Profile: Pathfinder Bancorp Inc (PBHC.O)

Pathfinder Bancorp, Inc. is a federally chartered mid-tier holding company headquartered in Oswego, New York. The primary business of the Company is its investment in Pathfinder Bank (the Bank). The Company is majority owned by Pathfinder Bancorp, M.H.C., a federally-chartered mutual holding company (the Mutual Holding Company). The Bank is primarily engaged in the business of attracting deposits from the general public in the Bank's market area, and investing such deposits, together with other sources of funds, in loans secured by one- to four-family residential real estate and commercial real estate. As of December 31, 2008, $190.4 million, or 76% of the Bank's total loan portfolio consisted of loans secured by real estate, of which $135.3 million, or 71%, were loans secured by one-to four-family residences and $55.1 million, or 29%, were secured by commercial real estate. Additionally, $24.4 million, or 10%, of total loans, were secured by second liens on residential properties that are classified as consumer loans.

The Bank also originates commercial and consumer loans that totaled $30.7 million and $3.5 million, respectively, or 14%, of the Bank's total loan portfolio as of December 31, 2008. The Bank invests a portion of its assets in securities issued by the United States Government and its agencies and sponsored enterprises, state and municipal obligations, corporate debt securities, mutual funds, and equity securities. The Bank also invests in mortgage-backed securities primarily issued or guaranteed by United States Government sponsored enterprises. The Bank's principal sources of funds are deposits, principal and interest payments on loans and borrowings from correspondent financial institutions. The principal source of income is interest on loans and investment securities.

Lending Activities

The residential real estate portfolio consists of 64% fixed-rate mortgages and 36% adjustable-rate mortgages. Commercial loans, including loans to municipalities, increased 21% over the prior year to $30.7 million as of December 31, 2008. Consumer loans, which include second mortgage loans, home equity lines of credit, direct installment and revolving credit loans, increased 10% to $27.9 million as of December 31, 2008.

Deposits

The Company’s deposit base is drawn from seven full-service offices in its market area. The deposit base consists of demand deposits, money management and money market deposit accounts, savings and time deposits. During the year ended December 31, 2008, 85% of the Company's average deposit base of $265.8 million consisted of core deposits.

The Company's average demand deposits, both interest and noninterest bearing accounts, represented 19% of total average deposits for 2008. The Company's money market deposit account (MMDA) accounts represented 11% of total deposits for 2008. Short-term borrowings are comprised primarily of advances and overnight borrowing at the Federal Home Loan Bank of New York (FHLBNY). There were $17.6 million in short-term borrowings outstanding as of December 31, 2008.

Investment Securities

The investment portfolio represents 22% of the Company’s earning assets. The Company invests in securities consisting primarily of mortgage-backed securities, securities issued by United States Government agencies and sponsored enterprises, state and municipal obligations, mutual funds, equity securities, investment grade corporate debt instruments, and common stock issued by the FHLBNY. Its mortgage backed securities portfolio is comprised predominantly of pass-through securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. As of December 31, 2008, there were two securities that exceeded 10% of consolidated shareholders’ equity.