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What changed in Pathfinder Bancorp, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Pathfinder Bancorp, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+315 added−343 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-22)

Top changes in Pathfinder Bancorp, Inc.'s 2024 10-K

315 paragraphs added · 343 removed · 252 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

91 edited+19 added−26 removed254 unchanged
Biggest changeThe Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the FHLBNY, Pathfinder Bank is required to acquire and hold a specified amount of shares of capital stock in the FHLBNY.
Biggest changePathfinder Bank is a member of the Federal Home Loan Bank System, which consists of eleven regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending.
The increased credit risk associated with commercial real estate loans is a result of several factors, including larger loan balances concentrated with a limited number of borrowers, the impact of local and general economic conditions on the borrower’s ability to repay the loan.
The increased credit risk associated with commercial real estate loans is a result of several factors, including larger loan balances concentrated with a limited number of borrowers, and the impact of local and general economic conditions on the borrower’s ability to repay the loan.
The Company also invests in mortgage‑backed securities issued or guaranteed by United States Government sponsored enterprises, collateralized mortgage obligations and similar debt securities issued by both government sponsored entities and private (non-governmental) issuers, and asset-backed securities that are generally issued by private entities.
The Company also invests in mortgage‑backed securities issued or guaranteed by United States Government sponsored enterprises, collateralized mortgage obligations and similar debt securities issued by both government sponsored entities and private (non-governmental) issuers, and asset-backed securities that are generally issued by private entities.
Holding Company Regulation The Company, as a BHC, is subject to examination, regulation, and periodic reporting under the Bank Holding Company Act of 1956, as amended, as administered by the Federal Reserve Board.
Holding Company Regulation The Company, as a Bank Holding Company ("BHC"), is subject to examination, regulation, and periodic reporting under the Bank Holding Company Act of 1956, as amended, as administered by the Federal Reserve Board.
This rule amended the Truth in Lending Act and the Real Estate Settlement Procedures Act to integrate several consumer disclosures for mortgage loans; • Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; • Truth in Savings Act; • Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws; - 18 - • Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; • Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; • USA PATRIOT Act, which requires banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering.
This rule amended the Truth in Lending Act and the Real Estate Settlement Procedures Act to integrate several consumer disclosures for mortgage loans; • Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; • Truth in Savings Act; • Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws; • Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; • Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; • USA PATRIOT Act, which requires banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income, up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for - 15 - institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income, up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
The CRA requires the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. Pathfinder Bank’s latest FDIC CRA rating, dated May 13, 2019, was “satisfactory.” On October 24, 2023, the FDIC and the other federal banking agencies issued a final rule to strengthen and modernize the CRA regulations.
The CRA requires the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. Pathfinder Bank’s latest FDIC CRA rating, dated May 13, 2019, was “satisfactory.” - 17 - On October 24, 2023, the FDIC and the other federal banking agencies issued a final rule to strengthen and modernize the CRA regulations.
Each subsidiary bank of a Qualifying BHC must comply with the Basel III Capital - 19 - Adequacy rules (or the Community Bank Leverage Ratio) and must be well-capitalized. If any subsidiary bank is not, the Federal Reserve Board expects it to become well-capitalized within a brief period of time. This Policy Statement applies to the Company.
Each subsidiary bank of a Qualifying BHC must comply with the Basel III Capital Adequacy rules (or the Community Bank Leverage Ratio) and must be well-capitalized. If any subsidiary bank is not, the Federal Reserve Board expects it to become well-capitalized within a brief period of time. This Policy Statement applies to the Company.
The capital securities of the trust are a pooled trust preferred fund of Preferred Term Securities VI, Ltd., with interest rates that reset quarterly, and are indexed to the 3-month the Secured Overnight - 13 - Financing Rate ("SOFR") which is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, plus 1.91%.
The capital securities of the trust are a pooled trust preferred fund of Preferred Term Securities VI, Ltd., with interest rates that reset quarterly, and are indexed to the 3-month the Secured Overnight Financing Rate ("SOFR") which is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, plus 1.91%.
Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and • Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.
Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and - 18 - • Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.
In order to meet this timeline requirement, the Bank adopted the CECL methodology for calculating its ACL on January 1, 2023. The - 9 - amended guidance replaced the previously-required allowance for loan and lease losses (“ALLL”) calculated under what was known as the Incurred Loss Model.
In order to meet this timeline requirement, the Bank adopted the CECL methodology for calculating its ACL on January 1, 2023. The amended guidance replaced the previously-required allowance for loan and lease losses (“ALLL”) calculated under what was known as the Incurred Loss Model.
The Dodd-Frank Act codified the source of strength policy. Under the prompt corrective action laws, the ability of a BHC to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions.
The Dodd-Frank Act codified the source of strength policy. Under the prompt corrective action laws, the ability of a BHC to pay dividends may be restricted if a subsidiary bank - 19 - becomes undercapitalized. These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions.
Pathfinder Bank’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.
Pathfinder Bank’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.
Furthermore, the repayment of loans secured by commercial real estate properties typically depends upon the successful operation of the real property securing the loan. If the cash flows from the property are reduced, the borrower’s ability to repay the loan may be impaired.
Furthermore, the repayment of loans secured by commercial real estate properties typically depends upon the successful operation of - 5 - the real property securing the loan. If the cash flows from the property are reduced, the borrower’s ability to repay the loan may be impaired.
However, commercial real estate loans generally have higher interest rates than loans secured by one-to-four family residential real estate. - 5 - Commercial Loans Our commercial lines of credit are typically adjustable rate lines, indexed to the prime interest rate.
However, commercial real estate loans generally have higher interest rates than loans secured by one-to-four family residential real estate. Commercial Loans Our commercial lines of credit are typically adjustable rate lines, indexed to the prime interest rate.
However, under current law, pre-1988 tax bad debt reserves remain subject to recapture if Pathfinder Bank makes certain non-dividend distributions, repurchases any of its common stock, pays dividends in excess of earnings and profits, or fails to qualify as a “bank” for tax purposes. At December 31, 2023, our total federal pre-base year bad debt reserve was approximately $1.3 million.
However, under current law, pre-1988 tax bad debt reserves remain subject to recapture if Pathfinder Bank makes certain non-dividend distributions, repurchases any of its common stock, pays dividends in excess of earnings and profits, or fails to qualify as a “bank” for tax purposes. At December 31, 2024, our total federal pre-base year bad debt reserve was approximately $1.3 million.
Based on management’s comprehensive analysis of the loan portfolio, we believe the current level of the allowance for credit losses is adequate. INVESTMENT ACTIVITIES Our investment policy is established by the Board of Directors.
Based on management’s comprehensive analysis of the loan portfolio, we believe the current level of the allowance for credit losses is adequate. - 11 - INVESTMENT ACTIVITIES Our investment policy is established by the Board of Directors.
An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a - 16 - common equity Tier 1 ratio of less than 4.5%.
An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%.
A commercial real estate borrower’s financial condition is monitored on an ongoing basis by requiring current financial statements, rent rolls, payment history reviews, property inspections and periodic face-to-face meetings with the borrower. We generally require borrowers with aggregate outstanding balances exceeding $100,000 to provide annual updated financial statements and/or federal tax returns.
A commercial real estate borrower’s financial condition is monitored on an ongoing basis by requiring current financial statements, rent rolls, payment history reviews, property inspections and periodic face-to-face meetings with the borrower. We generally require borrowers with aggregate outstanding balances exceeding $250,000 to provide annual updated financial statements and/or federal tax returns.
Our investment securities include a broad range of debt securities issued by the United States Government and its agencies and sponsored enterprises, - 11 - state and municipal governments and agencies, and corporations.
Our investment securities include a broad range of debt securities issued by the United States Government and its agencies and sponsored enterprises, state and municipal governments and agencies, and corporations.
Accordingly, interest expense related to this transaction of $1.6 million was recorded in both the years ended December 31, 2023 and 2022. SUPERVISION AND REGULATION General Pathfinder Bank is a New York-chartered commercial bank and the Company is a Maryland corporation and a registered bank holding company. The Bank’s deposits are insured up to applicable limits by the FDIC.
Accordingly, interest expense related to this transaction of $1.6 million was recorded in both the years ended December 31, 2024 and 2023. SUPERVISION AND REGULATION General Pathfinder Bank is a New York-chartered commercial bank and the Company is a Maryland corporation and a registered bank holding company. The Bank’s deposits are insured up to applicable limits by the FDIC.
Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material at December 31, 2023. Interest rate hedging agreements are recorded at fair value as other assets or liabilities.
Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material at December 31, 2024. Interest rate hedging agreements are recorded at fair value as other assets or liabilities.
We regularly monitor the credit quality of this portfolio. At December 31, 2023, no securities held by the Bank in this category had been downgraded by a NRSRO. HEDGING ACTIVITIES The Company is exposed to certain risks from both its business operations and changes in economic conditions.
We regularly monitor the credit quality of this portfolio. At December 31, 2024, no securities held by the Bank in this category had been downgraded by a NRSRO. HEDGING ACTIVITIES The Company is exposed to certain risks from both its business operations and changes in economic conditions.
MARKET AREA AND COMPETITION Market Area We provide financial services to individuals, families, small to mid-size businesses and municipalities through our seven branch offices located in Oswego County, NY, four branch offices located in Onondaga County, NY and one limited purpose office located in Oneida County, NY. Our primary lending market area includes both Oswego and Onondaga Counties.
MARKET AREA AND COMPETITION Market Area We provide financial services to individuals, families, small to mid-size businesses and municipalities through our seven branch offices located in Oswego County, NY, five branch offices located in Onondaga County, NY and one limited purpose office located in Oneida County, NY. Our primary lending market area includes both Oswego and Onondaga Counties.
Pathfinder Bank’s NYCRA most recent rating, dated September 30, 2021, was “satisfactory.” - 15 - Federal Regulations Capital Requirements.
Pathfinder Bank’s NYCRA most recent rating, dated September 30, 2021, was “satisfactory.” Federal Regulations Capital Requirements.
These securities have a five-year call provision. The Company guarantees all of these securities. The Company's equity interest in the trust subsidiary is included in other assets on the Consolidated Statements of Financial Condition at December 31, 2023 and 2022.
These securities have a five-year call provision. The Company guarantees all of these securities. The Company's equity interest in the trust subsidiary is included in other assets on the Consolidated Statements of Financial Condition at December 31, 2024 and 2023.
Our President and Chief Executive Officer, Chief Operating Officer and Chief Financial Officer have the authority to purchase and sell securities within specific guidelines established by the investment policy. All transactions are reviewed by the Board of Directors at its regular meetings.
Our President and Chief Executive Office and Chief Financial Officer have the authority to purchase and sell securities within specific guidelines established by the investment policy. All transactions are reviewed by the Board of Directors at its regular meetings.
The Company had no material derivative contracts not designated as hedging agreements at December 31, 2023 or December 31, 2022. See Note 21 within the Notes to consolidated financial statements contained herein. - 12 - SOURCES OF FUNDS General Deposits have traditionally been our primary source of funds for use in lending and investment activities.
The Company had no material derivative contracts not designated as hedging agreements at December 31, 2024 or December 31, 2023. See Note 21 within the Notes to consolidated financial statements contained herein. SOURCES OF FUNDS General Deposits have traditionally been our primary source of funds for use in lending and investment activities.
All privately issued mortgage-backed securities held by the Bank at December 31, 2023 were either rated at or above the lowest investment grade for credit quality by a nationally-recognized statistical rating organization (a “NRSRO”) or were the most senior tranches of securitizations that were not rated by a NRSRO at the time of the securities’ issuance.
All privately issued mortgage-backed securities held by the Bank at December 31, 2024 were either rated at or above the lowest investment grade for credit quality by a nationally-recognized statistical rating organization (a “NRSRO”) or were the most senior tranches of securitizations - 12 - that were not rated by a NRSRO at the time of the securities’ issuance.
That enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, enforcement actions may be initiated in response to violations of laws and regulations and unsafe or unsound practices.
That enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, enforcement actions may be initiated in response to violations of laws and regulations, breaches of fiduciary duties and unsafe or unsound practices.
At December 31, 2023, Pathfinder Bank had no reserves subject to recapture in excess of its base year reserves. The Bank continues to be required to use the specific charge-off method to account for tax bad debt deductions. Taxable Distributions and Recapture .
At December 31, 2024, Pathfinder Bank had no reserves subject to recapture in excess of its base year reserves. The Bank continues to be required to use the specific charge-off method to account for tax bad debt deductions. - 20 - Taxable Distributions and Recapture .
Residential Real Estate Loans We currently offer one-to-four family residential real estate loans, made to borrowers in our general market area, with terms up to 30 years that are generally underwritten according to Federal National Mortgage Association (“Fannie Mae”) guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed-rate and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which as of December 31, 2023, was generally $726,200 for single-family homes in our market area.
Residential Real Estate Loans We currently offer one-to-four family residential real estate loans, made to borrowers in our general market area, with terms up to 30 years that are generally underwritten according to Federal National Mortgage Association (“Fannie Mae”) guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed-rate and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which as of December 31, 2024, was generally $766,550 for single-family homes in our market area.
Whispering Oaks, through a wholly-owned second-tier subsidiary, is the sole limited partner in an unconsolidated special-purpose real estate management partnership. The partnership currently operates a low-income residential housing facility. The activities of Whispering Oaks resulted in a pre-tax gain of $10,000 in 2023.
Whispering Oaks, through a wholly-owned second-tier subsidiary, is the sole limited partner in an unconsolidated special-purpose real estate management partnership. The partnership currently operates a low-income residential housing facility. The activities of Whispering Oaks resulted in a pre-tax gain of $11,000 in 2024.
We continue to grow and employ team members respectively across our three-county footprint as follows: Date Headcount 12/31/2023 174 12/31/2022 174 12/31/2021 173 12/31/2020 183 12/31/2019 162 At December 31, 2023, approximately 60% of our staff was employed at our bank branch and loan production offices, with the remainder of our team employed within all other functional areas, including our customer-facing electronic commerce and call center units.
We continue to grow and employ team members respectively across our three-county footprint as follows: Date Headcount 12/31/2024 186 12/31/2023 174 12/31/2022 174 12/31/2021 173 12/31/2020 183 At December 31, 2024, approximately 55% of our staff was employed at our bank branch and loan production offices, with the remainder of our team employed within all other functional areas, including our customer-facing electronic commerce and call center units.
Our Allowance for Credit Losses policy (“ACL”) establishes criteria for specifically-identified loans to be measured for impairment based on the following: Residential and Consumer Loans: • All loans rated substandard or worse, on nonaccrual, and above our total related credit (“TRC”) threshold balance of $300,000.
Our Allowance for Credit Losses policy (“ACL”) establishes criteria for individually evaluated loans to be measured for impairment based on the following: Residential and Consumer Loans: • All loans rated substandard or worse, on nonaccrual, and above our total related credit (“TRC”) threshold balance of $300,000.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
The FDIC may also issue special assessments. Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
The New York State franchise tax is imposed in an amount equal to the greater of 6.5% of Business Income for companies with a Business Income Base up to $5 million, or 7.25% for companies with a Business Income Base greater than $5 million, 0.025% and 0.1875% of average Business Capital for 2022 and 2023, respectively, or a fixed dollar amount based on New York sourced gross receipts.
The New York State franchise tax is imposed in an amount equal to the greater of 6.5% of Business Income for companies with a Business Income Base up to $5 million, or 7.25% for companies with a Business Income Base greater than $5 million, 0.1875% of average Business Capital, or a fixed dollar amount based on New York sourced gross receipts.
A loan is considered specifically-identified when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.
A loan is considered individually evaluated when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.
Transactions between a bank (and, generally, its subsidiaries) and its related parties or affiliates are limited by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank.
Transactions between a bank and its affiliates are limited by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank.
The first component is the specific allowance that relates to loans that are specifically-identified or where analysis for impairment is appropriate. For these loans, an allowance is established when the discounted cash flows or collateral value of the specifically-identified loan are lower than the carrying value of the loan.
The first component is the specific allowance that relates to loans that are individually evaluated or where analysis for impairment is appropriate. For these loans, an allowance is established when the discounted cash flows or collateral value of the individually evaluated loan are lower than the carrying value of the loan.
At December 31, 2023 and 2022, 6,099,571 and 6,032,112 shares of Company common stock (voting and non-voting) were outstanding, respectively. Following shareholder approval obtained on June 4, 2021, the Company converted 1,380,283, or 100%, of its previously-outstanding shares of Series B Convertible Perpetual Preferred Stock to an equal number of Series A Non-Voting Common Stock.
At December 31, 2024 and 2023, 6,125,649 and 6,099,571 shares of Company common stock (voting and non-voting) were outstanding, respectively. Following shareholder approval obtained on June 4, 2021, the Company converted 1,380,283, or 100%, of its previously-outstanding shares of Series B Convertible Perpetual Preferred Stock to an equal number of Series A Non-Voting Common Stock.
Specifically-identified loans are measured by either the present value of the expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral if the loan is collateral dependent. The majority of our loans utilize the fair value of the underlying collateral.
Individually evaluated loans are measured by either the present value of the expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral if the loan is collateral dependent. The majority of our loans utilize the fair value of the underlying collateral.
The ACL is based on three major components which are: (i) specific components for specifically-identified loans, (ii) quantitative factors, applied to nonspecifically-identified loans derived from historical bank-specific and industry loss charge-off patterns that have been correlated to prior period econometric factors, and (iii) a broad range of qualitative factors intended to provide further forward-looking perspectives on overall credit quality.
The ACL is based on three major components which are: (i) specific components for individually evaluated loans, (ii) quantitative factors, applied to pooled loans derived from historical bank-specific and industry loss charge-off patterns that have been correlated to - 10 - prior period econometric factors, and (iii) a broad range of qualitative factors intended to provide further forward-looking perspectives on overall credit quality.
Loans to One Borrower Under New York law, New York commercial banks are subject to loans-to-one borrower limits, which are substantially similar as those applicable to national banks, which generally restrict loans to one borrower to an amount equal to 15% of unimpaired capital and unimpaired surplus, which was $24.0 million at December 31, 2023, on an unsecured basis, and an additional amount equal to 10% of unimpaired capital and unimpaired surplus, which was $16.0 million at December 31, 2023, if the loan is secured by readily marketable collateral (generally, financial instruments and bullion, but not real estate), subject to exceptions.
Loans to One Borrower Under New York law, New York commercial banks are subject to loans-to-one borrower limits, which are substantially similar as those applicable to national banks, which generally restrict loans to one borrower to an amount equal to 15% of unimpaired capital and unimpaired surplus, which was $23.4 million at December 31, 2024, on an unsecured basis, and an additional amount equal to 10% of unimpaired capital and unimpaired surplus, which was $15.6 million at December 31, 2024, if the loan is secured by readily marketable collateral (generally, financial instruments and bullion, but not real estate), subject to exceptions.
If a loan is in excess of any individual loan officer’s lending authority, the extension of credit must be referred to the Officer Loan Committee (“OLC”) or the Executive Loan Committee ("ELC"), depending on either the size of the loan or the loan relationship.
If a loan is in excess of any individual loan officer’s lending authority, the extension of credit must be referred to the Officer Loan Committee (“OLC”) or the Directors Loan Committee ("DLC"), depending on either the size of the loan or the loan relationship.
The OLC is comprised of select senior officers, and the ELC includes certain members of the Board of Directors.
The OLC is comprised of select senior officers, and the DLC includes certain members of the Board of Directors.
Specifically-identified loans are determined by the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses as compared to the loan carrying value.
Individually evaluated loans are determined by the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses as compared to the loan carrying value.
Specifically-Identified Loans, Non-performing Loans and Loan Modifications The policy of the Bank is to provide a continuous assessment of the quality of its loan portfolio through the maintenance of an internal and external loan review process.
Individually Evaluated Loans, Non-performing Loans and Loan Modifications The policy of the Bank is to provide a continuous assessment of the quality of its loan portfolio through the maintenance of an internal and external loan review process.
The Company’s federal tax returns are statutorily subject to potential audit for the years 2020 through 2023. No federal income tax returns are under audit as of the date of this report. Method of Accounting .
The Company’s federal tax returns are statutorily subject to potential audit for the years 2021 through 2024. No federal income tax returns are under audit as of the date of this report. Method of Accounting .
At December 31, 2023, over 27% of our current staff had been with us for ten years or more. There is a team assigned to retention efforts as a strategic initiative for 2024 and forward. ITEM 1A: RI SK FACTORS Not required of a smaller reporting company. ITEM 1B: UNRESOLV ED STAFF COMMENTS None. - 24 -
At December 31, 2024, 26.9% of our current staff had been with us for ten years or more. There is a team assigned to retention efforts as a strategic initiative for 2025 and forward. - 23 - ITEM 1A: RI SK FACTORS Not required of a smaller reporting company. ITEM 1B: UNRESOLV ED STAFF COMMENTS None.
Individual lending authority can be increased, suspended or removed by the Board of Directors, as recommended by the President or Executive Vice President and Chief Banking Officer.
Individual lending authority can be increased, suspended or removed by the Board of Directors, as recommended by the President or Senior Vice President and Chief Credit Officer.
The communities in which we serve include persons of various race, ethnicity, - 22 - gender, sexual orientation, socio-economic status, age, physical and cognitive ability, religion and political belief. We are committed to valuing and sharing the strength of our differences in a safe and positive environment.
The communities in which we serve include persons of various race, ethnicity, gender, sexual orientation, - 22 - socio-economic status, age, physical and cognitive ability, religion and political belief. We are committed to valuing and sharing the strength of our differences in a safe and positive environment, while maintaining selection and promotion processes that are without bias.
Factors considered by management in determining specifically-identified loans include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not specifically-identified.
Factors considered by management in determining individually evaluated loans include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not considered for individual evaluation.
Reimbursement is available to team members enrolled in pre-approved degree or certification programs at accredited institutions that teach skills or knowledge relevant to our business, in compliance with Section 127 of the Internal Revenue Code, and for seminars, conferences, and other training events team members attend in connection with their job duties. - 23 - Retention Efforts Employee retention helps us operate efficiently and achieve one of our business objectives.
Reimbursement is available to team members enrolled in pre-approved degree or certification programs at accredited institutions that teach skills or knowledge relevant to our business, in compliance with Section 127 of the Internal Revenue Code, and for seminars, conferences, and other training events team members attend in connection with their job duties.
For the year 2023, the population of our workforce was as follows: Ethnicity % American Indian or Alaska Native 0.6% Asian 2.2% Black or African American 2.2% Hispanic or Latino 3.4% Two or more races (Not Hispanic or Latino) 1.1% White 90.5% Age Range Total 18-25 21 26-35 56 36-45 44 46-55 16 56-65 34 Over 65 3 Grand Total 174 Compensation and Benefits We provide a competitive compensation and benefits program to help meet the needs of our team members.
For the year 2024, the population of our workforce was as follows: Ethnicity % American Indian or Alaska Native 0.5% Asian 1.6% Black or African American 0.5% Hispanic or Latino 2.7% Two or more races (Not Hispanic or Latino) 0.5% White 94.2% Age Range Total 18-25 21 26-35 63 36-45 46 46-55 22 56-65 29 Over 65 5 Grand Total 186 Compensation and Benefits We provide a competitive compensation and benefits program to help meet the needs of our team members.
“Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after being designated “critically undercapitalized.” At December 31, 2023, Pathfinder Bank was well-capitalized. Transactions with Related Parties.
“Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after being designated “critically undercapitalized.” - 16 - At December 31, 2024, Pathfinder Bank was well-capitalized. Transactions with Affiliates and Loans to Insiders.
Our voluntary turnover rates for the previous five years are as follows: Year Voluntary Turnover % 2023 23.4% 2022 25.0% 2021 24.2% 2020 13.2% 2019 18.8% Diversity and Inclusion An inclusive open-minded community that engages excellence and embraces diversity is fundamental to supporting the Pathfinder Bank vision to be a local bank that the community trusts.
Our voluntary turnover rates for the previous five years are as follows: Year Voluntary Turnover % 2024 23.7% 2023 23.4% 2022 25.0% 2021 24.2% 2020 13.2% Culture An open-minded community that engages excellence is fundamental to supporting the Pathfinder Bank vision to be a local bank that the community trusts.
As of June 30, 2023, based on the most recently-available FDIC data, we had the largest market share in Oswego County, representing 48.6% of all deposits, and we additionally held 2.0% of all deposits in Onondaga County.
As of June 30, 2024, based on the most recently-available FDIC data, we had the largest market share in Oswego County, representing 47.7% of all deposits, and we additionally held 2.1% of all deposits in Onondaga County.
Our staff is comprised of approximately 78% women.
Our staff is comprised of approximately 74% women.
We believe our commitment to living out our core values, actively prioritizing concern for our team members’ well-being, supporting our team members’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing team members.
Retention Efforts Employee retention helps us operate efficiently and achieve one of our business objectives. We believe our commitment to living out our core values, actively prioritizing concern for our team members’ well-being, supporting our team members’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing team members.
We strive to build and maintain a high-performing culture by creating a work environment that attracts and retains outstanding, engaged team members who embody our company mantra of " Local. Community. Trust. ” Demographics At December 31, 2023, we employed 174 team members, of which 161 were full-time, 12 were part-time, and one was an intern.
We strive to build and maintain a high-performing culture by creating a work environment that attracts and retains outstanding, engaged team members who embody our company mantra of " Local. Community. Trust. ” Demographics At December 31, 2024, we employed 186 team members, of which 172 were full-time, 10 were part-time, three were interns, and one was temporary.
The DCF method implements a probability of default with loss given default and loss exposure at default estimation. The probability of default and loss given default are applied to future cash flows that are adjusted to present value and these discounted expected losses become the quantitatively-derived portion of the ACL.
The probability of default and loss given default are applied to future cash flows that are adjusted to present value and these discounted expected losses become the quantitatively-derived portion of the ACL.
We continue our commitment to equal employment opportunity through a robust anti-discrimination plan, which includes annual compensation analyses and ongoing reviews of our selection and hiring practices, alongside a continued focus on building and maintaining a diverse workforce.
We continue our commitment to equal employment opportunity through a robust anti-discrimination plan, which includes annual compensation analyses and ongoing reviews of our selection and hiring practices.
Management determines the significance of payment delays and shortfalls on a case-by case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reason for the delay, the borrower’s prior payment record and the amount of shortfall in relation to what is owed. - 10 - When a loan is determined to be specifically-identified, we will reevaluate the collateral which secures the loan.
Management determines the significance of payment delays and shortfalls on a case-by case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reason for the delay, the borrower’s prior payment record and the amount of shortfall in relation to what is owed.
Such institutions that meet the CBLR threshold and certain other qualifying criteria will automatically be deemed to be well-capitalized. The new rule took effect on January 1, 2020. A financial institution can elect to be subject to this new definition. The Bank did not elect to become subject to the CBLR. Standards for Safety and Soundness.
Such institutions that meet the CBLR threshold and certain other qualifying criteria will automatically be deemed to be well-capitalized. A financial institution can elect to be subject to this new definition. As of December 31, 2024, the Bank did not elect to become subject to the CBLR. Standards for Safety and Soundness.
The second component of the ACL estimation is based on quantitative factors, which cover discrete pools of loans, by loan class, not considered specifically-identified, smaller balance homogenous loans, such as residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based on historical loss rates for each of these categories of loans.
The second component of the ACL estimation is based on quantitative factors, which cover discrete pools of loans, by loan class, not considered individually evaluated, smaller balance homogenous loans, such as residential real estate, home equity and other consumer loans.
None of these employees are represented by a collective bargaining agreement and management considers its relationship with employees to be good. During fiscal year 2023, we hired 44 employees, of which 34 were full-time, six were part-time, one was temporary, and three were interns.
None of these employees are represented by a collective bargaining agreement and management considers its relationship with employees to be good. During fiscal year 2024, we hired 71 employees, of which 56 were full-time, four were part-time, four were temporary, and seven were interns.
A survey was conducted to determine employee preferences and changes were made accordingly. Learning and Development We invest in the growth and development of our team members by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues.
The Company has surveyed employees to determine their benefits program preferences and has made program changes accordingly. Learning and Development We invest in the growth and development of our team members by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues.
Moreover, decreases in real estate values could adversely affect our ability to fully recover the loan balance in the event of a default.
Moreover, decreases in real estate values could adversely affect our ability to fully recover the loan balance in the event of a default. Consumer Loans We make consumer loans for a variety of personal and consumer purposes.
At December 31, 2023, the Company had total consolidated assets of $1.47 billion, total deposits of $1.12 billion and shareholders' equity of $120.3 million plus a noncontrolling interest of $761,000, which represents the 49% of the FitzGibbons Agency, LLC not owned by the Company. - 3 - Pathfinder Bank The Bank is a New York-chartered commercial bank and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”) through the Deposit Insurance Fund (“DIF”).
At December 31, 2024, the Company had total consolidated assets of $1.47 billion, total deposits of $1.20 billion and shareholders' equity of $121.5 million. - 3 - Pathfinder Bank The Bank is a New York-chartered commercial bank and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”) through the Deposit Insurance Fund (“DIF”).
Consumer Loans We are authorized to make loans for a variety of personal and consumer purposes and our consumer loan portfolio consists primarily of automobile, recreational vehicles and unsecured personal loans, as well as unsecured lines of credit and loans secured by deposit accounts.
Our consumer portfolio consists primarily of automobile, recreational vehicles and unsecured personal loans, as well as unsecured lines of credit and loans secured by deposit accounts.
Additionally, the Bank owns 100% of Pathfinder Risk Management Company, Inc., ("PRMC") which was established to record the 51% controlling interest upon the December 2013 purchase of the FitzGibbons Agency, an Oswego County property, casualty and life insurance brokerage business with approximately $1.3 million in annual revenues. The activities of PRMC resulted in pre-tax income of $263,000 in 2023.
Additionally, the Bank owns 100% of Pathfinder Risk Management Company, Inc., ("PRMC") which was established to record the 51% controlling interest upon the December 2013 purchase of FitzGibbons Agency, LLC (the “Agency”), an Oswego County property, casualty and life insurance brokerage business.
On August 28, 2018, pursuant to EGRRCPA, the Federal Reserve Board issued an interim final rule revising the Policy Statement increasing the consolidated asset limit to $3 billion.
The Company has elected to be a “financial holding company.” On August 28, 2018, pursuant to EGRRCPA, the Federal Reserve Board issued an interim final rule revising the “Small Bank Holding Company Policy Statement” increasing the consolidated asset limit to $3 billion.
It makes business sense because it helps us to attract and retain the best talent, it enables us to understand and meet clients' needs more effectively and thus provide a better quality service.
This commitment is essential to reflecting the values of our team members and the society we serve today. It makes business sense because it helps us to attract and retain the best talent, it enables us to understand and meet clients' needs more effectively and thus provide a better quality service.
As of December 31, 2023, Pathfinder Bank was in compliance with this requirement. Other Regulations Interest and other charges collected or contracted for by Pathfinder Bank are subject to state usury laws and federal laws concerning interest rates.
Other Regulations Interest and other charges collected or contracted for by Pathfinder Bank are subject to state usury laws and federal laws concerning interest rates.
The judgment about the level of future taxable income, including that which is considered capital, is inherently subjective and is reviewed on a continual basis as regulatory and business factors change. - 20 - Federal Taxation General .
If current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. The judgment about the level of future taxable income, including that which is considered capital, is inherently subjective and is reviewed on a continual basis as regulatory and business factors change. Federal Taxation General .
New York Bank Regulation Pathfinder Bank derives its lending, investment, branching and other authority primarily from the applicable provisions of New York State Banking Law and the regulations of the NYSDFS, as limited by federal laws and regulations.
The summary is not intended to be a complete description of such statutes and regulations and their effects on the Company and the Bank. - 14 - New York Bank Regulation Pathfinder Bank derives its lending, investment, branching and other authority primarily from the applicable provisions of New York State Banking Law and the regulations of the NYSDFS, as limited by federal laws and regulations.
Set forth below is a summary of certain material statutory and regulatory requirements applicable to the Company and the Bank. The summary is not intended to be a complete description of such statutes and regulations and their effects on the Company and the Bank.
Set forth below is a summary of certain material statutory and regulatory requirements applicable to the Company and the Bank.
Under the CECL methodology, quantitative analysis is used to predict future life-of loan charge-offs based on historical charge-off patterns correlated to a range of specific econometric factors, such as the national unemployment rate. The Company utilizes the Discounted Cash Flow (“DCF”) method for its pooled segment calculation.
These pools of loans are evaluated for loss exposure based on historical loss rates for each of these categories of loans. Under the CECL methodology, quantitative analysis is used to predict future life-of loan charge-offs based on historical charge-off patterns correlated to a range of specific econometric factors, such as the national unemployment rate.
Collateral will be inspected not less than annually for all specifically-identified loans and will be reevaluated not less than every two years. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.
Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company’s Information Technology ("IT") department consists of the Chief Information Officer ("CIO"), who has over 35 years of experience in the IT field, including 25 years with the Company, and other key personnel who have years of experience and various certifications related to assessing and managing cybersecurity risk.
Biggest changeThe Company’s Information Technology ("IT") department consists of the Chief Information Officer ("CIO"), who has 16 years of experience with the Company, and other key personnel who have years of experience and various certifications related to assessing and managing cybersecurity risk.
Management is responsible for ensuring that such third parties use suitable information security controls when providing services to us. As part of the oversight of third-party service providers, management will determine whether cybersecurity risks are identified, measured, mitigated, monitored, and reported by such third parties. - 25 -
Management is responsible for ensuring that such third parties use suitable information security controls when providing services to us. As part of the oversight of third-party service providers , management will determine whether cybersecurity risks are identified, measured, mitigated, monitored, and reported by such third parties. - 24 -
The ICPP is developed and maintained utilizing the Federal Financial Institutions Examination Council ("FFIEC") Information Technology Examination Handbook, FDIC, NYSDFS, and Gramm-Leach–Bliley Act, and represents the standards, policies, procedures, and guidelines defining the Company’s security requirements and related activities, which includes risk management and risk assessment practices.
The ICPP is developed and maintained utilizing the Federal Financial Institutions Examination Council ("FFIEC") Information Technology Examination Handbook, FDIC and NYSDFS guidance and regulations, and Gramm-Leach–Bliley Act, and represents the standards, policies, procedures, and guidelines defining the Company’s security requirements and related activities, which includes risk management and risk assessment practices.
Management has designated the Information Security Officer ("ISO"), who has over 14 years of experience, along with the Technology Steering Committee, with implementing and monitoring the ICPP.
Management has designated the Information Security Officer ("ISO"), who has 15 years of experience, along with the Technology Steering Committee, with implementing and monitoring the ICPP.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(6) The premises are leased with an annual rent of $17,000. - 26 -
Biggest change(2) The premises are leased with an annual rent of $93,000. (3) The premises are leased with an annual rent of $77,000. (4) The premises are leased with an annual rent of $262,000. (5) The premises are leased with an annual rent of $946,000.
ITEM 2: PR OPERTIES The Company has seven offices located in Oswego County, four offices located in Onondaga County and one limited purpose office located in Oneida County. Management believes that the Bank’s facilities are adequate for the business conducted.
ITEM 2: PR OPERTIES The Company has seven offices located in Oswego County, five offices located in Onondaga County and one limited purpose office located in Oneida County. Management believes that the Bank’s facilities are adequate for the business conducted.
Location Opening Date Owned/Leased Main Office 1874 Owned 214 West First Street Oswego, New York 13126 Plaza Branch 1989 Owned (1) 291 State Route 104 East Oswego, New York 13126 Mexico Branch 1978 Owned 3361 Main Street Mexico, New York 13114 Oswego East Branch 1994 Owned 34 East Bridge Street Oswego, New York 13126 Lacona Branch 2002 Owned 1897 Harwood Drive Lacona, New York 13083 Fulton Branch 2003 Owned (2) 5 West First Street South Fulton, New York 13069 Central Square Branch 2005 Owned 3025 East Ave Central Square, New York 13036 Cicero Branch 2011 Owned 6194 State Route 31 Cicero, New York 13039 Pike Block Branch 2014 Leased (3) 109 West Fayette Street Syracuse, New York 13202 Clay Branch 2018 Leased (4) 3775 State Route 31 Liverpool, NY 13090 Southwest Corridor Branch 2022 Leased (5) 506 West Onondaga Street Syracuse, NY 13204 Utica Loan Production Office 2017 Leased (6) 258 Genesee Street Utica, New York 13502 (1) The building is owned; the underlying land is leased with an annual rent of $39,000.
Location Opening Date Owned/Leased Main Office 1874 Owned 214 West First Street Oswego, New York 13126 Plaza Branch 1989 Owned (1) 291 State Route 104 East Oswego, New York 13126 Mexico Branch 1978 Owned 3361 Main Street Mexico, New York 13114 Oswego East Branch 1994 Owned 34 East Bridge Street Oswego, New York 13126 Lacona Branch 2002 Owned 1897 Harwood Drive Lacona, New York 13083 Fulton Branch 2003 Owned 5 West First Street South Fulton, New York 13069 Central Square Branch 2005 Owned 3025 East Ave Central Square, New York 13036 Cicero Branch 2011 Owned 6194 State Route 31 Cicero, New York 13039 Pike Block Branch 2014 Leased (2) 109 West Fayette Street Syracuse, New York 13202 Clay Branch 2018 Leased (3) 3775 State Route 31 Liverpool, NY 13090 Southwest Corridor Branch 2022 Leased (4) 506 West Onondaga Street Syracuse, NY 13204 East Syracuse Branch 2024 Leased (5) 6611 Manlius Center Road East Syracuse, NY 13057 Utica Loan Production Office 2017 Leased (6) 258 Genesee Street Utica, New York 13502 (1) The building is owned; the underlying land is leased with an annual rent of $40,000.
The following table sets forth certain information concerning the main office and each branch office of the Bank at December 31, 2023. The aggregate net book value of the Bank's premises and equipment was $18.4 million at December 31, 2023. For additional information regarding the Bank's properties, see Notes 8 and 28 to the consolidated financial statements.
The following table sets forth certain information concerning the main office and each branch office of the Bank at December 31, 2024. The aggregate net book value of the Bank's premises and equipment was $19.0 million at December 31, 2024. For additional information regarding the Bank's properties, see Notes 8 and 28 to the consolidated financial statements.
Removed
(2) Both building and land are owned as of July 2023; the land lease expense in 2023 was $23,000. (3) The premises are leased with an annual rent of $91,000. (4) The premises are leased with an annual rent of $75,000. (5) The premises are leased with an annual rent of $262,000.
Added
The lease began in July 2024 in connection with the Company's acquisition of the East Syracuse branch. Lease expense for 2024 was $425,0000. (6) The premises are leased with an annual rent of $17,000. - 25 -

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn the opinion of management, such claims and lawsuits in the aggregate are not expected to have a material adverse impact on the Company's consolidated financial condition and results of operations at December 31, 2023. ITEM 4: MINE SAF ETY DISCLOSURE Not applicable. PART II
Biggest changeIn the opinion of management, such claims and lawsuits in the aggregate are not expected to have a material adverse impact on the Company's consolidated financial condition and results of operations at December 31, 2024. ITEM 4: MINE SAF ETY DISCLOSURE Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company did not repurchase any shares of its common stock for the year ended December 31, 2023. Equity Compensation Plan Information The following table provides information as of December 31, 2023 with respect to shares of voting common stock that may be issued under the Company’s existing equity compensation plans.
Biggest changeThe Company did not repurchase any shares of its common stock for the year ended December 31, 2024. Equity Compensation Plan Information The following table provides information as of December 31, 2024 with respect to shares of voting common stock that may be issued under the Company’s existing equity compensation plans. See Note 15.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s voting common stock trades on the NASDAQ Capital Market under the symbol “PBHC.” There were 310 shareholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms) as of March 22, 2024.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s voting common stock trades on the NASDAQ Capital Market under the symbol “PBHC.” There were 292 shareholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms) as of March 24, 2025.
More details are included within the section titled Regulation and Supervision. ITEM 6: RES ERVED - 27 -
More details are included within the section titled Regulation and Supervision. ITEM 6: RES ERVED - 26 -
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 164,857 $ 11.03 10,408 Equity compensation plans not approved by stockholders N/A N/A N/A Dividends and Dividend History The Company has historically paid regular quarterly cash dividends on its common stock.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 138,779 $ 11.00 300,000 Equity compensation plans not approved by stockholders N/A N/A N/A Dividends and Dividend History The Company has historically paid regular quarterly cash dividends on its common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAVAILABLE FOR SALE More Than One More Than Five One Year or Less to Five Years to Ten Years Annualized Annualized Annualized Amortized Weighted Amortized Weighted Amortized Weighted (Dollars in thousands) Cost Avg Yield Cost Avg Yield Cost Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ 6,004 4.67 % $ 3,463 2.21 % $ 30,584 2.28 % State and political subdivisions - 0.00 % 513 1.82 % 3,103 2.15 % Corporate 4,096 5.45 % 5,221 5.65 % 756 1.80 % Asset backed securities - 0.00 % - 0.00 % 5,498 7.36 % Total $ 10,100 4.99 % $ 9,197 4.14 % $ 39,941 2.96 % Mortgage-backed securities: Residential mortgage-backed - US agency $ 5,055 5.81 % $ 2,495 0.99 % $ - 0.00 % Collateralized mortgage obligations - US agency - 0.00 % 1,741 2.18 % 1,974 5.48 % Collateralized mortgage obligations - Private label 5,871 6.72 % 9,787 5.88 % 15,619 3.94 % Total $ 10,926 6.30 % $ 14,023 4.55 % $ 17,593 4.11 % Other non-maturity investments: Equity securities $ 206 0.53 % $ - 0.00 % $ - 0.00 % Total $ 206 0.53 % $ - 0.00 % $ - 0.00 % Total investment securities $ 21,232 5.62 % $ 23,220 4.39 % $ 57,534 3.31 % - 43 - More Than Ten Years Total Investment Securities Annualized Annualized Amortized Weighted Amortized Fair Weighted (Dollars in thousands) Cost Avg Yield Cost Value Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ 42,537 5.77 % $ 82,588 $ 80,083 4.25 % State and political subdivisions 30,972 2.09 % 34,588 32,924 2.09 % Corporate 935 5.22 % 11,008 10,919 5.27 % Asset backed securities 14,753 5.23 % 20,251 19,892 5.81 % Total $ 89,197 4.40 % $ 148,435 $ 143,818 4.05 % Mortgage-backed securities: Residential mortgage-backed - US agency $ 17,896 4.22 % $ 25,446 $ 24,418 4.22 % Collateralized mortgage obligations - US agency 9,343 3.54 % 13,058 12,179 3.65 % Collateralized mortgage obligations - Private label 50,535 6.29 % 81,812 78,095 5.82 % Total $ 77,774 5.48 % $ 120,316 $ 114,692 5.25 % Other non-maturity investments: Equity securities $ - 0.00 % 206 $ 206 0.53 % Total $ - 0.00 % $ 206 $ 206 0.53 % Total investment securities $ 166,971 4.90 % $ 268,957 $ 258,716 4.58 % HELD-TO-MATURITY More Than One More Than Five One Year or Less to Five Years to Ten Years Annualized Annualized Annualized Amortized Weighted Amortized Weighted Amortized Weighted (Dollars in thousands) Cost Avg Yield Cost Avg Yield Cost Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ - 0.00 % $ - 0.00 % $ 1,497 3.18 % State and political subdivisions 666 3.14 % 2,614 3.15 % 7,987 2.36 % Corporate 1,754 4.10 % 11,695 4.82 % 31,978 4.85 % Asset backed securities - 0.00 % 4,259 4.09 % 1,997 7.52 % Total $ 2,420 0.00 % $ 18,568 4.42 % $ 43,459 4.11 % Mortgage-backed securities: Residential mortgage-backed - US agency $ - 0.00 % $ 1,253 3.40 % $ 2,374 2.82 % Collateralized mortgage obligations - US agency - 0.00 % 1,302 3.63 % 4,938 2.80 % Collateralized mortgage obligations - Private label 12,298 8.47 % 12,283 5.11 % 8,117 6.18 % Total $ 12,298 8.47 % $ 14,838 4.84 % $ 15,429 4.58 % Total investment securities $ 14,718 7.08 % $ 33,406 4.60 % $ 58,888 4.23 % More Than Ten Years Total Investment Securities Annualized Annualized Amortized Weighted Amortized Fair Weighted (Dollars in thousands) Cost Avg Yield Cost Value Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ 2,263 2.66 % $ 3,760 $ 3,456 2.87 % State and political subdivisions 5,309 2.51 % 16,576 14,730 2.56 % Corporate - 0.00 % 45,427 42,155 4.81 % Asset backed securities 10,604 4.55 % 16,860 15,680 4.79 % Total $ 18,176 3.72 % $ 82,623 $ 76,021 4.28 % Mortgage-backed securities: Residential mortgage-backed - US agency $ 3,347 2.79 % $ 6,974 $ 6,324 2.91 % Collateralized mortgage obligations - US agency 6,981 2.93 % 13,221 11,928 2.95 % Collateralized mortgage obligations - Private label 44,121 4.33 % 76,819 73,761 5.31 % Total $ 54,449 4.06 % $ 97,014 $ 92,013 4.84 % Total investment securities $ 72,625 3.89 % $ 179,637 $ 168,034 4.59 % The yield information disclosed above does not give effect to changes in fair value that are reflected in accumulated other comprehensive loss in consolidated shareholders’ equity. - 44 - Loans Receivable Average loans receivable represented 68.1% of the Company’s average interest earning assets in 2023 and account for the greatest portion of total interest income.
Biggest changeAVAILABLE FOR SALE More Than One More Than Five One Year or Less to Five Years to Ten Years Annualized Annualized Annualized Amortized Weighted Amortized Weighted Amortized Weighted (Dollars in thousands) Cost Avg Yield Cost Avg Yield Cost Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ - 0.00 % $ 31,483 1.83 % $ 4,863 7.56 % State and political subdivisions 988 2.59 % 416 3.34 % 4,678 2.15 % Corporate 4,068 5.14 % 5,963 4.78 % - 0.00 % Asset backed securities - 0.00 % - 0.00 % 5,003 6.99 % Total $ 5,056 4.64 % $ 37,862 2.31 % $ 14,544 5.62 % Mortgage-backed securities: Residential mortgage-backed - US agency $ - 0.00 % $ 2,366 0.99 % $ 2,043 5.01 % Collateralized mortgage obligations - US agency - 0.00 % 1,483 2.25 % 4,899 5.66 % Collateralized mortgage obligations - Private label 6,413 7.98 % 9,876 6.67 % 8,307 5.98 % Total $ 6,413 7.98 % $ 13,725 5.21 % $ 15,249 5.75 % Other non-maturity investments: Equity securities $ 206 0.53 % $ - 0.00 % $ - 0.00 % Total $ 206 0.53 % $ - 0.00 % $ - 0.00 % Total investment securities $ 11,675 6.40 % $ 51,587 3.08 % $ 29,793 5.69 % - 42 - More Than Ten Years Total Investment Securities Annualized Annualized Amortized Weighted Amortized Fair Weighted (Dollars in thousands) Cost Avg Yield Cost Value Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ 37,542 5.53 % $ 73,888 $ 70,425 4.09 % State and political subdivisions 29,046 2.49 % 35,128 33,322 2.46 % Corporate 925 5.22 % 10,956 10,881 4.95 % Asset backed securities 13,931 6.23 % 18,934 18,487 6.43 % Total $ 81,444 4.56 % $ 138,906 $ 133,115 4.08 % Mortgage-backed securities: Residential mortgage-backed - US agency $ 36,227 4.87 % $ 40,636 $ 39,171 4.65 % Collateralized mortgage obligations - US agency 7,994 3.40 % 14,376 13,530 4.05 % Collateralized mortgage obligations - Private label 60,830 5.23 % 85,426 83,309 5.68 % Total $ 105,051 4.97 % $ 140,438 $ 136,010 5.22 % Other non-maturity investments: Equity securities $ - 0.00 % $ 206 $ 206 0.53 % Total $ - 0.00 % $ 206 $ 206 0.53 % Total investment securities $ 186,495 4.79 % $ 279,550 $ 269,331 4.65 % HELD-TO-MATURITY More Than One More Than Five One Year or Less to Five Years to Ten Years Annualized Annualized Annualized Amortized Weighted Amortized Weighted Amortized Weighted (Dollars in thousands) Cost Avg Yield Cost Avg Yield Cost Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ - 0.00 % $ 1,498 3.18 % $ - 0.00 % State and political subdivisions 2,427 3.65 % 4,916 2.93 % 8,120 2.22 % Corporate 4,001 3.94 % 27,559 5.23 % 12,068 4.58 % Asset backed securities - 0.00 % 3,390 4.63 % - 0.00 % Total $ 6,428 3.83 % $ 37,363 4.79 % $ 20,188 3.63 % Mortgage-backed securities: Residential mortgage-backed - US agency $ 1,200 3.42 % $ 27 2.98 % $ 4,146 2.17 % Collateralized mortgage obligations - US agency 1,142 3.63 % 4,699 2.77 % - 0.00 % Collateralized mortgage obligations - Private label 9,770 7.25 % 9,058 6.00 % 10,213 6.16 % Total $ 12,112 6.53 % $ 13,784 4.89 % $ 14,359 5.01 % Total investment securities $ 18,540 5.59 % $ 51,147 4.82 % $ 34,547 4.20 % More Than Ten Years Total Investment Securities Annualized Annualized Amortized Weighted Amortized Fair Weighted (Dollars in thousands) Cost Avg Yield Cost Value Avg Yield Debt investment securities: US Treasury, agencies and GSEs $ 2,150 2.57 % $ 3,648 $ 3,648 2.82 % State and political subdivisions 1,690 2.56 % 17,153 17,153 2.66 % Corporate - 0.00 % 43,628 43,628 4.93 % Asset backed securities 9,660 4.35 % 13,050 13,050 4.42 % Total $ 13,500 3.84 % $ 77,479 $ 77,479 4.24 % Mortgage-backed securities: Residential mortgage-backed - US agency $ 4,202 5.25 % $ 9,575 $ 9,575 3.68 % Collateralized mortgage obligations - US agency 6,099 2.87 % 11,940 11,940 2.90 % Collateralized mortgage obligations - Private label 30,905 4.17 % 59,946 59,946 5.29 % Total $ 41,206 4.09 % $ 81,461 $ 81,461 4.75 % Total investment securities $ 54,706 4.03 % $ 158,940 $ 158,940 4.50 % The yield information disclosed above does not give effect to changes in fair value that are reflected in accumulated other comprehensive loss in consolidated shareholders’ equity. - 43 - Loans Receivable Average loans receivable represented 65.8% of the Company’s average interest earning assets in 2024 and accounted for the greatest portion of total interest income.
For regulatory reporting purposes, the Federal Reserve Board has indicated that the preferred securities will continue to qualify as Tier 1 Capital subject to previously specified limitations, until further notice. If regulators make a - 52 - determination that Trust Preferred Securities can no longer be considered in regulatory capital, the securities become callable and the Company may redeem them.
For regulatory reporting purposes, the Federal Reserve Board has indicated that the preferred securities will continue to qualify as Tier 1 Capital subject to previously specified limitations, until further notice. If regulators make a determination that Trust Preferred Securities can no longer be considered in regulatory capital, the securities become callable and the Company may redeem them.
If current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. The judgment about the level of future taxable income, including that which is considered capital, is inherently subjective and is reviewed on a continual basis as regulatory and business factors change.
If current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. The - 34 - judgment about the level of future taxable income, including that which is considered capital, is inherently subjective and is reviewed on a continual basis as regulatory and business factors change.
For commercial real estate held as collateral, the property is inspected every two years. - 46 - Management has identified certain loans with potential credit profiles that may result in the borrowers not being able to comply with the current loan repayment terms and which may result in possible future identified loan reporting.
For commercial real estate held as collateral, the property is inspected every two years. Management has identified certain loans with potential credit profiles that may result in the borrowers not being able to comply with the current loan repayment terms and which may result in possible future identified loan reporting.
The assumptions used by management are discussed in Note 14 to the consolidated financial statements contained herein. Evaluation of Goodwill . Management performs an annual evaluation of the Company’s goodwill for possible impairment. Based on the results of the 2023 evaluation, management has determined that the carrying value of goodwill is not impaired as of December 31, 2023.
The assumptions used by management are discussed in Note 14 to the consolidated financial statements contained herein. Evaluation of Goodwill . Management performs an annual evaluation of the Company’s goodwill for possible impairment. Based on the results of the 2023 evaluation, management has determined that the carrying value of goodwill is not impaired as of December 31, 2024.
The Articles Supplementary authorized 1,505,283 shares of the Non-Voting Common Stock which Castle Creek received in exchange for the Company’s outstanding Series B Preferred Stock on a one for one basis and allowed for the issuance of 125,000 shares of Non-Voting Common Stock that may be issued upon the exercise of the Warrant. - 29 - The preferences, limitations, powers and relative rights of the Non-Voting Common Stock are set forth in the Articles Supplementary, a summary of which follows: Ranking : The Non-Voting Common Stock will rank, as to the payment of dividends and distribution of assets upon dissolution, liquidation or winding up of the Company, (i) pari passu with the Company’s Common Stock, and (ii) subordinate and junior to all other securities of the Company which, by their respective terms, are senior to the Non-Voting Common Stock or the Company’s Common Stock.
The Articles Supplementary authorized 1,505,283 shares of the Non-Voting Common Stock which Castle Creek received in exchange for the Company’s outstanding Series B Preferred Stock on a one for one basis and allowed for the issuance of 125,000 shares of Non-Voting Common Stock that may be issued upon the exercise of the Warrant. - 28 - The preferences, limitations, powers and relative rights of the Non-Voting Common Stock are set forth in the Articles Supplementary, a summary of which follows: Ranking : The Non-Voting Common Stock will rank, as to the payment of dividends and distribution of assets upon dissolution, liquidation or winding up of the Company, (i) pari passu with the Company’s Common Stock, and (ii) subordinate and junior to all other securities of the Company which, by their respective terms, are senior to the Non-Voting Common Stock or the Company’s Common Stock.
Pathfinder Bank maintains a quality control program for closed loans and considers the risks and uncertainties associated with potential repurchase requirements to be minimal. Allowance for Credit Losses The allowance for credit losses (ACL) is established through provision for credit losses and reduced by loan charge-offs net of recoveries.
Pathfinder Bank maintains a quality control program for closed loans and considers the risks and uncertainties associated with potential repurchase requirements to be minimal. - 46 - Allowance for Credit Losses The allowance for credit losses (ACL) is established through provision for credit losses and reduced by loan charge-offs net of recoveries.
These fees will be amortized over the life of the 2020 Subordinated Debt through its first redemption date using the effective interest method, giving rise to an effective cost of funds of 6.22% from the issuance date calculated under this method.
These fees will be amortized over the life of the 2020 Subordinated Debt through its first redemption date using the effective interest method, giving - 51 - rise to an effective cost of funds of 6.22% from the issuance date calculated under this method.
Our deposits consist of various types of transactional accounts such as savings accounts, money market accounts, NOW, and demand accounts as well as time accounts in the form of certificates of deposits. We solicit deposits in our market areas as well as online through our website.
Our deposits consist of various types of transactional accounts such as savings accounts, money market accounts, NOW, and demand accounts as - 49 - well as time accounts in the form of certificates of deposits. We solicit deposits in our market areas as well as online through our website.
The Company utilizes the Discounted Cash Flow (“DCF”) method for its pooled segment calculation. The DCF method implements a probability of default with loss given default and loss exposure at default estimation.
The Company utilizes the Discounted Cash Flow (“DCF”) method for its pooled segment calculation. The DCF method implements a probability of default and loss given default and loss exposure at default estimation.
By investing in these types of assets, the Company reduces the credit risk of its asset base through geographical and collateral-type diversification but must accept lower yields than would typically be available on loan products. Our mortgage-backed securities and collateralized mortgage obligations portfolios include privately-issued but substantially collateralized pass-through securities as well as pass-through securities guaranteed by GSEs.
By investing in these types of assets, the Company reduces the credit risk of its asset base through geographical and collateral-type diversification but must accept lower yields than would typically be available on loan products. Our mortgage-backed securities and collateralized mortgage obligation portfolios include privately-issued but substantially collateralized pass-through securities as well as pass-through securities guaranteed by GSEs.
Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires - 34 - significant judgment on the use of estimates related to the amount and timing of expected future cash flows on individually evaluated loans, estimated losses on pools of homogeneous loans based on historical loss experience, and environmental factors, all of which may be susceptible to significant change.
Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires - 33 - significant judgment on the use of estimates related to the amount and timing of expected future cash flows on individually evaluated loans, estimated losses on pools of homogeneous loans based on historical loss experience, and environmental factors, all of which may be susceptible to significant change.
The Bank allocated $10.7 million to the ACL for these loans, including $3.4 million derived from the use of qualitative factors in the calculation.
The Bank allocated $10.4 million to the ACL for these loans, including $4.3 million derived from the use of qualitative factors in the calculation.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2024. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2025. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
The sensitivity and related range of impacts for various judgments on the ACL is a hypothetical analysis and is used to determine management’s judgments or assumptions of qualitative loss factors that were utilized at December 31, 2023 in the final recorded estimation of the ACL on loans recognized on the Statement of Financial Condition.
The sensitivity and related range of impacts for various judgments on the ACL is a hypothetical analysis and is used to determine management’s judgments or assumptions of qualitative loss factors that were utilized at December 31, 2024 in the final recorded estimation of the ACL on loans recognized on the Statement of Financial Condition.
As of December 31, 2023, the Bank’s most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as “well-capitalized”, under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized”, the Bank must maintain specified total risk-based, Tier 1 risk-based and Tier 1 leverage ratios.
As of December 31, 2024, the Bank’s most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as “well-capitalized”, under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized”, the Bank must maintain specified total risk-based, Tier 1 risk-based and Tier 1 leverage ratios.
The Company was required to request stockholder approval to eliminate the Exchange Cap no later than at the 2021 annual meeting of Company shareholders. In addition, at the same meeting, the Company was required to seek shareholder approval to create a class of - 28 - non-voting convertible common stock.
The Company was required to request stockholder approval to eliminate the Exchange Cap no later than at the 2021 annual meeting of Company shareholders. In addition, at the same meeting, the Company was required to seek shareholder approval to create a class of - 27 - non-voting convertible common stock.
The Company also establishes a specific allowance, regardless of the size of the loan, modified due to borrowers experiencing financial difficulties. In addition, an accruing substandard loan could be identified as being individually evaluated.
The Company also establishes a specific allowance, regardless of the size of the loan, for modified loans due to borrowers experiencing financial difficulties. In addition, an accruing substandard loan could be identified as being individually evaluated.
However, the exercise of such Warrant remains subject to certain contractual provisions, and regulatory approval if Castle Creek’s ownership of Common Stock would exceed 9.9%. At December 31, 2023, Castle Creek owned approximately 8.8% of the Company’s common voting stock. The Warrant will receive dividends equal to the amount paid on the Company’s common stock.
However, the exercise of such Warrant remains subject to certain contractual provisions, and regulatory approval if Castle Creek’s ownership of Common Stock would exceed 9.9%. At December 31, 2024, Castle Creek owned approximately 9.9% of the Company’s common voting stock. The Warrant will receive dividends equal to the amount paid on the Company’s common stock.
In addition, future problems with one or more specifically-identified loans or one or more specifically-identified borrower relationships could require a significant increase to the ACL. Management’s methodology and policy in determining the allowance for credit losses can be found in Note 1 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
In addition, future problems with one or more individually evaluated loans or one or more individually evaluated borrower relationships could require a significant increase to the ACL. Management’s methodology and policy in determining the allowance for credit losses can be found in Note 1 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
The decreases in return on average assets and return on average equity in 2023, as compared to the previous year, were both primarily due to the aforementioned decrease in net income.
The decreases in return on average assets and return on average equity in 2024, as compared to the previous year, were both primarily due to the aforementioned decrease in net income.
Management monitors its loan portfolios closely and has incorporated our current estimate of the ultimate collectability of all loans into the reported allowance for credit losses at December 31, 2023. The ratio of the allowance for credit losses to year end loans was 1.78% and 1.71% at December 31, 2023 and December 31, 2022, respectively.
Management monitors its loan portfolios closely and has incorporated our current estimate of the ultimate collectability of all loans into the reported allowance for credit losses at December 31, 2024. The ratio of the allowance for credit losses to year end loans was 1.88% and 1.78% at December 31, 2024 and December 31, 2023, respectively.
The allowance for credit losses represents the amount available for probable credit losses in the Company’s loan portfolio as estimated by management.
The allowance for credit losses represents the amount available for lifetime credit losses in the Company’s loan portfolio as estimated by management.
The measurement of specifically-identified loans is based upon the fair value of the collateral or the present value of future cash flows discounted at the historical effective interest rate for specifically-identified loans when the receipt of contractual principal and interest is probable.
The measurement of individually evaluated loans is based upon the fair value of the collateral or the present value of future cash flows discounted at the historical effective interest rate for individually evaluated loans when the receipt of contractual principal and interest is probable.
Conversion : Each share of Non-Voting Common Stock will be convertible into one share of the Company’s Common Stock (i) at any time and from time to time at the request of the holder thereof or at the written request of the Company; provided that upon such conversion, the holder, together with all affiliates of the holder, will not own or control in the aggregate more than 9.9% of the Company’s Common Stock (or of any class of the Company’s voting securities), excluding for the purpose of this calculation any reduction in the ownership resulting from transfers by such holder of voting securities (which, for the avoidance of doubt, does not included the Non-Voting Common Stock); or (ii) automatically, without any further action of the part of the holder, on the date that the holder transfers such share of Non-Voting Common Stock to a non-affiliate of the holder in a permissible transfer. - 30 - SELECTED FINANCIAL DATA The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the consolidated financial statements and related notes: At or for the year ended December 31, (In thousands, except per share amounts) 2023 2022 2021 2020 2019 Year End Total assets $ 1,465,798 $ 1,399,921 $ 1,285,177 $ 1,227,443 $ 1,093,807 Investment securities available-for-sale 258,716 191,726 190,598 128,261 111,134 Investment securities held-to-maturity 179,286 194,402 160,923 171,224 122,988 Loans receivable, net 881,232 882,435 819,524 812,718 772,782 Deposits 1,120,067 1,125,430 1,055,346 995,907 881,893 Borrowings and subordinated debt 205,513 145,730 106,661 121,450 108,253 Shareholders' equity 120,256 111,582 110,633 97,722 90,669 For the Year Total interest income $ 67,663 $ 51,098 $ 45,827 $ 42,507 $ 41,758 Total interest expense 28,744 9,695 7,532 10,864 13,528 Net interest income 38,919 41,403 38,295 31,643 28,230 Provision for credit losses 2,930 2,754 1,022 4,707 1,966 Net interest income after provision for credit losses 35,989 38,649 37,273 26,936 26,264 Total noninterest income 5,190 5,914 6,231 6,485 4,917 Total noninterest expense 29,395 28,874 27,495 25,080 25,730 Income before income taxes 11,784 15,689 16,009 8,341 5,451 Income tax expense 2,362 2,656 3,499 1,295 1,165 Net income attributable to noncontrolling interest 129 101 103 96 10 Net income attributable to Pathfinder Bancorp, Inc. $ 9,293 $ 12,932 $ 12,407 $ 6,950 $ 4,276 Convertible preferred stock dividends - - 97 291 208 Warrant dividends 45 45 35 30 23 Undistributed earnings allocated to participating securities 1,729 2,666 2,699 1,224 467 Net income available to common shareholders $ 7,519 $ 10,221 $ 9,576 $ 5,405 $ 3,578 Per Share Income per share - basic $ 1.51 $ 2.13 $ 2.07 $ 1.17 $ 0.80 Income per share - diluted 1.51 2.13 2.07 1.17 0.80 Book value per common share 19.59 18.40 18.43 17.56 15.94 Tangible book value per common share (a) 18.83 17.63 17.66 16.53 14.95 Cash dividends declared 0.36 0.36 0.28 0.24 0.24 Performance Ratios Return on average assets 0.67 % 0.96 % 0.98 % 0.60 % 0.43 % Return on average equity 8.09 11.77 11.91 7.43 5.34 Average equity to average assets 8.26 8.17 8.26 8.02 7.97 Shareholders' Equity to total assets at end of year 8.15 7.93 8.58 7.94 8.27 Net interest rate spread 2.47 3.05 3.06 2.68 2.73 Net interest margin 2.95 3.24 3.21 2.88 2.98 Average interest-earning assets to average interest-bearing liabilities 121.63 124.03 124.61 120.49 116.84 Noninterest expense to average assets 2.11 2.15 2.18 2.15 2.56 Efficiency ratio (a) (b) 66.62 61.11 63.07 68.71 78.75 Dividend payout ratio 28.95 20.87 16.17 20.39 30.21 Return on average common equity 8.09 11.77 11.91 8.92 6.02 - 31 - At December 31, 2023 2022 2021 2020 2019 Asset Quality Ratios Nonperforming loans to year end loans 1.92 % 1.00 % 1.00 % 2.58 % 0.67 % Nonperforming assets to total assets 1.19 0.66 0.65 1.74 0.49 Allowance for credit losses to year end loans 1.78 1.71 1.57 1.55 1.11 Allowance for credit losses to nonperforming loans 92.73 169.93 155.99 59.89 165.25 Regulatory Capital Ratios (Bank Only) Total capital (to risk-weighted assets) 15.05 % 15.14 % 15.19 % 13.13 % 12.28 % Tier 1 capital (to risk-weighted assets) 13.80 13.88 13.94 11.87 11.16 Tier 1 capital (to adjusted assets) 10.11 9.67 9.52 8.63 8.20 Tier 1 Common Equity (to risk-weighted assets) 13.80 13.88 13.94 11.87 11.16 Number of: Banking offices 12 12 11 11 11 Fulltime equivalent employees 164 160 161 176 157 (a) See table below for reconciliation of the non-GAAP financial measures.
Conversion : Each share of Non-Voting Common Stock will be convertible into one share of the Company’s Common Stock (i) at any time and from time to time at the request of the holder thereof or at the written request of the Company; provided that upon such conversion, the holder, together with all affiliates of the holder, will not own or control in the aggregate more than 9.9% of the Company’s Common Stock (or of any class of the Company’s voting securities), excluding for the purpose of this calculation any reduction in the ownership resulting from transfers by such holder of voting securities (which, for the avoidance of doubt, does not included the Non-Voting Common Stock); or (ii) automatically, without any further action of the part of the holder, on the date that the holder transfers such share of Non-Voting Common Stock to a non-affiliate of the holder in a permissible transfer. - 29 - SELECTED FINANCIAL DATA The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the consolidated financial statements and related notes: At or for the year ended December 31, (In thousands, except per share amounts) 2024 2023 2022 2021 2020 Year End Total assets $ 1,474,874 $ 1,465,798 $ 1,399,921 $ 1,285,177 $ 1,227,443 Investment securities available-for-sale 269,331 258,716 191,726 190,598 128,261 Investment securities held-to-maturity 158,683 179,286 194,402 160,923 171,224 Loans receivable, net 901,743 881,232 882,435 819,524 812,718 Deposits 1,204,524 1,120,067 1,125,430 1,055,346 995,907 Borrowings and subordinated debt 118,175 205,513 145,730 106,661 121,450 Shareholders' equity 121,483 120,256 111,582 110,633 97,722 For the Year Total interest income $ 78,357 $ 67,663 $ 51,098 $ 45,827 $ 42,507 Total interest expense 37,368 28,744 9,695 7,532 10,864 Net interest income 40,989 38,919 41,403 38,295 31,643 Provision for credit losses 10,973 2,930 2,754 1,022 4,707 Net interest income after provision for credit losses 30,016 35,989 38,649 37,273 26,936 Total noninterest income 9,561 5,190 5,914 6,231 6,485 Total noninterest expense 34,417 29,395 28,874 27,495 25,080 Income before income taxes 5,160 11,784 15,689 16,009 8,341 Income tax expense 332 2,362 2,656 3,499 1,295 Net income attributable to noncontrolling interest 1,445 129 101 103 96 Net income attributable to Pathfinder Bancorp, Inc. $ 3,383 $ 9,293 $ 12,932 $ 12,407 $ 6,950 Convertible preferred stock dividends - - - 97 291 Warrant dividends 50 45 45 35 30 Undistributed earnings allocated to participating securities 216 1,729 2,666 2,699 1,224 Net income available to common shareholders $ 3,117 $ 7,519 $ 10,221 $ 9,576 $ 5,405 Per Share Income per share - basic $ 0.54 $ 1.51 $ 2.13 $ 2.07 $ 1.17 Income per share - diluted 0.54 1.51 2.13 2.07 1.17 Book value per common share 19.83 19.59 18.40 18.43 17.56 Tangible book value per common share (a) 18.03 18.83 17.63 17.66 16.53 Cash dividends declared 0.40 0.36 0.36 0.28 0.24 Performance Ratios Return on average assets 0.23 % 0.67 % 0.96 % 0.98 % 0.60 % Return on average equity 2.75 8.09 11.77 11.91 7.43 Average equity to average assets 8.47 8.26 8.17 8.26 8.02 Shareholders' Equity to total assets at end of year 8.24 8.15 7.93 8.58 7.94 Net interest rate spread 2.37 2.47 3.05 3.06 2.68 Net interest margin 2.98 2.95 3.24 3.21 2.88 Average interest-earning assets to average interest-bearing liabilities 122.58 121.63 124.03 124.61 120.49 Noninterest expense to average assets 2.37 2.11 2.15 2.18 2.15 Efficiency ratio (a) (b) 72.53 66.74 60.81 61.80 67.69 Dividend payout ratio 78.28 28.95 20.87 16.17 20.39 Return on average common equity 2.75 8.09 11.77 11.91 8.92 - 30 - At December 31, 2024 2023 2022 2021 2020 Asset Quality Ratios Nonperforming loans to year end loans 2.40 % 1.92 % 1.00 % 1.00 % 2.58 % Nonperforming assets to total assets 1.50 1.19 0.66 0.65 1.74 Allowance for credit losses to year end loans 1.88 1.78 1.71 1.57 1.55 Allowance for credit losses to nonperforming loans 78.08 92.73 169.93 155.99 59.89 Regulatory Capital Ratios (Bank Only) Total capital (to risk-weighted assets) 14.65 % 15.05 % 15.14 % 15.19 % 13.13 % Tier 1 capital (to risk-weighted assets) 13.40 13.80 13.88 13.94 11.87 Tier 1 capital (to adjusted assets) 9.67 10.11 9.67 9.52 8.63 Tier 1 Common Equity (to risk-weighted assets) 13.40 13.80 13.88 13.94 11.87 Number of: Banking offices 13 12 12 11 11 Fulltime equivalent employees 175 164 160 161 176 (a) See table below for reconciliation of the non-GAAP financial measures.
The Company had 6,099,571 and 6,032,112 shares of voting and non-voting common stock in aggregate outstanding at December 31, 2023 and December 31, 2022, respectively. Since the Conversion, we have substantially transformed our business activities from those of a traditional savings bank to those of a commercial bank.
The Company had 6,125,649 and 6,099,571 shares of voting and non-voting common stock in aggregate outstanding at December 31, 2024 and December 31, 2023, respectively. Since the Conversion, we have substantially transformed our business activities from those of a traditional savings bank to those of a commercial bank.
The ACL could increase (or decrease) by approximately $891,000, assuming a 25% negative (or positive) change within the group of qualitative factors used to determine the ACL for commercial loans.
The ACL could increase (or decrease) by approximately $1.1 million, assuming a 25% negative (or positive) change within the group of qualitative factors used to determine the ACL for commercial loans.
The Company considers a loan specifically-identified when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan.
The Company considers a loan as individually evaluated when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan.
Accordingly, interest expense related to this transaction of $1.6 million was recorded in both the years ended December 31, 2023 and 2022. Shareholders' Equity The Company’s shareholders’ equity increased $8.5 million, or 7.7%, to $119.5 million at December 31, 2023 from $111.0 million at December 31, 2022.
Accordingly, interest expense related to this transaction of $1.6 million was recorded in both the years ended December 31, 2024 and 2023. Shareholders' Equity The Company’s shareholders’ equity increased $2.0 million, or 1.7%, to $121.5 million at December 31, 2024 from $119.5 million at December 31, 2023.
Such sources could include, but are not limited to, additional borrowings, brokered deposits, negotiated time deposits, the sale of "available-for-sale" investment securities, or the sale of loans. Such actions could result in higher interest expense costs and/or losses on the sale of securities or loans. For the year ended December 31, 2023, cash and cash equivalents increased by $11.9 million.
Such sources could include, but are not limited to, additional borrowings, brokered deposits, negotiated time deposits, the sale of "available-for-sale" investment securities, or the sale of loans. Such actions could result in higher interest expense costs and/or losses on the sale of securities or loans. For the year ended December 31, 2024, cash and cash equivalents decreased by $17.2 million.
The Company generally places a loan on nonaccrual status and ceases accruing interest when loan payment performance is deemed unsatisfactory and the loan is past due 90 days or more. There are no loans that are past due 90 days or more and still accruing interest.
The Company generally places a loan on nonaccrual status and ceases accruing interest when loan payment performance is deemed unsatisfactory and the loan is past due 90 days or more. There are no loans that are past due 90 days or more and still accruing interest as set forth in the table above.
Management believes that the current level of the allowance for credit losses, at $16.0 million at December 31, 2023, adequately addresses the current level of risk within the loan portfolio, particularly considering the types and levels of collateralization supporting the substantial majority of the portfolio.
Management believes that the current level of the allowance for credit losses, at $17.2 million at December 31, 2024, adequately addresses the current level of risk within the loan portfolio, particularly considering the types and levels of collateralization supporting the substantial majority of the portfolio.
Had the loans in nonaccrual status performed in accordance with their original terms, additional interest income of $989,000 and $476,000 would have been recorded for the years ended December 31, 2023 and December 31, 2022, respectively.
Had the loans in nonaccrual status performed in accordance with their original terms, additional interest income of $2.4 million and $989,000 would have been recorded for the years ended December 31, 2024 and December 31, 2023, respectively.
In addition to the term brokered deposits detailed above, the Bank had $40.0 million in overnight brokered funds, derived from a pool of individual depositors, at December 31, 2023. The interest rate paid for these funds is indexed to the overnight Fed funds effective rate plus 0.15%.
In addition to the term brokered deposits detailed above, the Bank had $2.0 million in overnight brokered funds, derived from a pool of individual depositors, at December 31, 2024. The interest rate paid for these funds is indexed to the overnight Fed funds effective rate plus -0- basis points.
Of these loans, 17 loans, totaling $1.6 million, were valued using the present value of future cash flows method; and 52 loans, totaling $20.9 million, were valued based on a collateral analysis. For all other loans, the Company uses the general allocation methodology that establishes an allowance to estimate the probable lifetime loss for each risk-rating category.
Of these loans, 15 loans, totaling $3.0 million, were valued using the present value of future cash flows method; and 30 loans, totaling $17.0 million, were valued based on a collateral analysis. For all other loans, the Company uses the general allocation methodology that establishes an allowance to estimate the probable lifetime loss for each risk-rating category.
The capital securities of the trust are a pooled trust preferred fund of Preferred Term Securities VI, Ltd., with interest rates that reset quarterly, and are indexed to the 3-month the Secured Overnight Financing Rate ("SOFR") which is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, plus1.91%. These securities have a five-year call provision.
The capital securities of the trust are a pooled trust preferred fund of Preferred Term Securities VI, Ltd., with interest rates that reset quarterly, and are indexed to the 3-month the Secured Overnight Financing Rate ("SOFR") which is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, plus 1.91%.
The average cost of all interest-bearing liabilities increased from 0.94% in 2022 to 2.65% in 2023. In addition, the year-over-year increase in interest expense resulted from increases in the average balances of deposits and borrowings.
The average cost of all interest-bearing liabilities increased from 2.65% in 2023 to 3.33% in 2024. In addition, the year-over-year increase in interest expense resulted from increases in the average balances of deposits and borrowings.
The Company believes that this restriction will not have an impact on the Company's ability to meet its ongoing cash obligations. At December 31, 2023 and 2022, the Company had cash and cash equivalents of $47.1 million and $35.3 million, respectively. The Bank has a number of existing credit facilities available to it.
The Company believes that this restriction will not have an impact on the Company's ability to meet its ongoing cash obligations. At December 31, 2024 and 2023, the Company had cash and cash equivalents of $31.6 million and $48.7 million, respectively. The Bank has a number of existing credit facilities available to it.
RECENT EVENTS On December 22, 2023, the Company announced that its Board of Directors had declared a cash dividend of $0.09 per share on the Company’s voting common and non-voting common stock, and a cash dividend of $0.09 per notional share for the issued Warrant relating to the fiscal quarter ended December 31, 2023.
On December 23, 2024, the Company announced that its Board of Directors had declared a cash dividend of $0.10 per share on the Company’s voting common and non-voting common stock, and a cash dividend of $0.10 per notional share for the issued Warrant relating to the fiscal quarter ended December 31, 2024.
December 31, (Dollars in thousands) 2023 2022 2021 2020 2019 Residential real estate $ 258,198 28.8 % $ 262,008 29.2 % $ 246,344 29.6 % $ 233,094 28.2 % $ 212,663 27.2 % Residential real estate held-for-sale - 0.0 % 19 0.0 % 513 0.1 % 1,526 0.2 % 35,936 4.6 % Commercial real estate 358,521 40.0 % 344,721 38.4 % 287,279 34.5 % 286,066 34.7 % 254,781 32.6 % Commercial and tax exempt 165,460 18.4 % 163,806 18.3 % 156,167 18.8 % 194,963 23.6 % 148,776 19.0 % Home equity and junior liens 35,231 3.9 % 34,349 3.8 % 32,048 3.8 % 38,941 4.7 % 46,688 6.0 % Consumer loans 79,797 8.9 % 92,851 10.3 % 110,108 13.2 % 70,905 8.6 % 82,607 10.6 % Total loans receivable $ 897,207 100.0 % $ 897,754 100.0 % $ 832,459 100.0 % $ 825,495 100.0 % $ 781,451 100.0 % The following table shows the amount of loans outstanding, including net deferred costs, as of December 31, 2023 which, based on remaining scheduled repayments of principal, are due in the periods indicated.
December 31, (Dollars in thousands) 2024 2023 2022 2021 2020 Residential real estate $ 255,302 27.8 % $ 258,198 28.8 % $ 262,008 29.2 % $ 246,344 29.6 % $ 233,094 28.2 % Residential real estate held-for-sale - 0.0 % - 0.0 % 19 0.0 % 513 0.1 % 1,526 0.2 % Commercial real estate 377,577 41.1 % 358,521 40.0 % 344,721 38.4 % 287,279 34.5 % 286,066 34.7 % Commercial and tax exempt 162,059 17.6 % 165,460 18.4 % 163,806 18.3 % 156,167 18.8 % 194,963 23.6 % Home equity and junior liens 51,338 5.6 % 35,231 3.9 % 34,349 3.8 % 32,048 3.8 % 38,941 4.7 % Consumer loans 72,710 7.9 % 79,797 8.9 % 92,851 10.3 % 110,108 13.2 % 70,905 8.6 % Total loans receivable $ 918,986 100.0 % $ 897,207 100.0 % $ 897,754 100.0 % $ 832,459 100.0 % $ 825,495 100.0 % The following table shows the amount of loans outstanding, including net deferred costs, as of December 31, 2024 which, based on remaining scheduled repayments of principal, are due in the periods indicated.
In estimating the ACL on loans, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. At December 31, 2023, the Bank held $520.6 million in commercial real estate and commercial & industrial loans (collectively, commercial loans) representing 57.9% of the Bank’s entire loan portfolio.
In estimating the ACL on loans, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. At December 31, 2024, the Bank held $535.0 million in commercial real estate and commercial & industrial loans (collectively, commercial loans) representing 58.2% of the Bank’s entire loan portfolio.
At December 31, 2023, the Bank had $205.0 million in outstanding commitments to extend credit and standby letters of credit. See Note 18 within the Notes to consolidated financial statements contained herein.
These financial instruments include commitments to extend credit and standby letters of credit. At December 31, 2024, the Bank had $233.0 million in outstanding commitments to extend credit and standby letters of credit. See Note 18 within the Notes to consolidated financial statements contained herein.
Commensurate with the increase in nonperforming loans to year end loans, the ratio of nonperforming assets to total assets increased to 1.19% at December 31, 2023 from 0.66% at December 31, 2022. The Company’s shareholders’ equity increased $8.5 million, or 7.7%, to $119.5 million at December 31, 2023 from $111.0 million at December 31, 2022.
Commensurate with the increase in nonperforming loans to year end loans, the ratio of nonperforming assets to total assets increased to 1.50% at December 31, 2024 from 1.19% at December 31, 2023. The Company’s shareholders’ equity increased $2.0 million, or 1.7%, to $121.5 million at December 31, 2024 from $119.5 million at December 31, 2023.
Core deposits, which exclude time deposits, are considered to be more stable and generally provide the Company with a lower cost of funds than time deposits.
Core deposits, which exclude brokered deposits and certificates of deposit of $250,000 or more, are considered to be more stable and generally provide the Company with a lower cost of funds than brokered and time deposits.
The allocation of the allowance by category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category. 2023 2022 2021 2020 2019 Allocation Percent of Allocation Percent of Allocation Percent of Allocation Percent of Allocation Percent of of the Loans to of the Loans to of the Loans to of the Loans to of the Loans to (Dollars in thousands) Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Residential real estate $ 2,466 28.8 % $ 714 29.2 % $ 872 29.6 % $ 931 28.2 % $ 580 27.2 % Commercial real estate 5,751 40.0 % 5,881 38.4 % 5,308 34.5 % 4,776 34.7 % 4,010 32.6 % Commercial and tax exempt 4,956 18.4 % 6,937 18.3 % 3,701 18.8 % 4,663 23.6 % 2,841 19.0 % Home equity and junior liens 657 3.9 % 741 3.8 % 774 3.8 % 739 4.7 % 553 6.0 % Consumer loans 2,145 8.9 % 1,046 10.3 % 1,297 13.2 % 1,123 8.6 % 413 10.6 % Unallocated (1) - - - - 983 0.1 % 545 0.2 % 272 4.6 % Total $ 15,975 100.0 % $ 15,319 100.0 % $ 12,935 100.0 % $ 12,777 100.0 % $ 8,669 100.0 % (1) Includes loans held-for-sale at December 31 for each of the indicated years. - 48 - The following table sets forth the allowance for credit losses for the years indicated: (Dollars In thousands) 2023 2022 2021 2020 2019 Balance at beginning of year $ 15,319 $ 12,935 $ 12,777 $ 8,669 $ 7,306 Adoption of New Accounting Standards 1,886 Provisions charged to operating expenses 2,991 2,754 1,022 4,707 1,966 Recoveries of loans previously charged-off: Commercial real estate and loans 236 296 70 4 1 Consumer and home equity 118 95 88 95 60 Residential real estate 1 - - 2 2 Total recoveries 355 391 158 101 63 Loans charged off: Commercial real estate and loans (4,109 ) (585 ) (764 ) (222 ) (294 ) Consumer and home equity (346 ) (147 ) (240 ) (353 ) (361 ) Residential real estate (121 ) (29 ) (20 ) (125 ) (11 ) Total charged-off (4,576 ) (761 ) (1,024 ) (700 ) (666 ) Net charge-offs (4,221 ) (370 ) (866 ) (599 ) (603 ) Balance at end of year $ 15,975 $ 15,319 $ 12,935 $ 12,777 $ 8,669 Net charge-offs to average loans outstanding 0.48 % 0.04 % 0.10 % 0.08 % 0.09 % Allowance for credit losses to year-end loans 1.78 % 1.71 % 1.57 % 1.55 % 1.11 % The following table sets forth the loan net charge-off ratios for the years indicated: 2023 2022 Allowance for credit losses to year-end loans 1.78 % 1.71 % Allowance for credit losses to nonperforming loans 92.73 % 169.93 % Nonaccrual loans to total loans 1.92 % 1.00 % Allowance for credit losses to nonaccrual loans 92.73 % 169.93 % Net charge-offs to average loans outstanding Commercial real estate and loans 0.44 % 0.03 % Consumer and home equity 0.03 % 0.01 % Residential real estate 0.01 % 0.00 % Total charged-off 0.48 % 0.04 % Bank Owned Life Insurance The Company held $24.6 million and $24.0 million in bank owned life insurance at December 31, 2023 and 2022, respectively.
The allocation of the allowance by category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category. 2024 2023 2022 2021 2020 Allocation Percent of Allocation Percent of Allocation Percent of Allocation Percent of Allocation Percent of of the Loans to of the Loans to of the Loans to of the Loans to of the Loans to (Dollars in thousands) Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Residential real estate $ 2,059 27.8 % $ 2,466 28.8 % $ 714 29.2 % $ 872 29.6 % $ 931 28.2 % Commercial real estate 6,746 41.1 % 5,751 40.0 % 5,881 38.4 % 5,308 34.5 % 4,776 34.7 % Commercial and tax exempt 3,632 17.6 % 4,956 18.4 % 6,937 18.3 % 3,701 18.8 % 4,663 23.6 % Home equity and junior liens 715 5.6 % 657 3.9 % 741 3.8 % 774 3.8 % 739 4.7 % Consumer loans 4,091 7.9 % 2,145 8.9 % 1,046 10.3 % 1,297 13.2 % 1,123 8.6 % Unallocated (1) - - - - - - 983 0.1 % 545 0.2 % Total $ 17,243 100.0 % $ 15,975 100.0 % $ 15,319 100.0 % $ 12,935 100.0 % $ 12,777 100.0 % (1) Includes loans held-for-sale at December 31 for each of the indicated years. - 47 - The following table sets forth the allowance for credit losses for the years indicated: (Dollars In thousands) 2024 2023 2022 2021 2020 Balance at beginning of year $ 15,975 $ 15,319 $ 12,935 $ 12,777 $ 8,669 Adoption of New Accounting Standards - $ 1,886 Provisions charged to operating expenses 11,106 2,991 2,754 1,022 4,707 Recoveries of loans previously charged-off: Commercial real estate and loans 90 236 296 70 4 Consumer and home equity 221 118 95 88 95 Residential real estate 34 1 - - 2 Total recoveries 345 355 391 158 101 Loans charged off: Commercial real estate and loans (6,473 ) (4,109 ) (585 ) (764 ) (222 ) Consumer and home equity (3,663 ) (346 ) (147 ) (240 ) (353 ) Residential real estate (47 ) (121 ) (29 ) (20 ) (125 ) Total charged-off (10,183 ) (4,576 ) (761 ) (1,024 ) (700 ) Net charge-offs (9,838 ) (4,221 ) (370 ) (866 ) (599 ) Balance at end of year $ 17,243 $ 15,975 $ 15,319 $ 12,935 $ 12,777 Net charge-offs to average loans outstanding 1.09 % 0.48 % 0.04 % 0.10 % 0.08 % Allowance for credit losses to year-end loans 1.88 % 1.78 % 1.71 % 1.57 % 1.55 % The following table sets forth the loan net charge-off ratios for the years indicated: 2024 2023 Allowance for credit losses to year-end loans 1.88 % 1.78 % Allowance for credit losses to nonperforming loans 78.08 % 92.73 % Nonaccrual loans to total loans 2.40 % 1.92 % Net charge-offs to average loans outstanding Commercial real estate and loans 0.71 % 0.44 % Consumer and home equity 0.38 % 0.03 % Residential real estate 0.00 % 0.01 % Total charged-off 1.09 % 0.48 % Charge-offs for commercial real estate and loans increased $2.4 million, or .27%, and consumer and home equity increased $3.3 million, or .35% at December 31, 2024, when compared to the prior year.
The Company maintains strict loan underwriting standards and carefully monitors the performance of the loan portfolio. See Note 1: Summary of Significant Accounting Policies contained in the financial statements herein. Foreclosed Real Estate (“FRE”) balances decreased to $151,000 at December 31, 2023, compared to $221,000 from the prior year end.
The Company maintains strict loan underwriting standards and carefully monitors the performance of the loan portfolio. See Note 1: Summary of Significant Accounting Policies contained in the financial statements herein. FRE balances decreased to zero at December 31, 2024, compared to $151,000 at the prior year end.
(GAAP) (numerator) $ 9,293 $ 12,932 $ 12,407 $ 6,950 $ 4,276 Average equity 114,824 109,898 104,131 93,586 80,136 Average preferred stock - - - 15,709 9,074 Denominator $ 114,824 $ 109,898 $ 104,131 $ 77,877 $ 71,062 Return on average common equity 8.09 % 11.77 % 11.91 % 8.92 % 6.02 % - 33 - At or for the year ended December 31, (In thousands, except per share amounts) 2023 2022 2021 2020 2019 Regulatory Capital Ratios (Bank Only) Total capital (to risk-weighted assets) Total equity (GAAP) $ 137,943 $ 126,148 $ 121,896 $ 106,720 $ 88,138 Goodwill (4,536 ) (4,536 ) (4,536 ) (4,536 ) (4,536 ) Intangible assets (85 ) (101 ) (117 ) (133 ) (149 ) Addback: Accumulated other comprehensive income 9,605 12,172 1,268 2,236 2,971 Total Tier 1 Capital $ 142,927 $ 133,683 $ 118,511 $ 104,287 $ 86,424 Allowance for loan and lease losses 12,995 12,076 10,655 11,002 8,669 Total Tier 2 Capital $ 12,995 $ 12,076 $ 10,655 $ 11,002 $ 8,669 Total Tier 1 plus Tier 2 Capital (numerator) $ 155,922 $ 145,759 $ 129,166 $ 115,289 $ 95,093 Risk-weighted assets (denominator) 1,035,747 962,861 850,157 878,380 774,177 Total core capital to risk-weighted assets 15.05 % 15.14 % 15.19 % 13.13 % 12.28 % Tier 1 capital (to risk-weighted assets) Total Tier 1 capital (numerator) $ 142,927 $ 133,683 $ 118,511 $ 104,287 $ 86,424 Risk-weighted assets (denominator) 1,035,747 962,861 850,157 878,380 774,177 Total capital to risk-weighted assets 13.80 % 13.88 % 13.94 % 11.87 % 11.16 % Tier 1 capital (to adjusted assets) Total Tier 1 capital (numerator) $ 142,927 $ 133,683 $ 118,511 $ 104,287 $ 86,424 Total average assets 1,418,313 1,387,480 1,249,752 1,212,512 1,059,060 Goodwill (4,536 ) (4,536 ) (4,536 ) (4,536 ) (4,536 ) Intangible assets (85 ) (101 ) (117 ) (133 ) (149 ) Adjusted assets (denominator) $ 1,413,692 $ 1,382,843 $ 1,245,099 $ 1,207,843 $ 1,054,375 Total capital to adjusted assets 10.11 % 9.67 % 9.52 % 8.63 % 8.20 % Tier 1 Common Equity (to risk-weighted assets) Total Tier 1 capital (numerator) $ 142,927 $ 133,683 $ 118,511 $ 104,287 $ 86,424 Risk-weighted assets (denominator) 1,035,747 962,861 850,157 878,380 774,177 Total Tier 1 Common Equity to risk-weighted assets 13.80 % 13.88 % 13.94 % 11.87 % 11.16 % CRITICAL ACCOUNTING ESTIMATES The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow practices within the banking industry.
(GAAP) (numerator) $ 3,383 $ 9,293 $ 12,932 $ 12,407 $ 6,950 Average equity 122,901 114,824 109,898 104,131 93,586 Average preferred stock - - - - 15,709 Denominator $ 122,901 $ 114,824 $ 109,898 $ 104,131 $ 77,877 Return on average common equity 2.75 % 8.09 % 11.77 % 11.91 % 8.92 % - 32 - At or for the year ended December 31, (In thousands, except per share amounts) 2024 2023 2022 2021 2020 Regulatory Capital Ratios (Bank Only) Total capital (to risk-weighted assets) Total equity (GAAP) $ 140,641 $ 137,943 $ 126,148 $ 121,896 $ 106,720 Goodwill (5,056 ) (4,536 ) (4,536 ) (4,536 ) (4,536 ) Intangible assets (5,989 ) (85 ) (101 ) (117 ) (133 ) Addback: Accumulated other comprehensive income 9,144 9,605 12,172 1,268 2,236 Total Tier 1 Capital $ 138,740 $ 142,927 $ 133,683 $ 118,511 $ 104,287 Allowance for loan and lease losses 13,007 12,995 12,076 10,655 11,002 Total Tier 2 Capital $ 13,007 $ 12,995 $ 12,076 $ 10,655 $ 11,002 Total Tier 1 plus Tier 2 Capital (numerator) $ 151,747 $ 155,922 $ 145,759 $ 129,166 $ 115,289 Risk-weighted assets (denominator) 1,035,557 1,035,747 962,861 850,157 878,380 Total core capital to risk-weighted assets 14.65 % 15.05 % 15.14 % 15.19 % 13.13 % Tier 1 capital (to risk-weighted assets) Total Tier 1 capital (numerator) $ 138,740 $ 142,927 $ 133,683 $ 118,511 $ 104,287 Risk-weighted assets (denominator) 1,035,557 1,035,747 962,861 850,157 878,380 Total capital to risk-weighted assets 13.40 % 13.80 % 13.88 % 13.94 % 11.87 % Tier 1 capital (to adjusted assets) Total Tier 1 capital (numerator) $ 138,740 $ 142,927 $ 133,683 $ 118,511 $ 104,287 Total average assets 1,445,991 1,418,313 1,387,480 1,249,752 1,212,512 Goodwill (5,056 ) (4,536 ) (4,536 ) (4,536 ) (4,536 ) Intangible assets (5,989 ) (85 ) (101 ) (117 ) (133 ) Adjusted assets (denominator) $ 1,434,946 $ 1,413,692 $ 1,382,843 $ 1,245,099 $ 1,207,843 Total capital to adjusted assets 9.67 % 10.11 % 9.67 % 9.52 % 8.63 % Tier 1 Common Equity (to risk-weighted assets) Total Tier 1 capital (numerator) $ 138,740 $ 142,927 $ 133,683 $ 118,511 $ 104,287 Risk-weighted assets (denominator) 1,035,557 1,035,747 962,861 850,157 878,380 Total Tier 1 Common Equity to risk-weighted assets 13.40 % 13.80 % 13.88 % 13.94 % 11.87 % CRITICAL ACCOUNTING ESTIMATES The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow practices within the banking industry.
Income Tax Expense The Company reported income tax expense of $2.4 million in 2023 and $2.7 million in 2022, a decrease of $300,000 when compared to the previous year. This decrease was primarily the result of a decrease in income before income taxes. The Company’s effective tax rate was 20.8% in 2023, as compared to 17.5% in 2022.
Income Tax Expense The Company reported income tax expense of $332,000 in 2024 and $2.4 million in 2023, a decrease of $2.1 million when compared to the previous year. This decrease was primarily the result of a decrease in income before income taxes. The Company’s effective tax rate was 8.9% in 2024, as compared to 20.8% in 2023.
The Bank can exit this funding arrangement, in whole or in part, with 60 days prior notice to the issuing counterparty. Excluding brokered deposits, all other deposits, collectively referred to as nonbrokered deposits, totaled $877.4 million, or 78.3% of total deposits with an average rate of 2.4% at December 31, 2023.
The Bank can exit this funding arrangement, in whole or in part, with 60 days prior notice to the issuing counterparty. Excluding brokered deposits, all other deposits, collectively referred to as nonbrokered deposits, totaled $1.07 billion, or 88.7% of total deposits with an average rate of 2.3% at December 31, 2024.
At December 31, 2023, total credit available under the existing lines of credit was approximately $236.7 million at FHLBNY, the FRB, and two other correspondent banks.
At December 31, 2024, total credit available under the existing lines of credit was approximately $245.3 million at FHLBNY, the FRB, and two other correspondent banks.
At December 31, 2022, there were $28.9 million in loans past due including $13.0 million, $4.3 million and $8.7 million in loans 30-59 days, 60-89 days, and 90 days and over past due, respectively. Loans purchased outside of the Bank’s general market area are subject to substantial pre-purchase due diligence.
At December 31, 2023, there were $34.0 million in loans past due including $13.6 million, $3.2 million and $17.2 million in loans 30-59 days, 60-89 days, and 90 days and over past due, respectively. Loans purchased outside of the Bank’s general market area are subject to substantial pre-purchase due diligence.
The allowance for credit losses and the allowance for loan losses at December 31, 2023 and 2022 was $16.0 million and $15.3 million, respectively, or 1.78% and 1.71% of total year end loans on those dates, respectively. The Company recorded $4.2 million in net charge-offs in 2023, as compared to $370,000 in net charge-offs in 2022.
The allowance for credit losses and the allowance for loan losses at December 31, 2024 and 2023 was $17.2 million and $16.0 million, respectively, or 1.87% and 1.78% of total year end loans on those dates, respectively. The Company recorded $9.8 million in net charge-offs in 2024, as compared to $4.2 million in net charge-offs in 2023.
The Company guarantees all of these securities. The Company's equity interest in the trust subsidiary is included in other assets on the Consolidated Statements of Financial Condition at December 31, 2023 and 2022.
These securities have a five-year call provision. The Company guarantees all of these securities. The Company's equity interest in the trust subsidiary is included in other assets on the Consolidated Statements of Financial Condition at December 31, 2024 and 2023.
In combination, these factors resulted in a $6.6 million increase in interest income associated with taxable investment securities in 2023, as compared to 2022. Interest Expense Interest expense increased $19.0 million, or 196.5%, to $28.7 million in 2023, as compared to $9.7 million in the previous year.
In combination, these factors resulted in a $4.9 million increase in interest income associated with taxable investment securities in 2024, as compared to 2023. Interest Expense Interest expense increased $8.6 million, or 30.0%, to $37.4 million in 2024, as compared to $28.7 million in the previous year.
At December 31, 2023, the Company had $175.6 million of the available lines of credit utilized, including encumbrances supporting the outstanding letters of credit, described above, on its existing lines of credit with the remainder of $61.1 million available.
At December 31, 2024, the Company had $88.1 million of the available lines of credit utilized, including encumbrances supporting the outstanding letters of credit, described above, on its existing lines of credit with the remainder of $157.2 million available.
Net interest income, before provision for credit losses, decreased $2.5 million, or 6.0%, to $38.9 million in 2023 on average interest earning assets of $1.32 billion, as compared to net interest income before provision for loan losses of $41.4 million in 2022 on average interest earning assets of $1.28 billion.
Net interest income before provision for credit losses increased $2.1 million, or 5.3%, to $41.0 million in 2024 on average interest earning assets of $1.37 billion, as compared to net interest income before provision for loan losses of $38.9 million in 2023 on average - 35 - interest earning assets of $1.32 billion.
The measurement of specifically-identified loans is based upon either the present value of future cash flows discounted at the historical effective interest rate or the fair value of the collateral, less costs to sell for collateral dependent loans. At December 31, 2023, the Bank’s position in specifically-identified loans consisted of 69 loans totaling $22.5 million.
The measurement of individually evaluated loans is based upon either the present value of future cash flows discounted at the historical effective interest rate or the fair value of the collateral, less costs to sell for collateral dependent loans. At December 31, 2024, the Bank’s position in individually evaluated loans consisted of 45 loans totaling $20.0 million.
The following table represents information regarding short-term borrowings for the years ended December 31: (Dollars in thousands) 2023 2022 2021 Maximum outstanding at any month end $ 125,680 $ 60,333 $ 12,500 Average amount outstanding during the year 49,601 12,492 3,677 Balance at the end of the period 125,680 60,333 12,500 Average interest rate during the year 5.42 % 2.48 % 0.28 % Average interest rate at the end of the period 4.50 % 3.86 % 1.28 % The following table represents information regarding long-term borrowings for the years ended December 31: (Dollars in thousands) 2023 2022 2021 Maximum outstanding at any month end $ 58,369 $ 67,371 $ 85,125 Average amount outstanding during the year 55,091 58,593 75,724 Balance at the end of the period 49,919 55,664 64,598 Average interest rate during the year 1.54 % 0.96 % 1.34 % Average interest rate at the end of the period 1.84 % 1.39 % 1.12 % Subordinated Debt The Company has a non-consolidated subsidiary trust, Pathfinder Statutory Trust II, of which the Company owns 100% of the common equity.
The following table represents information regarding short-term borrowings for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Maximum outstanding at any month end $ 127,577 $ 125,680 $ 60,333 Average amount outstanding during the year 76,668 49,601 12,492 Balance at the end of the period 61,000 125,680 60,333 Average interest rate during the year 5.45 % 5.42 % 2.48 % Average interest rate at the end of the period 6.14 % 4.50 % 3.86 % The following table represents information regarding long-term borrowings for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Maximum outstanding at any month end $ 49,919 $ 58,369 $ 67,371 Average amount outstanding during the year 43,162 55,091 58,593 Balance at the end of the period 27,068 49,919 55,664 Average interest rate during the year 1.70 % 1.54 % 0.96 % Average interest rate at the end of the period 1.26 % 1.84 % 1.39 % Trust Preferred Securities and Subordinated Debt The Company has a non-consolidated subsidiary trust, Pathfinder Statutory Trust II, of which the Company owns 100% of the common equity.
Additionally, $13.8 million was provided through operating activities generated principally by net income and proceeds from loan sales. These cash flows were primarily invested in: $112.8 million in purchases of investment securities in 2023, and $1.8 million net increases in loans outstanding.
Additionally, $11.2 million was provided through operating activities generated principally by net income and proceeds from loan sales. These cash flows were primarily invested in: $117.6 million in purchases of investment securities in 2024, and $31.2 million net increases in loans outstanding.
The average balance of total interest-bearing liabilities increased $55.0 million, or 5.3%, in 2023, as compared to 2022, and the average balance of all deposits increased by $20.5 million, or 2.2% in 2023, as compared to the previous year. - 40 - Provision for Credit Losses We establish a provision for credit losses, which is recorded to operations, at a level management believes is appropriate to absorb lifetime credit losses in the loan portfolio.
The average balance of total interest-bearing liabilities increased $35.1 million, or 3.2%, in 2024, as compared to 2023, and the average balance of all deposits increased by $37.5 million, or 3.3% in 2024, as compared to the previous year, primarily due to the East Syracuse branch acquisition. - 39 - Provision for Credit Losses We establish a provision for credit losses, which is recorded to operations, at a level management believes is appropriate to absorb lifetime credit losses in the loan portfolio.
Total potential problem loans, including impaired loans, were $38.6 million at December 31, 2022, and were comprised of special mention, substandard and doubtful loans of $20.0 million, $17.0 million and $2.1 million, respectively. The Company measures delinquency based on the amount of past due loans as a percentage of total loans.
Total potential problem loans, including individually evaluated loans, were $43.1 million at December 31, 2023, and were comprised of special mention, substandard and doubtful loans of $20.7 million, $20.3 million and $2.1 million, respectively. The Company measures delinquency based on the amount of past due loans as a percentage of total loans.
Potential problem loans increased $6.3 million to $43.1 million at December 31, 2023, compared to $38.6 million at December 31, 2022. These loans have been internally classified as special mention, substandard, or doubtful, yet are not currently considered specifically-identified.
Potential problem loans increased $13.3 million to $56.4 million at December 31, 2024, compared to $43.1 million at December 31, 2023. These loans have been internally classified as special mention, substandard, or doubtful, yet are not currently considered individually evaluated.
Additionally, the provision for credit losses in 2023 reflected an increase in nonperforming loans of $8.2 million at December 31, 2023, as compared to December 31, 2022. The Company recorded $4.2 million in net charge-offs in 2023 as compared to $370,000 in 2022.
Additionally, the provision for credit losses in 2024 reflected an increase in nonperforming loans of $4.9 million at December 31, 2024, as compared to December 31, 2023. The Company recorded $10.2 million in total loan charge-offs in 2024 as compared to $4.2 million in 2023.
At December 31, 2023 and December 31, 2022, the Company had $22.6 million and $20.2 million in loans, which were deemed to be specifically-identified, having specific reserves of $3.7 million and $4.8 million, respectively.
At December 31, 2024 and December 31, 2023, the Company had $20.0 million and $22.6 million in loans, which were deemed to be individually evaluated, having specific reserves of $2.5 million and $3.7 million, respectively.
The Company reported net cash flows from financing activities of $52.8 million generated principally by a $65.3 million increase in short term borrowings, offset by a decrease in brokered deposits of $5.0 million, customer deposits of $352,000, a decrease in net proceeds from long-term borrowings of $5.7 million, and an aggregate decrease in net cash of all other financing sources, including dividends paid to common shareholders, and the holder of the Warrant of $2.2 million.
The Company reported net cash outflows from financing activities of $6.0 million generated principally by an increase in customer deposits of $190.9 million, offset by a $64.7 million decrease in short-term borrowings, a decrease in brokered deposits of $106.4 million, a decrease in net proceeds from long-term borrowings of $22.9 million, and an aggregate decrease in net cash of all other financing sources, including dividends paid to common shareholders, and the holder of the Warrant of $2.4 million.
The increase in interest expense was primarily a result of the increase in average cost of deposits resulting from the rapidly rising interest rate environment and increased competition. - 38 - Average Balances and Rates The following table sets forth information concerning average interest-earning assets and interest-bearing liabilities and the yields and rates thereon.
The increase in interest expense was the result of an increase in average balances of deposit accounts, as well as an increase in average cost of deposits resulting from the high interest rate environment and increased competition. - 37 - Average Balances and Rates The following table sets forth information concerning average interest-earning assets and interest-bearing liabilities and the yields and rates thereon.
At December 31, 2023, available-for-sale investment securities increased 34.9% to $258.7 million and held-to-maturity investment securities decreased 7.6% to $179.6 million as compared to December 31, 2022. There were no securities that exceeded 10% of consolidated shareholders’ equity. Our available-for-sale investment securities are carried at fair value and our held-to-maturity investment securities are carried at amortized cost.
At December 31, 2024, available-for-sale investment securities increased 4.1% to $269.3 million and held-to-maturity investment securities decreased 11.5% to $158.7 million as compared to December 31, 2023. There were no securities that exceeded 10% of consolidated shareholders’ equity. Our available-for-sale investment securities are carried at fair value and our held-to-maturity investment securities are carried at amortized cost.
All other asset categories had a net increase of $500,000. - 42 - Investment Securities The average investment portfolio represented 31.0% of the Company’s average interest-earning assets in 2023 and is designed to generate a favorable rate of return in consideration of all risk factors associated with debt securities while assisting the Company in meeting its liquidity needs and interest rate risk strategies.
All other asset categories had a net decrease of $4.8 million. - 41 - Investment Securities The average balance of the investment portfolio represented 33.1% of the Company’s average interest-earning assets in 2024 and is designed to generate a favorable rate of return in consideration of all risk factors associated with debt securities while assisting the Company in meeting its liquidity needs and interest rate risk strategies.
The following table indicates the amount of the Company’s time deposit accounts in excess of $250,000 by time remaining until maturity as of December 31, 2023: (In thousands) Remaining Maturity: Three months or less $ 28,083 Three through six months 30,763 Six through twelve months 25,903 Over twelve months 10,524 Total $ 95,272 All municipal deposits, regardless of amount, are effectively insured, either through specific collateralization with securities held in third-party escrow or reciprocal deposit programs, as required under New York State law.
The following table indicates the amount of the Company’s time deposit accounts in excess of $250,000 by time remaining until maturity as of December 31, 2024: (In thousands) Remaining Maturity: Three months or less $ 41,958 Three through six months 37,927 Six through twelve months 54,217 Over twelve months 8,371 Total $ 142,473 All municipal deposits, regardless of amount, are effectively insured, either through specific collateralization with securities held in third-party escrow or reciprocal deposit programs, as required under New York State law.
At December 31, 2023, the Bank’s position in individually evaluated loans consisted of 69 loans totaling $22.6 million. Of these loans, 17 loans, totaling $1.6 million, were valued using the present value of future cash flows method; and 66 loans, totaling $20.9 million, were valued based on a collateral analysis.
At December 31, 2024, the Bank’s position in individually evaluated loans consisted of 45 loans totaling $20.0 million. Of these loans, 15 loans, totaling $3.0 million, were valued using the present value of future cash flows method; and 30 loans, totaling $17.0 million, were valued based on a collateral analysis.
These increases in interest income were more than offset by increases in interest expense, as interest expense increased $19.0 million due to an increase in the average rate paid on interest-bearing liabilities of 171 basis points in 2023 as compared to 2022, enhanced by an increase in the average balance of interest-bearing liabilities of $55.0 million during the same time period.
These increases in interest income were partially offset by increases in interest expense, as interest expense increased $8.6 million due to an increase in the average rate paid on interest-bearing liabilities of 68 basis points in 2024 as compared to 2023, enhanced by an increase in the average balance of interest-bearing liabilities of $35.1 million during the same time period.
The following table sets forth the carrying value of the Company's investment portfolio at December 31: Available-for-Sale Held-to-Maturity (In thousands) 2023 2022 2021 2023 2022 2021 Investment Securities: US treasury, agencies and GSEs $ 80,083 $ 29,364 $ 32,273 $ 3,760 $ 3,852 $ - State and political subdivisions 32,924 45,385 39,199 16,576 15,211 14,790 Corporate 10,919 11,829 14,127 45,427 45,086 46,290 Asset backed securities 19,892 15,400 13,613 16,860 19,158 14,636 Residential mortgage-backed - US agency 24,418 16,400 22,164 6,974 7,489 9,740 Collateralized mortgage obligations - US agency 12,179 11,708 12,285 13,221 15,109 11,362 Collateralized mortgage obligations - Private label 78,095 61,434 56,731 76,819 88,497 64,105 Common stock - financial services industry 206 206 206 - - - Total investment securities $ 258,716 $ 191,726 $ 190,598 $ 179,637 $ 194,402 $ 160,923 The following table sets forth the scheduled maturities, amortized cost, fair values and average yields for the Company's investment securities at December 31, 2023.
The following table sets forth the carrying value of the Company's investment portfolio at December 31: Available-for-Sale Held-to-Maturity (In thousands) 2024 2023 2022 2024 2023 2022 Investment Securities: US treasury, agencies and GSEs $ 70,425 $ 80,083 $ 29,364 $ 3,648 $ 3,760 $ 3,852 State and political subdivisions 33,322 32,924 45,385 17,153 16,576 15,211 Corporate 10,881 10,919 11,829 43,628 45,427 45,086 Asset backed securities 18,487 19,892 15,400 13,050 16,860 19,158 Residential mortgage-backed - US agency 39,171 24,418 16,400 9,575 6,974 7,489 Collateralized mortgage obligations - US agency 13,530 12,179 11,708 11,940 13,221 15,109 Collateralized mortgage obligations - Private label 83,309 78,095 61,434 59,946 76,819 88,497 Common stock - financial services industry 206 206 206 - - - Total investment securities $ 269,331 $ 258,716 $ 191,726 $ 158,940 $ 179,637 $ 194,402 The following table sets forth the scheduled maturities, amortized cost, fair values and average yields for the Company's investment securities at December 31, 2024.
Interest and dividend income increased $16.6 million in 2023 to $67.7 million, as compared to $51.1 million in 2022. The income effects of the aggregate increase in the average balance of interest-earning assets of $42.2 million were enhanced by an increase of 113 basis points in the overall average yield earned on those assets.
Interest and dividend income increased $10.7 million in 2024 to $78.4 million, as compared to $67.7 million in 2023. The income effects of the $53.4 million aggregate increase in the average balance of interest-earning assets were enhanced by an increase of 58 basis points in the overall average yield earned on those assets.
The Company provides, as supplemental information, such non-GAAP measures included in this document as described immediately below. - 32 - At or for the year ended December 31, (In thousands, except per share amounts) 2023 2022 2021 2020 2019 Per Share Book value per common share Total Pathfinder Bancorp, Inc. shareholders' equity (book value) (GAAP) $ 119,495 $ 110,997 $ 110,287 $ 97,456 $ 90,434 Preferred stock - - - 17,901 15,370 Total shares outstanding 6,100 6,032 5,983 4,531 4,709 Book value per common share $ 19.59 $ 18.40 $ 18.43 $ 17.56 $ 15.94 Total common equity Total equity (GAAP) $ 119,495 $ 110,997 $ 110,287 $ 79,555 $ 75,064 Goodwill 4,536 4,536 4,536 4,536 4,536 Intangible assets 85 101 117 133 149 Tangible common equity $ 114,874 $ 106,360 $ 105,634 $ 74,886 $ 70,379 Tangible book value per common share Tangible common equity $ 114,874 $ 106,360 $ 105,634 $ 74,886 $ 70,379 Total shares outstanding 6,100 6,032 5,983 4,531 4,709 Tangible book value per common share $ 18.83 $ 17.63 $ 17.66 $ 16.53 $ 14.95 Performance Ratios Efficiency ratio Operating expenses (numerator) $ 29,395 $ 28,874 $ 27,495 $ 25,080 $ 25,730 Net interest income 38,919 41,403 38,295 31,643 28,230 Noninterest income 5,190 5,914 6,231 6,485 4,917 Less: Gains/(Losses) on the sale/redemption of investment securities, fixed assets, loans, and foreclosed real estate 243 (282 ) 551 2,255 393 Less : (Losses)/Gains on marketable securities (255 ) 352 382 (629 ) 81 Denominator $ 44,121 $ 47,247 $ 43,593 $ 36,502 $ 32,673 Efficiency ratio 66.62 % 61.11 % 63.07 % 68.71 % 78.75 % Dividend payout ratio Dividends declared (numerator) $ 2,177 $ 2,143 $ 1,548 $ 1,102 $ 1,081 Net income available to common shareholders (denominator) 7,519 10,221 9,576 5,405 3,578 Dividend payout ratio 28.95 % 20.97 % 16.17 % 20.39 % 30.21 % Return on average common equity Net income attributable to Pathfinder Bancorp Inc.
The Company provides, as supplemental information, such non-GAAP measures included in this document as described immediately below. - 31 - At or for the year ended December 31, (In thousands, except per share amounts) 2024 2023 2022 2021 2020 Per Share Book value per common share Total Pathfinder Bancorp, Inc. shareholders' equity (book value) (GAAP) $ 121,483 $ 119,495 $ 110,997 $ 110,287 $ 97,456 Preferred stock - - - - 17,901 Total shares outstanding 6,126 6,100 6,032 5,983 4,531 Book value per common share $ 19.83 $ 19.59 $ 18.40 $ 18.43 $ 17.56 Total common equity Total equity (GAAP) $ 121,483 $ 119,495 $ 110,997 $ 110,287 $ 79,555 Goodwill 5,056 4,536 4,536 4,536 4,536 Intangible assets 5,989 85 101 117 133 Tangible common equity $ 110,438 $ 114,874 $ 106,360 $ 105,634 $ 74,886 Tangible book value per common share Tangible common equity $ 110,438 $ 114,874 $ 106,360 $ 105,634 $ 74,886 Total shares outstanding 6,126 6,100 6,032 5,983 4,531 Tangible book value per common share $ 18.03 $ 18.83 $ 17.63 $ 17.66 $ 16.53 Performance Ratios Efficiency ratio Operating expenses (numerator) $ 34,417 $ 29,395 $ 28,874 $ 27,495 $ 25,080 Net interest income 40,989 38,919 41,403 38,295 31,643 Noninterest income 9,561 5,190 5,914 6,231 6,485 Less: (Losses) gains on the sales and redemptions of investment securities (71 ) 62 (169 ) 37 1,076 Less: Gain on asset sale 3,169 - - - - Denominator $ 47,452 $ 44,047 $ 47,486 $ 44,489 $ 37,052 Efficiency ratio 72.53 % 66.74 % 60.81 % 61.80 % 67.69 % Dividend payout ratio Dividends declared (numerator) $ 2,440 $ 2,177 $ 2,143 $ 1,548 $ 1,102 Net income available to common shareholders (denominator) 3,117 7,519 10,221 9,576 5,405 Dividend payout ratio 78.28 % 28.95 % 20.97 % 16.17 % 20.39 % Return on average common equity Net income attributable to Pathfinder Bancorp Inc.
In addition, the average balance of taxable investment securities increased $27.7 million, or 7.9%, when compared to the prior year primarily due to increased purchases of securities in the fourth quarter of 2023 intended to take advantage of certain dynamics in the interest rate environment present at that time.
In addition, the average balance of taxable investment securities increased $43.9 million, or 11.6%, when compared to the prior year primarily due to increased purchases of securities in 2024 intended to take advantage of certain dynamics in the interest rate environment.
An increase of $183,000 in occupancy and equipment expenses contributed to the annual increase in overall noninterest expenses, reflecting the Bank's investment in physical infrastructure and branch network expansion. Professional and other services expense increased $491,000 in 2023, as compared to 2022.
An increase of $555,000 in occupancy and equipment expenses contributed to the annual increase in overall noninterest expense, reflecting the Bank's investment in physical infrastructure and branch network expansion.
The Company recorded $4.2 million in net charge-offs in 2023 as compared to $370,000 in net charge-offs in 2022. The ratio of net charge-offs to average loans therefore increased to 0.47% in 2023 from 0.04% in 2022. Further information on earnings per share can be found in Note 1 to the consolidated financial statements of this Form 10-K.
The ratio of net charge-offs to average loans therefore increased to 1.09% in 2024 from 0.47% in 2023. Further information on earnings per share can be found in Note 1 to the consolidated financial statements of this Form 10-K. Nonperforming loans to total loans increased to 2.40% at December 31, 2024 as compared to 1.92% at December 31, 2023.
In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum the following capital to risk-weighted assets ratios: (1) Core Capital, (2) Total Capital and (3) Common Equity.
In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum the following capital to risk-weighted assets ratios: (1) Core Capital, (2) Total Capital and (3) Common Equity. At December 31, 2024, the Bank exceeded all current regulatory required minimum capital ratios, including the capital buffer requirements.
The Bank does not initially increase the allowance for credit losses on the purchase date of the loan pools. In the normal course of business, the Bank has, from time to time, sold residential mortgage loans and participation interests in commercial loans. As is typical in the industry, the Bank makes certain representations and warranties to the buyer.
The Bank does not initially increase the allowance for credit losses on the purchase date of the loan pools. See Note 5 for further detail of purchased loan pools. In the normal course of business, the Bank has, from time to time, sold residential mortgage loans and participation interests in commercial loans.
At December 31, 2023, the Bank exceeded all current regulatory required minimum capital ratios, including the capital buffer requirements. - 53 - LIQUIDITY Liquidity management involves the Company’s ability to generate cash or otherwise obtain funds at reasonable rates to support asset growth, meet deposit withdrawals, maintain reserve requirements, and otherwise operate the Company on an ongoing basis.
LIQUIDITY Liquidity management involves the Company’s ability to generate cash or otherwise obtain funds at reasonable rates to support asset growth, meet deposit withdrawals, maintain reserve requirements, and otherwise operate the Company on an ongoing basis.

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