[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the Company's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1 – Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20%E2%80%93%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the Company's unaudited consolidated financial statements, including the statements of condition, income, comprehensive income (loss), changes in shareholders' equity, and cash flows, along with detailed notes providing context and breakdowns of key financial accounts and accounting policies [Consolidated Statements of Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Condition) The Company's total assets increased by **2.05% to $1.51 billion**, driven by increases in available-for-sale securities and bank owned life insurance, while total liabilities rose by **2.02% to $1.38 billion**, primarily due to higher deposits and short-term borrowings. Shareholders' equity saw a **2.41% increase** Consolidated Statements of Condition (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (%) | | :----------------------------- | :----------------------------- | :----------------------------- | :--------- | | Total assets | $1,505,119 | $1,474,874 | +2.05% | | Total liabilities | $1,380,706 | $1,353,391 | +2.02% | | Total shareholders' equity | $124,413 | $121,483 | +2.41% | | Available-for-sale securities | $300,951 | $269,331 | +11.74% | | Bank owned life insurance | $31,045 | $24,727 | +25.55% | | Total deposits | $1,221,887 | $1,204,524 | +1.44% | | Short-term borrowings | $75,500 | $61,000 | +23.77% | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income attributable to Pathfinder Bancorp, Inc. significantly decreased for both the three and six months ended June 30, 2025, primarily due to a fair value adjustment to loans held-for-sale. Net interest income, however, increased for both periods Consolidated Statements of Income (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Net income | $31 | $2,000 | -98.45% | $3,005 | $4,120 | -27.06% | | Net interest income | $10,814 | $9,480 | +14.07% | $22,225 | $18,880 | +17.72% | | Total noninterest income | $(1,518) | $1,211 | -225.35% | $(321) | $2,948 | -110.89% | | Total noninterest expense | $8,061 | $7,908 | +1.93% | $16,494 | $15,614 | +5.64% | | Basic EPS (Voting) | $0.00 | $0.32 | -100.00% | $0.48 | $0.66 | -27.27% | | Dividends per share | $0.10 | $0.10 | 0.00% | $0.20 | $0.20 | 0.00% | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The Company reported a comprehensive loss for the three months ended June 30, 2025, primarily due to unrealized losses on available-for-sale securities and derivatives, while comprehensive income for the six months ended June 30, 2025, decreased compared to the prior year Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Net income | $31 | $2,012 | -98.46% | $3,005 | $4,185 | -28.20% | | Other comprehensive (loss) income, net of tax | $(426) | $76 | -660.53% | $286 | $819 | -65.08% | | Comprehensive (loss) income attributable to Pathfinder Bancorp, Inc. | $(395) | $2,076 | -119.03% | $3,291 | $4,939 | -33.40% | [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Total shareholders' equity increased to **$124.4 million** at June 30, 2025, from **$121.5 million** at January 1, 2025, driven by net income and stock option exercises, partially offset by dividends Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric (in thousands) | June 30, 2025 | March 31, 2025 | Change (QoQ) | June 30, 2024 | March 31, 2024 | Change (QoQ) | | :-------------------- | :------------ | :------------- | :----------- | :------------ | :------------- | :----------- | | Total Equity (Q2) | $124,413 | $124,896 | -0.39% | $124,174 | $122,632 | +1.26% | | Net income (Q2) | $31 | - | N/A | $2,000 | - | N/A | | Dividends Declared (Q2) | $(630) | - | N/A | $(622) | - | N/A | | | | | | | | | | Total Equity (YTD) | $124,413 | $121,483 (Jan 1, 2025) | +2.41% | $124,174 | $120,256 (Jan 1, 2024) | +3.26% | | Net income (YTD) | $3,005 | - | N/A | $4,120 | - | N/A | | Dividends Declared (YTD) | $(1,257) | - | N/A | $(1,244) | - | N/A | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the Company experienced net cash inflows from operating and financing activities, offset by significant net cash outflows from investing activities, resulting in a slight decrease in cash and cash equivalents Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | | Net cash from operating activities | $1,960 | $2,022 | -3.07% | | Net cash from investing activities | $(27,013) | $3,122 | -964.86% | | Net cash from financing activities | $24,956 | $(22,057) | +213.10% | | Change in cash and cash equivalents | $(97) | $(16,913) | +99.43% | [Notes to Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures and explanations for the figures presented in the consolidated financial statements, covering accounting policies, new pronouncements, earnings per share, investment securities, loans, allowance for credit losses, fair value measurements, and other financial instruments [Note 1: Basis of Presentation](index=9&type=section&id=Note%201%3A%20Basis%20of%20Presentation) The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information, relying on management's estimates and assumptions. Operating results for the interim period are not indicative of the full year - Interim financial statements prepared under GAAP, Form 10-Q, and Article 8 of Regulation S-X[23](index=23&type=chunk) - Management's estimates, assumptions, and judgments are integral to the financial statements[24](index=24&type=chunk) - Interim results are not necessarily indicative of full-year performance[23](index=23&type=chunk) [Note 2: New Accounting Pronouncements](index=10&type=section&id=Note%202%3A%20New%20Accounting%20Pronouncements) The Company is evaluating ASU 2024-03, which requires disaggregation of certain income statement expenses, but does not expect a material impact on its consolidated financial statements upon adoption in fiscal years beginning after December 15, 2026 New Accounting Pronouncements | Standard | Description | Required Date of Implementation | Effect on Consolidated Financial Statements | | :------- | :---------- | :------------------------------ | :------------------------------------------ | | ASU 2024-03 (Subtopic 220-40): Disaggregation of Income Statement Expenses | Requires new disclosures disaggregating certain expense categories (e.g., compensation, depreciation, amortization of intangible assets) in tabular format for enhanced transparency. | Fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. | The Company is evaluating adoption but does not expect a material impact. | [Note 3: Earnings per Common Share](index=11&type=section&id=Note%203%3A%20Earnings%20per%20Common%20Share) The Company calculates basic and diluted EPS using the two-class method due to participating securities (voting common stock, non-voting common stock, and warrants). Diluted EPS for Q1 2025 was revised to **$0.47 from $0.41** Earnings per Common Share (in thousands, except per share data) | Metric (in thousands, except per share data) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to Pathfinder Bancorp, Inc. | $31 | $2,000 | $3,005 | $4,120 | | Net income available to common shareholders - Voting | $25 | $1,515 | $2,283 | $3,122 | | Basic earnings per common share - Voting | $0.00 | $0.32 | $0.48 | $0.66 | | Diluted earnings per common share - Voting | $0.00 | $0.32 | $0.47 | $0.66 | - Diluted EPS for Q1 2025 was revised to **$0.47 from $0.41**[34](index=34&type=chunk) [Note 4: Investment Securities](index=12&type=section&id=Note%204%3A%20Investment%20Securities) The Company's investment portfolio consists of available-for-sale (AFS) and held-to-maturity (HTM) securities. AFS securities had an aggregate fair value less than amortized cost by **$9.7 million** at June 30, 2025, an improvement from December 31, 2024, primarily due to interest rate environment changes. HTM securities also showed an improvement in fair value relative to cost Investment Securities (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | AFS Amortized Cost | $310,688 | $279,550 | +11.14% | | AFS Fair Value | $300,951 | $269,331 | +11.74% | | AFS Unrealized Losses | $(11,108) | $(11,185) | -0.70% | | HTM Amortized Cost | $158,154 | $158,940 | -0.49% | | HTM Fair Value | $151,205 | $151,023 | +0.12% | | HTM Unrealized Losses | $(7,153) | $(8,033) | -11.00% | - The **$482,000 total improvement** in the fair value of the AFS investment portfolio's aggregate fair value, relative to its aggregate amortized historical cost, in the six months ended June 30, 2025, was primarily due to changes in the interest rate environment[43](index=43&type=chunk) - The **$1.0 million improvement** in the aggregate fair value of the HTM investment portfolio, relative to its aggregate amortized historical cost, during the six months ended June 30, 2025, was primarily due to changes in the interest rate environment[44](index=44&type=chunk)[45](index=45&type=chunk) Realized Gains and Losses on Investments (in thousands) | Metric (in thousands) | 2025 | 2024 | | :-------------------- | :--- | :--- | | Realized gains on investments | $3 | $750 | | Realized losses on investments | $(11) | $(882) | | Total | $(8) | $(132) | [Note 5: Pension and Postretirement Benefits](index=19&type=section&id=Note%205%3A%20Pension%20and%20Postretirement%20Benefits) The Company's noncontributory defined benefit pension plan was frozen in 2012, with no future benefit accruals. Net periodic benefit plan cost for both pension and postretirement benefits remained stable or slightly decreased for the three and six months ended June 30, 2025, compared to 2024 Net Periodic Pension and Postretirement Plan Costs (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net periodic pension plan (benefit) cost | $(76) | $(75) | $(153) | $(149) | | Net periodic postretirement plan (benefit) cost | $0 | $0 | $0 | $0 | [Note 6: Loans](index=20&type=section&id=Note%206%3A%20Loans) Total loans, net of deferred fees, decreased by **1.0% to $909.7 million** at June 30, 2025, primarily due to a decrease in residential and consumer loans, partially offset by an increase in commercial loans. Nonaccrual loans significantly decreased by **$10.4 million** from December 31, 2024, mainly due to a July 2025 loan sale. Loan modifications for borrowers experiencing financial difficulty increased in 2025 Loans, Net of Deferred Fees (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | | Loans, net of deferred fees | $909,723 | $918,986 | -1.01% | | Residential mortgage loans | $244,353 | $256,237 | -4.64% | | Commercial loans | $549,074 | $539,678 | +1.74% | | Consumer loans | $117,778 | $124,658 | -5.52% | Nonaccrual and Collateral Dependent Loans (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | | Nonaccrual loans | $11,689 | $22,084 | -47.06% | | Collateral dependent loans | $11,316 | $17,038 | -33.69% | Loan Modifications for Financial Difficulty (in thousands) | Loan Modification Type (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Term Extension | $4,385 | $0 | | Interest Rate Reduction | $11,495 | $0 | [Note 7: Allowance for Credit Losses](index=33&type=section&id=Note%207%3A%20Allowance%20for%20Credit%20Losses) The provision for credit losses (PCL) significantly increased for both the three and six months ended June 30, 2025, primarily driven by **$2.6 million in net charge-offs** during Q2 2025. The total ACL for loans decreased to **$16.0 million** at June 30, 2025, from **$17.2 million** at December 31, 2024 Provision for Credit Losses and Allowance for Credit Losses (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | PCL - Loans | $1,173 | $304 | +285.86% | $1,677 | $1,014 | +65.38% | | Net Charge-Offs (Q2) | $(2,844) | $(112) | +2439.29% | N/A | N/A | N/A | | Total ACL - Loans | $15,983 (End of Q2) | $16,892 (End of Q2) | -5.49% | $15,983 (End of YTD) | $16,892 (End of YTD) | -5.38% | - The provision for credit losses for the second quarter of 2025 was primarily driven by **net charge offs of $2.6 million**[78](index=78&type=chunk) [Note 8: Foreclosed Real Estate](index=41&type=section&id=Note%208%3A%20Foreclosed%20Real%20Estate) The Company held one foreclosed real estate property valued at **$83,000** at June 30, 2025, compared to none at December 31, 2024. Real estate loans in foreclosure decreased Foreclosed Real Estate and Loans in Foreclosure (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Foreclosed real estate | $83 | $0 | N/A | | Real estate loans in foreclosure | $599 | $1,200 | -50.08% | [Note 9: Guarantees](index=41&type=section&id=Note%209%3A%20Guarantees) The Company does not issue guarantees requiring liability recognition other than standby letters of credit, which totaled **$2.9 million** at June 30, 2025, an increase from December 31, 2024 Standby Letters of Credit (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | | Standby letters of credit | $2,900 | $2,400 | +20.83% | [Note 10: Fair Value Measurements](index=41&type=section&id=Note%2010%3A%20Fair%20Value%20Measurements) The Company measures various assets and liabilities at fair value using a hierarchy of valuation techniques (Level 1, 2, 3). Total financial assets at fair value increased to **$1.29 billion** at June 30, 2025, from **$1.27 billion** at December 31, 2024, while financial liabilities at fair value increased to **$1.37 billion** from **$1.32 billion** Financial Assets Measured at Fair Value (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | | Total AFS securities (Fair Value) | $300,951 | $269,331 | +11.74% | | Marketable equity securities (Fair Value) | $4,881 | $4,076 | +19.74% | | Individually evaluated loans (Fair Value) | $3,574 | $13,020 | -72.55% | Estimated Fair Values of Financial Instruments (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | | Total Financial Assets (Estimated Fair Values) | $1,291,468 | $1,271,606 | +1.56% | | Total Financial Liabilities (Estimated Fair Values) | $1,370,072 | $1,320,338 | +3.77% | [Note 11: Interest Rate Derivatives](index=48&type=section&id=Note%2011%3A%20Interest%20Rate%20Derivatives) The Company uses interest rate derivatives, primarily swaps, as fair value hedges for investments and loans to manage interest rate risk. Fair value hedges increased investment security interest income by **$623,000** and loan interest income by **$543,000** for the six months ended June 30, 2025. The Bank settled cash flow hedges in April 2024, realizing a gain Net Cash Received from Derivatives (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | | Fair Value Hedges - Investments (Net Cash Received) | $623 | $1,229 | -49.31% | | Fair Value Hedges - Loans (Net Cash Received) | $543 | $1,287 | -57.81% | | Cash Flow Hedges - Borrowed Funds (Net Cash Received) | $162 | $157 | +3.18% | - The fair value of the derivatives (an unrealized gain, receivable from derivative counterparties) recorded in other assets resulted in a **net asset position of $1.4 million** at June 30, 2025, compared to **$3.2 million** at December 31, 2024, for AFS investments[126](index=126&type=chunk) - At June 30, 2025, the fair value of the derivatives recorded in other assets (an unrealized gain, receivable from derivative counterparties) resulted in a **net asset position of $310,000** for loans, compared to **$2.9 million** at December 31, 2024[127](index=127&type=chunk) [Note 12: Accumulated Other Comprehensive (Loss) Income](index=54&type=section&id=Note%2012%3A%20Accumulated%20Other%20Comprehensive%20(Loss)%20Income) AOCI, net of tax, decreased to **$(8.86) million** at June 30, 2025, from **$(9.14) million** at December 31, 2024. This change was influenced by unrealized losses on available-for-sale securities and derivatives, partially offset by retirement plan gains Accumulated Other Comprehensive (Loss) Income (in thousands) | Metric (in thousands) | June 30, 2025 | June 30, 2024 | Change (%) | | :-------------------- | :------------ | :------------ | :--------- | | AOCI (3 months ended) | $(8,858) | $(8,786) | +0.82% | | AOCI (6 months ended) | $(8,858) | $(8,786) | +0.82% | - For the six months ended June 30, 2025, other comprehensive income (loss) before reclassifications was **$232,000**, and amounts reclassified from AOCI were **$54,000**[135](index=135&type=chunk) [Note 13: Noninterest Income](index=56&type=section&id=Note%2013%3A%20Noninterest%20Income) Total noninterest income for Q2 2025 was **negative $1.5 million**, a significant decrease from **$1.2 million** in Q2 2024, primarily due to a **$3.1 million fair value adjustment** to loans held-for-sale and the absence of insurance agency revenue Noninterest Income (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Total noninterest income | $(1,518) | $1,211 | -225.35% | $(321) | $2,948 | -110.89% | | LOCOM HFS adjustment | $(3,064) | $0 | N/M | $(3,064) | $0 | N/M | | Insurance agency revenue | $0 | $260 | -100.00% | $0 | $657 | -100.00% | | Net unrealized gains (losses) on marketable equity securities | $420 | $(139) | +402.16% | $638 | $(31) | +2158.06% | [Note 14: Leases](index=57&type=section&id=Note%2014%3A%20Leases) The Company has both operating and finance leases for banking offices and land. Operating lease right-of-use assets and liabilities decreased, while finance lease assets and liabilities remained relatively stable at June 30, 2025, compared to December 31, 2024 Lease Assets and Liabilities (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | | Operating lease ROU assets | $1,115 | $1,391 | -19.84% | | Operating lease liabilities | $1,313 | $1,591 | -17.47% | | Finance lease ROU assets | $16,280 | $16,676 | -2.37% | | Finance lease liabilities | $16,566 | $16,745 | -1.07% | | Weighted Average Remaining Lease Term (Operating) | 18.58 years | 17.08 years | +8.72% | | Weighted Average Remaining Lease Term (Finance) | 21.52 years | 22.01 years | -2.23% | [Note 15: Subsequent Events](index=58&type=section&id=Note%2015%3A%20Subsequent%20Events) In July 2025, the Company sold nonperforming and classified loans with a June 30, 2025 principal balance of **$6.3 million** for **$3.2 million**. This resulted in a **$3.1 million fair value adjustment** to loans held-for-sale in Q2 2025 - Sale of nonperforming and classified loans in July 2025[144](index=144&type=chunk) - Original principal balance: **$9.3 million**; June 30, 2025 principal balance: **$6.3 million**[144](index=144&type=chunk) - Sale price: **$3.2 million**, resulting in a **$3.1 million pre-tax loss** (LOCOM HFS adjustment) recorded in Q2 2025[144](index=144&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)](index=59&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20(Unaudited)) This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025, highlighting key performance drivers, critical accounting estimates, and changes in assets, liabilities, and equity. It also discusses recent events, capital adequacy, and liquidity [General](index=59&type=section&id=General) Pathfinder Bancorp, Inc. is a Maryland corporation that wholly owns Pathfinder Bank. The Company completed the sale of its majority interest in FitzGibbons Agency in October 2024. At June 30, 2025, consolidated assets were **$1.51 billion**, liabilities **$1.38 billion**, and shareholders' equity **$124.4 million** Consolidated Financial Position (in millions) | Metric (in millions) | June 30, 2025 | | :------------------- | :------------ | | Total consolidated assets | $1.51 | | Total consolidated liabilities | $1.38 | | Total shareholders' equity | $124.4 | - The Company completed the sale of its majority membership interest in the FitzGibbons Agency in October 2024[147](index=147&type=chunk) [Statement Regarding Forward-Looking Statements](index=59&type=section&id=Statement%20Regarding%20Forward-Looking%20Statements) This section includes a disclaimer about forward-looking statements, emphasizing that actual future results may differ materially due to various risks and uncertainties, including economic conditions, competitive pressures, interest rate changes, and regulatory actions - Forward-looking statements involve inherent risks and uncertainties, and actual future results may differ materially from expectations[152](index=152&type=chunk)[154](index=154&type=chunk) - Key factors influencing future results include general economic conditions, competitive pressures, interest rate environment changes, loan volumes, and regulatory changes[152](index=152&type=chunk) [Application of Critical Accounting Estimates](index=61&type=section&id=Application%20of%20Critical%20Accounting%20Estimates) Management identifies ACL, deferred income taxes, pension obligations, investment securities credit losses, fair value estimations, and goodwill impairment as critical accounting estimates due to their reliance on significant judgment and assumptions. A sensitivity analysis for commercial loans indicates the ACL could change by approximately **$925,000** with a **25% change** in qualitative factors - Critical accounting estimates include allowance for credit losses (ACL), deferred income taxes, pension obligations, investment securities credit losses, fair value estimations, and goodwill impairment[156](index=156&type=chunk) - The ACL for commercial loans (**60.4% of the Bank's loan portfolio**) includes **$3.7 million** derived from qualitative factors[160](index=160&type=chunk) - A hypothetical **25% negative or positive change** within the qualitative factors used for commercial loans could result in an approximate **$925,000 increase or decrease** in the ACL[160](index=160&type=chunk) [Recent Events](index=65&type=section&id=Recent%20Events) The Board of Directors declared a cash dividend of **$0.10 per share** for Q2 2025. In July 2025, the Company completed the sale of nonperforming and classified loans, which had a significant accounting impact in Q2 2025 - A cash dividend of **$0.10 per share** was declared for the fiscal quarter ended June 30, 2025, payable on August 8, 2025[170](index=170&type=chunk) - In July 2025, the Company completed the sale of nonperforming and classified loans, resulting in a **$3.1 million pre-tax loss** (LOCOM HFS adjustment) recorded in Q2 2025[171](index=171&type=chunk)[172](index=172&type=chunk) [Summary of 2025 Second Quarter Results](index=65&type=section&id=Summary%20of%202025%20Second%20Quarter%20Results) Net income for Q2 2025 plummeted to **$31,000** from **$2.0 million** in Q2 2024, primarily due to a **$3.1 million pre-tax fair value adjustment** on loans held-for-sale. Net interest income increased by **14.1%**, and net interest margin improved to **3.11%**. Provision for credit losses rose significantly due to higher net charge-offs. Noninterest income was negative, while noninterest expense saw a modest increase, influenced by the East Syracuse branch acquisition and the absence of insurance agency costs Summary of 2025 Second Quarter Results (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Net income | $31 | $2,000 | $(1,969) | -98.45% | | Net interest income | $10,814 | $9,480 | $1,334 | +14.07% | | Net interest margin | 3.11% | 2.78% | +0.33% | +11.87% | | Provision for credit losses | $1,197 | $290 | $907 | +312.76% | | Net charge-offs (annualized % of average loans) | 1.14% | 0.03% | +1.11% | +3700.00% | | Noninterest income | $(1,518)| $1,211 | $(2,729) | -225.35% | | Noninterest expense | $8,061 | $7,908 | $153 | +1.93% | - The **$3.1 million pre-tax fair value adjustment** to loans held-for-sale (LOCOM HFS adjustment) had an after-tax effect of **$2.5 million or $0.40 per diluted share**[172](index=172&type=chunk) - Noninterest expense in Q2 2025 included **$595,000 in costs** associated with the East Syracuse branch acquisition and excluded insurance agency costs (which were **$232,000 in Q2 2024**)[179](index=179&type=chunk) - No FDIC assessment expense was recorded in Q2 2025 due to prior over-accruals, with normalized quarterly expense expected to be **$220,000-$230,000** in H2 2025[182](index=182&type=chunk) [Results of Operations](index=68&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the Company's operating performance, including net interest income, rate/volume analysis, deposit trends, provision for credit losses, noninterest income and expense, income tax expense, and earnings per share for the three and six months ended June 30, 2025, compared to the prior year [Net Interest Income](index=68&type=section&id=Net%20Interest%20Income) Net interest income increased by **14.1%** for Q2 2025 and **17.7%** for YTD June 30, 2025, primarily due to a significant decrease in interest expense from lower deposit and borrowing costs. Net interest margin improved by **33 basis points** in Q2 and **44 basis points** YTD, reflecting these lower funding costs and higher loan yields Net Interest Income and Margin (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net interest income | $10,814 | $9,480 | $1,334 | +14.07% | $22,225 | $18,880 | $3,345 | +17.72% | | Net interest margin | 3.11% | 2.78% | +0.33% | +11.87% | 3.21% | 2.77% | +0.44% | +15.88% | | Total interest expense | $8,368 | $9,542 | $(1,174) | -12.30% | $16,398 | $18,752 | $(2,354) | -12.55% | | Total interest & dividend income | $19,182 | $19,022 | $160 | +0.84% | $38,623 | $37,632 | $991 | +2.63% | - The decrease in interest expense for Q2 2025 was primarily due to average cost decreases of **40 basis points** for interest-bearing deposits and **38 basis points** for borrowings[188](index=188&type=chunk) - The increase in loan interest income for Q2 2025 was **$617,000**, reflecting an **11 basis points increase** in average yield on loans and a **$25.9 million increase** in average loan balances[174](index=174&type=chunk) [Rate/Volume Analysis](index=72&type=section&id=Rate%2FVolume%20Analysis) For Q2 2025, the increase in net interest income was primarily driven by volume changes in interest income and rate changes in interest expense. For YTD June 30, 2025, both volume and rate changes contributed positively to the increase in net interest income Rate/Volume Analysis of Net Interest Income (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 vs 2024 (Volume) | 3 Months Ended June 30, 2025 vs 2024 (Rate) | 3 Months Ended June 30, 2025 vs 2024 (Total Change) | 6 Months Ended June 30, 2025 vs 2024 (Volume) | 6 Months Ended June 30, 2025 vs 2024 (Rate) | 6 Months Ended June 30, 2025 vs 2024 (Total Change) | | :-------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------------ | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------------ | | Total interest income | $434 | $(274) | $160 | $699 | $292 | $991 | | Total interest expense | $(282) | $(892) | $(1,174) | $(645) | $(1,710) | $(2,355) | | Net change in net interest income | $716 | $618 | $1,334 | $1,344 | $2,002 | $3,346 | [Deposits](index=73&type=section&id=Deposits) Total deposits increased by **1.4% to $1.22 billion** at June 30, 2025, from December 31, 2024, reflecting increased market penetration. Core deposits constituted **78.5%** of the total. Brokered deposits decreased by **$17.6 million** Total Deposits (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Deposits | $1,221,887 | $1,204,524 | $17,363 | +1.44% | | Nonbrokered Deposits | $1,103,178 | $1,068,253 | $34,925 | +3.27% | | Brokered Deposits | $118,709 | $136,271 | $(17,562) | -12.89% | - At June 30, 2025, **78.5%** of the Company's deposit base consisted of core deposits[199](index=199&type=chunk) - The increase in deposits reflected the Bank's increased market penetration among both non-business and business customers[198](index=198&type=chunk) [Provision for Credit Losses](index=73&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses (PCL) increased significantly to **$1.2 million** in Q2 2025 (from **$290,000** in Q2 2024) and to **$1.7 million** YTD (from **$1.0 million** YTD 2024), primarily due to **$2.6 million in net charge-offs** during Q2 2025. The ratio of delinquent loans to total loans increased to **4.9%** at June 30, 2025 Provision for Credit Losses (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | PCL | $1,197 | $290 | $907 | +312.76% | $1,654 | $1,016 | $638 | +62.80% | - The increase in PCL was primarily attributed to **net charge-offs of $2.6 million** in Q2 2025[204](index=204&type=chunk)[205](index=205&type=chunk) - The ratio of delinquent loans to total loans was **4.9%** at June 30, 2025, an increase from **3.8%** at December 31, 2024[206](index=206&type=chunk) [Noninterest Income](index=76&type=section&id=Noninterest%20Income) Total noninterest income was **negative $1.5 million** in Q2 2025 and **negative $321,000** YTD, a substantial decrease from prior periods. This was primarily driven by a **$3.1 million LOCOM HFS adjustment** and the absence of insurance agency revenue following its sale in October 2024 Noninterest Income (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total noninterest income | $(1,518) | $1,211 | $(2,729) | -225.35% | $(321) | $2,948 | $(3,269) | -110.89% | | LOCOM HFS adjustment | $(3,064) | $0 | $(3,064) | N/M | $(3,064) | $0 | $(3,064) | N/M | | Insurance agency revenue | $0 | $260 | $(260) | -100.00% | $0 | $657 | $(657) | -100.00% | | Net unrealized gains (losses) on marketable equity securities | $420 | $(139) | $559 | +402.16% | $638 | $(31) | $669 | +2158.06% | - The decline in noninterest income for Q2 2025 primarily reflects the **$3.1 million LOCOM HFS adjustment** and the absence of contributions from the insurance agency business sold in October 2024[208](index=208&type=chunk) [Noninterest Expense](index=77&type=section&id=Noninterest%20Expense) Total noninterest expense increased by **1.9%** in Q2 2025 and **5.6%** YTD, primarily due to higher building and occupancy, data processing, and amortization expenses, largely associated with the East Syracuse branch acquisition. These increases were partially offset by the absence of insurance agency expenses and lower FDIC assessments Noninterest Expense (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total noninterest expenses | $8,061 | $7,908 | $153 | +1.93% | $16,494 | $15,614 | $880 | +5.64% | | Salaries and employee benefits | $4,525 | $4,399 | $126 | +2.86% | $8,975 | $8,728 | $247 | +2.83% | | Building and occupancy | $1,230 | $914 | $316 | +34.57% | $2,577 | $1,730 | $847 | +48.96% | | Data processing | $667 | $550 | $117 | +21.27% | $1,333 | $1,078 | $255 | +23.65% | | Amortization expense | $157 | $5 | $152 | +3040.00% | $314 | $8 | $306 | +3825.00% | | Insurance agency expense | $0 | $232 | $(232) | -100.00% | $0 | $517 | $(517) | -100.00% | | FDIC assessments | $0 | $228 | $(228) | -100.00% | $229 | $457 | $(228) | -49.89% | - The increases in noninterest expense were primarily attributed to additional operating expenses associated with the East Syracuse branch acquisition, totaling **$595,000 in Q2 2025** and **$1.2 million YTD**[179](index=179&type=chunk)[211](index=211&type=chunk) [Income Tax Expense](index=78&type=section&id=Income%20Tax%20Expense) Income tax expense decreased significantly in Q2 2025 to **$7,000** (from **$481,000** in Q2 2024) due to a **$2.5 million decrease** in pre-tax income. For YTD June 30, 2025, tax expense decreased to **$751,000** (from **$1.0 million** YTD 2024). The effective tax rate for Q2 2025 was **18.4%**, down from **19.3%** in Q2 2024, while YTD it increased slightly to **20.0%** from **19.5%** Income Tax Expense and Effective Tax Rate (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Income tax expense | $7 | $481 | $(474) | -98.54% | $751 | $1,013 | $(262) | -25.86% | | Effective tax rate | 18.4% | 19.3% | -0.9% | -4.66% | 20.0% | 19.5% | +0.5% | +2.56% | - The decrease in income tax expense for Q2 2025 was primarily driven by a **$2.5 million decrease** in income before taxes[213](index=213&type=chunk) [Earnings per Share](index=78&type=section&id=Earnings%20per%20Share) Basic and diluted EPS for both voting and non-voting shares were less than **$0.01** for Q2 2025, a significant drop from **$0.32** in Q2 2024. For YTD June 30, 2025, EPS decreased to **$0.48** (basic) and **$0.47** (diluted) from **$0.66** in YTD 2024. This decline was primarily due to the **$0.40 per share impact** of the LOCOM HFS adjustment Earnings per Share | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :----- | :--------------------------- | :--------------------------- | :----- | :--------------------------- | :--------------------------- | :----- | | Basic EPS (Voting) | < $0.01 | $0.32 | -100% | $0.48 | $0.66 | -27.27% | | Diluted EPS (Voting) | < $0.01 | $0.32 | -100% | $0.47 | $0.66 | -28.79% | - The decrease in EPS was primarily due to the **$0.40 per share effect** of the loss on sale of nonperforming and classified loans (LOCOM HFS adjustment)[216](index=216&type=chunk)[217](index=217&type=chunk) [Changes in Financial Condition](index=78&type=section&id=Changes%20in%20Financial%20Condition) This section details the changes in the Company's balance sheet, including assets, liabilities, and shareholders' equity, and assesses its capital adequacy against regulatory requirements [Assets](index=78&type=section&id=Assets) Total assets increased by **2.1% to $1.51 billion** at June 30, 2025, compared to December 31, 2024. This growth was mainly driven by increases in investment securities and bank owned life insurance, partially offset by a decrease in total loans due to a reclassification to held-for-sale status Total Assets (in millions) | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------- | :------------ | :---------------- | :--------- | :--------- | | Total assets | $1,505.1 | $1,474.9 | $30.2 | +2.05% | | Total investment securities (incl. FHLB-NY stock) | $469.0 | $436.7 | $32.3 | +7.39% | | Bank owned life insurance | $31.0 | $24.7 | $6.3 | +25.51% | | Loans, net of deferred fees | $909.7 | $919.0 | $(9.3) | -1.01% | - The decrease in loans was after **$3.2 million in balances** were moved to held-for-sale status for the July 2025 sale of nonperforming and classified loans[222](index=222&type=chunk) - Commercial loans increased by **$9.4 million (+1.7%)**, while consumer and residential loans decreased by **$18.8 million (-4.9%)**[222](index=222&type=chunk) [Liabilities](index=80&type=section&id=Liabilities) Total liabilities increased by **2.0% to $1.38 billion** at June 30, 2025, from December 31, 2024. This was primarily due to a **$17.4 million increase** in total deposits and an **$8.4 million increase** in total borrowings Total Liabilities (in millions) | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------- | :------------ | :---------------- | :--------- | :--------- | | Total liabilities | $1,380.7 | $1,353.4 | $27.3 | +2.02% | | Total deposits | $1,221.9 | $1,204.5 | $17.4 | +1.44% | | Total borrowings | $96.5 | $88.1 | $8.4 | +9.53% | - The increase in deposits was due to a **$39.4 million increase** in interest-bearing deposits, partially offset by a **$22.0 million decrease** in noninterest-bearing deposits[224](index=224&type=chunk) - The increase in borrowings was due to a **$14.5 million increase** in short-term borrowed funds, partially offset by a **$6.1 million decrease** in long-term borrowed funds[225](index=225&type=chunk) [Shareholders' Equity](index=80&type=section&id=Shareholders'%20Equity) Shareholders' equity increased by **2.4% to $124.4 million** at June 30, 2025, driven by net income, an increase in additional paid-in capital, and a decrease in accumulated other comprehensive loss, partially offset by declared dividends Total Shareholders' Equity (in millions) | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------- | :------------ | :---------------- | :--------- | :--------- | | Total shareholders' equity | $124.4 | $121.5 | $2.9 | +2.39% | - The increase was primarily due to **$3.0 million in net income**, an **$895,000 increase** in additional paid-in capital, and a **$286,000 decrease** in accumulated other comprehensive loss, partially reduced by **$1.3 million in declared dividends**[226](index=226&type=chunk) [Capital](index=80&type=section&id=Capital) Pathfinder Bank maintained a "well-capitalized" status at June 30, 2025, exceeding all regulatory minimum capital ratios, including the capital conservation buffer requirements. All key capital ratios showed slight increases or stable performance compared to December 31, 2024 Regulatory Capital Ratios | Regulatory Capital Ratio | June 30, 2025 | December 31, 2024 | Minimum for "Well-Capitalized" | | :----------------------- | :------------ | :---------------- | :----------------------------- | | Total Core Capital (to Risk-Weighted Assets) | 14.87% | 14.65% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 13.62% | 13.40% | 8.00% | | Tier 1 Common Equity (to Risk-Weighted Assets) | 13.62% | 13.40% | 6.50% | | Tier 1 Capital (to Assets) | 9.68% | 9.64% | 5.00% | - The Bank met the regulatory definition of a **"well-capitalized" institution** at June 30, 2025[227](index=227&type=chunk) - The Bank exceeded all regulatory required minimum capital ratios, including the capital buffer requirements[228](index=228&type=chunk) [Non-GAAP Financial Measures](index=81&type=section&id=Non-GAAP%20Financial%20Measures) The Company provides non-GAAP financial measures, including revenue, pre-tax, pre-provision net income, and efficiency ratio, to offer additional insights into its financial performance. Revenue increased, while pre-tax, pre-provision net income and the efficiency ratio improved for Q2 2025 compared to Q2 2024 Non-GAAP Financial Measures (in thousands) | Non-GAAP Metric (in thousands) | June 30, 2025 (Q2) | December 31, 2024 (Q2) | Change ($) | Change (%) | | :----------------------------- | :----------------- | :--------------------- | :--------- | :--------- | | Revenue | $12,277 | $11,826 | $451 | +3.81% | | Pre-tax, pre-provision net income | $4,216 | $3,321 | $895 | +26.95% | | Efficiency ratio | 65.66% | 72.25% | -6.59% | -9.12% | - Non-GAAP measures are provided as supplemental information to GAAP financial measures[230](index=230&type=chunk) [Loan and Asset Quality and Allowance for Credit Losses](index=83&type=section&id=Loan%20and%20Asset%20Quality%20and%20Allowance%20for%20Credit%20Losses) Nonperforming assets significantly decreased by **$10.3 million to $11.8 million** at June 30, 2025, primarily due to the July 2025 sale of nonperforming loans. The allowance for credit losses (ACL) on loans decreased to **$16.0 million**, and the ratio of ACL to total loans was **1.76%**. Potential problem loans increased to **$64.2 million** Loan and Asset Quality (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | :--------- | | Total nonperforming assets | $11,772 | $22,084 | $(10,312) | -46.69% | | Nonperforming loans to total loans | 1.28% | 2.40% | -1.12% | -46.67% | | Allowance for credit losses on loans | $15,983 | $17,243 | $(1,260) | -7.31% | | ACL to total loans | 1.76% | 1.88% | -0.12% | -6.38% | | Individually analyzed loans | $12,100 | $20,000 | $(7,900) | -39.50% | | Potential problem loans | $64,200 | $56,400 | $7,800 | +13.83% | - The decrease in nonperforming loans was driven by the July 2025 sale of loans associated with one large commercial relationship[236](index=236&type=chunk) [Liquidity](index=85&type=section&id=Liquidity) For the first six months of 2025, the Company reported net cash inflows from operating (**$2.0 million**) and financing (**$25.0 million**) activities, offset by net cash outflows from investing activities (**$27.0 million**). Uninsured deposits totaled **$154.7 million**, and the Bank had **$170.9 million** in available credit lines Net Cash Flow (in millions) | Metric (in millions) | 6 Months Ended June 30, 2025 | | :------------------- | :--------------------------- | | Net cash flow from operating activities | $2.0 | | Net cash flow from investing activities | $(27.0) | | Net cash flow from financing activities | $25.0 | - Uninsured deposits totaled **$154.7 million**, representing **14.0%** of all deposits at June 30, 2025[251](index=251&type=chunk) - The Bank had **$170.9 million** of available credit lines from FHLBNY, the Federal Reserve Bank, and other correspondent banks[252](index=252&type=chunk) [Off-Balance Sheet Arrangements](index=87&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company had **$229.9 million** in outstanding commitments to extend credit and standby letters of credit at June 30, 2025. An allowance for credit losses of **$532,000** was recorded for these off-balance sheet exposures Off-Balance Sheet Arrangements (in thousands) | Metric (in thousands) | June 30, 2025 | | :-------------------- | :------------ | | Outstanding commitments to extend credit and standby letters of credit | $229,900 | | Allowance for credit losses on off-balance sheet exposures | $532 | [Item 3 – Quantitative and Qualitative Disclosures About Market Risk](index=87&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - A smaller reporting company is not required to provide information relating to this item[256](index=256&type=chunk) [Item 4 – Controls and Procedures](index=87&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[257](index=257&type=chunk)[258](index=258&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[259](index=259&type=chunk) [PART II - OTHER INFORMATION](index=90&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, other information, and exhibits [Item 1 – Legal Proceedings](index=90&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) As of June 30, 2025, the Company is not a named party in any legal proceeding that would have a material and adverse effect on its financial condition or results of operations - The Company is not currently a named party in a legal proceeding with a material adverse effect on financial condition or results of operations[261](index=261&type=chunk) [Item 1A – Risk Factor](index=90&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factor) As a smaller reporting company, the registrant is not required to provide information relating to risk factors - A smaller reporting company is not required to provide information relating to this item[262](index=262&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=90&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not repurchase any shares during the second quarter of 2025. As of June 30, 2025, **74,292 shares** remained authorized for repurchase under the existing plan Share Repurchase Activity | Metric | April 1, 2025 - June 30, 2025 | | :----- | :---------------------------- | | Total Number of Shares Purchased | 0 | | Maximum Number of Shares That May Yet Be Purchased | 74,292 | [Item 3 – Defaults upon Senior Securities](index=90&type=section&id=Item%203%20%E2%80%93%20Defaults%20upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - No defaults upon senior securities occurred[264](index=264&type=chunk) [Item 4 – Mine Safety Disclosures](index=90&type=section&id=Item%204%20%E2%80%93%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to the Company - Mine Safety Disclosures are not applicable[264](index=264&type=chunk) [Item 5 – Other information](index=90&type=section&id=Item%205%20%E2%80%93%20Other%20information) During the second quarter of 2025, none of the Company's directors or officers adopted or terminated any Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during Q2 2025[264](index=264&type=chunk) [Item 6 – Exhibits](index=91&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and interactive data files in iXBRL format - Exhibits include Rule 13a-14(a)/15d-14(a) certifications, Section 1350 certifications, and Interactive Data Files (iXBRL)[266](index=266&type=chunk) [SIGNATURES](index=91&type=section&id=SIGNATURES) The report is duly signed on behalf of Pathfinder Bancorp, Inc. by its President and Chief Executive Officer, James A. Dowd, and its Senior Vice President and Chief Financial Officer, Justin K. Bigham, as of August 14, 2025 - The report was signed by James A. Dowd, President and Chief Executive Officer, and Justin K. Bigham, Senior Vice President and Chief Financial Officer, on August 14, 2025[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)

Pathfinder Bancorp, Inc. Q2 2025 Earnings Release [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights%20and%20Key%20Developments) Proactive credit risk mitigation via a major loan sale improved asset quality but drove a $3.1 million pre-tax loss, reducing net income to $31,000 Q2 2025 Key Financial Results | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income (attributable to common shareholders) | $31,000 | $3.0 million | $2.0 million | | Diluted EPS | < $0.01 | $0.47 | $0.32 | - The company sold **$9.3 million** in nonperforming and classified loans in July 2025, recording a **$3.1 million pre-tax loss** in Q2 2025, which amounted to **$0.40 per diluted share** after tax[4](index=4&type=chunk) Asset Quality and Balance Sheet Highlights (as of June 30, 2025) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Nonperforming Loans | $11.7 million | $13.2 million | $24.5 million | | Nonperforming Loans / Total Loans | 1.28% | 1.45% | 2.76% | | Total Deposits | $1.22 billion | $1.26 billion | $1.10 billion | | Core Deposits / Total Deposits | 78.47% | 78.31% | 67.98% | | Total Loans | $909.7 million | $912.2 million | $888.3 million | [Net Interest Income and Net Interest Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income decreased from the prior quarter due to a one-time benefit in Q1, though it increased year-over-year on higher loan yields NII and NIM Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $10.8 million | $11.4 million | $9.5 million | | Net Interest Margin (NIM) | 3.11% | 3.31% | 2.78% | - The decrease in NII from Q1 2025 was partly due to a **$347,000 benefit** in the first quarter from interest recovered on nonaccrual loans and prepayment fees, which had inflated Q1 NII and NIM by **10 basis points**[6](index=6&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk) - Compared to Q2 2024, NII increased by **$1.3 million (14.1%)**, attributed to a **$25.9 million increase** in average loan balances and a **45 basis point reduction** in the average cost of total interest-bearing liabilities[10](index=10&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) A $3.1 million loss adjustment on a nonperforming loan sale drove noninterest income to a negative $1.5 million for the quarter - A **$3.1 million pre-tax loss** (LOCOM HFS adjustment) was recorded on the sale of nonperforming and classified loans, resulting in a total noninterest loss of **$1.5 million** for the quarter[12](index=12&type=chunk)[13](index=13&type=chunk) - The loan portfolio sold had an original principal of **$9.3 million** and a balance of **$6.3 million** at June 30, 2025; it was sold for **$3.2 million** in July 2025[12](index=12&type=chunk) - Excluding the loan sale adjustment, noninterest income saw increases in debit card interchange fees and unrealized gains on marketable equity securities compared to the linked quarter[14](index=14&type=chunk) [Noninterest Expense](index=3&type=section&id=Noninterest%20Expense) Noninterest expense decreased from the prior quarter to $8.1 million, aided by lower maintenance costs and the absence of an FDIC assessment Noninterest Expense Comparison | Period | Total Noninterest Expense | | :--- | :--- | | Q2 2025 | $8.1 million | | Q1 2025 | $8.4 million | | Q2 2024 | $7.9 million | - **No FDIC assessment expense** was recorded in Q2 2025 due to prior over-accruals; this expense is expected to normalize to a range of **$220,000 to $230,000** per quarter in H2 2025[21](index=21&type=chunk) - The **efficiency ratio improved to 65.66%** from 67.19% in the linked quarter and 74.36% in the year-ago period[22](index=22&type=chunk) [Financial Condition](index=5&type=section&id=Statement%20of%20Financial%20Condition) Total assets remained stable at $1.51 billion, while deposits decreased due to managed reductions in higher-cost accounts Balance Sheet Summary (as of June 30, 2025) | Account | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $1.51 billion | $1.50 billion | $1.45 billion | | Total Loans | $909.7 million | $912.2 million | $888.3 million | | Total Deposits | $1.22 billion | $1.26 billion | $1.10 billion | | Shareholders' Equity | $124.4 million | $124.9 million | $123.3 million | - Commercial loans grew by **1.2%** during the quarter to **$549.1 million**, representing **60.4% of total loans**[4](index=4&type=chunk)[25](index=25&type=chunk) [Asset Quality](index=5&type=section&id=Asset%20Quality) Asset quality improved significantly with nonperforming loans falling to 1.28%, though net charge-offs increased due to the loan sale Key Asset Quality Metrics | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Nonperforming Loans | $11.7 million | $13.2 million | $24.5 million | | NPLs / Total Loans | 1.28% | 1.45% | 2.76% | | Net Charge-Offs (Annualized) | 1.14% | 0.15% | 0.03% | | ACL / Total Loans | 1.76% | 1.91% | 1.90% | - The provision for credit loss expense was **$1.2 million** in Q2 2025, primarily reflecting the period's net charge-offs[31](index=31&type=chunk) [Liquidity](index=6&type=section&id=Liquidity) The company maintains a strong liquidity profile, supported by a growing core deposit base and significant available funding capacity - Core deposits grew to **78.47% of total deposits**, up from 67.98% a year prior, enhancing deposit stability and providing low-cost funding[34](index=34&type=chunk) - The company has available additional funding capacity of **$124.5 million** with the FHLB of New York and another **$46.5 million** in unused credit lines[35](index=35&type=chunk) [Cash Dividend](index=6&type=section&id=Cash%20Dividend%20Declared) The Board declared a quarterly cash dividend of $0.10 per share, representing a 2.61% annualized yield - A cash dividend of **$0.10 per share** was declared[36](index=36&type=chunk) - The annualized dividend yield is **2.61%** based on the June 30, 2025 closing stock price of **$15.34**[37](index=37&type=chunk) [Selected Financial Tables](index=8&type=section&id=PATHFINDER%20BANCORP%2C%20INC.%20Selected%20Financial%20Information%20(Unaudited)) This section presents detailed unaudited financial statements and key performance metrics for the quarter and comparative periods Selected Balance Sheet Data (in thousands) | Account | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total assets | $1,505,119 | $1,495,337 | $1,446,211 | | Loans, net | $893,740 | $894,743 | $871,371 | | Total deposits | $1,221,887 | $1,264,480 | $1,101,277 | | Total equity | $124,413 | $124,896 | $124,174 | Selected Income Statement Data (in thousands) | Account | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net interest income | $10,814 | $11,411 | $9,480 | | Total provision for credit losses | $1,197 | $457 | $290 | | Total noninterest (loss) income | ($1,518) | $1,197 | $1,211 | | Total noninterest expense | $8,061 | $8,433 | $7,908 | | Net income (loss) attributable to Pathfinder | $31 | $2,974 | $2,000 | Selected Ratios | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Return on average assets | 0.01% | 0.81% | 0.56% | | Return on average common equity | 0.10% | 9.64% | 6.49% | | Net interest margin | 3.11% | 3.31% | 2.78% | | Efficiency ratio (non-GAAP) | 65.66% | 67.19% | 74.36% |

Core Insights - Pathfinder Bancorp reported a significant decline in net income for the second quarter of 2025, with net income attributable to common shareholders at $31,000, down from $3.0 million in the previous quarter and $2.0 million in the same quarter last year [2][21] - The company undertook proactive measures to mitigate credit risk, including the sale of $9.3 million in nonperforming and classified loans, which resulted in a pre-tax loss of $3.1 million [7][11] - Nonperforming loans decreased to $11.7 million, representing 1.28% of total loans, showing improvement from 1.45% in the previous quarter and 2.76% a year ago [27][30] Financial Performance - Net interest income for the second quarter of 2025 was $10.8 million, a decrease of 5.2% from the first quarter, but an increase of 14.1% from the second quarter of 2024 [5][9] - The net interest margin (NIM) was 3.11%, down from 3.31% in the first quarter of 2025, but up from 2.78% in the second quarter of 2024 [8][10] - Total deposits were $1.22 billion, a decrease from $1.26 billion in the previous quarter, but an increase of 11.0% from the same period last year [24][32] Asset Quality - The company recorded net charge-offs of $2.6 million, with a provision for credit loss expense of $1.2 million in the second quarter of 2025 [28][29] - The Allowance for Credit Losses (ACL) was $16.0 million, representing 1.76% of total loans, down from 1.91% in the previous quarter [30] - The efficiency ratio improved to 65.66%, compared to 67.19% in the linked quarter and 74.36% in the year-ago period, indicating better management of non-interest expenses [20] Liquidity and Capital - The company maintained a strong liquidity profile with total assets of $1.51 billion as of June 30, 2025, compared to $1.50 billion in the previous quarter [22] - Core deposits increased to 78.47% of total deposits, up from 78.31% in the previous quarter and 67.98% a year ago, reflecting a focus on low-cost funding [32] - Shareholders' equity totaled $124.4 million, a slight decrease from the previous quarter but an increase from the same period last year [25] Dividend Declaration - The Board of Directors declared a cash dividend of $0.10 per share, scheduled for disbursement on August 8, 2025, with an annualized dividend yield of 2.61% based on the closing stock price of $15.34 as of June 30, 2025 [35][36]

PART I - FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position, operations, and cash flows, with total assets reaching **$1.50 billion** and Q1 2025 net income increasing to **$3.0 million** [Consolidated Statements of Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Condition) The consolidated statements of condition show total assets increased to **$1.50 billion** by March 31, 2025, driven by higher cash and deposits, while total liabilities reached **$1.37 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Total cash and cash equivalents | $51,468 | $31,572 | | Available-for-sale securities, at fair value | $284,051 | $269,331 | | Loans receivable, net | $894,743 | $901,743 | | **Total assets** | **$1,495,337** | **$1,474,874** | | **Liabilities & Equity** | | | | Total deposits | $1,264,480 | $1,204,524 | | Total borrowings (Short & Long-term) | $44,628 | $88,068 | | **Total liabilities** | **$1,370,441** | **$1,353,391** | | **Total shareholders' equity** | **$124,896** | **$121,483** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income show Q1 2025 net income increased to **$3.0 million** from **$2.1 million** in Q1 2024, primarily due to higher net interest income and lower credit loss provisions Quarterly Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net interest income | $11,411 | $9,400 | | Total provision for credit losses | $457 | $726 | | Net interest income after provision | $10,954 | $8,674 | | Total noninterest income | $1,197 | $1,737 | | Total noninterest expense | $8,433 | $7,706 | | Net income attributable to Pathfinder Bancorp Inc. | $2,974 | $2,120 | | Voting Earnings per common share - basic | $0.48 | $0.34 | | Voting Earnings per common share - diluted | $0.41 | $0.34 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows indicate a **$19.9 million** increase in cash and cash equivalents for Q1 2025, driven by strong operating and financing cash inflows Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash inflows from operating activities | $5,697 | $504 | | Net cash outflows from investing activities | ($1,872) | ($7,404) | | Net cash inflows (outflows) from financing activities | $16,071 | ($12,609) | | **Change in cash and cash equivalents** | **$19,896** | **($19,509)** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, investment and loan portfolio composition, allowance for credit losses, fair value measurements, and derivative instruments - The company's investment portfolio consists of Available-for-Sale (AFS) securities valued at **$284.1 million** and Held-to-Maturity (HTM) securities with an amortized cost of **$155.7 million** as of March 31, 2025. The AFS portfolio had unrealized losses of **$10.3 million**, while the HTM portfolio had unrealized losses of **$7.0 million**, primarily due to changes in the interest rate environment, not credit deterioration[33](index=33&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - The loan portfolio totaled **$912.2 million** as of March 31, 2025, with commercial loans (real estate, lines of credit, C&I) representing the largest segment at **$542.7 million (59.5%)**[48](index=48&type=chunk) - Nonaccrual loans decreased significantly to **$13.2 million (1.5% of total loans)** at March 31, 2025, from **$22.1 million (2.4% of total loans)** at December 31, 2024, mainly due to three large commercial loans returning to accrual status[68](index=68&type=chunk) - The Allowance for Credit Losses (ACL) on loans was **$17.4 million** as of March 31, 2025, up slightly from **$17.2 million** at year-end 2024. The company recorded a **$504,000** provision for credit losses on loans during Q1 2025[78](index=78&type=chunk) - The company utilizes interest rate swaps as fair value hedges for portions of its investment and loan portfolios to manage interest rate risk. As of March 31, 2025, the fair value of these derivative hedges was a net asset of **$3.1 million**[114](index=114&type=chunk)[115](index=115&type=chunk)[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **$0.9 million** increase in Q1 2025 net income, driven by higher net interest income and improved asset quality, with the net interest margin expanding to **3.31%** - Net income for Q1 2025 was **$3.0 million**, an increase of **$854,000** from Q1 2024. The primary drivers were a **$1.2 million** decrease in interest expense and an **$831,000** increase in interest income[157](index=157&type=chunk) - Net interest margin expanded to **3.31%** in Q1 2025 from **2.75%** in Q1 2024, driven by a **36 basis point** decrease in the average cost of interest-bearing liabilities and a **19 basis point** increase in the average yield on interest-earning assets[158](index=158&type=chunk)[159](index=159&type=chunk)[171](index=171&type=chunk) - Noninterest income decreased by **$540,000** year-over-year, primarily due to the loss of **$397,000** in revenue from the insurance agency sold in October 2024[161](index=161&type=chunk)[182](index=182&type=chunk) - Noninterest expense increased by **$727,000 (9.4%)** year-over-year, largely due to a **$531,000** increase in building and occupancy costs associated with the East Syracuse branch acquired in July 2024[163](index=163&type=chunk)[185](index=185&type=chunk) [Application of Critical Accounting Estimates](index=53&type=section&id=Application%20of%20Critical%20Accounting%20Estimates) Management highlights critical accounting estimates including the allowance for credit losses, deferred income taxes, and fair value measurements, emphasizing judgment in the **$542.7 million** commercial loan portfolio - The Allowance for Credit Losses (ACL) is a critical estimate. Management notes that for the commercial loan portfolio, which represents **59.0%** of total loans, a hypothetical **25%** change in the qualitative factors used in the ACL calculation could increase or decrease the allowance by approximately **$1.1 million**[147](index=147&type=chunk) - At March 31, 2025, the Bank had **44 individually evaluated loans** totaling **$15.8 million**. Of these, **30 loans** totaling **$14.9 million** were valued based on collateral analysis, while **14 loans** totaling **$923,000** were valued using the discounted cash flow method[146](index=146&type=chunk) [Net Interest Income](index=59&type=section&id=Net%20Interest%20Income) Net interest income increased by **$2.0 million** to **$11.4 million** in Q1 2025, with the net interest margin improving significantly to **3.31%** due to lower funding costs Net Interest Income and Margin Analysis | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net interest income (in thousands) | $11,411 | $9,400 | | Net interest rate spread | 2.73% | 2.18% | | Net interest margin | 3.31% | 2.75% | Rate/Volume Analysis of Net Interest Income Change (Q1 2025 vs Q1 2024, in thousands) | Component | Change Due to Volume | Change Due to Rate | Total Change | | :--- | :--- | :--- | :--- | | Total interest income | $177 | $654 | $831 | | Total interest expense | ($437) | ($743) | ($1,180) | | **Net change in net interest income** | **$614** | **$1,397** | **$2,011** | [Loan and Asset Quality and Allowance for Credit Losses](index=71&type=section&id=Loan%20and%20Asset%20Quality%20and%20Allowance%20for%20Credit%20Losses) Asset quality improved significantly in Q1 2025, with nonperforming assets decreasing to **$13.2 million** and the allowance for credit losses on loans reaching **$17.4 million** Nonperforming Assets (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total nonaccrual loans | $13,232 | $22,084 | | Total nonperforming assets | $13,232 | $22,084 | | Nonperforming loans to total loans | 1.45% | 2.40% | | Nonperforming assets to total assets | 0.88% | 1.50% | - The allowance for credit losses on loans was **$17.4 million** at March 31, 2025, compared to **$17.2 million** at December 31, 2024. The ratio of ACL to total loans was **1.91%** at quarter-end[209](index=209&type=chunk) [Liquidity and Capital](index=68&type=section&id=Liquidity%20and%20Capital) The company maintained strong liquidity and capital, supported by a **$60.0 million** increase in deposits and capital ratios well above 'well-capitalized' minimums - At March 31, 2025, the company had total available credit lines of approximately **$224.5 million**, with **$179.8 million** unused and available[222](index=222&type=chunk) Pathfinder Bank Regulatory Capital Ratios | Ratio | March 31, 2025 | Minimum To Be "Well-Capitalized" | | :--- | :--- | :--- | | Total Core Capital (to Risk-Weighted Assets) | 14.86% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 13.61% | 8.00% | | Tier 1 Common Equity (to Risk-Weighted Assets) | 13.61% | 6.50% | | Tier 1 Capital (to Assets) | 9.80% | 5.00% | - Shareholders' equity increased by **$3.4 million** to **$124.9 million** at March 31, 2025, primarily due to **$2.3 million** in retained earnings and a **$712,000** decrease in accumulated other comprehensive loss[199](index=199&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Pathfinder Bancorp, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - A smaller reporting company is not required to provide the information relating to this item[227](index=227&type=chunk) [Item 4. Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[229](index=229&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter ended March 31, 2025[230](index=230&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2025, the company is not involved in any legal proceedings expected to materially adversely affect its financial condition or operations - At March 31, 2025, the Company is not currently a named party in a legal proceeding, the outcome of which would have a material and adverse effect on the financial condition or results of operations of the Company[231](index=231&type=chunk) [Item 1A. Risk Factor](index=61&type=section&id=Item%201A.%20Risk%20Factor) As a smaller reporting company, Pathfinder Bancorp, Inc. is exempt from providing risk factor disclosures - A smaller reporting company is not required to provide the information relating to this item[232](index=232&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase common stock in Q1 2025, with **74,292 shares** remaining available under the existing repurchase plan Share Repurchase Activity (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Remaining Under Plan | | :--- | :--- | :--- | :--- | | Jan 2025 | 0 | $ - | 74,292 | | Feb 2025 | 0 | $ - | 74,292 | | Mar 2025 | 0 | $ - | 74,292 | [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) The report includes filed exhibits such as CEO and CFO certifications and Interactive Data Files for financial statements

[Executive Summary & Highlights](index=1&type=section&id=First%20Quarter%202025%20Highlights%20and%20Key%20Developments) Pathfinder Bancorp reported strong Q1 2025 results with net income of **$3.0 million**, or **$0.41 per diluted share**, driven by significant growth in net interest income and margin, fueled by strong core deposit growth, reduced borrowings, and improved asset quality Quarterly Earnings Comparison | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Income (attributable to common shareholders) | $3.0 million | $3.9 million* | $2.1 million | | Diluted EPS | $0.41 | $0.63* | $0.34 | *Q4 2024 included a $1.4 million net gain from an asset sale. Q1 2025 Key Performance Indicators | Indicator | Value / Change | Note | | :--- | :--- | :--- | | Total Deposits | $1.26 billion | +10.3% YoY | | Core Deposits | 78.31% of total | Up from 69.17% YoY | | Borrowings | $44.6 million | -67.5% YoY | | Nonperforming Loans | $13.2 million | -32.7% YoY | | NPLs to Total Loans | 1.45% | Down from 2.20% YoY | | Net Interest Income | $11.4 million | +$2.0 million YoY | | Net Interest Margin (NIM) | 3.31% | Up from 2.75% YoY | | Efficiency Ratio | 66.84% | Improved from 68.29% YoY | - CEO James A. Dowd highlighted that the solid results reflect a strong balance sheet, a growing core deposit franchise, and disciplined pricing, with the company focused on a long-term strategy to enhance loan portfolio quality and optimistic about regional growth opportunities[4](index=4&type=chunk) [Financial Performance Analysis](index=2&type=section&id=Financial%20Performance%20Analysis) The company's financial performance in Q1 2025 was characterized by a **10.0% sequential increase** in net interest income to **$11.4 million** and a significant expansion in net interest margin to **3.31%**, with noninterest income normalizing to **$1.2 million** and an improved efficiency ratio of **66.84%** [Net Interest Income and Net Interest Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income (NII) for Q1 2025 was **$11.4 million**, a **10.0% increase** from the linked quarter, while net interest margin (NIM) expanded by **29 basis points to 3.31%**, primarily due to a **$1.1 million decrease** in interest expense and a **$347,000 benefit** from recovered interest and prepayment fees NII and NIM Performance | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $11.4 million | $10.4 million | $9.4 million | | Net Interest Margin | 3.31% | 3.02% | 2.75% | - The increase in NII and NIM was driven by a **$1.1 million decrease** in interest expense from the linked quarter, reflecting lower costs for deposits and borrowings[5](index=5&type=chunk)[6](index=6&type=chunk) - A benefit of approximately **$347,000** from recovered interest on nonaccrual loans and prepayment fees added **10 basis points** to NIM[7](index=7&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Q1 2025 noninterest income was **$1.2 million**, a significant decrease from **$4.9 million** in the linked quarter, which included a **$3.2 million pre-tax gain** from the sale of the company's insurance agency in October 2024 - Noninterest income totaled **$1.2 million** in Q1 2025, no longer including contributions from the insurance agency business, which was sold in October 2024, and the linked quarter (Q4 2024) included a **$3.2 million pre-tax gain** from this sale[9](index=9&type=chunk) - Compared to the linked quarter, key changes included a **$264,000 reduction** in debit card interchange fees and a **$257,000 decrease** in net realized gains on sales of investment securities[10](index=10&type=chunk) [Noninterest Expense](index=3&type=section&id=Noninterest%20Expense) Noninterest expense for Q1 2025 was **$8.4 million**, a slight decrease from **$8.5 million** in the linked quarter, primarily because Q1 2025 no longer includes expenses from the divested insurance agency, while the efficiency ratio improved to **66.84%** - Total noninterest expense was **$8.4 million** in Q1 2025, no longer including costs for the insurance agency, which amounted to **$456,000** in Q4 2024 and **$285,000** in Q1 2024[12](index=12&type=chunk) - Salaries and benefits rose by **$327,000** from the linked quarter to **$4.5 million**, driven by increases in stock-based compensation and payroll tax[13](index=13&type=chunk) - Building and occupancy expenses increased by **$531,000** from the year-ago quarter, primarily due to costs associated with the East Syracuse branch acquired in July 2024[14](index=14&type=chunk) - The efficiency ratio improved to **66.84%** in Q1 2025, compared to **72.01%** in the linked quarter and **68.29%** in the year-ago period[16](index=16&type=chunk) [Net Income](index=4&type=section&id=Net%20Income) The company reported net income attributable to common shareholders of **$3.0 million** for Q1 2025, translating to **$0.48 per basic** and **$0.41 per diluted share**, compared to **$3.9 million** in Q4 2024 and **$2.2 million** in Q1 2024 Net Income and EPS Summary | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Income (Common Shareholders) | $3.0 million | $3.9 million | $2.2 million | | Basic EPS | $0.48 | $0.63 | $0.34 | | Diluted EPS | $0.41 | $0.63 | $0.34 | [Financial Condition](index=4&type=section&id=Statement%20of%20Financial%20Condition) As of March 31, 2025, total assets grew to **$1.50 billion**, with total deposits increasing by **10.3% year-over-year to $1.26 billion**, facilitating a significant **67.5% year-over-year reduction** in total borrowings to **$44.6 million**, while total loans stood at **$912.2 million** and shareholders' equity increased to **$124.9 million** [Loans](index=4&type=section&id=Loans) Total loans were **$912.2 million** at the end of Q1 2025, a slight **0.7% decrease** from the prior quarter but a **2.3% increase year-over-year**, with commercial loans growing **3.3% year-over-year to $542.7 million** Loan Portfolio Composition (in millions) | Loan Category | Mar 31, 2025 | Dec 31, 2024 | Mar 31, 2024 | | :--- | :--- | :--- | :--- | | Commercial Loans | $542.7 | $539.7 | $525.6 | | Consumer & Residential | $371.0 | $380.3 | $366.5 | | **Total Loans** | **$912.2** | **$919.0** | **$891.5** | [Deposits and Borrowings](index=4&type=section&id=Deposits%20and%20Borrowings) Deposits grew strongly to **$1.26 billion**, up **5.0%** in the quarter and **10.3%** from the prior year, enabling the company to significantly reduce higher-cost borrowings to **$44.6 million**, a **49.3% decrease** in the quarter and a **67.5% decrease year-over-year** Deposits and Borrowings (in millions) | Liability | Mar 31, 2025 | Dec 31, 2024 | Mar 31, 2024 | | :--- | :--- | :--- | :--- | | Total Deposits | $1,260.0 | $1,204.5 | $1,146.1 | | Total Borrowings | $44.6 | $88.1 | $137.4 | [Shareholders' Equity](index=4&type=section&id=Shareholders%20Equity) Shareholders' equity increased by **2.8%** during the quarter to **$124.9 million** as of March 31, 2025, primarily driven by a **$2.3 million increase** in retained earnings and a **$712,000 decrease** in accumulated other comprehensive loss (AOCL) - Total shareholders' equity rose to **$124.9 million**, an increase of **$3.4 million (2.8%)** in Q1 2025, mainly due to a **$2.3 million increase** in retained earnings[21](index=21&type=chunk) [Asset Quality and Liquidity](index=5&type=section&id=Asset%20Quality%20and%20Liquidity) The company demonstrated significant improvements in asset quality, with nonperforming loans dropping **40.1%** from the previous quarter to **1.45% of total loans**, while the Allowance for Credit Losses was bolstered to **1.91% of total loans**, and liquidity remains strong, supported by a growing core deposit base of **78.31%** and substantial available borrowing capacity [Asset Quality](index=5&type=section&id=Asset%20Quality) Asset quality metrics improved markedly in Q1 2025, with nonperforming loans (NPLs) decreasing to **$13.2 million** from **$22.1 million** in the prior quarter, lowering the NPL to total loans ratio to **1.45%**, and the Allowance for Credit Losses (ACL) was increased to **$17.4 million**, or **1.91% of total loans** Nonperforming Loans (NPLs) | Metric | Mar 31, 2025 | Dec 31, 2024 | Mar 31, 2024 | | :--- | :--- | :--- | :--- | | NPLs (in millions) | $13.2 | $22.1 | $19.7 | | NPLs / Total Loans | 1.45% | 2.40% | 2.20% | - Net charge-offs were **$340,000**, or an annualized **0.15% of average loans**, in Q1 2025, down from **$1.0 million** in the linked quarter[23](index=23&type=chunk) - The Allowance for Credit Losses (ACL) stood at **$17.4 million**, representing **1.91% of total loans**, an increase from **1.88%** in the prior quarter[25](index=25&type=chunk) [Liquidity](index=5&type=section&id=Liquidity) The company maintains a strong liquidity position, with core deposits growing to **78.31% of total deposits**, enhancing funding stability, and access to **$133.3 million** in additional funding from the Federal Home Loan Bank of New York and **$46.6 million** in other unused credit lines - Core deposits grew to **78.31% of total deposits** as of March 31, 2025, up from **76.86%** at year-end 2024 and **69.17%** a year prior, enhancing deposit stability[27](index=27&type=chunk) - The company has significant additional funding capacity, including **$133.3 million** with the FHLB of New York and another **$46.6 million** in unused credit lines[28](index=28&type=chunk) [Shareholder Information](index=6&type=section&id=Shareholder%20Information) Pathfinder Bancorp's Board of Directors declared a quarterly cash dividend of **$0.10 per share**, demonstrating a continued commitment to delivering shareholder value, representing an annualized dividend yield of **2.43%** based on the closing stock price on March 31, 2025 [Dividend Declaration](index=6&type=section&id=Cash%20Dividend%20Declared) The Board of Directors declared a cash dividend of **$0.10 per share** for both voting and non-voting common stock, payable on May 9, 2025, to shareholders of record as of April 18, 2025, with an annualized dividend yield of **2.43%** - A cash dividend of **$0.10 per share** was declared for holders of both voting and non-voting common stock[30](index=30&type=chunk) - The annualized dividend yield is **2.43%**, based on the closing stock price of **$16.44** on March 31, 2025[31](index=31&type=chunk) [Financial Tables (Unaudited)](index=8&type=section&id=Financial%20Tables%20(Unaudited)) This section contains the detailed unaudited financial data supporting the Q1 2025 results, including consolidated balance sheets, income statements, key performance ratios, asset quality details, loan and deposit compositions, average balance and yield information, and reconciliations of non-GAAP financial measures [Selected Balance Sheet Data](index=8&type=section&id=Selected%20Balance%20Sheet%20Data) Presents the unaudited consolidated balance sheets as of March 31, 2025, and for the four preceding quarters, detailing assets, liabilities, and shareholders' equity[37](index=37&type=chunk) [Selected Income Statement Data](index=9&type=section&id=Selected%20Income%20Statement%20Data) Provides the unaudited consolidated income statements for Q1 2025 and the four preceding quarters, breaking down interest income, interest expense, noninterest income/expense, and net income[39](index=39&type=chunk) [Financial Highlights and Ratios](index=10&type=section&id=Financial%20Highlights) Contains key performance ratios for Q1 2025 and the four preceding quarters, including profitability (ROA, ROE), net interest margin, efficiency ratio, per share data, and capital ratios for both the company and the bank[41](index=41&type=chunk) [Asset Quality, Loan and Deposit Composition](index=11&type=section&id=Asset%20Quality,%20Loan%20and%20Deposit%20Composition) Details asset quality metrics (charge-offs, nonperforming loans), loan composition by type, and deposit composition by account type for Q1 2025 and the four preceding quarters[45](index=45&type=chunk) [Selected Average Balances and Yields](index=12&type=section&id=Selected%20Average%20Balances) Presents selected average balances for assets and liabilities, and the corresponding average yields and costs for Q1 2025, Q4 2024, and Q1 2024, which are used to calculate net interest margin[46](index=46&type=chunk) [Non-GAAP Reconciliations](index=13&type=section&id=NON-GAAP%20RECONCILIATIONS) Provides reconciliations of non-GAAP financial measures (e.g., tangible book value per share, tangible common equity to tangible assets, pre-tax pre-provision net income, efficiency ratio) to their most directly comparable GAAP measures for Q1 2025 and the four preceding quarters[48](index=48&type=chunk)

Core Insights - Pathfinder Bancorp, Inc. reported a net income of $3.0 million or $0.41 per diluted share for Q1 2025, an increase from $2.1 million or $0.34 per share in Q1 2024 [2][19] - The company's net interest income rose to $11.4 million, a 10.0% increase from the previous quarter, driven by improved operating efficiency and growth in core deposits and commercial loans [5][6] - Total deposits reached $1.26 billion, reflecting a 5.0% growth in Q1 2025 and a 10.3% increase year-over-year [6][22] Financial Performance - Net interest margin expanded to 3.31% in Q1 2025 from 3.02% in the previous quarter and 2.75% in the same period last year, attributed to reduced deposit and borrowing costs [9][40] - Noninterest income for Q1 2025 totaled $1.2 million, down from $4.9 million in the linked quarter, primarily due to the absence of contributions from the sold insurance agency [10][11] - Noninterest expense was $8.4 million in Q1 2025, slightly down from $8.5 million in the previous quarter but up from $7.7 million in the year-ago period [13][14] Asset Quality - Nonperforming loans decreased to $13.2 million or 1.45% of total loans, improving from $22.1 million or 2.40% in the previous quarter [24][25] - The allowance for credit losses stood at $17.4 million, representing 1.91% of total loans, compared to 1.88% in the previous quarter [26][27] Liquidity and Capital - The company maintained a strong liquidity profile with total deposits of $1.26 billion and additional funding capacity of $133.3 million with the Federal Home Loan Bank of New York [29][30] - Shareholders' equity increased to $124.9 million, reflecting a 2.8% growth in Q1 2025 [23] Dividend Declaration - The Board of Directors declared a cash dividend of $0.10 per share, scheduled for disbursement on May 9, 2025, with an annualized dividend yield of 2.43% based on the closing stock price of $16.44 as of March 31, 2025 [31][32]

[PART I](index=3&type=section&id=PART%20I) [Business Overview](index=3&type=section&id=Item%201.%20Business) Pathfinder Bancorp, Inc. operates Pathfinder Bank, a commercial bank with $1.47 billion in assets, focusing on lending and deposits [General Overview](index=3&type=section&id=General) Pathfinder Bancorp, Inc. is a bank holding company for Pathfinder Bank, reporting **$1.47 billion** in assets and **$1.20 billion** in deposits at year-end 2024 Consolidated Financial Highlights (as of Dec 31, 2024) | Metric | Amount | | :---------------------- | :--------------- | | Total Consolidated Assets | $1.47 billion | | Total Deposits | $1.20 billion | | Shareholders' Equity | $121.5 million | - The Company's primary business is its 100% ownership of Pathfinder Bank, a New York-chartered commercial bank regulated by the NYSDFS and the FDIC[10](index=10&type=chunk)[14](index=14&type=chunk) - The Company sold its majority interest in the FitzGibbons Agency in October 2024 for total consideration of **$2.8 million**, recognizing a pre-tax gain of **$3.2 million**[17](index=17&type=chunk) [Market Area and Competition](index=4&type=section&id=Market%20Area%20and%20Competition) The Company operates 13 offices in New York, holding the largest deposit market share in Oswego County at **47.7%** - The bank operates seven branches in Oswego County, five in Onondaga County, and one limited purpose office in Oneida County, NY[19](index=19&type=chunk) - The local economy is expected to benefit from significant investments in semiconductor manufacturing, particularly near existing branches in Clay and Cicero, NY[20](index=20&type=chunk) Deposit Market Share (as of June 30, 2024) | Market Area | Market Share | Rank | | :-------------------------- | :----------- | :-------- | | Oswego County | 47.7% | 1st | | Onondaga County | 2.1% | N/A | | Combined Oswego & Onondaga | 7.9% | 5th of 15 | [Lending Activities](index=6&type=section&id=Lending%20Activities) The Company's primary lending activities focus on commercial and residential real estate loans, with a strategy to grow commercial portfolios - The company's primary lending activities are originating commercial real estate, commercial loans, and one-to-four family residential real estate loans[25](index=25&type=chunk) - A strategic focus is to increase commercial real estate and commercial business lending, typically with adjustable or floating rates, to diversify the portfolio and manage interest rate risk[25](index=25&type=chunk)[26](index=26&type=chunk)[33](index=33&type=chunk) - The bank's lending limit to a single borrower is generally **15%** of unimpaired capital and surplus (**$23.4 million** at year-end 2024) for unsecured loans, with an additional **10%** (**$15.6 million**) if secured by readily marketable collateral[52](index=52&type=chunk) [Asset Quality](index=12&type=section&id=Asset%20Quality) Asset quality is managed through continuous review, risk grading, and the CECL methodology adopted on January 1, 2023 - The Company adopted the Current Expected Credit Loss (CECL) methodology for its Allowance for Credit Losses (ACL) on January 1, 2023[67](index=67&type=chunk) - The transition to CECL resulted in a one-time, after-tax adjustment of **$2.1 million** to retained earnings, which included establishing new reserves for held-to-maturity investments and unfunded commitments[71](index=71&type=chunk) - The ACL calculation has three main components: specific allowances for individually evaluated loans, quantitative factors for pooled loans based on historical loss patterns correlated with econometric data, and qualitative adjustments for forward-looking conditions[73](index=73&type=chunk) [Investment Activities](index=19&type=section&id=Investment%20Activities) Investment activities are governed by a Board-approved policy focused on safety, liquidity, and interest rate risk management - The investment policy's objectives are to manage interest rate risk, generate reasonable returns, provide liquidity, and reduce overall credit risk[81](index=81&type=chunk)[82](index=82&type=chunk) - The portfolio includes a broad range of debt securities, such as U.S. Government and agency obligations, mortgage-backed securities, and corporate bonds, classified as either held-to-maturity (HTM) or available-for-sale (AFS)[83](index=83&type=chunk)[84](index=84&type=chunk) - The Company invests in mortgage-backed securities and collateralized mortgage obligations guaranteed by government-sponsored enterprises (Fannie Mae, Freddie Mac, Ginnie Mae) as well as private issuers to achieve positive spreads and geographic diversification[87](index=87&type=chunk) [Sources of Funds](index=21&type=section&id=Sources%20of%20Funds) Primary funds come from local deposits, supplemented by FHLBNY advances, brokered deposits, and reciprocal programs - Deposits are the primary source of funds, supplemented by FHLBNY advances and brokered deposits[92](index=92&type=chunk) - The Company uses reciprocal deposit programs (CDARS and ICS) to offer customers FDIC insurance above standard limits[94](index=94&type=chunk)[95](index=95&type=chunk) - The Company has **$5.0 million** in trust preferred securities maturing in 2037 and **$25.0 million** in 5.50% fixed-to-floating rate subordinated debt maturing in 2030, which qualify as Tier 1 and Tier 2 capital, respectively[98](index=98&type=chunk)[100](index=100&type=chunk) [Supervision and Regulation](index=22&type=section&id=Supervision%20and%20Regulation) Pathfinder Bank is extensively regulated by NYSDFS, FDIC, and the Federal Reserve, and was well-capitalized as of December 31, 2024 - Pathfinder Bank is regulated by the New York State Department of Financial Services (NYSDFS) and the Federal Deposit Insurance Corporation (FDIC) The holding company is regulated by the Federal Reserve Board[101](index=101&type=chunk) - The Bank must meet minimum capital standards, including a common equity Tier 1 ratio of **4.5%**, a Tier 1 ratio of **6.0%**, and a total capital ratio of **8.0%** It must also maintain a capital conservation buffer of **2.5%**[110](index=110&type=chunk)[114](index=114&type=chunk) - The Bank is subject to prompt corrective action regulations, which establish five capital categories As of December 31, 2024, Pathfinder Bank was classified as "well-capitalized"[118](index=118&type=chunk)[121](index=121&type=chunk) - The Company has elected to be a "financial holding company" and qualifies for the Federal Reserve's Small Bank Holding Company Policy Statement, exempting it from risk-based capital rules at the holding company level[138](index=138&type=chunk) [Federal and State Taxation](index=34&type=section&id=Federal%20and%20State%20Taxation) The Company is subject to federal and New York State income taxes, filing a combined state franchise tax return - The Company uses the liability method to account for deferred income taxes, recognizing future tax consequences of differences between financial statement carrying amounts and their tax bases[148](index=148&type=chunk) - The Company files a combined New York State franchise tax return, with a tax rate of **6.5%** for business income up to **$5 million** and **7.25%** for income above that threshold[157](index=157&type=chunk) - Pre-1988 tax bad debt reserves of approximately **$1.3 million** remain subject to recapture into taxable income under certain conditions, such as non-dividend distributions or stock repurchases[152](index=152&type=chunk) [Human Capital Resources](index=37&type=section&id=Human%20Capital%20Resources) As of December 31, 2024, the Company employed 186 team members, emphasizing a values-driven culture and competitive benefits Employee Headcount and Turnover | Metric | 2024 | 2023 | 2022 | | :--------------------- | :------ | :------ | :------ | | Total Headcount | 186 | 174 | 174 | | Voluntary Turnover % | 23.7% | 23.4% | 25.0% | - The workforce is comprised of approximately **74%** women None of the employees are represented by a collective bargaining agreement[161](index=161&type=chunk) - The company provides competitive benefits including a 401(k) plan with employer matching and annual contributions, healthcare, paid time off, and an employee assistance program[166](index=166&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) Disclosure of risk factors is not required as the company qualifies as a smaller reporting company - Disclosure of risk factors is not required as the company qualifies as a smaller reporting company[169](index=169&type=chunk) [Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The Company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[170](index=170&type=chunk) [Cybersecurity](index=40&type=section&id=Item%201C.%20Cybersecurity) The Company manages cybersecurity through its ICPP, aligning with FFIEC, FDIC, and NYSDFS guidelines, with no material incidents to date - Cybersecurity is managed via the Information & Cybersecurity Program & Policy (ICPP), overseen by the Information Security Officer, Technology Steering Committee, and the Board of Directors[171](index=171&type=chunk)[172](index=172&type=chunk) - The company uses third-party threat analysis tools, including penetration testing and vulnerability scanning, to measure and manage information security risks[173](index=173&type=chunk) - To date, the Company has not experienced any cybersecurity incidents that have materially and adversely affected its business, financial condition, or results of operations[174](index=174&type=chunk) [Properties](index=41&type=section&id=Item%202.%20Properties) The Company operates 13 offices across three New York counties, with an aggregate net book value of **$19.0 million** for premises and equipment - The Company operates a total of 13 offices across three counties in New York[176](index=176&type=chunk) - The aggregate net book value of the Bank's premises and equipment was **$19.0 million** as of December 31, 2024[176](index=176&type=chunk) [Legal Proceedings](index=42&type=section&id=Item%203.%20Legal%20Proceedings) The Company is periodically involved in various claims incidental to its business, not expected to have a material adverse impact - The Company is involved in various legal claims incidental to its business, but management does not expect them to have a material adverse impact on its consolidated financial condition[178](index=178&type=chunk) [Mine Safety Disclosure](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This section is not applicable to the Company - Not applicable[179](index=179&type=chunk) [PART II](index=42&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=42&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Company's common stock trades on NASDAQ under "PBHC," with no repurchases in 2024, and intends to continue quarterly dividends - The Company's voting common stock trades on the NASDAQ Capital Market under the symbol "PBHC"[180](index=180&type=chunk) - No shares of common stock were repurchased during the year ended December 31, 2024[180](index=180&type=chunk) - The company has historically paid regular quarterly cash dividends and intends to continue this practice, subject to Board approval and financial conditions[183](index=183&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's 2024 financial condition and results, noting decreased net income due to higher credit loss provisions and expenses [Executive Summary and Results of Operations](index=55&type=section&id=Executive%20Summary%20and%20Results%20of%20Operations) Net income for 2024 fell to **$3.4 million** from **$9.3 million** in 2023, primarily due to increased credit loss provisions and noninterest expenses Key Performance Indicators (2024 vs. 2023) | Metric | 2024 | 2023 | | :-------------------------- | :---------- | :---------- | | Net Income | $3.4 million| $9.3 million| | EPS (Basic & Diluted) | $0.54 | $1.51 | | Return on Average Assets | 0.23% | 0.67% | | Return on Average Equity | 2.75% | 8.09% | | Provision for Credit Losses | $11.0 million| $2.9 million| - The primary drivers for the decrease in net income were an **$8.1 million** increase in the provision for credit losses and a **$5.0 million** increase in noninterest expense[236](index=236&type=chunk) - Noninterest income increased by **$4.4 million**, largely due to a **$3.2 million** pre-tax gain on the sale of the Company's insurance agency assets in October 2024[241](index=241&type=chunk) - Nonperforming loans to total loans increased to **2.40%** at year-end 2024 from **1.92%** at year-end 2023[244](index=244&type=chunk) [Net Interest Income](index=59&type=section&id=Net%20Interest%20Income) Net interest income increased by **$2.1 million** (**5.3%**) to **$41.0 million** in 2024, with a slight improvement in net interest margin to **2.98%** Net Interest Income and Margin (2024 vs. 2023) | Metric | 2024 | 2023 | Change | | :-------------------------- | :------------ | :------------ | :---------- | | Net Interest Income | $41.0 million | $38.9 million | +5.3% | | Net Interest Margin | 2.98% | 2.95% | +3 bps | | Total Interest Income | $78.4 million | $67.7 million | +15.8% | | Total Interest Expense | $37.4 million | $28.7 million | +30.0% | - The increase in interest income was driven by a $53.4 million increase in average interest-earning assets and a **58 basis point** rise in the average yield on those assets[258](index=258&type=chunk) - The increase in interest expense was due to a higher interest rate environment and competition for deposits, which raised the average rate on interest-bearing liabilities by **68 basis points** to **3.33%**[254](index=254&type=chunk)[259](index=259&type=chunk) [Changes in Financial Condition](index=64&type=section&id=Changes%20in%20Financial%20Condition) Total assets increased by **$9.1 million** to **$1.47 billion**, driven by loan growth and branch acquisition deposits, with shareholders' equity rising to **$121.5 million** - Total assets grew by **$9.1 million** to **$1.47 billion** at December 31, 2024[272](index=272&type=chunk) - Total loans receivable increased by **$21.8 million**, primarily due to growth in commercial real estate loans and home equity lines acquired from the East Syracuse branch purchase[282](index=282&type=chunk)[283](index=283&type=chunk) - Total deposits increased by **$84.5 million** to **$1.20 billion**, mainly from the **$186.0 million** in deposits assumed in the East Syracuse branch acquisition[310](index=310&type=chunk) - Shareholders' equity rose by **$2.0 million** to **$121.5 million**, reflecting net income of **$3.4 million** and a **$0.5 million** decrease in accumulated other comprehensive loss, partially offset by **$2.5 million** in total dividends declared[247](index=247&type=chunk)[334](index=334&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=85&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Disclosure of quantitative and qualitative disclosures about market risk is not required as the company qualifies as a smaller reporting company - Disclosure of quantitative and qualitative disclosures about market risk is not required as the company qualifies as a smaller reporting company[350](index=350&type=chunk) [Financial Statements and Supplementary Data](index=86&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the Company's consolidated financial statements for 2024 and 2023, along with management's report and independent auditor's opinion [Report of Independent Registered Public Accounting Firm](index=88&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an unqualified opinion on the financial statements, identifying the Allowance for Credit Losses as a critical audit matter - The auditor expressed an unqualified opinion, stating the financial statements are fairly presented in accordance with U.S. GAAP[359](index=359&type=chunk) - The Allowance for Credit Losses on Loans was identified as a critical audit matter due to the high degree of subjective and complex management judgment required in its calculation[363](index=363&type=chunk)[366](index=366&type=chunk) [Consolidated Financial Statements](index=91&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of **$1.47 billion**, net loans of **$901.7 million**, and net income of **$3.4 million** for 2024 Consolidated Statement of Condition Highlights (December 31) | (In thousands) | 2024 | 2023 | | :------------------------- | :---------- | :---------- | | Total Assets | $1,474,874 | $1,465,798 | | Loans Receivable, Net | $901,743 | $881,232 | | Total Deposits | $1,204,524 | $1,120,067 | | Total Liabilities | $1,353,391 | $1,345,542 | | Total Shareholders' Equity | $121,483 | $120,256 | Consolidated Statement of Income Highlights (Year Ended December 31) | (In thousands) | 2024 | 2023 | | :-------------------------------------------- | :--------- | :--------- | | Net Interest Income | $40,989 | $38,919 | | Provision for Credit Losses | $10,973 | $2,930 | | Noninterest Income | $9,561 | $5,190 | | Noninterest Expense | $34,417 | $29,395 | | Net Income Attributable to Pathfinder Bancorp | $3,383 | $9,293 | [Notes to Consolidated Financial Statements](index=97&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including CECL adoption, investment securities, loan portfolio, deposits, and the East Syracuse branch acquisition - The Company adopted the CECL methodology for its Allowance for Credit Losses (ACL) on January 1, 2023, resulting in a **$2.1 million** after-tax charge to retained earnings[398](index=398&type=chunk)[402](index=402&type=chunk) - The allowance for credit losses on loans was **$17.2 million** (**1.88%** of year-end loans) at Dec 31, 2024, up from **$16.0 million** (**1.78%** of year-end loans) at Dec 31, 2023[466](index=466&type=chunk)[306](index=306&type=chunk) - On July 19, 2024, the Bank acquired the East Syracuse branch from Berkshire Bank, assuming **$186.0 million** in deposits and acquiring **$29.9 million** in loans The transaction resulted in **$6.3 million** of core deposit intangible and **$1.2 million** of goodwill[610](index=610&type=chunk)[611](index=611&type=chunk) - As of December 31, 2024, the Bank was categorized as "well-capitalized" under regulatory standards, exceeding all minimum capital requirements including the capital conservation buffer[571](index=571&type=chunk)[572](index=572&type=chunk) [Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](index=181&type=section&id=Item%209.%20Changes%20In%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The Company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[622](index=622&type=chunk) [Controls and Procedures](index=181&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of December 31, 2024, with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[624](index=624&type=chunk) - No material changes were made to internal controls over financial reporting during the fourth quarter of 2024[625](index=625&type=chunk) [PART III](index=181&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=181&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the Company's Proxy Statement for the Annual Meeting of Shareholders[628](index=628&type=chunk) [Executive Compensation](index=183&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the Company's Proxy Statement for the Annual Meeting of Shareholders[633](index=633&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=183&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the Company's Proxy Statement for the Annual Meeting of Shareholders[631](index=631&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=183&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the Company's Proxy Statement for the Annual Meeting of Shareholders[631](index=631&type=chunk) [Principal Accounting Fees and Services](index=183&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the Company's Proxy Statement for the Annual Meeting of Shareholders[632](index=632&type=chunk) [PART IV](index=184&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=184&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report - The Company's consolidated financial statements are filed as part of this report under Item 8[634](index=634&type=chunk) - A list of exhibits filed with the report is provided, including articles of incorporation, bylaws, material agreements, and required certifications[634](index=634&type=chunk)[635](index=635&type=chunk)[637](index=637&type=chunk) [Form 10-K Summary](index=188&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[636](index=636&type=chunk)

[Financial Results for Fourth Quarter and Full Year 2024](index=1&type=section&id=Financial%20Results%20for%20Fourth%20Quarter%20and%20Full%20Year%202024) Pathfinder Bancorp reported strong Q4 2024 net income, significantly boosted by an insurance agency sale, contrasting with a full-year decline in net income compared to 2023 [Fourth Quarter and Full Year 2024 Highlights](index=1&type=section&id=Fourth%20Quarter%20and%20Full%20Year%202024%20Highlights) Pathfinder Bancorp achieved strong Q4 2024 net income, significantly boosted by an insurance agency sale, despite a full-year decline in net income compared to 2023, driven by deposit growth and margin expansion Q4 and Full Year 2024 Key Financial Results | Metric | Q4 2024 ($) | Q3 2024 ($) | Q4 2023 ($) | Full Year 2024 ($) | Full Year 2023 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $4.3M | ($4.6M) | $2.5M | $3.8M | $9.3M | | EPS | $0.69 | ($0.75) | $0.41 | $0.60 | $1.51 | - Q4 2024 net income included a significant benefit of approximately **$1.4 million** from the gain on the sale of its insurance agency, net of taxes and transaction-related expenses[2](index=2&type=chunk) Q4 2024 vs. Prior Periods - Key Metrics | Metric | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Provision Expense ($ thousands) | 988 | 9,000 | 265 | | Net Interest Income ($ millions) | 10.8 | 11.7 | 9.2 | | Net Interest Margin (%) | 3.15 | 3.34 | 2.74 | | Non-interest Income ($ millions) | 4.9 | 1.7 | 1.3 | | Non-interest Expense ($ millions) | 8.5 | 10.3 | 7.0 | - Total deposits grew to **$1.20 billion**, an increase of **7.5%** from December 31, 2023. Total loans stood at **$919.0 million**, with commercial loans growing to **$539.7 million**[8](index=8&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management emphasized that core net interest income growth and margin expansion drove Q4 earnings, alongside strategic investments in middle-market talent and a continued focus on expense and credit risk management for long-term value - Core net interest income growth and net interest margin expansion were key contributors to Q4 earnings[6](index=6&type=chunk) - The company is investing in talent to serve middle-market businesses in the Syracuse area, with the recently acquired East Syracuse branch contributing significantly[6](index=6&type=chunk) - Management is committed to managing operating expenses and continuously improving its credit risk management approach to build long-term shareholder value[6](index=6&type=chunk) [Financial Performance Analysis](index=2&type=section&id=Financial%20Performance%20Analysis) This section analyzes the company's financial performance, focusing on net interest income, noninterest income, and noninterest expense trends and their drivers [Net Interest Income and Net Interest Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Q4 2024 net interest income decreased quarter-over-quarter due to a prior one-time payment but increased significantly year-over-year, driven by higher loan yields and lower funding costs, while net interest margin followed a similar trend Net Interest Income and Margin Comparison | Metric | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income ($ millions) | 10.8 | 11.7 | 9.2 | | Net Interest Margin (%) | 3.15 | 3.34 | 2.74 | - The QoQ decrease in NII and NIM was primarily due to an **$887,000** catch-up interest payment in Q3 2024, which benefited the linked quarter's NIM by **25 basis points**[7](index=7&type=chunk)[9](index=9&type=chunk) - The YoY increase in NII of **18.1%** was driven by a **$1.2 million** increase in interest and dividend income and a **$463,000** decrease in interest expense, attributed to a better deposit mix and lower borrowing costs[10](index=10&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Noninterest income significantly increased in Q4 2024, primarily due to a substantial gain from the sale of the company's insurance agency, with underlying noninterest income remaining relatively stable quarter-over-quarter and showing moderate year-over-year growth - Noninterest income for Q4 2024 was **$4.9 million**, which included a **$3.2 million** pre-tax gain from the sale of the company's insurance agency[12](index=12&type=chunk) - Excluding the gain on sale, noninterest income grew by **$30,000** from Q3 2024 and **$419,000** from Q4 2023[12](index=12&type=chunk) - Compared to the linked quarter, changes included a **$194,000** decrease in BOLI earnings (due to a prior death benefit) and increases in net realized gains on securities[14](index=14&type=chunk) [Noninterest Expense](index=4&type=section&id=Noninterest%20Expense) Noninterest expense decreased quarter-over-quarter due to the absence of prior one-time acquisition costs, but increased year-over-year primarily driven by higher salaries, benefits, and occupancy costs associated with increased headcount and a new branch Noninterest Expense Comparison | Period | Total Noninterest Expense ($ millions) | Key Items | | :--- | :--- | :--- | | Q4 2024 | 8.5 | Includes $456 thousand in insurance agency sale costs | | Q3 2024 | 10.3 | Includes $1.6 million in branch acquisition costs | | Q4 2023 | 7.0 | Baseline for comparison | - Salaries and benefits decreased by **$839,000** from the linked quarter but increased by **$446,000** from the prior-year quarter due to higher headcount[18](index=18&type=chunk) - Building and occupancy costs increased by **$390,000** from Q4 2023, primarily due to operating the newly acquired branch[19](index=19&type=chunk) - The efficiency ratio was **69.42%** in Q4 2024, improving from **75.28%** in Q3 2024 but higher than **67.25%** in Q4 2023[21](index=21&type=chunk) [Statement of Financial Condition](index=4&type=section&id=Statement%20of%20Financial%20Condition) This section details the company's financial position, including assets, liabilities, and equity, highlighting key changes in loans, deposits, and borrowings [Assets, Liabilities, and Equity](index=4&type=section&id=Assets%2C%20Liabilities%2C%20and%20Equity) As of December 31, 2024, total assets remained stable, with total deposits increasing and total borrowings significantly reduced year-over-year, while shareholders' equity also saw an increase Balance Sheet Highlights (as of Dec 31, 2024) | Metric | Dec 31, 2024 ($) | Sep 30, 2024 ($) | Dec 31, 2023 ($) | | :--- | :--- | :--- | :--- | | Total Assets | $1.47 billion | $1.48 billion | $1.47 billion | | Total Loans | $919.0 million | $921.7 million | $897.2 million | | Total Deposits | $1.20 billion | $1.20 billion | $1.12 billion | | Total Borrowings | $88.1 million | $100.1 million | $175.6 million | | Shareholders' Equity | $121.9 million | $120.2 million | $119.5 million | - Commercial loans grew **1.0%** during Q4 and **3.0%** from the prior year, reaching **$539.7 million**[23](index=23&type=chunk) - The increase in shareholders' equity for the full year was primarily driven by a **$2.1 million** increase in retained earnings[25](index=25&type=chunk) [Asset Quality and Liquidity](index=5&type=section&id=Asset%20Quality%20and%20Liquidity) This section evaluates the bank's asset quality, including nonperforming loans and charge-offs, and assesses its liquidity position and funding capacity [Asset Quality](index=5&type=section&id=Asset%20Quality) Asset quality metrics showed an increase in nonperforming loans at year-end, while net charge-offs significantly decreased quarter-over-quarter following a prior loan review, with the Allowance for Credit Losses remaining robust Asset Quality Metrics | Metric | Dec 31, 2024 (%) | Sep 30, 2024 (%) | Dec 31, 2023 (%) | | :--- | :--- | :--- | :--- | | Nonperforming Loans / Total Loans | 2.40 | 1.75 | 1.92 | | Net Charge-Offs (Annualized) | 0.44 | 3.82 | 0.05 | | Allowance for Credit Losses (ACL) / Total Loans | 1.88 | 1.87 | 1.78 | - Provision for credit loss expense was **$988,000** in Q4 2024, compared to a large **$9.0 million** provision in Q3 2024 which was taken to replenish reserves after a loan portfolio review[28](index=28&type=chunk) - The Allowance for Credit Losses (ACL) stood at **$17.2 million** as of December 31, 2024[29](index=29&type=chunk) [Liquidity](index=5&type=section&id=Liquidity) The company maintained a strong liquidity profile as of December 31, 2024, characterized by stable total deposits, a high percentage of core deposits, sufficient cash inflows, and significant available funding capacity - The bank's leadership effectively manages a robust liquidity profile, with expected cash inflows sufficient to meet all projected financial obligations[31](index=31&type=chunk) - Core deposits represented **76.87%** of total deposits on December 31, 2024, an improvement from **69.83%** on December 31, 2023[32](index=32&type=chunk) - The company has available additional funding capacity of **$113.8 million** with the FHLB of New York and another **$43.3 million** in unused credit lines[33](index=33&type=chunk) [Shareholder Information](index=6&type=section&id=Shareholder%20Information) This section provides details on the company's dividend declaration and related shareholder metrics [Cash Dividend Declared](index=6&type=section&id=Cash%20Dividend%20Declared) The Board of Directors declared a cash dividend of $0.10 per share, payable in February 2025, resulting in a 2.29% dividend yield based on the December 31, 2024 closing stock price - A cash dividend of **$0.10** per share was declared for all common stock holders[34](index=34&type=chunk) - The dividend is payable on February 7, 2025, to shareholders of record by January 17, 2025[35](index=35&type=chunk) - The dividend yield is **2.29%** based on the closing stock price of **$17.50** on December 31, 2024[36](index=36&type=chunk) [Selected Financial Tables](index=8&type=section&id=Selected%20Financial%20Tables) This section provides comprehensive unaudited financial tables, including balance sheet, income statement, key ratios, asset quality, and average balances, offering detailed financial insights [Selected Financial Information (Unaudited)](index=8&type=section&id=Selected%20Financial%20Information%20(Unaudited)) This section provides detailed, unaudited balance sheet and income statement data for recent periods, breaking down assets, liabilities, equity, and various income and expense components Selected Balance Sheet Data (December 31, 2024) | Account | Amount (in thousands) | | :--- | :--- | | Total Assets | $1,474,874 | | Loans, net | $901,743 | | Total Deposits | $1,204,393 | | Total Shareholders' Equity | $121,860 | Selected Income Statement Data (Q4 2024) | Account | Amount (in thousands) | | :--- | :--- | | Net Interest Income | $10,820 | | Provision for Credit Losses | $988 | | Noninterest Income | $4,906 | | Noninterest Expense | $8,544 | | Net Income Attributable to PBHC | $4,284 | [Financial Highlights and Ratios](index=10&type=section&id=Financial%20Highlights%20and%20Ratios) This section presents key performance ratios for recent periods, encompassing profitability, margin analysis, operational efficiency, capital adequacy, and per-share data Key Performance Ratios (Q4 2024) | Ratio | Value | | :--- | :--- | | Return on average assets (ROA) (%) | 1.17 | | Return on average common equity (ROE) (%) | 14.09 | | Net interest margin (NIM) (%) | 3.15 | | Efficiency ratio (non-GAAP) (%) | 69.42 | | Book value per common share ($) | 19.90 | [Asset Quality, Loan and Deposit Composition](index=11&type=section&id=Asset%20Quality%2C%20Loan%20and%20Deposit%20Composition) This section provides detailed tables on asset quality metrics and the composition of the loan and deposit portfolios over recent quarters, categorized by loan type and deposit category Asset Quality Ratios (December 31, 2024) | Ratio | Value (%) | | :--- | :--- | | Net loan charge-offs to average loans (annualized) | 0.44 | | Allowance for credit losses to period end loans | 1.88 | | Nonperforming loans to period end loans | 2.40 | - As of December 31, 2024, the largest loan categories were Commercial real estate (**$377.6 million**) and 1-4 family residential mortgages (**$251.4 million**)[49](index=49&type=chunk) [Selected Average Balances and Yields](index=12&type=section&id=Selected%20Average%20Balances%20and%20Yields) This section details average balances of interest-earning assets and interest-bearing liabilities, along with their associated yields and costs, providing insight into net interest margin components Average Yields and Costs (Q4 2024) | Metric | Value (%) | | :--- | :--- | | Average Yield on Loans | 5.87 | | Average Yield on Total Interest-Earning Assets | 5.69 | | Average Cost of Total Interest-Bearing Liabilities | 3.16 | | Net Interest Rate Spread | 2.53 | | Net Interest Margin | 3.15 | [Non-GAAP Reconciliations](index=13&type=section&id=Non-GAAP%20Reconciliations) This section provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, including calculations for tangible book value, tangible common equity, and efficiency ratios - Tangible book value per common share (a non-GAAP measure) was **$18.10** at December 31, 2024, compared to a GAAP book value of **$19.90**[52](index=52&type=chunk) - Pre-tax, pre-provision net income (a non-GAAP measure) was **$3.76 million** for Q4 2024[52](index=52&type=chunk)

Core Financial Performance - Pathfinder Bancorp reported a net income of $4.3 million or $0.69 per share for the fourth quarter of 2024, benefiting from a $1.4 million gain on the sale of its insurance agency [2][3] - The company experienced a net loss of $4.6 million or $0.75 per share in the third quarter of 2024, primarily due to a $9.0 million provision expense related to a loan portfolio review [3] - For the full year 2024, net income was $3.8 million or $0.60 per share, compared to $9.3 million or $1.51 per share in 2023 [3] Net Interest Income and Margin - Fourth quarter 2024 net interest income was $10.8 million, a decrease of 7.8% from the third quarter, but an increase of 18.1% from the fourth quarter of 2023 [6][8] - The net interest margin (NIM) for the fourth quarter was 3.15%, down from 3.34% in the previous quarter but up from 2.74% in the same period last year [7][10] Non-Interest Income and Expenses - Non-interest income totaled $4.9 million in the fourth quarter, including a $3.2 million pre-tax gain from the insurance agency sale, compared to $1.7 million in the linked quarter [11][12] - Non-interest expenses were $8.5 million in the fourth quarter, decreasing by $1.7 million from the linked quarter but increasing by $1.5 million from the year-ago period [15] Asset Quality and Provision for Credit Losses - Nonperforming loans increased to $22.1 million or 2.40% of total loans as of December 31, 2024, compared to 1.75% in the previous quarter [25] - Provision for credit loss expense was $988,000 in the fourth quarter, significantly lower than the $9.0 million in the third quarter [27][28] Deposits and Loans - Total deposits reached $1.20 billion, growing by $8.1 million or 2.7% annualized from the previous quarter and by $84.3 million or 7.5% year-over-year [9][23] - Total loans were $919.0 million at the end of the fourth quarter, a slight decrease from the previous quarter but an increase of 2.4% from the year prior [22] Shareholder Equity and Dividends - Shareholders' equity totaled $121.9 million, reflecting a $1.6 million increase in the fourth quarter [24] - A cash dividend of $0.10 per share was declared, with a dividend yield of 2.29% based on the closing stock price of $17.50 as of December 31, 2024 [32][34]

Core Financial Performance - Pathfinder Bancorp reported a net income of $4.3 million or $0.69 per share for the fourth quarter of 2024, benefiting from a $1.4 million gain on the sale of its insurance agency [2][3] - The company experienced a net loss of $4.6 million or $0.75 per share in the third quarter of 2024, compared to a net income of $2.5 million or $0.41 per share in the fourth quarter of 2023 [3] - For the full year 2024, net income was $3.8 million or $0.60 per share, down from $9.3 million or $1.51 per share in 2023 [3] Net Interest Income and Margin - Fourth quarter 2024 net interest income was $10.8 million, a decrease of 7.8% from the third quarter but an increase of 18.1% from the fourth quarter of 2023 [6][9] - The net interest margin (NIM) for the fourth quarter was 3.15%, down from 3.34% in the previous quarter but up from 2.74% in the same period last year [8][10] - Full-year net interest income was $41.4 million in 2024, compared to $38.9 million in 2023 [7] Non-Interest Income and Expenses - Non-interest income totaled $4.9 million in the fourth quarter of 2024, including a $3.2 million pre-tax gain from the insurance agency sale, compared to $1.7 million in the linked quarter [11][12] - Non-interest expense was $8.5 million in the fourth quarter, decreasing from $10.3 million in the linked quarter but increasing from $7.0 million in the year-ago period [15] - Salaries and benefits accounted for $4.1 million in the fourth quarter, reflecting a decrease from the linked quarter but an increase from the year-ago period [17] Asset Quality and Provision for Credit Losses - Nonperforming loans were $22.1 million or 2.40% of total loans as of December 31, 2024, up from 1.75% in the previous quarter [25] - Provision for credit loss expense was $988,000 in the fourth quarter, significantly lower than $9.0 million in the linked quarter [27] - The allowance for credit losses (ACL) was $17.2 million, representing 1.88% of total loans [28] Liquidity and Deposits - Total deposits were $1.20 billion at the end of the fourth quarter, reflecting a 2.7% annualized growth from the previous quarter and a 7.5% increase from the year-ago period [23][30] - The company maintained a strong liquidity profile with an available additional funding capacity of $113.8 million with the Federal Home Loan Bank of New York [31] Shareholder Value - A cash dividend of $0.10 per share was declared on December 23, 2024, with a dividend yield of 2.29% based on a closing stock price of $17.50 per share as of December 31, 2024 [32][33]