SOURCE: Pathfinder Bancorp, Inc.

July 31, 2006 12:02 ET

Pathfinder Bancorp, Inc. Announces Second Quarter Earnings

OSWEGO, NY -- (MARKET WIRE) -- July 31, 2006 -- Pathfinder Bancorp, Inc., the mid-tier holding company of Pathfinder Bank, (NASDAQ: PBHC) (listing: PathBcp), reported net income of $303,000, or $0.12 per share, for the three months ended June 30, 2006 as compared to $234,000, or $0.10 per share for the same period in 2005. For the six months ended June 30, 2006, the Company reported net income of $543,000, or $0.22 per share, compared to $383,000, or $0.16 per share, for the same period in 2005.

"We continue to be pleased by our improvement in earnings, particularly in light of the current interest rate cycle," stated Thomas W. Schneider, President and C.E.O. "Rising short-term interest rates have continued to compress net interest margin, however, a 16% increase in core non-interest income, a 4% reduction in operating expenses, and continued improvement in asset quality helped to boost net income by 42% over the prior year."

Net interest income for the quarter ended June 30, 2006 decreased 8% when compared to the same period during 2005. Interest expense increased $327,000, or 21%, partially offset by an increase in interest income of $145,000, or 4%. Net interest rate spread decreased to 2.93% for the second quarter of 2006 from 3.17% for the same period in 2005. Average interest-earning assets decreased 3% to $273.9 million in the quarter ended June 30, 2006 as compared to $281.2 million in the quarter ended June 30, 2005, while the yield on those assets increased 34 basis points to 5.81% compared to 5.47% for the same period in 2005. The decrease in average earning assets is primarily attributable to an $11.1 million decrease in average investment securities, partially offset by a $4.5 million, or 2%, increase in average loans receivable. Average interest-bearing liabilities decreased $8.8 million, while the cost of funds increased 59 basis points to 2.88% from 2.29% for the same period in 2005. The decrease in the average balance of interest-bearing liabilities resulted primarily from a $10.0 million, or 5%, reduction in average deposits, partially offset by a $1.2 million increase in average borrowed funds. The reduction in deposits principally occurred in the municipal money management accounts due to the cyclical nature of the tax collections and expenditures of local municipal entities.

The sharp increase in cost of funds can be attributed to the 200 basis point increase in short-term interest rates over the past 12 months, combined with a $7.8 million deposit migration from lower earning savings accounts to higher yielding certificates of deposit.

Provision for loan losses for the quarter ended June 30, 2006 decreased 99% to $1,000 from $66,000 for the same period in 2005. The Company's ratio of allowance for loan losses to period end loans has decreased to 0.86% at June 30, 2006 from 0.89% at December 31, 2005. Nonperforming loans to period end loans have decreased to 0.73% at June 30, 2006, compared to 0.89% at December 31, 2005. Overall, 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 $616,000 for the quarter ended June 30, 2006 compared to $546,000 for the same period in the prior year. The increase in non-interest income is primarily attributable to increases in service charges on deposit accounts, loan servicing fees, other charges, commissions and fees and earnings on bank owned life insurance of $31,000, $19,000, $14,000 and $6,000, respectively.

Operating expenses decreased 8% to $2.3 million for the quarter ended June 30, 2006 compared to $2.5 million for the quarter ended June 30, 2005. During the second quarter of 2006, professional and other services, salaries and employee benefits, other expenses and data processing expenses decreased $106,000, $70,000, $30,000 and $13,000, respectively. These decreases were offset by a $19,000 increase in building occupancy expenses. The decrease in professional and other expenses was primarily due to costs associated with a company wide leadership training program and process improvement initiatives that occurred in 2005. The decrease in salaries and employee benefits was primarily due to the personnel realignment in December of 2005 and a reduction in stock based compensation expense, offset by the salaries and benefits associated with personnel at the new Central Square branch location. Data processing expenses were lower primarily due to a reduction in Internet banking and ATM processing charges. The decrease in other expenses was primarily attributable to a decrease in the purchase of office supplies, decreased costs associated with "no cost home equity loans" and a reduction in mortgage recording tax expense. The increase in building occupancy primarily resulted from costs associated with the operation of the new Central Square branch that opened in May of 2005.

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)
                    --------------------------  --------------------------
                        2006          2005          2006          2005
                    ------------  ------------  ------------  ------------

Condensed Income
 Statement
  Interest income   $      3,932  $      3,787  $      7,797  $      7,485
  Interest expense         1,853         1,526         3,601         3,025
                    ------------  ------------  ------------  ------------
   Net interest
    income                 2,079         2,261         4,196         4,460
  Provision for
   loan losses                 1            66            23           138
                    ------------  ------------  ------------  ------------
   Net interest
    income after
    provision for
    loan losses            2,078         2,195         4,173         4,322
  Other income               606           546         1,199         1,035
  Other expense            2,310         2,510         4,721         4,930
                    ------------  ------------  ------------  ------------
   Income before
    taxes                   374           231           651           427
  Provision for
   income taxes              71            (3)          108            44
                    ------------  ------------  ------------  ------------
   Net income       $        303  $        234  $        543  $        383
                    ============  ============  ============  ============

Key Earnings Ratios
   Return on average
    assets                  0.40%         0.30%         0.36%         0.25%
   Return on average
    equity                  5.85%         4.38%         5.19%         3.57%
   Return on average
    tangible equity
    (a)                     7.33%         5.51%         6.49%         4.50%
   Net interest
    margin (tax
    equivalent)             3.10%         3.28%         3.12%         3.25%


Share and Per Share
 Data
  Basic weighted
   average shares
   outstanding         2,463,132     2,452,537     2,463,132     2,449,889
  Basic earnings per
   share            $       0.12  $       0.10  $       0.22  $       0.16
  Diluted earnings
   per share                0.12          0.09          0.22          0.15
    Cash earnings
     per share -
     basic (b)              0.14          0.12          0.25          0.20
  Cash dividends per
   share                  0.1025        0.1025         0.205         0.205
  Book value per
   share                       -             -          8.35          8.37

                      (Unaudited)                 (Unaudited)   (Unaudited)
                        June 30,   December 31,    June 30,      June 30,
                         2006          2005          2005          2004
                    ------------  ------------  ------------  ------------
Selected Balance
 Sheet Data
  Assets            $    296,953  $    296,948  $    310,471  $    299,875
  Earning assets         267,520       266,198       277,927       271,247
  Total loans            192,850       189,568       187,943       186,210
  Deposits               232,071       236,377       237,239       233,853
  Borrowed Funds          36,260        31,360        43,260        36,360
  Trust Preferred
   Debt                    5,155         5,155         5,155         5,155
  Shareholders'
   equity                 20,579        20,928        21,678        21,049

Asset Quality
  Ratios
  Net loan
   charge-offs
   (annualized) to
   average loans           0.05%         0.24%         0.09%         0.18%
  Allowance for loan
   losses to period
   end loans               0.86%         0.89%         1.00%         0.99%
  Allowance for loan
   losses to
   nonperforming
   loans                 117.51%        99.94%        92.61%        60.88%
  Nonperforming
   loans to period
   end loans               0.73%         0.89%         1.08%         1.62%
  Nonperforming
   assets to total
   assets                  0.78%         0.82%         0.94%         1.11%


 (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         For the six months
                            ended June 30,              ended June 30,
                     --------------------------  --------------------------
                         2006          2005          2006          2005
                     ------------  ------------  ------------  ------------

 Net  Income         $       303   $        234  $        543  $        383
 Add back (net
  of tax effect):
   Amortization of
    intangibles               34             34            67            67
   Stock-based
    compensation               -             18             -            38
                    ------------   ------------  ------------  ------------
 Cash earnings      $        337   $        286  $        610  $        488
                    ============   ============  ============  ============

Contact Information

  • CONTACT:
    Thomas W. Schneider
    President, CEO

    James A. Dowd
    Vice President, CFO

    Telephone: (315) 343-0057