10-Q 1 pbhc-10q_20180630.htm 10-Q pbhc-10q_20180630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018

 

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _______ to _______

 

(Exact Name of Company as Specified in its Charter)

 

Maryland

(State of Other Jurisdiction of Incorporation)

001-36695

(Commission File No.)

38-3941859

(I.R.S. Employer Identification No.)

 

214 West First Street, Oswego, NY 13126

(Address of Principal Executive Office) (Zip Code)

(315) 343-0057

(Issuer's Telephone Number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

YES         NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

YES         NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

    Large accelerated filer    Accelerated filer   Non-accelerated filer    Smaller reporting company    Emerging growth company

(Do not check if a smaller reporting company)

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES     NO

As of August 10, 2018, there were 4,347,413 shares outstanding of the registrant’s common stock.

 


Table of Contents

PATHFINDER BANCORP, INC.

INDEX

 

PART I - FINANCIAL INFORMATION

 

PAGE NO.

 

 

 

 

Item 1.

Consolidated Financial Statements (Unaudited)

 

3

 

Consolidated Statements of Condition

 

3

 

Consolidated Statements of Income

 

4

 

Consolidated Statements of Comprehensive Income

 

5

 

Consolidated Statements of Changes in Shareholders' Equity

 

6

 

Consolidated Statements of Cash Flows

 

7

 

Notes to Consolidated Financial Statements

 

8

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)

 

39

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

61

 

 

 

 

Item 4.

Controls and Procedures

 

61

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

63

Item 1A.

Risk Factors

 

63

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

63

Item 3.

Defaults upon Senior Securities

 

63

Item 4.

Mine Safety Disclosures

 

63

Item 5.

Other information

 

63

Item 6.

Exhibits

 

63

 

 

 

 

SIGNATURES

 

64

 

 


Table of Contents

PART I - FINANCIAL INFORMATION

Item 1 – Consolidated Financial Statements

Pathfinder Bancorp, Inc.

Consolidated Statements of Condition

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

(In thousands, except share and per share data)

 

2018

 

 

2017

 

ASSETS:

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

8,787

 

 

$

9,708

 

Interest-earning deposits (including restricted balances of $4,365 and $6,342, respectively)

 

 

27,953

 

 

 

12,283

 

Total cash and cash equivalents

 

 

36,740

 

 

 

21,991

 

Available-for-sale securities, at fair value

 

 

184,030

 

 

 

171,138

 

Held-to-maturity securities, at amortized cost (fair value of $26,244 and $66,426, respectively)

 

 

26,647

 

 

 

66,196

 

Marketable equity securities, at fair value

 

 

541

 

 

 

-

 

Federal Home Loan Bank stock, at cost

 

 

4,388

 

 

 

3,855

 

Loans

 

 

607,185

 

 

 

580,831

 

Less: Allowance for loan losses

 

 

7,605

 

 

 

7,126

 

Loans receivable, net

 

 

599,580

 

 

 

573,705

 

Premises and equipment, net

 

 

16,692

 

 

 

16,117

 

Accrued interest receivable

 

 

2,725

 

 

 

3,047

 

Foreclosed real estate

 

 

97

 

 

 

468

 

Intangible assets, net

 

 

173

 

 

 

182

 

Goodwill

 

 

4,536

 

 

 

4,536

 

Bank owned life insurance

 

 

16,695

 

 

 

11,742

 

Other assets

 

 

10,638

 

 

 

8,280

 

Total assets

 

$

903,482

 

 

$

881,257

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Interest-bearing

 

$

624,718

 

 

$

633,820

 

Noninterest-bearing

 

 

108,451

 

 

 

89,783

 

Total deposits

 

 

733,169

 

 

 

723,603

 

Short-term borrowings

 

 

26,600

 

 

 

30,600

 

Long-term borrowings

 

 

57,503

 

 

 

43,288

 

Subordinated loans

 

 

15,076

 

 

 

15,059

 

Accrued interest payable

 

 

255

 

 

 

186

 

Other liabilities

 

 

8,010

 

 

 

6,377

 

Total liabilities

 

 

840,613

 

 

 

819,113

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.01; 25,000,000 authorized shares; 4,332,076 and  4,280,227

   shares outstanding, respectively

 

 

43

 

 

 

43

 

Additional paid in capital

 

 

28,629

 

 

 

28,170

 

Retained earnings

 

 

40,540

 

 

 

39,020

 

Accumulated other comprehensive loss

 

 

(5,471

)

 

 

(4,208

)

Unearned ESOP

 

 

(1,124

)

 

 

(1,214

)

Total Pathfinder Bancorp, Inc. shareholders' equity

 

 

62,617

 

 

 

61,811

 

Noncontrolling interest

 

 

252

 

 

 

333

 

Total equity

 

 

62,869

 

 

 

62,144

 

Total liabilities and shareholders' equity

 

$

903,482

 

 

$

881,257

 

 

The accompanying notes are an integral part of the consolidated financial statements.

- 3 -


Table of Contents

Pathfinder Bancorp, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

For the three

 

 

For the three

 

 

For the six

 

 

For the six

 

 

 

months ended

 

 

months ended

 

 

months ended

 

 

months ended

 

(In thousands, except per share data)

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2018

 

 

June 30, 2017

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

7,018

 

 

$

5,869

 

 

$

13,736

 

 

$

11,610

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,171

 

 

 

825

 

 

 

2,299

 

 

 

1,577

 

Tax-exempt

 

 

217

 

 

 

312

 

 

 

465

 

 

 

590

 

Dividends

 

 

61

 

 

 

50

 

 

 

129

 

 

 

104

 

Federal funds sold and interest earning deposits

 

 

49

 

 

 

28

 

 

 

96

 

 

 

73

 

Total interest and dividend income

 

 

8,516

 

 

 

7,084

 

 

 

16,725

 

 

 

13,954

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

1,566

 

 

 

895

 

 

 

2,911

 

 

 

1,660

 

Interest on short-term borrowings

 

 

70

 

 

 

283

 

 

 

163

 

 

 

578

 

Interest on long-term borrowings

 

 

203

 

 

 

128

 

 

 

378

 

 

 

248

 

Interest on subordinated loans

 

 

210

 

 

 

197

 

 

 

413

 

 

 

390

 

Total interest expense

 

 

2,049

 

 

 

1,503

 

 

 

3,865

 

 

 

2,876

 

Net interest income

 

 

6,467

 

 

 

5,581

 

 

 

12,860

 

 

 

11,078

 

Provision for loan losses

 

 

297

 

 

 

423

 

 

 

910

 

 

 

812

 

Net interest income after provision for loan losses

 

 

6,170

 

 

 

5,158

 

 

 

11,950

 

 

 

10,266

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

273

 

 

 

274

 

 

 

547

 

 

 

537

 

Earnings and gain on bank owned life insurance

 

 

108

 

 

 

62

 

 

 

181

 

 

 

133

 

Loan servicing fees

 

 

42

 

 

 

32

 

 

 

83

 

 

 

68

 

Net (losses) gains on sales and redemptions of investment securities

 

 

(22

)

 

 

135

 

 

 

(129

)

 

 

206

 

Gains on equity securities

 

 

13

 

 

 

-

 

 

 

26

 

 

 

-

 

Net gains (losses) on sales of loans and foreclosed real estate

 

 

13

 

 

 

(21

)

 

 

16

 

 

 

(45

)

Debit card interchange fees

 

 

148

 

 

 

147

 

 

 

291

 

 

 

268

 

Other charges, commissions & fees

 

 

449

 

 

 

421

 

 

 

904

 

 

 

820

 

Total noninterest income

 

 

1,024

 

 

 

1,050

 

 

 

1,919

 

 

 

1,987

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,429

 

 

 

2,819

 

 

 

6,513

 

 

 

5,669

 

Building occupancy

 

 

553

 

 

 

531

 

 

 

1,144

 

 

 

1,070

 

Data processing

 

 

476

 

 

 

416

 

 

 

955

 

 

 

843

 

Professional and other services

 

 

405

 

 

 

219

 

 

 

736

 

 

 

410

 

Advertising

 

 

285

 

 

 

172

 

 

 

476

 

 

 

348

 

FDIC assessments

 

 

135

 

 

 

81

 

 

 

255

 

 

 

137

 

Audits and exams

 

 

105

 

 

 

85

 

 

 

210

 

 

 

169

 

Other expenses

 

 

739

 

 

 

688

 

 

 

1,297

 

 

 

1,338

 

Total noninterest expense

 

 

6,127

 

 

 

5,011

 

 

 

11,586

 

 

 

9,984

 

Income before income taxes

 

 

1,067

 

 

 

1,197

 

 

 

2,283

 

 

 

2,269

 

Provision for income taxes

 

 

166

 

 

 

238

 

 

 

348

 

 

 

483

 

Net income attributable to noncontrolling interest and

   Pathfinder Bancorp, Inc.

 

 

901

 

 

 

959

 

 

 

1,935

 

 

 

1,786

 

Net income attributable to noncontrolling interest

 

 

(44

)

 

 

39

 

 

 

(14

)

 

 

66

 

Net income attributable to Pathfinder Bancorp Inc.

 

$

945

 

 

$

920

 

 

$

1,949

 

 

$

1,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic

 

$

0.23

 

 

$

0.23

 

 

$

0.47

 

 

$

0.42

 

Earnings per common share - diluted

 

$

0.22

 

 

$

0.22

 

 

$

0.46

 

 

$

0.41

 

Dividends per common share

 

$

0.06

 

 

$

0.0525

 

 

$

0.12

 

 

$

0.1025

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

- 4 -


Table of Contents

Pathfinder Bancorp, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

 

For the three months ended

 

 

For the six months ended

 

(In thousands)

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2018

 

 

June 30, 2017

 

Net Income

 

$

901

 

 

$

959

 

 

$

1,935

 

 

$

1,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive (Loss) Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement Plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement plan net losses recognized in plan expenses

 

 

43

 

 

 

37

 

 

 

86

 

 

 

73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains arising during the period

 

 

(1,156

)

 

 

1,387

 

 

 

(2,502

)

 

 

2,408

 

Reclassification adjustment for net (losses) gains included in net income

 

 

22

 

 

 

(135

)

 

 

129

 

 

 

(206

)

Net unrealized (losses) gains on available-for-sale securities

 

 

(1,134

)

 

 

1,252

 

 

 

(2,373

)

 

 

2,202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of net unrealized loss on securities transferred to held-to-

   maturity(1)

 

 

470

 

 

 

22

 

 

 

163

 

 

 

58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, before tax

 

 

(621

)

 

 

1,311

 

 

 

(2,124

)

 

 

2,333

 

Tax effect

 

 

162

 

 

 

(524

)

 

 

555

 

 

 

(931

)

Other comprehensive (loss) income, net of tax

 

 

(459

)

 

 

787

 

 

 

(1,569

)

 

 

1,402

 

Comprehensive income

 

$

442

 

 

$

1,746

 

 

$

366

 

 

$

3,188

 

Comprehensive (loss) income, attributable to noncontrolling interest

 

$

(44

)

 

$

39

 

 

$

(14

)

 

$

66

 

Comprehensive income attributable to Pathfinder Bancorp, Inc.

 

$

486

 

 

$

1,707

 

 

$

380

 

 

$

3,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax Effect Allocated to Each Component of Other Comprehensive (Loss) Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement plan net losses recognized in plan expenses

 

$

(11

)

 

$

(15

)

 

$

(22

)

 

$

(28

)

Unrealized holding (losses) gains arising during the period

 

 

302

 

 

 

(555

)

 

 

654

 

 

 

(963

)

Reclassification adjustment for net (losses) gains included in net income

 

 

(6

)

 

 

55

 

 

 

(34

)

 

 

83

 

Accretion of net unrealized loss on securities transferred to held-to-

   maturity(1)

 

 

(123

)

 

 

(9

)

 

 

(43

)

 

 

(23

)

Income tax effect related to other comprehensive (loss) income

 

$

162

 

 

$

(524

)

 

$

555

 

 

$

(931

)

 

(1) The accretion of the unrealized holding losses in accumulated other comprehensive loss at the date of transfer at September 30, 2013 partially offsets the amortization of the difference between the par value and the fair value of the investment securities at the date of transfer, and is an adjustment of yield.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

- 5 -


Table of Contents

Pathfinder Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

Six months ended June 30, 2018 and June 30, 2017

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other Com-

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

Common

 

 

Paid in

 

 

Retained

 

 

prehensive

 

 

Unearned

 

 

controlling

 

 

 

 

 

(In thousands, except share and per share data)

 

Stock

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

ESOP

 

 

Interest

 

 

Total

 

Balance, January 1, 2018

 

$

43

 

 

$

28,170

 

 

$

39,020

 

 

$

(4,208

)

 

$

(1,214

)

 

$

333

 

 

$

62,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

1,949

 

 

 

-

 

 

 

-

 

 

 

(14

)

 

 

1,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,569

)

 

 

-

 

 

 

-

 

 

 

(1,569

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares earned (12,221 shares)

 

 

-

 

 

 

101

 

 

 

-

 

 

 

-

 

 

 

90

 

 

 

-

 

 

 

191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units (14,490 shares)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

162

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options exercised

 

 

-

 

 

 

204

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of change in measurement of equity securities (1)

 

 

-

 

 

 

-

 

 

 

53

 

 

 

(53

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of change in investment securities transfer (2)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

359

 

 

 

-

 

 

 

-

 

 

 

359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock dividends declared ($0.12 per share)

 

 

-

 

 

 

-

 

 

 

(497

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(497

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of affiliate capital allocation

 

 

-

 

 

 

(8

)

 

 

15

 

 

 

-

 

 

 

-

 

 

 

(7

)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions from affiliates

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(60

)

 

 

(60

)

Balance, June 30, 2018

 

$

43