Pathfinder Bancorp(US:PBHC)2025-05-15 20:06PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 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 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 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 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 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 deterioration334041 - 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 - 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 status68 - 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 202578 - 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 million114115121 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 income157 - 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 assets158159171 - 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 2024161182 - 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 2024163185 Application of Critical Accounting Estimates 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 million147 - 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 method146 Net Interest Income 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 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-end209 Liquidity and Capital 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 available222 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 loss199 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 item227 Item 4. Controls and Procedures 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 effective229 - No material changes were made to the company's internal control over financial reporting during the quarter ended March 31, 2025230 PART II - OTHER INFORMATION Item 1. Legal Proceedings 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 Company231 Item 1A. Risk Factor 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 item232 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 The report includes filed exhibits such as CEO and CFO certifications and Interactive Data Files for financial statements