SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTER ENDED JUNE 30, 2002
SEC Exchange Act No. 000-23601
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Pathfinder Bancorp, Inc.
------------------------
(Exact name of Company as specified in its charter)
Federal
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(State or jurisdiction of incorporation or organization)
16-1540137
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(I.R.S. Employer Identification Number)
214 W. 1st Street
Oswego, New York 13126
------------------ -----
(Address of principal executive office) (Zip Code)
Company's telephone number, including area code: (315) 343-0057
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Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ______
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: There were 2,605,563 shares
of the Company's common stock outstanding as of August 09, 2002.
PATHFINDER BANCORP, INC.
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income. . . . . . . . . . . . . . 2 - 3
Consolidated Statements of Shareholders' Equity. . . . . . . 4
Consolidated Statements of Cash Flow . . . . . . . . . . . . 5 - 6
Notes to Consolidated Financial Statements . . . . . . . . . 7 - 8
Item 2. Management's Discussion and Analysis of Financial . . . . . . . . 9 - 15
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk . . . . 16 - 18
PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 19 - 20
Item 1. Legal proceedings
Item 2. Change in securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
Item 5. Other information
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PATHFINDER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
June 30, 2002 (unaudited) and December 31, 2001
June 30, December 31,
ASSETS 2002 2001
---------------------------------------------------------- ------------- --------------
Cash and due from banks. . . . . . . . . . . . . . . . . . $ 6,916,217 $ 5,284,917
Interest earning deposits. . . . . . . . . . . . . . . . . 10,260,241 2,160,927
------------- --------------
Total cash and cash equivalents . . . . . . . . . 17,176,458 7,445,844
Investment securities. . . . . . . . . . . . . . . . . . . 50,701,134 53,422,149
Mortgage loans held-for-sale . . . . . . . . . . . . . . . 3,031,081 5,270,999
Loans:
Real estate residential. . . . . . . . . . . . . . . . . 123,443,653 116,101,197
Real estate commercial . . . . . . . . . . . . . . . . . 32,029,605 30,454,798
Consumer . . . . . . . . . . . . . . . . . . . . . . . . 2,890,272 3,353,133
Commercial . . . . . . . . . . . . . . . . . . . . . . . 14,755,683 14,357,635
------------- --------------
Total loans. . . . . . . . . . . . . . . . . . . . . . . 173,119,213 164,266,763
Less: Allowance for loan losses. . . . . . . . . . . . . 2,166,615 1,679,215
------------- --------------
Loans receivable, net. . . . . . . . . . . . . . . . . 170,952,598 162,587,548
Premises and equipment, net. . . . . . . . . . . . . . . . 5,174,112 4,929,433
Accrued interest receivable. . . . . . . . . . . . . . . . 1,215,752 1,465,347
Other real estate. . . . . . . . . . . . . . . . . . . . . 439,090 632,465
Intangible assets, net . . . . . . . . . . . . . . . . . . 2,183,976 2,341,854
Other assets . . . . . . . . . . . . . . . . . . . . . . . 7,091,941 6,270,671
------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . $257,966,142 $ 244,366,310
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------
Deposits:
Interest bearing . . . . . . . . . . . . . . . . . . . . $163,906,124 $ 156,553,658
Non-interest bearing . . . . . . . . . . . . . . . . . . 13,440,320 13,035,489
------------- --------------
Total deposits . . . . . . . . . . . . . . . . . . . . 177,346,444 169,589,147
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . 49,440,500 49,440,500
Company obligated mandatorily redeemable preferred
securities of subsidiary, Pathfinder Statutory Trust I,
holding solely junior subordinated debentures of
the Company . . . . . . . . . . . . . . . . . . . . . . 5,000,000 -
Other liabilities. . . . . . . . . . . . . . . . . . . . . 3,199,344 3,151,914
------------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . . 234,986,288 222,181,561
Shareholders' equity:
Preferred stock, authorized shares 1,000,000;
no shares issued or outstanding . . . . . . . . . . . . - -
Common stock, par value $.01 per share; authorized
10,000,000 shares; issued 2,902,436 shares; and
2,605,563 and 2,600,995 shares outstanding for
2001 and 2002, respectively.. . . . . . . . . . . . . . 29,024 28,942
Additional paid in capital . . . . . . . . . . . . . . . 7,007,109 6,917,817
Retained earnings. . . . . . . . . . . . . . . . . . . . 19,690,594 19,015,639
Accumulated other comprehensive income . . . . . . . . . 134,427 80,652
Unearned ESOP shares . . . . . . . . . . . . . . . . . . (147,306) (173,142)
Treasury stock, at cost;
296,873 and 293,225 shares, respectively . . . . . . . (3,733,994) (3,685,159)
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Total shareholders' equity . . . . . . . . . . . . . . . 22,979,854 22,184,749
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Total liabilities and shareholders' equity . . . . . . . $257,966,142 $ 244,366,310
============= ==============
The accompanying notes are an integral part of the consolidated financial
statements
1
PATHFINDER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
June 30, 2002 June 30, 2001
-------------- --------------
INTEREST INCOME:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,244,249 $ 3,092,902
Interest and dividends on investments:
U.S. Treasury and agencies. . . . . . . . . . . . . . . . 26,465 116,746
State and political subdivisions. . . . . . . . . . . . . 78,260 85,985
Corporate obligations . . . . . . . . . . . . . . . . . . 310,436 382,704
Marketable equity securities. . . . . . . . . . . . . . . 37,740 40,217
Mortgage-backed securities. . . . . . . . . . . . . . . . 204,900 333,714
Federal funds sold and interest-bearing deposits. . . . . 11,288 22,896
-------------- --------------
Total interest income. . . . . . . . . . . . . . . . . 3,913,338 4,075,164
INTEREST EXPENSE:
Interest on deposits. . . . . . . . . . . . . . . . . . . . 1,170,377 1,597,480
Interest on borrowed funds. . . . . . . . . . . . . . . . . 558,570 583,702
-------------- --------------
Total interest expense . . . . . . . . . . . . . . . . 1,728,947 2,181,182
-------------- --------------
Net interest income . . . . . . . . . . . . . . . . 2,184,391 1,893,982
Provision for loan losses . . . . . . . . . . . . . . . . . 907,348 419,028
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Net interest income after provision for loan losses 1,277,043 1,474,954
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OTHER INCOME:
Service charges on deposit accounts . . . . . . . . . . . . 155,004 139,127
Loan servicing fees . . . . . . . . . . . . . . . . . . . . 78,419 36,093
Increase in value of bank owned life insurance. . . . . . . 45,582 41,851
Net gain on securities, loans and other real estate . . . . 712,197 422,029
Other charges, commissions & fees . . . . . . . . . . . . . 120,260 108,763
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Total other income. . . . . . . . . . . . . . . . . 1,111,462 747,863
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OTHER EXPENSES:
Salaries and employee benefits. . . . . . . . . . . . . . . 950,666 727,648
Building occupancy. . . . . . . . . . . . . . . . . . . . . 189,495 196,522
Data processing expenses. . . . . . . . . . . . . . . . . . 183,382 186,606
Professional and other services . . . . . . . . . . . . . . 224,643 186,006
Amortization of intangible asset. . . . . . . . . . . . . . 78,939 78,939
Other expenses. . . . . . . . . . . . . . . . . . . . . . . 341,515 350,805
Total other expenses. . . . . . . . . . . . . . . . 1,968,640 1,726,526
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Income before income taxes. . . . . . . . . . . . . . . . . . 419,865 496,291
Provision for income taxes. . . . . . . . . . . . . . . . . . 108,047 140,286
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NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . $ 311,818 $ 356,005
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NET INCOME PER SHARE - BASIC . . . . . . . . . . . . . . $ 0.12 $ 0.14
============== ==============
NET INCOME PER SHARE - DILUTED . . . . . . . . . . . . . $ 0.12 $ 0.14
============== ==============
2
PATHFINDER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the six months ended June 30, 2002 and June 30, 2001
(unaudited)
June 30, June 30,
2002 2001
---------- ----------
INTEREST INCOME:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,501,611 $6,226,222
Interest and dividends on investments:
U.S. Treasury and agencies. . . . . . . . . . . . . . . . 64,514 238,340
State and political subdivisions. . . . . . . . . . . . . 157,463 172,576
Corporate obligations . . . . . . . . . . . . . . . . . . 627,749 791,813
Marketable equity securities. . . . . . . . . . . . . . . 61,571 83,116
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . 474,373 696,286
Federal funds sold and interest-bearing deposits. . . . . 15,140 24,271
---------- ----------
Total interest income . . . . . . . . . . . . . . . . . 7,902,421 8,232,624
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INTEREST EXPENSE:
Interest on deposits. . . . . . . . . . . . . . . . . . . . 2,390,706 3,215,268
Interest on borrowed funds. . . . . . . . . . . . . . . . . 1,128,463 1,274,671
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Total interest expense. . . . . . . . . . . . . . . . . . 3,519,169 4,489,939
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Net interest income . . . . . . . . . . . . . . . . 4,383,252 3,742,685
Provision for loan losses . . . . . . . . . . . . . . . . . 1,069,581 540,211
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Net interest income after provision for loan losses 3,313,671 3,202,474
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OTHER INCOME:
Service charges on deposit accounts . . . . . . . . . . . . 296,708 255,866
Loan servicing fees . . . . . . . . . . . . . . . . . . . . 123,741 72,217
Increase in value of Company owned life insurance . . . . . 120,164 81,173
Net gain on securities, loans and other real estate . . . . 745,594 491,335
Other charges, commission and fees. . . . . . . . . . . . . 225,130 210,781
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Total other income. . . . . . . . . . . . . . . . . . . . 1,511,337 1,111,372
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OTHER EXPENSES:
Salaries and employee benefits. . . . . . . . . . . . . . . 1,734,542 1,487,210
Building occupancy. . . . . . . . . . . . . . . . . . . . . 369,234 427,111
Data processing expenses. . . . . . . . . . . . . . . . . . 401,394 374,156
Professional and other services . . . . . . . . . . . . . . 405,677 355,524
Amortization of intangible asset. . . . . . . . . . . . . . 157,878 157,878
Other expenses. . . . . . . . . . . . . . . . . . . . . . . 664,267 635,317
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Total other expenses. . . . . . . . . . . . . . . . . . . 3,732,992 3,437,196
---------- ----------
Income before income taxes. . . . . . . . . . . . . . . . . . 1,092,016 876,650
Provision for income taxes. . . . . . . . . . . . . . . . . . 277,801 254,020
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NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . $ 814,215 $ 622,630
========== ==========
NET INCOME PER SHARE - BASIC. . . . . . . . . . . . . . . . . $ 0.32 $ 0.24
========== ==========
NET INCOME PER SHARE - DILUTED. . . . . . . . . . . . . . . . $ 0.31 $ 0.24
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements
3
PATHFINDER BANCORP, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2002
(unaudited)
Additional
Common Stock Issued Paid in Retained
Shares Amount Capital Earnings
-------------------- -------- ---------- -----------
BALANCE, DECEMBER 31, 2001. . . . . 2,894,220 $ 28,942 $6,917,817 $19,015,639
Comprehensive income:
Net income. . . . . . . . . . . . 814,215
ESOP shares earned. . . . . . . . . 32,741
Stock option exercised. . . . . . . 8,216 82 56,551
Treasury stock purchased
Dividends declared ($.14 per share) (139,260)
--------------------
BALANCE, JUNE 30, 2002. . . . . . . 2,902,436 $ 29,024 $7,007,109 $19,690,594
==================== ======== ========== ===========
Accumulated
Other Com- Unearned
Comprehensive prehensive ESOP Treasury
Income(Loss) Income Shares Stock Total
--------------- ------------ ---------- ------------ -----------
BALANCE, DECEMBER 31, 2001. . . . . . . . . $ - $ 80,652 $(173,142) $(3,685,159) $22,184,749
Comprehensive income:
Net income. . . . . . . . . . . . . . . . 814,215 814,215
Other comprehensive income, net of tax
Unrealized gains on securities:
Unrealized holding gains arising
during period. . . . . . . . . . . . 706,646
Reclassification adjustment for gains
included in net income . . . . . . . (617,320)
---------------
Other comprehensive income, before tax. . 89,326
Income tax provision. . . . . . . . . . . (35,551)
---------------
Other comprehensive income, net of tax. . 53,775 53,775 53,775
---------------
Comprehensive income: . . . . . . . . . . . 867,990
===============
ESOP shares earned. . . . . . . . . . . . . 25,836 58,577
Stock option exercised. . . . . . . . . . . 56,633
Treasury stock purchased. . . . . . . . . . (48,835) (48,835)
Dividends declared ($.14 per share) . . . . (139,260)
---------------
BALANCE, JUNE 30, 2002. . . . . . . . . . . $ - $ 134,427 $(147,306) $(3,733,994) $22,979,854
=============== ============ ========== ============ ===========
The accompanying notes are an integral part of the consolidated financial
statements.
4
PATHFINDER BANCORP, INC.
STATEMENTS OF CASH FLOWS
June 30, 2002 and June 30, 2001
(unaudited)
June 30, June 30,
2002 2001
------------- ------------
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 814,215 $ 622,630
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . . . 1,069,581 540,211
ESOP and other stock-based compensation earned. . . . . . . . . 58,577 33,946
Deferred income tax provision . . . . . . . . . . . . . . . . . - 129,522
Proceeds from sale of loans . . . . . . . . . . . . . . . . . . 13,202,434 8,038,416
Originations of loans held-for-sale . . . . . . . . . . . . . . (10,945,433) (9,010,664)
Realized loss/(gain) on:
Sale of real estate acquired through foreclosure. . . . . . . 1,788 30,733
Sale of loans . . . . . . . . . . . . . . . . . . . . . . . . (17,083) (25,351)
Available-for-sale investment securities. . . . . . . . . . . (617,320) (444,974)
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . 235,698 237,604
Amortization of intangibles . . . . . . . . . . . . . . . . . . 157,878 157,878
Increase in surrender value of bank owned life insurance. . . . (120,164) (81,173)
Net accretion of premiums and discounts
on investment securities . . . . . . . . . . . . . . . . . . (11,470) (8,524)
Decrease in interest receivable . . . . . . . . . . . . . . . . 249,595 103,215
Net change in other assets and liabilities. . . . . . . . . . . (689,696) (888,411)
------------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES. . . . . . . 3,388,600 (564,942)
------------- ------------
INVESTING ACTIVITIES
Purchase of investment securities available-for-sale. . . . . . (3,299,497) (1,043,834)
Proceeds from maturities and principle reductions of
investment securities available-for-sale. . . . . . . . . . 4,936,777 2,936,605
Proceeds from sale of:
Real estate acquired through foreclosure. . . . . . . . . . 295,946 103,551
Available-for-sale investment securities. . . . . . . . . . 1,801,851 2,696,347
Net increase in loans . . . . . . . . . . . . . . . . . . . . . (9,538,990) (1,734,476)
Purchase of premises and equipment. . . . . . . . . . . . . . . (480,377) (156,270)
------------- ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES . . . . . . (6,284,290) 2,801,923
------------- ------------
FINANCING ACTIVITIES
Net increase in demand, NOW, savings, money market
and escrow deposit accounts. . . . . . . . . . . . . . . . 7,536,973 5,147,475
Net increase in time deposits . . . . . . . . . . . . . . . . . 220,324 2,668,968
Net repayments from borrowings. . . . . . . . . . . . . . . . . - (5,154,000)
Proceeds from trust preferred obligation. . . . . . . . . . . . 5,000,000 -
Proceeds from exercise of stock options . . . . . . . . . . . . 56,633 -
Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . . (138,791) (313,125)
Treasury stock purchased. . . . . . . . . . . . . . . . . . . . (48,835) -
------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . 12,626,304 2,349,318
------------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . 9,730,614 4,586,299
Cash and cash equivalents at beginning of period . . . . . . . . 7,445,844 4,155,343
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD. . . . . . . . . . . $ 17,176,458 $ 8,741,642
============= ============
5
CASH PAID DURING THE PERIOD FOR:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,520,084 $ 4,580,201
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . 625,000 359,618
NON-CASH INVESTING ACTIVITY:
Transfer of loans to other real estate. . . . . . . . . . . . . $ 104,359 $ 293,121
(Increase)/decrease in unrealized gains and losses on available
for sale investment securities. . . . . . . . . . . . . . . (89,326) 34,511
NON-CASH FINANCING ACTIVITY:
Dividends declared and unpaid . . . . . . . . . . . . . . . . . $ 71,713 $ 156,090
The accompanying notes are an integral part of the consolidated financial
statements
6
PATHFINDER BANCORP, INC.
Notes to Financial Statements
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements were prepared in accordance
with the instructions for Form 10-Q and Regulation S-X and, therefore, do
not include information for footnotes necessary for a complete presentation
of financial position, results of operations, and cash flows in conformity
with generally accepted accounting principles. The following material under
the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations" is written with the presumption that the users
of the interim financial statements have read, or have access to, the
Company's latest audited financial statements and notes thereto, together
with Management's Discussion and Analysis of Financial Condition and
Results of Operations as of December 31, 2001 and for the three year period
then ended. Therefore, only material changes in financial condition and
results of operations are discussed in the remainder of part 1.
All adjustments (consisting of only normal recurring accruals) which, in
the opinion of management, are necessary for a fair presentation of the
financial statements have been included in the results of operations for
the three months and six months ended June 30, 2002 and 2001. Operating
results for the three months and six months ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2002.
(2) EARNINGS PER SHARE
Basic earnings per share have been computed based upon net income for the
three months and six months ended June 30, using 2,576,769 and 2,574,159
weighted average common shares outstanding for 2002 and 2,565,347 and
2,564,165 for 2001. Diluted earnings per share for the three months and six
months ended June 30, 2002 and 2001, has been computed using 2,626,890,
2,624,452, 2588,239 and 2,574,863 shares, respectively. Dilutive earnings
per share gives effect to weighted average shares which would be
outstanding assuming the exercise of issued stock options using the
treasury stock method.
(3) RECLASSIFICATIONS
Certain prior period information has been reclassified to conform to the
current period's presentation. These reclassifications had no affect on net
income as previously reported.
7
(4) DIVIDEND RESTRICTIONS
For the second quarter ending June 30, 2002, the Company's parent,
Pathfinder Bancorp, MHC, waived its right to receive its portion, or
$111,0000, of the cash dividends declared on June 18, 2002. The Company
maintains a restricted capital account with a $443,000 balance,
representing Pathfinder Bancorp, MHC's portion of dividends waived as of
June 30, 2002.
(5) TRUST PREFERRED POOL TRANSACTION
On June 26, 2002, the Company formed a wholly owned subsidiary, Pathfinder
Statutory Trust I, a Connecticut business trust. The trust issued
$5,000,000 of 30 year floating rate Company-obligated pooled capital
securities of Pathfinder Statutory Trust I. The Company borrowed the
proceeds of the capital securities from its subsidiary by issuing floating
rate junior subordinated deferrable interest debentures having
substantially similar terms. The capital securities mature in 2032 and are
treated as Tier 1 capital by the Federal Deposit Insurance Company and the
Office of Thrift Supervision. The capital securities of the trust are a
pooled trust preferred fund of Preferred Term Securities VI, Ltd, and are
tied to the 3 month LIBOR plus 3.45%, with a five year call provision. All
of these securities are guaranteed by the Company.
(6) BRANCH ACQUISITION
On May 14, 2002, the Company's subsidiary, Pathfinder Bank, signed an
agreement with Cayuga Bank to purchase their Lacona branch location in
Northern Oswego County. The transaction includes approximately $27.3
million in deposits, $2.4 million in loans and the facility and equipment.
The transaction is subject to regulatory approval with an anticipated
closing at the end of the third quarter.
(7) NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." Under this pronouncement, goodwill will no longer be
amortized, but is subject to annual impairment tests in accordance with the
statements. Goodwill arising from branch acquisitions continues to be
amortized. As the Company's intangible assets represent goodwill arising
from branch acquisitions, there is no impact on the financial statements
under the current provisions of this pronouncement.
8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
This Quarterly Report contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including, among
other things, changes in economic conditions in the Company's market area,
changes in policies by regulatory agencies, fluctuations in interest rates,
demand for loans in the Company's market areas and competition, that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The Company does not undertake, and specifically declines any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
GENERAL
Throughout the Management's Discussion and Analysis the term, "the Company",
refers to the consolidated entity of Pathfinder Bancorp, Inc., Pathfinder Bank,
Pathfinder REIT Inc., Whispering Oaks Development Corp and Pathfinder Statutory
Trust I. At June 30, 2002, Pathfinder Bancorp, Inc.'s only business was the
100% ownership of Pathfinder Bank and Pathfinder Statutory Trust I. Pathfinder
Bank owns Pathfinder REIT, Inc. and Whispering Oaks Development Corp. At June
30, 2002, 1,583,239 shares, or 60.8%, of the Company's common stock was held by
Pathfinder Bancorp, MHC, the Company's mutual holding company parent and
1,022,324 shares, or 39.2%, was held by the public.
The Company's net income is primarily dependent on its net interest income,
which is the difference between interest income earned on its investments in
mortgage loans, investment securities and other loans, and its cost of funds
consisting of interest paid on deposits and borrowed funds. The Company's net
income also is affected by its provision for loan losses, as well as by the
amount of non interest income, including income from fees and service charges,
net gains and losses on sales of securities, and non interest expense such as
employee compensation and benefits, occupancy and equipment costs, data
processing and income taxes. Earnings of the Company also are affected
significantly by general economic and competitive conditions, particularly
changes in market interest rates, government policies and actions of regulatory
authorities, which events are beyond the control of the Company. In particular,
the general level of market rates tends to be highly cyclical.
The following discussion reviews the financial condition at June 30, 2002 and
the results of operations of the Company for the three months and six months
ended June 30, 2002 and June 30, 2001.
9
Financial Condition
Assets
------
Total assets increased approximately $13.6 million, or 5.6%, to $258.0 million
at June 30, 2002 from $244.4 million at December 31, 2001. The increase in total
assets is primarily attributable to a $9.7 million increase in cash and cash
equivalents and an $8.4 million increase in net loans receivable, partially
offset by decreases of $2.7 million in investment securities and $2.2 million in
mortgage loans held-for-sale. The increase in cash and cash equivalents was
primarily due to the $5.0 million in cash proceeds received from the Company's
participation in a pooled trust preferred issuance and the sale of $3.2 million
in 30 year fixed rate mortgages. The increase in net loans receivable is
primarily due to a $7.3 million increase in residential real estate loans, a
$2.0 million increase in commercial real estate and commercial loans, partially
offset by a $463,000 decrease in consumer loans. The increase in loans was
principally funded by an increase of $7.8 million in deposits and proceeds from
amortization, maturities, and sales of investment securities.
Liabilities
-----------
Total liabilities increased by $12.8 million, or 5.8%, to $235.0 million at June
30, 2002 from $222.2 million at December 31, 2001. The increase is primarily
attributable to a $7.8 million, or 4.6%, increase in deposits, and the issuance
of $5.0 million of subordinated debt securities, issued in connection with the
Company's participation in a trust preferred pooled transaction. The
subordinated debt securities and corresponding trust preferred securities have a
term of thirty years and have an adjustable rate of interest indexed to the
three-month LIBOR plus 3.45%. Under applicable regulatory guidelines, the debt
instrument from the sale of trust preferred securities qualifies as capital for
regulatory purposes. The increase in deposits was primarily comprised of a $7.4
million increase in interest bearing deposits. The increase in interest bearing
deposits was comprised of a $7.5 million increase in money management accounts,
a $1.5 million increase in savings accounts and a $220,000 increase in time
deposits, partially offset by a $1.4 million decrease in NOW accounts. The
increase in deposit accounts is primarily due to the Company's active efforts in
sales training and relationship building during a period when consumers are
seeking the safety and fixed returns of bank deposits.
Liquidity and Capital Resources
----------------------------------
Shareholders' equity increased $795,000, or 3.6%, to $23.0 million at June 30,
2002 from $22.2 million at December 31, 2001. The increase in shareholders'
equity is primarily the result of a $675,000 increase in retained earnings. The
increase in retained earnings is a result of net income of $814,000 offset by
dividends declared of $139,000 during the first six months of 2002.
The Company's primary sources of funds are deposits, amortization and prepayment
of loans and maturities of investment securities and other short-term
investments, earnings and funds provided from operations and borrowings. While
scheduled principal repayments on loans are a relatively predictable source of
10
funds, deposit flows and loan prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Company manages the
pricing of deposits to maintain a desired deposit balance. In addition, the
Company invests excess funds in short-term interest-bearing instruments and
other assets, which provide liquidity to meet lending requirements. For
additional information about cash flows from the Company's operating, financing,
and investing activities, see Statements of Cash Flows included in the Financial
Statements. The Company adjusts its liquidity levels in order to meet funding
needs of deposit outflows, payment of real estate taxes on mortgage loans and
loan commitments. The Company also adjusts liquidity as appropriate to meet its
assets and liability management objectives.
Results of Operations
-----------------------
The Company recorded net income of approximately $312,000 for the three months
ended June 30, 2002, as compared to $356,000 for the same period during 2001.
The decrease in net income of $44,000, or 12.4%, for the three months ended June
30, 2002, was primarily the result of loan charge offs totaling $560,000, and
the establishment of additional reserves of $347,000. These actions were taken
to recognize the deterioration in the asset quality of two commercial loan
relationships totaling $1.5 million. Additionally, operating expenses increased
$242,000, or 14.0%, offset by an increase in net interest income of $290,000, or
15.3%, an increase in other income of $364,000, or 48.6% and a $32,000, or
23.0%, decrease in the provision for income taxes.
For the six months ended June 30, 2002, the Company recorded net income of
$814,000 as compared to $623,000 for the same period in the prior year. The
increase in net income of $192,000, or 30.8%, for the six months ended June 30,
2002, was primarily the result of an increase in net interest income of
$641,000, or 17.1%, an increase in other income of $400,000, or 36.0%, offset by
an increase in other operating expenses of $296,000, or 8.6%.
Annualized return on average assets and return on average shareholders' equity
were 0.50% and 5.38%, respectively, for the three months ended June 30, 2002
compared to 0.61% and 7.09% for the second quarter of 2001. Earnings per share -
basic was $.12 for the second quarter of 2002 compared to $.14 for the same
period in 2001. For the six months ended June 30, 2002, the same performance
measurements were 0.66% and 7.08%, as compared to 0.54% and 6.27% for the same
period in the prior year. Earnings per share-basic for the six months ended
June 30, 2002 was $.32 compared to $.24 for the same period in 2001.
Interest Income
----------------
Three month period
Interest income, on a tax equivalent basis, totaled $3.9 million for the quarter
ended June 30, 2002, as compared to $4.1 million for the quarter ended June 30,
2001, a decrease of $158,000, or 3.9%. Interest income was affected by a
decrease in the tax equivalent yield on average interest-earning assets to 6.81%
from 7.59% in the prior period, offset by an increase in the average balance of
interest-earning assets to $231.6 million for the three months ended June 30,
11
2002 from $215.9 million in the prior year period. The decrease in the tax
equivalent yield was a result of a lower interest rate environment during the
second quarter of 2002 as compared to the same quarter in 2001. The yield
decrease was mitigated by increased originations of residential and commercial
real estate loans.
Interest income on loans receivable increased $151,000, or 4.9%, to $3.2 million
for the three months ended June 30, 2002 as compared to the same period in the
prior year. The increase in interest income on loans resulted from an increase
in the average balance of loans receivable of $25.9 million, or 17.1% to $177.6
million at June 30, 2002, from $151.7 million at June 30, 2001, partially offset
by a decrease in the average yield on loans receivable to 7.30% from 8.14%.
Interest income on the mortgage-backed securities portfolio decreased by
$129,000, or 38.6%, to $205,000 for the three months ended June 30, 2002, from
$334,000 for the three months ended June 30, 2001. The decrease in interest
income on mortgage-backed securities resulted generally from a reduction in the
average balance on mortgage-backed securities of $5.8 million and a decrease in
the average yield on mortgage-backed securities to 5.35% from 6.29%.
Interest income on investment securities, on a tax equivalent basis, decreased
$172,000, or 26.4%, for the three months ended June 30, 2002 to $480,000 from
$652,000 for the same period in 2001. The decrease resulted primarily from a
decrease in the average balance of investment securities, of $5.4 million,
combined with a decrease in the tax equivalent yield of investment securities to
5.48% from 6.45%. The decrease in the average balance of investment securities
resulted from the proceeds from calls and maturities of investments primarily
being utilized to fund the Company's loan portfolio growth.
Six Month Period
Interest income, on a tax equivalent basis, totaled $8.0 million for the six
months ended June 30, 2002, as compared to $8.3 million for the same period in
2001, a decrease of $369,000, or 4.4%. The decrease resulted primarily from a
decrease in the tax-equivalent yield on interest-earning assets to 6.95% from
7.74%, partially offset by an increase in the average balance of
interest-earning assets of $13.8 million, or 6.4%, to $228.9 million from $215.0
million.
For the six months ended June 30, 2002, interest income on loans receivable
increased $275,000, or 4.4%, as compared to the same period in the prior year.
Average loans receivable increased $24.0 million while the yield on average
loans receivable decreased to 7.41% from 8.22%.
For the six months ended June 30, 2002 and 2001, interest income on
mortgage-backed securities was $474,000 and $696,000, respectively, a decrease
of $222,000, or 31.9%. The decrease resulted primarily from a decrease in the
average balance of mortgage-backed securities of $5.3 million, or 24.8%,
combined with a decrease in the average yield on mortgage-backed securities to
5.88% from 6.48%. The decrease in the average balance of mortgage backed
securities reflects the increase in prepayments experienced during the first six
months of 2002 in response to the declining interest rate environment. The
proceeds were utilized to fund the Company's loan growth.
12
For the six months ended June 30, 2002, tax equivalent interest income on
investment securities decreased $419,000, or 30.3%, to $1.0 million compared to
$1.4 million for the same period in 2001. The decrease resulted primarily from
a decrease in the average balance of investment securities of $5.8 million and a
decrease in the tax equivalent yield on investment securities to 5.49% from
6.77%.
Interest Expense
-----------------
Three Month Period
Interest expense for the quarter ended June 30, 2002 decreased by approximately
$452,000, or 20.7%, to $1.7 million from $2.2 million when compared to the same
quarter for 2001. The decrease in interest expense for the period was
principally the result of the decrease in the average cost of interest bearing
deposits to 2.90% from 4.09% and the decrease in the average cost of borrowed
funds to 4.52% from 5.47%. These decreases were partially offset by an increase
of $5.3 million in the average balance of interest bearing deposits and a $6.7
million increase in the average balance of borrowed funds.
Six Month Period
For the six months ended June 30, 2002, interest expense decreased $971,000, or
21.6%, when compared to the first six months of 2000. The decrease in interest
expense for the period was the result of a decrease in the average cost of
interest bearing liabilities to 3.35% from 4.51%, offset by an increase in the
average balance of interest bearing liabilities of $11.1 million.
Net Interest Income
---------------------
Net interest income increased $295,000, or 15.4%, to $2.2 million, on a tax
equivalent basis, for the quarter ended June 30, 2002, when compared to the same
period in the prior year.
For the six months ended June 30, 2002, net interest income increased $602,000,
or 15.7%, when compared to the same period in the prior year.
Net interest margin for the quarter ended June 30, 2002 increased to 3.82% from
3.55% when compared to the same period in the prior year. For the six months
ended June 30, 2002, net interest margin increased to 3.88% from 3.57%. The
increase in the net interest margin is the result of an increase in net interest
income, on a tax equivalent basis, partially offset by the increase in the
average balance of interest earning assets for the periods presented.
13
Provision for Loan Losses
----------------------------
The Company maintains an allowance for loan losses based upon a quarterly
evaluation of known and inherent risks in the loan portfolio, which includes a
review of the balances and composition of the loan portfolio as well as
analyzing the level of delinquencies in each segment of the loan portfolio.
Loan loss reserves are based upon a methodology that uses loss factors applied
to loan balances and reflects actual loss experience, delinquency trends, and
current economic conditions, as well as standards applied by the Federal Deposit
Insurance Corporation. The Company established a provision for loan losses for
the three months ended June 30, 2002 of $907,000, as compared to a provision of
$419,000 for the three months ended June 30, 2001. For the six months ended
June 30, 2002, the provision for loan losses was $1.1 million as compared to
$540,000 for the same period in 2001. The increase in provision for loan losses
is attributable to loan charge offs totaling $560,000 and the establishment of
additional reserves of $347,000. These actions were taken to recognize the
deterioration in the asset quality of two commercial loans relationships
totaling $1.5 million, as well as an increase in the loan receivable balance and
an increase in delinquencies in the loan portfolio. The Company's ratios of
allowance for loan losses to total loans receivable and to non-performing loans
at June 30, 2002 were 1.25% and 61.15%, respectively, as compared to 1.01% and
81.58% at June 30, 2001.
Non-interest Income
--------------------
The Company's non-interest income is principally comprised of fees on deposit
accounts and transactions, loan servicing, commissions, and net securities gains
and losses. Non-interest income, net of gains and losses from the sale of
securities, loans, and other real estate, increased $73,000, or 22.5%, for the
quarter ended June 30, 2002, as compared to the same period in the prior year.
The increase in non-interest income is primarily attributable to a $16,000
increase in service charges on deposit accounts, a $42,000 increase in loan
servicing fees, and an $11,000 increase in other charges, commissions and fees.
Gains and losses on the sale of securities, loans and other real estate
increased $290,000 for the quarter ended June 30, 2002 compared to the same
period in the prior year. This increase was primarily the result of a gain of
$573,000 from the sale of the Company's holdings in an equity security.
For the six months ended June 30, 2002, non-interest income increased $400,000,
or 36.0%, compared to the same period in 2001. Non-interest income, net of
gains and losses from the sale of securities, loans and other real estate,
increased $146,000, or 23.5%, for the six months ended June 30, 2002 as compared
to June 30, 2001. Gains and losses on the sale of securities, loans and other
real estate increased $254,000 for the period ending June 30, 2002 as compared
to the same period in 2001.
Non-interest Expense
---------------------
Non-interest expense increased $242,000, or 14.0%, to $2.0 million for the
quarter ended June 30, 2002, when compared to the same period in the prior year.
The increase in operating expense was due to a $223,000, or 30.6%, increase in
salary expenses, and a $39,000, or 20.8%, increase in professional and other
services. The increase in salary expense was primarily the result of hiring an
in-house legal counsel and staff and a senior commercial loan officer. It is
anticipated that the addition of an in-house counsel will result in a reduction
of legal expenses and provide additional revenue generating opportunities for
14
the Company in the future. These increases were partially offset by decreases
in building occupancy, data processing and other expenses of $7,000, $3,000 and
$9,000, respectively.
For the six months ending June 30, 2002, operating expenses increased $296,000,
or 8.6%, to $3.7 million from $3.4 million for the same period in 2001. The
increase in operating expenses was the result of a $247,000, or 16.6%, increase
in salary expenses, a $27,000, or 7.3%, increase in data processing expenses, a
$50,000, or 14.1%, increase in professional services and a $29,000, or 4.6%,
increase in other operating expenses. These expenses were offset by a reduction
of $58,000, or 13.6%, in building occupancy charges.
Income Taxes
-------------
Income taxes decreased $32,000 for the quarter ended June 30, 2002 as compared
to the same period in the prior year. This increase was attributable to a
$76,000 decrease in the Company's pre-tax income.
For the six months ended June 30, 2002, income taxes increased $24,000, or 9.4%,
as compared to the six months ended June 30, 2001.
15
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's most significant form of market risk is interest rate risk, as the
majority of the Company's assets and liabilities are sensitive to changes in
interest rates. The Company's mortgage loan portfolio, consisting primarily of
loans on residential real property located in Oswego County, is subject to risks
associated with the local economy. The Company's interest rate risk management
program focuses primarily on evaluating and managing the composition of the
Company's assets and liabilities in the context of various interest rate
scenarios. Factors beyond management's control, such as market interest rates
and competition, also have an impact on interest income and interest expense.
The extent to which such assets and liabilities are "interest rate sensitive"
can be measured by an institution's interest rate sensitivity "gap". An asset
or liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets maturing or repricing within a specific time period and
that amount of interest-bearing liabilities maturing or repricing within that
time period. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities. A
gap is considered negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets. During a
period of rising interest rates, a negative gap would tend to adversely affect
net interest income while a positive gap would tend to positively affect net
interest income. Conversely, during a period of falling interest rates, a
negative gap would tend to positively affect net interest income while a
positive gap would tend to adversely affect net interest income.
The Company does not generally maintain in its portfolio fixed interest rate
loans with terms exceeding 20 years. The Company manages interest rate and
credit risk associated on the mortgage loans held for sale and outstanding loan
commitments through utilization of forward sale commitments of mortgage-backed
securities for the purpose of passing along these risks to acceptable third
parties. Management generally enters into forward sale commitments to minimize
the exposure to longer term fixed rate mortgages in mortgage loans held for sale
and mortgage commitments where interest rate locks have been granted. The fair
value of forward sale commitments was not material at June 30, 2002. To manage
interest rate risk within the portfolio, ARM loans are originated with terms
that provide that the interest rate on such loans cannot adjust below the
initial rate. Generally, the Company tends to fund longer-term loans and
mortgage-backed securities with shorter-term time deposits, repurchase
agreements, and advances. The impact of this asset/liability mix creates an
inherent risk to earnings in a rising interest rate environment. In a rising
interest rate environment, the Company's cost of shorter-term deposits may rise
faster than its earnings on longer-term loans and investments. Additionally,
the prepayment of principal on real estate loans and mortgage-backed securities
tends to decrease as rates rise, providing less available funds to invest in the
higher rate environment. Conversely, as interest rates decrease, the prepayment
of principal on real-estate loans and mortgage-backed securities tends to
increase, causing the Company to invest funds in a lower rate environment. The
potential impact on earnings from this mismatch is mitigated to a large extent
by the size and stability of the Company's savings accounts. Savings accounts
16
have traditionally provided a source of relatively low cost funding that have
demonstrated historically a low sensitivity to interest rate changes. The
Company generally matches a percentage of these, which are deemed core, against
longer-term loans and investments. In addition, the Company has sought to extend
the terms of its time deposits. In this regard, the Company has, on occasion,
offered certificates of deposits with three and four year terms which allow
depositors to make a one-time election, at any time during the term of the
certificate of deposit, to adjust the rate of the certificate of deposit to the
then prevailing rate for a certificate of deposit with the same term. The
Company has further sought to reduce the term of a portion of its rate sensitive
assets by originating one year ARM loans, three year/one year and five year/one
year ARM loans (mortgage loans which are fixed rate for the first three or five
years and adjustable annually thereafter), and by maintaining a relatively short
term investment securities (original maturities of three to five years)
portfolio with staggered maturities.
The Company manages its interest rate sensitivity by monitoring (through
simulation and net present value techniques) the impact on its GAP position, net
interest income, and the market value of portfolio equity to changes in interest
rates on its current and forecast mix of assets and liabilities. The Company
has an Asset-Liability Management Committee which is responsible for reviewing
the Company's assets and liability policies, setting prices and terms on
rate-sensitive products, and monitoring and measuring the impact of interest
rate changes on the Company's earnings. The Committee meets monthly on a formal
basis and reports to the Board of Directors on interest rate risks and trends,
as well as liquidity and capital ratios and requirements. The Company does not
have a targeted gap range, rather the Board of Directors has set parameters of
percentage change by which net interest margin and the market value of portfolio
equity are affected by changing interest rates. The Board and management deem
these measures to be a more significant and realistic means of measuring
interest rate risk.
Management anticipates that the Company's net interest margin ratio for the last
quarter of 2002 and the first two quarters of 2003, will decrease as the Company
invests, into the current interest rate environment, the cash proceeds
associated with the trust preferred security issuance and the deposits received
from the future Cayuga Bank branch acquisition.
GAP ANALYSIS. At June 30, 2002, the total interest bearing liabilities maturing
or repricing within one year exceeded total interest-earning assets maturing or
repricing in the same period by $3.4 million, representing a cumulative one-year
gap ratio of a negative 1.31%.
CHANGES IN NET INTEREST INCOME AND NET PORTFOLIO VALUE. The following table
measures the Company's interest rate risk exposure in terms of the percentage
change in its net interest income and net portfolio value as a result of
hypothetical changes in 50 basis point increments in market interest rates. Net
portfolio value (also referred to as market value of portfolio equity)
represents the fair value of net assets (determined as the market value of
assets minus the market value of liabilities). The table quantifies the changes
in net interest income and net portfolio value to parallel shifts in the yield
curve. The column "Net Interest Income Percent Change" measures the change to
the next twelve months' projected net interest income, due to parallel shifts in
the yield curve. The column "Net Portfolio Value Percent Change" measures
changes in the current net mark-to-market value of assets and liabilities due to
parallel shifts in the yield curve. The base case assumes June 30, 2002
17
interest rates. The Company uses these percentage changes as a means to measure
interest rate risk exposure and quantifies those changes against guidelines set
by the Board of Directors as part of the Company's Interest Rate Risk policy.
The Company's current interest rate risk exposure is within those guidelines set
forth.
Change in Interest Rates
Increase(Decrease)
Basis Points Net Interest Income Net Portfolio Value
(Rate Shock) Percentage Change Percentage Change
------------------------- -------------------- --------------------
300 . . . . . . . . . . . -8.44% -22.07%
200 . . . . . . . . . . . -5.30% -14.18%
100 . . . . . . . . . . . -2.22% -6.27%
Base Case
(100) . . . . . . . . . . -0.77% -0.43%
(200) . . . . . . . . . . -2.57% -4.26%
(300) . . . . . . . . . . -5.11% -9.90%
The negative percentage change from the base case in the downward interest rate
scenario is the result of deposit product interest rate floors incorporated into
the modeling, causing the assets to continue to reprice downward while the cost
of funds remains relatively stable.
18
PART II - OTHER INFORMATION
-------------------------------
LEGAL PROCEEDINGS
------------------
From time to time, the Company is involved as a plaintiff or defendant in
various legal actions incident to its business. None of these actions
individually or in the aggregate is believed to be material to the financial
condition of the Company
On November 28, 2001, the Company and its Board of Directors were named as
defendants in Jewelcor Management, Inc. ("Jewelcor") v. Pathfinder Bancorp,
----------------------------------------------------------------
Inc., et al. This action was filed in the United States District Court,
---------
Northern District. In its complaint, Jewelcor alleges that the Company's
---
directors breached their fiduciary duties to the Company by failing to consider
-
an offer from Fulton Savings Bank for the sale of the Company. Jewelcor is
seeking damages in excess of $1 million, punitive damages in excess of $10
million and equitable relief. Management and the Board of Directors of the
Company have carefully reviewed Jewelcor's complaint and believes that it is
without merit. The Company has filed a motion to dismiss the complaint. Oral
arguments for the motion to dismiss were heard on April 5, 2002 before the
United States District Court for the Northern District of New York. No decision
on the motion has been rendered at this date.
CHANGES IN SECURITIES
-----------------------
Not applicable
DEFAULTS UPON SENIOR SECURITIES
----------------------------------
Not applicable
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
The Company's Meeting of Shareholders was held on April 24, 2002. The following
are the items voted on and the results of the shareholder voting.
1. The election of Chris C. Gagas, Thomas W. Schneider, Chris Burritt and
Raymond Jung to serve as directors of the Company, each for a term of three
years or until his successor has been elected and qualified.
Name For Withheld
---- --------- --------
Chris C. Gagas 2,350,427 217,510
Thomas W. Schneider 2,350,427 217,510
Chris R. Burritt 2,351,384 216,553
Raymond W. Jung 2,351,384 216,553
19
Set forth below are the names of the other directors of the Bank and their
terms of office.
Name Term Expires
---- --------------
Bruce E. Manwaring 2003
L. William Nelson 2003
George P. Joyce 2003
Steven W. Thomas 2004
Corte J. Spencer 2004
Janette Resnick 2004
2. The ratification of the appointment of Pricewaterhouse Coopers, LLP as
auditors for the fiscal year ending December 31, 2002.
For Against Abstain
--- ------- -------
Number of Votes 2,406,921 161,016 0
OTHER INFORMATION
------------------
On June 18, 2002 the Board of Directors declared a $.07 cash dividend to
shareholders of record as of June 30, 2002, payable on July 15, 2002.
EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
Exhibit 99.1 - Officers' Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
20
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Thomas W. Schneider, Chief Executive Officer and James A. Dowd, Chief Financial
Officer of Pathfinder Bancorp, Inc. (the "Company") each certify in his capacity
as an officer of the Company that he has reviewed the quarterly report on Form
10-Q for the quarter ended June 30, 2002 and that to his knowledge:
(1) the report fully complies with the requirements of Sections 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations.
August 13, 2002 /s/ Thomas W. Schneider
----------------- --------------------------
Date Chief Executive Officer
August 13, 2002 /s/ James A. Dowd
----------------- --------------------
Date Chief Financial Officer
21
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PATHFINDER BANCORP, INC.
------------------------
/s/ Thomas W. Schneider
--------------------------
Date: August 13, 2002 Thomas W. Schneider
----------------- President, Chief Executive Officer
/s/ James A. Dowd
--------------------
Date: August 13, 2002 James A. Dowd
----------------- Vice President, Chief Financial Officer
22