OSWEGO, NY--(Marketwire - July 27, 2007) - Pathfinder Bancorp, Inc., the mid-tier holding
company of Pathfinder Bank (
"While the continuation of a flat to inverted yield curve continues to strain margins and interest rate spreads," stated Thomas W. Schneider, President and CEO, "the decline in 2007 earnings is more directly attributable to costs associated with preparing for and implementing the enhanced internal controls of Section 404 of the Sarbanes Oxley Act, and with the Bank Secrecy Act/Anti-Money Laundering regulations. These increased regulatory burdens, combined with the interest rate environment, have adversely impacted profitability and overcome the positive impacts from deposit and loan growth over the last year."
"Additionally", Schneider further stated, "we have been increasing our provision for loan losses to recognize our increased commercial lending activity and the slow down in the housing markets."
Net interest income for the quarter ended June 30, 2007 increased 2% when compared to the same period during 2006. Interest income increased $405,000, or 10%, offset by increased interest expense of $370,000, or 20%. Net interest rate spread decreased to 2.74% for the second quarter of 2007 from 2.93% for the same period in 2006. Average interest-earning assets increased 5% to $286.6 million for the quarter ended June 30, 2007 as compared to $273.5 million for the same quarter of 2006, and the yield on those assets increased 28 basis points to 6.09% compared to 5.81% for the same period in 2006. The increase in average earning assets is primarily attributable to an $11.3 million increase in the average loan portfolio and a $7.6 million increase in interest earning deposits, offset by a decrease in average investment securities of $5.7 million. Average interest-bearing liabilities increased $8.1 million and the cost of funds increased 47 basis points to 3.35% from 2.88% for the same period in 2006. The increase in the average balance of interest-bearing liabilities resulted primarily from a $19.8 million increase in average deposits, offset by an $11.7 million decrease in borrowed funds.
Provision for loan losses for the quarter ended June 30, 2007 increased to $75,000 from $1,000 for the same period in 2006. The increased provision is reflective of the increased risk inherent with the growing commercial loan portfolio. The Company's ratio of allowance for loan losses to period end loans increased to 0.76% at June 30, 2007 as compared to 0.74% at December 31, 2006. Nonperforming loans to period end loans have increased slightly to 0.61% at June 30, 2007 from 0.57% at December 31, 2006.
Non-interest income, exclusive of gains and losses from the sale of securities, loans and foreclosed real estate, increased to $684,000 for the quarter ended June 31, 2007 compared to $611,000 for the same quarter in the prior year. The increase in non-interest income is primarily attributable to an increase in service charges on deposit accounts, investment services revenue and fees associated with the Bank's Visa Debit card usage.
Net losses from the sale of securities, loans and foreclosed real estate for the quarter ended June 30, 2007 decreased $12,000 when compared to the same quarter of 2006.
Non-interest expense increased $217,000, or 9%, for the quarter ended June 30, 2007 when compared to the same period in the prior year. Professional and other services expense increased $110,000 primarily from consulting expenses associated with the on-going SOX 404 process review, a customer base risk analysis for BSA compliance and a direct mail campaign aimed at attracting new deposit customers. Salaries and employee benefits increased $91,000 primarily from increased commissions paid to mortgage originators and investment services representatives, combined with normal merit based salary increases. Data processing expenses increased $46,000 primarily due to an increase in Internet banking costs, customer check processing and ATM processing charges and maintenance charges. These increases were offset by a $47,000 decrease in other expenses primarily due to a reduction in costs associated with foreclosed real estate properties as the number of properties decreased to 7 from 13 in the comparable quarter of 2006. Additionally, audit and exam and travel and training expenses were lower when compared to the second quarter of 2006.
On March 22, 2007, the Company entered into a trust-preferred issuance for $5.0 million, adjustable quarterly at a 1.65% spread over the 3-month LIBOR. The Company used the proceeds from that issuance to retire its original trust preferred obligation on June 27, 2007, at its first call date. The original obligation was for $5.0 million, adjustable quarterly at a spread of 3.45% over the 3-month LIBOR. The new issuance and retirement of the original trust preferred obligation will result in an approximate pre-tax annual savings of $90,000 to the institution.
Pathfinder Bancorp, Inc. is the mid-tier holding company of Pathfinder Bank, a New York chartered savings bank headquartered in Oswego, New York. The Bank has seven full service offices located in its market area consisting of Oswego County. Financial highlights for Pathfinder Bancorp, Inc. are attached. Presently, the only business conducted by Pathfinder Bancorp, Inc. is the 100% ownership of Pathfinder Bank and Pathfinder Statutory Trust I.
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.
PATHFINDER BANCORP, INC.
FINANCIAL HIGHLIGHTS
(dollars in thousands except per share amounts)
For the three months For the six months
ended June 30, ended June 30,
(Unaudited) (Unaudited)
---------------------- ----------------------
2007 2006 2007 2006
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Condensed Income Statement
Interest and dividend
income $ 4,337 $ 3,932 $ 8,606 $ 7,797
Interest expense 2,223 1,853 4,371 3,601
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Net interest income 2,114 2,079 4,235 4,196
Provision for loan losses 75 1 125 23
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Net interest income
after provision for
loan losses 2,039 2,078 4,110 4,173
Noninterest income 691 606 1,282 1,199
Noninterest expense 2,527 2,310 4,985 4,721
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Income before taxes 203 374 407 651
Provision for income taxes 37 71 76 108
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Net income $ 166 $ 303 $ 331 $ 543
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Key Earnings Ratios
Return on average assets 0.21% 0.40% 0.21% 0.36%
Return on average equity 3.15% 5.85% 3.14% 5.19%
Return on average
tangible equity (a) 3.88% 7.33% 3.87% 6.49%
Net interest margin
(tax equivalent) 2.99% 3.11% 3.00% 3.12%
Share and Per Share Data
Basic weighted average
shares outstanding 2,483,532 2,463,132 2,482,557 2,463,132
Basic earnings per share $ 0.07 $ 0.12 $ 0.13 $ 0.22
Diluted earnings per
share 0.07 0.12 0.13 0.22
Cash dividends per share 0.1025 0.1025 0.205 0.205
Book value per share - - 8.36 8.35
(Unaudited) (Unaudited) (Unaudited)
June 30, December 31, June 30, June 30,
2007 2006 2006 2005
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Selected Balance Sheet Data
Assets $ 304,556 $ 301,382 $ 296,953 $ 310,471
Earning assets 277,020 274,083 267,520 277,927
Total loans 205,726 203,209 192,850 187,943
Deposits 254,825 245,585 232,071 237,239
Borrowed Funds 20,410 26,360 36,260 43,260
Trust Preferred Debt 5,155 5,155 5,155 5,155
Shareholders' equity 20,761 20,850 20,579 21,678
Asset Quality Ratios
Net loan charge-offs
(annualized) to average
loans 0.06% 0.11% 0.05% 0.09%
Allowance for loan losses
to period end loans 0.76% 0.74% 0.86% 1.00%
Allowance for loan losses
to nonperforming loans 123.42% 127.65% 117.51% 92.61%
Nonperforming loans to
period end loans 0.61% 0.57% 0.73% 1.08%
Nonperforming assets to
total assets 0.56% 0.54% 0.78% 0.94%
(a) Tangible equity excludes intangible assets
Contact Information: CONTACT: Thomas W. Schneider President, CEO James A. Dowd Vice President, CFO Telephone: (315) 343-0057