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, 2004

                        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 the 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]

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 15, 2004, was approximately $11,329,000. (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 15, 2004, there were 2,284,234 issued and outstanding shares of
the Registrant's Common Stock.
<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

Part II of Form 10-KSB-Annual Report to Stockholders for the fiscal year ended
September 30, 2004.
Part III of Form 10-KSB-Portions of Proxy Statement for 2005 Annual Meeting of
Stockholders.

Transitional Small Business Disclosure Format. YES [ ]. NO [X].


                                     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. The Company's assets consist primarily of
all the outstanding capital stock of its wholly owned subsidiary, Gouverneur
Savings and Loan Association (the "Bank") and its principal business is the
ownership of the Bank. At September 30, 2004, Cambray Mutual Holding Company
("Cambray MHC"), the Company's parent mutual holding company, held 1,311,222
shares or 57.4% of the Company's issued and outstanding common stock, and
shareholders other than Cambray MHC held 971,887 shares, or 42.6% 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 regulation. 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.

     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 ("FHLB") and proceeds from principal and
interest payments on loans and investment securities. At September 30, 2004, the
Company had $104.2 million in assets, $61.6 million in deposits and $18.0
million in total equity, as compared with last year's balances of $90.0 million,
$58.4 million and $17.6 million respectively. Net loans increased by $15.5
million, or 24.0%, from $64.7 million on September 30, 2003 to $80.2 million on
September 30, 2004.

     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")

                                       2
<PAGE>

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
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 the market interest rates or changes
in the speed at which market interest rates change; (iii) changes in laws and
regulations affecting us; (iv) changes in competition; and (v) 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 three years, and was purchased out of bankruptcy by a Canadian
company last year. However, mining operations have not started at this time and
it is not known when or if production will resume or to what extent it will
affect the local economy. Market forces in the zinc industry continue to be a
factor. A second paper mill within our service area, which was expected to open
this year, has not. The local economy has further deteriorated as another local
paper mill owned by the same company has stopped production.

     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 employers.

                                       3
<PAGE>

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.

     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 in our market area are below New York State and
national levels. Unemployment in each of the three counties in the Company's
market area is higher than statewide and national unemployment rates. A major,
ongoing expansion of the Fort Drum facility may improve local economy
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 increase of 5.5%. These conditions
are believed to extend to communities adjoining the Company's market area as
well. In August 2002, we closed the existing leased lending office in Alexandria
Bay and moved that operation to our newly constructed full service branch office
in that community. 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.


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 and 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 intuitional 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 having 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 northern 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 financial
institution.

Lending Activities

     Loan Portfolio Composition. The Company's loans consist primarily of
mortgage loans secured by one-to-four family residences. At September 30, 2004,
the Company had total loans of $80.2 million, of which $63.6 million, or 79.3%,
were one-to-four family residential mortgage loans, an increase of $14.9
million, or 30.6%, from $48.7 million at September 30, 2003. The increase was
primarily due to the continued growth of our full service office in Alexandria
Bay and our lending office in Clayton. Both of these communities border the St.
Lawrence River and include up-scale vacation home properties with river
frontage, in addition to traditional residential properties. We have been

                                       4
<PAGE>

originating mortgages on vacation home properties to buyers who often live and
work outside of our geographic area. That helps to diversify the risk on our
portfolio, since those loans are not directly tied to the local economy. It also
allows us to book larger mortgages since these properties are generally valued
much higher than non-river residences in the region. In Clayton, our residential
mortgage loan portfolio grew $5.6 million from $3.0 million to $8.6 million,
while in Alexandria Bay we increased residential mortgage loans $7.3 million
from $17.8 to $25.1 million from September 30, 2003 to September 30, 2004. The
Bank's main office in Gouverneur increased residential mortgage loans by $2.0
million from $28.1 million to $30.1 million over the same period. Real estate
loans increased as a percentage of total loans by 3.8% from 80.6% last year to
84.4% this year.

     Automobile manufacturers continue to offer low-rate financing programs that
reduce new car loan opportunities for the Bank causing that portfolio to shrink.
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 $9.2 million to $8.9 million
this year, as automobile loans decreased by $0.7 million and other consumer
loans increased by $0.4 million. Consumer loans represent 11.1% of total loans
this year versus 14.2% last year. The Company's ratio of net loans to total
assets increased from 71.9% September 30, 2003 to 76.9% at September 30, 2004.

     In August, we hired a commercial lending officer and the Bank is now
pursuing local commercial lending opportunities. We purchased $609 thousand of
the guaranteed portion of United States Department of Agriculture ("USDA") and
Small Business Administration ("SBA") guaranteed loans during the fiscal year.
This helped to produce an increase of $0.7 million, or 10.0%, in commercial
loans, both mortgage and non-mortgage, from $7.0 million on September 30, 2003
to $7.7 million on September 30, 2004. At September 30, 2004, we had a total of
$3.0 million of the guaranteed loans included in other commercial loans. We
expect to maintain a portfolio of $2.0 to $3.0 million of the government
guaranteed loans going forward. Bank originated commercial loans were up $0.2
million, or 4.4%, from $4.5 million on September 20, 2003 to $4.7 million on
September 30, 2004, with commercial mortgages increasing $0.5 million, or 13.9%,
from $3.6 million to $4.1 million, and other commercial loans decreasing $0.3
million, or 33.3%, from $0.9 million to $0.6 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.

                                       5
<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,
                              ---------------------------------------------------------------------------------------------
                                      2004                    2003                    2002                    2001
                              --------------------    --------------------    --------------------    --------------------
                                          Percent                 Percent                 Percent                 Percent
                               Amount     of total     Amount     of total     Amount     of total     Amount     of total
                              --------    --------    --------    --------    --------    --------    --------    --------
                                                                (dollars in thousands)
<S>                           <C>            <C>      <C>            <C>      <C>            <C>      <C>            <C>
Real estate loans:
  Residential mortgages
    including home equities
    and construction loans..  $ 63,580       79.26%   $ 48,660       74.98%   $ 39,055       71.52%   $ 39,223       70.02%
  Commercial mortgages .....     4,108        5.12%      3,624        5.58%      3,951        7.24%      4,482        8.00%
                              --------    --------    --------    --------    --------    --------    --------    --------

Total real estate loans ....    67,688       84.38%     52,284       80.56%     43,006       78.76%     43,705       78.02%

Other loans:
  Consumer other ...........     8,909       11.11%      9,234       14.23%     10,350       18.95%     10,746       19.18%
  Commercial other .........     3,618        4.51%      3,378        5.21%      1,248        2.29%      1,570        2.80%
                              --------    --------    --------    --------    --------    --------    --------    --------

Total other loans ..........    12,527       15.62%     12,612       19.44%     11,598       21.24%     12,316       21.98%
                              --------    --------    --------    --------    --------    --------    --------    --------

Total loans ................    80,215      100.00%     64,896      100.00%     54,604      100.00%     56,021      100.00%
                              --------                --------                --------                --------

Deferred loan costs (fees),
   net .....................       699                     497                     412                     413
Allowance for loan losses ..      (755)                   (655)                   (671)                   (655)
                              --------                --------                --------                --------

Loans, net .................  $ 80,159                $ 64,738                $ 54,345                $ 55,779
                              ========                ========                ========                ========
</TABLE>


                                               At September 30,
                                             --------------------
                                                     2000
                                             --------------------
                                                         Percent
                                              Amount     of total
                                             --------    --------
                                            (dollars in thousands)
Real estate loans:
  Residential mortgages
    including home equities
    and construction loans                   $ 37,762       69.19%
  Commercial mortgages .....                    4,593        8.41%
                                             --------    --------

Total real estate loans ....                   42,355       77.60%

Other loans:
  Consumer other ...........                   11,042       20.23%
  Commercial other .........                    1,181        2.17%
                                             --------    --------

Total other loans ..........                   12,223       22.40%
                                             --------    --------

Total loans ................                   54,578      100.00%
                                             --------

Deferred loan costs (fees),
   net .....................                      382
Allowance for loan losses ..                     (663)
                                             --------

Loans, net .................                 $ 54,297
                                             ========


                                       6
<PAGE>

                           Residential Mortgage Loans

Residential - first lien. Approximately 58% of the Company's residential
mortgage loan originations are first lien, fixed-rate mortgage loans with terms
up to 25 years, but predominantly for 15 to 20 years. The Company also offers
adjustable-rate mortgage loans. The adjustable-rate residential mortgage
portfolio was $26.5 million this year end, or 41.7% of the Company's $63.6
million of residential mortgage loans, compared to September 30, 2003 when $16.3
million of the $48.7 million in residential loans were adjustable rate loans, or
33.5%. In the past, customer preference has strongly favored fixed rate mortgage
loans. Now, we are adding more adjustable rate loans which have fixed rates for
the first five years of the loan term and then re-price annually. While we have
decided not to compete with the secondary fixed rate mortgage market, we have
been able to compete with the adjustable rate market and increase our
residential mortgage loan portfolio.

     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 security 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 between twenty-five and thirty percent 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 underwriting factors. We
require real estate tax escrows on all mortgage loans.

     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 rate mortgage loans originated.
Therefore, during periods of level or declining interest rates, these loans tend
to provide higher yields than adjustable loans. Since we hold in our portfolio
all of the fixed rate mortgage loans we originate, we price them higher than
fixed rate mortgage loans which are sold in the secondary market. This pricing
policy makes the adjustable rate loans more attractive to the customer and has
helped to increase that portfolio. 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 rate 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.

                                       7
<PAGE>

     The Company has enrolled in FHLB'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,
and have not sold any loans to date. 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. 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, which are offered at prime rate, 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.

     The maximum loan to value ratio, including prior liens, is 80% for junior
mortgage loans. At September 30, 2004, the Company had $5.5 million in
outstanding advances on home equity lines of credit, $2.5 million of unused home
equity lines of credit and $0.2 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 the construction through regular
inspections. At September 30, 2004, the Company had $2.4 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 3% 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

     The Company has been offering commercial mortgage loans to diversify risk
and obtain the higher yield normally associated with this type of loan. The Bank
has hired a commercial loan officer and will now look to develop this portfolio,
which involves greater risk, more complex underwriting and more administration
than residential real estate loans.

     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 73.9% of the Company's commercial mortgage loan balances at
September 30, 2004 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 and appraisal by an independent appraiser.

                                       8
<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, 2004, the Company had $6.0 million of auto loans, 10.4% lower than the level
one year earlier. Principal is repaid quickly on auto loans because the maximum
term is 66 months. That makes it necessary to add new loans to maintain
portfolio level. The lending programs of automobile manufacturers, in which
interest free financing is offered, have negatively impacted our ability to grow
and maintain the portfolio. 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. Other consumer
loans, not including automobile loans, totaled $2.9 million at September 30,
2004, up $0.4 million from $2.5 million at September 30, 2003. 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 has $0.6 million of such loans, not
including purchased government guaranteed loans, at September 30, 2004, compared
to $0.9 million on September 30, 2003, a decrease of 33.3%.

                                       9
<PAGE>

     Applications for these loans are generally evaluated based up 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
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.

     The Company has purchased the USDA and SBA guaranteed portion of commercial
loans originated by other financial institutions. These loans can be either
fixed or variable rate and can be split into pieces or purchased in full by a
single buyer. During 2004 we purchased $609,000 of such loans and expect to
maintain a portfolio of between $2 million and $3 million. These purchased loans
help to diversify our loan portfolio as the loans are originated in different
parts of the country.

     Origination of loans. Loan originations come from a number of sources.
Residential loan originations develop from 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 in excess of
$200,000, up to $400,000 require loan committee approval. Loans exceeding
$400,000 must be approved by the Executive Committee of the Board of Directors.

     Under federal law and applicable OTS regulations, the Bank may not lend
more than 15% of the Bank's 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, 2004, the Company's largest loan
was a residential mortgage loan located in the company's market area with a loan
balance of $456,000. This customer also had the largest loan relationship with
the company, combining all loans to a single borrower or related group of
borrowers, at $655,000, substantially below the Bank's regulatory loan limit to
one borrower of $2.7 million. At September 30, 2004, all loans for this customer
were current and performing in accordance with their terms.

     The Company has not sold loans, serviced loans for other lenders nor
purchased loan-servicing rights but may engage in any one or all such activities
in the future.

     The following table shows the contractual maturity of the Company's loan
portfolio at September 30, 2004. 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.

                                       10
<PAGE>

<TABLE>
<CAPTION>
                    Residential     Commercial      Consumer      Commercial
                      mortgage       mortgage        other          other          Total
                    ------------   ------------   ------------   ------------   ------------
                                                (in thousands)
<S>                 <C>            <C>            <C>            <C>            <C>
   Amount due:

   Within 1 year    $      1,855   $         37   $        629   $        144   $      2,665
   1 to 2 years              413            421          1,231            153          2,218
   2 to 3 years              349             85          1,643            160          2,237
   3 to 5 years            1,765            440          4,890            194          7,289
   5 to 10 years          10,141          1,676            516            215         12,548
   over 10 years          49,057          1,449             --          2,752         53,258
                    ------------   ------------   ------------   ------------   ------------
      Total loans   $     63,580   $      4,108   $      8,909   $      3,618   $     80,215
                    ============   ============   ============   ============   ============
</TABLE>


     The following table shows, as of September 30, 2004, the amount of loans
due after September 30, 2005, and whether they have fixed interest rates or
adjustable interest rates.

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

   Residential mortgage   $     35,580   $     26,145   $     61,725
   Commercial mortgage           1,037          3,034          4,071
   Consumer other                7,957            323          8,280
   Commercial other              1,424          2,050          3,474
                          ------------   ------------   ------------
           Total          $     45,998   $     31,552   $     77,550
                          ============   ============   ============

     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, 2004, the Company had
$53,000 of foreclosed real estate, represented by one single-family residence
and one commercial property. 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

                                       11
<PAGE>

and changes in the valuation allowance are charged to other expense. The 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, 2004, the Company has
$598,000 of "loans to facilitate," with one loan in the amount of $27,000 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 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 two repossessed assets totaling
$9,100 at September 30, 2004.

     The following table sets forth the Company's loan delinquencies by type, by
amount and by percentage of each loan category at September 30, 2004.

<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
                      No.      Amount    Category       No.      Amount    Category       No.      Amount    Category
                   --------   --------   --------    --------   --------   --------    --------   --------   --------
<S>                      <C>  <C>            <C>           <C>  <C>            <C>           <C>  <C>            <C>
Residential mtg          19   $    477       0.75%          8   $    247       0.39%         27   $    724       1.14%
Commercial mtg            4        336       8.18%         --         --       0.00%          4        336       8.18%
Consumer other            8         48       0.54%          2          5       0.05%         10         53       0.59%
Commercial other          3        266       7.35%         --         --       0.00%          3        266       7.35%
                   --------   --------               --------   --------               --------   --------
     Total               34   $  1,127       1.41%         10   $    252       0.31%         44   $  1,379       1.72%
                   ========   ========               ========   ========               ========   ========
</TABLE>

(1)     These loans are included as non-accrual loans in the following table on
non-performing assets.

     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 it
indicated.

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                  At September 30,
                                         ------------------------------------------------------------------
                                            2004          2003          2002          2001          2000
                                         ----------    ----------    ----------    ----------    ----------
                                                               (Dollars in thousands)
<S>                                      <C>           <C>           <C>           <C>           <C>
Non-accrual loans:
Residential mortgage                     $      247    $      198    $      282    $       48    $      354
Commercial mortgage                              --            83            41            73            --
Consumer other                                    5            85            12            63            55
Commercial other                                 --           112            84           253            --
                                         ----------    ----------    ----------    ----------    ----------
     Total non-accrual loans                    252           478           419           437           409

Restructured commercial mortgage                104           225            --            --            --
Restructured commercial other                    24            --           261            --            --
                                         ----------    ----------    ----------    ----------    ----------
     Total non-performing loans                 380           703           680           437           409

Foreclosed real estate                           53            92            25           182            91
Other repossessed assets                          9            29            46            38            20
                                         ----------    ----------    ----------    ----------    ----------

     Total non-performing assets         $      442    $      824    $      751    $      657    $      520
                                         ==========    ==========    ==========    ==========    ==========

Non-performing loans as a percent
of total loans                                 0.47%         1.08%         1.23%         0.78%         0.75%

Non-performing loans as a percent
of total assets                                0.36%         0.92%         0.88%         0.79%         0.69%

Allowance for loan losses as a percent
of non-performing loans                      198.68%        93.71%        98.68%       149.89%       162.10%
</TABLE>

     The Company had no loans more than 90 days delinquent and accruing interest
at September 30, 2004, 2003, 2002, 2001 or 2000.

     During fiscal 2004, the Bank's non-performing assets decreased from
$824,000 to $442,000. Non-performing loans decreased by $323,000 to $380,000 at
September 30, 2004 from $703,000 at September 30, 2003 and represented only
0.47% of total loans versus 1.08% a year earlier. During fiscal 2004, we
incurred $21,000 of losses associated with the $703,000 of non-performing loans
at September 30, 2003. Currently, two of the eight residential non-accrual
mortgages are in foreclosure proceedings and the restructured commercial loans
are in bankruptcy proceedings. The borrower in bankruptcy has two loans, both
current, totaling $128,000, comprised of a $104,000 commercial mortgage and a
$24,000 commercial cattle and equipment loan at September 30, 2004. Since
year-end, those balances have been further reduced by the sale of equipment, so
that the balance of the equipment loan is $0 and the balance of the commercial
mortgage is $56,000. We expect to fully recover once the real estate is sold.

     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. Management has determined that a $100,000

                                       13
<PAGE>

increase in the loan loss allowance is appropriate at this time due to the
general growth of the loan portfolio and specifically the residential mortgage
loan portfolio by $14.9 million.

     At September 30, 2004, there were no loans other than those included in the
table above 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 the present loan repayment terms. The
Bank's ratio of non-performing assets to total assets was below 1% for the
seventh straight year.

     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 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 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 $10,000 for fiscal 2004 and $34,000 for fiscal 2003.

     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.

     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, 2004, the Company had $184,000 of
assets classified as Substandard and none classified as Doubtful or 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. 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.

                                       14
<PAGE>

     The analysis of the adequacy of the allowance is reported to and reviewed
by the Board of Directors quarterly. 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.

     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>
                                                                      At September 30,
                                                 --------------------------------------------------------
                                                   2004        2003        2002        2001        2000
                                                 --------    --------    --------    --------    --------
                                                                   (Dollars in thousands)
<S>                                              <C>         <C>         <C>         <C>         <C>
         Allowance, beginning of period          $    655    $    671    $    655    $    663    $    620
         Provision for loan losses                    135          95          85          80         158
         Charge-offs:
            Residential mortgage & Home equity         --          33          47          26          36
            Commercial mortgage                        --          18          --          --          19
            Consumer other                             63          85          80         103          39
            Commercial other                           58          52          --           6          85
                                                 --------    --------    --------    --------    --------
               Total charge-offs                      121         188         127         135         179
         Recoveries:
            Residential mortgage & Home equity          9          16           8           6          32
            Commercial mortgage                        --          --          --          --          --
            Consumer Other                             18          51          50          40          32
            Commercial other                           59          10          --           1          --
                                                 --------    --------    --------    --------    --------
               Total recoveries                        86          77          58          47          64
                                                 --------    --------    --------    --------    --------
         Net charge-offs                               35         111          69          88         115
                                                 --------    --------    --------    --------    --------

         Allowance, end of period                $    755    $    655    $    671    $    655    $    663
                                                 ========    ========    ========    ========    ========

         Allowance as a percent of total loans       0.94%       1.01%       1.23%       1.17%       1.21%

         Ratio of net charge-offs to average
         loans outstanding                           0.05%       0.19%       0.13%       0.16%       0.23%
</TABLE>


     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.

                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                               At September 30,
                                              --------------------------------------------------
                                                       2004                        2003
                                              -----------------------    -----------------------
                                                            Percent                     Percent
                                                            of Loans                    of Loans
                                                            to Total                    to Total
                                                Amount       Loans         Amount        Loans
                                              ----------   ----------    ----------   ----------
                                                             (Dollars in thousands)
<S>                                           <C>              <C>       <C>              <C>
         Allowance allocated to:
         Residential & commercial mortgages   $      446        84.38%   $      382        80.56%
         Consumer & commercial other loans           309        15.62%          273        19.44%
                                              ----------   ----------    ----------   ----------
            Total allowance                   $      755       100.00%   $      655       100.00%
                                              ==========   ==========    ==========   ==========


<CAPTION>
                                                            At September 30,
                                    -----------------------------------------------------------------
                                           2002                   2001                    2000
                                    -------------------    -------------------    -------------------
                                                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                           $    294      78.76%   $    317      78.02%   $    363      77.60%
Consumer & commercial other
loans                                    377      21.24%        338      21.98%        300      22.40%
                                    --------   --------    --------   --------    --------   --------
   Total allowance                  $    671     100.00%   $    655     100.00%   $    663     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 may also 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
commercial mortgage loans when management deems necessary based on the history
of the property.

     The Company believes its procedures regarding the assessment of
environmental risk are adequate. As of September 30, 2004, the Company was
unaware of any environmental issues with respect to any of its mortgage loans

                                       16
<PAGE>

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 Company develops an annual investment plan approved by the
Board of Directors. The Company recognizes that imbedded in the mortgage
portfolio are inherent prepayment and extension risks. Among the goals of the
investment plan are to develop a securities portfolio that may offset some of
the risks of the loan portfolio. Investments are well diversified and are of
high quality. The price risk of the investment portfolio is governed by
parameters of the investment plan. In addition to price risk, the plan also
develops goals for portfolio yield and cash flow. Individual security purchases
are analyzed in terms of how they fit with the goals of the investment plan. The
Company's President implements the investment plan. All security purchases and
sales are reported to the Board of Directors each month. An update of the
progress made versus the investment plan is also reported to the Board's Asset
Liability Committee on a quarterly basis, at which time recommendations may be
made to alter the plan if conditions warrant.

     The Company primarily employs a strategy of investing in short and
intermediate term fixed rate securities and may from time to time invest in
longer-term fixed rate securities. The Company has de-emphasized investments in
adjustable rate securities because of the high level of adjustable rate loans in
its mortgage portfolio. The Company may elect to increase or decrease its
interest rate sensitivity depending upon, among other things, the absolute level
of interest rates. The investment portfolio would change based upon the
Company's desired interest rate risk position.

     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 $14.0
million at September 30, 2004, including $13.8 million classified as
available-for-sale and $0.2 million classified as held-to maturity. The Company
invests primarily in debt securities issued by the United States Government and
its agencies ($6.4 million at September 30, 2004) and mortgage-backed securities
issued or guaranteed by government-sponsored enterprises ($5.3 million at
September 30, 2004). 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 many 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 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, 2004, 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 21 of this report. More than ninety percent of the
mortgage-backed securities were issued, and are insured or guaranteed by "Fannie
Mae", "Freddie Mac" or the Government National Mortgage Association ("Ginnie

                                       17
<PAGE>

Mae"). At September 30, 2004, the Company's mortgage-backed securities portfolio
contained $5.3 million classified as available-for-sale and $0.2 million
classified as held-to maturity.

     The Company employs a strategy of investing in short-tem 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 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 resulting in a decline
in shareholders' equity.

     At September 30, 2004, the Company had unrealized losses of $58,000 on
available for sale securities and $3,000 on held to maturity securities. In
management's opinion, the unrealized losses primarily reflect changes in
interest rates subsequent to the acquisition of the securities rather than a
deterioration of the issuer's ability to repay the debt, and as such, are
considered to be a temporary impairment of the securities.

     Equity Securities. At September 30, 2004 the Company had $680,000 in fair
market value of corporate equity securities represented by Freddie Mac common
stock with a cost of $10,000.

     At September 30, 2004, the Company also had $1,150,000 of stock in the FHLB
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 1.57%
(annualized) for the year ended September 30, 2004.

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

                                       18
<PAGE>

                                                    At September 30,
                                         ------------------------------------
                                            2004         2003         2002
                                          Carrying     Carrying     Carrying
                                           Value        Value        Value
                                         ----------   ----------   ----------
                                                    (In thousands)
  Securities Available for Sale:
     U.S. Government and
        federal agency securities        $    6,385   $    8,876   $    4,083
     Mortgage-backed securities               5,304        5,562        9,827
     Municipal securities                     1,286          531           --
                                         ----------   ----------   ----------
        Total debt securities                12,975       14,969       13,910

     Corporate securities                       680          636          779
     Mutual funds and other securities          142        1,868        8,275
                                         ----------   ----------   ----------
        Total available for sale             13,797       17,473       22,964

  Securities Held to Maturity:
     Mortgage-backed securities                 251          399        1,284
                                         ----------   ----------   ----------
           Total Securities              $   14,048   $   17,872   $   24,248
                                         ==========   ==========   ==========


     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, 2004. There were no securities (exclusive of obligations of the
U.S. Government and federal agencies) issued by any one entity with the 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. Gov't sec.    $    502      3.86%  $    542      5.36%  $  1,014      4.41%  $  4,327      3.85%  $  6,385      4.07%  $  6,385
Mortgage-back sec.        1      7.25%       135      5.85%       913      3.52%     4,506      4.76%     5,555      4.58%     5,552
Municipal sec.           --      0.00%       261      3.84%     1,025      3.88%        --      0.00%     1,286      3.87%     1.286
Other sec.              822      1.90%        --      0.00%        --      0.00%        --      0.00%       822      1.90%       822
                   --------             --------             --------             --------             --------             --------
   Total           $  1,325      2.65%  $    938      5.01%  $  2,952      3.95%  $  8,833      4.31%  $ 14,048      4.13%  $ 14,045
                   ========             =========            ========             ========             ========             ========
</TABLE>


(1)      Includes equity securities and mutual funds, 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 loans and security repayments and prepayments and revenues from
operations. Scheduled payments on loans and mortgage-backed and investment

                                       19
<PAGE>

securities are 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 FHLB advances as
a source of funds to maximize the return on the Company's common stock.

Deposits. The Company offers several types of deposit programs to its customers,
including 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, 2004, the Company had $61.6 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, 2004.

                                       20
<PAGE>

<TABLE>
<CAPTION>
                                                                 At September 30,
                                   -----------------------------------------------------------------------------
                                            2004                       2003                       2002
                                   -----------------------    -----------------------    -----------------------
                                                 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
      (1.05%)                      $   20,038        32.53%   $   19,157        32.79%   $   15,821        29.99%
   NOW and money market
      accounts (0.49 - 1.49%)          10,710        17.39%        9,409        16.10%        7,141        13.53%
   Non-interest bearing
      demand accounts                   1,327         2.15%          806         1.38%          779         1.48%
                                   ----------   ----------    ----------   ----------    ----------   ----------
         Total non-time deposits       32,075        52.07%       29,372        50.27%       23,741        45.00%

Time accounts:
   1.00 - 1.99%                        11,037        17.92%       10,757        18.41%           --         0.00%
   2.00 - 2.99%                        10,158        16.49%        6,576        11.26%       13,383        25.36%
   3.00 - 3.99%                         3,622         5.88%        5,547         9.50%        7,780        14.75%
   4.00 - 4.99%                         4,441         7.21%        5,611         9.60%        6,022        11.41%
   5.00 - 5.99%                           265         0.43%          560         0.96%        1,705         3.23%
   6.00 - 6.99%                            --         0.00%           --         0.00%           85         0.16%
   7.00 - 7.99%                            --         0.00%           --         0.00%           45         0.09%
                                   ----------   ----------    ----------   ----------    ----------   ----------
      Total time deposits              29,523        47.93%       29,051        49.73%       29,020        55.00%
                                   ----------   ----------    ----------   ----------    ----------   ----------

Total deposits                     $   61,598       100.00%   $   58,423       100.00%   $   52,761       100.00%
                                   ==========   ==========    ==========   ==========    ==========   ==========
</TABLE>

     At September 30, 2004, the Company had $5,228,000 in certificates of
deposit with balances of $100,000 or more ("jumbo deposits"), representing 8.49%
of all deposits.

     The following table sets forth the amount of certificates of deposit in
denominations of $100,000 at September 30, 2004, 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
         ----------   ----------    ----------    ----------   ----------
         $      388   $      116    $    1,530    $    3,194   $    5,228

     Borrowings. During fiscal 2004, new borrowings of $10.8 million were
incurred in the 2004 fiscal year. All outstanding advances are from the FHLB 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 FHLB
outstanding advances payable during 2004 was $17.3 million and the weighted
average cost was 3.70%. The highest balance outstanding during the year was
$23.0 million and the balance at September 30, 2004 was $23.0 million. In 2003,
the average balance of loans payable to FHLB was $12.8 million at a weighted
average cost of 4.74%. The highest outstanding balance during the 2003 fiscal
year was $13.4 million and the balance at September 30, 2003 was $12.2 million.

                                       21
<PAGE>

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.

Personnel

     At September 30, 2004, the Company had thirty-three full-time and no
part-time employees as compared to twenty-nine full-time and three part-time on
September 30, 2003. 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 FHLB. 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 regulation 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 Association

     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, 2004, the Bank's regulatory limit on
loans to one borrower was in excess of $2.7 million. At that date, the Bank's
largest aggregate loans to one borrower was $655,000.

                                       22
<PAGE>

     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 loan 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 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, 2004 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.

     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 of 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 engages 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.

                                       23
<PAGE>

     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 FHLB and uses it
as a source for borrowing funds. The Company must own stock in the FHLB 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 FHLB. At September 30, 2004, we had $1,150,000 of capital
stock of the FHLB, which satisfied this requirement and we had FHLB borrowings
totaling $23.0 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 Directory.

     Waivers of dividends by the Mutual Holding Company. Cambray MHC owns 57.4%
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

                                       24
<PAGE>

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 $747,000 as of September 30, 2004.

     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 57.4% 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 42.6% 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 Company is subject to the Sarbanes-Oxley Act. The SEC has
adopted in final form substantially all of the new regulations Congress directed
it to adopt in the Sarbanes-Oxley Act, including: new standards of independence
for directors who serve on the Company's Audit Committee; disclosure
requirements as to whether at least one member of the Company's Audit Committee
qualifies as a "financial expert" as defined in the SEC regulations and whether
the Company has adopted a code of ethics applicable to its chief executive
officer, chief financial officer or those persons performing similar functions;
and disclosure requirements regarding the operations of board nominating
committees and the means, if any, by which security holders may communicate with
directors. We have incurred, and expect that we will continue to incur,
increased professional fees and other expenses associated with compliance with
the Sarbanes-Oxley Act.

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 $1,060,000. The Bank has purchased two
separate parcels of land adjacent to its headquarters at 42 Church Street in the
Town and Village of Gouverneur. Both structures have been razed and removed. The
plan is to build on those properties an addition to the Bank building, or a
separate building connected to the Bank, to provide additional office space to
allow for future growth, as well as expand and improve our drive up facilities.
The Company currently operates a loan production office out of rented space in
Clayton, New York. The book value of the premises is zero.

                                       25
<PAGE>

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
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,
2004.

PART II

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

     Information contained under the caption "Common Stock" in the 2004 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 2004 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 2004 Annual Report to
Stockholders included as Exhibit 13 hereto is herein incorporated by this
reference.

     Report of Independent Registered Public Accounting Firm
     Consolidated Statements of Financial Condition as of September 30, 2004 and
     2003.
     Consolidated Statements of Income for the Years Ended September 30, 2004
     and 2003.
     Consolidated Statements of Shareholders' Equity for the Years Ended
     September 30, 2004 and 2003.
     Consolidated Statements of Cash Flows for the Years Ended September 30,
     2004 and 2003.
     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, 2004, 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

                                       26
<PAGE>

Item 8A.  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 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 September 30. 2004, and they have concluded that as of that
date, our disclosure controls and procedures were effective at ensuring that
required information will be disclosed on a timely basis in our reports filed
under the Exchange Act.

     (b) Changes in Internal Controls. There were no significant changes to our
internal controls in other factors that could significantly affect our internal
controls during the quarter ended September 30, 2004, including any corrective
actions with regard to significantly deficiencies and material weaknesses.

Item 8B.  Other Information

     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 14, 2005, 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.

Executive Officers

     Information contained under the caption "The Election of Directors -
Continuing Directors;" 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 14, 2005, 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, 2004, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with.

                                       27
<PAGE>

Code of Ethics

     The Company had adopted a Code of Ethics for adherence by its chief
executive officer, chief financial officer and treasurer to promote honest and
ethical conduct; full, fair and proper disclosure of financial information in
the Company's periodic reports; and compliance with applicable laws, rules, and
regulations. The text of the Company's Code of Ethics was previously filed as an
exhibit, and is incorporated by reference herein.

     We will provide to any person without charge, upon request, a copy of our
Code of Ethics. Any such request should be directed to our corporate secretary,
Gouverneur Bancorp, Inc., 42 Church Street, Gouverneur, New York 13642.

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
14, 2005, 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 14, 2005, 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 14, 2005, 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

     See Index to Exhibits.

Item 14.  Principal Accountant Fees and Services

     Information contained under the caption "Independent Auditors' Fees - Audit
Fees"; "Independent Auditors' Fees - Audit-Related Fees"; "Independent Auditors'
Fees - Tax Fees"; and "Independent Auditors' Fees - All other Fees" in the
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
February 14, 2005, 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.

Information contained under the caption "Report of the Audit Committee -
Pre-Approval Policies and Procedures" in the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on February 14, 2005, to be filed with

                                       28
<PAGE>

the Commission within 120 days after the end of the fiscal year covered by this
report, is incorporated herein by this reference.

                                   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 23, 2004            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 23, 2004                           /s/ FRANK LANGEVIN
                                            ------------------------------------
                                            Frank Langevin, Chairman of the
                                            Board

December 23, 2004                           /s/ RICHARD F. BENNETT
                                            ------------------------------------
                                            Richard F. Bennett, President, Chief
                                            Executive Officer and Director

December 23, 2004                           /s/ ROBERT J. TWYMAN
                                            ------------------------------------
                                            Robert J. Twyman, Vice President and
                                            Chief Financial Officer, Principal
                                            financial and accounting officer

December 23, 2004                           /s/ CHARLES VANVLEET
                                            ------------------------------------
                                            Charles VanVleet, Vice President and
                                            Secretary

December 23, 2004                           /s/ RICHARD JONES
                                            ------------------------------------
                                            Richard Jones, Director

December 23, 2004                           /s/ ROBERT LEADER
                                            ------------------------------------
                                            Robert Leader, Director

December 23, 2004                           /s/ TIMOTHY MONROE
                                            ------------------------------------
                                            Timothy Monroe, Director

December 23, 2004                           /s/ JOSEPH PISTOLESI
                                            ------------------------------------
                                            Joseph Pistolesi, Director

December 23, 2004                           /s/ LARRY STRAW
                                            ------------------------------------
                                            Larry Straw, Director

                                       29
<PAGE>

INDEX TO EXHIBITS

Exhibit Number                  Document           Reference to Previous Filing,
--------------                  --------                  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               2004 Annual Report to Stockholders

    14               Code of Ethics for the President and       ****
                     Chief Executive Officer, Chief Financial
                     Officer, and Treasurer

    21               Subsidiaries of Registrant

    31.1             Certification of Principal Executive Officer pursuant to
                     Exchange Act Rules 13a - 15(e) and 15(d) - 15(e)

    31.2             Certification of Principal Financial Officer pursuant to
                     Exchange Act Rules 13a - 15(e) and 15(d) - 15(e)

    32.1             Certification of Principal Executive Officer pursuant to
                     Section 1350

    32.2             Certification of Principal Financial Officer pursuant to
                     Section 1350

     *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.

     ****Filed as an exhibit to the Company's Form 10-KSB for the year ended
September 30, 2003, as filed with the Commission on December 23, 2003. The
previously filed document is hereby incorporated by reference in accordance with
Item 601 of Regulation S-K.

                                       30