For the quarterly period ended September 30, 2023 OR EXCHANGE ACT OF 1934 For the transition period from _______ to _______ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES (Exact Name of Company as Specified in its Charter) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 001-36695 (Commission File No.) 38-3941859 (I.R.S. Employer Identification No.) 214 West First ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ (Exact Name of Company as Specified in its Charter) Maryland (State of Other Jurisdiction of Incorporation) 001-36695 (Commission File No.) 38-3941859 ...

```markdown [PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's consolidated financial statements and management's discussion and analysis for the reporting period [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements present the financial position of Pathfinder Bancorp, Inc. as of March 31, 2023, and December 31, 2022, and its results of operations for the three months ended March 31, 2023, and 2022. A key event was the adoption of the Current Expected Credit Loss (CECL) accounting standard on January 1, 2023, which resulted in a one-time $2.1 million reduction to retained earnings. Net income for Q1 2023 was $2.6 million, a decrease from $3.0 million in Q1 2022, primarily due to higher interest expenses and an increased provision for credit losses [Consolidated Statements of Condition (Balance Sheet)](index=3&type=section&id=Consolidated%20Statements%20of%20Condition) This statement details the company's assets, liabilities, and equity at specific points in time Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$1,404,269** | **$1,399,921** | **+0.3%** | | Loans, net | $892,285 | $882,435 | +1.1% | | Total Investment Securities (AFS & HTM) | $388,201 | $386,128 | +0.5% | | Total Deposits | $1,144,262 | $1,125,430 | +1.7% | | Total Liabilities | $1,291,908 | $1,288,339 | +0.3% | | **Total Equity** | **$112,361** | **$111,582** | **+0.7%** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) This statement presents the company's revenues, expenses, and net income over a period Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $9,968 | $9,467 | +5.3% | | Provision for Credit Losses | $692 | $102 | +578.4% | | Noninterest Income | $1,592 | $1,603 | -0.7% | | Noninterest Expense | $7,524 | $7,252 | +3.8% | | **Net Income** | **$2,599** | **$2,950** | **-11.9%** | | **EPS (Voting, basic & diluted)** | **$0.43** | **$0.49** | **-$0.06** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities - For the three months ended March 31, 2023, the company experienced: - **Net cash from operating activities:** $6.0 million - **Net cash used in investing activities:** ($10.6 million), primarily due to a net increase in loans - **Net cash from financing activities:** $1.6 million, driven by a net increase in deposits ($18.8 million) which was largely offset by a net decrease in short-term borrowings ($16.8 million)[21](index=21&type=chunk)[22](index=22&type=chunk) [Key Notes to Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the consolidated financial statements - The company adopted the Current Expected Credit Loss (CECL) standard on January 1, 2023. This resulted in a one-time transition adjustment that increased the allowance for credit losses on loans by $1.9 million, established a $450,000 allowance for held-to-maturity securities, and recorded a $552,000 liability for unfunded commitments. The net effect was a $2.1 million reduction in retained earnings[29](index=29&type=chunk)[145](index=145&type=chunk)[168](index=168&type=chunk) - Total nonaccrual loans significantly increased to **$19.1 million** at March 31, 2023, from $9.0 million at December 31, 2022. This **$10.1 million** increase was primarily due to the downgrade of two significant commercial loan relationships, which accounted for $13.0 million of the nonaccrual balance[68](index=68&type=chunk)[205](index=205&type=chunk) - The company utilizes interest rate swaps for hedging purposes. As of March 31, 2023, there were fair value hedges with a notional value of **$56.0 million** on investment securities and **$36.7 million** on loans. Additionally, there were cash flow hedges with a notional value of **$70.0 million** on borrowed funds[112](index=112&type=chunk)[115](index=115&type=chunk)[118](index=118&type=chunk) - At March 31, 2023, the allowance for credit losses (ACL) on loans was **$17.9 million**, or **1.96%** of total loans. This is an increase from $15.3 million, or 1.71% of total loans, at year-end 2022. The increase reflects the CECL adoption, loan growth, and downgrades in loan quality[74](index=74&type=chunk)[208](index=208&type=chunk) [Management's Discussion and Analysis (MD&A)](index=46&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20(Unaudited)) Management attributes the 11.9% decrease in Q1 2023 net income to a significant rise in interest expense and a larger provision for credit losses, which more than offset the growth in interest income. The Net Interest Margin (NIM) compressed to 3.02% from 3.06% YoY due to rapidly rising funding costs. A key challenge highlighted is the deterioration in asset quality, with nonperforming loans increasing to 2.10% of total loans, driven by two large commercial relationships. The company adopted the CECL accounting standard, resulting in a $2.1 million after-tax reduction to equity. Despite these challenges, the bank remains well-capitalized and has sufficient liquidity [Results of Operations](index=50&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, focusing on revenue, expenses, and profitability trends - Net income decreased by **$351,000 (11.9%)** to **$2.6 million** in Q1 2023 compared to Q1 2022. The decline was primarily driven by a **$3.6 million** increase in interest expense and a **$590,000** increase in the provision for credit losses[160](index=160&type=chunk) - Net interest margin (NIM) decreased by **4 basis points** to **3.02%** in Q1 2023 from 3.06% in Q1 2022. This was caused by the cost of interest-bearing liabilities rising faster (up 127 bps) than the yield on interest-earning assets (up 102 bps) in the current rising rate environment[160](index=160&type=chunk)[162](index=162&type=chunk)[176](index=176&type=chunk) - The provision for credit losses increased to **$692,000** from $102,000 YoY, primarily due to management's decision to downgrade certain commercial real estate and commercial loans within two large borrower relationships[165](index=165&type=chunk)[182](index=182&type=chunk) - Noninterest expense rose **3.8%** to **$7.5 million**, mainly due to a **3.3%** increase in salaries and benefits to respond to inflationary pressures and for staffing a new branch, along with a **36.4%** increase in professional and other services[188](index=188&type=chunk) [Financial Condition](index=59&type=section&id=Financial%20Condition) This section discusses the company's overall financial position, including assets, liabilities, and equity - Total assets increased slightly by **$4.3 million** to **$1.40 billion** at March 31, 2023. The growth was driven by a **$12.4 million** increase in loans, funded by an **$18.8 million** increase in deposits, which allowed for a **$16.8 million** reduction in borrowings[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - Shareholders' equity increased by **$0.7 million** to **$111.7 million**. The increase was a result of **$2.6 million** in net income and a **$0.6 million** decrease in accumulated other comprehensive loss, which offset a **$2.1 million** reduction from the CECL adoption and **$0.6 million** in dividends[197](index=197&type=chunk) [Loan and Asset Quality](index=61&type=section&id=Loan%20and%20Asset%20Quality%20and%20Allowance%20for%20Credit%20Losses) This section assesses the quality of the company's loan portfolio, nonperforming assets, and credit loss allowances Nonperforming Assets (in thousands) | Metric | March 31, 2023 | Dec 31, 2022 | March 31, 2022 | | :--- | :--- | :--- | :--- | | Total Nonperforming Loans | $19,102 | $9,015 | $7,948 | | Total Nonperforming Assets | $19,323 | $9,236 | $7,948 | | Nonperforming Loans to Total Loans | 2.10% | 1.00% | 0.93% | | Nonperforming Assets to Total Assets | 1.38% | 0.66% | 0.60% | - The significant increase in nonperforming assets was primarily due to placing **$13.0 million** in loans from two large commercial real estate and commercial loan relationships into nonaccrual status during Q1 2023[205](index=205&type=chunk)[206](index=206&type=chunk) - The allowance for credit losses to total loans ratio increased to **1.96%** as of March 31, 2023, compared to 1.71% at year-end 2022, reflecting the adoption of CECL and deteriorating credit quality in specific relationships[208](index=208&type=chunk) [Capital and Liquidity](index=59&type=section&id=Capital%20and%20Liquidity) This section evaluates the company's capital adequacy and ability to meet financial obligations - The Bank met the regulatory definition of a "well-capitalized" institution as of March 31, 2023, exceeding all minimum capital ratios including the capital conservation buffer[198](index=198&type=chunk)[200](index=200&type=chunk) Bank Capital Ratios (Actual) | Ratio | March 31, 2023 | | :--- | :--- | | Total Core Capital (to Risk-Weighted Assets) | 15.11% | | Tier 1 Capital (to Risk-Weighted Assets) | 13.85% | | Tier 1 Common Equity (to Risk-Weighted Assets) | 13.85% | | Tier 1 Capital (to Assets) | 9.68% | - The company has strong liquidity sources. Of the **$1.1 billion** in deposits, **$189.1 million (16.5%)** were uninsured after accounting for collateralized municipal deposits and reciprocal deposit programs. The company also had **$77.1 million** available in credit lines and access to the Federal Reserve's Bank Term Funding Program (BTFP), which has not been used[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk) [Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2023. They noted that controls were significantly modified during the quarter to accommodate the adoption of the CECL model for credit losses, which involves increased reliance on third-party experts. No other material changes to internal controls were reported - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2023[227](index=227&type=chunk) - Internal controls were significantly modified during Q1 2023 to implement the new CECL model for accounting for credit losses, a process which involves significant complexity and reliance on independent third-party experts[228](index=228&type=chunk)[229](index=229&type=chunk) [PART II - OTHER INFORMATION](index=67&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional disclosures on legal proceedings and equity security transactions [Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2023, the company is not a party to any legal proceedings that would be expected to have a material adverse effect on its financial condition or results of operations - The company is not currently a named party in any material legal proceedings[230](index=230&type=chunk) [Share Repurchases](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any of its common stock during the first quarter of 2023. As of March 31, 2023, 74,292 shares remained available for repurchase under the existing board-authorized plan from August 2016 - No shares of common stock were repurchased during the three months ended March 31, 2023[232](index=232&type=chunk) - There are **74,292 shares** that may yet be purchased under the publicly announced repurchase plan[232](index=232&type=chunk) ```

PART I [Business](index=6&type=section&id=Item%201.%20Business) Pathfinder Bancorp, Inc. operates Pathfinder Bank, providing diverse financial services in New York with a focus on commercial lending and community engagement - Consolidated Financial Highlights (as of Dec 31, 2022) | Metric | Value (Millions) | | :--- | :--- | | Total Consolidated Assets | $1,400 | | Total Deposits | $1,130 | | Shareholders' Equity | $111.0 | - The Company's primary business is its investment in Pathfinder Bank, a New York-chartered commercial bank. The Bank's main activities involve attracting public deposits and investing them in commercial and residential real estate loans, as well as commercial business and consumer loans[15](index=15&type=chunk)[21](index=21&type=chunk) - The Bank operates through seven branch offices in Oswego County, four in Onondaga County, and one limited purpose office in Oneida County, NY. Its primary lending market includes Oswego and Onondaga Counties[25](index=25&type=chunk) - Pathfinder Bank faces strong competition from money-center banks (JPMorgan Chase, Bank of America), regional banks (M&T, Key Bank), community banks, and local credit unions. Emerging financial technology ("FinTech") companies also represent a new competitive threat[28](index=28&type=chunk) [Lending Activities](index=8&type=section&id=LENDING%20ACTIVITIES) The company primarily originates adjustable-rate commercial real estate and business loans, alongside fixed-rate residential mortgages, to diversify its portfolio and manage interest rate sensitivity - The company has strategically increased its focus on **commercial real estate and commercial business lending** to diversify its portfolio and make it less sensitive to interest rate changes[32](index=32&type=chunk) - The Bank participated in the Paycheck Protection Program (PPP), originating **1,177 loans** totaling approximately **$111.7 million**. By the end of 2022, only **five PPP loans** remained in its portfolio, with gross revenues from PPP activities totaling **$707,000** for the year[40](index=40&type=chunk) - As of December 31, 2022, the Bank held **fifteen pools of loans** purchased from third-party lenders with an aggregate amortized cost of **$115.2 million**. These pools include consumer installment loans, auto loans, home equity lines, and commercial lines of credit[63](index=63&type=chunk) [Asset Quality](index=13&type=section&id=ASSET%20QUALITY) The company maintains asset quality through continuous loan review, risk grading, and a three-component Allowance for Loan and Lease Losses (ALLL) methodology to cover probable losses - The Allowance for Loan Losses (ALLL) is based on three components: **specific allowances for impaired loans**, a **general allowance for loan pools** using historical loss rates and qualitative factors, and an **unallocated component for uncertainties**[84](index=84&type=chunk) - Interest accrual is generally stopped when a loan becomes **90 days past due** or when management has serious doubts about collectability. Loans are restored to accrual status after a sustained period of performance, typically a minimum of **six months**[72](index=72&type=chunk) - Troubled Debt Restructurings (TDRs) are granted to borrowers in financial difficulty and may involve concessions like interest rate reductions or maturity extensions. These loans are returned to accrual status after at least **six consecutive months of timely payments** under the new terms[75](index=75&type=chunk)[76](index=76&type=chunk) [Supervision and Regulation](index=21&type=section&id=SUPERVISION%20AND%20REGULATION) Pathfinder Bank and its holding company are extensively regulated by NYSDFS, FDIC, and the Federal Reserve, meeting 'well capitalized' status and CRA requirements - The Bank is regulated by the New York State Department of Financial Services (NYSDFS) and the Federal Deposit Insurance Corporation (FDIC), while the holding company is regulated by the Federal Reserve Board[117](index=117&type=chunk) - The Bank must meet minimum capital standards, including a common equity Tier 1 ratio of **4.5%**, a Tier 1 capital ratio of **6.0%**, a total capital ratio of **8.0%**, and a leverage ratio of **4.0%**. As of December 31, 2022, the Bank was categorized as **"well capitalized"**[127](index=127&type=chunk)[137](index=137&type=chunk) - The Bank is subject to the Community Reinvestment Act (CRA) and received a **"satisfactory" rating** in its latest FDIC CRA evaluation dated May 13, 2019, and its latest NYCRA rating dated September 30, 2021[144](index=144&type=chunk)[126](index=126&type=chunk) [Human Capital Resources](index=29&type=section&id=Human%20Capital%20Resources) The company's human capital strategy focuses on attracting and retaining talent through competitive compensation, benefits, and development, employing 174 team members as of December 31, 2022 - Employee Headcount and Turnover | Year | Headcount | Voluntary Turnover % | | :--- | :--- | :--- | | 2022 | 174 | 25.0% | | 2021 | 173 | 24.2% | | 2020 | 183 | 13.2% | | 2019 | 162 | 18.8% | - As of December 31, 2022, the company employed **174 team members**, approximately **75%** of whom are women. None are represented by a collective bargaining agreement[171](index=171&type=chunk) - The company fosters retention through competitive benefits, career development, and an Employee Stock Ownership Plan (ESOP). As of year-end 2022, over **34% of the staff** had been with the company for ten years or more[179](index=179&type=chunk) [Properties](index=32&type=section&id=Item%202.%20Properties) As of December 31, 2022, the company operates twelve offices across three New York counties, with an aggregate net book value of premises and equipment totaling $17.9 million - Office Locations | County | Number of Offices | | :--- | :--- | | Oswego | 7 | | Onondaga | 4 | | Oneida | 1 (limited purpose) | - The aggregate net book value of the Bank's premises and equipment was **$17.9 million** at December 31, 2022[182](index=182&type=chunk) PART II [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Pathfinder Bancorp, Inc. reported $12.9 million net income for 2022, with total assets growing to $1.40 billion, driven by loan growth and deposits, while maintaining a 'well-capitalized' status - Key Performance Indicators (2022 vs. 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $12.9 million | $12.4 million | | EPS (Basic & Diluted) | $2.13 | $2.07 | | Total Assets | $1.40 billion | $1.29 billion | | Net Interest Income | $41.4 million | $38.3 million | | Provision for Loan Losses | $2.8 million | $1.0 million | | Return on Average Assets | 0.96% | 0.98% | | Return on Average Equity | 11.77% | 11.91% | - Total assets increased by **$114.7 million (8.9%)** in 2022, primarily funded by a **$70.1 million increase in deposits**, which was largely driven by a **$90.8 million increase in brokered deposits**[248](index=248&type=chunk) - The provision for loan losses increased by **$1.8 million** year-over-year, mainly due to the downgrading of a few large commercial real estate and commercial loan relationships and overall loan growth[251](index=251&type=chunk)[272](index=272&type=chunk) [Changes in Financial Condition](index=56&type=section&id=CHANGES%20IN%20FINANCIAL%20CONDITION) Total assets grew to $1.40 billion at year-end 2022, primarily from increased net loans and held-to-maturity securities, funded by deposits, while shareholders' equity slightly increased - Loan Portfolio Composition (in millions) | Loan Type | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Commercial Real Estate | $344.7 | $287.3 | | Residential Real Estate | $262.0 | $246.3 | | Commercial & Tax Exempt | $163.8 | $156.2 | | Consumer Loans | $92.9 | $110.1 | | Home Equity & Junior Liens | $34.3 | $32.0 | | **Total Loans** | **$897.8** | **$832.5** | - Asset Quality Ratios | Ratio | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Nonperforming Assets to Total Assets | 0.66% | 0.65% | | Allowance for Loan Losses to Total Loans | 1.71% | 1.57% | | Allowance for Loan Losses to Nonperforming Loans | 169.93% | 155.99% | - Shareholders' equity increased by **$710,000** to **$111.0 million**. The increase was driven by **$12.9 million in net income**, but was largely offset by a **$10.9 million increase in comprehensive loss**, primarily from unrealized losses on available-for-sale securities due to rising interest rates[259](index=259&type=chunk)[343](index=343&type=chunk) [Liquidity](index=68&type=section&id=LIQUIDITY) The company manages liquidity through deposits, borrowings, and credit facilities, with $163.4 million available at year-end 2022, and access to the Federal Reserve's BTFP - Primary liquidity sources include deposits, borrowings from the FHLBNY, loan and investment payments, and operating cash flow[349](index=349&type=chunk)[350](index=350&type=chunk) - At December 31, 2022, the Bank had total available credit lines of **$163.4 million** from the FHLBNY, the Federal Reserve, and correspondent banks, with **$47.4 million** of this capacity remaining available[354](index=354&type=chunk) - In Q1 2023, the Federal Reserve created the Bank Term Funding Program (BTFP) as an additional liquidity source for banks. Pathfinder is eligible but had not accessed the program as of the filing date[356](index=356&type=chunk)[357](index=357&type=chunk) [Financial Statements and Supplementary Data](index=70&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2022 and 2021, including management's report on internal control and the independent auditor's report [Notes to Consolidated Financial Statements](index=82&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, loan portfolio, allowance for loan losses, deposits, regulatory capital, and the upcoming CECL adoption - Loan Portfolio by Type (Dec 31, 2022) | Loan Type | Balance (Millions) | % of Total | | :--- | :--- | :--- | | Commercial Loans | $509.1 | 56.6% | | Residential Mortgage Loans | $262.8 | 29.2% | | Consumer Loans | $126.9 | 14.1% | | **Total Loans** | **$898.8** | **100.0%** | - Bank Regulatory Capital Ratios (Dec 31, 2022) | Ratio | Actual | Minimum To Be "Well-Capitalized" | | :--- | :--- | :--- | | Total Core Capital (to Risk-Weighted Assets) | 15.14% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 13.88% | 8.00% | | Tier 1 Common Equity (to Risk-Weighted Assets) | 13.88% | 6.50% | | Tier 1 Capital (to Assets) | 9.67% | 5.00% | - The company adopted the new Current Expected Credit Loss (CECL) accounting standard on January 1, 2023. This resulted in a one-time transitional adjustment increasing the allowance for credit losses by **$2.3 million**, which reduced retained earnings by an after-tax amount of **$1.7 million**[452](index=452&type=chunk)[528](index=528&type=chunk) [Controls and Procedures](index=150&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2022[670](index=670&type=chunk)[671](index=671&type=chunk) - There were **no material changes** in internal control over financial reporting during the year ended December 31, 2022, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[673](index=673&type=chunk) PART III [Directors, Compensation, Security Ownership, and Accountant Fees](index=151&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) This section incorporates information from the Proxy Statement regarding directors, executive compensation, security ownership, related party transactions, and independent accounting firm fees - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, and related transactions is incorporated by reference from the Company's Proxy Statement for the Annual Meeting of Shareholders[677](index=677&type=chunk)[678](index=678&type=chunk)[679](index=679&type=chunk) - The company's independent registered public accounting firm is Bonadio & Co., LLP. Information on audit and related fees is incorporated by reference from the Proxy Statement[680](index=680&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=153&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and CEO/CFO certifications - This section lists all exhibits filed with the Form 10-K, including Articles of Incorporation, Bylaws, material contracts like the Securities Purchase Agreement with Castle Creek, debt indentures, and executive compensation plans[682](index=682&type=chunk)[683](index=683&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits[686](index=686&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents Pathfinder Bancorp's unaudited consolidated financial statements, highlighting asset growth to $1.40 billion and a Q3 2022 net income decrease to $3.2 million [Consolidated Statements of Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Condition) Total assets increased to $1.40 billion driven by loan and securities growth, while shareholders' equity decreased to $107.3 million due to unrealized losses on available-for-sale securities Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$1,396,946** | **$1,285,177** | | Total cash and cash equivalents | $44,454 | $37,149 | | Total securities | $392,354 | $355,427 | | Loans receivable, net | $872,574 | $819,524 | | **Total Liabilities** | **$1,289,151** | **$1,174,544** | | Total deposits | $1,180,583 | $1,055,346 | | Total borrowings | $95,310 | $106,661 | | **Total Shareholders' Equity** | **$107,301** | **$110,287** | | Accumulated other comprehensive loss | $(12,565) | $(1,268) | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Q3 2022 net income decreased to $3.2 million due to higher loan loss provisions, while nine-month net income increased to $9.4 million driven by higher net interest income Key Income Statement Data (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $10,780 | $9,791 | $30,224 | $28,566 | | Provision for loan losses | $710 | $104 | $871 | $2,061 | | Noninterest Income | $1,161 | $1,546 | $4,060 | $4,825 | | Noninterest Expense | $7,267 | $6,823 | $21,665 | $20,304 | | **Net Income Attributable to Pathfinder** | **$3,180** | **$3,365** | **$9,402** | **$8,528** | | Basic and Diluted EPS | $0.52 | $0.56 | $1.55 | $1.43 | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company reported a comprehensive income of $26,000 for Q3 2022 and a comprehensive loss of $1.8 million for the nine months, primarily due to significant unrealized losses on available-for-sale securities Comprehensive Income (Loss) Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $3,192 | $3,405 | $9,475 | $8,621 | | Other Comprehensive (Loss) Income, net of tax | $(3,166) | $(156) | $(11,297) | $845 | | *Unrealized (losses) gains on AFS securities* | *$(4,402)* | *$(504)* | *$(16,382)* | *$459* | | **Comprehensive Income (Loss)** | **$26** | **$3,249** | **$(1,822)** | **$9,466** | [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity decreased by $2.8 million to $107.8 million for the nine months, primarily due to an $11.3 million other comprehensive loss, partially offset by net income - Shareholders' equity decreased by **$2.8 million** in the first nine months of 2022, from **$110.6 million** to **$107.8 million**[21](index=21&type=chunk) - The primary driver of the equity decrease was an **$11.3 million** other comprehensive loss, net of tax, which was partially offset by **$9.4 million** in net income[21](index=21&type=chunk) - The company declared dividends of **$0.27 per share** on both voting and non-voting common stock during the nine-month period[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by $7.3 million for the nine months, with operating cash inflows offset by significant investing outflows funded by financing activities, primarily brokered deposits Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $12,152 | $15,707 | | Net cash from investing activities | $(117,358) | $(8,409) | | Net cash from financing activities | $112,511 | $24,479 | | **Net change in cash and cash equivalents** | **$7,305** | **$31,777** | - Investing activities included net purchases of available-for-sale and held-to-maturity securities totaling **$73.0 million** and a net increase in loans of **$54.6 million**[24](index=24&type=chunk) - Financing activities were dominated by a **$145.1 million** net increase in brokered deposits, which funded investment activities and repayments of other liabilities[24](index=24&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial items, including CECL adoption, securities valuation, loan portfolio, nonperforming loans, and the allowance for loan losses - The company will adopt the new Current Expected Credit Loss (CECL) standard on **January 1, 2023**, which is expected to increase the allowance for credit losses[32](index=32&type=chunk)[33](index=33&type=chunk) - The available-for-sale securities portfolio had gross unrealized losses of **$16.6 million** as of **September 30, 2022**, primarily due to rising interest rates[60](index=60&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - Nonaccrual loans increased to **$10.6 million** at **September 30, 2022**, from **$8.3 million** at year-end 2021, largely due to the downgrade of a single large commercial borrower relationship[91](index=91&type=chunk)[92](index=92&type=chunk) - The allowance for loan losses stood at **$13.6 million**, or **1.54%** of total loans, as of **September 30, 2022**[108](index=108&type=chunk)[260](index=260&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)](index=47&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28Unaudited%29) Management discusses the company's financial performance and condition, highlighting Q3 net income decrease due to higher loan loss provision, asset growth to $1.40 billion, and adequate capital levels [Overview and Results of Operations](index=51&type=section&id=Overview%20and%20Results%20of%20Operations) Q3 2022 net income decreased by 5.5% to $3.2 million due to a higher loan loss provision, while nine-month net income increased 10.2% to $9.4 million Q3 2022 vs Q3 2021 Performance Highlights | Metric | Q3 2022 | Change from Q3 2021 | | :--- | :--- | :--- | | Net Income | $3.2 million | ▼ 5.50% | | Basic & Diluted EPS | $0.52 | ▼ $0.04 | | Net Interest Income (after provision) | $10.1 million | ▲ 4.0% | | Provision for Loan Losses | $710,000 | ▲ $606,000 | Nine Months 2022 vs 2021 Performance Highlights | Metric | Nine Months 2022 | Change from 2021 | | :--- | :--- | :--- | | Net Income | $9.4 million | ▲ 10.2% | | Basic & Diluted EPS | $1.55 | ▲ $0.12 | | Net Interest Income (after provision) | $29.4 million | ▲ 10.8% | [Net Interest Income](index=54&type=section&id=Net%20Interest%20Income) Net interest income for Q3 2022 increased 10.1% to $10.8 million due to higher asset volumes and yields, while the nine-month period saw a $1.7 million increase to $30.2 million Net Interest Margin Analysis | Period | Net Interest Margin | Net Interest Rate Spread | Change in Net Interest Income (YoY) | | :--- | :--- | :--- | :--- | | **Q3 2022** | 3.32% | 3.14% | +$989,000 | | **Q3 2021** | 3.31% | 3.15% | N/A | | **Nine Months 2022** | 3.18% | 3.02% | +$1,658,000 | | **Nine Months 2021** | 3.19% | 3.03% | N/A | - The increase in Q3 net interest income was primarily driven by higher volume of interest-earning assets (**+$2.1 million** impact), partially offset by rate compression (**-$0.8 million** impact)[221](index=221&type=chunk) [Changes in Financial Condition](index=62&type=section&id=Changes%20in%20Financial%20Condition) Total assets grew by $111.8 million to $1.40 billion, primarily from loan and securities growth funded by deposits, while shareholders' equity decreased due to unrealized losses on AFS securities - Total assets increased by **$111.8 million** (**8.7%**) to **$1.40 billion** since year-end 2021[241](index=241&type=chunk) - Deposits increased by **$125.2 million** (**11.9%**), with interest-bearing deposits, particularly brokered time deposits, driving the growth[244](index=244&type=chunk) - Shareholders' equity declined by **$3.0 million**, primarily due to a **$15.2 million** pre-tax decline in the fair value of the available-for-sale investment portfolio, resulting in an **$11.3 million** after-tax increase in accumulated other comprehensive loss[246](index=246&type=chunk)[247](index=247&type=chunk) [Capital](index=62&type=section&id=Capital) Pathfinder Bank remains a 'well-capitalized' institution as of September 30, 2022, with all capital ratios significantly exceeding minimum regulatory requirements Pathfinder Bank Capital Ratios (September 30, 2022) | Ratio | Actual | Minimum to be "Well-Capitalized" | | :--- | :--- | :--- | | Total Core Capital (to Risk-Weighted Assets) | 14.69% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 13.44% | 8.00% | | Tier 1 Common Equity (to Risk-Weighted Assets) | 13.44% | 6.50% | | Tier 1 Capital (to Assets) | 9.48% | 5.00% | [Loan and Asset Quality and Allowance for Loan Losses](index=64&type=section&id=Loan%20and%20Asset%20Quality%20and%20Allowance%20for%20Loan%20Losses) Nonperforming assets increased to $10.8 million due to a single commercial relationship, but the allowance for loan losses at $13.6 million is deemed adequate Nonperforming Assets (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total nonaccrual loans | $10,625 | $8,292 | | Foreclosed real estate | $221 | $0 | | **Total nonperforming assets** | **$10,846** | **$8,292** | | Nonperforming loans to total loans | 1.22% | 1.00% | | Nonperforming assets to total assets | 0.78% | 0.65% | - The increase in nonperforming loans was primarily due to one large commercial real estate and commercial loan relationship with a total outstanding amount of **$7.2 million**, of which **$1.8 million** was placed on nonaccrual[258](index=258&type=chunk) - The allowance for loan losses was **$13.6 million**, or **1.54%** of total loans, at **September 30, 2022**[260](index=260&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Pathfinder Bancorp, Inc. is not required to provide market risk disclosures - As a smaller reporting company, Pathfinder Bancorp, Inc. is not required to provide quantitative and qualitative disclosures about market risk[275](index=275&type=chunk) [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of **September 30, 2022**[277](index=277&type=chunk) - No changes were made during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[278](index=278&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2022, the company is not a party to any material legal proceedings that would adversely affect its financial condition - The Company is not currently a named party in any material legal proceedings[280](index=280&type=chunk) [Item 1A. Risk Factor](index=68&type=section&id=Item%201A.%20Risk%20Factor) As a smaller reporting company, Pathfinder Bancorp, Inc. is not required to provide risk factor disclosures - Disclosure for this item is not required as the company is a smaller reporting company[281](index=281&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any shares during Q3 2022, with 74,292 shares remaining available for purchase under an existing plan - No shares were repurchased in the three months ended **September 30, 2022**[282](index=282&type=chunk) - The maximum number of shares that may yet be purchased under the existing plan is **74,292**[282](index=282&type=chunk) [Item 3. Defaults upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[283](index=283&type=chunk) [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and Interactive Data Files in iXBRL format - Filed exhibits include Rule 13a-14(a)/15d-14(a) certifications for the CEO and CFO, Section 1350 certifications, and iXBRL data files[283](index=283&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ (Exact Name of Company as Specified in its Charter) Maryland (State of Other Jurisdiction of Incorporation) 001-36695 (Commission File No.) 38-3941859 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ (Exact Name of Company as Specified in its Charter) Maryland (State of Other Jurisdiction of Incorporation) 001-36695 (Commission File No.) 38-3941859 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File No. 001-36695 PATHFINDER BANCORP, INC. (Exact name of registrant as specified in its charter) Maryland 38-3941859 (State or other jurisdict ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 001-36695 (Commission File No.) 38-3941859 (I.R.S. Employer Identification No.) 214 West First Street, Oswego, NY 13126 (Address of Principal Executive Office) (Zip Code) (315) 343-0057 (Issuer's Telephone Number including area code) For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) O ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ (Exact Name of Company as Specified in its Charter) Maryland (State of Other Jurisdiction of Incorporation) 001-36695 (Commission Fil ...