SOURCE: Pathfinder Bancorp, Inc.

October 27, 2006 10:06 ET

Pathfinder Bancorp, Inc. Announces Third Quarter Earnings

OSWEGO, NY -- (MARKET WIRE) -- October 27, 2006 -- Pathfinder Bancorp, Inc., the mid-tier holding company of Pathfinder Bank, (NASDAQ: PBHC) (listing: PathBcp) reported net income of $170,000, or $0.07 per share, for the three months ended September 30, 2006 as compared to $116,000, or $0.05 per share for the same period in 2005. For the nine months ended September 30, 2006, the Company reported net income of $713,000, or $0.29 per share, compared to $499,000, or $0.20 per share, for the same period in 2005.

"An earnings improvement of approximately 43% over the first nine months of 2006 is a result of the positive execution of a number of our strategic initiatives," stated Thomas W. Schneider, President and CEO. "We are progressing with our plans to restructure our balance sheet through the growth of commercial loans; control our costs; and increase our non-interest income. Over the past 9 months, commercial loans have risen 15%, operating expenses have been reduced 4% and core non-interest income has grown 9%."

"Earnings, however, are still well below our performance objectives and expectations," Mr. Schneider continued. "Even with a pause by the Federal Reserve Bank in raising Fed Fund target rates, we expect net-interest margin compression to continue over the next 6 months and we expect to progress in our strategic plan to combat these forces in the near term and produce added value over the intermediate and long term."

Net interest income for the quarter ended September 30, 2006 decreased 7% when compared to the same period during 2005. Interest expense increased $283,000, or 17%, partially offset by an increase in interest income of $138,000, or 4%. Net interest rate spread decreased to 2.91% for the third quarter of 2006 from 3.06% for the same period in 2005. Average interest-earning assets decreased 3% to $270.3 million in the quarter ended September 30, 2006 as compared to $279.6 million in the quarter ended September 30, 2005, while the yield on those assets increased 40 basis points to 5.94% compared to 5.54% for the same period in 2005. The decrease in average earning assets is primarily attributable to a $14.4 million decrease in average investment securities, partially offset by a $5.0 million, or 3%, increase in average loans receivable. Average interest-bearing liabilities decreased $9.7 million, while the cost of funds increased 54 basis points to 3.03% from 2.49% for the same period in 2005. The decrease in the average balance of interest-bearing liabilities resulted primarily from an $8.3 million, or 19%, reduction in borrowed funds, and a $4.8 million, or 6%, reduction in average deposits. The reduction in borrowed funds is primarily attributable to the pay off of several short-term advances in the fourth quarter of 2005 and the third quarter of 2006. 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 175 basis point increase in short-term interest rates over the past 12 months, combined with a $8.2 million deposit migration from lower earning savings accounts to higher yielding certificates of deposit.

Provision for loan losses for the quarter ended September 30, 2006 decreased 100% from the same period in 2005. The Company's ratio of allowance for loan losses to period end loans has decreased to 0.83% at September 30, 2006 from 0.97% at September 30, 2005. Nonperforming loans to period end loans have decreased to 0.69% at September 30, 2006, compared to 0.88% at September 30, 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, decreased 4% to $573,000 for the quarter ended September 30, 2006 compared to $599,000 for the same period in the prior year. The decrease in non-interest income is primarily attributable to decreases in service charges on deposit accounts, loan servicing fees and other charges, commissions and fees of $18,000, $6,000, $8,000, respectively. These decreases were offset by an increase in earnings on bank owned life insurance of $6,000.

Operating expenses decreased 4% to $2.4 million for the quarter ended September 30, 2006 compared to $2.5 million for the quarter ended September 30, 2005. During the third quarter of 2006, professional and other services, other expenses and building occupancy decreased $51,000, $44,000 and $27,000, respectively. These decreases were offset by increases of $17,000 and $3,000 in salaries and employee benefits and data processing expenses, respectively. 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 other expenses was primarily attributable to lower expenses on other real estate owned, a reduction in office supplies and a reduction in costs associated with no cost closing loans. The decrease in building occupancy was primarily due to a reduction of machine maintenance expenses and expenses associated with branch facility improvements that did not recur in 2006.

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 below. 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 nine months
                        ended September 30,         ended September 30,
                            (Unaudited)                 (Unaudited)
                     -------------------------  --------------------------
                         2006          2005         2006          2005
                     ------------  -----------  ------------  ------------

Condensed Income
 Statement
 Interest income     $      3,967  $     3,829  $     11,764  $     11,314
 Interest expense           1,910        1,627         5,511         4,652
                     ------------  -----------  ------------  ------------
  Net interest
   income                   2,057        2,202         6,253         6,662
 Provision for loan
  losses                        -           91            23           229
                     ------------  -----------  ------------  ------------
  Net interest
   income after
   provision for
   loan losses              2,057        2,111         6,230         6,433
 Other income                 544          449         1,743         1,484
 Other expense              2,391        2,493         7,112         7,423
                     ------------  -----------  ------------  ------------
  Income before
   taxes                      210           67           861           494
 Provision for
  income taxes                 40          (49)          148            (5)
                     ------------  -----------  ------------  ------------
  Net income         $        170  $       116  $        713  $        499
                     ============  ===========  ============  ============

Key Earnings Ratios
  Return on average
   assets                    0.23%        0.15%         0.32%         0.22%
  Return on average
   equity                    3.21%        2.16%         4.53%         3.10%
  Return on average
   tangible equity
   (a)                       3.98%        2.71%         5.64%         3.90%
  Net interest
   margin (tax
   equivalent)               3.11%        3.21%         3.12%         3.24%


Share and Per Share
 Data
 Basic weighted
  average shares
  outstanding           2,463,482    2,461,328     2,463,250     2,453,744
 Basic earnings per
  share              $       0.07  $      0.05  $       0.29  $       0.20
 Diluted earnings
  per share                  0.07         0.05          0.29          0.20
 Cash dividends per
  share                    0.1025       0.1025        0.3075         3.075
 Book value per
  share                         -            -          8.67          8.76

                      (Unaudited)                (Unaudited)   (Unaudited)
                       September     December     September     September
                           30,          31,           30,           30,
                          2006         2005          2005          2004
                     ------------  -----------  ------------  ------------
Selected Balance
 Sheet Data
 Assets              $    298,003  $   296,948  $    303,076  $    303,029
 Earning assets           268,550      266,198       272,290       274,207
 Total loans              197,463      189,568       185,459       187,788
 Deposits                 237,921      236,377       240,852       236,731
 Borrowed Funds            30,660       31,360        32,360        35,360
 Trust Preferred
  Debt                      5,155        5,155         5,155         5,155
 Shareholders'
  equity                   21,365       20,928        21,578        21,953

Asset Quality Ratios
 Net loan
  charge-offs
  (annualized) to
  average loans              0.06%        0.24%         0.18%         0.17%
 Allowance for loan
  losses to period
  end loans                  0.83%        0.89%         0.97%         1.00%
 Allowance for loan
  losses to
  nonperforming
  loans                    120.58%       99.94%       109.75%        63.94%
 Nonperforming loans
  to period end
  loans                      0.69%        0.89%         0.88%         1.57%
 Nonperforming
  assets to total
  assets                     0.62%        0.82%         0.85%         1.06%


 (a) Tangible equity excludes intangible assets

Contact Information

  • CONTACT:
    Thomas W. Schneider
    President, CEO

    James A. Dowd
    Vice President, CFO
    Telephone: (315) 343-0057