Pathfinder Bancorp(US:PBHC)2022-03-25 20:33PART I Business Pathfinder Bancorp, Inc. operates as a bank holding company through Pathfinder Bank, focusing on commercial and residential lending and deposit gathering in New York, with $1.29 billion in consolidated assets as of December 31, 2021 Consolidated Financial Highlights (as of December 31, 2021) | Metric | Value (in millions) | | :--- | :--- | | Total Consolidated Assets | $1,290 | | Total Deposits | $1,060 | | Shareholders' Equity | $110.3 | - The Bank's primary business involves attracting public deposits to fund a loan portfolio concentrated in commercial real estate, residential real estate, and commercial business loans, also investing in various government and corporate debt securities20 - The company operates through ten branch offices, primarily serving Oswego and Onondaga Counties in New York, with a dominant deposit market share of 45.0% in Oswego County as of June 30, 20213742 - The company has strategically shifted its focus to increase commercial real estate and commercial business lending to diversify its loan portfolio and reduce interest rate sensitivity43 - As of December 31, 2021, the company employed 173 team members, with approximately 74% being women, emphasizing a strong workplace culture grounded in its stated mission and values2426 Risk Factors As a smaller reporting company, Pathfinder Bancorp, Inc. is not required to provide a detailed list of risk factors in this section - As a smaller reporting company, Pathfinder Bancorp, Inc. is not required to provide a detailed list of risk factors in this section184 Unresolved Staff Comments The company reports no unresolved comments from the SEC staff - There are no unresolved staff comments as of the filing date185 Properties The company operates eleven offices across three counties, with premises and equipment valued at $21.7 million as of December 31, 2021, comprising owned and leased locations - The aggregate net book value of the Bank's premises and equipment was $21.7 million at December 31, 2021187 Office Locations and Ownership Status | County | Number of Offices | Ownership Status | | :--- | :--- | :--- | | Oswego | 7 | Mostly Owned | | Onondaga | 3 | Mix of Owned and Leased | | Oneida | 1 | Leased (Loan Production Office) | Legal Proceedings The company is involved in routine legal proceedings, primarily foreclosures, which management does not expect to materially impact its financial condition or operations - Management asserts that ongoing legal claims and lawsuits are not expected to materially impact the Company's consolidated financial condition190 Mine Safety Disclosure This section on mine safety disclosures is not applicable to the company's operations - Mine safety disclosures are not applicable to the company's operations191 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ under "PBHC," with 322 shareholders as of March 22, 2022, and a history of regular quarterly cash dividends - The company's common stock trades on the NASDAQ Capital Market under the symbol "PBHC"192 - No shares of common stock were repurchased during the fourth quarter of 2021193 Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining for future issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | 264,270 | $10.98 | 4,382 | Management's Discussion and Analysis of Financial Condition and Results of Operations For 2021, net income increased 78.5% to $12.4 million, driven by higher net interest income and lower loan loss provisions, with total assets growing to $1.29 billion and improved credit quality Key Performance Metrics (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Income | $12.4 million | $7.0 million | | Diluted EPS | $2.07 | $1.17 | | Return on Average Assets | 0.98% | 0.60% | | Return on Average Equity | 11.91% | 7.43% | | Net Interest Margin | 3.21% | 2.88% | - The significant increase in net income was primarily due to a 21.0% increase in net interest income and a $3.7 million decrease in the provision for loan losses, reflecting improved credit quality and economic conditions248249250 - Total assets increased by $57.7 million (4.7%) to $1.29 billion, mainly driven by growth in investment securities and loans, funded by a $59.4 million increase in deposits255 - Credit quality showed significant improvement, with nonperforming loans as a percentage of total loans decreasing from 2.58% at year-end 2020 to 1.00% at year-end 2021256 - The Bank participated in the Paycheck Protection Program (PPP), originating 1,177 loans totaling $111.7 million since inception, with $19.3 million in PPP loans remaining outstanding as of year-end 202151237 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Pathfinder Bancorp, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Pathfinder Bancorp, Inc. is not required to provide quantitative and qualitative disclosures about market risk360 Financial Statements and Supplementary Data This section presents consolidated financial statements, an unqualified auditor's opinion, and management's effective internal control report, noting critical audit matters related to loan losses and loans - The independent auditor, Bonadio & Co., LLP, issued an unqualified opinion on the consolidated financial statements372 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021364 - The auditor identified two critical audit matters: the allowance for loan losses, due to subjective judgments in qualitative adjustments, and the accounting for loans, due to material weaknesses that existed for a portion of the year377380381 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Total Cash and Cash Equivalents | $37,149 | $43,464 | | Loans Receivable, Net | $819,524 | $812,718 | | Total Investment Securities | $352,198 | $301,335 | | Total Assets | $1,285,177 | $1,227,443 | | Liabilities & Equity | | | | Total Deposits | $1,055,346 | $995,907 | | Total Borrowings & Subordinated Loans | $106,661 | $121,450 | | Total Shareholders' Equity | $110,633 | $97,722 | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - There were no disagreements with accountants on accounting and financial disclosure691 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2021, having remediated a material weakness identified in the prior year - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2021693 - A material weakness identified in the 2020 Form 10-K related to related party transactions and loan controls has been remediated as of December 31, 2021694696697 Other Information The company reports no other information in this section - There is no other information to report699 PART III Directors, Executive Officers, Corporate Governance, Executive Compensation, and Related Matters Information for Items 10 through 14, covering directors, executive officers, corporate governance, and related matters, is incorporated by reference from the 2022 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's Proxy Statement for the 2022 Annual Meeting of Shareholders702703704705 PART IV Exhibits and Financial Statement Schedules This section lists financial statements and exhibits filed with the Form 10-K, with schedules omitted as information is either inapplicable or included elsewhere - The consolidated financial statements for 2021 and 2020 are filed as part of this report708 - All financial statement schedules were omitted because the information was inapplicable or included in the MD&A section708 Form 10-K Summary The company did not provide a Form 10-K summary - No Form 10-K summary is provided710