Pathfinder Bancorp(PBHC) - 2024 Q4 - Annual Results

Financial Results for Fourth Quarter and Full Year 2024 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 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 $1.4 million from the gain on the sale of its insurance agency, net of taxes and transaction-related expenses[2] Q4 2024 vs. Prior Periods - Key Metrics | Metric | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Provision Expense ($ 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 $539.7 million[8] Management Commentary Management emphasized that core net interest income growth and margin expansion drove Q4 earnings, alongside strategic investments in middle-market talent and a continued focus on expense and credit risk management for long-term value - Core net interest income growth and net interest margin expansion were key contributors to Q4 earnings[6] - The company is investing in talent to serve middle-market businesses in the Syracuse area, with the recently acquired East Syracuse branch contributing significantly[6] - Management is committed to managing operating expenses and continuously improving its credit risk management approach to build long-term shareholder value[6] Financial Performance Analysis This section analyzes the company's financial performance, focusing on net interest income, noninterest income, and noninterest expense trends and their drivers Net Interest Income and Net Interest Margin Q4 2024 net interest income decreased quarter-over-quarter due to a prior one-time payment but increased significantly year-over-year, driven by higher loan yields and lower funding costs, while net interest margin followed a similar trend Net Interest Income and Margin Comparison | Metric | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income ($ 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][9] - 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] Noninterest Income 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] - Excluding the gain on sale, noninterest income grew by $30,000 from Q3 2024 and $419,000 from Q4 2023[12] - Compared to the linked quarter, changes included a $194,000 decrease in BOLI earnings (due to a prior death benefit) and increases in net realized gains on securities[14] Noninterest Expense Noninterest expense decreased quarter-over-quarter due to the absence of prior one-time acquisition costs, but increased year-over-year primarily driven by higher salaries, benefits, and occupancy costs associated with increased headcount and a new branch Noninterest Expense Comparison | Period | Total Noninterest Expense ($ 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] - Building and occupancy costs increased by $390,000 from Q4 2023, primarily due to operating the newly acquired branch[19] - The efficiency ratio was 69.42% in Q4 2024, improving from 75.28% in Q3 2024 but higher than 67.25% in Q4 2023[21] Statement of Financial Condition This section details the company's financial position, including assets, liabilities, and equity, highlighting key changes in loans, deposits, and borrowings Assets, Liabilities, and Equity As of December 31, 2024, total assets remained stable, with total deposits increasing and total borrowings significantly reduced year-over-year, while shareholders' equity also saw an increase Balance Sheet Highlights (as of Dec 31, 2024) | Metric | Dec 31, 2024 ($) | 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] - The increase in shareholders' equity for the full year was primarily driven by a $2.1 million increase in retained earnings[25] Asset Quality and Liquidity This section evaluates the bank's asset quality, including nonperforming loans and charge-offs, and assesses its liquidity position and funding capacity Asset Quality 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] - The Allowance for Credit Losses (ACL) stood at $17.2 million as of December 31, 2024[29] 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] - Core deposits represented 76.87% of total deposits on December 31, 2024, an improvement from 69.83% on December 31, 2023[32] - 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] Shareholder Information This section provides details on the company's dividend declaration and related shareholder metrics Cash Dividend Declared 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] - The dividend is payable on February 7, 2025, to shareholders of record by January 17, 2025[35] - The dividend yield is 2.29% based on the closing stock price of $17.50 on December 31, 2024[36] Selected Financial Tables 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) 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 | $4,284 | Financial Highlights and Ratios This section presents key performance ratios for recent periods, encompassing profitability, margin analysis, operational efficiency, capital adequacy, and per-share data Key Performance Ratios (Q4 2024) | Ratio | Value | | :--- | :--- | | Return on average assets (ROA) (%) | 1.17 | | Return on average common equity (ROE) (%) | 14.09 | | Net interest margin (NIM) (%) | 3.15 | | Efficiency ratio (non-GAAP) (%) | 69.42 | | Book value per common share ($) | 19.90 | Asset Quality, Loan and Deposit Composition 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] Selected Average Balances and Yields 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 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] - Pre-tax, pre-provision net income (a non-GAAP measure) was $3.76 million for Q4 2024[52]