SOURCE: Pathfinder Bancorp, Inc.

July 28, 2005 16:10 ET

Pathfinder Bancorp, Inc. Announces Second Quarter Earnings

OSWEGO, NY -- (MARKET WIRE) -- July 28, 2005 -- Pathfinder Bancorp, Inc., the mid-tier holding company of Pathfinder Bank (NASDAQ: PBHC) (listing: PathBcp), reported net income of $234,000, or $0.10 per share, for the three months ended June 30, 2005 as compared to $522,000, or $0.21 per share for the same period in 2004. For the six months ended June 30, 2005, the Company reported net income of $383,000, or $0.16 per share, compared to $845,000, or $0.35 per share, for the same period in 2004.

"The reduction in earnings reflects higher operating expenses, primarily related to the opening of our new branch office in Central Square, New York," according to Thomas W. Schneider, President and CEO. "We are excited to be a part of the growing Central Square community and encouraged by our early reception and the branch's activity. We project, however, that it will take 18 months for the branch to achieve a breakeven deposit level."

"Earnings are being challenged by a flattening yield curve, an expanding delivery system, and increased regulatory burden cost," Schneider further stated. "Over the past year we have been working on enhancing fee income sources and improving asset quality in anticipation of these challenges. We are now actively working on strategies to streamline operations and reduce our administrative costs while not impacting our service standards."

Net interest income for the quarter ended June 30, 2005 decreased slightly when compared to the same period during 2004. Interest expense increased $130,000, or 9%, partially offset by an increase in interest income of $105,000, or 3%. Net interest rate spread decreased to 3.17% for the second quarter of 2005 from 3.22% for the same period in 2004. Average interest-earning assets increased 2% to $281.2 million in the quarter ended June 30, 2005 as compared to $276.7 million in the quarter ended June 30, 2004, while the yield on those assets increased 11 basis points to 5.47% compared to 5.36% for the same period in 2004. The increase in average earning assets is primarily attributable to a $13.8 million increase in investment securities, partially offset by a $9.3 million decrease in interest-earning deposits. Average interest-bearing liabilities increased $5.7 million, while the cost of funds increased 14 basis points to 2.29% from 2.15% for the same period in 2004. The increase in the average balance of interest-bearing liabilities resulted primarily from a $7.2 million, or 3%, growth in average deposits, partially offset by a $1.5 million decrease in borrowed funds. The growth in deposits principally occurred in short to mid-term time deposits.

Provision for loan losses for the quarter ended June 30, 2005 decreased 38% to $66,000 from $107,000 for the same period in 2004. The Company's ratio of allowance for loan losses to period end loans has increased to 1.00% at June 30, 2005 from 0.98% at December 31, 2004. Non-performing loans to period end loans have increased to 1.08% at June 30, 2005, compared to 0.99% at December 31, 2004. Overall, however, asset quality has improved significantly over the past two years through a combination of tightened credit administration and more robust collection activities.

Non-interest income, net of gains and losses from the sale of securities, loans and foreclosed real estate, increased 13% to $545,000 for the quarter ended June 30, 2005 compared to $481,000 for the same period in the prior year. The increase in non-interest income is primarily attributable to a $92,000 increase in service charges on deposit accounts and an $8,000 increase in other charges, commissions and fees, partially offset by a $33,000 decrease in loan servicing fees. Net gains and losses from the sale of securities, loans and foreclosed real estate decreased $370,000 to $1,000 for the quarter ended June 30, 2005 compared to $371,000 for the same period in the prior year.

Operating expenses increased 8% to $2.5 million for the quarter ended June 30, 2005 compared to $2.3 million for the quarter ended June 30, 2004. During the second quarter of 2005, salary and employee benefits, data processing expenses and professional and other services increased $73,000, $77,000 and $53,000, respectively. These increases were offset by a $21,000 decrease in other operating expenses. The increase in salaries and employee benefits was primarily due to the salaries and benefits associated with the personnel at the Central Square branch combined with the hiring of a Business Development Officer. The increase in data processing expenses was primarily due to software purchases and related annual maintenance charges, along with increased internet banking and check processing charges. The increase in professional and other services primarily resulted from costs associated with strategic planning and process improvement initiatives.

Pathfinder Bancorp, Inc. is the mid-tier holding company of Pathfinder Bank, a New York chartered savings bank headquartered in Oswego, New York. The Bank has seven full service offices located in its market area consisting of Oswego County. Financial highlights for Pathfinder Bancorp, Inc. are attached. Presently, the only business conducted by Pathfinder Bancorp, Inc. is the 100% ownership of Pathfinder Bank and Pathfinder Statutory Trust I.

This release may contain certain forward-looking statements, which are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact the Company's earnings in future periods. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products, and services.


                   PATHFINDER BANCORP, INC.
                    FINANCIAL HIGHLIGHTS
        (dollars in thousands except per share amounts)


                                 For the three months    For the six months
                                     ended June 30,        ended June 30,
                                      (Unaudited)           (Unaudited)
                                     2005      2004       2005       2004
                                     ----      ----       ----       ----
Condensed Income Statement
 Interest income               $    3,787 $    3,682 $    7,485 $    7,243
 Interest expense                   1,526      1,396      3,025      2,753
                               ---------- ---------- ---------- ----------
  Net interest income               2,261      2,286      4,460      4,490
 Provision for loan losses             66        107        138        295
                               ---------- ---------- ---------- ----------
  Net interest income
   after provision for loan
   losses                           2,195      2,179      4,322      4,195
 Other income                         546        852      1,035      1,530
 Other expense                      2,510      2,327      4,930      4,577
                               ---------- ---------- ---------- ----------
  Income before taxes                 231        704        427      1,148
 Provision for income taxes            (3)       182         44        303
                               ---------- ---------- ---------- ----------
  Net income                   $      234 $      522 $      383 $      845
                               ========== ========== ========== ==========

Key Earnings Ratios
 Return on average assets            0.30%      0.69%      0.25%      0.57%
 Return on average equity            4.38%      9.85%      3.57%      7.79%
 Return on average tangibl
  e equity (a)                       5.51%     12.62%      4.50%      9.90%
 Net interest margin
 (tax equivalent)                    3.30%      3.34%      3.25%      3.39%


Share and Per Share Data
 Basic weighted average
  shares outstanding            2,452,537  2,436,878  2,449,889  2,430,468
 Basic earnings per share      $     0.10 $     0.21 $     0.16 $     0.35
 Diluted earnings per share          0.09       0.21       0.15       0.34
  Cash earnings per share -
   basic (b)                         0.12       0.24       0.20       0.39
 Cash dividends per share          0.1025       0.10      0.205       0.20
Book value per share                    -          -       8.67       8.60

                               (Unaudited)          (Unaudited) (Unaudited)
                                 June 30,  December 31, June 30,   June 30,
                                     2005       2004       2004       2003
                                     ----       ----       ----       ----
Selected Balance Sheet Data
 Assets                        $  310,471 $  302,037 $  299,875 $  283,128
 Earning assets                   277,927    273,532    271,247    258,761
 Total loans                      187,943    186,952    186,210    184,641
 Deposits                         237,239    236,672    233,853    204,523
 Borrowed Funds                    43,260     35,360     36,360     48,160
 Trust Preferred Debt               5,155      5,155      5,155      5,000
 Shareholders' equity              21,678     21,826     21,049     21,488

Asset Quality Ratios
 Net loan charge-offs
 (annualized) to average loans       0.09%      0.33%      0.18%      0.33%
 Allowance for loan losses to
  period end loans                   1.00%      0.98%      0.99%      0.86%
 Allowance for loan losses to
  nonperforming loans               92.61%     98.76%     60.88%    124.37%
 Nonperforming loans to period
  end loans                          1.08%      0.99%      1.62%      0.69%
 Nonperforming assets to total
  assets                             0.94%      0.88%      1.11%      1.01%

(a) Tangible equity excludes intangible assets
(b) Cash earnings excludes noncash charges for amortization relating to
    intangibles and the allocation of ESOP stock:

                             For the three months ended  For the six months
                                       ended June 30,      ended June 30,
                                     2005       2004       2005       2004
                                     ----       ----       ----       ----

 Net  Income                   $      234 $      522 $      383 $      845
 Add back (net of tax effect):
   Amortization of intangibles         34         34         67         67
   Stock-based compensation            18         20         38         43
                               ---------- ---------- ---------- ----------
  Cash earnings                $      286 $      576 $      488       $955
                               ========== ========== ========== ==========

Contact Information

  • CONTACT:

    Thomas W. Schneider
    President, CEO

    James A. Dowd
    Vice President, CFO

    214 West First Street
    Oswego, NY 13126
    315-343-0057