EXHIBIT 13


                                President Message



To Our Stockholders:

On behalf of the Board of Directors, Officers and employees of Gouverneur
Bancorp, Inc and its subsidiary, Gouverneur Savings and Loan Association, I am
pleased to present to you our 2004 annual report.

We achieved a milestone in our history in fiscal 2004 when our assets reached
$100.0 million and we closed the books at $104.2 million, a 15.8 % increase over
the 2003 assets of $ 90.0 million.

In this era of low interest rates the mortgage market has been very active and
combined with the addition of the two offices in Alexandria Bay and Clayton,
have produced growth in that portfolio of $14.9 million or 30.6%. Mortgages at
year-end now total $63.6 million. Consumer loans continue to decline both in
volume and as a percentage of our loans due primarily to the decrease in auto
lending. We have reported previously that the low rate, no rate and other
incentive programs offered by the auto manufacturers have substantially impacted
our ability to grow or maintain that segment of the portfolio. In fiscal 2003
balances in the consumer category stood at $9.2 million, whereas at fiscal year
end 2004 those balances have declined to $8.9 million, a 3.26% decrease.
Commercial loans have been a small part of our lending, as we were not actively
pursuing growth in that area. However, with the hiring Thomas Penn as Vice
President and Commercial Loan Officer in August 2004, we expect growth in our
commercial loan portfolio. Mr. Penn will be responsible for maintaining the
current loans and developing new relationships in our expanded market.

Our investment portfolio has continued to decline from $17.9 million in 2003 to
$14.0 million in 2004, or 27.9%, as we have invested those funds in loans, due
primarily to the strong loan demand and the greater rate of return.

Deposits have also increased through this period by $3.2 million to $61.6
million or 5.5%. However, the loan growth greatly exceeded the deposit growth
and we increased our borrowings from the Federal Home Loan Bank of New York, in
accordance with management's strategy to help fund loan growth, from $12.2
million in 2003 to $23.0 million in 2004, an 88.5% increase.

The current low rate environment has resulted in a significant decrease in our
cost of funding and contributes greatly to the improvement in our net return.
The average cost of interest-bearing funds in fiscal 2003 was 2.81% and for
fiscal 2004 was 2.17%. However we continue to monitor this area closely and
anticipate that the cost of funding will increase in the future and earnings may
be adversely impacted for the near term. To help offset this we have been
developing a loan portfolio that has more adjustable rate characteristics. Loans
that have adjustable rates now total $31.9 million, an increase of $10.5
million, or 49.1 %, from $21.4 million at the end of fiscal 2003 and are now
39.8 % of the total loan portfolio.

Non Interest Income increased $113,000 to $463,000 or 32.3%, the majority of
that coming from investment of $3.5 million in bank owned life insurance, and we
continue to explore additional programs to enhance that source of revenue. Non
Interest Expense increased $0.1 million from $2.6 million to $2.7 million, or
3.85%. The increase is due primarily to the increase in employee salaries and
benefits. In addition to the commercial loan officer we have also added an
Assistant Treasurer to the accounting area. We needed to address three elements
in this department - (i) the increased volume of work due to our growth, (ii)
the additional burden of complying with the Sarbanes-Oxley Act and (iii)
management succession planning.
<PAGE>

The return on average assets increased to 0.89% from the 0.68% we reported for
fiscal 2003 as a result of increasing net income from $592,000 to $860,000,
representing a 45.3 % improvement from the prior year. The increased earnings
improved the diluted earnings per share from $0.26 in fiscal 2003 to $0.38 in
fiscal 2004. The company paid a $0.26 per share dividend to all shareholders
during the fiscal year ending September 2004. Shareholders equity increased from
$17.6 million to $18.0 million a 2.27% increase over fiscal 2003 and book value
increased from $7.71 per common share to $7.86 per common share based on
2,283,109 shares issued and outstanding at September 30, 2004.

Over the winter months, we will be working with an architect to finalize plans
for an addition to the main office facility to accommodate the current staff and
allow for additional growth and to improve services through an expanded drive-up
facility. We have completed the acquisition and site clearing on the two
adjoining properties in preparation for the construction.

I extend my sincere appreciation to you, our stockholders, for your continued
support of our endeavors, and I especially want to thank the Board of Directors
and staff who have worked diligently with me to achieve our success. We look
forward to continuing to grow our franchise.


                                          /s/ RICHARD F. BENNETT
                                          -------------------------------------
                                          Richard F. Bennett
                                          President and Chief Executive Officer

                                       2
<PAGE>

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Selected Financial Condition Data:
                                                           At September 30,
                                  ------------------------------------------------------------------
                                     2004          2003          2002          2001          2000
                                  ----------    ----------    ----------    ----------    ----------
                                                        (Dollars in thousands)
<S>                               <C>           <C>           <C>           <C>           <C>
  Total Assets                    $  104,169    $   89,956    $   85,058    $   82,863    $   74,900
  Loans (1)                           80,914        65,393        55,016        56,434        54,960
  Allowance for loan losses              755           655           671           655           663
  Securities available-for-sale       13,797        17,473        22,964        19,017        11,368
  Securities held-to-maturity            251           399         1,341         2,651         4,263
  Foreclosed real estate                  53            92            25           182            91
  Deposits                            61,598        58,423        52,761        47,683        46,800
  Borrowings                          23,000        12,200        13,400        16,400        10,800
  Total shareholders' equity      $   17,950    $   17,557    $   17,228    $   16,656    $   15,989
                                  ==========    ==========    ==========    ==========    ==========

Selected Operations Data:
                                                        (Dollars in thousands)

  Interest income                 $    5,403    $    5,223    $    5,612    $    5,955    $    5,586
  Interest expense                     1,648         1,906         2,281         2,951         2,581
                                  ----------    ----------    ----------    ----------    ----------
    Net interest income                3,755         3,317         3,331         3,004         3,005
  Provision for loan losses              135            95            85            80           158
                                  ----------    ----------    ----------    ----------    ----------
    Net interest income after
      Provision for loan losses        3,620         3,222         3,246         2,924         2,847
  Non-interest income                    463           350           293           329           306
  Non-interest expense                 2,667         2,619         2,240         2,020         1,994
                                  ----------    ----------    ----------    ----------    ----------
  Income before income taxes           1,416           953         1,299         1,233         1,159
  Income tax expense                     556           361           524           467           434
  Net income                      $      860    $      592    $      775    $      766    $      725
                                  ==========    ==========    ==========    ==========    ==========

Per Common Share:

  Net Income
     Basic                        $     0.39    $     0.27    $     0.35    $     0.35    $     0.33
     Diluted                            0.38          0.26          0.35          0.35          0.32
     Book value                         7.86          7.71          7.57          7.32          7.02
     Cash dividends declared            0.26          0.26          0.22          0.16          0.11
     Dividend payout ratio             66.67%        96.30% *      62.86% *      45.71% *      33.33%
</TABLE>

*Cambray Mutual Holding Company waived its right to dividends declared in 2003,
2002, and 2001 amounting to $341,000, $288,000 and $118,000 respectively. The
dividend payout ratio excluding waived dividends was 42.57% in 2003, 27.42% in
2002 and 32.11% in 2001.


Notes appear on the following page.

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                           At or for the Year Ended September 30,
                                            ------------------------------------------------------------------
                                               2004          2003          2002          2001          2000
                                            ----------    ----------    ----------     ---------    ----------
<S>                                             <C>           <C>           <C>           <C>           <C>
Performance Ratios:

 Return on average assets (net
  income to average total assets)                 0.89%         0.68%         0.93%         0.96%         1.00%
 Return on average equity (net
  income to average equity)                       4.82%         3.40%         4.56%         4.69%         4.58%
 Average interest-earning assets to
  average interest-bearing liabilities          117.39%       122.00%       123.40%       125.08%       126.57%
 Net interest rate spread (3)                     3.89%         3.51%         3.53%         2.97%         3.31%
 Net interest margin (4)                          4.21%         4.01%         4.21%         3.93%         4.29%
 Net interest income after provision
  for loan losses to total other expenses         1.36x         1.23x         1.45x         1.45x         1.43x


Capital and Asset Quality Ratios (2)

 Average equity to average total assets          18.47%        19.88%        20.41%        20.55%        21.77%
 Total equity to assets end of period            17.23%        19.52%        20.25%        20.10%        21.35%
 Non-performing assets to total assets            0.42%         0.92%         0.88%         0.79%         0.69%
 Non-performing loans to total loans              0.47%         1.08%         1.23%         0.78%         0.75%
 Allowance for loan losses to total loans         0.94%         1.01%         1.21%         1.17%         1.21%
 Allowance for loan losses to
   Non-performing loans                         198.68%        93.17%        98.68%       149.89%       162.10%


Other Data:

 Number of real estate loans outstanding         1,605         1,467         1,393         1,456         1,438
 Number of deposit accounts                      7,409         7,639         7,216         6,989         7,014
 Full service offices                                2             2             2             1             1
</TABLE>

(1)  Shown net of deferred fees and costs.
(2)  Capital and asset quality ratios are at end of period. All other ratios are
     based on average daily balances.
(3)  The net interest rate spread represents the difference between the weighted
     average yield on interest-earning assets and the weighted average cost of
     interest-bearing liabilities.
(4)  The net interest margin, also known as the net yield on average
     interest-earning assets, represents net interest income as a percentage of
     average interest-earning assets.


Year 2004 Highlights For Our Bank

         During fiscal 2004, Gouverneur Bancorp, Inc. marked its fifth full year
as a public company. In the course of this year, our subsidiary, Gouverneur
Savings and Loan Association (the "Bank"), increased its assets by $14.2
million, through mortgage portfolio growth, while remaining well capitalized,
with strong asset quality.

         The Bank has been and continues to be a community oriented financial
institution offering a variety of financial services. The Bank attracts deposits
from the general public and uses those deposits, together with other funds, to
make loans and other investments. Most of the loans are mortgages secured by
one-to-four family residences (including home equity lines of credit). The Bank
also makes consumer commercial and multi-family real estate and other loans.
Most of the loans are in the Bank's primary market area, southern St. Lawrence
and northern Jefferson and Lewis counties in New York State. The Savings
Association Insurance Fund of the Federal Deposit Insurance Company ("FDIC")
insures the Bank's deposit accounts, and the FDIC and the Office of Thrift
Supervision ("OTS") both regulate the Bank.

                                       4
<PAGE>

         Our profitability depends, to a large extent, on our net interest
income, which is the difference between the interest we receive on our interest
earning assets, such as loans and investments, and the interest we pay on
interest bearing liabilities, primarily deposits. Other categories of expenses
generally include the provision for loan losses, salaries and employee benefit
costs, net expenses on foreclosed real estate and various other categories of
operational expenses. External factors, such as general economic and competitive
conditions, particularly changes in interest rates, government policies and
actions of regulatory authorities, can have a substantial effect on
profitability.

         Loans are our highest yielding asset category. We are faced with
increasing competition from other financial institutions, loan brokers, mortgage
bankers, insurance companies, brokerage firms and other companies that are
competing for a limited number of loan opportunities. Two years ago, in order to
meet the challenge of competition and increase our earning assets, we:

          o    opened a new full service branch office in Alexandria Bay, NY to
               replace the lending office in that community to allow us to fully
               service current customers in that market area and create new loan
               opportunities, and
          o    opened a new lending office in Clayton, NY, ten miles west of
               Alexandria Bay, to generate additional loan opportunities along
               the St. Lawrence River in conjunction with the new branch office.

         This year, we have increased loans at the Alexandria Bay office by $6.6
million, or 28.7%, from $23.0 million on September 30, 2003 to $29.6 million, on
September 30, 2004. The Clayton lending office has increased its loan portfolio
$5.6 million, from $3.7 million to $9.3 million over the same period. The
Gouverneur office contributed growth of $2.6 million, or 6.8%, to increase its
loan portfolio from $35.7 million to $38.3 million. The three locations,
combined with an increase in purchased government guaranteed loans, resulted in
an overall increase of $15.5 million in the Bank's net loans, from $64.7 million
at the end of the 2003 fiscal year to $80.2 million at the end of the 2004
fiscal year.

         During fiscal year 2004, our deposits increased by $3.2 million, or
5.5%. Deposits grew $0.9 million in savings and club accounts, $1.3 million NOW
and money market accounts, $0.5 million in demand deposits and $0.5 million in
time certificates. Deposits at the Alexandria Bay branch office grew by $1.8
million, or 36.7%, from $4.9 million on September 30, 2003 to $6.7 million on
September 30, 2004. The growth in deposits in Alexandria Bay is lagging our
projections, but we expect that office will continue to provide additional
deposit growth opportunities for the Bank. Our borrowings from the Federal Home
Loan Bank of New York ("FHLB"), consisting of advances and securities repurchase
obligations, were $23.0 million on September 30, 2004 compared to $12.2 million
on September 30, 2003. The increase of $10.8 million is consistent with
management's strategy to fund loans when our deposit base is not sufficient.

         We believe that some of our deposit growth has come because the
securities markets have been in a state of flux. Market uncertainty may continue
to create opportunities for new deposits. Individuals may choose to invest their
discretionary funds in bank deposits rather than equity securities. However, if
the markets stabilize we may lose deposits. If we are unable to attract the
deposits necessary to support our growth, we will continue to borrow funds from
the FHLB.

         The following discussion of our financial condition and results of
operations shows the effect of our efforts in fiscal 2004.

Introduction to Financial Information and Comparisons

         Our current financial statements combine the assets, liabilities,
income and expenses of Gouverneur Bancorp, Inc., with those of Gouverneur
Savings and Loan Association.

Critical Accounting Policies

         Note 2 to Gouverneur Bancorp, Inc.'s consolidated financial statements
lists significant accounting policies used in the development and presentation
of its financial statements. This discussion and analysis, the significant
accounting policies, and other financial statement disclosures identify and
address key variables and other qualitative and quantitative factors that are
necessary for an understanding and evaluation of Gouverneur Bancorp, Inc. and
its results of operations.

                                       5
<PAGE>

         The reporting of the Company's financial condition and results of
operations is impacted by the application of accounting policies by management.
Certain accounting policies are particularly sensitive and require significant
judgments, estimates and assumptions to be made by management in matters that
are inherently uncertain.

         The Company's provision for loan losses and the level of the allowance
for loan losses involve significant estimates by management in evaluating the
adequacy of the allowance for loan losses. Management's evaluation is based on
the Company's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay
(including the timing of future payments), the estimated value of any underlying
collateral, composition of the loan portfolio, current economic conditions and
other relevant factors. While management uses available information to make such
evaluations, future adjustments to the allowance may be necessary if economic
conditions or loan credit quality differ substantially from the assumptions used
in making the evaluation.

         As permitted by SFAS No. 123 the Company accounts for stock-based
compensation in accordance with Accounting Principles Board Opinion (APB) No.
25. Under APB No. 25, no compensation expense is recognized in the income
statement related to any options granted under the Company's stock option plans.
The pro forma impact to net income and earnings per share that would occur if
compensation expense as recognized, based on the estimated fair value of the
options on the date of grant, is disclosed in note 2 to the consolidated
financial statements. The Company intends to continue to account for stock-based
compensation in this manner unless there is more specific guidance issued by the
Financial Accounting Standards Board or unless a clear consensus develops in the
financial services industry on the application of accounting methods.

Analysis of Net Interest Income

         Net interest income, our primary income source, depends principally
upon (i) the amount of interest earning assets that we can maintain based upon
our funding sources; (ii) the relative amounts of interest-earning assets versus
interest-bearing liabilities; and (iii) the difference between the yields earned
on those assets and the rates paid on those liabilities. Non-performing loans
adversely affect net interest income because they are funded by interest-bearing
liabilities, but they do not provide interest income. Furthermore, when we
designate an asset as non-performing, all interest that we have already accrued
but not actually received is deducted from current period income, further
reducing net interest income.

Average Balances, Interest Rates and Yields

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

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                                        For the Year Ended September 30,
                                            ---------------------------------------------------------------------------------------
                                                       2004                          2003                          2002
                                            ---------------------------   ---------------------------   ---------------------------
                                                                               ($ in thousands)

                                            Average              Yield/   Average              Yield/   Average              Yield/
                                            Balance  Interest   Cost(6)   Balance  Interest   Cost(6)   Balance  Interest   Cost(6)
                                            -------   -------   -------   -------   -------   -------   -------   -------   -------
<S>                                         <C>       <C>          <C>    <C>       <C>          <C>    <C>       <C>          <C>
Loans, net (1)                              $72,142   $ 4,836      6.70%  $57,312   $ 4,413      7.70%  $54,798   $ 4,593      8.38%
Securities (2)                               15,245       551      3.61%   23,194       788      3.40%   22,481       989      4.40%
Other short-term investments                  1,773        16      0.90%    2,188        22      1.01%    1,880        30      1.60%
                                            -------   -------             -------   -------             -------   -------
   Total interest-earning assets             89,160     5,403      6.06%   82,694     5,223      6.32%   79,159     5,612      7.09%
                                                      -------                       -------                       -------
Non-interest-earning assets                   7,389                         4,869                         4,078
                                            -------                       -------                       -------
   Total assets                             $96,549                       $87,563                       $83,237
                                            =======                       =======                       =======

Savings and club accounts (3)               $20,023   $   206      1.03%  $17,968   $   321      1.79%  $14,925   $   353      2.37%
Time certificates                            28,741       740      2.57%   28,749       907      3.15%   26,782     1,129      4.20%
NOW and money market accounts                 9,904        62      0.63%    8,296        73      0.88%    6,988        87      1.24%
Borrowings                                   17,282       640      3.70%   12,766       605      4.74%   15,364       712      4.63%
                                            -------   -------             -------   -------             -------   -------
   Total interest-bearing liabilities        75,950     1,648      2.17%   67,779     1,906      2.81%   64,149     2,281      3.56%
                                                      -------                       -------                       -------
Non-interest-bearing liabilities              2,765                         2,378                         2,099
                                            -------                       -------                       -------
   Total liabilities                         78,715                        70,157                        66,248
Shareholders' equity                         17,834                        17,406                        16,989
                                            -------                       -------                       -------
   Total liabilities and
     shareholders' equity                   $96,549                       $87,563                       $83,237
                                            =======                       =======                       =======

Net interest income/spread (4)                        $ 3,755      3.89%            $ 3,317      3.51%            $ 3,331      3.53%
                                                      =======   =======             =======   =======             =======   =======

Net earning assets/net interest
   margin (5)                               $13,210                4.21%  $14,915                4.01%  $15,010                4.21%
                                            =======             =======   =======             =======   =======             =======
Ratio of average interest-earning assets
   To average interest-bearing liabilities     1.17x                         1.22x                         1.23x
                                            =======                       =======                       =======
</TABLE>

Notes appear on following page

                                       7
<PAGE>

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

Rate Volume Analysis of Net Interest Income

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

<TABLE>
<CAPTION>
                                                                    Year Ended September 30,
                                        --------------------------------------------------------------------------------
                                                     2004 vs. 2003                            2003 vs. 2002
                                        --------------------------------------    --------------------------------------
                                               Increase (Decrease) Due To:              Increase (Decrease) Due To:
                                        --------------------------------------    --------------------------------------
                                          Volume         Rate         Total        Volume          Rate         Total
                                        ----------    ----------    ----------    ----------    ----------    ----------
                                                                    (Dollars in thousands)
<S>                                     <C>           <C>           <C>           <C>           <C>           <C>
Interest-earning assets:

 Loans                                  $    1,044    $     (621)   $      423    $      204    $     (384)   $     (180)
 Securities                                   (283)           46          (237)           30          (231)         (201)
 Other short-term investments                   (4)           (2)           (6)            4           (12)          (12)
                                        ----------    ----------    ----------    ----------    ----------    ----------
   Total interest-earning assets               757          (577)          180           238          (627)         (389)
                                        ----------    ----------    ----------    ----------    ----------    ----------

Interest-bearing liabilities:

 Savings and club accounts                      34          (149)         (115)           64           (96)          (32)
 Time certificates                              --          (167)         (167)           75          (297)         (222)
 NOW and money market accounts                  12           (23)          (11)           14           (28)          (14)
 Borrowings                                    185          (150)           35          (123)           16          (107)
                                        ----------    ----------    ----------    ----------    ----------    ----------
   Total interest-bearing liabilities          231          (489)         (258)           30          (405)         (375)
                                        ----------    ----------    ----------    ----------    ----------    ----------

 Net change in net interest income      $      526    $      (88)   $      438    $      208    $     (222)   $      (14)
                                        ==========    ==========    ==========    ==========    ==========    ==========
</TABLE>

                                       8
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Comparison of Financial Condition at September 30, 2004 and 2003

     The Company's total assets amounted to $104.2 million at September 30,
2004, which was $14.2 million, or 15.78%, higher than our total assets of $90.0
million one year earlier. The increase was funded mostly by an increase in debt
with FHLB in the amount of $10.8 million and growth in deposits of $3.2 million.

     Cash and due from banks, interest bearing deposits and investment
securities decreased by $5.5 million, or 24.8%, to a total of $16.8 million at
September 30, 2004 compared to $22.2 million at September 30, 2003.
Interest-bearing deposits decreased by $1.6 million and available-for-sale
securities decreased during the year by $3.7 million. The decrease in the
balances of the available-for-sale portfolio was due to the sale of mutual fund
assets, as well as not fully replacing all of the maturing bonds and scheduled
principal repayments in the portfolio.

     Net loans were $80.2 million at September 30, 2004, an increase of $15.5
million, or 24.0%, compared to $64.7 million one year ago. This increase was the
result of refinancing activity due to historically low interest rates combined
with an active real estate market in the Thousands Islands region affecting both
Alexandria Bay and Clayton. The increase was also the result of offering
competitive adjustable rate mortgage products.

     Total deposits increased by $3.2 million, or 5.5%, from $58.4 million at
September 30, 2003 to $61.6 million at September 30, 2004. We experienced
increases in saving and club account deposits of $0.9 million, NOW and money
market deposits by $1.3 million, demand deposits by $0.5 million and time
deposits by $0.5 million. Deposits at the Alexandria Bay office grew by $1.8
million, or 36.7%, from $4.9 million on September 30, 2003 to $6.7 million on
September 30, 2004. We expect that office will continue to provide additional
deposit growth opportunities for the Bank.

     Borrowed funds increased by $10.8 million from $12.2 million at September
30, 2003 to $23.0 million at September 30, 2004 as discussed earlier.

     The shareholders' equity amounted to $18.0 million at September 30, 2004,
an increase of $0.4 million, or 2.3%, over the balance of $17.6 million at
September 30, 2003. The increase primarily resulted from net income of $860,000
and increases due to the allocation of Employee Stock Ownership Plan ("ESOP")
shares and the amortization of Management Recognition Plan ("MRP") shares
totaling $136,000 offset by $593,000 paid in dividends on common stock.

     Comparison of Operating Results for the Years Ended September 30, 2004 and
2003

     Net Income. Net income for the year ended September 30, 2004 was $860,000
compared to net income of $592,000 the previous year. The $268,000 increase in
net income represents a 45.3% increase from fiscal 2003. Income before income
taxes increased by $463,000, or 48.6%, as a result of increases of $438,000 in
net interest income and $113,000 in other income more than offsetting increases
of $48,000 in non-interest expenses and $40,000 in the provision for loan
losses. The increase in income before income taxes resulted in a corresponding
increase of $195,000 in income taxes, and net income improved by $268,000.

     Interest Income. Interest rates remained at historic low levels for most of
the year. Loan and deposit portfolios both re-priced lower this fiscal year as
compared to last fiscal year. The Federal Reserve has raised short-term rates,
but little impact has been felt yet. Further tightening of interest rates by the
Federal Reserve may lead to contraction of interest margins during the coming
year. It is uncertain whether the economy is growing fast enough to support any
further rate increases, but the Federal Reserve has decided to move interest
rates up at a measured pace, as evidenced by five increases in the fed funds

                                       9
<PAGE>

rate, the interest rate at which banks lend to each other overnight, totaling
1.25% since June, 2004. At December 14, 2004 the fed funds rate stands at 2.25%.

     A summary of the information shown previously in the Average Balances,
Interest Rates and Yields table and in the Interest-earning assets section of
the Rate Volume Analysis of Net Interest Income table follows:

     1.   the results for the 2004 fiscal year, show that interest income
          increased by $180,000 from $5,223,000 last year to 5,403,000. The
          increase in interest income was caused by an increase of $757,000 due
          to an increase in the average balance of interest-earning assets, from
          $82.7 million to $89.2 million, more than offsetting a $577,000
          decrease in interest income due to a decrease in the average rate
          earned on interest-earning assets, from 6.32% to 6.06%, and

     2.   growth of the loan portfolio fueled an increase in loan interest
          income of $423,000 as the average balance of loans increased by $14.8
          million, resulting in a $1,044,000 increase in interest income, while
          the decrease in the average rate on loans from 7.70% to 6.70% resulted
          in a $621,000 decrease in interest income, and

     3.   interest income on securities and other short-term investments fell by
          $243,000 as a reduction in the average balances of securities and
          other short-term investments by $8.4 million from $25.4 million in
          fiscal 2003 to $17.0 million in fiscal 2004, resulted in decreased
          interest income of $287,000 while an increase in the average rate
          earned on securities and other short-term investments from 3.19% for
          the year ended September 30, 2003 to 3.33% for the year ended
          September 30, 2004 increased interest income by $44,000.

     Interest Expense. A summary of the information shown previously in the
Average Balances, Interest Rates and Yields table and in the Interest-bearing
liabilities section of the Rate Volume Analysis of Net Interest Income table
follows:

     1.   interest expense decreased by $258,000 from $1,906,000 for fiscal 2003
          to $1,648,000 for fiscal 2004. The increase in the average balance of
          interest-bearing liabilities from $67.8 million in fiscal 2003 to
          $76.0 million in fiscal 2004 resulted in an increase of $231,000 in
          interest expense, while a decrease in the average interest rate from
          2.81% for fiscal 2003 to 2.17% for fiscal 2004 resulted in a $489,000
          decrease in interest expense,

     2.   growth in average balances of savings and club accounts from $18.0
          million to $20.0 million, money market and NOW accounts from $8.3
          million to $9.9 million, and borrowings from FHLB from $12.8 million
          to $17.3 million increased interest expense by $34,000 and $112,000
          and $185,000 respectively. Those increases were more than offset by
          interest rate decreases on savings and club accounts from 1.79% to
          1.03%, time certificates from 3.15% to 2.57%, NOW and money market
          accounts from 0.88% to 0.63% and on the cost of borrowings from FHLB
          from 4.74% to 3.70% resulting in decreases to interest expense of
          $149,000, $167,000, $23,000 and $150,000 respectively. The average
          balance on time certificates remained the same at $28.7 million.

     Net Interest Income. Net interest income increased by $438,000 in fiscal
2004. The increase was attributable to a $180,000 increase in interest income
combined with a decrease of $258,000 in interest expense as explained above. The
decrease in interest rates resulted in a 38 basis point increase in our spread,
the difference between the average yield earned on our interest-earning assets
and the average rate paid on our interest-bearing liabilities, from 3.51% to
3.89%.

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

                                       10
<PAGE>

disagree with our judgments regarding the risks in our loan portfolio and could
require us to increase the allowance in the future.

     We increased our provision for loan losses from $95,000 in 2003 to $135,000
in 2004. At September 30, 2004, the ratios of the allowance for loan losses to
total loans and the allowance for loan losses to non-performing loans were 0.94%
and 198.68% respectively, as compared to 1.01% and 93.17% at September 30, 2003.
The allowance at the beginning of the year was $655,000 and we determined at the
end of the year that the appropriate level for the allowance was $755,000. We
had charge-offs during the year of $121,000 and recoveries of $86,000, so a
$135,000 provision was necessary to reach the desired level for the allowance.

     Non-interest income. Non-interest income increased from $350,000 in fiscal
year 2003 to $463,000 in fiscal 2004. Service charge income increased $36,000
consistent with the growth in deposits and new accounts and other non-interest
income items increased by $88,000 (including $82,000 from earnings on bank owned
life insurance ("BOLI").

     Non-interest expense. Non-interest expenses increased $48,000 from
$2,619,000 in fiscal 2003 to $2,667,000 in fiscal 2004. Non-interest expenses
include most categories of expense other than interest we pay on deposits and
borrowed funds and income tax expense. The largest category of non-interest
expenses is salaries and employee benefits, followed by other expense, building,
occupancy and equipment and professional fees.

     The increase was principally due to increased costs of $103,000 in salaries
and employee benefits expense offset by a decrease of $40,000 in other expenses.
The additional salaries and employee benefits expense resulted from performance
increases to our employees and the hiring a commercial loan officer, an
assistant treasurer and an additional teller.

     Income Tax Expense. Our income tax expense increased from $361,000 in
fiscal 2003 to $556,000 in fiscal 2004, or 54.0%. The effective income tax rate
was 39.3% in 2004 and 37.8% in 2003. The increase was the result of increased
income before income taxes and permanent differences between tax and book income
expenses as outlined in Note 9 to the Consolidated Financial Statements.

     Liquidity and Capital Resources

     Our primary sources of funds are deposits, borrowings and proceeds from the
principal interest payments loans and securities. Maturities and scheduled
principal payments on loans and securities are predictable sources of funds.
However, general economic conditions and interest rate conditions can cause
increases or decreases in deposit outflows and loan pre-payments thereby
affecting the level of funds we have available for investment. Our level of
borrowed funds is generally at our own discretion, based upon our need for funds
and the cost of deposits as an alternative source of funds.

     In general, we manage our liquidity by maintaining a sufficient level of
short-term investments so that funds are normally available for investment loans
when needed. During the year ended September 30, 2004, we decreased our cash and
cash equivalents by $1,573,000. The decrease was the net result of the
combination of all our sources and uses of funds. We originated $28.3 million of
new loans and purchased $0.6 million in USDA and SBA guaranteed loans during
fiscal 2004, as compared to originations of $26.3 million and $2.5 million in
purchased loans in fiscal 2003. However, loans, net, after payments, charge-offs
and transfers to foreclosed assets, increased by $15.7 million this year after
increasing by $10.8 million last year.

     Deposits increased by $3.2 million during fiscal 2004. We believe the
increase is attributable to competitive rates we paid on deposits. In addition
to factors within our control, such as our deposit pricing strategies and our
marketing efforts, deposit flows are affected by factors outside our control,
such as the level of general market interest rates, the availability of
alternate investment opportunities and general economic conditions.

                                       11
<PAGE>

     We monitor our liquidity regularly. Excess liquidity is invested in
overnight federal funds sold and other short-term investments. If we need
additional funds, we can borrow those funds, although the cost of borrowing
money is normally higher than the average cost of deposits. As a member of the
FHLB, the Bank can arrange to borrow in excess of $39.6 million of which $23.0
million was outstanding at September 30, 2003, but to do so it must provide
appropriate collateral and satisfy other requirements for Federal Home Loan Bank
borrowings. We have not needed to use borrowings to fund unanticipated deposits
outflows. However, as per management's strategy, we are using borrowings to help
us fund our loan growth. In addition to borrowings, we believe that, if we need
to do so, we can attract additional deposits by increasing the rates we offer.

     We had $6.5 million of outstanding commitments to make loans at September
30, 2004 and $2.8 million of unused home equity, commercial and overdraft lines
of credit.

During the upcoming year, we anticipate that loan originations may exceed the
amount of cash available from the net increase, if any, in deposits, loan
repayments and prepayments and the proceeds from the maturity, payment or
disposition of securities. If that occurs, we may obtain additional funds to
increase our loan portfolio through a variety of strategies, including reducing
securities as a percentage of total assets, borrowing funds, or the use of
wholesale or brokered deposits. At September 30, 2004, we have $16.6 million of
time certificates scheduled to mature within in one year. We anticipate that we
can retain substantially all of those deposits if we need to do so to fund loans
and other investments as part of our efforts to grow and leverage our capital.

     The OTS has minimum capital ratio requirements, which apply to the Bank,
but there are no comparable minimum capital requirements that apply to us as a
savings and loan holding company. At September 30, 2004, the Bank substantially
exceeded all regulatory capital requirements of the OTS applicable to it, and
the OTS minimum capital requirements had no material adverse affect on the Bank.
The Bank was classified as "well capitalized" at September 30, 2004 under OTS
regulations.

     We measure liquidity on a monthly basis and want to maintain a liquidity
ratio between 5% and 15%. At September 30, 2004 the ratio is 12.4%.

     Off Balance Sheet Arrangements

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

     We had $6.5 million in outstanding commitments to make loans at September
30, 2004, along with $2.8 million of unused home equity, commercial and
overdraft lines of credit. We anticipate that we have enough liquid funds to
meet our current loan commitments, purchase commitments and to fund draws on
lines of credit through the normal turnover of our loan and securities
portfolios. At September 30, 2004, we had $16.6 million of time certificates
scheduled to mature within one year. We anticipate that we can retain
substantially all of those deposits if we need to do so to fund loans and other
investments as part of our efforts to grow and leverage our capital.

     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 or other
disclosures, we are making "forward-looking statements" as described in the
Private Securities Litigation Reform Act of 1995. In 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 statement. We want you to know that a variety of future
events could cause or actual results and experience to differ materially from

                                       12
<PAGE>

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 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, but not limiting to
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 that occur after the
statements are made.

                                       13
<PAGE>

SHAREHOLDER INFORMATION
-----------------------

Corporate Offices
-----------------
Gouverneur Bancorp, Inc.
42 Church Street
Gouverneur, New York 13642
(315) 287-2600

Annual Meeting of Shareholders
------------------------------
The annual meeting of Gouverneur Bancorp, Inc. will be held February 14, 2005 at
10:00 am at the Executive Offices of Gouverneur Savings & Loan Association, 26
John Street, Gouverneur, New York 13642.

Annual Report on Form 10-KSB
----------------------------
For the 2004 fiscal year, Gouverneur Bancorp, Inc. has filed an Annual Report on
Form 10-KSB with the Securities and Exchange Commission. The Form 10-KSB is
available on the World Wide Web as part of the SEC EDGAR database at
www.sec.gov.
------------
Shareholders may also obtain a copy free of charge by writing to Gouverneur
Bancorp, Inc., 42 Church Street, Gouverneur, New York 13642, Attention:
Corporate Secretary.

Stock Transfer Agent & Registrar
--------------------------------
Shareholders wishing to change name, address or ownership of stock, or to report
lost certificates or to consolidate accounts should contact the Company's stock
registrar and transfer agent directly at:

Registrar & Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
(800) 368-5948

Counsel
-------
Hinman, Howard & Kattell, LLP
106 Corporate Park Drive, Suite 317
White Plains, New York 10604

Independent Auditors
--------------------
Beard Miller Company LLP
320 East Market Street
Harrisburg, Pennsylvania 17108

Market Information for Common Stock
-----------------------------------
The Common Stock of Gouverneur Bancorp, Inc. trades on the American Stock
Exchange under the symbol "GOV". At December 12, 2004, there were approximately
340 shareholders of record, not including the number of persons or entities
holding stock in nominee or street names through various brokers and banks.

Gouverneur Bancorp, Inc. common stock was issued at $5.00 per share in
connection with the Company's initial public offering completed on March 23,
1999. The following table shows the range of high and low sale prices for each
full quarterly period for the past two fiscal years.

                                                             Cash
                                                           Dividend
Quarter Ended                        High        Low       Declared
-------------                      --------    --------    --------

Fiscal 2004
-----------
September 30, 2004                 $  14.00    $  11.50    $   0.13
June 30, 2004                      $  14.00    $  11.88    $   0.00
March 31, 2004                     $  13.90    $  11.59    $   0.13
December 31, 2003                  $  12.95    $  11.10    $   0.00

Fiscal 2003
-----------
September 30, 2003                 $  11.20    $  10.12    $   0.13
June 30, 2003                      $  10.62    $   9.70    $   0.00
March 31, 2003                     $  10.00    $   9.20    $   0.13
December 31, 2002                  $  10.20    $   9.40    $   0.00

DIRECTORS AND OFFICERS
Gouverneur Bancorp, Inc.

Board of Directors
Frank Langevin: Chairman of the Board, Retired contractor
Richard F. Bennett: President & Chief Executive Officer, Gouverneur Bancorp,
Inc.
Richard E. Jones: Retired feed & farm store owner
Robert J. Leader: Principal, Case & Leader LLP, Attorneys at Law
Timothy J. Monroe: Veterinarian, President, Northland Veterinarian Hospital
Joseph C. Pistolesi: Owner, Clearview Motel
Larry Straw: Project Manager, Cives Steel Co., Northern Division, steel
fabricator

Directors of Gouverneur Bancorp, Inc. also serve as Directors of Gouverneur
Savings & Loan Association

Officers
Richard F. Bennett: President & Chief Executive Officer
Charles VanVleet: Vice President & Secretary
Robert Twyman: Vice President & Chief Financial Officer
Kathleen McIntosh: Treasurer

                                       14
<PAGE>

                            GOUVERNEUR BANCORP, INC.

                         CONSOLIDATED FINANCIAL REPORT


                               SEPTEMBER 30, 2004

<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
TABLE OF CONTENTS


                                                                        PAGE NO.

CONSOLIDATED FINANCIAL STATEMENTS:

    Report of Independent Registered Public Accounting Firm                1

    Consolidated Statements of Financial Condition                         2

    Consolidated Statements of Income                                      3

    Consolidated Statements of Shareholders' Equity                        4

    Consolidated Statements of Cash Flows                                  5

    Notes to Consolidated Financial Statements                             6

<PAGE>

[GRAPHIC OMITTED]
Beard Miller
Company LLP
------------
Certified Public Accountants and Consultants



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders
Gouverneur Bancorp, Inc.
Gouverneur, New York


         We have audited the accompanying consolidated statements of financial
condition of Gouverneur Bancorp, Inc. and its subsidiary as of September 30,
2004 and 2003, and the related consolidated statements of income, shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

         We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gouverneur
Bancorp, Inc. and its subsidiary as of September 30, 2004 and 2003, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.



                                             /s/ BEARD MILLER COMPANY LLP


Harrisburg, Pennsylvania
November 12, 2004
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                                               September 30,
                                                                                         ------------------------
                                                                                            2004          2003
                                                                                         ----------    ----------
                                                                                              (In Thousands)
                                     ASSETS
<S>                                                                                      <C>           <C>
   Cash and due from banks                                                               $    1,817    $    1,762
   Interest bearing deposits with banks                                                         898         2,526
                                                                                         ----------    ----------

      Cash and Cash Equivalents                                                               2,715         4,288

   Securities available for sale                                                             13,797        17,473
   Securities held to maturity, fair value 2004 $248; 2003 $402                                 251           399
   Loans receivable, net of allowance for loan losses 2004 $755; 2003 $655                   80,159        64,738
   Investment in FHLB stock, at cost                                                          1,150           610
   Investment in life insurance                                                               3,582            --
   Bank premises and equipment, net                                                           1,493         1,484
   Accrued interest receivable and other assets                                               1,022           964
                                                                                         ----------    ----------

      Total Assets                                                                       $  104,169    $   89,956
                                                                                         ==========    ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES

   Deposits:
     Non-interest bearing demand                                                         $    1,327    $      806
     NOW and money market                                                                    10,710         9,409
     Savings                                                                                 20,038        19,157
     Time                                                                                    29,523        29,051
                                                                                         ----------    ----------

      Total Deposits                                                                         61,598        58,423


   Advances from Federal Home Loan Bank                                                      23,000        12,200
   Accrued interest payable and other liabilities                                             1,621         1,776
                                                                                         ----------    ----------

      Total Liabilities                                                                      86,219        72,399
                                                                                         ----------    ----------

SHAREHOLDERS' EQUITY

   Preferred stock, par value $.01 per share; authorized 1,000,000 shares; none issued           --            --
   Common stock, par value $.01 per share; authorized 9,000,000 shares;
     issued 2,384,040 shares                                                                     24            24
   Paid-in capital                                                                            4,642         4,577
   Retained earnings                                                                         13,632        13,365
   Treasury stock, at cost, 2004 100,931 shares; 2003 106,156 shares                           (511)         (537)
   Accumulated other comprehensive income                                                       451           487
   Unearned common stock held by management recognition plan                                    (57)          (85)
   Unallocated common stock held by employee stock ownership plan                              (231)         (274)
                                                                                         ----------    ----------

      Total Shareholders' Equity                                                             17,950        17,557
                                                                                         ----------    ----------

      Total Liabilities and Shareholders' Equity                                         $  104,169    $   89,956
                                                                                         ==========    ==========
</TABLE>

See notes to consolidated financial statements.
--------------------------------------------------------------------------------
                                        2
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                           Years Ended September 30,
                                                           -------------------------
                                                               2004         2003
                                                            ----------   ----------
                                                       (In Thousands, Except Per Share Data)
<S>                                                         <C>          <C>
INTEREST INCOME
   Loans receivable, including fees                         $    4,836   $    4,413
   Securities:
     Taxable                                                       513          788
     Tax-exempt                                                     38           --
   Other                                                            16           22
                                                            ----------   ----------

      Total Interest Income                                      5,403        5,223
                                                            ----------   ----------

INTEREST EXPENSE
   Deposits                                                      1,008        1,301
   Borrowings                                                      640          605
                                                            ----------   ----------

      Total Interest Expense                                     1,648        1,906
                                                            ----------   ----------

      Net Interest Income                                        3,755        3,317

PROVISION FOR LOAN LOSSES                                          135           95
                                                            ----------   ----------

      Net Interest Income after Provision for Loan Losses        3,620        3,222
                                                            ----------   ----------

OTHER INCOME
   Service charges and fees                                        182          146
   Net realized gains on sales of securities                        80           83
   Earnings on investment in life insurance                         82           --
   Other                                                           119          121
                                                            ----------   ----------

      Total Other Income                                           463          350
                                                            ----------   ----------

OTHER EXPENSES
   Salaries and employee benefits                                1,415        1,312
   Directors' fees                                                  92          101
   Occupancy and equipment                                         347          356
   Data processing                                                 135          127
   Postage and supplies                                             98          116
   Professional fees                                               158          145
   Other                                                           422          462
                                                            ----------   ----------

      Total Other Expenses                                       2,667        2,619
                                                            ----------   ----------

      Income before Income Taxes                                 1,416          953

INCOME TAX EXPENSE                                                 556          361
                                                            ----------   ----------

      Net Income                                            $      860   $      592
                                                            ==========   ==========

EARNINGS PER SHARE
   Basic                                                    $     0.39   $     0.27
                                                            ==========   ==========

   Diluted                                                  $     0.38   $     0.26
                                                            ==========   ==========
</TABLE>

See notes to consolidated financial statements.
--------------------------------------------------------------------------------
                                        3
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended September 30, 2004 and 2003
<TABLE>
<CAPTION>

                                                                                     Accumulated   Unearned  Unallocated
                                                                                        Other       Common     Common
                                         Common    Paid-in     Retained    Treasury Comprehensive Stock Held  Stock Held
                                         Stock     Capital     Earnings     Stock       Income      by MRP     by ESOP       Total
                                        --------   --------    --------    --------    --------    --------    --------    --------
                                                                           (In Thousands)
<S>                                     <C>        <C>         <C>         <C>         <C>         <C>         <C>         <C>
BALANCE - SEPTEMBER 30, 2002            $     24   $  4,570    $ 13,025    $   (543)   $    537    $    (73)   $   (312)   $ 17,228
                                                                                                                           --------
Comprehensive income:
  Net income                                  --         --         592          --          --          --          --         592
  Change in unrealized gains
    on securities available for sale,
     net of reclassification
     adjustment and tax effects               --         --          --          --         (50)         --          --         (50)
                                                                                                                           --------

  Total Comprehensive Income                                                                                                    542
                                                                                                                           --------

  Cash dividends declared, $0.26
    per share                                 --         --        (252)         --          --          --          --        (252)
  Allocation of ESOP shares
    (7,792 shares)                            --         40          --          --          --          --          38          78
  Purchase stock for MRP (6,600 shares)       --        (33)         --          --          --         (32)         --         (65)
  Amortization of MRP                         --         --          --          --          --          20          --          20
  Exercise of stock options
    (1,125 shares)                            --         --          --           6          --          --          --           6
                                        --------   --------    --------    --------    --------    --------    --------    --------

BALANCE - SEPTEMBER 30, 2003                  24      4,577      13,365        (537)        487         (85)       (274)     17,557
                                                                                                                           --------
Comprehensive income:
  Net income                                  --         --         860          --          --          --          --         860
  Change in unrealized gains
    on securities available for sale,
     net of reclassification
     adjustment and tax effects               --         --          --          --         (36)         --          --         (36)
                                                                                                                           --------

  Total Comprehensive Income                                                                                                    824
                                                                                                                           --------

  Cash dividends declared, $0.26
    per share                                 --         --        (593)         --          --          --          --        (593)
  Allocation of ESOP shares
    (8,396 shares)                            --         65          --          --          --          --          43         108
  Amortization of MRP                         --         --          --          --          --          28          --          28
  Exercise of stock options
    (5,225 shares)                            --         --          --          26          --          --          --          26
                                        --------   --------    --------    --------    --------    --------    --------    --------

BALANCE - SEPTEMBER 30, 2004            $     24   $  4,642    $ 13,632    $   (511)   $    451    $    (57)   $   (231)   $ 17,950
                                        ========   ========    ========    ========    ========    ========    ========    ========
</TABLE>

See notes to consolidated financial statements.
--------------------------------------------------------------------------------
                                        4
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         Years Ended September 30,
                                                                                       ----------------------------
                                                                                           2004            2003
                                                                                       ------------    ------------
                                                                                             (In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                    <C>             <C>
   Net income                                                                          $        860    $        592
   Adjustments to reconcile net income to net cash provided by operating activities:
     Provision for loan losses                                                                  135              95
     Depreciation                                                                               125             148
     Deferred income taxes                                                                      (45)            (46)
     Net amortization of securities premiums and discounts                                       64             120
     Net realized gains on sales of securities                                                  (80)            (83)
     Earnings on investment in life insurance                                                   (82)             --
     Allocated and earned shares of ESOP and MRP                                                136              98
     Decrease in accrued interest receivable and other assets                                    98              14
     Increase (decrease) in accrued interest payable and other liabilities                      (86)            187
                                                                                       ------------    ------------

        Net Cash Provided by Operating Activities                                             1,125           1,125
                                                                                       ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES

   Securities available for sale:
     Proceeds from sales                                                                      7,080           6,599
     Proceeds from maturities and principal reductions                                        5,526           5,247
     Purchases                                                                               (8,974)         (6,330)
   Securities held to maturity, proceeds from maturities                                        147             883
   (Increase) decrease in investment in FHLB stock                                             (540)            135
   Loans purchased                                                                             (609)         (2,464)
   Net increase in loans                                                                    (15,102)         (8,321)
   Net proceeds from sale of land                                                                --             250
   Purchase of bank owned life insurance                                                     (3,500)             --
   Purchase of bank premises and equipment                                                     (134)            (34)
                                                                                       ------------    ------------

        Net Cash Used in Investing Activities                                               (16,106)         (4,035)
                                                                                       ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES

   Net increase in deposits                                                                   3,175           5,662
   Proceeds from borrowings                                                                  12,500          (1,200)
   Repayment of borrowings                                                                   (1,700)             --
   Exercise of stock options                                                                     26               6
   Purchase of common stock for MRP                                                              --             (65)
   Cash dividends paid                                                                         (593)           (252)
                                                                                       ------------    ------------

        Net Cash Provided by Financing Activities                                            13,408           4,151
                                                                                       ------------    ------------

        Net Increase (Decrease) in Cash and Cash Equivalents                                 (1,573)          1,241

CASH AND CASH EQUIVALENTS - BEGINNING                                                         4,288           3,047
                                                                                       ------------    ------------

CASH AND CASH EQUIVALENTS - ENDING                                                     $      2,715    $      4,288
                                                                                       ============    ============

SUPPLEMENTAL CASH FLOWS INFORMATION

   Interest paid                                                                       $      1,633    $      1,913
                                                                                       ============    ============

   Income taxes paid                                                                   $        629    $        293
                                                                                       ============    ============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES

   Additions to foreclosed assets                                                      $        155    $        297
                                                                                       ============    ============
</TABLE>

See notes to consolidated financial statements.
--------------------------------------------------------------------------------
                                        5
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF OPERATIONS

Gouverneur Bancorp, Inc. (the Company) is a savings and loan holding company.
Its only subsidiary is Gouverneur Savings and Loan Association (the Bank). On
March 23, 1999, the Bank reorganized into the mutual holding company form of
organization as a wholly-owned subsidiary of the Company, a mid-tier stock
holding company that became the majority-owned subsidiary of Cambray Mutual
Holding Company.

Cambray Mutual Holding Company, a mutual holding company whose activity is not
included in the accompanying consolidated financial statements, owns 57.4% of
the outstanding common stock of the Company as of September 30, 2004.

The Bank provides financial services to individuals and businesses primarily in
St. Lawrence, Jefferson and Lewis Counties in New York State. The Bank is
subject to regulation by the Office of Thrift Supervision (OTS).


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES

Principles of Consolidation

    The consolidated financial statements include the accounts of the Company
    and its wholly-owned subsidiary, the Bank. All intercompany accounts and
    transactions have been eliminated in consolidation.

Estimates

    The preparation of financial statements in conformity with accounting
    principles generally accepted in the United States of America requires
    management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities and disclosure of contingent assets and
    liabilities at the date of the financial statements and the reported amounts
    of revenues and expenses during the reporting period. Actual results could
    differ from those estimates. Material estimates that are particularly
    susceptible to significant change in the near term relate to the
    determination of the allowance for loan losses.

Significant Group Concentrations of Credit Risk

    The Bank operates primarily in St. Lawrence, Jefferson and Lewis Counties,
    New York and, accordingly, has extended credit primarily to commercial
    entities and individuals in this area whose ability to honor their contracts
    is influenced by the region's economy. These customers are also the primary
    depositors of the Bank. The Bank is limited in extending credit by legal
    lending limits to any single borrower or group of borrowers. Note 3
    discusses the types of securities the Bank invests in and Note 4 discusses
    the types of lending the Bank engages in.

Securities

    Securities classified as available for sale are those securities that the
    Company intends to hold for an indefinite period of time but not necessarily
    to maturity. Any decision to sell a security classified as available for
    sale would be based on various factors, including significant movement in
    interest rates, changes in maturity mix of the Company's assets and
    liabilities, liquidity needs, regulatory capital considerations and other
    similar factors. Securities available for sale are carried at fair value.
    Unrealized gains and losses are reported in other comprehensive income, net
    of the related deferred tax effect. Realized gains or losses, determined on
    the basis of the cost of the specific securities sold, are included in
    earnings. Premiums and discounts are recognized in interest income using a
    method which approximates the interest method over the terms of the
    securities.


--------------------------------------------------------------------------------
                                        6
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Securities (Continued)

    Securities classified as held to maturity are those debt securities the
    Company has both the intent and ability to hold to maturity regardless of
    changes in market conditions, liquidity needs or changes in general economic
    conditions. These securities are carried at cost adjusted for the
    amortization of premium and accretion of discount, computed by the interest
    method over the terms of the securities.

    Declines in the fair value of held-to-maturity and available-for-sale
    securities below their cost that are deemed to be other than temporary are
    reflected in earnings as realized losses. In estimating other than temporary
    impairment losses, management considers (1) the length of time and the
    extent to which the fair value has been less than cost, (2) the financial
    condition and near-term prospects of the issuer, and (3) the intent and
    ability of the Company to retain its investment in the issuer for a period
    of time sufficient to allow for any anticipated recovery in fair value.

    Management determines the appropriate classification of debt securities at
    the time of purchase and re-evaluates such designation as of each balance
    sheet date.

    Federal law requires a member institution of the Federal Home Loan Bank
    system to hold stock of its district Federal Home Loan Bank according to a
    predetermined formula. This restricted stock is carried at cost.

Loans Receivable

    Loans receivable that management has the intent and ability to hold for the
    foreseeable future or until maturity or payoff are stated at their
    outstanding unpaid principal balances, net of an allowance for loan losses
    and any deferred fees and costs. Interest income is accrued on the unpaid
    principal balance. Loan origination fees, net of certain direct origination
    costs, are deferred and recognized as an adjustment of the yield (interest
    income) of the related loans. The Company is generally amortizing these
    amounts over the contractual life of the loan.

    The accrual of interest is generally discontinued when the contractual
    payment of principal or interest has become 90 days past due or management
    has serious doubts about further collectibility of principal or interest,
    even though the loan is currently performing. A loan may remain on accrual
    status if it is in the process of collection and is either guaranteed or
    well secured. When a loan is placed on nonaccrual status, unpaid interest
    credited to income in the current year is reversed and unpaid interest
    accrued in prior years is charged against the allowance for loan losses.
    Interest received on nonaccrual loans generally is either applied against
    principal or reported as interest income, according to management's judgment
    as to the collectibility of principal. Generally, loans are restored to
    accrual status when the obligation is brought current, has performed in
    accordance with the contractual terms for a reasonable period of time and
    the ultimate collectibility of the total contractual principal and interest
    is no longer in doubt.


--------------------------------------------------------------------------------
                                        7
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Allowance for Loan Losses

    The allowance for loan losses is established through provisions for loan
    losses charged against income. Loans deemed to be uncollectible are charged
    against the allowance for loan losses, and subsequent recoveries, if any,
    are credited to the allowance.

    The allowance for loan losses is maintained at a level considered adequate
    to provide for losses that can be reasonably anticipated. Management's
    periodic evaluation of the adequacy of the allowance is based on the
    Company's past loan loss experience, known and inherent risks in the
    portfolio, adverse situations that may affect the borrower's ability to
    repay, the estimated value of any underlying collateral, composition of the
    loan portfolio, current economic conditions and other relevant factors. This
    evaluation is inherently subjective as it requires material estimates that
    may be susceptible to significant change, including the amounts and timing
    of future cash flows expected to be received on impaired loans.

    The allowance consists of specific, general and unallocated components. The
    specific component relates to loans that are classified as either doubtful,
    substandard or special mention. For such loans that are also classified as
    impaired, an allowance is established when the discounted cash flows (or
    collateral value or observable market price) of the impaired loan is lower
    than the carrying value of that loan. The general component covers
    non-classified loans and is based on historical loss experience adjusted for
    qualitative factors. An unallocated component is maintained to cover
    uncertainties that could affect management's estimate of probable losses.
    The unallocated component of the allowance reflects the margin of
    imprecision inherent in the underlying assumptions used in the methodologies
    for estimating specific and general losses in the portfolio.

    A loan is considered impaired when, based on current information and events,
    it is probable that the Company will be unable to collect the scheduled
    payments of principal or interest when due according to the contractual
    terms of the loan agreement. Factors considered by management in determining
    impairment include payment status, collateral value and the probability of
    collecting scheduled principal and interest payments when due. Loans that
    experience insignificant payment delays and payment shortfalls generally are
    not classified as impaired. Management determines the significance of
    payment delays and payment shortfalls on a case-by-case basis, taking into
    consideration all of the circumstances surrounding the loan and the
    borrower, including the length of the delay, the reasons for the delay, the
    borrower's prior payment record and the amount of the shortfall in relation
    to the principal and interest owed. Impairment is measured on a loan by loan
    basis for commercial and construction loans by either the present value of
    expected future cash flows discounted at the loan's effective interest rate,
    the loan's obtainable market price or the fair value of the collateral if
    the loan is collateral dependent.

    Large groups of smaller balance homogeneous loans are collectively evaluated
    for impairment. Accordingly, the Company does not separately identify
    individual consumer and residential real estate loans for impairment
    disclosures.

Premises and Equipment

    Premises and equipment are stated at cost less accumulated depreciation.
    Depreciation expense is calculated principally on the straight-line method
    over the respective assets estimated useful lives.


--------------------------------------------------------------------------------
                                       8
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Foreclosed Real Estate

    Real estate properties acquired through, or in lieu of, loan foreclosure are
    to be sold and are initially recorded at fair value less cost to sell at the
    date of foreclosure establishing a new cost basis. After foreclosure,
    valuations are periodically performed by management and the real estate is
    carried at the lower of its carrying amount or fair value less cost to sell.
    Revenue and expenses from operations and changes in the valuation allowance
    are included in other expenses. Foreclosed real estate is included in other
    assets.

Transfers of Financial Assets

    Transfers of financial assets are accounted for as sales, when control over
    the assets has been surrendered. Control over transferred assets is deemed
    to be surrendered when (1) the assets have been isolated from the Company,
    (2) the transferee obtains the right (free from conditions that constrain it
    from taking advantage of that right) to pledge or exchange the transferred
    assets, and (3) the Company does not maintain effective control over the
    transferred assets through an agreement to repurchase them before maturity.

Income Taxes

    Deferred income tax assets and liabilities are determined based on the
    differences between financial statement carrying amounts and the tax basis
    of existing assets and liabilities. These differences are measured at the
    enacted tax rates that will be in effect when these differences reverse.
    Deferred tax assets are reduced by a valuation allowance when, in the
    opinion of management, it is more likely than not that some portion of the
    deferred tax assets will not be realized. As changes in tax laws or rates
    are enacted, deferred tax assets and liabilities are adjusted through the
    provision for income taxes. The Company and its subsidiary file a
    consolidated federal income tax return.

Advertising Costs

    The Company follows the policy of charging the costs of advertising to
    expense as incurred. Advertising expense was $54,000 and $60,000 in 2004 and
    2003, respectively.

Earnings per Common Share

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


--------------------------------------------------------------------------------
                                       9
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Earnings per Common Share (Continued)

    The following table sets forth the computations of basic and diluted
    earnings per common share:

<TABLE>
<CAPTION>
                                                                  Years Ended September 30,
                                                                 ---------------------------
                                                                     2004           2003
                                                                 ------------   ------------
                                                             (In Thousands, Except Per Share Data)
<S>                                                              <C>            <C>
          Numerator, net income                                  $        860   $        592
                                                                 ============   ============

          Denominator:
              Denominator for basic earnings per common share,
                  weighted average shares                               2,214          2,203
              Effect of dilutive options                                   32             32
                                                                 ------------   ------------

          Denominator for diluted earnings per common share,
              adjusted weighted average shares                          2,246          2,235
                                                                 ============   ============

          Basic earnings per common share                        $       0.39   $       0.27
                                                                 ============   ============

          Diluted earnings per common share                      $       0.38   $       0.26
                                                                 ============   ============
</TABLE>

Cash Flow Information

    For the purposes of reporting cash flows, cash and cash equivalents include
    cash on hand, amounts due from banks and interest-bearing deposits with
    banks.

Off-Balance Sheet Financial Instruments

    In the ordinary course of business, the Company has entered into off-balance
    sheet financial instruments consisting of commitments to extend credit. Such
    financial instruments are recorded in the statements of financial condition
    when they become payable.

Employee Stock Ownership Plan

    The Company sponsors a non-contributory Employee Stock Ownership Plan (ESOP)
    covering substantially all employees. Employer contributions are
    discretionary and there is no guarantee that a contribution will be made
    during any particular year. However, the Company will make annual
    contributions sufficient to cover principal and interest due under the
    contractual terms of the ESOP loan agreement. Contributions will be in the
    form of cash or Gouverneur Bancorp, Inc. securities. The number of shares
    allocable to Plan participants is based on employee compensation levels.
    Accordingly, as shares are committed to be released to participants, the
    Company reports compensation expense equal to the current market price of
    the shares and the shares become outstanding for earnings per share
    computations. Dividends paid on allocated shares are credited to
    participants' accounts.


--------------------------------------------------------------------------------
                                       10
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Stock Compensation Plans

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

    The following table illustrates the effect on net income and earnings per
    share if the Company had applied the fair value recognition provisions of
    SFAS No. 123, "Accounting for Stock-Based Compensation," to the stock option
    plan.

<TABLE>
<CAPTION>
                                                                              Years Ended
                                                                             September 30,
                                                                     ----------------------------
                                                                         2004            2003
                                                                     ------------    ------------
                                                                  (In Thousands, Except Per Share Data)
<S>                                                                  <C>             <C>
          Net income, as reported                                    $        860    $        592
              Total stock-based employee compensation expense
                  determined under fair value based method for all
                  awards, net of related taxes                                (40)            (36)
              Compensation expense recorded in statements of
                  income, net of related taxes                                 16              12
                                                                     ------------    ------------

          Pro forma net income                                       $        836    $        568
                                                                     ============    ============

          Earnings per share (basic):
              As reported                                            $       0.39    $       0.27
              Pro forma                                              $       0.38    $       0.26

          Earnings per share (diluted):
              As reported                                            $       0.38    $       0.26
              Pro forma                                              $       0.37    $       0.25
</TABLE>

--------------------------------------------------------------------------------
                                       11
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Comprehensive Income

    Accounting principles generally require that recognized revenue, expenses,
    gains and losses be included in net income. Although certain changes in
    assets and liabilities, such as unrealized gains and losses on available for
    sale securities, are reported as a separate component of the equity section
    of the statement of financial condition, such items, along with net income,
    are components of comprehensive income.

    The components of other comprehensive income and related tax effects are as
    follows:

<TABLE>
<CAPTION>
                                                                                       Years Ended
                                                                                       September 30,
                                                                               ----------------------------
                                                                                   2004            2003
                                                                               ------------    ------------
                                                                                      (In Thousands)
<S>                                                                            <C>             <C>
          Unrealized holding gains (losses) on available for sale securities   $         21    $         (1)
          Reclassification adjustment for gains realized in income                      (80)            (83)
                                                                               ------------    ------------

                Net Unrealized Losses                                                   (59)            (84)

          Income tax                                                                     23              34
                                                                               ------------    ------------

                  Net of Tax Amount                                            $        (36)   $        (50)
                                                                               ============    ============
</TABLE>

Segment Reporting

    The Company acts as an independent community financial service provider and
    offers traditional banking and related financial services to individual and
    business customers. Through its branch and automated teller machine network,
    the Company offers a full array of commercial and retail financial services,
    including the taking of time, savings and demand deposits; the making of
    commercial, consumer and mortgage loans; and the providing of safe deposit
    services.

    Management does not separately allocate expenses, including the cost of
    funding loan demand, between the commercial and retail operations of the
    Company. As such, discrete information is not available and segment
    reporting would not be meaningful.


--------------------------------------------------------------------------------
                                       12
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SECURITIES

The amortized cost and fair value of securities were as follows:

<TABLE>
<CAPTION>
                                                    September 30, 2004
                                 -----------------------------------------------------------
                                                   Gross           Gross
                                  Amortized      Unrealized      Unrealized        Fair
                                     Cost          Gains           Losses          Value
                                 ------------   ------------    ------------    ------------
                                                       (In Thousands)
<S>                              <C>            <C>             <C>             <C>
AVAILABLE FOR SALE
    U.S. Government agencies     $      6,335   $         78    $        (28)   $      6,385
    Mortgage-backed securities          5,282             43             (21)          5,304
    Municipal securities                1,276             19              (9)          1,286
                                 ------------   ------------    ------------    ------------
                                       12,893            140             (58)         12,975

    Equity securities                      10            670              --             680
    Mutual funds                          142             --              --             142
                                 ------------   ------------    ------------    ------------

                                 $     13,045   $        810    $        (58)   $     13,797
                                 ============   ============    ============    ============

HELD TO MATURITY
    Mortgage-backed securities   $        251   $         --    $         (3)   $        248
                                 ============   ============    ============    ============

                                                    September 30, 2003
                                 -----------------------------------------------------------

AVAILABLE FOR SALE
    U.S. Government agencies     $      8,774   $        107    $         (5)   $      8,876
    Mortgage-backed securities          5,476             86              --           5,562
    Municipal securities                  524              7              --             531
                                 ------------   ------------    ------------    ------------

                                       14,774            200              (5)         14,969
    Equity securities                      12            624              --             636
    Mutual funds                        1,875             --              (7)          1,868
                                 ------------   ------------    ------------    ------------

                                 $     16,661   $        824    $        (12)   $     17,473
                                 ============   ============    ============    ============

HELD TO MATURITY
    Mortgage-backed securities   $        399   $          4    $         (1)   $        402
                                 ============   ============    ============    ============
</TABLE>

--------------------------------------------------------------------------------
                                       13
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SECURITIES (CONTINUED)

The amortized cost and fair value of securities as of September 30, 2004 by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                               Available for Sale           Held to Maturity
                                         ---------------------------   ---------------------------
                                          Amortized        Fair          Amortized       Fair
                                            Cost           Value           Cost          Value
                                         ------------   ------------   ------------   ------------
                                                              (In Thousands)
<S>                                      <C>            <C>            <C>            <C>
Due in one year or less                  $        502   $        502   $         --   $         --
Due after one year through five years             756            803             --             --
Due after five years through ten years          2,003          2,039             --             --
Due after ten years                             4,350          4,327             --             --
                                         ------------   ------------   ------------   ------------

                                                7,611          7,671             --             --
Mortgage-backed securities                      5,282          5,304            251            248
Mutual funds                                      142            142             --             --
Equity securities                                  10            680             --             --
                                         ------------   ------------   ------------   ------------

                                         $     13,045   $     13,797   $        251   $        248
                                         ============   ============   ============   ============
</TABLE>

Gross realized gains on sales of securities available for sale were $90,000 in
2004 and $99,000 in 2003. Gross realized losses on sales of securities available
for sale were $10,000 in 2004 and $16,000 in 2003. The income tax provision
includes $32,000 and $33,000 for the years ended September 30, 2004 and 2003,
respectively, of income tax expense on net realized securities gains and losses.

Information pertaining to securities with gross unrealized losses at September
30, 2004, aggregated by investment category and length of time that individual
securities have been in a continuous loss position, follows:

<TABLE>
<CAPTION>
                                  Less Than Twelve Months          Over Twelve Months
                                ---------------------------   ---------------------------
                                   Gross                         Gross
                                 Unrealized       Fair         Unrealized       Fair
                                   Losses         Value          Losses         Value
                                ------------   ------------   ------------   ------------
                                                      (In Thousands)
<S>                             <C>            <C>            <C>            <C>
Securities Available for Sale
    U.S. Government agencies    $         10   $      1,385   $         18   $      1,492
    Mortgage-backed                       21          2,056             --             --
    Municipal                              9            442             --             --
                                ------------   ------------   ------------   ------------

                                          40          3,883             18          1,492

Securities Held to Maturity
    Mortgage-backed                        3            145             --             --
                                ------------   ------------   ------------   ------------

                                $         43   $      4,028   $         18   $      1,492
                                ============   ============   ============   ============
</TABLE>

--------------------------------------------------------------------------------
                                       14
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SECURITIES (CONTINUED)

In management's opinion, the unrealized losses primarily reflect changes in
interest rates subsequent to the acquisition of specific securities. At
September 30, 2004, the Company had 16 securities in an unrealized loss
position. None of the losses exceeds 3% of the amortized cost of the related
security. The Company has the intent and the ability to hold such securities
until maturity or market price recovery. Management believes that the unrealized
losses represent temporary impairment of the securities.

NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

The components of loans receivable at September 30 were as follows:

                                            2004            2003
                                        ------------    ------------
                                              (In Thousands)

          Real estate:
              Residential               $     55,488    $     45,472
              Commercial                       4,108           3,624
              Construction                     2,414             195
          Commercial and agricultural          3,618           3,378
          Automobile                           6,042           6,679
          Home equity                          5,678           2,993
          Passbook                               408             369
          Other                                2,459           2,186
                                        ------------    ------------

                                              80,215          64,896
          Deferred fees and costs                699             497
          Allowance for loan losses             (755)           (655)
                                        ------------    ------------

                                        $     80,159    $     64,738
                                        ============    ============

The following presents changes in the allowance for loan losses:

                                                  Years Ended
                                                 September 30,
                                         ----------------------------
                                             2004            2003
                                         ------------    ------------
                                               (In Thousands)

         Balance, beginning              $        655    $        671
             Provision for loan losses            135              95
             Recoveries                            86              77
             Loans charged off                   (121)           (188)
                                         ------------    ------------

         Balance, ending                 $        755    $        655
                                         ============    ============


--------------------------------------------------------------------------------
                                       15
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

The recorded investment in impaired loans requiring an allowance for loan losses
was $607,000 and $436,000 at September 30, 2004 and 2003, respectively. The
related allowance for loan losses associated with these loans was $55,000 and
$42,000 at September 30, 2004 and 2003, respectively. For the years ended
September 30, 2004 and 2003, the average recorded investment in these impaired
loans was $661,000 and $443,000, respectively. The interest income recognized on
these impaired loans was not significant for the years ended September 30, 2004
and 2003.

Loans on which the accrual of interest has been discontinued amounted to
$252,000 and $478,000 at September 30, 2004 and 2003, respectively. The interest
income foregone on nonaccruing loans was approximately $10,000 and $34,000
during the years ended September 30, 2004 and 2003, respectively. Loan balances
past due 90 days or more and still accruing interest, but which management
expects will eventually be paid in full, amounted to $-0- at September 30, 2004
and 2003.


NOTE 5 - PREMISES AND EQUIPMENT

Components of premises and equipment at September 30 are as follows:

                                            2004            2003
                                        ------------    ------------
                                              (In Thousands)

           Land                         $        422    $        334
           Buildings and improvements          1,262           1,254
           Furniture and equipment               767             729
                                        ------------    ------------

                                               2,451           2,317
           Accumulated depreciation             (958)           (833)
                                        ------------    ------------

                                        $      1,493    $      1,484
                                        ============    ============

Depreciation expense for the years ended September 30, 2004 and 2003 amounted to
$125,000 and $148,000, respectively.


NOTE 6 - DEPOSITS

Aggregate time deposits in denominations of $100,000 or more were $5,228,000 and
$5,436,000 at September 30, 2004 and 2003, respectively.

At September 30, 2004, the scheduled maturities of time deposits are as follows
(in thousands):

                2005                         $   16,604
                2006                              6,861
                2007                              4,268
                2008                              1,790
                                             ----------

                                             $   29,523
                                             ==========


--------------------------------------------------------------------------------
                                       16
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - DEPOSITS (CONTINUED)

A summary of interest expense is as follows:

                                              Years Ended
                                             September 30,
                                      ---------------------------
                                          2004           2003
                                      ------------   ------------
                                            (In Thousands)

               Savings                $        206   $        321
               Time                            740            907
               NOW and money market             62             73
                                      ------------   ------------

                                      $      1,008   $      1,301
                                      ============   ============

NOTE 7 - BORROWED FUNDS

Borrowed funds from the Federal Home Loan Bank of New York at September 30 are
summarized as follows:

<TABLE>
<CAPTION>
                                                      2004                           2003
                                          ----------------------------   ----------------------------
                                                            Weighted                       Weighted
                                                            Average                        Average
                                                            Interest                       Interest
                                             Amount           Rate          Amount           Rate
                                          ------------    ------------   ------------    ------------
                                                             (Dollars in Thousands)
<S>                                       <C>                     <C>    <C>                     <C>
Securities sold under agreements to
    repurchase                            $      6,000            4.19%  $      5,700            4.59%
Fixed term advances                             17,000            3.24%         6,500            4.72%
                                          ------------                   ------------

                                          $     23,000            3.49%  $     12,200            4.66%
                                          ============                   ============
</TABLE>

Future contractual maturities of the securities sold under agreements to
repurchase and advances from the Federal Home Loan Bank of New York (FHLBNY) are
as follows (in thousands):

                Years ending September 30:
                    2005                                 $    7,000
                    2006                                      1,500
                    2007                                      2,500
                    2008                                      2,000
                    2011                                     10,000
                                                         ----------

                                                         $   23,000
                                                         ==========


--------------------------------------------------------------------------------
                                       17
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - BORROWED FUNDS (CONTINUED)

The securities sold under agreements to repurchase are secured by
mortgage-backed securities and agency securities. The collateral underlying the
securities sold under agreements to repurchase had a carrying value of
$6,372,000 and a fair value of $6,370,000 at September 30, 2004 and a carrying
value of $6,695,000 and a fair value of $6,808,000 at September 30, 2003. The
securities sold under agreements to repurchase have fixed interest rates.

The Company utilizes advance programs offered by the FHLBNY including a line of
credit agreement with an available limit of $16,638,000 at September 30, 2004.
Under terms of a blanket collateral agreement with the FHLBNY, outstanding
advances are secured by certain qualifying assets not otherwise pledged. The
advances from the FHLBNY have fixed interest rates.


NOTE 8 - EMPLOYEE BENEFIT PLANS

401(k) Plan

    The Company has a defined contribution 401(k) Retirement Plan (Plan) for all
    eligible salaried employees. Employees are permitted to contribute up to 15%
    of base pay to the Plan, subject to certain limitations. The Company
    contributes 3% of each eligible employee's salary. Additional Company
    contributions to the Plan are determined annually by the Board of Directors.
    For the years ended September 30, 2004 and 2003, expense for the Plan
    amounted to $28,000 and $47,000, respectively.

Deferred Compensation Plan

    The Company has a nonqualified deferred compensation plan for directors,
    under which directors may elect to defer all or part of their director fees,
    and a nonqualified deferred compensation plan for the President. At
    September 30, 2004 and 2003, deferred compensation included in other
    liabilities aggregated approximately $310,000 and $236,000, respectively.
    Deferred compensation expense for the years ended September 30, 2004 and
    2003 amounted to $38,000 and $54,000, respectively.

Supplemental Retirement Plans

    In 2004, the Company adopted supplemental retirement and life insurance
    plans for the benefit of certain officers and directors. At September 30,
    2004, other liabilities include approximately $67,000 accrued under these
    plans. The expense was $67,000 relating to the supplemental retirement plans
    for 2004.

    To fund the benefits under these plans, the Company is the owner of single
    premium life insurance policies on participants in the non-qualified
    retirement plans. At September 30, 2004, the cash value of the policies was
    $3,582,000.

Employee Stock Ownership Plan

    The Company sponsors a non-contributory Employee Stock Ownership Plan (ESOP)
    covering substantially all employees. In connection with establishing the
    Employee Stock Ownership Plan (ESOP) in 1999, the ESOP borrowed $429,000
    from the Company to purchase 85,825 common shares of the Company's stock.
    The loan is being repaid in ten equal annual installments through 2009. The
    loan bears interest at 7.75%. Compensation expense for the ESOP was $108,000
    and $78,000 for the years ended September 30, 2004 and 2003, respectively.


--------------------------------------------------------------------------------
                                       18
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - EMPLOYEE BENEFIT PLANS (CONTINUED)

The status of the ESOP shares at September 30 are as follows:

                                                2004         2003
                                             ----------   ----------

           Shares released for allocation        39,509       31,113
           Unreleased shares                     46,316       54,712
                                             ----------   ----------

                 Total ESOP Shares               85,825       85,825
                                             ==========   ==========

           Fair value of unreleased shares   $  648,000   $  602,000
                                             ==========   ==========

NOTE 9 - INCOME TAXES

The components of the provision for income taxes are as follows:

                                                Years Ended
                                               September 30,
                                       ----------------------------
                                           2004            2003
                                       ------------    ------------
                                             (In Thousands)

            Federal:
                Current                $        477    $        329
                Deferred                        (37)            (37)
                                       ------------    ------------

                                                440             292
                                       ------------    ------------
            State:
                Current                         124              78
                Deferred                         (8)             (9)
                                       ------------    ------------

                                                116              69
                                       ------------    ------------

                                       $        556    $        361
                                       ============    ============

A reconciliation of the statutory federal income tax at a rate of 34% to the
income tax expense included in the statements of income for the years ended
September 30, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                2004                      2003
                                                       -----------------------   -----------------------
                                                                       % of                      % of
                                                                      Pretax                    Pretax
                                                         Amount       Income       Amount       Income
                                                       ----------   ----------   ----------   ----------
                                                                     (Dollars in Thousands)
<S>                                                    <C>                <C>    <C>                <C>
         Federal income tax at statutory rate          $      481         34.0%  $      324         34.0%
         State tax, net of federal benefit                     77          5.4           46          4.8
         Other                                                 (2)        (0.1)          (9)        (1.0)
                                                       ----------   ----------   ----------   ----------

                                                       $      556         39.3%  $      361         37.8%
                                                       ==========   ==========   ==========   ==========
</TABLE>

--------------------------------------------------------------------------------
                                       19
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 - INCOME TAXES (CONTINUED)

The net deferred tax liability included in other liabilities in the accompanying
statements of financial condition includes the following amounts of deferred tax
assets and liabilities:

                                                      2004          2003
                                                   ----------    ----------
                                                        (In Thousands)

    Deferred tax assets:
        Allowance for loan losses                  $      294    $      257
        Deferred compensation                             148            95
        Other                                              42            57
                                                   ----------    ----------

          Total Deferred Tax Assets                       484           409
                                                   ----------    ----------

    Deferred tax liabilities:
        Net unrealized gains on securities                301           324
        Premises and equipment                             35            40
        Net deferred loan costs                           273           195
        Other                                              15            58
                                                   ----------    ----------

          Total Deferred Tax Liabilities                  624           617
                                                   ----------    ----------

          Net Deferred Tax Liability               $     (140)   $     (208)
                                                   ==========    ==========

Retained earnings include $1,274,000 at September 30, 2004 and 2003, for which
no provision for federal income tax has been made. These amounts represent
deductions for bad debt reserves for tax purposes which were only allowed to
savings institutions which met certain definitional tests prescribed by the
Internal Revenue Code of 1986, as amended. The Small Business Job Protection Act
of 1996 eliminated the special bad debt deduction granted solely to thrifts.
Under the terms of the Act, there would be no recapture of the pre-1988 (base
year) reserves. However, these pre-1988 reserves would be subject to recapture
under the rules of the Internal Revenue Code if the Company itself pays a cash
dividend in excess of earnings and profits, or liquidates. The Act also provides
for the recapture of deductions arising from "applicable excess reserve" defined
as the total amount of reserve over the base year reserve. The Company's total
reserve exceeds the base year reserve and deferred taxes have been provided for
this excess.


NOTE 10 - TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS

Certain directors and executive officers of the Company, their families and
their affiliates are customers of the Bank. Any transactions with such parties,
including loans and commitments, were in the ordinary course of business at
normal terms, including interest rates and collateralization, prevailing at the
time and did not represent more than normal risks. At September 30, 2004 and
2003, such loans amounted to $321,000 and $316,000, respectively. During 2004,
new loans to such related parties totaled $60,000 and repayments aggregated
$55,000.


--------------------------------------------------------------------------------
                                       20
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - REGULATORY MATTERS

The Company and Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material affect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance sheet items as calculated
under regulatory accounting practices. The Company's and the Bank's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets, and of Tier 1 capital to average assets. Management
believes, as of September 30, 2004, that the Company and the Bank meets all
capital adequacy requirements to which they are subject.

As of September 30, 2004, the most recent notification from the regulators has
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. There are no conditions or events since that
notification that management believes have changed the Bank's category.

The Bank's actual capital amounts and ratios are presented in the table:

<TABLE>
<CAPTION>
                                                                                                         To be Well
                                                                                                         Capitalized
                                                                                                         under Prompt
                                                                                  For Capital            Corrective
                                                             Actual            Adequacy Purposes      Action Provisions
                                                       ------------------      -----------------      -----------------
                                                       Amount      Ratio       Amount     Ratio       Amount     Ratio
                                                       -------    -------      -------   -------      -------   -------
                                                                            (Dollars in Thousands)
<S>                                                    <C>           <C>       <C>          <C>       <C>         <C>
As of September 30, 2004:

    Total risk-based capital                           $18,274       31.0%     $>4,713      >8.0%     $>5,892     >10.0%
                                                                                -           -          -          -
    Core capital (to risk-weighted assets)              17,262       29.3       >2,357      >4.0       >3,535     > 6.0
                                                                                -           -          -          -
    Core capital (to adjusted total assets)             17,262       16.6       >3,114      >3.0       >5,191     > 5.0
                                                                                -           -          -          -
    Tangible capital (to adjusted total
        assets)                                         17,262       16.6       >1,557      >1.5          N/A       N/A
                                                                                -           -
As of September 30, 2003:

    Total risk-based capital                           $17,488       36.4%     $>3,839      >8.0%     $>4,799     >10.0%
                                                                                -           -          -          -
    Core capital (to risk-weighted assets)              16,887       35.2       >1,920      >4.0       >2,879     > 6.0
                                                                                -           -          -          -
    Core capital (to adjusted total assets)             16,887       18.9       >2,680      >3.0       >4,466     > 5.0
                                                                                -           -          -          -
    Tangible capital (to adjusted total
        assets)                                         16,887       18.9       >1,340      >1.5          N/A       N/A
                                                                                -           -
</TABLE>

The Company's ratios do not differ significantly from the Bank's ratios
presented above.

The Bank is required to maintain average cash reserve balances in vault cash or
with the Federal Reserve Bank. The amount of these restricted cash reserve
balances at September 30, 2004 and 2003 was approximately $321,000 and $285,000,
respectively.


--------------------------------------------------------------------------------
                                       21
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - STOCK OPTION AND MANAGEMENT RECOGNITION PLANS

The Stock Option Plan provides for awards in the form of stock options,
representing a right to purchase up to 107,281 shares of common stock. All
options have a ten-year term and vest ratably over a five-year period.

A summary of the Company's stock option activity and related information for the
years ended September 30 follows:

<TABLE>
<CAPTION>
                                                     2004                      2003
                                            -----------------------   -----------------------
                                                         Weighted                  Weighted
                                                          Average                    Average
                                                          Exercise                   Exercise
                                              Options      Price        Options       Price
                                            ----------   ----------   ----------   ----------
<S>                                             <C>      <C>              <C>      <C>
       Outstanding, beginning of year           62,625   $     5.48       68,250   $     5.42
           Forfeited                                --           --       (4,500)        4.75
           Exercised                            (5,225)        5.19       (1,125)        4.75
                                            ----------   ----------   ----------   ----------

       Outstanding, end of year                 57,400   $     5.50       62,625   $     5.48
                                            ==========   ==========   ==========   ==========

       Exercisable, at end of year              40,650   $     5.14
                                            ==========   ==========
</TABLE>

Exercise prices for options outstanding as of September 30, 2004 ranged from
$4.75 to $9.30 per share. The weighted average remaining contractual life is 5.5
years. Options available for grant at September 30, 2004 were 43,531. No options
were granted in the years ended September 30, 2004 and 2003.

The Company did not award any shares of stock under the MRP during the years
ended September 30, 2004 and 2003. Compensation expense for MRP shares granted
in prior years was $28,000 and $20,000 for the years ended September 30, 2004
and 2003, respectively.


NOTE 13 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and purchase loans.
Those instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statements of financial
condition.

The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and purchase
loans is represented by the contractual amount of those instruments. The Bank
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.


--------------------------------------------------------------------------------
                                       22
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS (CONTINUED)

A summary of the Bank's financial instrument commitments is as follows:

                                                           September 30,
                                                     -----------------------
                                                        2004         2003
                                                     ----------   ----------
                                                          (In Thousands)

   Commitments to grant loans                        $    6,516   $    5,367
   Commitments to purchase loans                             --        1,034
   Unfunded commitments under lines of credit             2,751        2,029
                                                     ----------   ----------

                                                     $    9,267   $    8,430
                                                     ==========   ==========

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since some of the commitments are expected to expire
without being drawn upon, the total commitment amount does not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation of the customer and generally consists of real estate.


NOTE 14 - RETAINED EARNINGS

Cambray Mutual Holding Company (Cambray) waived receipt of its March and
September 2003 dividends in the amount of $341,000 from the Company. The total
dividends waived by Cambray were $747,000 as of September 30, 2004. The
dividends waived by Cambray are considered as a restriction on the retained
earnings of the Company.


--------------------------------------------------------------------------------
                                       23
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Management uses its best judgment in estimating the fair value of the Company's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates herein are not necessarily indicative of the amounts the Company
could have realized in a sales transaction on the dates indicated. The estimated
fair value amounts have been measured as of their respective year ends and have
not been re-evaluated or updated for purposes of these consolidated financial
statements subsequent to those respective dates. As such, the estimated fair
values of these financial instruments subsequent to the respective reporting
dates may be different than the amounts reported at each year end.

The following information should not be interpreted as an estimate of the fair
value of the entire Company since a fair value calculation is only provided for
a limited portion of the Company's assets and liabilities. Due to a wide range
of valuation techniques and the degree of subjectivity used in making the
estimates, comparisons between the Company's disclosures and those of other
companies may not be meaningful. The following methods and assumptions were used
to estimate the fair values of the Company's financial instruments at September
30, 2004 and 2003:

     o    For cash and due from banks and interest-bearing deposits with banks,
          the carrying amount is a reasonable estimate of fair value.

     o    For securities, fair value equals quoted market price, if available.
          If a quoted market price is not available, fair value is estimated
          using quoted market prices for similar securities.

     o    The fair value of loans is estimated by discounting the future cash
          flows using the current rates at which similar loans would be made to
          borrowers with similar credit ratings and for the same remaining
          maturities.

     o    The fair value of the investment in FHLB stock is the carrying amount.

     o    The fair value of accrued interest receivable and accrued interest
          payable is the carrying amount.

     o    The fair value of demand deposits, savings accounts, NOW and money
          market accounts is the amount payable on demand at the reporting date.
          The fair value of fixed-maturity certificates of deposit is estimated
          using the rates currently offered for deposits of similar remaining
          maturities.

     o    The fair value of securities sold under agreements to repurchase and
          advances from the Federal Home Loan Bank are estimated using
          discounted cash flow analyses based upon rates currently available to
          the Bank for similar types of borrowing arrangements.

     o    The fair value of off-balance sheet financial instruments is estimated
          using the fees currently charged to enter into similar agreements.


--------------------------------------------------------------------------------
                                       24
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The estimated fair values of the Bank's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                      September 30, 2004        September 30, 2003
                                                   -----------------------   -----------------------
                                                    Carrying      Fair        Carrying      Fair
                                                     Amount       Value        Amount       Value
                                                   ----------   ----------   ----------   ----------
                                                                    (In Thousands)
<S>                                                <C>          <C>          <C>          <C>
Financial assets:
    Cash and due from banks and interest-bearing
        deposits with banks                        $    2,715   $    2,715   $    4,288   $    4,288
    Securities                                         14,048       14,045       17,872       17,875
    Loans receivable, net                              80,159       81,802       64,738       67,449
    Investment in FHLB stock                            1,150        1,150          610          610
    Accrued interest receivable                           458          458          399          399

Financial liabilities:
    Deposits                                           61,598       61,689       58,423       58,653
    Borrowed funds                                     23,000       23,649       12,200       13,262
    Accrued interest payable                              113          113           98           98

Off-balance sheet financial instruments                    --           --           --           --
</TABLE>

NOTE 16 - GOUVERNEUR BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION

CONDENSED STATEMENTS OF FINANCIAL CONDITION

                                                          September 30,
                                                    -----------------------
                                                       2004         2003
                                                    ----------   ----------
                                                         (In Thousands)

                                     ASSETS

     Cash                                           $      102   $       77
     Investment in bank subsidiary                      17,713       17,374
     Other assets                                          135          106
                                                    ----------   ----------

                                                    $   17,950   $   17,557
                                                    ==========   ==========

                              SHAREHOLDERS' EQUITY

     Shareholders' equity                           $   17,950   $   17,557
                                                    ==========   ==========


--------------------------------------------------------------------------------
                                       25
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16 - GOUVERNEUR BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
   (CONTINUED)

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME

                                                                                  Years Ended
                                                                                 September 30,
                                                                           ------------------------
                                                                              2004          2003
                                                                           ----------    ----------
                                                                                (In Thousands)
<S>                                                                        <C>           <C>
         Income:
             Dividends from subsidiary                                     $      600    $       64
             Interest                                                              25            31
         Other expenses                                                           (74)          (92)
                                                                           ----------    ----------

               Income before Equity in Undistributed Earnings of                  551             3
                  Subsidiary

         Equity in undistributed earnings of subsidiary                           309           589
                                                                           ----------    ----------

               Net Income                                                  $      860    $      592
                                                                           ==========    ==========

CONDENSED STATEMENTS OF CASH FLOWS

                                                                                  Years Ended
                                                                                 September 30,
                                                                           ------------------------
                                                                              2004          2003
                                                                           ----------    ----------
                                                                                (In Thousands)

         CASH FLOWS FROM OPERATING ACTIVITIES
             Net income                                                    $      860    $      592
             Adjustments to reconcile net income to net cash provided by
                 operating activities:
                 Equity in undistributed earnings of bank subsidiary             (309)         (589)
                 Other, net                                                         2            11
                                                                           ----------    ----------

               Net Cash Provided by Operating Activities                          553            14
                                                                           ----------    ----------

         CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
             Principal collected on ESOP note receivable                           39            37
                                                                           ----------    ----------

         CASH FLOWS FROM FINANCING ACTIVITIES
             Exercise of stock options                                             26             6
             Purchase of stock for MRP                                             --           (65)
             Cash dividends paid                                                 (593)         (252)
                                                                           ----------    ----------

               Net Cash Used in Financing Activities                             (567)         (311)
                                                                           ----------    ----------

               Increase (Decrease) in Cash and Cash Equivalents                    25          (260)

         CASH AND CASH EQUIVALENTS - BEGINNING                                     77           337
                                                                           ----------    ----------

         CASH AND CASH EQUIVALENTS - ENDING                                $      102    $       77
                                                                           ==========    ==========
</TABLE>

--------------------------------------------------------------------------------
                                       26
<PAGE>

GOUVERNEUR BANCORP, INC.
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17 - QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

The following represents summarized quarterly financial data of the Company
which, in the opinion of management, reflects all adjustments necessary for a
fair presentation (in thousands, except per share data):
<TABLE>
<CAPTION>

                                                           Three Months Ended
                                      ------------------------------------------------------------
2004                                  December 31       March 31        June 30       September 30
-----------------------------------   ------------    ------------    ------------    ------------
<S>                                   <C>             <C>             <C>             <C>
Interest income                       $      1,329    $      1,339    $      1,336    $      1,399
Interest expense                               405             403             405             435
                                      ------------    ------------    ------------    ------------

      Net Interest Income                      924             936             931             964

Provision for loan losses                      (25)            (25)            (35)            (50)
Other expenses, net of other income           (558)           (558)           (512)           (576)
                                      ------------    ------------    ------------    ------------

      Income before Income Taxes               341             353             384             338

Income tax expense                             134             130             145             147
                                      ------------    ------------    ------------    ------------

      Net Income                      $        207    $        223    $        239    $        191
                                      ============    ============    ============    ============

Earnings per share:
    Basic                             $       0.09    $       0.10    $       0.11    $       0.09
                                      ============    ============    ============    ============

    Diluted                           $       0.09    $       0.10    $       0.11    $       0.08
                                      ============    ============    ============    ============


                                                           Three Months Ended
                                      ------------------------------------------------------------
2003                                  December 31       March 31        June 30       September 30
-----------------------------------   ------------    ------------    ------------    ------------

Interest income                       $      1,321    $      1,343    $      1,275    $      1,284
Interest expense                               525             493             449             439
                                      ------------    ------------    ------------    ------------

      Net Interest Income                      796             850             826             845

Provision for loan losses                      (40)            (10)            (25)            (20)
Other expenses, net of other income           (599)           (562)           (543)           (565)
                                      ------------    ------------    ------------    ------------

      Income before Income Taxes               157             278             258             260

Income tax expense                              59             108              97              97
                                      ------------    ------------    ------------    ------------

      Net Income                      $         98    $        170    $        161    $        163
                                      ============    ============    ============    ============

Earnings per share:
    Basic                             $        .04    $        .08    $        .07    $        .08
                                      ============    ============    ============    ============

    Diluted                           $        .04    $        .08    $        .07    $        .07
                                      ============    ============    ============    ============
</TABLE>

--------------------------------------------------------------------------------
                                       27