Pathfinder Bancorp, Inc. Announces Fourth Quarter 2021 Net Income of $3.9 Million and Record Full Year Net Income of $12.5 Million

Rhea-AI Summary

Pathfinder Bancorp (NASDAQ: PBHC) reported record net income of $12.4 million for 2021, up from $7.0 million in 2020. The fourth quarter 2021 earnings reached $3.9 million, or $0.64 per share, a significant increase compared to $1.9 million, or $0.33 per share, in Q4 2020. Total revenues rose 16.8% to $44.5 million, driven by a 21% increase in net interest income. Total assets grew to $1.28 billion, with deposits increasing to $1.06 billion. The Company recorded a $1.0 million benefit in its provision for loan losses, reflecting improved asset quality.

Positive

• Record net income of $12.4 million for 2021, a 77.5% increase from 2020.
• Fourth quarter 2021 net income of $3.9 million, up 105.3% from Q4 2020.
• Total revenue increased by 16.8% to $44.5 million in 2021, with net interest income up 21.0%.
• Total deposits grew by 6.0% to $1.06 billion as of December 31, 2021.
• Improved asset quality with nonperforming loans at 1.00%, down from 2.58% a year prior.

Negative

• Noninterest income declined by 18.0% to $1.4 million in Q4 2021 compared to Q4 2020.
• Noninterest expense increased by 9.6% for the full year 2021, driven largely by salary and benefit costs.

Results Include Record Earnings, Continued Stable Asset Quality,
Prudent Expense Management and Significant Fourth Quarter Provision Benefit

OSWEGO, N.Y., Feb. 03, 2022 (GLOBE NEWSWIRE) -- Pathfinder Bancorp, Inc. (“Company”) (NASDAQ: PBHC), the holding company for Pathfinder Bank (“Bank”), announced fourth quarter 2021 net income available to common shareholders of $3.9 million, or $0.64 per basic and diluted share, compared to $1.9 million, or $0.33 per basic and diluted share, for the fourth quarter of 2020. For the full year 2021, total net income attributable to Pathfinder Bancorp, Inc. was $12.4 million, or $2.07 per basic and diluted share, compared to $7.0 million, or $1.17 per basic and diluted share, for 2020.

2021 Fourth Quarter and Full Year Performance Highlights

• Fourth quarter 2021 total revenue (net interest income and total noninterest income) of $11.1 million increased $1.5 million, or 15.7%, compared to the fourth quarter of 2020. Full year total revenue of $44.5 million was up $6.4 million, or 16.8%, compared to 2020.
• Total interest-earning assets on December 31, 2021 of $1.21 billion increased by $52.4 million, or 4.5%, from December 31, 2020 and included $832.5 million in total loans.
• Total deposits on December 31, 2021 were $1.06 billion, an increase of $59.4 million, or 6.0%, compared to one year prior.
• A more beneficial deposit mix contributed to a 44 basis point improvement in deposit funding costs to 0.56% for the year. Total funding costs decreased 40 basis points to 0.79% in 2021.
• Total net interest income for fourth quarter 2021 of $9.7 million increased by $1.8 million, or 23.0%, from the prior year period, and increased $6.7 million, or 21.0%, to $38.3 million for full year 2021 compared to 2020.
• Noninterest expense of $7.2 million for the fourth quarter of 2021 represents an increase of $344,000, or 5.0%, compared to the year-ago quarter. Noninterest expense was $27.5 million for 2021, an increase of $2.4 million, or 9.6%, compared to 2020.
• These factors combined to reduce our Efficiency Ratio to 62.6% in 2021, a decline of 3.7%, when compared to 66.3% for the year ended December 2020.
• Loan growth was impacted by significant reductions in the Paycheck Protection Program (“PPP”) for the past three quarters, however, the Bank’s loan pipeline remains strong.
• In response to continuing improvements in the nonaccrual loans and general economic conditions, the Company recorded a benefit of $1.0 million in its provision for loan losses during the fourth quarter of 2021.
  

“Since our private placement capital raise in May 2019, our earnings and tangible capital have grown significantly,” said Thomas W. Schneider, President and CEO. “Our record net income in 2021 of $12.5 million for the year represents a 77.5% and 190.0% increase over year-end results for 2020 and 2019, respectively. Similarly, the return on average assets has grown from 0.60% in 2019 to 0.98% in 2021. Tangible Book Value per common share has grown from $14.14 at June 30, 2019 to $17.65 at December 31, 2021.

“Many exogenous factors have weighed into this significant increase in performance. Most notably were the governmental responses to Covid-19 and the accompanying fiscal programs and monetary policy.”

“The board of directors and staff take great pride and credit for the improvement in performance, including execution of our Strategic Plan, announced in June of 2019, and the careful and prudent management of asset quality through this tumultuous period. I want to thank our shareholders for their patience and confidence, our board of directors for their steady governance, and the relentless and restless work of our staff.”

“Our focus throughout 2021 on enhancing our operating leverage proved to be successful, as double-digit revenue growth outpaced noninterest expense growth by a significant margin. Total revenue in 2021 was up 16.8%, while we limited expense growth to under 10%, even compared to the lower-than-typical expenses we recorded in 2020 amid the pandemic-induced operating environment. Looking ahead, we remain focused on balancing effective expense management with appropriate investments to support the future growth of the Company, which includes attracting and retaining exceptional talent. To that end, we do expect increased salary and benefits costs in 2022 and beyond as we respond to inflationary and wage pressures within our markets.”

“Our balance sheet continues to grow, with an improving funding mix and healthy loan portfolio. Period-end deposits grew by more than $59 million from one year prior and included growth of approximately $30 million of noninterest bearing deposits. We continued to reduce our reliance on time deposits, with both average balance and rate paid on time deposits decreasing significantly compared to the prior year. This supported continued improvement in our overall funding costs, with the average cost of total interest-bearing liabilities down 40 basis points to 0.79% in 2021.”

“We continued to maintain strong credit quality on our $832.5 million loan portfolio, with a ratio of nonperforming loans to total loans of 1.00% at December 31, 2021, less than half of the 2.58% we reported one year prior. In addition, even as we released reserves during the fourth quarter, our ratio of allowance for loan losses to nonperforming loans stood at approximately156% at year end.”

“While our local economies have improved significantly from the height of the pandemic and our pipelines remain solid, we continue to maintain a conservative approach to managing asset quality and modest loan growth expectations given fiscal policy changes and the evolving impacts of the latest COVID-19 variant. Improved metrics have borne out our patient approach with borrowers through the Pandemic. That said, we are optimistic about the opportunities in our vibrant Central New York markets and are taking strategic steps to maximize them. In the second quarter of 2022, we expect to open a new branch in the Southwest Corridor of the City of Syracuse, which will allow us to serve our growing customer base there and provide a range of community banking services to the City’s underserved neighborhoods. Overall, our strong financial performance, dedicated and highly capable team and healthy capital position, leaves us well-positioned for 2022 and beyond.”

Income Statement for the Quarter Ended December 31, 2021

Net Interest Income

Unaudited		For the three months ended															For the twelve months ended
(In thousands, except per share data)		December 31, 2021				December 31, 2020				Change							December 31, 2021				December 31, 2020				Change
Interest and dividend income:
Loans, including fees		$	8,930			$	8,537			$	393			4.6	%		$	37,026			$	35,421			$	1,605			4.5	%
Debt securities:
Taxable			2,135				1,763				372			21.1	%			8,312				6,524				1,788			27.4	%
Tax-exempt			72				50				22			44.0	%			171				159				12			7.5	%
Dividends			48				87				(39	)		-44.8	%			309				324				(15	)		-4.6	%
Federal funds sold and interest earning deposits			2				26				(24	)		-92.3	%			9				79				(70	)		-88.6	%
Total interest and dividend income			11,187				10,463				724			6.9	%			45,827				42,507				3,320			7.8	%
Interest expense:
Interest on deposits			889				1,736				(847	)		-48.8	%			4,714				8,112				(3,398	)		-41.9	%
Interest on short-term borrowings			2				14				(12	)		-85.7	%			10				148				(138	)		-93.2	%
Interest on long-term borrowings			153				288				(135	)		-46.9	%			1,018				1,503				(485	)		-32.3	%
Interest on subordinated loans			414				512				(98	)		-19.1	%			1,790				1,101				689			62.6	%
Total interest expense			1,458				2,550				(1,092	)		-42.8	%			7,532				10,864				(3,332	)		-30.7	%
Net interest income			9,729				7,913				1,816			22.9	%			38,295				31,643				6,652			21.0	%
Provision for loan losses			(1,039	)			812				(1,851	)		-228.0	%			1,022				4,707				(3,685	)		-78.3	%
Net interest income after provision for loan losses		$	10,768			$	7,101			$	3,667			51.6	%		$	37,273			$	26,936			$	10,337			38.4	%

As noted in the table above, fourth quarter 2021 net interest income was $9.7 million, an increase of $1.8 million, or 23.0%, compared to $7.9 million for the same quarter in 2020. Interest and dividend income in the 2021 fourth quarter was $11.2 million, compared to $10.5 million in the fourth quarter of 2020. The increase in net interest income between comparable quarters was a result of a 45 basis point reduction in rates paid on interest-bearing liabilities, combined with a 24 basis point increase in the average loan yield, and a $32.8 million increase in average taxable investment securities combined with a 10 basis point increase in the average yield. Total interest expense for the fourth quarter of 2021 was $1.5 million, a decrease of $1.1 million, or 42.8%, from $2.6 million for the prior year quarter. The decrease in the quarterly interest expense was primarily a result of an improved funding mix, which included a $56.3 million reduction in average time deposit balances combined with a 76 basis point decrease in the average interest rate paid on time deposits. The net interest margin for the fourth quarter of 2021 was 3.28%, a 52 basis point increase compared to 2.75% for the fourth quarter of 2020. This improvement reflects both a 13 basis point increase in the average yield for interest-earning assets, and a 45 basis point decline in the average cost for interest-bearing liabilities.

Net interest income for the full year of 2021 increased $6.7 million, or 21.0%, to $38.3 million compared to $31.6 million for the full year of 2020. Interest and dividend income for the full year ended December 31, 2021 was $45.8 million, an increase of $3.3 million, or 7.8%, compared to $42.5 million for 2020. The increase was due to a $56.8 million, or 22.1%, increase in average taxable investment securities and a $36.2 million, or 4.5%, increase in average loans compared to the prior year period. Interest expense of $7.5 million for the full year decreased by $3.3 million, or 30.7%, from the prior year period, primarily due to a reduction in time deposit balances along with a 44 basis point decrease in the interest rate paid on time deposits. Full year 2021 net interest margin of 3.21% was up 33 basis points from 2.88% for the twelve months ended December 31, 2020.

Paycheck Protection Program Discussion

From April 2020 to May 2021, the Company participated in all phases of the Paycheck Protection Program (“PPP”) as administered by the U.S. Small Business Administration (the “SBA”). PPP loans are substantially guaranteed as to timely repayment by the SBA and have unique forgiveness features whereby loan principal amounts may be discharged, for the benefit of the borrowers, by direct payments from the SBA to the lending institution holding the indebtedness. The Company has received both interest (calculated at a stated rate of 1%) and various levels of fee income related to the origination of PPP loans. Information related to the Company’s PPP loans are included in the following tables:

Unaudited		For the three months ended						For the twelve months ended,
(In thousands, except number of loans)		December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020
Number of PPP loans originated in the period			-			25			478			699
Funded balance of PPP loans originated in the period		$	-		$	313		$	36,369		$	75,352
Number of PPP loans forgiven in the period		160				136		796				136
Average balance of PPP loans in the period		$	23,315		$	67,960		$	75,538		$	91,328
Balance of PPP loans forgiven in the period		$	7,611		$	15,279		$	77,054		$	15,279
Deferred PPP fee income recognized in the period		$	407		$	495		$	2,150		$	938

(In thousands, except number of loans)		December 31, 2021			December 31, 2020
Unearned PPP deferred fee income at end of period		$	716		$	1,216

(In thousands, except number of loans)			Number		Balance
Total PPP loans originated since inception			1,177		$	111,721
Total PPP loans forgiven since inception			932		$	92,333
Total PPP loans remaining at December 31, 2021			256		$	19,338

Provision for Loan Losses

The Bank reported a credit to provision for loan losses of $1.0 million for the fourth quarter of 2021, reflecting improvements in its strong asset quality metrics. This compares to a provision for loan losses of $812,000 for the fourth quarter of 2020. The credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its proven conservative loan classification and reserve building methodologies to the analysis of these portfolios. The provision for loan losses for the full year of 2021 was $1.0 million, compared to $4.7 million in 2020.

Noninterest Income

Fourth quarter 2021 noninterest income was $1.4 million, a decrease of $309,000, or 18.0%, compared to $1.7 million for the same three-month period in 2020. Noninterest income was $6.2 million for the full year ended 2021, compared to $6.5 million for 2020.

The following table details the components of noninterest income for the three and twelve months ended December 31, 2021 and 2020:

Unaudited		For the three months ended															For the twelve months ended
(Dollars in thousands)		December 31, 2021				December 31, 2020			Change								December 31, 2021				December 31, 2020			Change
Service charges on deposit accounts		$	382			$	397		$	(15	)			-3.8	%		$	1,464			$	1,395		$	69				4.9	%
Earnings and gain on bank owned life insurance			141				105			36				34.3	%			559				460			99				21.5	%
Loan servicing fees			91				143			(52	)			-36.4	%			246				361			(115	)			-31.9	%
Debit card interchange fees			225				194			31				16.0	%			923				771			152				19.7	%
Insurance agency revenue			231				216			15				6.9	%			1,048				955			93				9.7	%
Other charges, commissions and fees			258				215			43				20.0	%			1,058				917			141				15.4	%
Noninterest income before gains (losses)			1,328				1,270			58				4.6	%			5,298				4,859			439				9.0	%
Net gains on sales and redemptions of investment securities			(19	)			-			(19	)		>100		%			37				1,076			(1,039	)			-96.6	%
Gains/(losses) on marketable equity securities			10				169			(159	)			-94.1	%			382				(629	)		1,011				160.7	%
Net gains on sales of loans and foreclosed real estate			87				276			(189	)			-68.5	%			313				1,179			(866	)			-73.5	%
Gains on sale of premises and equipment			-				-			-				-				201				-			201			>100		%
Total noninterest income		$	1,406			$	1,715		$	(309	)			-18.0	%		$	6,231			$	6,485		$	(254	)			-3.9	%

Noninterest Expense

Total noninterest expense for the fourth quarter of 2021 was $7.2 million, an increase of $344,000, or 5.0%, compared to $6.8 million for the same three-month period in 2020. The increase was primarily a result of increases in advertising and other expenses, offset in part by lower data processing expenses. Total noninterest expense for the full year period of 2021 was $27.5 million, an increase of $2.4 million, or 9.6%, compared with $25.1 million for the prior year period, and primarily driven by increases in salaries and employee benefits expense, professional and other services, and advertising costs.

The following table details the components of noninterest expense for the three and twelve months ended December 31, 2021 and 2020:

Unaudited		For the three months ended															For the twelve months ended
(Dollars in thousands)		December 31, 2021				December 31, 2020				Change							December 31, 2021				December 31, 2020				Change
Salaries and employee benefits		$	3,918			$	3,853			$	65			1.7	%		$	14,384			$	13,468			$	916			6.8	%
Building and occupancy			734				764				(30	)		-3.9	%			3,121				3,013				108			3.6	%
Data processing			539				675				(136	)		-20.1	%			2,555				2,396				159			6.6	%
Professional and other services			374				311				63			20.3	%			1,627				1,210				417			34.5	%
Advertising			502				268				234			87.3	%			1,198				941				257			27.3	%
FDIC assessments			222				190				32			16.8	%			874				699				175			25.0	%
Audits and exams			153				131				22			16.8	%			725				507				218			43.0	%
Insurance agency expense			198				226				(28	)		-12.4	%			825				743				82			11.0	%
Community service activities			39				36				3			8.3	%			220				199				21			10.6	%
Foreclosed real estate expenses			16				8				8			100.0	%			46				50				(4	)		-8.0	%
Other expenses			496				385				111			28.8	%			1,920				1,854				66			3.6	%
Total noninterest expenses		$	7,191			$	6,847			$	344			5.0	%		$	27,495			$	25,080			$	2,415			9.6	%

During the most restrictive periods following the inception of the COVID-19 pandemic, which began in March 2020, the Company experienced material declines in substantially all forms of noninterest expenses. These reductions in noninterest expenses were the result of the curtailment or elimination of a significant portion of non-critically essential business and business development activities during that time. These activities were reduced or eliminated for the duration of the substantial restrictions imposed by governmental officials and as a consequence of the internal safety and social distancing protocols initiated by the Company and/or its customers. These effects were most pronounced in the third and fourth quarters of 2020 and extended, to lessening degrees, at least through the end of the first quarter of 2021. Accordingly, as the Company progressively returned to less restricted operations, noninterest expenses progressively returned to the levels considered by its management to be prudent for the effective long-term management of the Company.

Unaudited		For the three months ended													For the twelve months ended,
(Dollars in thousands)		December 31, 2021			December 31, 2019			Change							December 31, 2021			December 31, 2019			Change
Salaries and employee benefits		$	3,918		$	3,281		$	637			19.4	%		$	14,384			13,660		$	724			5.3	%
Building and occupancy			734			688			46			6.7	%			3,121			2,674			447			16.7	%
Data processing			539			590			(51	)		-8.6	%			2,555			2,339			216			9.2	%
Professional and other services			374			257			117			45.5	%			1,627			1,325			302			22.8	%
Advertising			502			243			259			106.6	%			1,198			962			236			24.5	%
FDIC assessments			222			50			172			344.0	%			874			421			453			107.6	%
Audits and exams			153			123			30			24.4	%			725			427			298			69.8	%
Insurance agency expense			198			198			-			0.0	%			825			816			9			1.1	%
Community service activities			39			228			(189	)		-82.9	%			220			620			(400	)		-64.5	%
Foreclosed real estate expenses			16			13			3			23.1	%			46			337			(291	)		-86.4	%
Other expenses			496			527			(31	)		-5.9	%			1,920			2,149			(229	)		-10.7	%
Total noninterest expenses		$	7,191		$	6,198		$	993			16.0	%		$	27,495		$	25,730		$	1,765			6.9	%

Balance Sheet on December 31, 2021

The Company’s total assets on December 31, 2021 were $1.28 billion, an increase of $57.7 million, or 4.7%, from $1.23 billion on December 31, 2020. This increase was primarily driven by available-for-sale securities and loans. Total loans of $832.5 million increased by $7.0 million, or 0.8%, compared with $825.5 million on December 31, 2020. Investment securities totaled $352.2 million, an increase of $50.9 million compared to $301.3 million on December 31, 2020.

Total deposits on December 31, 2021 were $1.06 billion, an increase of $59.4 million, or 6.0%, from $995.9 million at December 31, 2020. Interest-bearing deposits of $863.5 million at 2021 year end were up by $29.6 million, or 3.6%, largely due to increases in retail and commercial deposits.   Noninterest-bearing deposits totaled $191.9 million at December 31, 2021, an increase of $29.8 million, or 18.4%, from the 2020 year end. The increases in noninterest-bearing deposits were the result of continued growth in business banking relationships and the effects of the Bank’s participation in the PPP.

Shareholders’ equity was $110.3 million at December 31, 2021, reflecting an increase of $12.8 million, or 13.2%, compared with $97.5 million at December 31, 2020. The increase was primarily a result of a $10.7 million increase in retained earnings.

Asset Quality

The Bank’s asset quality metrics, as measured by net loan charge-offs to average loans, remained strong and relatively stable for fourth quarter 2021. Annualized net loan charge-offs to average loans were 0.12% for the fourth quarter 2021, compared with 0.08% for the fourth quarter of 2020 and 0.12% for the quarter ended September 30, 2021. Nonperforming loans as a percentage of total loans continued to improve, totaling 1.00% at December 31, 2021, or a decrease of 158 basis points compared to 2.58% at December 31, 2020.

The decrease in the nonperforming loan portfolio at December 31, 2021, as compared to December 31, 2020, was primarily the result of loans held in portfolio that resumed regular payment status following the improvement in general business conditions in the second half of 2021. Management is monitoring all nonaccrual loans closely and has incorporated our current estimate of the ultimate collectability of these loans into the reported allowance for loan losses at December 31, 2021. No loans were classified as being on COVID-19 related payment deferral at December 31, 2021.

The following table summarizes nonaccrual loans by category and status at December 31, 2021:

Loan Type	Collateral Type	Number of Loans			Loan Balance			Average Loan Balance			Weighted LTV at Origination/ Modification			Status
Secured residential mortgage:
	Real Estate		10		$	892		$	89		81	%		Under active resolution management by the Bank.
Secured commercial real estate:
	Private Museum		1			1,384			1,384		79	%		The modification is still in progress and the customer is making monthly payments to the bank under an informal agreement currently. DRI grant proceeds are anticipated to be received in both Q1 2022 and Q2 2022 further reducing our exposure.
	Recreational		1			1,233			1,233		49	%		The loan is currently classified as a Troubled Debt Restructuring (TDR). Next payment was due September 1, 2021.
	All other		12			1,790			149		74	%		Under active resolution management by the Bank.
Commercial lines of credit			5			629			126		N/A			Under active resolution management by the Bank.
Commercial and industrial:			7			1,261			180		N/A			Under active resolution management by the Bank.
Consumer loans			71			1,103			16		N/A			Under active resolution management by the Bank.
			107		$	8,292		$	77

The allowance for loan losses to non-performing loans at December 31, 2021 was 155.99%, compared with 59.89% at December 31, 2020. The change in the allowance for loans losses to non-performing loans is reflective of the changes in nonaccrual loans discussed above and appropriate reserve releases during the fourth quarter of 2021.

COVID-19 Additional Discussion

Pathfinder Bank has participated in all rounds of the PPP to date. The Program was initially established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and is a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the SBA. The PPP was renewed under the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021. While these legislative actions, and the programs that resulted therefrom, appear to have significantly reduced the negative near-term economic impact of the pandemic, the future trajectory of the economy and the economy’s effect on the financial condition and results of the Company’s operations cannot be predicted with certainty.

Cash Dividend Declared     

On December 20, 2021, the Company announced that its Board of Directors declared a cash dividend of $0.07 per share on the Company's voting common and non-voting common stock, and a cash dividend of $0.07 per notional share for the issued warrant relating to the fiscal quarter ended December 31, 2021. The dividend will be payable to all shareholders of record on January 14, 2022 and will be paid on February 4, 2022. Based on the closing price of the Company’s common stock of $17.17 on December 31, 2021, the implied dividend yield is 1.6%. The quarterly cash dividend of $0.07 equates to a dividend payout ratio of 10.9%.

About Pathfinder Bancorp, Inc.

Pathfinder Bank is a New York State chartered commercial bank headquartered in Oswego, whose deposits are insured by the Federal Deposit Insurance Corporation. The Bank is a wholly owned subsidiary of Pathfinder Bancorp, Inc., (NASDAQ SmallCap Market; symbol: PBHC). The Bank has ten full-service offices located in its market areas consisting of Oswego and Onondaga County and one limited purpose office in Oneida County. Through its subsidiary, Pathfinder Risk Management Company, Inc., the Bank owns a 51% interest in the FitzGibbons Agency, LLC. At December 31, 2021, there were 4,603,184 shares of common stock issued and outstanding, as well as 1,380,283 shares of non-voting common stock issued and outstanding. The Company's common stock trades on the NASDAQ market under the symbol "PBHC."  At December 31, 2021, the Company and subsidiaries had total consolidated assets of $1.28 billion, total deposits of $1.06 billion and shareholders' equity of $110.6 million.

Forward-Looking Statement

Certain statements contained herein are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” or “may.”   This release may contain certain forward-looking statements, which are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact the Company's earnings in future periods. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products, and services.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following additional risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

• demand for our products and services may decline, making it difficult to grow assets and income;
• if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;
• collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
• our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;
• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
• as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;
• a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;
• our cyber security risks are increased as the result of an increase in the number of employees working remotely;
• we rely on fourth party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and
• Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.

The Company disclaims any obligation to revise or update any forward-looking statements contained in this press release to reflect future events or developments.

PATHFINDER BANCORP, INC. FINANCIAL HIGHLIGHTS (Dollars and shares in thousands except per share amounts)
		For the three months								For the twelve months
		ended December 31,								ended December 31,
		(Unaudited)								(Unaudited)
		2021				2020				2021				2020
Condensed Income Statement
Interest and dividend income		$	11,187			$	10,463			$	45,827			$	42,507
Interest expense			1,458				2,550				7,532				10,864
Net interest income			9,729				7,913				38,295				31,643
Provision for loan losses			(1,039	)			812				1,022				4,707
			10,768				7,101				37,273				26,936
Noninterest income excluding net gains on sales of securities, fixed assets, loans and foreclosed real estate			1,328				1,270				5,298				4,859
Net gains on sales of securities, fixed assets, loans and foreclosed real estate			68				276				551				2,255
Gains (losses) on marketable equity securities			10				169				382				(629	)
Noninterest expense			7,191				6,847				27,495				25,080
Income before income taxes			4,983				1,969				16,009				8,341
Provision for income taxes			1,094				29				3,499				1,295
Net income attributable to noncontrolling interest and Pathfinder Bancorp, Inc.		$	3,889			$	1,940			$	12,510			$	7,046
Net income attributable to noncontrolling interest			10				(5	)			103				96
Net income attributable to Pathfinder Bancorp Inc.		$	3,879			$	1,945			$	12,407			$	6,950

	For the Periods Ended
	(Unaudited)
	December 31,				December 31,				December 31,
	2021				2020				2019
Selected Balance Sheet Data
Assets	$	1,285,177			$	1,227,443			$	1,093,807
Earning assets		1,212,139				1,159,778				1,032,817
Total loans		832,459				825,495				781,451
Deposits		1,055,346				995,907				881,893
Borrowed funds		77,098				82,050				93,125
Allowance for loan losses		12,935				12,777				8,669
Subordinated loans		29,563				39,400				15,128
Pathfinder Bancorp, Inc. Shareholders' equity		110,287				97,456				90,434
Asset Quality Ratios
Net loan charge-offs (annualized) to average loans		0.12	%			0.08	%			0.09	%
Allowance for loan losses to period end loans		1.55	%			1.55	%			1.11	%
Allowance for loan losses to nonperforming loans		155.99	%			59.89	%			162.25	%
Nonperforming loans to period end loans		1.00	%			2.58	%			0.67	%
Nonperforming assets to total assets		0.65	%			1.74	%			0.49	%

PATHFINDER BANCORP, INC. FINANCIAL HIGHLIGHTS (Dollars and shares in thousands except per share amounts)
		For the three months								For the twelve months
		ended December 31,								ended December 31,
		(Unaudited)								(Unaudited)
		2021				2020				2021				2020
Key Earnings Ratios
Return on average assets			1.24	%			0.63	%			0.98	%			0.60		%
Return on average common equity			14.38	%			9.83	%			11.91	%			8.92		%
Return on average equity			14.38	%			8.11	%			11.91	%			7.43		%
Net interest margin			3.27	%			2.75	%			3.21	%			2.88		%
Share, Per Share and Ratio Data
Basic weighted average shares outstanding- Voting			4,518				4,537				4,478				4,608
Basic earnings per share- Voting		$	0.64			$	0.33			$	2.07			$	1.17
Basic weighted average shares outstanding- Series A Non-Voting			1,380				-				745				-
Basic earnings per share- Series A Non-Voting		$	0.64				-			$	2.07				-
Diluted weighted average shares outstanding- Voting			4,518				4,537				4,478				4,608
Diluted earnings per share- Voting		$	0.64			$	0.33			$	2.07			$	1.17
Diluted weighted average shares outstanding- Series A Non-Voting			1,380				-				745				-
Diluted earnings per share- Series A Non-Voting		$	0.64				-			$	2.07				-
Cash dividends per share		$	0.07			$	0.06			$	0.28			$	0.24
Book value per common share at December 31, 2021 and 2020										$	18.43			$	17.56
Tangible book value per common share at December 31, 2021 and 2020										$	17.66			$	16.53
Tangible common equity to tangible assets at December 31, 2021 and 2020											8.25	%			6.12		%
Tangible common equity to tangible assets at December 31, 2021 and 2020, adjusted											8.38	%			6.44		%

Non-GAAP Reconciliation
Tangible book value per common share
Total equity		$	110,287			$	97,456
Intangible assets			(4,653	)			(4,669	)
Convertible preferred equity			-				(17,901	)
Common tangible equity		$	105,634			$	74,886
Common shares outstanding			5,983				4,531
Tangible book value per common share		$	17.66			$	16.53
Tangible common equity to tangible assets
Tangible common equity		$	105,634			$	74,886
Tangible assets			1,280,524				1,222,914
Tangible common equity to tangible assets ratio			8.25	%			6.12	%
Tangible common equity to tangible assets, adjusted
Tangible common equity		$	105,634			$	74,886
Tangible assets			1,280,524				1,222,914
Less: Paycheck Protection Program (PPP) loans			(19,338	)			(60,643	)
Total assets excluding PPP loans		$	1,261,186			$	1,162,271
Tangible common equity to tangible assets ratio, excluding PPP loans			8.38	%			6.44	%

* Basic and diluted earnings per share are calculated based upon the two-class method for the three and six months ended September 30, 2021 and 2020.
                
Weighted average shares outstanding do not include unallocated ESOP shares.

                

PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(Dollars and shares in thousands except per share amounts)

The following table sets forth information concerning average interest-earning assets and interest-bearing liabilities and the yields and rates thereon. Interest income and resultant yield information in the table has not been adjusted for tax equivalency. Averages are computed on the daily average balance for each month in the period divided by the number of days in the period. Yields and amounts earned include loan fees. Nonaccrual loans have been included in interest-earning assets for purposes of these calculations.

	Unaudited
	For the three months ended December 31,
	2021										2020
								Average										Average
	Average							Yield /			Average							Yield /
(Dollars in thousands)	Balance				Interest			Cost			Balance				Interest			Cost
Interest-earning assets:
Loans	$	805,421			$	8,930		4.43	%		$	814,990			$	8,537		4.19	%
Taxable investment securities		323,166				2,138		2.65	%			290,398				1,850		2.55	%
Tax-exempt investment securities		26,759				117		1.75	%			12,333				50		1.62	%
Fed funds sold and interest-earning deposits		29,750				2		0.03	%			34,714				26		0.30	%
Total interest-earning assets		1,185,096				11,187		3.78	%			1,152,435				10,463		3.63	%
Noninterest-earning assets:
Other assets		84,608										85,463
Allowance for loan losses		(14,083	)									(12,541	)
Net unrealized gains on available-for-sale securities		535										103
Total assets	$	1,256,156									$	1,225,460
Interest-bearing liabilities:
NOW accounts	$	94,178			$	74		0.31	%		$	80,335			$	50		0.25	%
Money management accounts		15,489				4		0.10	%			15,563				4		0.10	%
MMDA accounts		265,570				253		0.38	%			242,793				310		0.51	%
Savings and club accounts		129,441				44		0.14	%			103,607				26		0.10	%
Time deposits		337,054				514		0.61	%			393,350				1,346		1.37	%
Subordinated loans		29,537				415		5.62	%			36,098				512		5.67	%
Borrowings		65,596				154		0.94	%			77,776				302		1.55	%
Total interest-bearing liabilities		936,865				1,458		0.62	%			949,522				2,550		1.07	%
Noninterest-bearing liabilities:
Demand deposits		199,254										167,279
Other liabilities		12,146										12,765
Total liabilities		1,148,265										1,129,566
Shareholders' equity		107,891										95,894
Total liabilities & shareholders' equity	$	1,256,156									$	1,225,460
Net interest income					$	9,729									$	7,913
Net interest rate spread								3.16	%									2.56	%
Net interest margin								3.28	%									2.75	%
Ratio of average interest-earning assets to average interest-bearing liabilities								126.50	%									121.37	%

PATHFINDER BANCORP, INC. FINANCIAL HIGHLIGHTS (Dollars and shares in thousands except per share amounts)
		Unaudited For the years ended December 31,
		2021									2020
								Average										Average
		Average						Yield /			Average							Yield /
(Dollars in thousands)		Balance			Interest			Cost			Balance				Interest			Cost
Interest-earning assets:
Loans		$	833,308		$	37,026		4.44	%		$	797,099			$	35,421		4.44	%
Taxable investment securities			313,392			8,576		2.74	%			256,590				6,848		2.67	%
Tax-exempt investment securities			16,191			216		1.33	%			8,992				159		1.77	%
Fed funds sold and
interest-earning deposits			28,765			9		0.03	%			36,366				79		0.22	%
Total interest-earning assets			1,191,656			45,827		3.85	%			1,099,047				42,507		3.87	%
Noninterest-earning assets:
Other assets			82,130									79,024
Allowance for loan losses			(13,992	)								(10,584	)
Net unrealized losses on available-for-sale securities			1,482									(447	)
Total assets		$	1,261,276								$	1,167,040
Interest-bearing liabilities:
NOW accounts		$	93,950		$	286		0.30	%		$	79,338			$	159		0.20	%
Money management accounts			15,916			17		0.11	%			15,482				18		0.12	%
MMDA accounts			245,329			990		0.40	%			211,191				1,381		0.65	%
Savings and club accounts			122,275			159		0.13	%			96,381				97		0.10	%
Time deposits			366,724			3,262		0.89	%			407,910				6,457		1.58	%
Subordinated loans			32,736			1,790		5.47	%			20,421				1,101		5.39	%
Borrowings			79,362			1,028		1.30	%			81,434				1,651		2.03	%
Total interest-bearing liabilities			956,292			7,532		0.79	%			912,157				10,864		1.19	%
Noninterest-bearing liabilities:
Demand deposits			189,434									148,739
Other liabilities			11,419									12,558
Total liabilities			1,157,145									1,073,454
Shareholders' equity			104,131									93,586
Total liabilities & shareholders' equity		$	1,261,276								$	1,167,040
Net interest income					$	38,295									$	31,643
Net interest rate spread								3.06	%									2.68	%
Net interest margin								3.21	%									2.88	%
Ratio of average interest-earning assets
to average interest-bearing liabilities								124.61	%									120.49	%

PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(Dollars and shares in thousands except per share amounts)

Net interest income can also be analyzed in terms of the impact of changing interest rates on interest-earning assets and interest bearing liabilities, and changes in the volume or amount of these assets and liabilities. The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the years indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (change in volume multiplied by prior rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) total increase or decrease. Changes attributable to both rate and volume have been allocated ratably. Tax-exempt securities have not been adjusted for tax equivalency.

	Unaudited											Unaudited
	Three months ended December 31,											Twelve months ended December 31,
	2021 vs. 2020											2021 vs. 2020
	Increase/(Decrease) Due to											Increase/(Decrease) Due to
								Total												Total
								Increase												Increase
(In thousands)	Volume				Rate			(Decrease)				Volume				Rate				(Decrease)
Interest Income:
Loans	$	(602	)		$	995		$	393			$	1,609			$	(4	)		$	1,605
Taxable investment securities		215				73			288				1,550				178				1,728
Tax-exempt investment securities		63				4			67				103				(46	)			57
Interest-earning deposits		(3	)			(21	)		(24	)			(14	)			(56	)			(70	)
Total interest income		(327	)			1,051			724				3,248				72				3,320
Interest Expense:
NOW accounts		10				14			24				33				94				127
Money management accounts		(0	)			0			-				-				(1	)			(1	)
MMDA accounts		154				(211	)		(57	)			198				(589	)			(391	)
Savings and club accounts		7				11			18				30				32				62
Time deposits		(171	)			(661	)		(832	)			(598	)			(2,597	)			(3,195	)
Subordinated loans		(92	)			(5	)		(97	)			673				16				689
Borrowings		(42	)			(106	)		(148	)			(41	)			(582	)			(623	)
Total interest expense		(134	)			(958	)		(1,092	)			295				(3,627	)			(3,332	)
Net change in net interest income	$	(193	)		$	2,009		$	1,816			$	2,953			$	3,699			$	6,652

The above information is preliminary and based on the Company's data available at the time of presentation.

Investor/Media Contacts

Thomas W. Schneider, President, CEO
Walter F. Rusnak, Senior Vice President, CFO
Telephone: (315) 343-0057

FAQ

What was Pathfinder Bancorp's net income for 2021?

Pathfinder Bancorp reported a record net income of $12.4 million for the year 2021.

How did Pathfinder Bancorp perform in Q4 2021?

In Q4 2021, Pathfinder Bancorp achieved net income of $3.9 million, or $0.64 per share.

What was the total revenue for Pathfinder Bancorp in 2021?

The total revenue for Pathfinder Bancorp in 2021 was $44.5 million, up 16.8% from 2020.

What was the nonperforming loan ratio for Pathfinder Bancorp?

As of December 31, 2021, Pathfinder Bancorp's nonperforming loans ratio was 1.00%.

How much did total deposits increase for Pathfinder Bancorp in 2021?

Total deposits increased by 6.0% to $1.06 billion as of December 31, 2021.