Pathfinder Real Estate Report | New York State

Pathfinder Bancorp, Inc. ("Company"), the mid-tier holding company of Pathfinder Bank ("Bank"), (NASDAQ: PBHC) announced its results for the three month period ended March 31, 2014.
Highlights for the three month period ended March 31, 2014

• Net income for the first quarter of 2014 was $489,000 as compared to $505,000 for the comparable prior year period. The decrease in net income was principally due to the $287,000 increase in personnel expenses driven by salaries and deferred compensation expenses. Also included here are personnel expenses related to the Company's acquisition of the Fitzgibbons Agency, LLC (the "Agency") in the fourth quarter of 2013. Partially offsetting this increase was a $150,000 year over year first quarter improvement in noninterest income due largely to insurance commissions from the Agency.
  
• Basic and diluted earnings per share were $0.19 for the first quarter of 2014 as compared to basic and diluted earnings per share of $0.20 for the first quarter of 2013. The decrease in basic and diluted earnings per share between these two periods was principally due to the decrease in net income.
  
• Return on average assets was 0.38% for the three month period ended March 31, 2014 compared to 0.41% for the corresponding period in 2013. The decrease was due to the decrease in net income and the increase in average assets, due principally to increased levels of commercial real estate loans, between the year over year first quarter periods.
  
• Return on average equity was 4.52% for the three month period ended March 31, 2014, compared to 4.92% for the same period in 2013. This decrease was due to a combination of lower net income and higher average equity between these two periods.
  
• Total loans were $348.1 million at March 31, 2014, compared to total loans of $341.6 million at December 31, 2013, representing an increase of 1.9%. Growth between these two time periods stemmed largely from a 4.3% increase in the commercial loan portfolio. Residential loan outstandings between these two time periods was essentially unchanged.
  

"We continue to be pleased by the rate of organic growth in our loan and deposit portfolios," stated Tom Schneider, President and CEO. "This growth is primarily driven by our continued expansion and relationship building in the greater Syracuse market, particularly in serving the small business community. There is a strong momentum in our growth pattern, which will be further stimulated by the opening of our Downtown Syracuse office in the second quarter," Schneider added.
"While this growth continues to drive new revenue, the rate of expense growth has prevented this from translating into improved earnings," Schneider continued, "This planned rate of expense growth, designed to enhance our capabilities in talent, technology, risk management and compliance is deemed to be temporary," Schneider continued, "and we remain confident in our ability to drive our business model towards enhanced value."


Income Statement

For the three months ended March 31, 2014, net interest income increased 4.6% to $4.0 million from the same prior year period. The largest impact on the improvement in net interest income stemmed from the $201,000 year over year first quarter reduction of interest expense due principally to higher rate maturing certificates of deposit and Federal Home Loan Bank borrowings replaced with similar products but at lower current market rates. Interest income decreased between the same two time periods driven largely by the reduction in average balances and yield of residential mortgages. Average balances decreased as a result of the Company's sale of residential loans in the second quarter of 2013. Net interest margin on a tax equivalent basis for the first quarter of 2014 increased to 3.48% from 3.40% for the comparable prior year period.


Noninterest income for the first quarter of 2014 was $826,000 as compared to $676,000 for the comparable prior year period due primarily to commissions generated by the Agency. Service charges on deposit accounts also increased $24,000 or 9.4% between the year over year first quarter periods.


Noninterest expense for the first quarter of 2014 was $3.9 million as compared to $3.5 million for the first quarter of 2013. This increase was principally due to an increase in personnel expenses driven by wage increases, salaries expenses of the Agency, and deferred compensation costs. Additionally occupancy expenses increased $42,000 between the year over year first quarter time periods due, in part, to the periodic costs related to the maintenance and upkeep of the three properties purchased from the Company's Mutual Holding Company in the fourth quarter of 2013.

For the first quarter of 2014, the Company recorded $245,000 in provision for loan losses as compared to $324,000 for the first quarter of 2013. The Company required a larger provision in the first quarter of 2013 due to the specific reserve required from the addition of a large commercial relationship categorized as impaired during the first quarter of 2013