Mortgage Loans

         Residential - first lien. After reclassifying the balance of
residential mortgage loans upward by $1.2 million at September 30, 2001 from
$38.0 million to $39.2 million, the portfolio decreased by $0.1 million, or
0.3%, to $39.1 million at September 30, 2002. The reclassification moved $1.2
million of loans from the commercial mortgage loan category to the residential
mortgage loan category and lowered the commercial mortgage loan portfolio by
$1.2 million at September 30, 2001. These loan balances were corrected in July
of this year after it was discovered that the loans were improperly categorized
during our banking software conversion in November of 2000. The loan
reclassification has not had any effect on the Company's financial condition or
results of operations.

         Approximately three-quarters of the Company's residential mortgage loan
originations are first lien, fixed-rate mortgage loans with terms up to 25
years, but predominantly from 15 to 20 years. The Company also offers
adjustable-rate mortgage loans. The adjustable-rate residential mortgage
portfolio was $9.3 million this year end,or 23.8% of the Company's $39.1 million
of residential mortgage loans, compared to September 30, 2001 when $6.9 million
of the $39.2 million in residential loans were adjustable-rate, or 17.6%.
Customer preference has strongly favored fixed-rate mortgage loans and most of
the adjustable rate loans have fixed rates for the first five years of the loan
term.

         When underwriting residential mortgage loan applications, the Company
considers the income and assets of the borrower, the borrower's prior credit
history and the value of the collateral offered for the loan. In light of the
nature of the local market and competitive considerations, the Company
occasionally waives adverse credit information related to the borrower if the
loan is generally considered to be sound. The Company believes it has adopted
prudent policies and procedures for underwriting and generally experiences a
declination rate of approximately 40% on all residential mortgage applications.

         The Company obtains independent appraisals on all residential first
mortgage loans and attorneys' opinions of title are required at closing. Current
surveys are generally not required because the Company believes that the cost of
obtaining a survey in the local market is not justified by the risks involved.
In most cases, the Company accepts the attorney's title opinion rather than
requiring title insurance on residential mortgage loans. This practice has not
resulted in losses. Private mortgage insurance is required on loans with a loan
to value ratio in excess of 90% and is usually required on loans with loan to
value ratios between 80% and 90% depending upon other circumstances. For the
past four years, real estate tax escrows have been required on all mortgage
loans. Previously, tax escrows were required only on loans with loan to value
ratios in excess of 85%.

         Although fixed-rate mortgage loans may adversely affect the Company's
net interest income in periods of rising interest rates, the Company originates
such loans to satisfy customer demand. Such loans are generally originated at
higher interest rates than those offered on adjustable mortgage loans originated
at the same time. Therefore, during periods of level or declining interest
rates, they tend to provide higher yields than adjustable loans. Fixed-rate
residential mortgage loans originated by the Company generally include
due-on-sale clauses permitting the Company to demand payment in full if the
borrower sells the property without the Company's consent. Due-on-sale clauses
are an important means of adjusting the rates of the Company's fixed-rate
mortgage loan portfolio, and the Company has generally exercised its rights
under these clauses.

         Adjustable mortgage loans are offered with interest rates that adjust
annually based on the one-year treasury bill index, plus 2.75%. Most of these
loans have initial five-year periods with a fixed interest rate, after which the
rate adjusts annually. Interest rate adjustments are generally limited to 2% per
year for one-year adjustable loans. There is normally a lifetime maximum
interest rate adjustment, measured from the initial interest rate, of 6%. Credit
risks on adjustable rate loans are somewhat greater than on fixed-rate loans
primarily because, as interest rates rise, so do borrowers' payments, increasing
the potential for default.

         The Company has enrolled in FHLBNY's Mortgage Partnership Funding (MPF)
program. This is a secondary market program similar to the Federal Home Loan
Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association
("Fannie Mae") programs. We are under no obligation to sell existing mortgages.
However, we do want to position the Company to compete with other lenders in our
market area and may use this program to offer longer-term lower rate mortgages.

                                        6
<PAGE>

The lack of title insurance and surveys means that a portion of the Company's
residential mortgage loan portfolio may not be salable at par under this
program. Management intends to continue to emphasize the origination of mortgage
loans secured by one-to-four family residences while at the same time seeking to
expand the Company's portfolio of other loan types.

         Home Equity Loans. The Company offers a home equity line of credit
secured by a residential one-to-four family mortgage, usually a second lien. The
Company has sought to increase its volume of these revolving credit loans
because the adjustable rates help improve the interest rate sensitivity of the
Company's assets. These loans provide for an initial advance period of ten
years, during which the borrower pays 1/240th of the outstanding principal
balance, plus interest, each month, and can borrow, repay, and re-borrow the
principal balance. This is followed by a repayment period of ten years, during
which the balance of the loan is repaid in principal and interest installments.

         The Company also offers home equity junior mortgage loans that are
fully advanced at closing and repayable in monthly principal and interest
installments over a period generally not to exceed 10 years. Customers in the
local market tend to prefer these loans to adjustable rate revolving credit home
equity loans because, the Company believes, they like the stability of the fixed
interest rate more than the flexibility of a line of credit.

         The maximum loan to value ratio, including prior liens, is 75% for
junior mortgage loans. At September 30, 2002, the Company had $1.9 million in
outstanding advances on home equity lines of credit, $0.8 million of unused home
equity lines of credit and $0.4 million in regular amortizing home equity loans.

         Construction Loans. The Company offers residential single-family
construction loans primarily to persons who intend to occupy the property upon
completion of construction. The loans automatically convert to regular
amortizing loans after construction is complete. Proceeds of the construction
loan are advanced in stages as construction is completed. The loans generally
provide for a construction period of not more than twelve months during which
the borrower pays interest only. In recognition of the risks involved in such
loans, the Company carefully monitors construction through regular inspections.
At September 30, 2002, the Company had $0.7 million of construction loans.
Construction loan levels tend to increase during the summer because of the
seasonal nature of residential construction, but even during the summer these
loans generally do not represent more than 2% of the Company's loan portfolio.
Occasionally, the Company makes construction loans for purposes other than the
construction of the borrower's residence when appropriate opportunities arise.

                            Commercial Mortgage Loans

         After reclassifying the September 30, 2001, commercial mortgage loan
portfolio downward by $1.2 million from $5.7 million to $4.5 million, the
portfolio decreased by $0.5 million, or 11.1%, to $4.0 million at September 30,
2002. The reclassification involved moving $1.2 million of loans from the
commercial mortgage loan category to the residential mortgage loan category and
thereby increased the residential loan portfolio by $1.2 million at September
30, 2001. The classification of these loans was corrected in July of this year
after it was discovered that the loans were improperly categorized during our
banking software conversion in November of 2000. The Company has been offering
such loans to diversify risk and obtain a higher yield normally associated with
this type of loan. However, management has placed a temporary moratorium on
commercial lending due to the current low interest rate environment since the
margin on prime rate loans is not commensurate with the additional risk involved
on these loans and to allow the Bank time to find a suitable commercial loan
officer before expanding this portfolio any further.

         The Company offers commercial mortgage loans with loan-to-value ratios
up to 70%. The Company offers both fixed and adjustable rate commercial mortgage
loans, with 42.1% of the Company's commercial mortgage loan balances maturing
after September 30, 2003 having adjustable interest rates.

         The Company generally requires a debt service coverage ratio of at
least 120% and the personal guarantee of the principals of the borrower as
additional security. The Company also requires an appraisal by an independent
appraiser. Attorneys' opinions of title are used instead of title insurance for
commercial mortgage loans, but the Company has not experienced losses as a
result of this practice.

                                        7
<PAGE>

         Loans secured by commercial properties generally involve a greater
degree of risk than one-to-four family residential mortgage loans. Because
payments on such loans are often dependent on successful operation or management
of the properties, repayment may be subject to a greater extent to adverse
conditions in the real estate market or the economy. We feel that the additional
risk associated with this type of lending is acceptable since the Bank's strong
capital position is more than sufficient to absorb losses, and because we seek
to minimize these risks through our underwriting policies. The Company evaluates
the qualifications and financial condition of the borrower, including credit
history, profitability and expertise, as well as the value and condition of the
underlying property. The factors considered by the Company include net operating
income; the debt coverage ratio (the ratio of cash net income plus interest to
debt service); and the loan to value ratio. When evaluating the borrower, the
Company considers the financial resources and income level of the borrower, the
borrower's experience in owning or managing similar property and the Company's
lending experience with the borrower. The Company's policy requires borrowers to
present evidence of the ability to repay the loan without having to resort to
the sale of the mortgaged property.

                              Other Consumer Loans

         Automobile Loans. In recent years, the Company has tried to increase
its level of automobile loans in order to provide improved yields, increase the
interest rate sensitivity of its assets and expand its customer base. Auto loans
are originated both through direct contact between the Company and the borrower
and through auto dealers who refer the borrowers to the Company. However, the
Company underwrites the loans itself and the loan is originated in the name of
the Company. The dealer is paid a flat fee for each successful referral.

         The Company offers auto loans for both new and used cars. The loans
have fixed rates with maturities of not more than five and a half years. At
September 30, 2002, the Company had $8.1 million of auto loans, 3.6% lower than
the level one year earlier. The lending programs of automobile manufacturers, in
which interest free financing is offered, have negatively impacted our growth in
this area. Auto loans are offered in amounts up to 100% of the purchase price of
the car. The Company evaluates the credit and repayment ability of the borrower
as well as the value of the collateral in determining whether to approve a loan.

         Other Consumer Loans. The Company also makes fixed-rate consumer loans
either unsecured or secured by savings accounts or other consumer assets.
Consumer loans generally have terms not exceeding five years, but home
improvement loans are offered with terms up to twenty years, although most have
terms not exceeding ten years. Other consumer loans totaled $2.3 million at
September 30, 2002, the same as at September 30, 2001. Other consumer loans
generally have higher interest rates than mortgage loans. The shorter terms to
maturity are helpful in managing the Company's interest rate risk. Applications
for these loans are evaluated based upon the borrower's ability to repay and the
value of any collateral.

                             Other Commercial Loans

         The Company offers commercial non-mortgage loans to local businesses
for working capital, machinery and equipment purchases, expansion, and other
business purposes. These loans generally have higher yields than mortgages
loans, and include installment equipment financing with terms that generally do
not exceed seven years, short-term working capital loans, and commercial lines
of credit with annual reviews. The Company offers fixed and adjustable rate
commercial loans, with fixed rates being more prevalent. The Company had $1.2
million of such loans at September 30, 2002, compared to $1.6 million on
September 30, 2001, a decrease of 25.0%. As stated earlier, the Company is not
marketing such loans to businesses in its market area until such time as a
commercial lending officer is added to our staff.

         Applications for these loans are generally evaluated based upon the
borrower's ability to repay the loan from ongoing operations. The loans normally
present greater risks than mortgage loans because the collateral, if any, is
often rapidly depreciable, easier to conceal and of limited value to other
companies. Furthermore, changes in economic conditions and other factors outside
the control of the Company, and often outside the control of the commercial

                                        8
<PAGE>

borrowers, can often have a substantial effect on delinquencies. Therefore, the
Company monitors these accounts on an ongoing basis after making the loan to be
able to address any credit problems promptly if they occur.

         Origination of loans. Loan originations come from a number of sources.
Residential loan originations can be attributed to depositors, retail customers,
telephone inquiries, advertising, the efforts of the Company's loan officers,
and referrals from other borrowers, real estate brokers and builders. The
Company originates loans through its own efforts and does not use mortgage
brokers, mortgage bankers or other non-employee fee paid loan finders except for
the referral of auto loans from local dealers.

         All of the Company's lending is subject to its written,
nondiscriminatory underwriting standards and to loan origination procedures
prescribed by the Company's Board of Directors. Loan officers have individual
authority to make secured and unsecured loans up to amounts set by the Board.
Loans greater than $75,000, up to $150,000 require loan committee approval.
Loans ranging from $150,000 up to $250,000 require Large Loan Committee approval
(the Large Loan Committee consists of three outside directors and the
President). Loans exceeding $250,000 must be approved by the full Board of
Directors.

         Under federal law and applicable OTS regulations, we may not lend more
than 15% of our capital to any one borrower, with additional loans up to 10% of
capital being permitted if the additional loans are secured by readily
marketable collateral. At September 30, 2002, the Company's largest loan was a
commercial mortgage loan located in the Company's market area secured by a
mini-market with a balance of $285,000. At year-end, this loan was 60 days past
due. A heating contractor had the largest loan relationship with the Company,
combining all loans to a single borrower or related group of borrowers, at
$305,000, substantially below our regulatory loan limit to one borrower of $2.5
million. At September 30, 2002, all loans for this customer were current and
performing in accordance with their terms.

         The Company neither purchases nor sells loans. The Company does not
service loans for other lenders and the Company has never purchased
loan-servicing rights, however, we may do so in the future.

         The following table shows the contractual maturity of the Company's
loan portfolio at September 30, 2002. Loans are shown as due based on their
contractual terms to maturity. Adjustable rate loans are shown as maturing when
the final loan payment is due without regard to rate adjustments. The table does
not show the effects of loan amortization, possible prepayments or enforcement
of due-on-sale clauses. Non-performing loans are shown as being due based upon
their contractual maturity without regard to acceleration due to default.

                                        9
<PAGE>

                      Residential  Commercial   Consumer   Commercial
                        Mortgage    Mortgage      other       other       Total
                        --------    --------    --------    --------    --------
                                             (In thousands)

Amounts due:
  Within 1 year         $    174    $    196    $    626    $     18    $  1,014
   1 to 2 years              361         110       1,881          19       2,371
   2 to 3 years              452          64       2,433         110       3,059
   3 to 5 years            1,715         764       5,005         920       8,404
  5 to 10 years            9,208       1,533         401         181      11,323
  over 10 years           27,145       1,284           4          --      28,433
                        --------    --------    --------    --------    --------
    Total loans         $ 39,055    $  3,951    $ 10,350    $  1,248    $ 54,604
                        ========    ========    ========    ========    ========



         The following table shows, as of September 30, 2002, the amount of
loans due after September 30, 2003, and whether they have fixed interest rates
or adjustable interest rates.

                                        Fixed   Adjustable
                                        Rates      Rates      Total
                                      --------   --------   --------
                                              (In thousands)

            Residential mortgage      $ 29,564   $  9,317   $ 38,881
            Commercial mortgage          1,930      1,825      3,755
            Consumer other               9,439        285      9,724
            Commercial other               659        571      1,230
                                      --------   --------   --------
               Total                  $ 41,592   $ 11,998   $ 53,590
                                      ========   ========   ========



         Asset Quality

         Delinquency Procedures. When a borrower fails to make a required
payment on a mortgage loan, the Company attempts to cure the deficiency by
contacting the borrower. Late notices are sent when a payment is more than
fifteen days past due and a late charge is generally assessed at that time. The
Company attempts to contact, personally, any borrower who is more than 30 days
past due. When a mortgage loan is 90 days past due, the Company sends a 30 days
notice of acceleration and if the loan is not brought current by the end of that
period, the loan is turned over to an attorney for collection, with foreclosure
generally commenced within 30 to 60 days thereafter. A foreclosure action, if
the default is not cured, generally leads to a judicial sale of the mortgaged
real estate. If the borrower files a bankruptcy petition, the judicial sale is
delayed and the foreclosure action cannot be continued until the Company obtains
relief from the automatic stay provided by the bankruptcy code. The Company has
experienced losses due to delays caused by borrower bankruptcy filings.

         If the Company acquires the mortgaged property at foreclosure sale or
accepts a voluntary deed in lieu of foreclosure, the acquired property is then
classified as foreclosed real estate. At September 30, 2002, the Company had
$25,000 of foreclosed real estate, represented by one single-family residence.
The Company seeks to dispose of these properties through real estate brokers.
Due to adverse local economic conditions in the residential housing market, the
disposition of foreclosed real estate can take six months or more. When real
estate is acquired in full or partial satisfaction of a loan, it is initially
recorded at the fair value less estimated costs to sell at the date of
foreclosure, establishing a new cost basis. Write-downs from the unpaid loan
balance to fair value at the time of foreclosure are charged to the allowance
for loan losses. Subsequent revenue and expenses from operations and changes in
the valuation allowance are charged to the expense, foreclosed assets, net. The

                                       10
<PAGE>

Company is permitted to finance sales of foreclosed real estate by "loans to
facilitate," which may involve a lower down payment or a longer repayment term
or other more favorable features than generally would be granted under the
Company's underwriting guidelines. At September 30, 2002, the Company had
$581,000 of "loans to facilitate," with one loan of $26,000 not current in
accordance with its terms.

         Late notices are sent on all consumer loans when a payment is more than
10 days past due. When an automobile loan becomes 60 days past due, the Company
seeks to repossess the collateral. If the default is not cured, then upon
repossession the Company sells the automobile as soon as practicable by public
notice and auction. The remaining balance of the loan is fully charged off when
the loan is 120 days past due. When other types of non-mortgage loans become
past due, the Company takes measures to cure defaults through contacts with the
borrower and takes appropriate action, depending upon the borrower and the
collateral, to obtain repayment of the loan. The Company had four repossessed
assets totaling $46,000 at September 30, 2002.

         The following table sets forth the Company's loan delinquencies by
type, by amount and by percentage of each loan category at September 30, 2002.

<TABLE>
<CAPTION>
                                                   Loans Delinquent For:
                                                   ---------------------

                           60-89 Days               90 Days or More (1)        Total Delinquent Loans
                           ----------               -------------------        ----------------------

                                       Percent                      Percent                      Percent
                                       of loan                      of loan                      of loan
                    Number    Amount  Category   Number    Amount  Category   Number    Amount  Category
                   -------   -------   ------   -------   -------   ------   -------   -------   ------
                                                  (Dollars in thousands)
<S>                     <C>  <C>       <C>           <C>  <C>        <C>          <C>  <C>       <C>
Residential mtg          6   $   107    0.27%         9   $   282    0.72%        15   $   389    1.00%
Commercial mtg           1       285    7.21%         1        41    1.04%         2       326    8.25%
Consumer other          16       134    1.29%         4        12    0.12%        20       146    1.41%
Commercial other         1       236   18.91%         1        84    6.73%         2       320   25.64%
                   -------   -------            -------   -------            -------   -------
     Total              24   $   762    1.40%        15   $   419    0.77%        39   $ 1,181    2.16%
                   =======   =======            =======   =======            =======   =======
</TABLE>

(1) These loans are included as non-accrual loans in the following schedule.


         During fiscal 2002, the Bank's nonperforming assets increased from
$657,000 to $751,000 and the composition of such assets changed to include a
higher amount of non-accruing residential mortgage loans, non-accruing and
restructured other commercial loans and a lower amount of commercial mortgage
loans, other consumer loans and foreclosed assets, net.

         Non-performing loans rose $243,000, mainly as a result of the increase
of $234,000 in non-accruing residential mortgages. Five of the nine residential
mortgages are currently in foreclosure proceedings as is the one commercial
mortgage. The restructured commercial loans are for one borrower and are under
the control of bankruptcy court. Management believes that these non-performing
loans are adequately secured by collateral. Further, management is not aware of
any factors common to these loans, which caused their non-performance or any
developments that suggest an upward trend in delinquencies. Accordingly, even
though the allowance as a percent of non-performing loans dropped to 98.68% from
last year's 149.89%, management has determined that only a modest increase in
the loan loss allowance is appropriate at this time. At September 30, 2002,
there were no loans other than those included in the table below with regard to
which management had information about possible credit problems of the borrower
that caused management to seriously doubt the ability of the borrower to comply
with present loan repayment terms. The ratio of non-performing assets to total
assets was below 1% for the fifth straight year.

         The following table presents information with respect to the Company's
non-performing assets (which generally include loans that are delinquent for 90
days or more, restructured loans and foreclosed real estate) at the dates
indicated.

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                             At September 30,
                                                             ----------------

                                               2002      2001      2000      1999      1998
                                              ------    ------    ------    ------    ------
                                                          (Dollars in thousands)
<S>                                           <C>       <C>       <C>       <C>       <C>
     Non-accrual loans:
       Residential mortgage ...............   $  282    $   48    $  354    $  196    $  259
       Commercial mortgage ................       41        73        --        --        --
       Consumer other .....................       12        63        55        25        --
       Commercial other ...................       84       253        --        --        --
                                              ------    ------    ------    ------    ------
            Total non-accrual loans .......      419       437       409       221       259

     Restructured commercial other ........      261        --        --        --        --
                                              ------    ------    ------    ------    ------
            Total non-performing loans ....      680       437       409       221       259

     Foreclosed real estate ...............       25       182        91       169        51

     Other repossessed assets .............       46        38        20        --        --
                                              ------    ------    ------    ------    ------

            Total non-performing assets ...   $  751    $  657    $  520    $  390    $  310
                                              ======    ======    ======    ======    ======

     Non-performing loans as a percent
     of total loans .......................     1.23%     0.78%     0.75%     0.47%     0.73%

     Non-performing assets as a percent
     of total assets ......................     0.88%     0.79%     0.69%     0.56%     0.52%

     Allowance for loan losses as a percent
     of non-performing loans ..............    98.68%   149.89%   162.10%   280.54%   186.87%
</TABLE>

         The Company had no loans more than 90 days delinquent and accruing
interest at September 30, 2002, 2001, 2000, 1999 or 1998.

         It is the Company's policy to discontinue accruing interest on a loan
when its fourth monthly payment is due and unpaid, unless the Company determines
that the nature of the delinquency and the collateral are such that collection
of the principal and interest on the loan in full is reasonably assured. When
the accrual of interest is discontinued, all accrued but unpaid interest is
charged against current period income. Generally, once the accrual of interest
is discontinued, the Company records interest as and when received until the
loan is restored to accruing status. However, if there is substantial doubt as
to the collectibility of the loan, amounts received are recorded as a reduction
of principal until the loan is returned to accruing status.

         The amount of additional interest income that would have been recorded
on non-accrual loans had those loans been performing in accordance with their
terms was approximately $22,000 for fiscal 2002, $28,000 for fiscal 2001 and
$15,000 for fiscal 2000.

         Classified Assets. OTS regulations require that the Company classify
its assets on a regular basis and establish prudent valuation allowances based
on such classifications. In addition, in connection with examinations, OTS
examiners have the authority to identify problem assets and, if appropriate,
require that they be classified. There are three adverse classifications for
problem assets: Substandard, Doubtful and Loss. Substandard assets have one or
more defined weaknesses and are characterized by the distinct possibility that
the Company will sustain some loss if the deficiencies are not corrected.
Doubtful assets have the weaknesses of substandard assets, with the additional
characteristics that the weaknesses make collection or liquidation in full on
the basis of currently existing facts, conditions and values questionable, and
there is a high probability of loss. An asset classified as Loss is considered
not collectible and of such little value that its continuance as an asset on the
financial statements of the Company is not warranted.

                                       12
<PAGE>

         Assets classified as Substandard or Doubtful require the Company to
establish prudent valuation allowances. If an asset or portion thereof is
classified as Loss, the Company must either establish a specific allowance for
loss equal to 100% of the portion of the asset classified Loss or charge off
such amount. If the Company does not agree with an examiner's classification of
an asset it may appeal this determination. On the basis of management's review
of its loans and other assets at September 30, 2002, the Company had $366,000 of
assets classified as Substandard, none classified as Doubtful and $50,000
classified as Loss.

         Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the
risks inherent in the Company's loan portfolio and the general economy. The
allowance for loan losses is maintained at an amount management considers
adequate to cover loan losses deemed probable by our estimates. The allowance is
based upon a number of factors, including asset classifications, economic
trends, industry experience and trends, industry and geographic concentrations,
estimated collateral values, management's assessment of the credit risk inherent
in the portfolio, historical loan loss experience and the Company's underwriting
policies. The Company evaluates, on a monthly basis, all loans identified as
problem loans, including all non-accrual loans and other loans where management
has reason to doubt collection in full in accordance with original payment
terms. The Company considers whether the allowance should be adjusted to protect
against risks associated with such loans. In addition, the Company applies a
percentage, for each category of performing loans not designated as problem
loans to determine an additional component of the allowance to protect against
unascertainable risks inherent in any portfolio of performing loans.

         The analysis of the adequacy of the allowance is reported to and
reviewed by the Board of Directors monthly. Management believes it uses a
reasonable and prudent methodology to project losses in the loan portfolio, and
hence assess the adequacy of the allowance for loan losses. However, any such
assessment is only an informed estimate and future adjustments may be necessary
if economic conditions or the Company's actual experience differ substantially
from the assumptions upon which the evaluation of the allowance was based.
Furthermore, state and federal regulators, in reviewing the Company's loan
portfolio as part of a future regulatory examination, may request the Company to
increase its allowance for loan losses, thereby negatively affecting the
Company's financial condition and earnings at that time. Moreover, future
additions to the allowance may be necessary based on changes in economic and
real estate market conditions, new information regarding existing loans,
identification of additional problem loans and other factors, both within and
outside of management's control.

                                       13
<PAGE>

         The following table analyzes activity in the Company's allowance for
loan losses during the periods indicated. Loans in the consumer other category
are primarily automobile loans.

<TABLE>
<CAPTION>
                                                      Year Ended September 30,
                                                      ------------------------
                                            2002      2001      2000      1999      1998
                                           ------    ------    ------    ------    ------
                                                       (Dollars in thousands)

<S>                                        <C>       <C>       <C>       <C>       <C>
Allowance, beginning of period             $  655    $  663    $  620    $  484    $  403
Provision                                      85        80       158       162       130
Charge-offs:
   Residential mortgage & Home equity          47        26        36        40        87
   Commercial mortgage                         --        --        19        --        --
   Consumer other                              80       103        39        20        47
   Commercial other                            --         6        85        --        --
                                           ------    ------    ------    ------    ------
      Total charge-offs                       127       135       179        60       134
Recoveries:
   Residential mortgage & Home equity           8         6        32        21        66
   Commercial mortgage                         --        --        --        --        --
   Consumer other                              50        40        32        13        19
   Commercial other                            --         1        --        --        --
                                           ------    ------    ------    ------    ------
      Total recoveries                         58        47        64        34        85
                                           ------    ------    ------    ------    ------
Net charge-offs                                69        88       115        26        49

Allowance, end of period                   $  671    $  655    $  663    $  620    $  484
                                           ======    ======    ======    ======    ======

Allowance as a percent of total loans        1.21%     1.17%     1.21%     1.33%     1.35%

Ratio of net charge-offs to average
 loans outstanding                           0.13%     0.16%     0.23%     0.07%     0.14%
</TABLE>


         The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. The allocation of the allowance
to each category is not necessarily indicative of future losses and does not
restrict the use of the allowance to absorb losses in any category.


                                                     At September 30,
                                                     ----------------
                                                 2002                2001
                                                 ----                ----

                                                     Percent             Percent
                                                    of Loans            of Loans
                                                    to Total            to Total
                                           Amount     Loans    Amount     Loans
                                           ------    ------    ------    ------
                                                  (Dollars in thousands)
    Allowance allocated to:
Residential & commercial mortgages         $  294     43.82%   $  317     78.02%
Consumer & commercial other loans             377     56.18%      338     21.98%
                                           ------    ------    ------    ------
   Total allowance                         $  671    100.00%   $  655    100.00%
                                           ======    ======    ======    ======

                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                               At September 30,
                                                               ----------------

                                                 2000                1999                1998
                                                 ----                ----                ----
                                                     Percent             Percent             Percent
                                                    of Loans            of Loans            of Loans
                                                    to Total            to Total            to Total
                                           Amount     Loans    Amount     Loans    Amount     Loans
                                           ------    ------    ------    ------    ------    ------
                                                            (Dollars in thousands)
<S>                                        <C>       <C>       <C>       <C>       <C>       <C>
    Allowance allocated to:
Residential & commercial mortgages         $  363     77.60%   $  481     81.83%   $  394     87.82%
Consumer & commercial other loans             300     22.40%      139     18.17%       90     12.18%
                                           ------    ------    ------    ------    ------    ------
   Total allowance                         $  663    100.00%   $  620    100.00%   $  484    100.00%
                                           ======    ======    ======    ======    ======    ======
</TABLE>


Environmental Issues

         The Company encounters certain environmental risks in its lending
activities. Under federal and state environmental laws, lenders may become
liable for costs of cleaning up hazardous materials found on property securing
their loans. In addition, the presence of hazardous materials may have a
substantial adverse effect on the value of such property as collateral and may
cause economic difficulties for the borrower, causing the loan to go into
default. Although environmental risks are usually associated with loans secured
by commercial real estate, risks also may exist for loans secured by residential
real estate if, for example, there is nearby commercial contamination or if the
residence was constructed on property formerly used for commercial purposes. The
Company attempts to control its risk by requiring a phase one environmental
assessment by a Company approved engineer as part of its underwriting review for
all mortgage loans other than those secured by one-to-four family residences.

         The Company believes its procedures regarding the assessment of
environmental risk are adequate. As of September 30, 2002, the Company was
unaware of any environmental issues with respect to any of its mortgage loans
that would subject it to any material liability at this time. Hidden or future
environmental contamination could adversely affect the values of properties
securing loans in the Company's portfolio.

Investment Activities

         General. The investment policy of the Company, which is approved by the
Board of Directors, is based upon its asset/liability management goals and is
designed primarily to provide satisfactory yields while maintaining adequate
liquidity, a balance of high quality, diversified investments, and minimal risk.
In recognition of the high level of fixed rate residential mortgage loans, the
Company has sought to limit its securities investments to those with adjustable
rates or short terms to maturity. The Company's President implements the
investment policy. All securities purchases and sales are reported to the Board
of Directors each month.

         As required by Statement of Financial Accounting Standards ("SFAS")
115, securities are classified into three categories: trading, held-to-maturity
and available-for-sale. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and are reported at fair value with unrealized gains and losses included in
trading account activities in the statement of income. Securities that the
Company has the positive intent and ability to hold to maturity are classified
as held-to-maturity and reported at amortized cost. All other securities are
classified as available-for-sale. Available-for-sale securities are reported at
fair value with unrealized gains and losses included, on an after-tax basis, as
a separate component of accumulated other comprehensive income. The Company does
not have a trading securities portfolio and has no current plans to maintain
such a portfolio in the future. The Company classifies each security in either
the available-for-sale or the held-to-maturity categories when the security is
purchased.

         Investment Securities. The Company's investment securities totaled
$24.4 million at September 30, 2002, including $23.1 million classified as
available-for-sale and $1.3 million classified as held-to-maturity. The Company
invests primarily in debt securities issued by the United States Government and
its agencies ($4.1 million at September 30, 2002) and mortgage-backed securities
issued or guaranteed by government-sponsored enterprises ($11.1 million at
September 30, 2002). The Company has classified all recent purchases of
investment securities as available-for-sale in order to maintain flexibility in
managing its investments. Investment securities are purchased in order to invest
funds that may be needed to make loans in the future, to provide a source of
liquidity if the need for funds arises, to manage interest rate sensitivity, and

                                       15
<PAGE>

to take advantage of acceptable after-tax yields that are available when
purchasing certain tax-exempt municipal securities. The Company purchases only
investment grade debt securities and at September 30, 2002, none of its
investment securities were in default or otherwise classified.

         The Company invests in mortgage-backed securities to supplement the
yields on its loan portfolio and to help satisfy our Qualified Thrift Lender
("QTL") test, as described on page 19 of this report. Substantially all of the
mortgage-backed securities were issued, and are insured or guaranteed by "Fannie
Mae", "Freddie Mac" or the Government National Mortgage Association ("Ginnie
Mae"). At September 30, 2002, the Company's mortgage-backed securities portfolio
contained $9.8 million classified as available-for-sale and $1.3 million
classified as held-to-maturity.

         The Company employs a strategy of investing in short-term balloon and
one-year adjustable mortgage-backed securities rather than longer term fixed
rate securities. This helps the Company to manage cash flow and mitigate
interest rate sensitivity, but may result in a slightly lower average yield.

         Mortgage-backed securities are more liquid than individual mortgage
loans and may be used to collateralize borrowings of the Company. However, these
securities generally yield less than the loans that underlie them because of the
cost of payment guarantees or credit enhancements that reduce credit risk.
Mortgage-backed securities of the type held by the Company are generally
weighted at 20%, rather than the 50% weighting for performing residential
one-to-four family mortgage loans, in determining risk-based capital ratios.

         Investment securities carry a reduced credit risk as compared to loans.
However, investment securities classified as available-for-sale are subject to
the risk that a fluctuating interest rate environment could cause a material
decline in the carrying value of such securities. In addition, interest rate
fluctuations, real estate market changes and changes in economic conditions may
alter the prepayment rates on the mortgage loans underlying the mortgage-backed
securities and thus affect the value of such securities.

         Equity Securities. At September 30, 2002, the Company had $779,000 in
fair market value of corporate equity securities represented by Freddie Mac
common stock with a cost of $13,000. In addition, the Company also had at
September 30, 2002 a mutual fund investment classified as available-for-sale
with a carrying value of $7.7 million. The mutual fund invests substantially all
of its assets in mortgage-backed securities which are themselves qualified
investments for the Company. Although the mutual fund does not qualify as a
liquid asset because the terms to maturity of the underlying mortgage-backed
securities are too long, the Company considers it a potential source of
liquidity because it can be easily redeemed on a daily basis as and when funds
are needed.

         At September 30, 2002, the Company also had $745,000 of stock in the
FHLBNY that was necessary for the Company to maintain its membership in the FHLB
system. The stock is redeemable at par. The yield on this stock was 4.57%
(annualized) for the year ended September 30, 2002.

         The following table sets forth certain information regarding the
carrying value of the Company's available for sale and held to maturity
portfolios at the dates indicated.

                                                         At September 30,
                                                         ----------------
                                                    2002       2001       2000
                                                  Carrying   Carrying   Carrying
                                                    Value      Value      Value
                                                  --------   --------   --------
                                                          (In thousands)
         Securities Available for Sale:
              U.S. Government and
               federal agency securities          $  4,083   $  3,816   $  4,099
              Mortgage-backed securities             9,827      5,876      4,436
              Municipal securities                      --      1,085      1,975
                                                  --------   --------   --------
                Total debt securities               13,910     10,777     10,510

              Corporate securities                     779        925        837
              Mutual funds and other securities      8,419      7,375         21
                                                  --------   --------   --------
                Total available for sale            23,108     19,077     11,368

         Securities Held to Maturity:
              Mortgage-backed securities             1,284      2,593      4,205
              Other securities                          57         58         58
                                                  --------   --------   --------
                Total held to maturity               1,341      2,651      4,263
                                                  --------   --------   --------
                  Total Securities                $ 24,449   $ 21,728   $ 15,631
                                                  ========   ========   ========

                                       16
<PAGE>

         The table below sets forth certain information regarding the carrying
value, weighted average yields and stated maturity of the Company's securities
at September 30, 2002. There were no securities (exclusive of obligations of the
U.S. Government and federal agencies) issued by any one entity with a total
carrying value in excess of 10% of the Company's shareholders' equity at that
date.

<TABLE>
<CAPTION>
                                   One year          From one          From five         More than
                                  Or less (1)      to five years     to ten years        ten years      Total securities
                               Carrying    Ave.  Carrying    Ave.  Carrying    Ave.  Carrying    Ave.   Carrying    Ave.   Market
                                 Value    Yield    Value    Yield    Value    Yield    Value    Yield     Value    Yield    Value
                                -------   -----   -------   -----   -------   -----   -------   -----    -------   -----   -------
                                                                      (Dollars in thousands)

<S>                             <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>      <C>       <C>     <C>
U.S. Government securities ..   $   765   4.02%   $ 1,564   3.85%   $ 1,518   6.04%   $   236   (.70)%   $ 4,083   4.43%   $ 4,083
Mortgage-backed securities ..       324   5.59%     1,168   5.59%        --   0.00%     9,619   4.45%     11,111   5.07%    11,122
     Other securities .......     9,255   3.16%        --   0.00%        --   0.00%        --   0.00%      9,255   3.16%     9,255
                                -------           -------           -------           -------            -------           -------
     Total ..................   $10,344   3.30%   $ 2,732   4.59%   $ 1,518   6.04%   $ 9,855   4.86%    $24,449   4.24%   $24,460
                                =======           =======           =======           =======            =======           =======
</TABLE>
     (1) Includes equity securities which have no maturity.

     Sources of Funds

         General. The Company's primary source of funds is deposits. The Company
has incurred borrowings to fund additional loans and investments, and may do so
again in the future. In addition, the Company derives funds for loans and
investments from loan and security repayments and prepayments and revenues from
operations. Scheduled payments on loans and mortgage-backed and investment
securities are a relatively stable source of funds, while savings inflows and
outflows and loan and mortgage-backed and investment securities prepayments are
significantly influenced by general interest rates and money market conditions.
In general, the Company expects that it will continue to offer the same types of
deposit products but also expects that it will continue to use FHLBNY advances
as a source of funds to maximize the return on the additional capital raised
through the sale of the Company's common stock.

         Deposits. The Company offers several types of deposit programs to its
customers, including passbook savings accounts, NOW accounts, money market
deposit accounts, checking accounts and certificates of deposit. Deposit account
terms vary according to the minimum balance required, the time periods the funds
must remain on deposit and the interest rate, among other factors. The Company's
deposits are obtained predominantly from its primary market area. The Company
relies primarily on customer service and long-standing relationships with
customers to attract and retain these savings deposits; however, market interest
rates and rates offered by competing financial institutions significantly affect
the Company's ability to attract and retain savings deposits. The Company does
not use brokers to obtain deposits and has no brokered deposits. At September
30, 2002, the Company had $52.8 million of deposits.

         We generally price our deposit rates to be competitive with other
institutions in our market area. Pricing determinations are made weekly by a
committee of officers.

         The following table sets forth the distribution of the Company's
deposit accounts at the dates indicated. The interest rates shown for non-time
accounts are the rates in effect at September 30, 2002.

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                              At September 30,
                                                2002                2001                2000
                                                ----                ----                ----
                                                   Percent             Percent             Percent
                                          Amount  of Total    Amount  of Total    Amount  of Total
                                         -------   -------   -------   -------   -------   -------
                                                          (Dollars in thousands)
<S>                                      <C>       <C>       <C>       <C>       <C>       <C>
         Non-time accounts:
           Savings and club accounts
             (2.25-2.5%) .............   $15,821    29.99%   $13,795    28.93%   $14,694    31.40%
           NOW and money market
             accounts (0.99-2.23%) ...     7,141    13.53%     6,964    14.61%     6,618    14.14%
           Demand accounts ...........       779     1.48%       738     1.55%       621     1.33%
                                         -------   ------    -------   ------    -------   ------
           Total non-time accounts ...    23,741    45.00%    21,497    45.09%    21,933    46.87%

         Time accounts:
         2.00 - 2.99% ................    13,383    25.36%        --     0.00%        --     0.00%
         3.00 - 3.99% ................     7,780    14.75%     1,818     3.81%        --     0.00%
         4.00 - 4.99% ................     6,022    11.41%     9,070    19.02%     1,703     3.64%
         5.00 - 5.99% ................     1,705     3.23%     3,705     7.77%    11,748    25.10%
         6.00 - 6.99% ................        85     0.16%     8,059    16.90%     7,071    15.11%
         7.00 - 7.99% ................        45     0.09%     3,534     7.41%     4,345     9.28%
                                         -------   ------    -------   ------    -------   ------
         Total time accounts .........    29,020    55.00%    26,186    54.91%    24,867    53.13%
                                         -------   ------    -------   ------    -------   ------

         Total deposits ..............   $52,761   100.00%   $47,683   100.00%   $46,800   100.00%
</TABLE>

         At September 30, 2002, the Company had $4.5 million in certificates of
deposit with balances of $100,000 or more ("jumbo deposits"), representing 8.52%
of all deposits.

         The following table sets forth the amount of certificates of deposit in
denominations of $100,000 at September 30, 2002, and the remaining period to
maturity of such deposits.

                            Amount Due (in thousands)
                            -------------------------
                     In More Than   In More Than
       In 3 Months    3 up to 6      6 up to 12    In More Than
         or Less        Months         Months       12 Months      Total
         -------       -------        -------        -------       -------
         $ 1,350       $   903        $   776        $ 1,433       $ 4,462


         Borrowings. During fiscal 2002, the Company used an increase in
deposits to repay $3.0 million in borrowings that came due. No new borrowings
were incurred in the 2002 fiscal year. All outstanding advances are from the
FHLBNY and generally have terms of one to ten years with the entire principal
balance repayable at the earlier of call date or maturity. The average balance
of FHLBNY outstanding loans payable during 2002 was $15.4 million and the
weighted average cost was 4.63%. The highest balance outstanding during the year
was $16.4 million and the balance at September 30, 2002 was $13.4 million. In
2001, the average balance of loans payable to FHLBNY was $14.6 million at a
weighted average cost of 5.32%. The highest outstanding balance during the 2001
fiscal year and the balance at September 30, 2001 was $16.4.

Subsidiary Activities

         The Company is permitted to own subsidiaries for certain limited
purposes, as permitted under OTS regulations. The Company has no subsidiaries
except for the Bank.

                                       18
<PAGE>

Personnel

         At September 30, 2002, the Company had twenty-nine full-time and two
part-time employees as compared to twenty-two full-time and two part-time on
September 30, 2001. A collective bargaining unit does not represent employees,
and the Company considers its relationship with its employees to be good.

Regulation

General

         The Bank is a federal savings association subject to extensive
regulation, examination, and supervision by the OTS, as its primary federal
regulator and by the FDIC, as its deposit insurer. The Bank's deposit accounts
are insured up to applicable limits by the Savings Association Insurance Fund of
the FDIC, and the Bank is a member of the FHLBNY . The OTS regulates the Company
and Cambray MHC as savings and loan holding companies. The following discussion
is not, and does not purport to be, a complete description of the laws and
regulations applicable to the Company and the Bank. Any change in such laws or
regulations by the OTS, the FDIC or Congress could materially adversely affect
the Company and the Bank.

Regulation of Federal Savings Associations

         Business Activities. The Bank's lending, investment and deposit powers
come from the Home Owners' Loan Act, as amended (the "HOLA") and OTS
regulations. These powers are also governed to some extent by the FDIC under the
Federal Deposit Insurance Act and FDIC regulations. The Bank may make mortgage
loans, commercial loans and consumer loans, and may invest in certain types of
debt securities, and other assets. The Bank's lending and investment powers are
subject to limits, including, among others, (a) a prohibition against acquiring
any corporate debt security that is not rated in one of the four highest rating
categories; (b) a limit of 400% of capital that can be invested in loans secured
by non-residential real estate property; (c) a limit of 10% of assets that can
be invested in commercial loans; (d) a limit of 35% of assets that can be
invested in consumer loans, commercial paper and corporate debt securities; (e)
a limit of 5% of assets which can be invested in non-conforming loans (loans in
excess of limits specified in federal law); (f) a limit of the greater of 5% of
assets or its total capital which can be invested in certain construction loans
made for the purpose of financing what is or is expected to become residential
property; and (g) a limit of 10% of assets that can be invested in personal
property used for general leasing activities. The Bank may offer a variety of
deposit accounts, including savings, certificate (time), demand and NOW
accounts.

         Loans to One Borrower. Under the HOLA, federal savings associations are
subject to the limits applicable to national banks on loans to a single borrower
or a related group of borrowers. The Bank generally may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of its
unimpaired capital and surplus. Up to an additional 10% of unimpaired capital
and surplus can be lent if the additional amount is fully secured by readily
marketable collateral. At September 30, 2002, the Bank's regulatory limit on
loans to one borrower was in excess of $2.5 million. At that date, the Bank's
largest aggregate loans to one borrower was $305,000.

         QTL Test. The HOLA requires the Bank to meet a "QTL" test. Under the
QTL test the Bank must maintain at least 65% of its assets, after certain
adjustments, in various types of loans made for residential and housing
purposes, related investments, education, small business and credit card loans,
and consumer loans and certain other loans and investments. The Bank satisfies
the QTL test and the Bank anticipates that it will continue to satisfy the test
in the future. If the Bank fails to satisfy the QTL test it will have to either
restrict its activities or convert to a commercial bank charter.

         Capital Requirements. OTS regulations require that the Bank maintain
tangible capital equal to 1.5% of total assets as adjusted under the OTS
regulations, core capital equal to 3% of such adjusted total assets and total
capital (core capital plus supplementary capital) equal to 8% of risk-weighted
assets. The Bank's capital ratios at September 30, 2002 all substantially
exceeded OTS minimum capital requirements, and those requirements do not now
have a material effect on the Bank.

         Limitations on Capital Distributions. OTS regulates the amount of
dividends and other capital distributions that the Bank may pay to the Company.
In general, if the Bank will satisfy all OTS capital requirements both before
and after the distribution, the Bank may make capital distributions to the
Company in any year equal to the current year' s net income plus retained net
income for the preceding two years. However, because it is a savings and loan
holding company subsidiary, the Bank must notify the OTS of the distribution and
the OTS may object on safety and soundness grounds.

                                       19
<PAGE>

         If any capital distribution will exceed these limits, or if the OTS
either considers the Bank a troubled or problem institution or gives the Bank a
rating in less than the two highest rating categories, then the Bank must get
OTS approval before making a capital distribution. The Bank is not currently
required to obtain OTS approval unless it exceeds the dollar limits, and the
Bank has never paid a dividend to the Company. Therefore, the Company does not
believe that the OTS capital distribution regulations will have a material
affect on its operations or its ability to pay dividends to its stockholders.

         Community Reinvestment Act and Fair Lending Laws. Under the federal
Community Reinvestment Act (the "CRA"), the Bank, consistent with its safe and
sound operation, must help meet the credit needs of its entire community,
including low and moderate income neighborhoods The OTS periodically assesses
the Bank's compliance with CRA requirements. The Bank received a "satisfactory"
CRA rating in its most recent OTS examination. The Bank must also comply with
the Equal Credit Opportunity Act, which prohibits creditors from discrimination
in their lending practices on bases specified in these statutes. The OTS and the
Justice Department may take enforcement action against institutions that fail to
comply with Fair Lending Laws.

         Transactions With Related Parties. The Bank is authorized by federal
law to engage in transactions with its affiliates. In general, an affiliate of
the Bank is any company that controls the Bank or any other company that is
controlled by a company that controls the Bank, excluding the Bank's
subsidiaries other than those that are insured depository institutions. The Bank
may not (a) lend to any of its affiliates that is engaged in activities that are
not permissible for bank holding companies and (b) purchase the securities of
any affiliate other than a subsidiary. Transactions with any individual
affiliate may not exceed 10% of the capital and surplus of the Bank and
aggregate transactions with all affiliates may not exceed 20%. These
restrictions do not impose material limits on the Bank's business activities.

         The Bank's loans to insiders must be made on terms that are
substantially the same as, and follow credit underwriting procedures that are
not less stringent than, those prevailing for comparable transactions with
unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features. The loans are also subject to
maximum dollar limits and must generally be approved by the Board of Directors.
The Bank may make loans to insiders on preferential terms as part of a benefit
or compensation program that is widely available to employees. The Bank has no
such benefit or compensation programs.

         Insurance of Deposit Accounts. The Bank pays deposit insurance premiums
to the FDIC. The amount of the premium depends upon the Bank's capital ratios
and supervisory rating category. At present the Bank's capital ratios and
supervisory rating are high enough that the Bank pays no regular deposit
insurance premiums. However, the Bank must pay a share of the cost of the bonds
issued in the late 1980s to recapitalize the now defunct Federal Savings and
Loan Insurance Corporation, currently equal to approximately 0.02% of its
insured deposits per year.

         Federal Home Loan Bank System. The Bank is a member of the FHLBNY and
uses it as a source for borrowing funds. The Company must own stock in the
FHLBNY at least equal to the greater of 1% of the principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of each year
or 5% of its advances from the FHLBNY . At September 30, 2002, we had $745,000
of capital stock of the FHLBNY , which satisfied this requirement and we had
FHLBNY borrowings totaling $13.4 million.

         Holding Company Regulation

         General Powers. As a savings and loan holding company, we may engage in
activities prescribed under HOLA and OTS regulations including: (i) furnishing
or performing management services for a savings association subsidiary of such
company; (ii) holding, managing or liquidating assets owned or acquired from a
savings association subsidiary of such company; (iii) conducting as insurance
agency or escrow business; (iv) holding or managing properties used or occupied
by a savings association subsidiary of such company; (v) acting as trustee under
deeds of trust; (vi) any other activity (A) that the Federal Reserve Board, by
regulation, has determined to be permissible for bank holding companies under
Section 4(c) of the Bank Holding Company Act of 1956, unless the Director, by
regulation, prohibits or limits any such activity for savings and loan holding
companies; or (B) in which multiple savings and loan holding companies were
authorized (by regulation) to directly engage on March 5, 1987; and (vii)
purchasing, holding, or disposing of stock acquired in connection with a
qualified stock issuance if the purchase of such stock by such savings and loan
holding company is approved by the Director.

                                       20
<PAGE>

         Waivers of dividends by the Mutual Holding Company. Cambray MHC owns
57.6% of the stock of the Company. If Cambray MHC decides to waive its share of
any dividend that the Bank is paying to its stockholders, Cambray MHC must
notify the OTS. The OTS reviews dividend waiver notices on a case-by-case basis,
and, in general, does not object to any such waiver if: (i) the mutual holding
company board of directors determines that such waiver is consistent with such
directors' fiduciary duties to the mutual holding company's members, (ii) for as
long as the savings association subsidiary is controlled by the mutual holding
company, the dollar amount of dividends waived by the mutual holding company are
considered as a restriction to the retained earnings of the savings association,
which restriction, if material, is disclosed in the public financial statements
of the savings association as a note to the financial statements; (iii) the
amount of any dividend waived by the mutual holding company is available for
declaration as a dividend solely to the mutual holding company, and, in
accordance with SFAS 5, where the savings association determines that the
payment of such dividend to the mutual holding company is probable, an
appropriate dollar amount is recorded as a liability. Cambray MHC has elected to
waive the dividends totaling $406,479 as of September 30, 2002.

         Conversion of the Mutual Holding Company to Stock Form. OTS regulations
permit the Mutual Holding Company to convert from the mutual to the capital
stock form of organization. The Board of Directors has no current intention or
plans for such a transaction. In general, if such a transaction is undertaken, a
new company would be formed to replace the Company and 57.6% of its stock would
be offered to the depositors of the Bank and to the public. The other current
stockholders of the Company would be entitled to receive 42.4% of the stock of
the new company in exchange for the stock of the Company.

         Federal Securities Law

         The common stock of the Company is registered with the SEC under the
Securities Exchange Act of 1934 (the "Exchange Act"). The Company is subject to
the information, proxy solicitation, insider trading restrictions and other
requirements of the SEC under the Exchange Act.

         Sarbanes-Oxley Act of 2002

         On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act
of 2002 (the "Sarbanes-Oxley Act") The Sarbanes-Oxley Act represents a
comprehensive revision of laws affecting corporate governance, accounting
obligations and corporate reporting. Specifically, the Sarbanes-Oxley Act: (i)
creates a new federal accounting oversight body; (ii) revamps auditor
independence rules; (iii) enacts new corporate responsibility and governance
measures; (iv) enhances disclosures by public companies, their directors and
executive officers; (v) strengthens the powers and resources of the SEC; and
(vi) imposes new criminal and civil penalties for securities fraud and related
wrongful conduct. The Sarbanes-Oxley Act is applicable to all companies with
equity or debt securities registered under the Securities Exchange Act of 1934.
Many of the provisions became effective immediately while other provisions are
subject to rulemaking by the SEC. The SEC has adopted some new regulations in
final form and has proposed others. Although we anticipate that we will incur
additional expense in complying with the provisions of the Sarbanes-Oxley Act
and the resulting regulations, management does not expect that such compliance
will have a material impact on our financial condition or results of operations.

Item 2.  Description of Properties

         The Company conducts its business through its headquarters at 42 Church
Street and an adjacent building at 26 John Street in the Town and Village of
Gouverneur and a full service branch office in the Town of Alexandria. The net
book value of these three premises is $1,291,000. As the Bank continues to grow,
it may be necessary to add both production and support personnel. Therefore, the
Board of Directors of the Bank continues to explore possibilities for the
expansion of our headquarters. The Company currently operates a loan production
office out of rented space in Clayton, New York. The book value of the premises
is zero. The Company entered into an agreement to sell approximately 1.6 acres
adjacent to the new branch building in Alexandria Bay for $250,000 to a
developer to build an 11,000 square foot drug store building.

Item 3.  Legal Proceedings

         The Bank is involved as plaintiff or defendant in various legal actions
arising in the normal course of its business. While the ultimate outcome of
these proceedings cannot be predicted with certainty, it is the opinion of

                                       21
<PAGE>

management, after consultation with counsel representing the Bank in the
proceedings, that the resolution of these proceedings should not have a material
effect on the Bank's or the Registrant's results of operations and financial
condition. The Registrant is not a party to any litigation.

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

         No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended September 30,
2002.


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         Information contained under the caption "Common Stock" in the 2002
Annual Report to Stockholders included as Exhibit 13 hereto is herein
incorporated by this reference.

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         Information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 2002 Annual
Report to Stockholders included as Exhibit 13 hereto is herein incorporated by
this reference.

Item 7.  Financial Statements

         The following information appearing in the 2002 Annual Report to
Stockholders included as Exhibit 13 hereto is herein incorporated by this
reference.

         Independent Auditor's Report
         Consolidated Statements of Financial Condition as of September 30, 2002
         and 2001.
         Consolidated Statements of Income for the Years Ended September 30,
         2002 and 2001.
         Consolidated Statements of Changes in Shareholders' Equity for the
         Years Ended September 30, 2002 and 2001.
         Consolidated Statements of Cash Flows for the Years Ended September 30,
         2002 and 2001.
         Notes to Consolidated Financial Statements


         With the exception of the information expressly incorporated herein by
reference, the Company's Annual Report to Stockholders for the year ended
September 30, 2002, is not deemed filed as part of this Annual Report on Form
10-KSB.

Item 8.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure: None


                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

Directors

         Information contained under the caption "The Election of Directors
(introduction);" "The Election of Directors - The Board of Directors and
Nominees;" "The Election of Directors - Nominees;" "The Election of Directors -
Continuing Directors;" and "The Election of Directors - Meetings of the Board of
Directors and Certain Committees" in the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on February 18, 2003, to be filed with
the Commission within 120 days after the end of the fiscal year covered by this
report is incorporated herein by this reference.

                                       22
<PAGE>

Executive Officers

         Information contained under the caption "The Election of Directors -
Continuing Directors - Richard F. Bennett;" and "The Election of Directors -
Executive Officers Who Are Not Directors" in the definitive Proxy Statement for
the Annual Meeting of Stockholders to be held on February 18, 2003, to be filed
with the Commission within 120 days after the end of the fiscal year covered by
this report, is incorporated herein by this reference.

Compliance with Section 16(a)

         To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 2002, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with.

Item 10. Executive Compensation

         Information contained under the caption "Compensation" in the
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
February 18, 2003, to be filed with the Commission within 120 days after the end
of the fiscal year covered by this report, is incorporated herein by this
reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters

         Information contained under the caption "Principal Owners of Our Common
Stock" in the definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on February 18, 2003, to be filed with the Commission within 120 days
after the end of the fiscal year covered by this report is incorporated herein
by this reference.

Item 12. Certain Relationships and Related Transactions

         Information contained under the caption "Compensation - Transactions
With Directors and Officers" in the definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on February 18, 2003, to be filed with the
Commission within 120 days after the end of the fiscal year covered by this
report, is incorporated herein by this reference.

Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Exhibits

         See Index to Exhibits.

(b) Reports on Form 8-K

         The Company filed no reports on Form 8-K during the quarter ended
September 30, 2002.

Item 14. Control 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 a date within 90 days before the filing of this annual report,
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.

                                       23
<PAGE>

         (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 subsequent to the date of their evaluation by our Chief
Executive Officer and our Chief Financial Officer, including any corrective
actions with regard to significant deficiencies and material weaknesses.


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.

                                       Gouverneur Bancorp, Inc.

Date: December 18, 2002                By: /s/ RICHARD F. BENNETT
                                           -------------------------------------
                                           Richard F. Bennett, President
                                           (Duly authorized representative)

In accordance with the Exchange Act this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Date:

December 18, 2002                      /s/ FRANK LANGEVIN
                                       -----------------------------------------
                                       Frank Langevin, Chairman of the Board

December 18, 2002                      /s/ RICHARD F. BENNETT
                                       -----------------------------------------
                                       Richard F. Bennett, President, Chief
                                       Executive Officer and Director

December 18, 2002                      /s/ ROBERT TWYMAN
                                       -----------------------------------------
                                       Robert Twyman, Vice President and Chief
                                       Financial Officer Principal financial and
                                       accounting officer

December 18, 2002                      /s/ CHARLES VANVLEET
                                       -----------------------------------------
                                       Charles VanVleet, Vice President and
                                       Secretary

December 18, 2002                      /s/ RICHARD JONES
                                       -----------------------------------------
                                       Richard Jones, Director

December 18, 2002                      /s/ ROBERT LEADER
                                       -----------------------------------------
                                       Robert Leader, Director

December 18, 2002                      /s/ TIMOTHY MONROE
                                       -----------------------------------------
                                       Timothy Monroe, Director

December 18, 2002                      /s/ JOSEPH PISTOLESI
                                       -----------------------------------------
                                       Joseph Pistolesi, Director

December 18, 2002                      /s/ LARRY STRAW
                                       -----------------------------------------
                                       Larry Straw, Director


                                       24
<PAGE>

                                  Certification

I, Richard F. Bennett, Chief Executive Officer of the Company, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Gouverneur Bancorp,
Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.   Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

(b)  evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

(c)  presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

(a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


DATE: December 18, 2002

/s/ RICHARD F. BENNETT
-----------------------
RICHARD F. BENNETT
CHIEF EXECUTIVE OFFICER


                                       25
<PAGE>

                                  Certification

I, Robert J. Twyman, Chief Financial Officer of the Company, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Gouverneur Bancorp,
Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.   Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

(b)  evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

(c)  presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

(a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


DATE: December 18, 2002

/s/ ROBERT J. TWYMAN
-----------------------
ROBERT J. TWYMAN
CHIEF FINANCIAL OFFICER


                                       26
<PAGE>

INDEX TO EXHIBITS

                                                                Reference to
                                                                Previous Filing,
         Exhibit Number    Document                             If applicable.
         --------------    --------                             -------------

         3(1)              Certificate of Incorporation               **

         3(11)             Bylaws                                     **

         4                 Form of Stock Certificate                  *

         10.1              Employee Stock Ownership Plan              *

         10.2              Stock Option Plan                          ***

         10.3              Management Recognition Plan                ***

         13                2002 Annual Report to Stockholders

         21                Subsidiaries of Registrant

         99.1              Certification of Chief Executive
                           Officer Pursuant to 18 U.S.C.
                           Section 1350, as adopted pursuant to
                           Section 906 of the Sarbanes-Oxley
                           Act of 2002

         99.2              Certification of Chief Financial
                           Officer Pursuant to 18 U.S.C.
                           Section 1350, as adopted pursuant to
                           Section 906 of the Sarbanes-Oxley
                           Act of 2002


         * Filed as exhibits to the Company's Form S-1 registration statement
filed with the Commission on June 26, 1998 (File No. 333-57845). All of such
previously filed documents are hereby incorporated herein by reference in
accordance with Item 601 of Regulation S-K.

         ** Filed as exhibits to the Company's Pre-effective Amendment No. One
to Form S-1 filed with the Commission on August 5, 1999, 1998 (File No.
333-57845). All of such previously filed documents are hereby incorporated
herein by reference in accordance with Item 601 of Regulation S-K.

         *** Filed as exhibits to the Company's Definitive Proxy Statement on
Form 14A filed with the Commission on September 9, 1999. All of such previously
filed documents are hereby incorporated herein by reference in accordance with
Item 601 of Regulation S-K.

                                       27