Pathfinder Bancorp, Inc. Announces Fourth Quarter 2021 Net

Results Include Record Earnings, Continued Stable Asset Quality,
Prudent Expense Management and Significant Fourth Quarter Provision Benefit

OSWEGO, N.Y., Feb. 03, 2022 (GLOBE NEWSWIRE) — Pathfinder Bancorp, Inc. (“Company”) (NASDAQ: PBHC), the holding company for Pathfinder Bank (“Bank”), announced fourth quarter 2021 net income available to common shareholders of $3.9 million, or $0.64 per basic and diluted share, compared to $1.9 million, or $0.33 per basic and diluted share, for the fourth quarter of 2020. For the full year 2021, total net income attributable to Pathfinder Bancorp, Inc. was $12.4 million, or $2.07 per basic and diluted share, compared to $7.0 million, or $1.17 per basic and diluted share, for 2020.

2021 Fourth Quarter and Full Year Performance Highlights

  • Fourth quarter 2021 total revenue (net interest income and total noninterest income) of $11.1 million increased $1.5 million, or 15.7%, compared to the fourth quarter of 2020. Full year total revenue of $44.5 million was up $6.4 million, or 16.8%, compared to 2020.
  • Total interest-earning assets on December 31, 2021 of $1.21 billion increased by $52.4 million, or 4.5%, from December 31, 2020 and included $832.5 million in total loans.
  • Total deposits on December 31, 2021 were $1.06 billion, an increase of $59.4 million, or 6.0%, compared to one year prior.
  • A more beneficial deposit mix contributed to a 44 basis point improvement in deposit funding costs to 0.56% for the year. Total funding costs decreased 40 basis points to 0.79% in 2021.
  • Total net interest income for fourth quarter 2021 of $9.7 million increased by $1.8 million, or 23.0%, from the prior year period, and increased $6.7 million, or 21.0%, to $38.3 million for full year 2021 compared to 2020.
  • Noninterest expense of $7.2 million for the fourth quarter of 2021 represents an increase of $344,000, or 5.0%, compared to the year-ago quarter. Noninterest expense was $27.5 million for 2021, an increase of $2.4 million, or 9.6%, compared to 2020.
  • These factors combined to reduce our Efficiency Ratio to 62.6% in 2021, a decline of 3.7%, when compared to 66.3% for the year ended December 2020.
  • Loan growth was impacted by significant reductions in the Paycheck Protection Program (“PPP”) for the past three quarters, however, the Bank’s loan pipeline remains strong.
  • In response to continuing improvements in the nonaccrual loans and general economic conditions, the Company recorded a benefit of $1.0 million in its provision for loan losses during the fourth quarter of 2021.

“Since our private placement capital raise in May 2019, our earnings and tangible capital have grown significantly,” said Thomas W. Schneider, President and CEO. “Our record net income in 2021 of $12.5 million for the year represents a 77.5% and 190.0% increase over year-end results for 2020 and 2019, respectively. Similarly, the return on average assets has grown from 0.60% in 2019 to 0.98% in 2021. Tangible Book Value per common share has grown from $14.14 at June 30, 2019 to $17.65 at December 31, 2021.

“Many exogenous factors have weighed into this significant increase in performance. Most notably were the governmental responses to Covid-19 and the accompanying fiscal programs and monetary policy.”

“The board of directors and staff take great pride and credit for the improvement in performance, including execution of our Strategic Plan, announced in June of 2019, and the careful and prudent management of asset quality through this tumultuous period. I want to thank our shareholders for their patience and confidence, our board of directors for their steady governance, and the relentless and restless work of our staff.”

“Our focus throughout 2021 on enhancing our operating leverage proved to be successful, as double-digit revenue growth outpaced noninterest expense growth by a significant margin. Total revenue in 2021 was up 16.8%, while we limited expense growth to under 10%, even compared to the lower-than-typical expenses we recorded in 2020 amid the pandemic-induced operating environment. Looking ahead, we remain focused on balancing effective expense management with appropriate investments to support the future growth of the Company, which includes attracting and retaining exceptional talent. To that end, we do expect increased salary and benefits costs in 2022 and beyond as we respond to inflationary and wage pressures within our markets.”

“Our balance sheet continues to grow, with an improving funding mix and healthy loan portfolio. Period-end deposits grew by more than $59 million from one year prior and included growth of approximately $30 million of noninterest bearing deposits. We continued to reduce our reliance on time deposits, with both average balance and rate paid on time deposits decreasing significantly compared to the prior year. This supported continued improvement in our overall funding costs, with the average cost of total interest-bearing liabilities down 40 basis points to 0.79% in 2021.”

“We continued to maintain strong credit quality on our $832.5 million loan portfolio, with a ratio of nonperforming loans to total loans of 1.00% at December 31, 2021, less than half of the 2.58% we reported one year prior. In addition, even as we released reserves during the fourth quarter, our ratio of allowance for loan losses to nonperforming loans stood at approximately156% at year end.”

“While our local economies have improved significantly from the height of the pandemic and our pipelines remain solid, we continue to maintain a conservative approach to managing asset quality and modest loan growth expectations given fiscal policy changes and the evolving impacts of the latest COVID-19 variant. Improved metrics have borne out our patient approach with borrowers through the Pandemic. That said, we are optimistic about the opportunities in our vibrant Central New York markets and are taking strategic steps to maximize them. In the second quarter of 2022, we expect to open a new branch in the Southwest Corridor of the City of Syracuse, which will allow us to serve our growing customer base there and provide a range of community banking services to the City’s underserved neighborhoods. Overall, our strong financial performance, dedicated and highly capable team and healthy capital position, leaves us well-positioned for 2022 and beyond.”

Income Statement for the Quarter Ended December 31, 2021

Net Interest Income

Unaudited   For the three months ended     For the twelve months ended  
(In thousands, except per share data)   December
31, 2021
    December
31, 2020
    Change     December
31, 2021
    December
31, 2020
    Change  
Interest and dividend income:                                                            
Loans, including fees   $ 8,930     $ 8,537     $ 393     4.6 %   $ 37,026     $ 35,421     $ 1,605     4.5 %
Debt securities:                                                            
Taxable     2,135       1,763       372     21.1 %     8,312       6,524       1,788     27.4 %
Tax-exempt     72       50       22     44.0 %     171       159       12     7.5 %
Dividends     48       87       (39 )   -44.8 %     309       324       (15 )   -4.6 %
Federal funds sold and interest earning deposits     2       26       (24 )   -92.3 %     9       79       (70 )   -88.6 %
Total interest and dividend income     11,187       10,463       724     6.9 %     45,827       42,507       3,320     7.8 %
Interest expense:                                                            
Interest on deposits     889       1,736       (847 )   -48.8 %     4,714       8,112       (3,398 )   -41.9 %
Interest on short-term borrowings     2       14       (12 )   -85.7 %     10       148       (138 )   -93.2 %
Interest on long-term borrowings     153       288       (135 )   -46.9 %     1,018       1,503       (485 )   -32.3 %
Interest on subordinated loans     414       512       (98 )   -19.1 %     1,790       1,101       689     62.6 %
Total interest expense     1,458       2,550       (1,092 )   -42.8 %     7,532       10,864       (3,332 )   -30.7 %
Net interest income     9,729       7,913       1,816     22.9 %     38,295       31,643       6,652     21.0 %
Provision for loan losses     (1,039 )     812       (1,851 )   -228.0 %     1,022       4,707       (3,685 )   -78.3 %
Net interest income after provision for loan losses   $ 10,768     $ 7,101     $ 3,667     51.6 %   $ 37,273     $ 26,936     $ 10,337     38.4 %

As noted in the table above, fourth quarter 2021 net interest income was $9.7 million, an increase of $1.8 million, or 23.0%, compared to $7.9 million for the same quarter in 2020. Interest and dividend income in the 2021 fourth quarter was $11.2 million, compared to $10.5 million in the fourth quarter of 2020. The increase in net interest income between comparable quarters was a result of a 45 basis point reduction in rates paid on interest-bearing liabilities, combined with a 24 basis point increase in the average loan yield, and a $32.8 million increase in average taxable investment securities combined with a 10 basis point increase in the average yield. Total interest expense for the fourth quarter of 2021 was $1.5 million, a decrease of $1.1 million, or 42.8%, from $2.6 million for the prior year quarter. The decrease in the quarterly interest expense was primarily a result of an improved funding mix, which included a $56.3 million reduction in average time deposit balances combined with a 76 basis point decrease in the average interest rate paid on time deposits. The net interest margin for the fourth quarter of 2021 was 3.28%, a 52 basis point increase compared to 2.75% for the fourth quarter of 2020. This improvement reflects both a 13 basis point increase in the average yield for interest-earning assets, and a 45 basis point decline in the average cost for interest-bearing liabilities.

Net interest income for the full year of 2021 increased $6.7 million, or 21.0%, to $38.3 million compared to $31.6 million for the full year of 2020. Interest and dividend income for the full year ended December 31, 2021 was $45.8 million, an increase of $3.3 million, or 7.8%, compared to $42.5 million for 2020. The increase was due to a $56.8 million, or 22.1%, increase in average taxable investment securities and a $36.2 million, or 4.5%, increase in average loans compared to the prior year period. Interest expense of $7.5 million for the full year decreased by $3.3 million, or 30.7%, from the prior year period, primarily due to a reduction in time deposit balances along with a 44 basis point decrease in the interest rate paid on time deposits. Full year 2021 net interest margin of 3.21% was up 33 basis points from 2.88% for the twelve months ended December 31, 2020.

Paycheck Protection Program Discussion

From April 2020 to May 2021, the Company participated in all phases of the Paycheck Protection Program (“PPP”) as administered by the U.S. Small Business Administration (the “SBA”). PPP loans are substantially guaranteed as to timely repayment by the SBA and have unique forgiveness features whereby loan principal amounts may be discharged, for the benefit of the borrowers, by direct payments from the SBA to the lending institution holding the indebtedness. The Company has received both interest (calculated at a stated rate of 1%) and various levels of fee income related to the origination of PPP loans. Information related to the Company’s PPP loans are included in the following tables:

Unaudited   For the three months ended   For the twelve months ended,
(In thousands, except number of loans)   December 31,
2021
  December 31,
2020
  December 31,
2021
  December 31,
2020
Number of PPP loans originated in the period         25     478     699
Funded balance of PPP loans originated in the period   $   $ 313   $ 36,369   $ 75,352
Number of PPP loans forgiven in the period   160     136   796     136
Average balance of PPP loans in the period   $ 23,315   $ 67,960   $ 75,538   $ 91,328
Balance of PPP loans forgiven in the period   $ 7,611   $ 15,279   $ 77,054   $ 15,279
Deferred PPP fee income recognized in the period   $ 407   $ 495   $ 2,150   $ 938
(In thousands, except number of loans)   December 31, 2021   December 31, 2020
Unearned PPP deferred fee income at end of period   $ 716   $ 1,216
(In thousands, except number of loans)     Number   Balance
Total PPP loans originated since inception     1,177   $ 111,721
Total PPP loans forgiven since inception     932   $ 92,333
Total PPP loans remaining at December 31, 2021     256   $ 19,338

Provision for Loan Losses

The Bank reported a credit to provision for loan losses of $1.0 million for the fourth quarter of 2021, reflecting improvements in its strong asset quality metrics. This compares to a provision for loan losses of $812,000 for the fourth quarter of 2020. The credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its proven conservative loan classification and reserve building methodologies to the analysis of these portfolios. The provision for loan losses for the full year of 2021 was $1.0 million, compared to $4.7 million in 2020.

Noninterest Income

Fourth quarter 2021 noninterest income was $1.4 million, a decrease of $309,000, or 18.0%, compared to $1.7 million for the same three-month period in 2020. Noninterest income was $6.2 million for the full year ended 2021, compared to $6.5 million for 2020.

The following table details the components of noninterest income for the three and twelve months ended December 31, 2021 and 2020:

Unaudited   For the three months ended     For the twelve months ended  
(Dollars in thousands)   December 31, 2021     December 31, 2020   Change     December 31, 2021     December 31, 2020   Change  
Service charges on deposit accounts   $ 382     $ 397   $ (15 )     -3.8 %   $ 1,464     $ 1,395   $ 69       4.9 %
Earnings and gain on bank owned life insurance     141       105     36       34.3 %     559       460     99       21.5 %
Loan servicing fees     91       143     (52 )     -36.4 %     246       361     (115 )     -31.9 %
Debit card interchange fees     225       194     31       16.0 %     923       771     152       19.7 %
Insurance agency revenue     231       216     15       6.9 %     1,048       955     93       9.7 %
Other charges, commissions and fees     258       215     43       20.0 %     1,058       917     141       15.4 %
Noninterest income before gains (losses)     1,328       1,270     58       4.6 %     5,298       4,859     439       9.0 %
Net gains on sales and redemptions of
investment securities
    (19 )         (19 )   >100 %     37       1,076     (1,039 )     -96.6 %
Gains/(losses) on marketable equity securities     10       169     (159 )     -94.1 %     382       (629 )   1,011       160.7 %
Net gains on sales of loans and foreclosed
real estate
    87       276     (189 )     -68.5 %     313       1,179     (866 )     -73.5 %
Gains on sale of premises and equipment                           201           201     >100 %
Total noninterest income   $ 1,406     $ 1,715   $ (309 )     -18.0 %   $ 6,231     $ 6,485   $ (254 )     -3.9 %

Noninterest Expense

Total noninterest expense for the fourth quarter of 2021 was $7.2 million, an increase of $344,000, or 5.0%, compared to $6.8 million for the same three-month period in 2020. The increase was primarily a result of increases in advertising and other expenses, offset in part by lower data processing expenses. Total noninterest expense for the full year period of 2021 was $27.5 million, an increase of $2.4 million, or 9.6%, compared with $25.1 million for the prior year period, and primarily driven by increases in salaries and employee benefits expense, professional and other services, and advertising costs.

The following table details the components of noninterest expense for the three and twelve months ended December 31, 2021 and 2020:

Unaudited   For the three months ended         For the twelve months ended  
(Dollars in thousands)   December
31, 2021
    December
31, 2020
    Change     December
31, 2021
    December
31, 2020
    Change  
Salaries and employee benefits   $ 3,918     $ 3,853     $ 65     1.7 %   $ 14,384     $ 13,468     $ 916     6.8 %
Building and occupancy     734       764       (30 )   -3.9 %     3,121       3,013       108     3.6 %
Data processing     539       675       (136 )   -20.1 %     2,555       2,396       159     6.6 %
Professional and other services     374       311       63     20.3 %     1,627       1,210       417     34.5 %
Advertising     502       268       234     87.3 %     1,198       941       257     27.3 %
FDIC assessments     222       190       32     16.8 %     874       699       175     25.0 %
Audits and exams     153       131       22     16.8 %     725       507       218     43.0 %
Insurance agency expense     198       226       (28 )   -12.4 %     825       743       82     11.0 %
Community service activities     39       36       3     8.3 %     220       199       21     10.6 %
Foreclosed real estate expenses     16       8       8     100.0 %     46       50       (4 )   -8.0 %
Other expenses     496       385       111     28.8 %     1,920       1,854       66     3.6 %
Total noninterest expenses   $ 7,191     $ 6,847     $ 344     5.0 %   $ 27,495     $ 25,080     $ 2,415     9.6 %

During the most restrictive periods following the inception of the COVID-19 pandemic, which began in March 2020, the Company experienced material declines in substantially all forms of noninterest expenses. These reductions in noninterest expenses were the result of the curtailment or elimination of a significant portion of non-critically essential business and business development activities during that time. These activities were reduced or eliminated for the duration of the substantial restrictions imposed by governmental officials and as a consequence of the internal safety and social distancing protocols initiated by the Company and/or its customers. These effects were most pronounced in the third and fourth quarters of 2020 and extended, to lessening degrees, at least through the end of the first quarter of 2021. Accordingly, as the Company progressively returned to less restricted operations, noninterest expenses progressively returned to the levels considered by its management to be prudent for the effective long-term management of the Company.

Unaudited   For the three months ended     For the twelve months ended,  
(Dollars in thousands)   December
31, 2021
  December
31, 2019
  Change     December
31, 2021
  December
31, 2019
  Change  
Salaries and employee benefits   $ 3,918   $ 3,281   $ 637     19.4 %   $ 14,384     13,660   $ 724     5.3 %
Building and occupancy     734     688     46     6.7 %     3,121     2,674     447     16.7 %
Data processing     539     590     (51 )   -8.6 %     2,555     2,339     216     9.2 %
Professional and other services     374     257     117     45.5 %     1,627     1,325     302     22.8 %
Advertising     502     243     259     106.6 %     1,198     962     236     24.5 %
FDIC assessments     222     50     172     344.0 %     874     421     453     107.6 %
Audits and exams     153     123     30     24.4 %     725     427     298     69.8 %
Insurance agency expense     198     198         0.0 %     825     816     9     1.1 %
Community service activities     39     228     (189 )   -82.9 %     220     620     (400 )   -64.5 %
Foreclosed real estate expenses     16     13     3     23.1 %     46     337     (291 )   -86.4 %
Other expenses     496     527     (31 )   -5.9 %     1,920     2,149     (229 )   -10.7 %
Total noninterest expenses   $ 7,191   $ 6,198   $ 993     16.0 %   $ 27,495   $ 25,730   $ 1,765     6.9 %

Balance Sheet on December 31, 2021

The Company’s total assets on December 31, 2021 were $1.28 billion, an increase of $57.7 million, or 4.7%, from $1.23 billion on December 31, 2020. This increase was primarily driven by available-for-sale securities and loans. Total loans of $832.5 million increased by $7.0 million, or 0.8%, compared with $825.5 million on December 31, 2020. Investment securities totaled $352.2 million, an increase of $50.9 million compared to $301.3 million on December 31, 2020.

Total deposits on December 31, 2021 were $1.06 billion, an increase of $59.4 million, or 6.0%, from $995.9 million at December 31, 2020. Interest-bearing deposits of $863.5 million at 2021 year end were up by $29.6 million, or 3.6%, largely due to increases in retail and commercial deposits.   Noninterest-bearing deposits totaled $191.9 million at December 31, 2021, an increase of $29.8 million, or 18.4%, from the 2020 year end. The increases in noninterest-bearing deposits were the result of continued growth in business banking relationships and the effects of the Bank’s participation in the PPP.

Shareholders’ equity was $110.3 million at December 31, 2021, reflecting an increase of $12.8 million, or 13.2%, compared with $97.5 million at December 31, 2020. The increase was primarily a result of a $10.7 million increase in retained earnings.

Asset Quality

The Bank’s asset quality metrics, as measured by net loan charge-offs to average loans, remained strong and relatively stable for fourth quarter 2021. Annualized net loan charge-offs to average loans were 0.12% for the fourth quarter 2021, compared with 0.08% for the fourth quarter of 2020 and 0.12% for the quarter ended September 30, 2021. Nonperforming loans as a percentage of total loans continued to improve, totaling 1.00% at December 31, 2021, or a decrease of 158 basis points compared to 2.58% at December 31, 2020.

The decrease in the nonperforming loan portfolio at December 31, 2021, as compared to December 31, 2020, was primarily the result of loans held in portfolio that resumed regular payment status following the improvement in general business conditions in the second half of 2021. Management is monitoring all nonaccrual loans closely and has incorporated our current estimate of the ultimate collectability of these loans into the reported allowance for loan losses at December 31, 2021. No loans were classified as being on COVID-19 related payment deferral at December 31, 2021.

The following table summarizes nonaccrual loans by category and status at December 31, 2021:

Loan Type Collateral Type Number
of
Loans
  Loan Balance   Average Loan Balance   Weighted
LTV at
Origination/
Modification
    Status
Secured residential mortgage:                          
  Real Estate   10   $ 892   $ 89   81 %   Under active resolution management by the Bank.
                             
Secured commercial real estate:                          
  Private Museum   1     1,384     1,384   79 %   The modification is still in progress and the customer is making monthly payments to the bank under an informal agreement currently. DRI grant proceeds are anticipated to be received in both Q1 2022 and Q2 2022 further reducing our exposure.
  Recreational   1     1,233     1,233   49 %   The loan is currently classified as a Troubled Debt Restructuring (TDR). Next payment was due September 1, 2021.
  All other   12     1,790     149   74 %   Under active resolution management by the Bank.
                             
Commercial lines of credit   5     629     126   N/A     Under active resolution management by the Bank.
                             
Commercial and industrial:   7     1,261     180   N/A     Under active resolution management by the Bank.
                             
Consumer loans   71     1,103     16   N/A     Under active resolution management by the Bank.
      107   $ 8,292   $ 77          

The allowance for loan losses to non-performing loans at December 31, 2021 was 155.99%, compared with 59.89% at December 31, 2020. The change in the allowance for loans losses to non-performing loans is reflective of the changes in nonaccrual loans discussed above and appropriate reserve releases during the fourth quarter of 2021.

COVID-19 Additional Discussion

Pathfinder Bank has participated in all rounds of the PPP to date. The Program was initially established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and is a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the SBA. The PPP was renewed under the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021. While these legislative actions, and the programs that resulted therefrom, appear to have significantly reduced the negative near-term economic impact of the pandemic, the future trajectory of the economy and the economy’s effect on the financial condition and results of the Company’s operations cannot be predicted with certainty.

Cash Dividend Declared     

On December 20, 2021, the Company announced that its Board of Directors declared a cash dividend of $0.07 per share on the Company’s voting common and non-voting common stock, and a cash dividend of $0.07 per notional share for the issued warrant relating to the fiscal quarter ended December 31, 2021. The dividend will be payable to all shareholders of record on January 14, 2022 and will be paid on February 4, 2022. Based on the closing price of the Company’s common stock of $17.17 on December 31, 2021, the implied dividend yield is 1.6%. The quarterly cash dividend of $0.07 equates to a dividend payout ratio of 10.9%.

About Pathfinder Bancorp, Inc.

Pathfinder Bank is a New York State chartered commercial bank headquartered in Oswego, whose deposits are insured by the Federal Deposit Insurance Corporation. The Bank is a wholly owned subsidiary of Pathfinder Bancorp, Inc., (NASDAQ SmallCap Market; symbol: PBHC). The Bank has ten full-service offices located in its market areas consisting of Oswego and Onondaga County and one limited purpose office in Oneida County. Through its subsidiary, Pathfinder Risk Management Company, Inc., the Bank owns a 51% interest in the FitzGibbons Agency, LLC. At December 31, 2021, there were 4,603,184 shares of common stock issued and outstanding, as well as 1,380,283 shares of non-voting common stock issued and outstanding. The Company’s common stock trades on the NASDAQ market under the symbol “PBHC.”  At December 31, 2021, the Company and subsidiaries had total consolidated assets of $1.28 billion, total deposits of $1.06 billion and shareholders’ equity of $110.6 million.

Forward-Looking Statement

Certain statements contained herein are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” or “may.”   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.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following additional risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

  • demand for our products and services may decline, making it difficult to grow assets and income;
  • if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;
  • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
  • our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;
  • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
  • as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;
  • a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;
  • our cyber security risks are increased as the result of an increase in the number of employees working remotely;
  • we rely on fourth party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and
  • Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.

The Company disclaims any obligation to revise or update any forward-looking statements contained in this press release to reflect future events or developments.

 
PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(Dollars and shares in thousands except per share amounts)
 
    For the three months     For the twelve months  
    ended December 31,     ended December 31,  
    (Unaudited)     (Unaudited)  
    2021     2020     2021     2020  
Condensed Income Statement                                
Interest and dividend income   $ 11,187     $ 10,463     $ 45,827     $ 42,507  
Interest expense     1,458       2,550       7,532       10,864  
Net interest income     9,729       7,913       38,295       31,643  
Provision for loan losses     (1,039 )     812       1,022       4,707  
      10,768       7,101       37,273       26,936  
Noninterest income excluding net gains on sales of
securities, fixed assets, loans and foreclosed real estate
    1,328       1,270       5,298       4,859  
Net gains on sales of securities, fixed assets, loans and foreclosed
real estate
    68       276       551       2,255  
Gains (losses) on marketable equity securities     10       169       382       (629 )
Noninterest expense     7,191       6,847       27,495       25,080  
Income before income taxes     4,983       1,969       16,009       8,341  
Provision for income taxes     1,094       29       3,499       1,295  
                                 
Net income attributable to noncontrolling interest and
Pathfinder Bancorp, Inc.
  $ 3,889     $ 1,940     $ 12,510     $ 7,046  
Net income attributable to noncontrolling interest     10       (5 )     103       96  
Net income attributable to Pathfinder Bancorp Inc.   $ 3,879     $ 1,945     $ 12,407     $ 6,950  
                                 
  For the Periods Ended  
  (Unaudited)  
  December 31,     December 31,     December 31,  
  2021     2020     2019  
Selected Balance Sheet Data                      
Assets $ 1,285,177     $ 1,227,443     $ 1,093,807  
Earning assets   1,212,139       1,159,778       1,032,817  
Total loans   832,459       825,495       781,451  
Deposits   1,055,346       995,907       881,893  
Borrowed funds   77,098       82,050       93,125  
Allowance for loan losses   12,935       12,777       8,669  
Subordinated loans   29,563       39,400       15,128  
Pathfinder Bancorp, Inc. Shareholders’ equity   110,287       97,456       90,434  
                       
Asset Quality Ratios                      
Net loan charge-offs (annualized) to average loans   0.12 %     0.08 %     0.09 %
Allowance for loan losses to period end loans   1.55 %     1.55 %     1.11 %
Allowance for loan losses to nonperforming loans   155.99 %     59.89 %     162.25 %
Nonperforming loans to period end loans   1.00 %     2.58 %     0.67 %
Nonperforming assets to total assets   0.65 %     1.74 %     0.49 %
                       
PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(Dollars and shares in thousands except per share amounts)
               
    For the three months     For the twelve months  
    ended December 31,     ended December 31,  
    (Unaudited)     (Unaudited)  
    2021     2020     2021     2020  
Key Earnings Ratios                                
Return on average assets     1.24 %     0.63 %     0.98 %     0.60 %
Return on average common equity     14.38 %     9.83 %     11.91 %     8.92 %
Return on average equity     14.38 %     8.11 %     11.91 %     7.43 %
Net interest margin     3.27 %     2.75 %     3.21 %     2.88 %
                                 
Share, Per Share and Ratio Data                                
Basic weighted average shares outstanding- Voting     4,518       4,537       4,478       4,608  
Basic earnings per share- Voting   $ 0.64     $ 0.33     $ 2.07     $ 1.17  
Basic weighted average shares outstanding- Series A Non-Voting     1,380             745        
Basic earnings per share- Series A Non-Voting   $ 0.64           $ 2.07        
Diluted weighted average shares outstanding- Voting     4,518       4,537       4,478       4,608  
Diluted earnings per share- Voting   $ 0.64     $ 0.33     $ 2.07     $ 1.17  
Diluted weighted average shares outstanding- Series A Non-Voting     1,380             745        
Diluted earnings per share- Series A Non-Voting   $ 0.64           $ 2.07        
Cash dividends per share   $ 0.07     $ 0.06     $ 0.28     $ 0.24  
Book value per common share at December 31, 2021 and 2020                   $ 18.43     $ 17.56  
Tangible book value per common share at December 31, 2021 and 2020                   $ 17.66     $ 16.53  
Tangible common equity to tangible assets at December 31, 2021 and 2020                     8.25 %     6.12 %
Tangible common equity to tangible assets at December 31, 2021 and 2020, adjusted                     8.38 %     6.44 %
Non-GAAP Reconciliation                
Tangible book value per common share                
Total equity   $ 110,287     $ 97,456  
Intangible assets     (4,653 )     (4,669 )
Convertible preferred equity           (17,901 )
Common tangible equity   $ 105,634     $ 74,886  
Common shares outstanding     5,983       4,531  
Tangible book value per common share   $ 17.66     $ 16.53  
                 
Tangible common equity to tangible assets                
Tangible common equity   $ 105,634     $ 74,886  
Tangible assets     1,280,524       1,222,914  
Tangible common equity to tangible assets ratio     8.25 %     6.12 %
                 
Tangible common equity to tangible assets, adjusted                
Tangible common equity   $ 105,634     $ 74,886  
Tangible assets     1,280,524       1,222,914  
Less: Paycheck Protection Program (PPP) loans     (19,338 )     (60,643 )
Total assets excluding PPP loans   $ 1,261,186     $ 1,162,271  
Tangible common equity to tangible assets ratio, excluding PPP loans     8.38 %     6.44 %

* Basic and diluted earnings per share are calculated based upon the two-class method for the three and six months ended September 30, 2021 and 2020.
                
Weighted average shares outstanding do not include unallocated ESOP shares.

                

PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(Dollars and shares in thousands except per share amounts)

The following table sets forth information concerning average interest-earning assets and interest-bearing liabilities and the yields and rates thereon. Interest income and resultant yield information in the table has not been adjusted for tax equivalency. Averages are computed on the daily average balance for each month in the period divided by the number of days in the period. Yields and amounts earned include loan fees. Nonaccrual loans have been included in interest-earning assets for purposes of these calculations.

  Unaudited    
  For the three months ended December 31,    
  2021     2020  
                Average                   Average  
  Average           Yield /     Average           Yield /  
(Dollars in thousands) Balance     Interest   Cost     Balance     Interest   Cost  
Interest-earning assets:                                      
Loans $ 805,421     $ 8,930   4.43 %   $ 814,990     $ 8,537   4.19 %
Taxable investment securities   323,166       2,138   2.65 %     290,398       1,850   2.55 %
Tax-exempt investment securities   26,759       117   1.75 %     12,333       50   1.62 %
Fed funds sold and interest-earning deposits   29,750       2   0.03 %     34,714       26   0.30 %
Total interest-earning assets   1,185,096       11,187   3.78 %     1,152,435       10,463   3.63 %
Noninterest-earning assets:                                      
Other assets   84,608                   85,463              
Allowance for loan losses   (14,083 )                 (12,541 )            
Net unrealized gains on available-for-sale securities   535                   103              
Total assets $ 1,256,156                 $ 1,225,460              
Interest-bearing liabilities:                                      
NOW accounts $ 94,178     $ 74   0.31 %   $ 80,335     $ 50   0.25 %
Money management accounts   15,489       4   0.10 %     15,563       4   0.10 %
MMDA accounts   265,570       253   0.38 %     242,793       310   0.51 %
Savings and club accounts   129,441       44   0.14 %     103,607       26   0.10 %
Time deposits   337,054       514   0.61 %     393,350       1,346   1.37 %
Subordinated loans   29,537       415   5.62 %     36,098       512   5.67 %
Borrowings   65,596       154   0.94 %     77,776       302   1.55 %
Total interest-bearing liabilities   936,865       1,458   0.62 %     949,522       2,550   1.07 %
Noninterest-bearing liabilities:                                      
Demand deposits   199,254                   167,279              
Other liabilities   12,146                   12,765              
Total liabilities   1,148,265                   1,129,566              
Shareholders’ equity   107,891                   95,894              
Total liabilities & shareholders’ equity $ 1,256,156                 $ 1,225,460              
Net interest income         $ 9,729                 $ 7,913      
Net interest rate spread               3.16 %                 2.56 %
Net interest margin               3.28 %                 2.75 %
Ratio of average interest-earning assets
to average interest-bearing liabilities
              126.50 %                 121.37 %
PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(Dollars and shares in thousands except per share amounts)
 
    Unaudited
For the years ended December 31,
    2021     2020  
                Average                   Average  
    Average         Yield /     Average           Yield /  
(Dollars in thousands)   Balance   Interest   Cost     Balance     Interest   Cost  
Interest-earning assets:                                      
Loans   $ 833,308   $ 37,026   4.44 %   $ 797,099     $ 35,421   4.44 %
Taxable investment securities     313,392     8,576   2.74 %     256,590       6,848   2.67 %
Tax-exempt investment securities     16,191     216   1.33 %     8,992       159   1.77 %
Fed funds sold and                                      
interest-earning deposits     28,765     9   0.03 %     36,366       79   0.22 %
Total interest-earning assets     1,191,656     45,827   3.85 %     1,099,047       42,507   3.87 %
Noninterest-earning assets:                                      
Other assets     82,130                 79,024              
Allowance for loan losses     (13,992 )               (10,584 )            
Net unrealized losses
on available-for-sale securities
    1,482                 (447 )            
Total assets   $ 1,261,276               $ 1,167,040              
Interest-bearing liabilities:                                      
NOW accounts   $ 93,950   $ 286   0.30 %   $ 79,338     $ 159   0.20 %
Money management accounts     15,916     17   0.11 %     15,482       18   0.12 %
MMDA accounts     245,329     990   0.40 %     211,191       1,381   0.65 %
Savings and club accounts     122,275     159   0.13 %     96,381       97   0.10 %
Time deposits     366,724     3,262   0.89 %     407,910       6,457   1.58 %
Subordinated loans     32,736     1,790   5.47 %     20,421       1,101   5.39 %
Borrowings     79,362     1,028   1.30 %     81,434       1,651   2.03 %
Total interest-bearing liabilities     956,292     7,532   0.79 %     912,157       10,864   1.19 %
Noninterest-bearing liabilities:                                      
Demand deposits     189,434                 148,739              
Other liabilities     11,419                 12,558              
Total liabilities     1,157,145                 1,073,454              
Shareholders’ equity     104,131                 93,586              
Total liabilities & shareholders’ equity   $ 1,261,276               $ 1,167,040              
Net interest income         $ 38,295                 $ 31,643      
Net interest rate spread               3.06 %                 2.68 %
Net interest margin               3.21 %                 2.88 %
Ratio of average interest-earning assets                                      
to average interest-bearing liabilities               124.61 %                 120.49 %
                                       

PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(Dollars and shares in thousands except per share amounts)

Net interest income can also be analyzed in terms of the impact of changing interest rates on interest-earning assets and interest bearing liabilities, and changes in the volume or amount of these assets and liabilities. The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the years indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (change in volume multiplied by prior rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) total increase or decrease. Changes attributable to both rate and volume have been allocated ratably. Tax-exempt securities have not been adjusted for tax equivalency.

  Unaudited     Unaudited  
  Three months ended December 31,     Twelve months ended December 31,  
  2021 vs. 2020     2021 vs. 2020  
  Increase/(Decrease) Due to     Increase/(Decrease) Due to  
                Total                     Total  
                Increase                     Increase  
(In thousands) Volume     Rate   (Decrease)     Volume     Rate     (Decrease)  
Interest Income:                                            
Loans $ (602 )   $ 995   $ 393     $ 1,609     $ (4 )   $ 1,605  
Taxable investment securities   215       73     288       1,550       178       1,728  
Tax-exempt investment securities   63       4     67       103       (46 )     57  
Interest-earning deposits   (3 )     (21 )   (24 )     (14 )     (56 )     (70 )
Total interest income   (327 )     1,051     724       3,248       72       3,320  
Interest Expense:                                            
NOW accounts   10       14     24       33       94       127  
Money management accounts   (0 )     0                 (1 )     (1 )
MMDA accounts   154       (211 )   (57 )     198       (589 )     (391 )
Savings and club accounts   7       11     18       30       32       62  
Time deposits   (171 )     (661 )   (832 )     (598 )     (2,597 )     (3,195 )
Subordinated loans   (92 )     (5 )   (97 )     673       16       689  
Borrowings   (42 )     (106 )   (148 )     (41 )     (582 )     (623 )
Total interest expense   (134 )     (958 )   (1,092 )     295       (3,627 )     (3,332 )
Net change in net interest income $ (193 )   $ 2,009   $ 1,816     $ 2,953     $ 3,699     $ 6,652  

The above information is preliminary and based on the Company’s data available at the time of presentation.

Investor/Media Contacts

Thomas W. Schneider, President, CEO
Walter F. Rusnak, Senior Vice President, CFO
Telephone: (315) 343-0057

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