10-Q

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 September 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 every Interactive Data File required to be submitted 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 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 ☐

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 November 13, 2018, there were 4,358,328 shares outstanding of the registrant’s common stock.

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)	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	67
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other information	68
Item 6.	Exhibits	68
SIGNATURES		69

PART I - FINANCIAL INFORMATION

Item 1 – Consolidated Financial Statements

Pathfinder Bancorp, Inc.

Consolidated Statements of Condition

(Unaudited)

	September 30,			December 31,
(In thousands, except share and per share data)	2018			2017
ASSETS:
Cash and due from banks	$	10,595		$	9,708
Interest-earning deposits (including restricted balances of $4,478 and $6,342, respectively)		25,379			12,283
Total cash and cash equivalents		35,974			21,991
Available-for-sale securities, at fair value		188,953			171,138
Held-to-maturity securities, at amortized cost (fair value of $25,628 and $66,426, respectively)		26,084			66,196
Marketable equity securities, at fair value		541			-
Federal Home Loan Bank stock, at cost		4,187			3,855
Loans		620,859			580,831
Less: Allowance for loan losses		7,804			7,126
Loans receivable, net		613,055			573,705
Premises and equipment, net		17,418			16,117
Accrued interest receivable		2,915			3,047
Foreclosed real estate		268			468
Intangible assets, net		169			182
Goodwill		4,536			4,536
Bank owned life insurance		16,833			11,742
Other assets		10,682			8,280
Total assets	$	921,615		$	881,257
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Interest-bearing	$	662,343		$	633,820
Noninterest-bearing		93,861			89,783
Total deposits		756,204			723,603
Short-term borrowings		2,000			30,600
Long-term borrowings		77,636			43,288
Subordinated loans		15,085			15,059
Accrued interest payable		326			186
Other liabilities		6,801			6,377
Total liabilities		858,052			819,113
Shareholders' equity:
Common stock, par value $0.01; 25,000,000 authorized shares; 4,358,328 and  4,280,227    shares outstanding, respectively		44			43
Additional paid in capital		28,933			28,170
Retained earnings		41,270			39,020
Accumulated other comprehensive loss		(5,848	)		(4,208	)
Unearned ESOP		(1,079	)		(1,214	)
Total Pathfinder Bancorp, Inc. shareholders' equity		63,320			61,811
Noncontrolling interest		243			333
Total equity		63,563			62,144
Total liabilities and shareholders' equity	$	921,615		$	881,257

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

- 3 -

Pathfinder Bancorp, Inc.

Consolidated Statements of Income

(Unaudited)

	For the three			For the three		For the nine			For the nine
	months ended			months ended		months ended			months ended
(In thousands, except per share data)	September 30, 2018			September 30, 2017		September 30, 2018			September 30, 2017
Interest and dividend income:
Loans, including fees	$	7,213		$	6,291	$	20,949		$	17,901
Debt securities:
Taxable		1,348			971		3,647			2,548
Tax-exempt		143			188		608			778
Dividends		61			53		190			157
Federal funds sold and interest earning deposits		65			30		161			103
Total interest and dividend income		8,830			7,533		25,555			21,487
Interest expense:
Interest on deposits		1,839			1,016		4,750			2,676
Interest on short-term borrowings		41			135		204			713
Interest on long-term borrowings		338			178		716			426
Interest on subordinated loans		216			201		629			591
Total interest expense		2,434			1,530		6,299			4,406
Net interest income		6,396			6,003		19,256			17,081
Provision for loan losses		291			420		1,201			1,232
Net interest income after provision for loan losses		6,105			5,583		18,055			15,849
Noninterest income:
Service charges on deposit accounts		291			295		838			832
Earnings and gain on bank owned life insurance		138			92		319			225
Loan servicing fees		25			44		108			112
Net (losses) gains on sales and redemptions of investment securities		(60	)		108		(189	)		314
Gains on equity securities		-			-		26			-
Net gains (losses) on sales of loans and foreclosed real estate		8			2		24			(43	)
Debit card interchange fees		141			105		432			373
Other charges, commissions & fees		397			335		1,301			1,155
Total noninterest income		940			981		2,859			2,968
Noninterest expense:
Salaries and employee benefits		3,317			2,960		9,830			8,629
Building occupancy		613			554		1,757			1,624
Data processing		507			468		1,462			1,311
Professional and other services		359			245		1,095			655
Advertising		162			191		638			539
FDIC assessments		152			153		407			290
Audits and exams		104			84		314			253
Other expenses		698			598		1,995			1,936
Total noninterest expense		5,912			5,253		17,498			15,237
Income before income taxes		1,133			1,311		3,416			3,580
Provision for income taxes		157			386		505			869
Net income attributable to noncontrolling interest and    Pathfinder Bancorp, Inc.		976			925		2,911			2,711
Net income attributable to noncontrolling interest		(9	)		18		(23	)		84
Net income attributable to Pathfinder Bancorp Inc.	$	985		$	907	$	2,934		$	2,627
Earnings per common share - basic	$	0.23		$	0.22	$	0.71		$	0.65
Earnings per common share - diluted	$	0.23		$	0.22	$	0.69		$	0.63
Dividends per common share	$	0.06		$	0.055	$	0.18		$	0.1575

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

- 4 -

Pathfinder Bancorp, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	For the three months ended						For the nine months ended
(In thousands)	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Net Income	$	976		$	925		$	2,911		$	2,711
Other Comprehensive (Loss) Income
Retirement Plans:
Retirement plan net losses recognized in plan expenses		43			37			129			109
Unrealized holding (losses) gains on available-for-sale securities
Unrealized holding (losses) gains arising during the period		(618	)		(170	)		(3,120	)		2,236
Reclassification adjustment for net (losses) gains included in net income		60			(108	)		189			(314	)
Net unrealized (losses) gains on available-for-sale securities		(558	)		(278	)		(2,931	)		1,922
Accretion of net unrealized loss on securities transferred to held-to-    maturity(1)		5			25			168			83
Other comprehensive (loss) income, before tax		(510	)		(216	)		(2,634	)		2,114
Tax effect		133			86			688			(843	)
Other comprehensive (loss) income, net of tax		(377	)		(130	)		(1,946	)		1,271
Comprehensive income	$	599		$	795		$	965		$	3,982
Comprehensive (loss) income, attributable to noncontrolling interest	$	(9	)	$	18		$	(23	)	$	84
Comprehensive income attributable to Pathfinder Bancorp, Inc.	$	608		$	777		$	988		$	3,898
Tax Effect Allocated to Each Component of Other Comprehensive (Loss) Income
Retirement plan net losses recognized in plan expenses	$	(12	)	$	(15	)	$	(34	)	$	(42	)
Unrealized holding (losses) gains arising during the period		162			68			815			(894	)
Reclassification adjustment for net (losses) gains included in net income		(16	)		43			(49	)		126
Accretion of net unrealized loss on securities transferred to held-to-    maturity(1)		(1	)		(10	)		(44	)		(33	)
Income tax effect related to other comprehensive (loss) income	$	133		$	86		$	688		$	(843	)

(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 -

Pathfinder Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

Nine months ended September 30, 2018 and September 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		-		-			2,934			-			-			(23	)		2,911
Other comprehensive loss, net of tax		-		-			-			(1,946	)		-			-			(1,946	)
ESOP shares earned (18,332 shares)		-		150			-			-			135			-			285
Restricted stock units (14,490 shares)		-		-			-			-			-			-			-
Stock based compensation		-		259			-			-			-			-			259
Stock options exercised		1		362			-			-			-			-			363
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 ($0.18 per share)		-		-			(752	)		-			-			-			(752	)
Cumulative effect of affiliate capital allocation		-		(8	)		15			-			-			(7	)		-
Distributions from affiliates		-		-			-			-			-			(60	)		(60	)
Balance, September 30, 2018	$	44	$	28,933		$	41,270		$	(5,848	)	$	(1,079	)	$	243		$	63,563
Balance, January 1, 2017	$	43	$	27,483		$	35,619		$	(3,822	)	$	(1,394	)	$	432		$	58,361
Net income		-		-			2,627			-			-			84			2,711
Other comprehensive income, net of tax		-		-			-			1,271			-			-			1,271
ESOP shares earned (18,332 shares)		-		138			-			-			135			-			273
Restricted stock units (15,720 shares)		-		-			-			-			-			-			-
Stock based compensation		-		300			-			-			-			-			300
Stock options exercised		-		149			-			-			-			-			149
Common stock dividends declared ($0.1575 per share)		-		-			(645	)		-			-			-			(645	)
Distributions from affiliates		-		-			-			-			-			(31	)		(31	)
Balance, September 30, 2017	$	43	$	28,070		$	37,601		$	(2,551	)	$	(1,259	)	$	485		$	62,389

(1) Cumulative effect of unrealized gain on marketable equity securities based on the adoption of ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities.

(2) Cumulative effect of unrealized gains on the transfer of 52 investment securities from held-to-maturity classification to available-for-sale classification based on the adoption of ASU 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

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

- 6 -

Pathfinder Bancorp, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	For the nine months ended September 30,
(In thousands)	2018			2017
OPERATING ACTIVITIES
Net income attributable to Pathfinder Bancorp, Inc.	$	2,934		$	2,627
Adjustments to reconcile net income to net cash flows from operating activities:
Provision for loan losses		1,201			1,232
Proceeds from sales of loans		216			-
Originations of loans held-for-sale		(212	)		-
Realized (gains) losses on sales, redemptions and calls of:
Real estate acquired through foreclosure		(22	)		49
Loans		(2	)		(6	)
Available-for-sale investment securities		177			(63	)
Held-to-maturity investment securities		12			(1	)
Premises and equipment		(8	)		-
Depreciation		869			766
Amortization of mortgage servicing rights		3			9
Amortization of deferred loan costs		240			174
Amortization of deferred financing from subordinated debt		26			26
Earnings and gain on bank owned life insurance		(319	)		(225	)
Net amortization of premiums and discounts on investment securities		1,339			1,206
Amortization of intangible assets		13			12
Stock based compensation and ESOP expense		544			573
Net change in accrued interest receivable		132			(106	)
Pension plan contribution		(825	)		-
Net change in other assets and liabilities		(335	)		(1,918	)
Net cash flows from operating activities		5,983			4,355
INVESTING ACTIVITIES
Purchase of investment securities available-for-sale		(55,284	)		(80,814	)
Purchase of investment securities held-to-maturity		-			(19,061	)
Purchase of Federal Home Loan Bank stock		(6,439	)		(648	)
Proceeds from redemption of Federal Home Loan Bank stock		6,107			-
Proceeds from maturities and principal reductions of investment securities available-for-sale		33,650			29,101
Proceeds from maturities and principal reductions of investment securities held-to-maturity		5,238			5,253
Proceeds from sales, redemptions and calls of:
Available-for-sale investment securities		33,421			55,037
Held-to-maturity investment securities		953			2,105
Real estate acquired through foreclosure		542			609
Premise and equipment		14			-
Purchase of bank owned life insurance		(5,000	)		-
Proceeds from bank owned life insurance		228			-
Realized gains on hedging activity		-			(250	)
Net change in loans		(41,111	)		(76,095	)
Purchase of premises and equipment		(2,176	)		(1,640	)
Net cash flows from investing activities		(29,857	)		(86,403	)
FINANCING ACTIVITIES
Net change in demand deposits, NOW accounts, savings accounts, money management deposit accounts,      MMDA accounts and escrow deposits		(19,633	)		84,160
Net change in time deposits		43,260			23,750
Net change in brokered deposits		8,974			(2,466	)
Net change in short-term borrowings		(28,600	)		(7,911	)
Payments on long-term borrowings		(2,000	)		(7,000	)
Proceeds from long-term borrowings		36,348			30,760
Proceeds from exercise of stock options		362			149
Cash dividends paid to common shareholders		(764	)		(648	)
Change in noncontrolling interest, net		(90	)		53
Net cash flows from financing activities		37,857			120,847
Change in cash and cash equivalents		13,983			38,799
Cash and cash equivalents at beginning of period		21,991			22,419
Cash and cash equivalents at end of period	$	35,974		$	61,218
CASH PAID DURING THE PERIOD FOR:
Interest	$	6,159		$	4,303
Income taxes		662			760
NON-CASH INVESTING ACTIVITY
Real estate acquired in exchange for loans		320			721
RESTRICTED CASH
Federal Reserve Bank Reserve Requirements included in interest earning deposits		4,478			5,245

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

- 7 -

Notes to Consolidated Financial Statements (Unaudited)

Note 1:   Basis of Presentation

The accompanying unaudited consolidated financial statements of Pathfinder Bancorp, Inc., (the “Company”), Pathfinder Bank (the “Bank”) and its other wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions for Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes necessary for a complete presentation of consolidated financial condition, results of operations and cash flows in conformity with generally accepted accounting principles.  In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included.  Certain amounts in the 2017 consolidated financial statements may have been reclassified to conform to the current period presentation.  These reclassifications had no effect on net income or comprehensive income as previously reported.  Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018 or any other interim period.  

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.  Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes.  These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.  Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.  Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value or when an asset or liability needs to be recorded contingent upon a future event.  Carrying assets and liabilities at fair value inherently results in more financial statement volatility.  The fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices or are provided by unaffiliated third-party sources, when available.  When third party information is not available, valuation adjustments are estimated in good faith by management.

Although the Company owns, through its subsidiary Pathfinder Risk Management Company, Inc., 51% of the membership interest in FitzGibbons Agency, LLC (“Agency”), the Company is required to consolidate 100% of the Agency within the consolidated financial statements.  The 49% of which the Company does not own is accounted for separately as noncontrolling interests within the consolidated financial statements.

Note 2:   New Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) and, to a lesser extent, other authoritative rulemaking bodies promulgate generally accepted accounting principles (“GAAP”) to regulate the standards of accounting in the United States.  From time to time, the FASB issues new GAAP standards, known as Accounting Standards Updates (“ASUs”) some of which, upon adoption, may have the potential to change the way in which the Company recognizes or reports within its consolidated financial statements.  The following presentation provides a description of standards that are not currently effective but could have an impact on the Company's consolidated financial statements upon adoption.

Standards Not Yet Adopted as of September 30, 2018

Standard:  Leases (ASU 2016-02: Leases [Topic 842])

Description:  The new guidance requires lessees to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months.  While the guidance requires all leases to be recognized in the balance sheet, there continues to be a differentiation between finance leases and operating leases for purposes of income statement recognition and cash flow statement presentation.  For finance leases, interest on the lease liability and amortization of the right-of-use asset will be recognized separately in the statement of income.  Repayments of principal on those lease liabilities will be classified within financing activities and payments of interest on the lease liability will be classified within operating

- 8 -

activities in the statement of cash flows.  For operating leases, a single lease cost is recognized in the statement of income and allocated over the lease term, generally on a straight-line basis.  All cash payments are presented within operating activities in the statement of cash flows. The accounting applied by lessors is largely unchanged from existing GAAP, however, the guidance eliminates the accounting model for leveraged leases for leases that commence after the effective date of the guidance.

Required Date of Implementation:  January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  The Company occupies certain banking offices and uses certain equipment under noncancelable operating lease agreements which currently are not reflected in its consolidated balance sheet.  Upon adoption of the guidance, the Company expects to report increased assets and increased liabilities as a result of recognizing right-of-use assets and lease liabilities on its consolidated balance sheet. The Company was committed to $1.0 million of minimum lease payments under noncancelable operating lease agreements at September 30, 2018.  In addition, the Company leases office and similar use space, also under noncancelable operating lease agreements to unrelated entities within a limited number of its real estate locations.  The Company does not expect the new guidance will have a material impact to its consolidated statement of income.

____

Standard:  Leases (ASU 2018-10: Codification Improvements to Topic 842, Leases)

Description: The Board has an ongoing project on its agenda about improvements to clarify the Codification or to correct unintended application of guidance related to ASU 2016-02. Those items generally are not expected to have a significant effect on current accounting practice or create a significant administrative cost for most entities. The amendments in this Update are of a similar nature to the items typically addressed in the Codification improvements project. However, the Board decided to issue a separate Update for the improvements related to Update 2016-02 to increase stakeholders’ awareness of the amendments and to expedite the improvements.

Required Date of Implementation: January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  See comments, above, related to the adoption of ASU 2016-02

___

Standard:  Premium Amortization on Purchased Callable Debt Securities (ASU 2017-08: Receivables—Nonrefundable Fees and Other Costs [Subtopic 310-20]: Premium Amortization on Purchased Callable Debt Securities)

Description:  The amended guidance requires the premium on callable debt securities to be amortized to the earliest call date.  The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

Required Date of Implementation:  January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company does not expect the guidance to have a material impact on its consolidated financial statements.

____

Standard:  Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07: Compensation - Stock Compensation [Topic 718])

Description:  Consistent with the accounting requirement for employee share-based payment awards, under the new guidance, nonemployee share-based payment awards within the scope of Topic 718 are measured on the grant date at the grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been

- 9 -

satisfied.  The amendments in this Update affect all entities that enter into share-based payment transactions for acquiring goods and services from nonemployees.

Required Date of Implementation:  January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  The amendments should be applied using a prospective transition method. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

____

Standard:  Measurement of Credit Losses on Financial Instruments (ASU 2016-13: Financial Instruments—Credit Losses [Topic 326]: Measurement of Credit Losses on Financial Instruments)

Description: The amended guidance replaces the current incurred loss model for determining the allowance for credit losses. The guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected.  The allowance for credit losses will represent a valuation account that is deducted from the amortized cost basis of the financial assets to present their net carrying value at the amount expected to be collected. The income statement will reflect the measurement of credit losses for newly recognized financial assets as well as expected increases or decreases of expected credit losses that have taken place during the period. When determining the allowance, expected credit losses over the contractual term of the financial asset(s) (taking into account prepayments) will be estimated considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.  The amended guidance also requires recording an allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination.  The initial allowance for these assets will be added to the purchase price at acquisition rather than being reported as an expense.  Subsequent changes in the allowance will be recorded through the income statement as an expense adjustment.  In addition, the amended guidance requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The calculation of credit losses for available-for-sale securities will be similar to how it is determined under existing guidance.

Required Date of Implementation:  January 1, 2020 (early adoption permitted as of January 1, 2019)

Effect on Consolidated Financial Statements:  The Company is assessing the new guidance to determine what modifications to existing credit estimation processes may be required.  The Company expects that the new guidance will result in an increase in its allowance for credit losses as a result of considering credit losses over the expected life of its loan and debt securities portfolios.  Increases in the level of allowances will also reflect new requirements to include estimated credit losses on investment securities classified as held-to-maturity, if any.  The Company has formed an Implementation Committee, whose membership includes representatives of senior management, to develop plans that will encompass: (1) internal methodology changes (2) data collection and management activities, (3) internal communication requirements, and (4) estimation of the projected impact of this guidance.  The amount of any change in the allowance for credit losses resulting from the new guidance will ultimately be impacted by the provisions of this guidance as well as by the loan and debt security portfolios composition and asset quality at the adoption date, and economic conditions and forecasts at the time of adoption.

____

Standard:  Simplifying the Test for Goodwill Impairment (ASU 2017-04: Intangibles—Goodwill and Other [Topic 350]: Simplifying the Test for Goodwill Impairment)

Description:  Current guidance requires a two-step approach to determining if recorded goodwill is impaired.  In Step 1, reporting entities must first evaluate whether or not the carrying value of a reporting unit is greater than its fair value. In Step 2, if a reporting unit’s carrying value is greater than its fair value, then the entity should calculate the implied fair value of goodwill. If the carrying value of goodwill is more than the implied fair value, an impairment charge for the difference must be recorded.  The amended guidance eliminates Step 2 from the goodwill impairment test.  Therefore, under the new guidance, if the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of the recorded goodwill).

- 10 -

Required Date of Implementation: January 1, 2020 (early adoption permitted)

Effect on Consolidated Financial Statements:  The amendments should be applied using a prospective transition method. The Company does not expect the guidance will have a material impact on its consolidated financial statements, unless at some point in the future one of its reporting units were to fail Step 1 of the goodwill impairment test.

____

Standard:  Leases (ASU 2018-11: Codification Improvements to Topic 842, Leases)

Description:  The amendments in this Update provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (Topic 840, Leases). An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).  

The amendments in this Update provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

1. The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.

2. The lease component, if accounted for separately, would be classified as an operating lease.

If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842.

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose the following by class of underlying asset:

1. The fact that it elected the expedient

2. Which class(es) of underlying asset the lessor made the election to

3. The nature of (a) the lease component and nonlease component(s) that were combined as a result of applying the practical expedient and (b) any nonlease components that were not eligible for the practical expedient and, thus, not combined

4. The Topic the entity applies to the combined component (Topic 606 or Topic 842).

Required Date of Implementation: January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  See comments, above, related to the adoption of ASU 2016-02

____

Standard: Fair Value Measurement (ASU 2018-13:  Fair Value Measurement (Topic 820):  Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement

Description:  The Board is issuing the amendments in this Update as part of the disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to

- 11 -

users of each entity’s financial statements. The amendments in this Update modify the disclosure requirements for entities such as the Company on fair value measurements in Topic 820, Fair Value Measurement:

The following disclosure requirements were removed from Topic 820:

1. The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy

2. The policy for timing of transfers between levels

3. The valuation processes for Level 3 fair value measurements

The following disclosure requirements were modified in Topic 820:

1. In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.

2. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.

3. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

The following disclosure requirements were added to Topic 820:

1. The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period

2. The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

Required Date of Implementation:  The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date.

Effect on Consolidated Financial Statements:  The Company does not expect the new guidance will have a material impact to its consolidated statements of condition or income.

____

Standard: Compensation (ASU 2018-14:  Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans)

Description:  The Board is issuing the amendments in this Update as part of the disclosure framework project. The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The following disclosure requirements are removed from Subtopic 715-20:

1. The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.

2. The amount and timing of plan assets expected to be returned to the employer.

3. Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.

- 12 -

4. The effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

The following disclosure requirements are added to Subtopic 715-20:

1. The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates.

2. An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

The amendments in this Update also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

1. The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets

2. The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

Required Date of Implementation:  The amendments in this Update are effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities.

Effect on Consolidated Financial Statements:  The Company does not expect the new guidance will have a material impact to its consolidated statements of condition or income.

____

Standard:  Derivatives and Hedging (ASU 2018-16: Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

Description:  Topic 815, Derivatives and Hedging, provides guidance on the risks associated with financial assets or liabilities that are permitted to be hedged. Among those risks is the risk of changes in fair values or cash flows of existing or forecasted issuances or purchases of fixed-rate financial assets or liabilities attributable to the designated benchmark interest rate (referred to as interest rate risk). At present in the United States, eligible benchmark interest rates are the interest rates on direct Treasury obligations of the U.S. government (UST), the London Interbank Offered Rate (LIBOR) swap rate, and the Overnight Index Swap (OIS) Rate based on the Fed Funds Effective Rate. Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, introduced the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate as the fourth permissible U.S. benchmark rate.

The amendments in this Update permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the UST, the LIBOR swap rate, the OIS rate based on the Fed Funds Effective Rate, and the SIFMA Municipal Swap Rate.

Required Date of Implementation:  The Company adopted ASU 2017-12 in the quarter ended June 30, 2018.  For public business entities that already have adopted the amendments in Update 2017-12, such as the Company, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

Effect on Consolidated Financial Statements:  The Company has certain assets, primarily in its investment securities portfolio, that have adjustable rates of interest based on LIBOR. To the extent that the Company utilizes hedging strategies involving those securities, or uses hedging strategies designed to modify the effective repricing characteristics of its fixed-rate asset or fixed-rate liabilities portfolios to floating-rate assets or floating-rate liabilities in the future the use of the liabilities in the future, the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes may have an effect on future results of operations.  The Company had no hedging activities in place

- 13 -

at September 30, 2018 and does not expect the new guidance will have a material impact to its consolidated statements of condition or income.

Note 3:   Earnings per Common Share

Basic earnings per share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period.  Net income available to common shareholders is net income to Pathfinder Bancorp, Inc. less the total of preferred dividends declared, if any. Diluted earnings per share include the potential dilutive effect that could occur upon the assumed exercise of issued stock options using the Treasury Stock method.  Anti-dilutive stock options, not included in the computation below, were -0-for the three andnine months ended September 30, 2018 and were -0- for the three months ended September 30, 2017 and 30,754 for the nine months ended September 30, 2017.  Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating earnings per common share until they are committed to be released to plan participants.

The following table sets forth the calculation of basic and diluted earnings per share.  

	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands, except per share data)	2018		2017		2018		2017
Basic Earnings Per Common Share
Net income available to common shareholders	$	985	$	907	$	2,934	$	2,627
Weighted average common shares outstanding		4,195		4,090		4,157		4,072
Basic earnings per common share	$	0.23	$	0.22	$	0.71	$	0.65
Diluted Earnings Per Common Share
Net income available to common shareholders	$	985	$	907	$	2,934	$	2,627
Weighted average common shares outstanding		4,195		4,090		4,157		4,072
Effect of assumed exercise of stock options		84		108		100		106
Diluted weighted average common shares outstanding		4,279		4,198		4,257		4,178
Diluted earnings per common share	$	0.23	$	0.22	$	0.69	$	0.63

- 14 -

Note 4:   Investment Securities

The amortized cost and estimated fair value of investment securities are summarized as follows:

	September 30, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	22,213	$	-	$	(225	)	$	21,988
State and political subdivisions		23,765		-		(900	)		22,865
Corporate		17,453		191		(356	)		17,288
Asset backed securities		21,045		3		(175	)		20,873
Residential mortgage-backed - US agency		34,137		22		(1,126	)		33,033
Collateralized mortgage obligations - US agency		51,198		3		(1,996	)		49,205
Collateralized mortgage obligations - Private label		23,891		20		(415	)		23,496
Total		193,702		239		(5,193	)		188,748
Equity investment securities:
Common stock - financial services industry		205		-		-			205
Total		205		-		-			205
Total available-for-sale	$	193,907	$	239	$	(5,193	)	$	188,953
Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	3,985	$	-	$	(47	)	$	3,938
State and political subdivisions		5,304		14		(109	)		5,209
Corporate		6,196		6		(207	)		5,995
Residential mortgage-backed - US agency		3,691		1		(96	)		3,596
Collateralized mortgage obligations - US agency		2,953		1		(9	)		2,945
Collateralized mortgage obligations - Private label		3,955		19		(29	)		3,945
Total held-to-maturity	$	26,084	$	41	$	(497	)	$	25,628

- 15 -

	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	41,489	$	1	$	(154	)	$	41,336
State and political subdivisions		13,960		12		(291	)		13,681
Corporate		8,584		108		(92	)		8,600
Asset backed securities		6,662		12		(30	)		6,644
Residential mortgage-backed - US agency		36,214		23		(495	)		35,742
Collateralized mortgage obligations - US agency		54,481		-		(1,133	)		53,348
Collateralized mortgage obligations - Private label		11,193		62		(203	)		11,052
Total		172,583		218		(2,398	)		170,403
Equity investment securities:
Common stock - financial services industry		663		72		-			735
Total		663		72		-			735
Total available-for-sale	$	173,246	$	290	$	(2,398	)	$	171,138
Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	4,948	$	14	$	(14	)	$	4,948
State and political subdivisions		35,130		641		(311	)		35,460
Corporate		8,311		151		(159	)		8,303
Residential mortgage-backed - US agency		6,853		53		(10	)		6,896
Collateralized mortgage obligations - US agency		7,574		83		(215	)		7,442
Collateralized mortgage obligations - Private label		3,380		7		(10	)		3,377
Total held-to-maturity	$	66,196	$	949	$	(719	)	$	66,426

The amortized cost and estimated fair value of debt investments at September 30, 2018 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Available-for-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	5,320	$	5,314	$	2,306	$	2,296
Due after one year through five years		34,938		34,738		5,534		5,484
Due after five years through ten years		23,671		23,059		4,810		4,719
Due after ten years		20,547		19,903		2,835		2,643
Sub-total		84,476		83,014		15,485		15,142
Residential mortgage-backed - US agency		34,137		33,033		3,691		3,596
Collateralized mortgage obligations - US agency		51,198		49,205		2,953		2,945
Collateralized mortgage obligations - Private label		23,891		23,496		3,955		3,945
Totals	$	193,702	$	188,748	$	26,084	$	25,628

- 16 -

The Company’s investment securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	September 30, 2018
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(Dollars in thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSE's		3	$	(156	)	$	13,038		3	$	(69	)	$	6,930		6	$	(225	)	$	19,968
State and political subdivisions		15		(189	)		9,122		18		(711	)		12,090		33		(900	)		21,212
Corporate		11		(184	)		8,373		2		(172	)		1,613		13		(356	)		9,986
Asset backed securities		10		(154	)		15,327		1		(21	)		1,013		11		(175	)		16,340
Residential mortgage-backed - US agency		9		(269	)		8,975		18		(857	)		20,315		27		(1,126	)		29,290
Collateralized mortgage obligations - US agency		9		(198	)		15,033		26		(1,798	)		31,906		35		(1,996	)		46,939
Collateralized mortgage obligations - Private label		7		(283	)		13,989		6		(132	)		6,807		13		(415	)		20,796
Totals		64	$	(1,433	)	$	83,857		74	$	(3,760	)	$	80,674		138	$	(5,193	)	$	164,531
Held-to-Maturity Portfolio
US Treasury, agencies and GSE's		3	$	(20	)	$	2,965		1	$	(27	)	$	973		4	$	(47	)	$	3,938
State and political subdivisions		3		(8	)		1,390		6		(101	)		2,294		9		(109	)		3,684
Corporate		2		(47	)		1,266		1		(160	)		1,962		3		(207	)		3,228
Residential mortgage-backed - US agency		4		(85	)		2,939		1		(11	)		312		5		(96	)		3,251
Collateralized mortgage obligations - US agency		1		(9	)		1,002		-		-			-		1		(9	)		1,002
Collateralized mortgage obligations - Private label		-		-			-		2		(29	)		2,083		2		(29	)		2,083
Totals		13	$	(169	)	$	9,562		11	$	(328	)	$	7,624		24	$	(497	)	$	17,186

	December 31, 2017
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(Dollars in thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSE's		5	$	(105	)	$	27,359		4	$	(49	)	$	13,957		9	$	(154	)	$	41,316
State and political subdivisions		18		(24	)		2,480		12		(267	)		5,041		30		(291	)		7,521
Corporate		2		(19	)		1,791		1		(73	)		1,727		3		(92	)		3,518
Asset backed securities		2		(17	)		3,123		1		(13	)		742		3		(30	)		3,865
Residential mortgage-backed - US agency		15		(159	)		21,551		9		(336	)		10,463		24		(495	)		32,014
Collateralized mortgage obligations - US agency		14		(195	)		23,790		21		(938	)		25,395		35		(1,133	)		49,185
Collateralized mortgage obligations - Private label		4		(203	)		7,439		-		-			-		4		(203	)		7,439
Totals		60	$	(722	)	$	87,533		48	$	(1,676	)	$	57,325		108	$	(2,398	)	$	144,858
Held-to-Maturity Portfolio
US Treasury, agencies and GSE's		2	$	(2	)	$	1,990		1	$	(12	)	$	988		3	$	(14	)	$	2,978
State and political subdivisions		8		(55	)		5,668		11		(256	)		8,644		19		(311	)		14,312
Corporate		3		(10	)		1,412		1		(149	)		2,087		4		(159	)		3,499
Residential mortgage-backed - US agency		2		(10	)		1,909		-		-			-		2		(10	)		1,909
Collateralized mortgage obligations - US agency		2		(215	)		4,418		-		-			-		2		(215	)		4,418
Collateralized mortgage obligations - Private label		1		(10	)		1,119		-		-			-		1		(10	)		1,119
Totals		18	$	(302	)	$	16,516		13	$	(417	)	$	11,719		31	$	(719	)	$	28,235

Excluding the effects of changes in the characteristics of individual debt securities that potentially give rise to other-than-temporary impairment (“OTTI”), as described below, the fair market value of a debt security as of a particular measurement date is highly dependent upon prevailing market and economic environmental factors at the measurement date relative to the prevailing market and economic environmental factors present at the time the debt security was acquired.  The most significant market and environmental factors include, but are not limited to (1) the general level of interest rates, (2) the relationship between shorter-term interest rates and longer-term interest rates (referred to as the “slope” of the interest rate yield curve), (3) general bond market liquidity, (4) the recent and expected near-term volume of new issuances of similar debt securities, and (5) changes in the market values of individual loan collateral underlying mortgage-backed debt securities.  Changes in interest rates affect the fair market values of debt securities by influencing the discount rate applied to the securities’ future expected cash flows.  The higher the discount rate, the lower the resultant security price.  Conversely, the lower the discount rate, the higher the resultant security price.  In addition, the cumulative amount and timing of undiscounted cash flows of debt securities may be also affected by changes in interest rates.  For any given level of movement in the general market and economic environmental factors described above, the magnitude

- 17 -

of any particular debt security’s price changes will also depend heavily upon security-specific factors such as (1) the duration of the security, (2) imbedded optionality contractually granted to the issuer of the security with respect to principal prepayments, and (3) changes in the level of market premiums demanded by investors for securities with imbedded credit risk (where applicable).

The Company conducts a formal review of investment securities on a quarterly basis for the presence of OTTI.  The Company assesses whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the statement of condition date.  Under these circumstances, OTTI is considered to have occurred (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not anticipated to be sufficient to recover the entire amortized cost basis.  The guidance requires that credit-related OTTI is recognized in earnings while non-credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”).  Non-credit-related OTTI is based on other factors, including illiquidity and changes in the general interest rate environment.  Presentation of OTTI is made in the consolidated statement of income on a gross basis, including both the portion recognized in earnings as well as the portion recorded in OCI.  The gross OTTI would then be offset by the amount of non-credit-related OTTI, showing the net as the impact on earnings.

Management does not believe any individual unrealized loss in securities within the portfolio as of September 30, 2018 represents OTTI.  At September 30, 2018, the Bank had the following securities, in a loss position for 12 months or more relative to their amortized historical cost, which were deemed to have no credit impairment, thus, the disclosed unrealized losses relate directly to changes in interest rates subsequent to the acquisition of the individual securities.  The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.

• 18 state and political subdivision securities, categorized as available-for-sale, with an aggregate amortized historical cost of $12.8 million and an aggregate market value of $12.1 million (unrealized aggregate loss of $711,000, or 5.6%).  Each of the securities maintains a credit rating established by one or more nationally-recognized statistical rating organizations (“NRSRO”) that is well above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.

• Two corporate securities, categorized as available-for-sale, with an aggregate amortized historical cost of $1.8 million and an aggregate market value of $1.6 million (unrealized loss of $172,000, or 10.7%).  The securities maintain credit ratings established by one or more NRSRO that are above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.

• One privately-issued asset-backed security, categorized as available-for-sale, with a book value of $1.0 million and a market value of $1.0 million (unrealized loss of $21,000, or 2.1%) is rated above the minimum investment grade by one or more NRSRO and therefore, no credit-related OTTI is deemed to be present.

• Five privately-issued mortgage-backed securities, categorized as available-for-sale, with an aggregate amortized historical cost of $6.4 million and an aggregate market value of $6.3 million (unrealized loss of $123,000, or 2.0%).  These securities were unrated at the time of their issuance but remain significantly collateralized through subordination and, therefore, no credit-related OTTI is deemed to be present. In addition, one privately-issued mortgage-backed security, categorized as available-for-sale, with a book value of $518,000 and a market value of $509,000 (unrealized loss of $9,000, or 1.7%) is rated at the highest investment grade rating by one or more NRSRO and therefore, no credit-related OTTI is deemed to be present.

• Six state and political subdivision securities, categorized as held-to-maturity, with an aggregate amortized historical cost of $2.4 million and an aggregate market value of $2.3 million (unrealized aggregate loss of $101,000, or 4.4%).  Each of the securities maintains a credit rating established by one or more NRSRO that is above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.

• One corporate security, categorized as held-to-maturity, with an amortized historical cost of $2.1 million and a market value of $2.0 million (unrealized aggregate loss of $160,000, or 7.6%).  This security maintains a credit rating established by one or more NRSRO well above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.

- 18 -

• Two privately-issued mortgaged-backed securities, categorized as held-to-maturity, with an amortized historical cost of $2.1 million and a market value of $2.1 million (aggregate unrealized loss of $29,000, or 1.4%).  These securities were unrated at the time of their issuance but remain significantly collateralized through subordination and, therefore, no credit-related OTTI is deemed to be present.

All other securities with market values less than their amortized historical costs for twelve or more months are issued by United States agencies or government sponsored enterprises and consist of mortgage-backed securities, collateralized mortgage obligations and direct agency financings.  These positions in US government agency and government-sponsored enterprises are deemed to have no credit impairment, thus, the disclosed unrealized losses relate directly to changes in interest rates subsequent to the acquisition of the individual securities.  The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.

In determining whether OTTI has occurred for equity securities, the Company considers the applicable factors described above and the length of time the equity security’s fair value has been below the carrying amount. The Company had no equity securities that were impaired at September 30, 2018 or December 31, 2017.

Gross realized gains (losses) on sales of securities for the indicated periods are detailed below:

	For the three months						For the nine months
	ended September 30,						ended September 30,
(In thousands)	2018			2017			2018			2017
Realized gains on investments	$	76		$	165		$	236		$	313
Realized gains on hedging activity		-			-			-			250
Realized losses on investments		(136	)		(57	)		(425	)		(249	)
	$	(60	)	$	108		$	(189	)	$	314
Gains on equity securities		-			-			26			-
	$	-		$	-		$	26		$	-

The Company adoptedASU 2017-12: Derivatives and Hedging [Topic 815]: Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2018, in the second quarter of 2018.  The amended guidance within this Update expands and clarifies hedge accounting for nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements, and simplifies the requirements for assessing effectiveness in a hedging relationship.  The Company did not have any hedging activities in the first half of 2018 but expects to utilize hedging in the future to improve the management of its risk profiles.  In order to facilitate potential future hedging activities, the Company transferred 52 investment securities with an aggregate amortized cost before transfer of $35.2 million from the held-to-maturity classification to the available-for-sale classification at the date of adoption.

As of September 30, 2018 and December 31, 2017, securities with a fair value of $103.1 million and $113.0 million, respectively, were pledged to collateralize certain municipal deposit relationships.  As of the same dates, securities with a fair value of $19.1 million and $19.9 million were pledged against the Company’s established borrowing arrangements.  

Management has reviewed its loan and mortgage-backed securities portfolios and determined that, to the best of its knowledge, only minimal exposure exists to sub-prime or other high-risk residential mortgages.  With limited exceptions in the Company’s investment portfolio involving the most senior tranches of securitized bonds, the Company is not in the practice of investing in, or originating, these types of investments or loans.

Note 5:   Pension and Postretirement Benefits

The Company has a noncontributory defined benefit pension plan covering most employees. The plan provides defined benefits based on years of service and final average salary. On May 14, 2012, the Company informed its employees of its decision to freeze participation and benefit accruals under the plan, primarily to reduce some of the volatility in earnings

- 19 -

that can accompany the maintenance of a defined benefit plan.  The plan was frozen on June 30, 2012.  Compensation earned by employees up to June 30, 2012 is used for purposes of calculating benefits under the plan but there are no future benefit accruals after this date.  Participants as of June 30, 2012 will continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work. In addition, the Company provides certain health and life insurance benefits for a limited number of eligible retired employees.  The healthcare plan is contributory with participants’ contributions adjusted annually; the life insurance plan is noncontributory.  Employees with less than 14 years of service as of January 1, 1995, are not eligible for the health and life insurance retirement benefits.

The composition of net periodic pension plan and postretirement plan costs for the indicated periods is as follows:

	Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
	For the three months ended September 30,												For the nine months ended September 30,
(In thousands)	2018			2017			2018			2017			2018			2017			2018			2017
Service cost	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Interest cost		119			118			5			2			355			355			16			6
Expected return on plan assets		(260	)		(236	)		-			-			(778	)		(709	)		-			-
Amortization of prior service credits		-			-			(1	)		-			-			-			(3	)		-
Amortization of net losses/(gains)		41			39			3			(2	)		123			115			9			(6	)
Net periodic benefit plan (benefit) cost	$	(100	)	$	(79	)	$	7		$	-		$	(300	)	$	(239	)	$	22		$	-

The Company made a contribution in the amount of $825,000 to the defined benefit pension plan during the second quarter of 2018.  The Company will evaluate the need for further contributions to the defined benefit pension plan during 2018.  The prepaid pension asset is recorded in other assets on the statement of condition as of September 30, 2018 and December 31, 2017.

- 20 -

Note 6:   Loans

Major classifications of loans at the indicated dates are as follows:

	September 30,			December 31,
(In thousands)	2018			2017
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	231,830		$	216,793
Construction		3,888			5,558
Total residential mortgage loans		235,718			222,351
Commercial loans:
Real estate		213,303			192,525
Lines of credit		48,496			51,285
Other commercial and industrial		60,984			50,097
Tax exempt loans		10,163			10,405
Total commercial loans		332,946			304,312
Consumer loans:
Home equity and junior liens		25,985			25,935
Other consumer		26,410			28,646
Total consumer loans		52,395			54,581
Total loans		621,059			581,244
Net deferred loan fees		(200	)		(413	)
Less allowance for loan losses		(7,804	)		(7,126	)
Loans receivable, net	$	613,055		$	573,705

Although the Bank may occasionally purchase or fund loan participation interests outside of its primary market areas, the Bank generally originates residential mortgage, commercial, and consumer loans largely to customers throughout Oswego and Onondaga counties. Although the Bank has a diversified loan portfolio, a substantial portion of its borrowers’ abilities to honor their loan contracts is dependent upon the counties’ employment and economic conditions.

The Bank acquired $15.6 million and $10.2 million of loans originated by an unrelated financial institution, located outside of the Bank’s market area, in January 2017 and April 2017, respectively.   The acquired loan pools represented a 90% participating interest in a total of 1,231 loans secured by liens on automobiles with maturities ranging primarily from two to six years. These loans are serviced through their respective maturities by the originating financial institution.  As of September 30, 2018 and December 31, 2017 there were 954 loans outstanding with a remaining outstanding carrying value of $14.8 million and 1,082 loans outstanding with a remaining outstanding carrying value of $19.6 million, respectively.  Since the acquisition of these loan pools, a total of 16 loans had cumulative net charge-offs totaling $89,000 with $44,000 in net charge-offs for the nine months ended September 30, 2018.

As of September 30, 2018 and December 31, 2017, residential mortgage loans with a carrying value of $153.1 million and $148.1 million, respectively, have been pledged by the Company to the Federal Home Loan Bank of New York (“FHLBNY”) under a blanket collateral agreement to secure the Company’s line of credit and term borrowings.  

Loan Origination / Risk Management

The Company’s lending policies and procedures are presented in Note 5 to the audited consolidated financial statements included in the 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2018 and have not changed.  As part of the execution of the Company’s overall balance sheet management strategies, the Bank will acquire participating interests in loans originated by unrelated third parties on a sporadic basis.  The purchase of participations in loans that are originated by third parties only occurs after the completion of thorough pre-acquisition due diligence.  Loans in which the Company acquires a participating interest are determined to meet, in all material respects,

- 21 -

the Company’s internal underwriting policies, including credit and collateral suitability thresholds, prior to acquisition.  In addition, the financial condition of the originating financial institutions, which are generally retained as the ongoing loan servicing provider for participations acquired by the Bank, are analyzed prior to the acquisition of the participating interests and monitored on a regular basis thereafter for the life of those interests.

To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three portfolio segments, each with different risk characteristics but with similar methodologies for assessing risk.  Each portfolio segment is broken down into loan classes where appropriate.  Loan classes contain unique measurement attributes, risk characteristics, and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses.  Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class.  

The following table illustrates the portfolio segments and classes for the Company’s loan portfolio:

Portfolio Segment	Class
Residential Mortgage Loans	1-4 family first-lien residential mortgages
	Construction
Commercial Loans	Real estate
	Lines of credit
	Other commercial and industrial
	Tax exempt loans
Consumer Loans	Home equity and junior liens
	Other consumer

- 22 -

The following tables present the classes of the loan portfolio, not including net deferred loan costs, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:

	As of  September 30, 2018
			Special
(In thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	228,135	$	663	$	694	$	2,338	$	231,830
Construction		3,888		-		-		-		3,888
Total residential mortgage loans		232,023		663		694		2,338		235,718
Commercial loans:
Real estate		208,188		1,513		1,749		1,853		213,303
Lines of credit		48,170		164		122		40		48,496
Other commercial and industrial		59,847		379		624		134		60,984
Tax exempt loans		10,163		-		-		-		10,163
Total commercial loans		326,368		2,056		2,495		2,027		332,946
Consumer loans:
Home equity and junior liens		25,632		126		140		87		25,985
Other consumer		26,201		149		35		25		26,410
Total consumer loans		51,833		275		175		112		52,395
Total loans	$	610,224	$	2,994	$	3,364	$	4,477	$	621,059
	As of  December 31, 2017
			Special
(In thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	211,825	$	891	$	1,869	$	2,208	$	216,793
Construction		5,558		-		-		-		5,558
Total residential mortgage loans		217,383		891		1,869		2,208		222,351
Commercial loans:
Real estate		187,073		1,372		2,024		2,056		192,525
Lines of credit		50,507		195		523		60		51,285
Other commercial and industrial		48,738		407		532		420		50,097
Tax exempt loans		10,405		-		-		-		10,405
Total commercial loans		296,723		1,974		3,079		2,536		304,312
Consumer loans:
Home equity and junior liens		25,396		61		304		174		25,935
Other consumer		28,584		55		7		-		28,646
Total consumer loans		53,980		116		311		174		54,581
Total loans	$	568,086	$	2,981	$	5,259	$	4,918	$	581,244

Management has reviewed its loan portfolio and determined that, to the best of its knowledge, no material exposure exists to sub-prime or other high-risk residential mortgages.  The Company is not in the practice of originating these types of loans.

- 23 -

Nonaccrual and Past Due Loans

Loans are placed on nonaccrual when the contractual payment of principal and interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing.  

Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date.  

An age analysis of past due loans, not including net deferred loan costs, segregated by portfolio segment and class of loans, as of September 30, 2018 and December 31, 2017, are detailed in the following tables:

	As of  September 30, 2018
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	530	$	239	$	1,780	$	2,549	$	229,281	$	231,830
Construction		-		-		-		-		3,888		3,888
Total residential mortgage loans		530		239		1,780		2,549		233,169		235,718
Commercial loans:
Real estate		3,715		385		2,033		6,133		207,170		213,303
Lines of credit		3,354		-		40		3,394		45,102		48,496
Other commercial and industrial		517		237		387		1,141		59,843		60,984
Tax exempt loans		-		-		-		-		10,163		10,163
Total commercial loans		7,586		622		2,460		10,668		322,278		332,946
Consumer loans:
Home equity and junior liens		102		9		146		257		25,728		25,985
Other consumer		259		64		84		407		26,003		26,410
Total consumer loans		361		73		230		664		51,731		52,395
Total loans	$	8,477	$	934	$	4,470	$	13,881	$	607,178	$	621,059
	As of  December 31, 2017
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,196	$	925	$	1,931	$	4,052	$	212,741	$	216,793
Construction		-		-		-		-		5,558		5,558
Total residential mortgage loans		1,196		925		1,931		4,052		218,299		222,351
Commercial loans:
Real estate		720		2,171		1,430		4,321		188,204		192,525
Lines of credit		1,482		31		132		1,645		49,640		51,285
Other commercial and industrial		575		60		766		1,401		48,696		50,097
Tax exempt loans		-		-		-		-		10,405		10,405
Total commercial loans		2,777		2,262		2,328		7,367		296,945		304,312
Consumer loans:
Home equity and junior liens		94		74		262		430		25,505		25,935
Other consumer		192		50		63		305		28,341		28,646
Total consumer loans		286		124		325		735		53,846		54,581
Total loans	$	4,259	$	3,311	$	4,584	$	12,154	$	569,090	$	581,244

- 24 -

Nonaccrual loans, segregated by class of loan, were as follows:

	September 30,		December 31,
(In thousands)	2018		2017
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,858	$	2,088
		1,858		2,088
Commercial loans:
Real estate		2,132		1,545
Lines of credit		46		132
Other commercial and industrial		387		766
		2,565		2,443
Consumer loans:
Home equity and junior liens		146		300
Other consumer		109		63
		255		363
Total nonaccrual loans	$	4,678	$	4,894

The Company is required to disclose certain activities related to Troubled Debt Restructurings (“TDR”) in accordance with accounting guidance. Certain loans have been modified in a TDR where economic concessions have been granted to a borrower who is experiencing, or expected to experience, financial difficulties. These economic concessions could include a reduction in the loan interest rate, extension of payment terms, reduction of principal amortization, or other actions that it would not otherwise consider for a new loan with similar risk characteristics.

The Company is required to disclose new TDRs for each reporting period for which an income statement is being presented.  The pre-modification outstanding recorded investment is the principal loan balance less the provision for loan losses before the loan was modified as a TDR.  The post-modification outstanding recorded investment is the principal balance less the provision for loan losses after the loan was modified as a TDR.  Additional provision for loan losses is the change in the allowance for loan losses between the pre-modification outstanding recorded investment and post-modification outstanding recorded investment.  

The Company had no loans that have been modified as TDRs for the three months ended September 30, 2018.

The table below details a loan that has been modified as a TDR for the nine months ended September 30, 2018.

	For the nine months ended September 30, 2018
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Other commercial and industrial loans	1	$	300	$	300	$	-

The TDR evaluated for impairment for the nine months ended September 30, 2018, has been classified as a TDR due to economic concessions granted, which included an extended maturity date that will result in a delay in payment from the original contractual maturity.

 The table below details a loan that had been modified as a TDR for the three months ended September 30, 2017.

	For the three months ended September 30, 2017
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Commercial real estate loans	1	$	2,024	$	2,024	$	-

The table below details a loan that had been modified as a TDR for the nine months ended September 30, 2017.

- 25 -

	For the nine months ended September 30, 2017
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Commercial real estate loans	1	$	2,024	$	2,024	$	-

The TDR individually evaluated for impairment, for the three and nine months ended September 30, 2017, has been classified as a TDR due to economic concessions granted, which included extended interest only payment terms.

The Company is required to disclose loans that have been modified as TDRs within the previous 12 months in which there was payment default after the restructuring.  The Company defines payment default as any loans 90 days past due on contractual payments.

The Company had no loans that had been modified as TDRs during the twelve months prior to September 30, 2018, which had subsequently defaulted during the three or nine months ended September 30, 2018.

The Company had no loans that had been modified as TDRs during the twelve months prior to September 30, 2017, which had subsequently defaulted during the three months ended September 30, 2017.

The Company had one loan that had been modified as a TDR during the twelve months prior to September 30, 2017, which had subsequently defaulted during the nine months ended September 30, 2017.

When the Company modifies a loan within a portfolio segment that is individually evaluated for impairment, a potential impairment is analyzed either based on the present value of the expected future cash flows discounted at the interest rate of the original loan terms or the fair value of the collateral less costs to sell. If it is determined that the value of the loan is less than its recorded investment, then impairment is recognized as a component of the provision for loan losses, an associated increase to the allowance for loan losses or as a charge-off to the allowance for loan losses in the current period.

Impaired Loans

The following table summarizes impaired loan information by portfolio class at the indicated dates:

	September 30, 2018						December 31, 2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(In thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
With no related allowance recorded:
1-4 family first-lien residential mortgages	$	1,225	$	1,229	$	-	$	900	$	909	$	-
Commercial real estate		2,288		2,345		-		3,314		3,360		-
Commercial lines of credit		116		116		-		507		507		-
Other commercial and industrial		550		551		-		523		524		-
Home equity and junior liens		-		-		-		80		80		-
With an allowance recorded:
1-4 family first-lien residential mortgages		610		610		109		958		958		210
Commercial real estate		2,175		2,176		593		2,186		2,187		320
Commercial lines of credit		46		47		46		40		40		40
Other commercial and industrial		306		306		276		525		525		391
Home equity and junior liens		206		206		140		210		210		142
Total:
1-4 family first-lien residential mortgages		1,835		1,839		109		1,858		1,867		210
Commercial real estate		4,463		4,521		593		5,500		5,547		320
Commercial lines of credit		162		163		46		547		547		40
Other commercial and industrial		856		857		276		1,048		1,049		391
Home equity and junior liens		206		206		140		290		290		142
Totals	$	7,522	$	7,586	$	1,164	$	9,243	$	9,300	$	1,103

- 26 -

The following table presents the average recorded investment in impaired loans for the periods indicated:

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
1-4 family first-lien residential mortgages	$	1,840	$	1,343	$	1,846	$	1,477
Commercial real estate		4,497		5,185		4,976		4,996
Commercial lines of credit		186		438		365		422
Other commercial and industrial		947		905		1,001		958
Home equity and junior liens		207		213		228		282
Total	$	7,677	$	8,084	$	8,416	$	8,135

The following table presents the cash basis interest income recognized on impaired loans for the periods indicated:

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
1-4 family first-lien residential mortgages	$	16	$	13	$	48	$	34
Commercial real estate		62		89		128		184
Commercial lines of credit		4		4		25		16
Other commercial and industrial		5		6		24		20
Home equity and junior liens		3		3		9		7
Total	$	90	$	115	$	234	$	261

- 27 -

Note 7:   Allowance for Loan Losses

Summarized in the tables below are changes in the allowance for loan losses for the indicated periods and information pertaining to the allocation of the allowance for loan losses, balances of the allowance for loan losses, loans receivable based on individual, and collective impairment evaluation by loan portfolio class.  An allocation of a portion of the allowance to a given portfolio class does not limit the Company’s ability to absorb losses in another portfolio class.

	For the three months ended September 30, 2018
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	722		$	-		$	4,141		$	731		$	1,271
Charge-offs		(27	)		-			(31	)		(12	)		(1	)
Recoveries		1			-			-			-			-
Provisions (credits)		65			-			(170	)		66			(82	)
Ending balance	$	761		$	-		$	3,940		$	785		$	1,188
Ending balance: related to loans    individually evaluated for impairment		109			-			593			46			276
Ending balance: related to loans    collectively evaluated for impairment	$	652		$	-		$	3,347		$	739		$	912
Loans receivables:
Ending balance	$	231,830		$	3,888		$	213,303		$	48,496		$	60,984
Ending balance: individually    evaluated for impairment		1,835			-			4,463			162			856
Ending balance: collectively    evaluated for impairment	$	229,995		$	3,888		$	208,840		$	48,334		$	60,128
				Homeequity			Other
	Tax exempt			and junior liens			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	434		$	291		$	14		$	7,605
Charge-offs		-			-			(33	)		-			(104	)
Recoveries		-			5			6			-			12
Provisions (credits)		-			(18	)		166			264			291
Ending balance	$	1		$	421		$	430		$	278		$	7,804
Ending balance: related to loans    individually evaluated for impairment		-			140			-			-			1,164
Ending balance: related to loans    collectively evaluated for impairment	$	1		$	281		$	430		$	278		$	6,640
Loans receivables:
Ending balance	$	10,163		$	25,985		$	26,410					$	621,059
Ending balance: individually    evaluated for impairment		-			206			-						7,522
Ending balance: collectively    evaluated for impairment	$	10,163		$	25,779		$	26,410					$	613,537

- 28 -

	For the nine months ended September 30, 2018
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	865		$	-		$	3,589		$	735		$	1,214
Charge-offs		(219	)		-			(31	)		(62	)		(172	)
Recoveries		21			-			-			66			-
Provisions		94			-			382			46			146
Ending balance	$	761		$	-		$	3,940		$	785		$	1,188
				Home equity			Other
	Tax exempt			and junior liens			consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	514		$	208		$	-		$	7,126
Charge-offs		-			(17	)		(144	)		-			(645	)
Recoveries		-			6			29			-			122
Provisions (credits)		-			(82	)		337			278			1,201
Ending balance	$	1		$	421		$	430		$	278		$	7,804

- 29 -

	For the three months ended September 30, 2017
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	813		$	-		$	2,804		$	373		$	1,611
Charge-offs		-			-			-			(7	)		-
Recoveries		-			-			-			-			-
Provisions (credits)		(13	)		-			477			348			(543	)
Ending balance	$	800		$	-		$	3,281		$	714		$	1,068
Ending balance: related to loans    individually evaluated for impairment		181			-			14			40			381
Ending balance: related to loans    collectively evaluated for impairment	$	619		$	-		$	3,267		$	674		$	687
Loans receivables:
Ending balance	$	209,147		$	5,924		$	187,960		$	53,888		$	43,779
Ending balance: individually    evaluated for impairment		1,464			-			5,896			454			843
Ending balance: collectively    evaluated for impairment	$	207,683		$	5,924		$	182,064		$	53,434		$	42,936
				Home equity			Other
	Tax exempt			and junior liens			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	493		$	163		$	-		$	6,258
Charge-offs		-			-			(57	)		-			(64	)
Recoveries		-			5			9			-			14
Provisions (credits)		-			(8	)		88			71			420
Ending balance	$	1		$	490		$	203		$	71		$	6,628
Ending balance: related to loans    individually evaluated for impairment		-			142			-			-			758
Ending balance: related to loans    collectively evaluated for impairment	$	1		$	348		$	203		$	71		$	5,870
Loans receivables:
Ending balance	$	11,064		$	25,408		$	29,733					$	566,903
Ending balance: individually    evaluated for impairment		-			212			-						8,869
Ending balance: collectively    evaluated for impairment	$	11,064		$	25,196		$	29,733					$	558,034

- 30 -

	For the nine months ended September 30, 2017
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	759		$	-		$	2,935		$	397		$	1,658
Charge-offs		(156	)		-			(505	)		(60	)		(17	)
Recoveries		1			-			-			-			15
Provisions		196			-			851			377			(588	)
Ending balance	$	800		$	-		$	3,281		$	714		$	1,068
				Home equity			Other
	Tax exempt			and junior liens			consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	331		$	166		$	-		$	6,247
Charge-offs		-			(69	)		(97	)		-			(904	)
Recoveries		-			6			31			-			53
Provisions		-			222			103			71			1,232
Ending balance	$	1		$	490		$	203		$	71		$	6,628

The Company’s methodology for determining its allowance for loan losses includes an analysis of qualitative factors that are added to the historical loss rates in arriving at the total allowance for loan losses needed for this general pool of loans.  The qualitative factors include:

• Changes in national and local economic trends;

• The rate of growth in the portfolio;

• Trends of delinquencies and nonaccrual balances;

• Changes in loan policy; and

• Changes in lending management experience and related staffing.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation.  These qualitative factors, applied to each product class, make the evaluation inherently subjective, as it requires material estimates that may be susceptible to significant revision as more information becomes available.  Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan losses analysis and calculation.

The allocation of the allowance for loan losses summarized on the basis of the Company’s calculation methodology was as follows:

	September 30, 2018
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	109	$	-	$	593	$	46	$	276
Historical loss rate		114		-		87		18		24
Qualitative factors		538		-		3,260		721		888
Total	$	761	$	-	$	3,940	$	785	$	1,188
			Home equity		Other
	Tax exempt		and junior liens		consumer		Unallocated		Total
Specifically reserved	$	-	$	140	$	-	$	-	$	1,164
Historical loss rate		-		21		218		-		482
Qualitative factors		1		260		212		-		5,880
Other		-		-		-		278		278
Total	$	1	$	421	$	430	$	278	$	7,804

- 31 -

	September 30, 2017
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	181	$	-	$	14	$	40	$	381
Historical loss rate		106		-		121		77		14
Qualitative factors		513		-		3,146		597		673
Total	$	800	$	-	$	3,281	$	714	$	1,068
			Home equity		Other
	Tax exempt		and junior liens		consumer		Unallocated		Total
Specifically reserved	$	-	$	142	$	-	$	-	$	758
Historical loss rate		-		48		34		-		400
Qualitative factors		1		300		169		-		5,399
Other		-		-		-		71		71
Total	$	1	$	490	$	203	$	71	$	6,628

Note 8:   Foreclosed Real Estate

The Company is required to disclose the carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession of the property at each reporting period.

(Dollars in thousands)	Number of properties		September 30, 2018		Number of properties		December 31, 2017
Foreclosed residential real estate		5	$	268		5	$	468

At September 30, 2018, the Company reported $996,000 in residential real estate loans in the process of foreclosure.

- 32 -

Note 9:   Guarantees

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit.  Generally, all letters of credit, when issued have expiration dates within one year.  The credit risks involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers.  The Company generally holds collateral and/or personal guarantees supporting these commitments.  The Company had $2.0 million of standby letters of credit as of September 30, 2018.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.   The fair value of standby letters of credit was not significant to the Company’s consolidated financial statements.

Note 10:   Fair Value Measurements

Accounting guidance related to fair value measurements and disclosures specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 – Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs, minimize the use of unobservable inputs, to the extent possible, and considers counterparty credit risk in its assessment of fair value.

The Company used the following methods and significant assumptions to estimate fair value:

Investment securities: The fair values of available-for-sale and marketable equity securities are obtained from an independent third party and are based on quoted prices on nationally recognized securities exchanges where available (Level 1).  If quoted prices are not available, fair values are measured by utilizing matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).  Management made no adjustment to the fair value quotes that were received from the independent third party pricing service.Level 3 securities are assets whose fair value cannot be determined by using observable measures, such as market prices or pricing models. Level 3 assets are typically very illiquid, and fair values can only be calculated using estimates or risk-adjusted value ranges. Management applies known factors, such as currently applicable discount rates, to the valuation of those investments in order to determine fair value at the reporting date.

Impaired loans: Impaired loans are those loans in which the Company has measured impairment based on the fair value of the loan’s collateral or the discounted value of expected future cash flows.  Fair value is generally determined based upon market value evaluations by third parties of the properties and/or estimates by management of working capital collateral or discounted cash flows based upon expected proceeds.  These appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property), and the cost approach.  Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as, changes in absorption rates or market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition.  Such modifications to the appraised values could result in lower

- 33 -

valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets.  These measurements are classified as Level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment.  A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.

Foreclosed real estate:  Fair values for foreclosed real estate are initially recorded based on market value evaluations by third parties, less costs to sell (“initial cost basis”).  Any write-downs required when the related loan receivable is exchanged for the underlying real estate collateral at the time of transfer to foreclosed real estate are charged to the allowance for loan losses.  Values are derived from appraisals, similar to impaired loans, of underlying collateral or discounted cash flow analysis.  Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the initial cost basis.  In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as, changes in absorption rates and market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition.  Either change could result in adjustment to lower the property value estimates indicated in the appraisals.  These measurements are classified as Level 3 within the fair value hierarchy.

The following tables summarizes assets measured at fair value on a recurring basis as of the indicated dates, segregated by the level of valuation inputs within the hierarchy utilized to measure fair value:

	September 30, 2018
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	-	$	21,988	$	-	$	21,988
State and political subdivisions		-		22,865		-		22,865
Corporate		-		17,288		-		17,288
Asset backed securities		-		20,873		-		20,873
Residential mortgage-backed - US agency		-		33,033		-		33,033
Collateralized mortgage obligations - US agency		-		49,205		-		49,205
Collateralized mortgage obligations - Private label		-		23,496		-		23,496
Total available-for-sale securities	$	-	$	188,748	$	-	$	188,748
Marketable equity securities	$	-	$	541	$	-	$	541

	December 31, 2017
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	-	$	41,336	$	-	$	41,336
State and political subdivisions		-		13,681		-		13,681
Corporate		-		8,600		-		8,600
Asset backed securities		-		6,644		-		6,644
Residential mortgage-backed - US agency		-		35,742		-		35,742
Collateralized mortgage obligations - US agency		-		53,348		-		53,348
Collateralized mortgage obligations - Private label		-		11,052		-		11,052
Equity investment securities:
Common stock - Financial services industry		-		-		515		515
Total available-for-sale securities	$	-	$	170,403	$	515	$	170,918

- 34 -

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the nine months ended September 30, 2018 were as follows:

(In thousands)	Common Stock - Financial Services Industry
Balance - December 31, 2017	$	515
Total gains realized/unrealized:
Included in earnings		-
Included in other comprehensive income		-
Settlements		-
Sales		-
Transfers to Level 2		(515	)
Balance - September 30, 2018	$	-
Changes in unrealized gains included in earnings related to assets still held at September 30, 2018	$	-

The following table summarizes the valuation techniques and significant unobservable inputs used for the Company's investments that are categorized within Level 3 of the fair value hierarchy at the indicated dates:

(In thousands)	At December 31, 2017
Investment Type	Fair Value		Valuation Techniques	Unobservable Input	Weight
Common Stock - Financial    Services Industry	$	515	Inputs to comparables	Weight ascribed to comparable companies	100%

Pathfinder Bank had the following assets measured at fair value on a nonrecurring basis as of September 30, 2018 and December 31, 2017: 

			September 30, 2018
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Impaired loans	$	-	$	-	$	1,859	$	1,859
Foreclosed real estate	$	-	$	-	$	232	$	232

			December 31, 2017
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Impaired loans	$	-	$	-	$	4,887	$	4,887
Foreclosed real estate	$	-	$	-	$	434	$	434

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were used to determine fair value at the indicated dates.

		Quantitative Information about Level 3 Fair Value Measurements
	Valuation	Unobservable	Range
	Techniques	Input	(Weighted Avg.)
At September 30, 2018
Impaired loans	Appraisal of collateral	Appraisal Adjustments	5% - 10% (5%)
	(Sales Approach)	Costs to Sell	7% - 13% (11%)
	Discounted Cash Flow
Foreclosed real estate	Appraisal of collateral	Appraisal Adjustments	15% - 15% (15%)
	(Sales Approach)	Costs to Sell	6% - 8% (7%)

- 35 -

		Quantitative Information about Level 3 Fair Value Measurements
	Valuation	Unobservable	Range
	Techniques	Input	(Weighted Avg.)
At December 31, 2017
Impaired loans	Appraisal of collateral	Appraisal Adjustments	5% - 30% (9%)
	(Sales Approach)	Costs to Sell	7% - 13% (11%)
	Discounted Cash Flow
Foreclosed real estate	Appraisal of collateral	Appraisal Adjustments	15% - 15% (15%)
	(Sales Approach)	Costs to Sell	6% - 8% (7%)

The Company owns a small percentage of the common stock of a single, otherwise unaffiliated, financial institution with a fair market value of $541,000 at September 30, 2018.  This financial institution had been recently formed, was relatively limited in the scope of its business activities, and was relatively small in asset size at the time the shares of common stock were initially acquired by the Company.  The shares of this financial institution are not, and have never been, listed on any public stock exchange.  Through December 31, 2017, the Company determined the fair market value of these shares using Level 3 methodologies.  The relatively unique characteristics of the institution precluded the use of significant inputs and value drivers observable in active markets through that date.  During the three months ended March 31, 2018, the Company’s management reevaluated the fair value methodology it had previously used with respect to this investment and determined that the institution’s increased size and current business activities had become reasonably comparable over time with applicable peer institutions.   Consequently, relevant significant inputs and value drivers observable in active markets were deemed to be present and available beginning with the three months ended March 31, 2018.  Accordingly, the Company transferred this asset from Level 3 to Level 2 at March 31, 2018 for purposes of the accompanying fair value disclosure. The investment was valued using Level 2 methodologies at September 30, 2018 and it is expected to be valued using Level 2 methodologies prospectively.  There have been no transfers of assets into or out of any fair value measurement during the three months ended September 30, 2018.

Required disclosures include fair value information of financial instruments, whether or not recognized in the consolidated statement of condition, for which it is practicable to estimate that value.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

The Company has various processes and controls in place to ensure that fair value is reasonably estimated. The Company performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. 

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective period-ends, and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

FASB ASC Topic 820 for Fair Value Measurements and Disclosures, the financial assets and liabilities were valued at a price that represents the Company’s exit price or the price at which these instruments would be sold or transferred.  

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s

- 36 -

disclosures and those of other companies may not be meaningful.  The Company, in estimating its fair value disclosures for financial instruments, used the following methods and assumptions:

Cash and cash equivalents – The carrying amounts of these assets approximate their fair value and are classified as Level 1.

Investment securities – The fair values of available-for-sale, held-to-maturity and marketable equity securities are obtained from an independent third party and are based on quoted prices on nationally recognized exchange where available (Level 1).  If quoted prices are not available, fair values are measured by utilizing matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).  Management made no adjustment to the fair value quotes that were received from the independent third party pricing service.  Level 3 securities are assets whose fair value cannot be determined by using observable measures, such as market prices or pricing models. Level 3 assets are typically very illiquid, and fair values can only be calculated using estimates or risk-adjusted value ranges. Management applies known factors, such as currently applicable discount rates, to the valuation of those investments in order to determine fair value at the reporting date.

Federal Home Loan Bank stock – The carrying amount of these assets approximates their fair value and are classified as Level 2.

Net loans – For variable-rate loans that re-price frequently, fair value is based on carrying amounts.  The fair value of other loans (for example, fixed-rate commercial real estate loans, mortgage loans, and commercial and industrial loans) is estimated using discounted cash flow analysis, based on interest rates currently being offered in the market for loans with similar terms to borrowers of similar credit quality.  Loan value estimates include judgments based on expected prepayment rates.  The measurement of the fair value of loans, including impaired loans, is classified within Level 3 of the fair value hierarchy.

Accrued interest receivable and payable – The carrying amount of these assets approximates their fair value and are classified as Level 1.

Deposits – The fair values disclosed for demand deposits (e.g., interest-bearing and noninterest-bearing checking, passbook savings and certain types of money management accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts) and are classified within Level 1 of the fair value hierarchy.  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates of deposits to a schedule of aggregated expected monthly maturities on time deposits.  Measurements of the fair value of time deposits are classified within Level 2 of the fair value hierarchy.

Borrowings – Fixed/variable term “bullet” structures are valued using a replacement cost of funds approach.  These borrowings are discounted to the FHLBNY advance curve.  Option structured borrowings’ fair values are determined by the FHLB for borrowings that include a call or conversion option.  If market pricing is not available from this source, current market indications from the FHLBNY are obtained and the borrowings are discounted to the FHLBNY advance curve less an appropriate spread to adjust for the option. These measurements are classified as Level 2 within the fair value hierarchy.

Subordinated loans – The Company secures quotes from its pricing service based on a discounted cash flow methodology or utilizes observations of recent highly-similar transactions which result in a Level 2 classification.

- 37 -

The carrying amounts and fair values of the Company’s financial instruments as of the indicated dates are presented in the following table:

		September 30, 2018				December 31, 2017
	Fair Value	Carrying		Estimated		Carrying		Estimated
(In thousands)	Hierarchy	Amounts		Fair Values		Amounts		Fair Values
Financial assets:
Cash and cash equivalents	1	$	35,974	$	35,974	$	21,991	$	21,991
Investment securities - available-for-sale	2		188,953		188,953		170,623		170,623
Investment securities - available-for-sale	3		-		-		515		515
Investment securities - marketable equity	2		541		541		-		-
Investment securities - held-to-maturity	2		26,084		25,628		66,196		66,426
Federal Home Loan Bank stock	2		4,187		4,187		3,855		3,855
Net loans	3		613,055		598,372		573,705		570,439
Accrued interest receivable	1		2,915		2,915		3,047		3,047
Financial liabilities:
Demand Deposits, Savings, NOW and MMDA	1	$	490,282	$	490,282	$	510,176	$	510,176
Time Deposits	2		265,922		264,215		213,427		212,453
Borrowings	2		79,636		79,160		73,888		73,575
Subordinated loans	2		15,085		14,899		15,059		14,953
Accrued interest payable	1		326		326		186		186

- 38 -

Note 11:   Interest Rate Derivatives

Derivative instruments are entered into by the Company primarily as a risk management tool.  Financial derivatives are recorded at fair value as other liabilities.  The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship. For a fair value hedge, changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or liability are recognized currently in earnings.  For a cash flow hedge, changes in the fair value of the derivative instrument, to the extent that it is effective, are recorded in other comprehensive income and subsequently reclassified to earnings as the hedged transaction impacts net income.  Any ineffective portion of a cash flow hedge is recognized currently in earnings.

On four occasions during the first half of 2017, the Company sold, and subsequently repurchased, a U.S. Treasury security in the approximate amount of $40.0 million for each transaction.  These transactions were intended to act as hedges against rising short-term interest rates.  The Company was in controlling possession of, but did not own, the securities at the time of each sale. The securities had been received by the Company, under industry-standard repurchase agreements, from an unrelated third party as collateral for a series of 30-day loans of approximately $40.0 million on each occasion which were made at market rates of interest to that third party. The security sale on each occasion provided the funds necessary to advance the loan to the third party and placed the Company in what is generally described as a “short position” with respect to the sold U.S. Treasury security.  These transactions acted as a hedge against rising short-term interest rates because the price of each sold security would be expected to decline in a rising short-term interest rate environment and could therefore be re-acquired at the conclusion of each 30-day loan period at a price lower than the price at which the security was originally sold.  Short-term rates rose over the combined duration of these transactions and, consequently, the Company recognized aggregate gains on the sale and repurchase of the securities in the amounts of$250,000 for the nine months ended September 30, 2017.  The transactions’ gains were characterized as capital gains for tax purposes.  These capital gains utilized existing, previously reserved-for, capital loss tax carryforwards that were established in 2013.  The Company recognized tax benefits related to these transactions of $96,000 for the nine months ended September 30, 2017.  The tax benefits arose from the reversal of reserves established in 2013 against the portion of the Company’s deferred tax asset related to existing capital loss carryforward positions.  The reserves were originally established due to the uncertainty of the Company’s ability to generate future capital gain income within the five-year statutory life of the capital loss carryforward position under the Internal Revenue Code. The recognized tax benefit from the reversal of those reserves reduced the Company’s effective tax rate from what would have been28.3% to 25.5% for the nine months ended September 30, 2017.  

The capital gain income and the additional recognized tax benefits derived from these transactions were partially offset by an additional $266,000 in after-tax interest expense on borrowings derived from additional pre-tax interest expense on those borrowings of $430,000 that reduced pretax net interest margin by that amount for the nine months ended September 30, 2017.  In total, after-tax net income increased by $80,000 for the nine months ended September 30, 2017 as a result of these hedging transactions.  The Company did not have any hedging activities during the nine months ended September 30, 2018.

The Company adoptedASU 2017-12: Derivatives and Hedging [Topic 815]: Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2018, in the second quarter of 2018.  The amended guidance within this Update expands and clarifies hedge accounting for nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements, and simplifies the requirements for assessing effectiveness in a hedging relationship.  The Company did not have any hedging activities during the nine months ended September 30, 2018, but expects to utilize hedging in the future to improve the management of its risk profiles.  In order to facilitate potential future hedging activities, the Company transferred 52 investment securities with an aggregate amortized cost before transfer of $35.2 million from the held-to-maturity classification to the available-for-sale classification at the date of adoption.

- 39 -

Note 12:   Accumulated Other Comprehensive Income (Loss)

Changes in the components of accumulated other comprehensive income (loss) (“AOCI”), net of tax, for the periods indicated are summarized in the table below.

	For the three months ended September 30, 2018
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(2,156	)	$	(3,248	)	$	(67	)	$	(5,471	)
Other comprehensive income before reclassifications		-			(456	)		4			(452	)
Amounts reclassified from AOCI		31			44			-			75
Ending balance	$	(2,125	)	$	(3,660	)	$	(63	)	$	(5,848	)

	For the three months ended September 30, 2017
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(1,468	)	$	(523	)	$	(429	)	$	(2,420	)
Other comprehensive income before reclassifications		-			(103	)		15			(88	)
Amounts reclassified from AOCI		22			(65	)		-			(43	)
Ending balance	$	(1,446	)	$	(691	)	$	(414	)	$	(2,551	)

	For the nine months ended September 30, 2018
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(2,220	)	$	(1,558	)	$	(430	)	$	(4,208	)
Other comprehensive income before reclassifications		-			(2,305	)		124			(2,181	)
Amounts reclassified from AOCI		95			140			-			235
Cumulative effect of change in measurement of equity    securities (1)		-			(53	)		-			(53	)
Cumulative effect of change in investment securities transfer (2)		-			116			243			359
Ending balance	$	(2,125	)	$	(3,660	)	$	(63	)	$	(5,848	)

(1) Cumulative effect of unrealized gain on marketable equity securities based on the adoption of ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities.

(2) Cumulative effect of unrealized gains on the transfer of 52 investment securities from held-to-maturity classification to available-for-sale classification based on the adoption of ASU 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

	For the nine months ended September 30, 2017
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Securities reclassified from AFS to HTM			Total
Beginning balance	$	(1,513	)	$	(1,845	)	$	(464	)	$	(3,822	)
Other comprehensive income before reclassifications		-			1,342			50			1,392
Amounts reclassified from AOCI		67			(188	)		-			(121	)
Ending balance	$	(1,446	)	$	(691	)	$	(414	)	$	(2,551	)

- 40 -

The following table presents the amounts reclassified out of each component of AOCI for the indicated period:

	Amount Reclassified							Amount Reclassified
	from AOCI (1)							from AOCI (1)
	(Unaudited)							(Unaudited)
(In thousands)	For the three months ended							For the nine months ended
Details about AOCI (1) components	September 30, 2018			September 30, 2017			Affected Line Item in the Statement of Income	September 30, 2018			September 30, 2017
Retirement plan items
Retirement plan net losses    recognized in plan expenses (2)	$	(43	)	$	(37	)	Salaries and employee benefits	$	(129	)	$	(109	)
Tax effect		12			15		Provision for income taxes		34			42
	$	(31	)	$	(22	)	Net Income	$	(95	)	$	(67	)
Available-for-sale securities
Realized gain on sale of securities	$	(60	)	$	108		Net gains on sales and redemptions of    investment securities	$	(189	)	$	314
Tax effect		16			(43	)	Provision for income taxes		49			(126	)
	$	(44	)	$	65		Net Income	$	(140	)	$	188

(1)Amounts in parentheses indicates debits in net income.

(2) These items are included in net periodic pension cost.  

      See Note 5 for additional information.

- 41 -

Note 13: Noninterest Income

The Company adopted the revenue recognition guidance effective January 1, 2018, and applied the new accounting guidance using a modified retrospective approach for reporting purposes.  A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, which are excluded from the scope of the amended guidance.

The Company recognizes revenue as it is earned.  The adoption of ASU 2014-09 required that credit card interchange revenue be presented net of rewards expense in noninterest income.  For the three months ended September 30, 2018 and 2017, the Company recognized credit cards reward program expense as a reduction of noninterest income in the amounts of $28,000and $29,000, respectively.  For the nine months ended September 30, 2018 and 2017, the Company recognized credit cards reward program expense as a reduction of noninterest income in the amounts of $66,000and $68,000, respectively.

The Company has included the following table regarding the Company’s noninterest income for the periods presented.

	For the three months					For the nine months
	ended September 30,					ended September 30,
(In thousands)	2018			2017		2018			2017
Service fees
Insufficient funds fees	$	218		$	224	$	618		$	617
Deposit related fees		49			46		148			141
ATM fees		24			25		72			74
Total service fees		291			295		838			832
Fee Income
Insurance commissions		172			175		632			627
Investment services revenue		70			40		218			186
ATM fees surcharge		71			65		178			170
Banking house rents collected		34			26		100			81
Total fee income		347			306		1,128			1,064
Card income
Debit card interchange fees		141			105		432			373
Merchant card fees		21			15		54			40
Total card income		162			120		486			413
Mortgage fee income and realized gain on sale of loans   and foreclosed real estate
Loan servicing fees		25			44		108			112
Net gains (losses) on sales of loans and foreclosed real estate		8			2		24			(43	)
Total mortgage fee income and realized gain on sale of    loans and foreclosed real estate		33			46		132			69
Total		833			767		2,584			2,378
Earnings and gain on bank owned life insurance		138			92		319			225
Net (losses) gains on sales and redemptions of investment    securities		(60	)		108		(189	)		314
Gains on equity securities		-			-		26			-
Other miscellaneous income		29			14		119			51
Total noninterest income	$	940		$	981	$	2,859		$	2,968

The following is a discussion of key revenues within the scope of the new revenue guidance:

• Service fees – Revenue is earned through insufficient funds fees, customer initiated activities or passage of time for deposit related fees, and ATM service fees. Transaction-based fees are recognized as the time the transaction is executed, which is the same time the Company’s performance obligation is satisfied.  Account maintenance fees are earned over the course of the month as the monthly maintenance performance obligation to the customer is satisfied.

- 42 -

• Fee income – Revenue is earned through commissions on insurance, investment products and investment advisory services, ATM surcharge fees, and banking house rents collected.  The Company earns investment advisory services fee income by providing investment management services to customers under investment management contracts.  As investment management services are provided over time, the performance obligation to customers is satisfied over time, and therefore, revenue is recognized over time.    

• Card income – Card income consists of interchange fees from consumer debit card networks and other related services.  Interchange rates are set by the card networks.  Interchange fees are based on purchase volumes and other factors and are recognized as transactions occur.

• Mortgage fee income and realized gain on sale of loans and foreclosed real estate – Revenue from mortgage fee income and realized gain on sale of loans and foreclosed real estate is earned through the origination of residential and commercial mortgage loans, sales of one-to-four family residential mortgage loans and sales of foreclosed real estate, and is earned as the individual transactions occur.

Note 14: Subsequent Events

On October 24, 2018, the Company contractually agreed to acquire a mixed-use commercial and office facility located in downtown Oswego, NY.  Management plans a multi-use strategy for the building, which will include development of a portion of the building for lease to unrelated third parties.   The acquisition will provide future tenant rental income, some additional flexible space for the Company’s use and is intended to provide support for the City of Oswego’s Downtown Revitalization Initiative.  The final acquisition price for the facility will be $1.8 million, of which a $200,000 deposit was capitalized in October 2018.  It is expected that the purchase transaction will be formally completed in the fourth quarter of 2018.  Under the contractual agreement, the Bank has prepossession development rights and plans to immediately begin the process of converting the structure for both tenant and internal uses.  The net financial impact of this transaction is not expected to be material to the operating results of the Company in future periods.  

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)

General

The Company is a Maryland corporation headquartered in Oswego, New York.  The Company is 100% owned by public shareholders.  The primary business of the Company is its investment in Pathfinder Bank (the "Bank"), a New York State chartered commercial bank, which is 100% owned by the Company.  The Bank has two wholly owned operating subsidiaries, Pathfinder Risk Management Company, Inc. (“PRMC”) and Whispering Oaks Development Corp. All significant inter-company accounts and activity have been eliminated in consolidation.  Although the Company owns, through its subsidiary PRMC, 51% of the membership interest in FitzGibbons Agency, LLC (“Agency”), the Company is required to consolidate 100% of the Agency within the consolidated financial statements.  The 49% of which the Company does not own is accounted for separately as noncontrolling interests within the consolidated financial statements.  At September 30, 2018, the Company and subsidiaries had total consolidated assets of $921.6 million, total consolidated liabilities of $858.1 million and shareholders' equity of $63.3 million plus noncontrolling interest of $243,000, which represents the 49% of the Agency not owned by the Company.

The following discussion reviews the Company's financial condition at September 30, 2018 and the results of operations for the three and nine month periods ended September 30, 2018 and 2017. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

The following material under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" is written with the presumption that the users of the interim financial statements have read, or have access to, the Company's latest audited financial statements and notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2018 (“the consolidated annual financial statements”) as of December 31, 2017 and 2016 and for the two years then ended.  Therefore, only material changes in financial condition and results of operations are discussed in the remainder of Item 2.

- 43 -

Statement Regarding Forward-Looking Statements

This report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to:

• Credit quality and the effect of credit quality on the adequacy of our allowance for loan losses;

• Deterioration in financial markets that may result in impairment charges relating to our securities portfolio;

• Competition in our primary market areas;

• Changes in interest rates and national or regional economic conditions;

• Changes in monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board;

• Significant government regulations, legislation and potential changes thereto;

• A reduction in our ability to generate or originate revenue-producing assets as a result of compliance with heightened capital standards;

• Increased cost of operations due to greater regulatory oversight, supervision and examination of banks and bank holding companies, and higher deposit insurance premiums;

• Cyberattacks, computer viruses and other technological threats that may breach the security of our websites or other systems;

• Technological changes that may be more difficult or expensive than expected;

• Limitations on our ability to expand consumer product and service offerings due to potential stricter consumer protection laws and regulations; and

• Other risks described herein and in the other reports and statements we file with the SEC.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Application of Critical Accounting Policies

The Company's consolidated annual financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow practices within the banking industry.  Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated annual financial statements and accompanying notes.  These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.  Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.  Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value or when an asset or liability needs to be recorded contingent upon a future event.  Carrying assets and liabilities at fair value inherently results in more financial statement volatility.  The fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices or are provided by unaffiliated third-party sources, when available.  When third party information is not available, valuation adjustments are estimated in good faith by management.

The most significant accounting policies followed by the Company are presented in Note 1 to the annual audited consolidated financial statements.  These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the consolidated annual financial statements and how those values are determined.  Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the allowance for loan losses, deferred income taxes, pension obligations, the evaluation of

- 44 -

investment securities for other than temporary impairment, the estimation of fair values for accounting and disclosure purposes, and the evaluation of goodwill for impairment to be the accounting areas that require the most subjective and complex judgments.  These areas could be the most subject to revision as new information becomes available.

The allowance for loan losses represents management's estimate of probable loan losses inherent in the loan portfolio.  Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment on the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.

Our Allowance for Loan and Lease Losses policy establishes criteria for selecting 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.

• All Troubled Debt Restructured Loans

Commercial Lines and Loans, Commercial Real Estate and Tax-exempt loans:

• All loans rated substandard or worse, on nonaccrual, and above our TRC threshold balance of $100,000.

• All Troubled Debt Restructured Loans  

Impairment is measured by determining 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.  For all other loans and leases, the Company uses the general allocation methodology that establishes an allowance to estimate the probable incurred loss for each risk-rating category.  

Deferred income tax assets and liabilities are determined using the liability method.  Under this method, the net deferred tax asset or liability is recognized for the future tax consequences.  This is attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating and capital loss carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.  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.  No valuation allowances were maintained at September 30, 2018 and December 31, 2017.  The Tax Cuts and Jobs Act of 2017 (“Tax Act”), which was effective on January 1, 2018, reduced the Company’s corporate federal tax rate from 34% to 21%, starting on that date, and affected the valuation of its net deferred tax assets calculated under GAAP, at December 31, 2017. The Company’s effective tax rate differs from the federal statutory tax rate due primarily to tax-exempt income from specific types of investment securities and loans, and bank owned life insurance.  The Company’s effective New York State tax rate differs from the state statutory tax rate of 6.5% due primarily to state tax-exempt income that can now be calculated under a newly-available modification of the state’s tax laws.  This modification allows the Company to exclude up to 50% of interest income derived from qualified lending activities within the State from its state taxable income.  The exclusion of this substantial portion of interest income from the Company’s New York State tax calculation significantly reduces the Company’s state income-based tax to a level where only immaterial capital-based or minimum franchise taxes apply.  

We maintain a noncontributory defined benefit pension plan covering most employees. The plan provides defined benefits based on years of service and final average salary. On May 14, 2012, we informed our employees of our decision to freeze participation and benefit accruals under the plan, primarily to reduce some of the volatility in earnings that can accompany the maintenance of a defined benefit plan.  Pension and post-retirement benefit plan liabilities and expenses are based

- 45 -

upon actuarial assumptions of future events; including fair value of plan assets, interest rates, and the length of time the Company will have to provide those benefits.  The assumptions used by management are discussed in Note 14 to the consolidated annual financial statements.  

The Company carries all of its available-for-sale investments at fair value with any unrealized gains or losses reported, net of tax, as an adjustment to shareholders' equity and included in accumulated other comprehensive income (loss), except for the credit-related portion of debt securities impairment losses and OTTI of equity securities which are charged to earnings.  The Company's ability to fully realize the value of its investments in various securities, including corporate debt securities, is dependent on the underlying creditworthiness of the issuing organization.  In evaluating the debt securities (both available-for-sale and held-to-maturity) portfolio for other-than-temporary impairment losses, management considers (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) if the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. When the fair value of a held-to-maturity or available-for-sale security is less than its amortized cost basis, an assessment is made as to whether OTTI is present.  The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover.  The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issue and (guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a NRSRO, and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

The estimation of fair value is significant to several of our assets; including loans, available-for-sale and marketable equity investment securities, intangible assets, foreclosed real estate, and the value of loan collateral when valuing impaired loans.  These are all recorded at either fair value, or the lower of cost or fair value. Fair values are determined based on third party sources, when available.  Furthermore, accounting principles generally accepted in the United States require disclosure of the fair value of financial instruments as a part of the notes to the annual audited consolidated financial statements.  Fair values on our available-for-sale securities may be influenced by a number of factors; including market interest rates, prepayment speeds, discount rates, and the shape of yield curves.

Fair values for securities available-for-sale are obtained from unaffiliated third party pricing services.  Where available, fair values are based on quoted prices on a nationally recognized securities exchange.  If quoted prices are not available, fair values are measured using quoted market prices for similar benchmark securities. Management made no adjustments to the fair value quotes that were provided by the pricing sources. Fair values for marketable equity securities are based on quoted prices on a nationally recognized securities exchange for similar benchmark securities.  The fair values of foreclosed real estate and the underlying collateral value of impaired loans are typically determined based on evaluations by third parties, less estimated costs to sell.  When necessary, appraisals are updated to reflect changes in market conditions. On January 1, 2018, the Company adopted Accounting Standards Update (ASU) 2016-01: Financial Instruments – Overall [Subtopic 825-10]: Recognition and Measurement of Financial Assets and Financial Liabilities.  The ASU requires the use of exit pricing in disclosures related to the fair value of financial instruments.  Accordingly, at September 30, 2018, the financial assets and liabilities of the Company were valued at a price that represents the Company’s exit price or the price at which these instruments would be sold or transferred. The adoption of the ASU did not materially affect the fair value evaluations of the financial assets and financial liabilities of the Company at the adoption date. Further information on the estimation of fair values can be found in Note 22 to the consolidated annual financial statements.

Management performs an evaluation of our goodwill for possible impairment of the recorded value of goodwill for each of our reporting units at each fiscal year end, or if events or circumstances warrant an evaluation. Based on the results of the December 31, 2017 evaluation, management has determined that the carrying value of goodwill was not impaired as of that date. No events or circumstances arose during the nine months ended September 30, 2018 to adversely affect the Company’s recorded goodwill. The evaluation approach is described in Note 10 of the consolidated annual financial statements.

- 46 -

Recent Events

On September 28, 2018, the Company announced that the Board of Directors declared a quarterly cash dividend of $0.06 per common share.  The dividend is payable on November 9, 2018 to shareholders of record on October 19, 2018.

Overview and Results of Operations

The following represents the significant highlights of the Company’s operating results between the third quarter of 2018 and the third quarter of 2017.

• Net income increased $78,000, or 8.6%, to $985,000.

• Basic and diluted earnings per share both increased $0.01 to $0.23.

• Return on average assets remain unchanged at 0.44% as average assets increased proportionally with the increase in net income.

• Net interest income, after provision for loan losses, increased $522,000, or 9.3%, to $6.1 million.  This increase in earnings was primarily due to the increase of $73.5 million in average balances of interest-earning assets and an increase in the average yield earned on those assets of 28 basis points.

• Net interest margin decreased by nine basis points to 3.01%, primarily as a result of a 42 basis point increase in the average rate paid on interest-earning liabilities.

• The effective income tax rate decreased 16.7% to 13.6% for the three months ended September 30, 2018 as compared to 30.3% for the same three month period in 2017.  This reduction in the effective tax rate was primarily the result of the combined effects of the Tax Act and changes to the New York State tax code that became effective on January 1, 2018.

The following represents significant highlights of the Company’s operating results between the first nine months of 2018 and the first nine months of 2017.

• Net income improved by $307,000, or 11.7%, to $2.9 million.

• Basic and diluted earnings per share each improved by $0.06 to $0.71 and $0.69 per share, respectively.

• Return on average assets remain unchanged at 0.44% as average assets increased proportionally with the increase in net income.

• Net interest income, after provision for loan losses, increased by $2.2 million, or 13.9%, to $18.1 million.  This increase in earnings was primarily due to the increase of $86.3 million in average balances of interest earning assets and an increase in the average yield earned on those assets of 26 basis points.

• Net interest margin increased by three basis points to 3.03%, primarily as a result of a 26 basis point increase in the average yield earned on interest-earning assets, primarily due to increases in the average yield earned on loans and taxable investment securities.    

• The effective income tax rate decreased 10.9% to 14.6% for the nine months ended September 30, 2018 as compared to 25.5% for the same nine month period in 2017.  This reduction in the effective tax rate was primarily the result of the combined effects of the Tax Act and changes to the New York State tax code that became effective on January 1, 2018.

The following reflects the significant changes in financial condition between the periods of December 31, 2017 and September 30, 2018.  In addition, the following reflects significant changes in asset quality metrics between September 30, 2017 and September 30, 2018.

• Total assets increased $40.4 million, or 4.6%, to $921.6 million at September 30, 2018, as compared to $881.3 million at December 31, 2017, primarily due to increases in loans and cash and cash equivalents, partially offset by a decrease in investment securities.  These increases were funded largely by increases in long-term borrowings from the FHLB and increases in deposits, including brokered deposits, as well as the cash flow from the sale and maturity of investment securities.

• Asset quality metrics remained stable in comparison to recent reporting periods and are comparable to peer group averages. The Company’s consistent asset quality metrics are reflective of its disciplined risk management

- 47 -

process, along with the relative economic stability of its Central New York State market area.  Nonperforming loans to total loans decreased to 0.75% at September 30, 2018, compared to 0.84% at December 31, 2017, and 0.86% at September 30, 2017.  Correspondingly, the ratio of the allowance for loan losses to nonperforming loans for third quarter 2018 was166.82%, as compared to 145.61% at December 31, 2017 and136.83%at September 30, 2017. Annualized net loan charge-offs to average loans ratio remained favorable and was 0.12% for the third quarter of 2018, compared to 0.16% for the fourth quarter of 2017 and 0.21% for the third quarter of 2017.

The Company had net income of $985,000 for the three months ended September 30, 2018 compared to net income of $907,000 for the three months ended September 30, 2017.  The $78,000 increase in net income was due primarily to a $1.3 million increase in interest and dividend income, a $229,000 decrease in income tax expense, and a decrease of $129,000 in the provision for loan losses.  This increase was partially offset by a $904,000 increase in interest expense, a $659,000 increase in noninterest expense, and a decrease in noninterest income of $41,000.  

Net interest income before the provision for loan losses increased $393,000, or 6.5%, to $6.4 million for the three months ended September 30, 2018 as compared to $6.0 million for the same three month period in 2017.  The increase was primarily the result of the increase in average interest-earning asset balances due to increases in average loans and average taxable investment securities.  The positive effects of increased average interest-earning assets for the three months ended September 30, 2018, as compared to the same three month period in 2017, were also enhanced by an increase in the average yield of those assets of 28 basis points to 4.16% for the three months ended September 30, 2018 from 3.88% for the same three month period of the previous year. This increase in net interest income was partially offset by an increase in the average balance and average cost of interest-bearing liabilities between the year-over-year third quarter periods.  

The $41,000, or 4.2%, decrease in noninterest income in the quarter ended September 30, 2018, as compared to the same quarterly period in 2017, was primarily the result of a net decrease of $168,000 in the net gains on the sales and redemptions of investment securities from a gain of $108,000 for the three months ended September 30, 2017 to a net loss of $60,000 for the same quarter in 2018.  During the three months ended September 30, 2018, Company-initiated sales and issuer-initiated redemptions of investment securities in the amount of $6.3 million, generated a net loss of $60,000, or 0.95%.  The investment securities sales were part of the Company’s portfolio optimization and liquidity management strategies. It is the intention of management to reinvest the proceeds of these investment securities transactions into potentially higher yielding interest-earning assets in future periods.

Excluding the effects of the quarter over quarter reduction in gains on the sale of investment securities, all other noninterest income categories increased by $127,000, or 14.5% to $1.0 million in the quarter ended September 30, 2018 as compared with $873,000 in the same quarter of 2017.  This $127,000 quarter over quarter increase in noninterest income, excluding the effects of gains on the sales and redemptions of investment securities, was due primarily to increases of $62,000 in other charges, commissions and fees, a $46,000 increase in earnings and gains on bank owned life insurance, a $36,000 increase in debit card interchange fees, and a $6,000 increase in gains on the sale of loans and foreclosed real estate, partially offset by a $19,000 decrease in loan servicing fees.    

The $659,000 increase in noninterest expense in the quarter ended September 30, 2018, as compared to the same quarterly period in 2017, was due primarily to an increase of $357,000, or 12.1%, in salaries and employee benefits expense that reflected an increase in staffing levels intended to meet increased loan demand and to better serve customers and potential customers as the Bank’s operations continue to expand primarily into Onondaga County, New York.  In addition, professional and other services increased $114,000, building and occupancy expenses increased $59,000, and data processing expenses increased $39,000.  All other noninterest expense categories increased $90,000, or 8.8%, in aggregate during the quarter ended September 30, 2018, as compared to the same three month period in 2017.

The $129,000 decrease in the provision for loan losses in the quarter ended September 30, 2018, as compared with the same quarter of 2017, was primarily due to favorable changes to both the quantitative and environmental factors deemed to be appropriate for the Bank’s loan portfolio, as well as ongoing stable asset quality metrics, partially offset by an increase in the provision for loan losses recorded due to the increase in the loan portfolio’s aggregate size.  The ratio of nonperforming loans to total loans improved to 0.75% at September 30, 2018 as compared to 0.84% at December 31, 2017 as a result of  a decrease in nonaccrual residential real estate loans, commercial loans, and consumer loans, offset by an increase in nonaccrual commercial real estate loans.  Partially offsetting the effects of these improvements in credit

- 48 -

quality metrics was the increase in the estimable and probable loan losses inherent in the loan portfolio due to increases of $55.6 million, or 10.0%, in average loan balances in the thirdquarter of 2018 as compared with the same quarter of 2017.

In comparing the year-over-year third quarter periods, the return on average assets remained unchanged at 0.44% as average assets (the denominator in the ratio) increased proportionally with the increase in net income (the numerator in the ratio).  Average assets increased primarily due to increases in average loans and average taxable investment securities of $55.6 million and $18.6 million, respectively, in the third quarter of 2018 as compared to the same quarter of 2017.  Average interest-bearing deposits increased $65.2 million in the third quarter of 2018, as compared with the same quarter in 2017, due to increased brokered and consumer deposits, resulting in part from new loan account relationships, particularly in Onondaga County. These increases in average deposits were partially offset by decreases in municipal deposits that are considered to be seasonal in nature.

The Company had net income of $2.9 million for the nine months ended September 30, 2018 compared to net income of $2.6 million for the nine months ended September 30, 2017.  The $307,000 increase in net income available to common shareholders was due primarily to a $4.1 million increase in interest and dividend income, a $364,000 decrease in income tax expense, and a decrease of $31,000 in provision for loan losses. This increase was partially offset by an increase of $2.3 million in noninterest expense, a $1.9 million increase in interest expense, and a $109,000 decrease in noninterest income.

Net interest income before the provision for loan losses increased $2.2 million, or 12.7%, to $19.3 million for the nine months ended September 30, 2018 as compared to $17.1 million for the same nine month period in the previous year.  The increase was primarily a result of the increase in average balances on loans and taxable investment securities and an increase in the average yield earned on those balances, partially offset by an increase in the average balance and average cost of those interest-bearing liabilities between the year-over-year nine month periods.

The $109,000, or 3.7% decrease in noninterest income in the nine months ended September 30, 2018, as compared to the same nine month period in 2017, was primarily the result of a net decrease of $503,000 in the net gains on the sales and redemptions of investment securities from a gain of $314,000 for the nine months ended September 30, 2017 to a net loss of $189,000 for the same nine month period in 2018.  The net gains on investment securities during the nine months ended September 30, 2017 were primarily the result of $250,000 in net gains recorded on short-term interest rate hedging activities in that period. There were no hedging activities of this type in the nine months ended September 30, 2018. During the nine months ended September 30, 2018, Company-initiated sales and issuer-initiated redemptions of investment securities in the amount of $34.6 million, generated a net loss of $189,000, or 0.55%.  The investment securities sales were part of the Company’s portfolio optimization and liquidity management strategies. It was the intention of management at the time of sale to reinvest the proceeds of these investment securities transactions into potentially higher yielding interest-earning assets in subsequent periods.

Excluding the effects of the period over period reduction in gains on the sale of investment securities, all other noninterest income categories increased in the aggregate by $394,000, or 14.8%, to $3.0 million in the nine months ended September 30, 2018 as compared with $2.7 million in the same nine month period of 2017.  This $394,000 period over period increase in noninterest income, excluding the effects of gains on the sales and redemptions of investment securities, was due primarily to increases of $146,000 in other charges, commissions and fees, a $94,000 increase in earnings and gains on bank owned life insurance, a $67,000 increase in net gains on sales of loans and foreclosed real estate, and a $59,000 increase in debit interchange fees.

The $2.3 million increase in noninterest expense for the nine months ended September 30, 2018 as compared to the same nine month period in 2017 was due primarily to an increase of $1.2 million, or 13.9%, in salary and employee benefits expense that reflected in part an increase in staffing levels intended to meet increased loan demand and to better serve customers and potential customers as the Bank’s operations continue to expand into Onondaga County.  In addition, professional and other services expense increased $440,000, data processing expense increased $151,000, building occupancy expense increased $133,000, FDIC assessment expense increased $117,000, advertising expense increased $99,000, and audits and exams expense increased $61,000.  All other noninterest expense categories increased $59,000, or 3.0%, in aggregate for the nine month period ended September 30, 2018, as compared to the same nine month period in 2017.

- 49 -

For the first nine months of 2018 and 2017, we recorded $1.2 million in provision for loan losses.The provision for loan losses was consistent with the prior year due principally to favorable changes to both the quantitative and environmental factors assigned to the Bank’s loan portfolio in aggregate, partially offset by $70.1 million, or 13.1%, increase in average loan balances in the nine months ended September 30, 2018 as compared with the same nine month period of 2017 and the resultant increase in the estimable and probable loan losses inherent in the loan portfolio.

Return on average assets remained unchanged at 0.44% between the year-over-year nine month periods as average assets (the denominator in the ratio) increased proportionally with the increase in net income (the numerator in the ratio).  

Net Interest Income

Net interest income is the Company's primary source of operating income for payment of operating expenses and providing for loan losses.  It is the amount by which interest earned on loans, interest-earning deposits, and investment securities, exceeds the interest paid on deposits and other interest-bearing liabilities.  Changes in net interest income and net interest margin result from the interaction between the volume and composition of interest-earning assets, interest-bearing liabilities, related yields, and associated funding costs.

- 50 -

The following tables set forth information concerning average interest-earning assets and interest-bearing liabilities and the average yields and rates thereon for the periods indicated.  Interest income and resultant yield information in the tables has not been adjusted for tax equivalency.  Averages are computed on the daily average balance for each month in the period divided by the number of days in the period. Yields and amounts earned include loan fees. Nonaccrual loans have been included in interest-earning assets for purposes of these calculations.

	For the three months ended September 30,
	2018								2017
						Average								Average
	Average					Yield /			Average					Yield /
(Dollars in thousands)	Balance			Interest		Cost			Balance			Interest		Cost
Interest-earning assets:
Loans	$	613,889		$	7,213		4.70	%	$	558,280		$	6,291		4.51	%
Taxable investment securities		194,925			1,409		2.89	%		176,328			1,024		2.32	%
Tax-exempt investment securities		23,568			143		2.43	%		27,526			188		2.73	%
Fed funds sold and interest-earning deposits		16,921			65		1.54	%		13,621			30		0.88	%
Total interest-earning assets		849,303			8,830		4.16	%		775,755			7,533		3.88	%
Noninterest-earning assets:
Other assets		59,232								49,474
Allowance for loan losses		(7,721	)							(6,387	)
Net unrealized losses
on available-for-sale securities		(4,273	)							(910	)
Total assets	$	896,541							$	817,932
Interest-bearing liabilities:
NOW accounts	$	67,203		$	30		0.18	%	$	71,611		$	30		0.17	%
Money management accounts		13,117			5		0.15	%		13,862			6		0.17	%
MMDA accounts		218,866			583		1.07	%		207,747			340		0.65	%
Savings and club accounts		83,620			21		0.10	%		85,123			21		0.10	%
Time deposits		255,267			1,200		1.88	%		194,483			619		1.27	%
Subordinated loans		15,079			216		5.73	%		15,045			201		5.34	%
Borrowings		71,807			379		2.11	%		78,595			313		1.59	%
Total interest-bearing liabilities		724,959			2,434		1.34	%		666,466			1,530		0.92	%
Noninterest-bearing liabilities:
Demand deposits		100,932								83,178
Other liabilities		6,570								5,842
Total liabilities		832,461								755,486
Shareholders' equity		64,080								62,446
Total liabilities & shareholders' equity	$	896,541							$	817,932
Net interest income				$	6,396							$	6,003
Net interest rate spread							2.82	%							2.96	%
Net interest margin							3.01	%							3.10	%
Ratio of average interest-earning assets
to average interest-bearing liabilities							117.15	%							116.40	%

- 51 -

	For the nine months ended September 30,
	2018								2017
						Average								Average
	Average					Yield /			Average					Yield /
(Dollars in thousands)	Balance			Interest		Cost			Balance			Interest		Cost
Interest-earning assets:
Loans	$	604,987		$	20,949		4.62	%	$	534,905		$	17,901		4.46	%
Taxable investment securities		194,133			3,837		2.64	%		175,603			2,705		2.05	%
Tax-exempt investment securities		31,521			608		2.57	%		29,412			778		3.53	%
Fed funds sold and interest-earning deposits		15,345			161		1.40	%		19,792			103		0.69	%
Total interest-earning assets		845,986			25,555		4.03	%		759,712			21,487		3.77	%
Noninterest-earning assets:
Other assets		56,033								51,621
Allowance for loan losses		(7,458	)							(6,248	)
Net unrealized (losses)
on available for sale securities		(3,666	)							(1,676	)
Total assets	$	890,895							$	803,409
Interest-bearing liabilities:
NOW accounts	$	67,741		$	83		0.16	%	$	66,891		$	78		0.16	%
Money management accounts		13,865			16		0.15	%		13,948			19		0.18	%
MMDA accounts		241,363			1,654		0.91	%		220,791			901		0.54	%
Savings and club accounts		83,806			64		0.10	%		84,604			62		0.10	%
Time deposits		235,347			2,933		1.66	%		185,448			1,616		1.16	%
Subordinated loans		15,071			629		5.56	%		15,037			591		5.24	%
Borrowings		68,608			920		1.79	%		68,313			1,139		2.22	%
Total interest-bearing liabilities		725,801			6,299		1.16	%		655,032			4,406		0.90	%
Noninterest-bearing liabilities:
Demand deposits		95,542								82,229
Other liabilities		6,166								5,271
Total liabilities		827,509								742,532
Shareholders' equity		63,386								60,877
Total liabilities & shareholders' equity	$	890,895							$	803,409
Net interest income				$	19,256							$	17,081
Net interest rate spread							2.87	%							2.87	%
Net interest margin							3.03	%							3.00	%
Ratio of average interest-earning assets
to average interest-bearing liabilities							116.56	%							115.98	%

As indicated in the above tables, net interest income, before provision for loan losses, increased $393,000, or 6.5%, to $6.4 million for the three months ended September 30, 2018 as compared to $6.0 million for the same prior year period.  This increase was due principally to the $73.5 million, or 9.5%, increase in the average balance of interest-earning assets, and an increase of 28 basis points on the average interest yield earned on those assets.  These positive factors on net interest income were partially offset by an increase in the average balance of interest-bearing liabilities of $58.5 million, or 8.8%, and an increase of 42 basis points on the average interest rate paid on those liabilities.   In total, net interest margin decreased 9 basis points to 3.01% due largely to the increase in the average rates paid on average interest-bearing liabilities, as noted above.  The following analysis should also be viewed in conjunction with the table below which reports the changes in net interest income attributable to rate and volume.

Interest and dividend income increased $1.3 million, or 17.2%, to $8.8 million for the three months ended September 30, 2018 compared to $7.5 million for the same three month period in 2017.  The increase in interest income was due principally to the increase in average interest-earning assets (primarily loans and taxable investment securities) which increased between the year-over-year third quarter periods by 10.1%.  The increase in the average balances of loans reflects the Company’s continued success in its expansion within the greater Syracuse, New York market.  Further supporting the quarter-over-quarter increase in interest income, the average yield on the loan and taxable investment portfolios improved 19 basis points to 4.70% and 57 basis points to 2.89%, respectively.  The increase in the average yield

- 52 -

on loans was the result of new loan production being added to the loan portfolio at rates slightly higher than the average rates of the previously existing portfolio.  The increase in the average yield on taxable investment securities was the result of an increase in book yields on adjustable-rate securities and the purchase of new securities, often with longer durations or more credit risk exposure, at rates higher than the average yields of securities within the previously-existing portfolio whose balances continue to be reduced by amortization and maturities.  

Interest expense for the three months ended September 30, 2018 increased $904,000, or 59.1%, to $2.4 million when compared to the same prior year period.  Deposit interest expense increased $823,000, or 81.0%, to $1.8 million due to a $65.2 million increase in the average balance of interest-bearing deposits accompanied by a 44 basis point increase in the average annualized rate paid on these deposits to 1.15% for the three months ended September 30, 2018, as compared with the same three month period in 2017. This increase in average rates was primarily due to a 61 and 42 basis point increase in the average rates paid on time deposits and money market deposit accounts (“MMDA”), respectively, during the three months ended September 30, 2018 as compared to the same three month period in 2017.  These increases in the average rates paid on time deposits and MMDA deposits, which include brokered deposits, reflected the competitive environment for such deposits within the Company’s marketplace as well as a general increase in short-term interest rates nationally. Further contributing to the increase in interest expense in the three months ended September 30, 2018, as compared with the same three month period in 2017, was an increase in borrowings expense and subordinated loan expense of $66,000 and $15,000, respectively.

For the nine month period ended September 30, 2018, net interest income, before the provision for loan losses, increased $2.2 million, or 12.7%, to $19.3 million compared to $17.1 million for the nine months ended September 30, 2017.  Interest and dividend income increased $4.1 million, or 18.9%, to $25.6 million for the nine months ended September 30, 2018 from $21.5 million for the same nine month period in 2017.  The increase in interest income was due principally to the increases in average balances of loans, and the aggregate balances of taxable and tax-exempt investment securities, which increased 13.1% and 10.1%, respectively, between the year-over-year nine month periods.  The increase in the average balances of loans reflects the Company’s continued success in its expansion within the greater Syracuse market.  These increases were also positively affected by the increase in the average yield on loans and taxable investment securities of 16 basis points to 4.62% and 59 basis points to 2.64%, respectively.  This increase in the average yield on loans was the result of new loan production being added to the loan portfolio at rates slightly higher than the average rates of the previously existing portfolio.  The increase in the average yield on taxable investment securities was the result of an increase in book yields on adjustable-rate securities and the purchase of new securities, often with longer durations or more credit risk exposure, at rates higher than the average rates of securities within the previously-existing portfolio whose balances continue to be reduced by amortization, maturities and sales.

Interest expense for the nine months ended September 30, 2018 increased $1.9 million, or 43.0%, to $6.3 million as compared to $4.4 million for the nine months ended September 30, 2017.  The increase in interest expense was due principally to the increase in average interest-bearing liabilities of $70.8 million, along with a 26 basis point increase in the average rate paid on these liabilities to 1.16%.  The increase in average rates paid on interest-bearing liabilities was due to a $2.1 million increase in deposit interest expense, partially offset by a $219,000 decrease in interest expense paid on borrowed funds. The average balances of interest-bearing deposits, which include brokered deposits, increased $70.4 million between the year-over-year nine month periods.  Deposit interest expense increased 37 basis points to 0.99% for the nine months ended September 30, 2018 as compared with 0.62% for the same nine month period in 2017.  This increase was primarily due to a 50 and 37 basis point increase in the average rate paid on time deposits and MMDA deposits, respectively, during the nine months ended September 30, 2018 as compared to the same time period in 2017.  These increases in the average rates paid on time deposits and MMDA deposits, which include brokered deposits, reflected the competitive environment for such deposits within the Company’s marketplace and a general increase in short-term interest rates nationally.

The $219,000 decrease in interest expense related to borrowings between the year-over-year nine month periods was primarily due to a reduction of $430,000 in pretax interest expense paid that was related to the Bank’s short-term interest rate risk hedging activities in 2017.  This reduction in interest expense paid on borrowings was partially offset by an increase of $211,000 in interest expense related to non-hedge related borrowings. There were no hedging activities in the first nine months of 2018.  During the first nine months of 2017, the Bank paid $430,000 in net interest on a $40 million U.S. Treasury security that it had received from an unrelated entity as collateral for a short term loan.  The U.S. Treasury security was sold by the Bank, which placed the Bank in what is commonly referred to as a “short” position with respect

- 53 -

to that security.  During the period of time that the Bank was in a short position with respect to the security, short-term interest rates generally rose and the Bank reacquired the security with a realized gain, net of tax benefits, of $346,000.  The $211,000 increase in non-hedge related borrowings interest expense was primarily due to a 41 basis point increase in the average rate paid on non-hedge related borrowings to 1.79% in thenine months ended September 30, 2018 from 1.38% in the same nine month period of 2017.  This increase in the average rate paid on non-hedge related borrowings was primarily due to a general year-over-year nine month increase in short-term interest rates.

Rate/Volume Analysis

Net interest income can also be analyzed in terms of the impact of changing interest rates on interest-earning assets and interest-bearing liabilities and changes in the volume or amount of these assets and liabilities. The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (change in volume multiplied by prior rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) total increase or decrease.  Changes attributable to both rate and volume have been allocated ratably.

	Three months ended September 30,									Nine months ended September 30,
	2018 vs. 2017									2018 vs. 2017
	Increase/(Decrease) Due to									Increase/(Decrease) Due to
							Total									Total
							Increase									Increase
(In thousands)	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
Interest Income:
Loans	$	645		$	277		$	922		$	2,410		$	638		$	3,048
Taxable investment securities		116			269			385			307			825			1,132
Tax-exempt investment securities		(25	)		(20	)		(45	)		82			(252	)		(170	)
Interest-earning deposits		9			26			35			(40	)		98			58
Total interest income		745			552			1,297			2,759			1,309			4,068
Interest Expense:
NOW accounts		(8	)		8			-			1			4			5
Money management accounts		-			(1	)		(1	)		-			(3	)		(3	)
MMDA accounts		19			224			243			91			662			753
Savings and club accounts		(1	)		1			-			(1	)		3			2
Time deposits		230			351			581			507			810			1,317
Subordinated loans		-			15			15			1			37			38
Borrowings		(157	)		223			66			8			(227	)		(219	)
Total interest expense		83			821			904			607			1,286			1,893
Net change in net interest income	$	662		$	(269	)	$	393		$	2,152		$	23		$	2,175

Provision for Loan Losses

We establish a provision for loan losses, which is charged to operations, at a level management believes is appropriate to absorb probable incurred credit losses in the loan portfolio.  In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. The provision for loan losses represents management’s estimate of the amount necessary to maintain the allowance for loan losses at an adequate level.  

Management extensively reviews recent trends in historical losses, qualitative factors and specific reserve needs on loans individually evaluated for impairment in its determination of the adequacy of the allowance for loan losses. We recorded $291,000 in provision for loan losses for the three month period ended September 30, 2018, as compared to $420,000 for the three month period ended September 30, 2017.  The $129,000 decrease in the provision for loan losses was primarily due to favorable changes to both the quantitative and environmental factors deemed to be appropriate for the Bank’s loan

- 54 -

portfolio, as well as ongoing stable asset quality metrics, partially offset by a $55.6 million, or 10.0%, increase in average loan balances in the third quarter of 2018 as compared with the same quarter of 2017 and the resultant increase in the estimable and probable loan losses inherent in the loan portfolio.

For the first nine months of 2018 and 2017, we recorded $1.2 million in provision for loan losses.  The  provision for loan losses was consistent with the prior year primarily due to favorable changes to both the quantitative and environmental factors deemed to be appropriate for the Bank’s loan portfolio, as well as ongoing stable asset quality metrics, partially offset by a $70.1 million, or 13.1% increase in average loan balances for the nine month period ended September 30, 2018 as compared with the same period in 2017 and the resultant increase in the estimable and probable loan losses inherent in the loan portfolio.

The Company measures delinquency based on the amount of past due loans as a percentage of total loans.  The ratio of delinquent loans to total loans increasedto 2.24% at September 30, 2018 as compared to 2.09% at December 31, 2017.  Delinquent loans (numerator of the ratio) increased $1.7 million while total loan balances (denominator of the ratio) increased $39.8 million at September 30, 2018, as compared to December 31, 2017.  The increase in past due loans was primarily driven by an increase of $4.2 million in loans delinquent 30-59 day, partially offset by a decrease of $2.4 million in loans delinquent 60-89 days, and a $114,000 decrease in loans delinquent 90 days or more.  At September 30, 2018, there were $13.9 million in loans past due including $8.5 million in loans 30-59 days past due, $934,000 in loans 60-89 days past due, and $4.5 million in loans 90 or more days past due.  At December 31, 2017, there were $12.2 million in loans past due, including $4.3 million in loans 30-59 days past due, $3.3 million in loans 60-89 days past due, and $4.6 million in loans 90 or more days past due.

The increase of $1.7 million in total loans past due at September 30, 2018, as compared to December 31, 2017, was primarily due to an increase of $4.2 million in loans 30-59 days past due, primarily due to an increase of $3.0 million in commercial real estate loans and an increase of $1.9 million in commercial lines of credit that were delinquent 30-59 days.  The increase in commercial real estate loans delinquent 30-59 days was primarily the result of the delinquency of a single commercial real estate loan in the amount of $3.2 million.  The increase in the commercial lines of credit delinquent 30-59 days was primarily the result of the delinquency of a single commercial line of credit in the amount of $2.0 million.   Partially offsetting these increases was a decrease of $2.4 million in loans delinquent 60-89 days.  Total loans with delinquent balances 60-89 days past due decreased by $2.4 million in aggregate, primarily as a result of one commercial real estate loan with an outstanding balance of $1.7 million that was 60-89 days delinquent at December 31, 2017 and was over 90 days past due at September 30, 2018.

- 55 -

Noninterest Income

The Company's noninterest income is primarily comprised of fees on deposit account balances and transactions, loan servicing, commissions, including insurance agency commissions, and net gains on sales of securities, loans, and foreclosed real estate.  

The following table sets forth certain information on noninterest income for the periods indicated:

	Three months ended September 30,											Nine months ended September 30,
(Dollars in thousands)	2018			2017		Change						2018			2017			Change
Service charges on deposit accounts	$	291		$	295	$	(4	)		-1.4	%	$	838		$	832		$	6		0.7	%
Earnings and gain on bank owned life insurance		138			92		46			50.0	%		319			225			94		41.8	%
Loan servicing fees		25			44		(19	)		-43.2	%		108			112			(4	)	-3.6	%
Debit card interchange fees		141			105		36			34.3	%		432			373			59		15.8	%
Other charges, commissions and fees		397			335		62			18.5	%		1,301			1,155			146		12.6	%
Noninterest income before gains (losses)		992			871		121			13.9	%		2,998			2,697			301		11.2	%
Net (losses) gains on sales and redemptions of investment securities		(60	)		108		(168	)		-155.6	%		(189	)		314			(503	)	-160.2	%
Gains on equity securities		-			-		-		-				26			-			26		-
Net gains (losses) on sales of loans and foreclosed real estate		8			2		6			300.0	%		24			(43	)		67		-155.8	%
Total noninterest income	$	940		$	981	$	(41	)		-4.2	%	$	2,859		$	2,968		$	(109	)	-3.7	%

The $41,000, or 4.2%, decrease in noninterest income in the quarter ended September 30, 2018, as compared to the same quarterly period in 2017, was primarily the result of a net decrease of $168,000 in the net gains on the sales and redemptions of investment securities from a gain of $108,000 for the three months ended September 30, 2017 to a net loss of $60,000 for the same quarter in 2018.  During the three months ended September 30, 2018, Company-initiated sales and issuer-initiated redemptions of investment securities in the amount of $6.3 million, generated a net loss of $60,000, or 0.95%.  The investment securities sales were part of the Company’s portfolio optimization and liquidity management strategies. It is the intention of management to reinvest the proceeds of these investment securities transactions into potentially higher yielding interest-earning assets in future periods.

Excluding the effects of the quarter over quarter reduction in gains on the sale of investment securities, all other noninterest income categories increased by $127,000, or 14.5% to $1.0 million in the quarter ended September 30, 2018 as compared with $873,000 in the same quarter of 2017.  This $127,000 quarter over quarter increase in noninterest income, excluding the effects of gains on the sales and redemptions of investment securities, was due primarily to increases of $62,000 in other charges, commissions and fees, a $46,000 increase in earnings and gains on bank owned life insurance, a $36,000 increase in debit card interchange fees, and a $6,000 increase in gains on the sale of loans and foreclosed real estate, partially offset by a $19,000 decrease in loan servicing fees.    

The $109,000, or 3.7% decrease in noninterest income in the nine months ended September 30, 2018, as compared to the same nine month period in 2017, was primarily the result of a net decrease of $503,000 in the net gains on the sales and redemptions of investment securities from a gain of $314,000 for the nine months ended September 30, 2017 to a net loss of $189,000 for the same nine month period in 2018.  The net gains on investment securities during the nine months ended September 30, 2017 were primarily the result of $250,000 in net gains recorded on short-term interest rate hedging activities in that period. There were no hedging activities of this type in the nine months ended September 30, 2018.  During the nine months ended September 30, 2018, Company-initiated sales and issuer-initiated redemptions of investment securities in the amount of $34.6 million, generated a net loss of $189,000, or 0.55%.  The investment securities sales were part of the Company’s portfolio optimization and liquidity management strategies. It is the intention of management to reinvest the proceeds of these investment securities transactions into potentially higher yielding interest-earning assets in future periods.

Excluding the effects of the period over period reduction in gains on the sale of investment securities, all other noninterest income categories increased in the aggregate by $394,000, or 14.8%, to $3.0 million in the nine months ended September

- 56 -

30, 2018 as compared with $2.7 million in the same nine month period of 2017. This $394,000 period over period increase in noninterest income, excluding the effects of gains on the sales and redemptions of investment securities, was due primarily to increases of $146,000 in other charges, commissions and fees, a $94,000 increase in earnings and gains on bank owned life insurance, a $67,000 increase in net gains on sales of loans and foreclosed real estate, and a $59,000 increase in debit card interchange fees.  The $146,000 increase in other charges, commissions and fees was primarily due to a $57,000 non-recurring recovery related to return of unused escrow balances that were originally deposited as part of a foreclosure settlement in 2012, a $32,000 increase in investment services revenue, a $19,000 increase in banking house rents and a $14,000 increase in merchant card fee income.

Noninterest Expense

The following table sets forth certain information on noninterest expense for the periods indicated:

	Three months ended September 30,									Nine months ended September 30,
(Dollars in thousands)	2018		2017		Change					2018		2017		Change
Salaries and employee benefits	$	3,317	$	2,960	$	357		12.1	%	$	9,830	$	8,629	$	1,201	13.9	%
Building occupancy		613		554		59		10.6	%		1,757		1,624		133	8.2	%
Data processing		507		468		39		8.3	%		1,462		1,311		151	11.5	%
Professional and other services		359		245		114		46.5	%		1,095		655		440	67.2	%
Advertising		162		191		(29	)	-15.2	%		638		539		99	18.4	%
FDIC assessments		152		153		(1	)	-0.7	%		407		290		117	40.3	%
Audits and exams		104		84		20		23.8	%		314		253		61	24.1	%
Other expenses		698		598		100		16.7	%		1,995		1,936		59	3.0	%
Total noninterest expenses	$	5,912	$	5,253	$	659		12.5	%	$	17,498	$	15,237	$	2,261	14.8	%

The $659,000, or 12.5%, increase in noninterest expense between the year-over-year third quarter periods was principally due to an increase in salaries and employee benefits expense of $357,000, or 12.1%.  All other noninterest expenses in aggregate increased $302,000, or 13.2%, for the three months ended September 30, 2018 as compared to the same three month period in 2017.  The detail of the components of the overall increase in noninterest expense is as follows:

• The $357,000 increase in salaries and employee benefits expense in the third quarter of 2018, as compared to the same three month period in 2017, was primarily due to increases of $226,000 in salary expense, increases of $111,000 in commissions/incentives expense, increases of $76,000 in employee benefits expense, including employee payroll tax expenses.  The Company conducts regular succession planning for its senior management team and determined that it was more likely than not that its Senior Vice-President and General Counsel would elect certain early retirement options.  Management thereby accelerated the recognition of certain financial benefits that previously were scheduled to be recognized over a more extended number of financial periods through that individual’s originally-expected retirement date. Management intends to accrue a total of approximately $533,000 in accelerated compensation expenses, including stock-based compensation expense, during 2018 related to this expected retirement, of which $161,000 was recognized during the quarter ended September 30, 2018, primarily as commissions/incentives expense. Partially offsetting these increases were decreases in deferred compensation, stock-based compensation, and director’s compensation expenses totaling $56,000.The increases in employee benefitsexpenses for the three months ended September 30, 2018, as compared to the same three-month period in 2017, were consistent with the salary and commissions/incentives expense increases discussed above.

• The $114,000 increase in professional and other services fees was primarily due to fees paid to an unaffiliated consulting firm during the quarter for assistance with operational and strategic planning.  

• The $100,000 increase in other expenses was primarily due to an increase in charitable contributions and various community service donations.

• The $59,000 increase in building occupancy costs was primarily due to an increase of $25,000 in property tax expenses and a $27,000 increase in building and machine maintenance expenses.  The increase in building and machine maintenance expenses was largely due to timing factors and nonrecurring charges for the three months ended September 30, 2018.

- 57 -

• The $39,000 increase in data processing costs was primarily due to an additional $27,000 in processing fees paid by the Bank that were based on increased levels of customer activity primarily transacted through its electronic delivery channels,$26,000 of additional equipment depreciation expense, $5,000 of additional data processing supplies expense, $4,000 of additional internet banking services expense, which was offset by a $23,000 decrease in equipment maintenance expenses.

• All other noninterest expenses decreased in aggregate in the year-over-year three month periods by a total of $10,000 or 2.3%, due to a broad range of individually immaterial variances.

The $2.3 million, or 14.8%, increase in noninterest expenses between the nine month period ended September 30, 2018 and the same nine month period in the prior year was principally due to an increase in salaries and employee benefits expense, professional and other service fees, data processing expense, building occupancy costs, FDIC assessments, advertising expense, audits and exams expense, and other expenses.  The detail of the components of the overall increase in noninterest expense is as follows:

• The $1.2 million increase in salaries and employee benefits expense in the first nine months of 2018, as compared to the same nine month period in 2017, was primarily due to $673,000 in salary expense increases, increases of $395,000 in commissions/incentives expenses, increases of $227,000 in employee benefits expense, including employee payroll tax expenses.  The Company conducts regular succession planning for its senior management team and determined that it was more likely than not that its Senior Vice-President and General Counsel would elect certain early retirement options.  Management thereby accelerated the recognition of certain financial benefits that previously were scheduled to be recognized over a more extended number of financial periods through that individual’s originally-expected retirement date. Management intends to accrue a total of approximately $533,000 in accelerated compensation expenses, including stock-based compensation expense, during 2018 related to this expected retirement, of which $311,000 was recognized, primarily as commissions/incentives expense, during the nine months ended September 30, 2018.  Partially offsetting these increases were decreases in deferred compensation, stock-based compensation, and director’s compensation expenses totaling $95,000. Salaries expense increased as the result of the additions of staff members supporting current and planned asset growth and risk management activities.  Commissions/incentives expense increased primarily due to $132,000 in additional accruals in the second and third quarters of 2018 that related to the timing of commissions/incentives payments, primarily to the senior management team of the Agency under a revised compensation formula established at the end of 2017.  These timing factors are expected to partially reverse themselves in the remainder of 2018.  The increases in employee benefits expenses for the nine months ended September 30, 2018, as compared to the same nine month period in 2017, were consistent with the salary and commissions/incentives expense increases discussed above.

• The $440,000 increase in professional and other services fees was primarily due to fees paid to an unaffiliated consulting firm during the nine months ended September 30, 2018 for assistance with operational and strategic planning.  

• The $151,000 increase in data processing expenses was primarily related to increases of $58,000, $41,000, and $31,000 in equipment depreciation expense, third-party processing charges, and internet banking services expense, respectively, for the nine months ended September 30, 2018, as compared with the same nine month period in 2017.

• The $133,000 increase in building occupancy costs was primarily due to an increase of $45,000 in depreciation expense, a $28,000 increase in building and machine maintenance expense, a $30,000 increase in building and land lease expense, a $16,000 increase in property tax expense, and a $14,000 in utilities and communication and expense.  The increase in building and machine maintenance expenses was largely due to timing factors and nonrecurring charges during the nine months ended September 30, 2018

• FDIC assessments increased $117,000 due to an increase in the Bank’s risk-weighted assessment resulting from the phase-out of a benefit the Bank received in the FDIC’s risk-weighting methodology as a result of the dissolution of Pathfinder Commercial Bank.  

• Advertising expense increased $99,000 primarily as the result of increases in the level of brand awareness advertising expenditures primarily focused on the Onondaga County market.

• Audits and exams increased $61,000 principally due to increased utilization of third-party internal audits services during the nine months ended September 30, 2018 as compared to the previous year’s period.  

- 58 -

• Other noninterest expenses increased in the year-over-year nine month periods by a total of $59,000, or 3.0%, due to a broad range of individually immaterial variances.

At September 30, 2018, the Bank serviced 213 residential mortgage loans in the aggregate amount of $12.5 million that have been sold on a non-recourse basis to FNMA.  FNMA is the only unrelated third-party that has acquired loans originated by the Bank. On an infrequent basis, loans previously sold to FNMA that subsequently default may be found to have underwriting defects that place the loans out of compliance with the representations and warranties made by the Bank.  This can occur at any time while the loan is outstanding.  In such cases, the Bank is required to repurchase the defaulted loans from FNMA.  Repurchase losses sustained by the Bank include all costs incurred by FNMA as part of the foreclosure process, including items such as delinquent property taxes and legal fees.  Management continues to monitor the underwriting standards applied to all residential mortgage loan originations and subsequent sales through its quality control processes and considers these occurrences and their related expenses to be isolated instances.  No loan repurchases have been made during the three and nine months ended September 30, 2018.

Income Tax Expense

Income tax expense decreased $229,000 to $157,000, with aneffective tax rate of 13.6% for the quarter ended September 30, 2018 as compared to $386,000, with an effective tax rate of 30.3%, for the same three month period in 2017.  The reduction in income tax expense was primarily the result of a reduction in statutory tax rates applicable to the Company and, to a lesser extent, a reduction in net income before income taxes of $178,000. The reduction in the third quarter 2018 effective tax rate, compared to the effective tax rate in the same quarter of 2017, was primarily the result of the enactment of the Tax Act, which reduced the federal statutory corporate tax rate applicable to the Company from 34% to 21%, and favorable changes to the New York State tax code.  During both the third quarters of 2018 and 2017, the Company derived tax benefits from its investments in tax-exempt securities issued by municipalities and political subdivisions, and from its investments in bank owned life insurance.  In the third quarter of 2018, these benefits reduced the effective tax rate to 16.5%. In addition, the Company recognized tax benefits of $33,000 related to the nonqualified redemption of employee incentive stock options that further reduced the overall effective tax rate for the quarter ended September 30, 2018 to the reported 13.6%.  

Income tax expense decreased $364,000 to $505,000, with an effective tax rate of 14.6% for the nine months ended September 30, 2018 as compared to $869,000, with an effective tax rate of 25.5%, for the same nine month period in 2017.  The reduction in the effective tax rate in the first nine months of 2018, compared to the effective tax rate in the same nine month period in 2017, was primarily the result of the enactment of the Tax Act, which reduced the federal statutory corporate tax rate applicable to the Company from 34% to 21%, and favorable changes to the New York State tax code.  During both the first nine months of 2018 and 2017, the Company derived effective tax rate benefits from its investments in tax-exempt securities issued by municipalities and political subdivisions, and from its investments in bank owned life insurance.  In the first nine months of 2018, these benefits reduced the effective tax rate to 17.8%.  In addition, the Company recognized tax benefits of $92,000 and $19,000 related to the nonqualified redemption of employee incentive stock options and the utilization of low-income housing tax credits, respectively, reducing the overall effective tax rate for the first nine months of 2018 to the reported 14.6%.  

During the first nine months of 2017, the sale of certain U.S. Treasury assets, positioned as part of the Company’s short-term interest rate hedge strategies, resulted in realized capital gains in the amount of $250,000. These gains enabled the partial utilization of previously reserved-for capital loss carryforwards resulting in a reduction in income tax expense of $96,000 during the nine months ended September 30, 2018. Absent this capital loss carryforward utilization effect in the first nine months of 2017, the Company’s income tax expense would have been $965,000 and its effective tax rate for that nine month period would have been 28.3%.

Earnings per Share

Basic and diluted earnings per share both increased $0.01 to $0.23 for the third quarter of 2018 when compared to 2017.  

Basic and diluted earnings per share were $0.71 and $0.69, respectively, for the nine month period ended September 30, 2018 as compared to $0.65 and $0.63, respectively, for the same prior year period.  The increase in earnings per share

- 59 -

between these two periods was due to the increase in net income between these two time periods.  Further information on earnings per share can be found in Note 3 of this Form 10-Q.

Changes in Financial Condition

Assets

Total assets increased $40.4 million, or 4.6%, to $921.6 million at September 30, 2018 as compared to $881.3 million at December 31, 2017.  This increase was due primarily to increases in loans and cash and cash equivalents, partially offset by a decrease in investment securities.

Total loans receivable increased $40.0 million, or 6.9%, to $620.9 million at September 30, 2018 from $580.8 million at December 31, 2017. Commercial loans and residential loans recorded increases between these two dates, with increases of $28.6 million, and $13.4 million, respectively.  These increases were partially offset by a decrease of $2.2 million in consumer loans.

Investment securities decreased $21.8 million, or 9.2%, to $215.6 million at September 30, 2018, as compared to $237.3 million at December 31, 2017, due principally to sales and maturities of securities during the first nine months of 2018.  

Cash and cash equivalents increased $14.0 million, or 63.6%, to $36.0 million at September 30, 2018, as compared to $22.0 million at December 31, 2017.  The $14.0 million increase in cash and cash equivalents was primarily due to a strategic increase in short-term liquidity in anticipation of continued high levels of demand for loan funding in the fourth quarter of 2018.  The Bank considers its statutorily required cash reserve balances held at the Federal Reserve Bank to be restricted cash.  Total restricted cash was $4.5 million and $6.3 million at September 30, 2018 and December 31, 2017, respectively.

Liabilities

Total liabilities increased $38.9 million, or 4.8%, to $858.1 million at September 30, 2018 compared to $819.1 million at December 31, 2017.  Deposits increased $32.6 million, or 4.5%, to $756.2 million at September 30, 2018, compared to $723.6 million at December 31, 2017.  This increase was the result of an increase in deposits obtained directly from customers within the Bank’s marketplace of $23.6 million and an increase in brokered deposits of $9.0 million. The net increase in customer deposits during the nine months ended September 30, 2018 was due primarily to increases in consumer and business deposit categories of $23.7 million and $3.8 million, respectively, offset by a decrease in municipal deposits of $3.9 million.   The Bank utilizes the Certificates of Deposit Account Registry Service (“CDARS”) provided by Promontory Interfinancial Network as a form of brokered deposits.  At September 30, 2018, deposits obtained through the use of this service increased $9.0 million to $68.5 million as compared to $59.5 million at December 31, 2017.  Borrowed funds balances at September 30, 2018 increased $5.7 million, or 7.8%, to $79.6 million from $73.9 million at December 31, 2017.

Shareholders’ Equity

The Company’s shareholders’ equity, exclusive of the noncontrolling interest, increased $1.5 million, or 2.4%, to $63.3 million at September 30, 2018 from $61.8 million at December 31, 2017. This increase was principally due to an increase of $2.3 million in retained earnings, a $763,000 increase in additional paid-in capital, resulting from activity within the Company’s stock-based compensation programs, and a $135,000 increase in ESOP shares earned. In addition, the Company adopted ASU 2017-12: Derivatives and Hedging [Topic 815]: Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2018, in the second quarter of 2018.  As a result of the adoption of this guidance, the Company transferred investment securities from HTM to AFS with an amortized historical cost before transfer of $35.2 million.  This transfer resulted in the addition of $359,000 to accumulated other comprehensive income as of the effective date.  Partially offsetting these increases in shareholders’ equity was an increase of $1.9 million in accumulated other comprehensive loss. The increase in retained earnings primarily resulted from $2.9 million in net income recorded in the first nine months of 2018 and a $53,000 one-time adjustment related to the cumulative effect of an unrealized gain on marketable equity securities based on the adoption of ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities in the first quarter of 2018.  Partially offsetting these

- 60 -

increases in retained earnings was a reduction of $752,000 for cash dividends declared on our common stock.  The increase in accumulated comprehensive loss was primarily the result of the decline in the fair market value of our available-for-sale investment securities during the nine months ended September 30, 2018.

Capital

Capital adequacy is evaluated primarily by the use of ratios which measure capital against total assets, as well as against total assets that are weighted based on risk characteristics defined by regulation.  The Company’s goal is to maintain a strong capital position, determined in a manner that is consistent with the risk profile of its banking operations.  This strong capital position serves to support growth and expansion activities while at the same time exceeding regulatory standards.  At September 30, 2018, the Bank met the regulatory definition of a “well-capitalized” institution, i.e. a leverage capital ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 8%, Tier 1 common equity exceeding 6.5%, and a total risk-based capital ratio exceeding 10%.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.  The buffer is separate from the capital ratios required under the Prompt Corrective Actions (“PCA”) standards. In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum levels of the following capital to risk-weighted assets ratios: (1) Core Capital, (2) Total Capital and (3) Common Equity.  The capital conservation buffer requirement began being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and is increasing each year until fully implemented at 2.5% on January 1, 2019. For 2018, the capital buffer is 1.875% of risk-weighted assets. At September 30, 2018, the Bank exceeded all current and projected regulatory required minimum capital ratios, including the maximum capital buffer level that will be required on January 1, 2019.

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion.  A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes.  The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%.  A financial institution can elect to be subject to this new definition.  The federal banking agencies have not issued final regulations related to this change.  Management will evaluate its options related to the election of this new definition following the final issuance of those regulations.

- 61 -

Pathfinder Bank’s capital amounts and ratios as of the indicated dates are presented in the following tables:

	Actual					Minimum For Capital Adequacy Purposes					Minimum To Be "Well-Capitalized" Under Prompt Corrective Provisions					Minimum For Capital Adequacy with Buffer, Fully Phased In 2019
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of  September 30, 2018:
Total Core Capital (to Risk-Weighted Assets)	$	82,073		13.59	%	$	48,298		8.00	%	$	60,372		10.00	%	$	63,391		10.50	%
Tier 1 Capital (to Risk-Weighted Assets)	$	74,523		12.34	%	$	36,223		6.00	%	$	48,298		8.00	%	$	51,316		8.50	%
Tier 1 Common Equity (to Risk-Weighted Assets)	$	74,523		12.34	%	$	27,167		4.50	%	$	39,242		6.50	%	$	42,260		7.00	%
Tier 1 Capital (to Assets)	$	74,523		8.37	%	$	35,630		4.00	%	$	44,538		5.00	%	$	44,538		5.00	%
As of December 31, 2017:
Total Core Capital (to Risk-Weighted Assets)	$	78,105		13.97	%	$	44,733		8.00	%	$	55,916		10.00	%	$	58,712		10.50	%
Tier 1 Capital (to Risk-Weighted Assets)	$	71,114		12.72	%	$	33,550		6.00	%	$	44,733		8.00	%	$	47,529		8.50	%
Tier 1 Common Equity (to Risk-Weighted Assets)	$	71,114		12.72	%	$	25,162		4.50	%	$	36,345		6.50	%	$	39,141		7.00	%
Tier 1 Capital (to Assets)	$	71,114		8.16	%	$	34,863		4.00	%	$	43,579		5.00	%	$	43,579		5.00	%

- 62 -

Non-GAAP Financial Measures

Regulation G, a rule adopted by the Securities and Exchange Commission (SEC), applies to certain SEC filings, including earnings releases, made by registered companies that contain “non-GAAP financial measures.”  GAAP is generally accepted accounting principles in the United States of America.  Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure (if a comparable GAAP measure exists) and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures.  The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP.  When these exempted measures are included in public disclosures, supplemental information is not required. Financial institutions like the Company and its subsidiary bank are subject to an array of bank regulatory capital measures that are financial in nature but are not based on GAAP. The Company follows industry practice in disclosing its financial condition under these various regulatory capital measures, including period-end regulatory capital ratios for its subsidiary bank, in its periodic reports filed with the SEC. The Company provides, below, an explanation of the calculations, as supplemental information, for non-GAAP measures included in the consolidated annual financial statements.  In addition, the Company provides a reconciliation of its subsidiary bank’s disclosed regulatory capital measures, below.

	September 30,				December 31,
(Dollars in thousands)	2018				2017
Regulatory Capital Ratios (Bank Only)
Total capital (to risk-weighted assets)
Total equity (GAAP)	$	73,380			$	71,535
Goodwill		(4,536	)			(4,536	)
Intangible assets		(169	)			(146	)
Addback: Accumulated other comprehensive income		5,848				4,261
Total Tier 1 Capital	$	74,523			$	71,114
Allowance for loan and lease losses		7,550				6,991
Unrealized Gain on available-for-sale securities		-				-
Total Tier 2 Capital	$	7,550			$	6,991
Total Tier 1 plus Tier 2 Capital (numerator)	$	82,073			$	78,105
Risk-weighted assets (denominator)		603,720				559,161
Total core capital to risk-weighted assets		13.59		%		13.97		%
Tier 1 capital (to risk-weighted assets)
Total Tier 1 capital (numerator)	$	74,523			$	71,114
Risk-weighted assets (denominator)		603,720				559,161
Total capital to risk-weighted assets		12.34		%		12.72		%
Tier 1 capital (to adjusted assets)
Total Tier 1 capital (numerator)	$	74,523			$	71,114
Total average assets		895,467				876,263
Goodwill		(4,536	)			(4,536	)
Intangible assets		(169	)			(146	)
Adjusted assets (denominator)	$	890,762			$	871,581
Total capital to adjusted assets		8.37		%		8.16		%
Tier 1 Common Equity (to risk-weighted assets)
Total Tier 1 capital (numerator)	$	74,523			$	71,114
Risk-weighted assets (denominator)		603,720				559,161
Total Tier 1 Common Equity to risk-weighted assets		12.34		%		12.72		%

- 63 -

Loan and Asset Quality and Allowance for Loan Losses

The following table represents information concerning the aggregate amount of non-performing assets at the indicated dates:

	September 30,			December 31,			September 30,
(Dollars In thousands)	2018			2017			2017
Nonaccrual loans:
Commercial and commercial real estate loans	$	2,565		$	2,443		$	2,189
Consumer		255			363			390
Residential mortgage loans		1,858			2,088			2,265
Total nonaccrual loans		4,678			4,894			4,844
Total nonperforming loans		4,678			4,894			4,844
Foreclosed real estate		268			468			671
Total nonperforming assets	$	4,946		$	5,362		$	5,515
Accruing troubled debt restructurings	$	2,711		$	2,539		$	4,464
Nonperforming loans to total loans		0.75	%		0.84	%		0.86	%
Nonperforming assets to total assets		0.54	%		0.61	%		0.63	%

Nonperforming assets include nonaccrual loans, nonaccrual troubled debt restructurings (“TDR”), and foreclosed real estate (‘‘FRE”). 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.  Loans are considered modified in a TDR when, due to a borrower’s financial difficulties, the Company makes a concession(s) to the borrower that it would not otherwise consider. These modifications may include, among others, an extension of the term of the loan, and granting a period when interest-only payments can be made, with the principal payments made over the remaining term of the loan or at maturity.  TDRs are included in the above table within the categories of nonaccrual loans or accruing TDRs.  There were two nonaccruing TDR loans, with an aggregate carrying value of $69,000 included among the nonaccrual loans detailed in the table above at September 30, 2018. 

As indicated in the table above, nonperforming assets at September 30, 2018 were $4.9 million and were $416,000 lower than the $5.4 million reported at December 31, 2017, due primarily to a decrease of $230,000 in nonperforming residential mortgage loans, a decrease of $200,000 in FRE, a decrease of $108,000 in nonperforming consumer loans, partially offset by an increase of $122,000 in nonperforming commercial and commercial real estate loans.   

As indicated in the nonperforming asset table above, FRE balances decreased $200,000 to $268,000 at September 30, 2018 from $468,000 at December 31, 2017, following seven sales from the portfolio and three additions to the portfolio during the nine month period ended September 30, 2018.  More information regarding foreclosed real estate can be found in Note 8 of this Form 10-Q.

Fair values for commercial FRE are initially recorded based on market value evaluations by third parties, less costs to sell (“initial cost basis”).  On a prospective basis, residential FRE assets will be initially recorded at the lower of the net amount of loan receivable or the real estate’s fair value less costs to sell.   Any write-downs required when the related loan receivable is exchanged for the underlying real estate collateral at the time of transfer to FRE are charged to the allowance for loan losses.  Values are derived from appraisals, similar to impaired loans, of underlying collateral or discounted cash flow analysis.  Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the initial cost basis for the FRE property.  

- 64 -

The allowance for loan losses represents management’s estimate of the probable losses inherent in the loan portfolio as of the date of the statement of condition.  The allowance for loan losses was $7.8 million and $7.1 million at September 30, 2018 and December 31, 2017, respectively.  The ratio of the allowance for loan losses to total loans increased three basis points to 1.26% at September 30, 2018from 1.23% at December 31, 2017.  Management performs a quarterly evaluation of the allowance for loan losses based on quantitative and qualitative factors and has determined that the current level of the allowance for loan losses is adequate to absorb the losses in the loan portfolio as of September 30, 2018.

The Company considers a loan impaired 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 measurement of impaired loans is generally based upon the fair value of the collateral, with a portion of the impaired loans measured based upon the present value of future cash flows discounted at the historical effective interest rate.  A specific reserve is established for an impaired loan if its carrying value exceeds its estimated fair value.  The estimated fair values of the majority of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.  For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals or broker price opinions.  When a loan is determined to be impaired, the Bank will reevaluate the collateral which secures the loan. For real estate, the Company will obtain a new appraisal or broker’s opinion whichever is considered to provide the most accurate value in the event of sale. An evaluation of equipment held as collateral will be obtained from a firm able to provide such an evaluation. Collateral will be inspected not less than annually for all impaired loans and will be reevaluated not less than every two years. Appraised values and broker opinion values are discounted due to the market’s perception of a reduced price of Bank-owned property and the Bank’s desire to sell the property more quickly 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.

At September 30, 2018 and December 31, 2017, the Company had $7.5 million and $9.2 million in loans, respectively, which were deemed to be impaired, having established specific reserves of $1.2 million and $1.1 million, respectively, on these loans.  The decrease in impaired loans between these two dates was driven by decreases in impaired commercial real estate loans, impaired commercial lines of credit, impaired other commercial loans, impaired consumer loans, and impaired residential mortgages of $1.0 million, $385,000, $192,000, $84,000, and $23,000 respectively. The $61,000 increase in specific reserves for impaired loans at September 30, 2018, as compared to December 31, 2017 was primarily due to a $273,000 increase in specific reserves for commercial real estate loans, partially offset by a $212,000 decrease in reserves for all other loans in aggregate.

Management has identified potential credit problems which may result in the borrowers not being able to comply with the current loan repayment terms and which may result in those loans being included in future impaired loan reporting.  Potential problem loans totaled $3.3 million as of September 30, 2018, a decrease of $602,000, or 15.4%, as compared to $3.9 million at December 31, 2017.  These loans have been internally classified as special mention, substandard, or doubtful, yet are not currently considered impaired.  

Appraisals are obtained at the time a real estate secured loan is originated.   For commercial real estate held as collateral, the property is inspected every two years.  

In the normal course of business, the Bank has infrequently 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 maintains a quality control program for closed loans and considers the risks and uncertainties associated with potential repurchase requirements to be minimal.  

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.  The Company's primary sources of funds are deposits, borrowed funds, amortization and prepayment of loans and maturities of investment securities and other short-term investments, and earnings and funds provided from operations.  While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.  The Company

- 65 -

manages the pricing of deposits to maintain a desired deposit composition and balance.  In addition, the Company invests excess funds in short-term interest-earning and other assets, which provide liquidity to meet lending requirements.  

The Company's liquidity has been enhanced by its ability to borrow from the Federal Home Loan Bank of New York (“FHLBNY”), whose competitive advance programs and lines of credit provide the Company with a safe, reliable, and convenient source of funds.  A significant decrease in deposits in the future could result in the Company having to seek other sources of funds for liquidity purposes.  Such sources could include, but are not limited to, additional borrowings, brokered deposits, negotiated time deposits, the sale of "available-for-sale" investment securities, the sale of securitized loans, or the sale of whole loans.  Such actions could result in higher interest expense and/or losses on the sale of securities or loans.  

Through the first nine months of 2018, as indicated in the consolidated statement of cash flows, the Company reported net cash flows from operating activities of $6.0 million and net cash outflows of $29.9 million related to investing activities.  The net cash outflows from investing activities primarily was due to a net $41.1 million increase in loan balances, partially offset by a $11.2 million decrease in all other investing activities in aggregate.  The Company reported net cash flows from financing activities of $37.9 million generated principally by increased balances of long-term borrowings of $34.3 million and brokered deposits of $9.0 million, partially offset by an aggregate decrease in net cash of $5.4 million from all other financing sources, including dividends paid to common shareholders of $764,000.

In June 2018, the Company renewed a $12.0 million portion of an expiring $26.0 million Irrevocable Stand-By Letter of Credit (“LOC”), first established in June 2016, with the FHLBNY as an alternative means of collateralizing certain public funds deposits.  A LOC is a conditional commitment issued by the FHLBNY to guarantee the performance of the Bank with respect to large public funds deposits. These deposits are placed with the Bank by entities, such as municipalities and other political subdivisions within the Bank’s market area, and typically exceed the statutory FDIC deposit insurance limits for individual accounts. As a matter of statute, these depositors require that collateral be directly deposited by the Bank with an independent safekeeping agent, or in certain cases, that LOCs be issued by a third party that is acceptable to the depositor.  The Bank finds that, with certain depositor relationships, this method of collateralization for the benefit of the municipal depositors is more economically efficient than posting specific securities with a safekeeping agent. The Bank committed a portion of its mortgage loan portfolio as pledged collateral to the FHLBNY for the LOC.  Loans encumbered as collateral for letters of credit reduce the Bank’s available liquidity position in that available borrowing capacity with the FHLBNY is decreased substantially on a dollar-for-dollar basis.    

The Company has a number of existing credit facilities available to it. At September 30, 2018, total credit available to the Company under the existing lines of credit was approximately $187.3 million at FHLBNY, the Federal Reserve Bank, and two other correspondent banks. As of September 30, 2018, the Company had $91.6 million of the available lines of credit utilized, including encumbrances supporting outstanding letters of credit, described above, on its existing lines of credit with $95.7 million available.

The Asset Liability Management Committee of the Company is responsible for implementing the policies and guidelines for the maintenance of prudent levels of liquidity.  As of September 30, 2018, management reported to the Board of Directors that the Company is in compliance with its liquidity policy guidelines.

Off-Balance Sheet Arrangements

The Company is also a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  At September 30, 2018, the Company had $90.9 million in outstanding commitments to extend credit and standby letters of credit. 

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information relating to this item.

- 66 -

Item 4 – Controls and Procedures

Under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.  There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting.

- 67 -

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

At September 30, 2018, the Company is not currently a named party in a legal proceeding, the outcome of which would have a material and adverse effect on the financial condition or results of operations of the Company.

Item 1A – Risk Factors

A smaller reporting company is not required to provide the information relating to this item.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1, 2018 through July 31, 2018		-	$	-		-		74,292
August 1, 2018 through August 31, 2018		-	$	-		-		74,292
September 1, 2018 through September 30, 2018		-	$	-		-		74,292

(1) On August 29, 2016, our Board of Directors authorized the repurchase of up to 217,692 shares of our common stock, or 5% of the Company’s shares outstanding as of that date.

Item 3 – Defaults Upon Senior Securities

None

Item 4 – Mine Safety Disclosures

Not applicable

Item 5 – Other Information

None

Item 6 – Exhibits

Exhibit No.	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
32	Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer
101	Interactive data files pursuant to Rule 405 of Regulation S-T formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements tagged as blocks of text.

- 68 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PATHFINDER BANCORP, INC.

(registrant)

November 13, 2018	/s/ Thomas W. Schneider
	Thomas W. Schneider
	President and Chief Executive Officer
November 13, 2018	/s/ James A. Dowd
	James A. Dowd
	Executive Vice President, Chief Operating Officer and Chief Financial Officer

- 69 -

EX-31.1

EXHIBIT 31.1: Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas W. Schneider, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pathfinder Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 13, 2018 /s/ Thomas W. Schneider Thomas W. Schneider President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2: Rule 13a-14(a) / 15d-14(a) Certification of the Chief Financial Officer

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James A. Dowd, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pathfinder Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a   material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 13, 2018 /s/ James A. Dowd James A. Dowd Executive Vice President, Chief Operating Officer and Chief Financial Officer

EX-32

EXHIBIT 32 Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer

Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Pathfinder Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.

November 13, 2018	/s/ Thomas W. Schneider Thomas W. Schneider President and Chief Executive Officer
November 13, 2018	/s/ James A. Dowd James A. Dowd Executive Vice President, Chief Operating Officer and Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 13, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	PATHFINDER BANCORP, INC.
Entity Central Index Key	0001609065
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		4,358,328
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Trading Symbol	PBHC

XML

Consolidated Statements of Condition (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
ASSETS:
Cash and due from banks	$ 10,595	$ 9,708
Interest-earning deposits (including restricted balances of $4,478 and $6,342, respectively)	25,379	12,283
Total cash and cash equivalents	35,974	21,991
Available-for-sale securities, at fair value	188,953	171,138
Held-to-maturity securities, at amortized cost (fair value of $25,628 and $66,426, respectively)	26,084	66,196
Marketable equity securities, at fair value	541
Federal Home Loan Bank stock, at cost	4,187	3,855
Loans	620,859	580,831
Less: Allowance for loan losses	7,804	7,126
Loans receivable, net	613,055	573,705
Premises and equipment, net	17,418	16,117
Accrued interest receivable	2,915	3,047
Foreclosed real estate	268	468
Intangible assets, net	169	182
Goodwill	4,536	4,536
Bank owned life insurance	16,833	11,742
Other assets	10,682	8,280
Total assets	921,615	881,257
Deposits:
Interest-bearing	662,343	633,820
Noninterest-bearing	93,861	89,783
Total deposits	756,204	723,603
Short-term borrowings	2,000	30,600
Long-term borrowings	77,636	43,288
Subordinated loans	15,085	15,059
Accrued interest payable	326	186
Other liabilities	6,801	6,377
Total liabilities	858,052	819,113
Shareholders' equity:
Common stock, par value $0.01; 25,000,000 authorized shares; 4,358,328 and 4,280,227 shares outstanding, respectively	44	43
Additional paid in capital	28,933	28,170
Retained earnings	41,270	39,020
Accumulated other comprehensive loss	(5,848)	(4,208)
Unearned ESOP	(1,079)	(1,214)
Total Pathfinder Bancorp, Inc. shareholders' equity	63,320	61,811
Noncontrolling interest	243	333
Total equity	63,563	62,144
Total liabilities and shareholders' equity	$ 921,615	$ 881,257

XML

Consolidated Statements of Condition (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
ASSETS:
Restricted Cash	$ 4,478	$ 6,342
Held-to-maturity securities at fair value	$ 25,628	$ 66,426
Shareholders' equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	25,000,000	25,000,000
Common stock, shares outstanding (in shares)	4,358,328	4,280,227

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest and dividend income:
Loans, including fees	$ 7,213	$ 6,291	$ 20,949	$ 17,901
Debt securities:
Taxable	1,348	971	3,647	2,548
Tax-exempt	143	188	608	778
Dividends	61	53	190	157
Federal funds sold and interest earning deposits	65	30	161	103
Total interest and dividend income	8,830	7,533	25,555	21,487
Interest expense:
Interest on deposits	1,839	1,016	4,750	2,676
Interest on short-term borrowings	41	135	204	713
Interest on long-term borrowings	338	178	716	426
Interest on subordinated loans	216	201	629	591
Total interest expense	2,434	1,530	6,299	4,406
Net interest income	6,396	6,003	19,256	17,081
Provision for loan losses	291	420	1,201	1,232
Net interest income after provision for loan losses	6,105	5,583	18,055	15,849
Noninterest income:
Earnings and gain on bank owned life insurance	138	92	319	225
Net (losses) gains on sales and redemptions of investment securities	(60)	108	(189)	314
Gains on equity securities	0	0	26	0
Net gains (losses) on sales of loans and foreclosed real estate	8	2	24	(43)
Total noninterest income	940	981	2,859	2,968
Noninterest expense:
Salaries and employee benefits	3,317	2,960	9,830	8,629
Building occupancy	613	554	1,757	1,624
Data processing	507	468	1,462	1,311
Professional and other services	359	245	1,095	655
Advertising	162	191	638	539
FDIC assessments	152	153	407	290
Audits and exams	104	84	314	253
Other expenses	698	598	1,995	1,936
Total noninterest expense	5,912	5,253	17,498	15,237
Income before income taxes	1,133	1,311	3,416	3,580
Provision for income taxes	157	386	505	869
Net income attributable to noncontrolling interest and Pathfinder Bancorp, Inc.	976	925	2,911	2,711
Net income attributable to noncontrolling interest	(9)	18	(23)	84
Net income attributable to Pathfinder Bancorp Inc.	$ 985	$ 907	$ 2,934	$ 2,627
Earnings per common share - basic	$ 0.23	$ 0.22	$ 0.71	$ 0.65
Earnings per common share - diluted	0.23	0.22	0.69	0.63
Dividends per common share	$ 0.06	$ 0.055	$ 0.18	$ 0.1575
Service Charges on Deposit Accounts [Member]
Noninterest income:
Noninterest income	$ 291	$ 295	$ 838	$ 832
Loan Servicing Fees [Member]
Noninterest income:
Noninterest income	25	44	108	112
Debit Card Interchange Fees [Member]
Noninterest income:
Noninterest income	141	105	432	373
Other Charges, Commissions & Fees [Member]
Noninterest income:
Noninterest income	$ 397	$ 335	$ 1,301	$ 1,155

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Consolidated Statements of Comprehensive Income [Abstract]
Net Income		$ 976	$ 925	$ 2,911	$ 2,711
Retirement Plans:
Retirement plan net losses recognized in plan expenses		43	37	129	109
Unrealized holding (losses) gains on available-for-sale securities
Unrealized holding (losses) gains arising during the period		(618)	(170)	(3,120)	2,236
Reclassification adjustment for net (losses) gains included in net income		60	(108)	189	(314)
Net unrealized (losses) gains on available-for-sale securities		(558)	(278)	(2,931)	1,922
Accretion of net unrealized loss on securities transferred to held-to-maturity	[1]	5	25	168	83
Other comprehensive (loss) income, before tax		(510)	(216)	(2,634)	2,114
Tax effect		133	86	688	(843)
Other comprehensive (loss) income, net of tax		(377)	(130)	(1,946)	1,271
Comprehensive income		599	795	965	3,982
Comprehensive (loss) income, attributable to noncontrolling interest		(9)	18	(23)	84
Comprehensive income attributable to Pathfinder Bancorp, Inc.		608	777	988	3,898
Tax Effect Allocated to Each Component of Other Comprehensive (Loss) Income
Retirement plan net losses recognized in plan expenses		(12)	(15)	(34)	(42)
Unrealized holding (losses) gains arising during the period		162	68	815	(894)
Reclassification adjustment for net (losses) gains included in net income		(16)	43	(49)	126
Accretion of net unrealized loss on securities transferred to held-to-maturity	[1]	(1)	(10)	(44)	(33)
Income tax effect related to other comprehensive (loss) income		$ 133	$ 86	$ 688	$ (843)

[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.

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands		Total	Common Stock [Member]	Additional Paid in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Unearned ESOP [Member]	Non-controlling Interest [Member]
Balance at Dec. 31, 2016		$ 58,361	$ 43	$ 27,483	$ 35,619	$ (3,822)	$ (1,394)	$ 432
Net income		2,711			2,627			84
Other comprehensive income (loss), net of tax		1,271				1,271
ESOP shares earned		273		138			135
Stock based compensation		300		300
Stock options exercised		149		149
Common stock dividends declared		(645)			(645)
Distributions from affiliates		(31)						(31)
Balance at Sep. 30, 2017		62,389	43	28,070	37,601	(2,551)	(1,259)	485
Net income		925
Other comprehensive income (loss), net of tax		(130)
Balance at Sep. 30, 2017		62,389	43	28,070	37,601	(2,551)	(1,259)	485
Balance at Dec. 31, 2017		62,144	43	28,170	39,020	(4,208)	(1,214)	333
Net income		2,911			2,934			(23)
Other comprehensive income (loss), net of tax		(1,946)				(1,946)
ESOP shares earned		285		150			135
Stock based compensation		259		259
Stock options exercised		363	1	362
Cumulative effect of change in equity securities and investment securities | ASU 2016-01 [Member]	[1]	(53)			53	(53)
Cumulative effect of change in equity securities and investment securities | ASU 2017-12 [Member]	[2]	359				359
Common stock dividends declared		(752)			(752)
Cumulative effect of affiliate capital allocation				(8)	15			(7)
Distributions from affiliates		(60)						(60)
Balance at Sep. 30, 2018		63,563	44	28,933	41,270	(5,848)	(1,079)	243
Net income		976
Other comprehensive income (loss), net of tax		(377)
Balance at Sep. 30, 2018		$ 63,563	$ 44	$ 28,933	$ 41,270	$ (5,848)	$ (1,079)	$ 243

[1] Cumulative effect of unrealized gain on marketable equity securities based on the adoption of ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities.

[2] Cumulative effect of unrealized gains on the transfer of 52 investment securities from held-to-maturity classification to available-for-sale classification based on the adoption of ASU 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parenthetical)	9 Months Ended
	Sep. 30, 2018 Security $ / shares shares	Sep. 30, 2017 $ / shares shares
ESOP shares earned (in shares)	18,332	18,332
Restricted stock units (in shares)	14,490	15,720
Dividends per common share | $ / shares	$ 0.18	$ 0.1575
ASU 2017-12 [Member]
Number of investment securities classified from held-to-maturity to available-for-sale. | Security	52

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
OPERATING ACTIVITIES
Net income attributable to Pathfinder Bancorp, Inc.	$ 2,934	$ 2,627
Adjustments to reconcile net income to net cash flows from operating activities:
Provision for loan losses	1,201	1,232
Proceeds from sales of loans	216	0
Originations of loans held-for-sale	(212)	0
Realized (gains) losses on sales, redemptions and calls of:
Real estate acquired through foreclosure	(22)	49
Loans	(2)	(6)
Available-for-sale investment securities	177	(63)
Held-to-maturity investment securities	12	(1)
Premises and equipment	(8)	0
Depreciation	869	766
Amortization of mortgage servicing rights	3	9
Amortization of deferred loan costs	240	174
Amortization of deferred financing from subordinated debt	26	26
Earnings and gain on bank owned life insurance	(319)	(225)
Net amortization of premiums and discounts on investment securities	1,339	1,206
Amortization of intangible assets	13	12
Stock based compensation and ESOP expense	544	573
Net change in accrued interest receivable	132	(106)
Pension plan contribution	(825)	0
Net change in other assets and liabilities	(335)	(1,918)
Net cash flows from operating activities	5,983	4,355
INVESTING ACTIVITIES
Purchase of investment securities available-for-sale	(55,284)	(80,814)
Purchase of investment securities held-to-maturity	0	(19,061)
Purchase of Federal Home Loan Bank stock	(6,439)	(648)
Proceeds from redemption of Federal Home Loan Bank stock	6,107	0
Proceeds from maturities and principal reductions of investment securities available-for-sale	33,650	29,101
Proceeds from maturities and principal reductions of investment securities held-to-maturity	5,238	5,253
Proceeds from sales, redemptions and calls of:
Available-for-sale investment securities	33,421	55,037
Held-to-maturity investment securities	953	2,105
Real estate acquired through foreclosure	542	609
Premise and equipment	14	0
Purchase of bank owned life insurance	(5,000)	0
Proceeds from bank owned life insurance	228	0
Realized gains on hedging activity	0	(250)
Net change in loans	(41,111)	(76,095)
Purchase of premises and equipment	(2,176)	(1,640)
Net cash flows from investing activities	(29,857)	(86,403)
FINANCING ACTIVITIES
Net change in demand deposits, NOW accounts, savings accounts, money management deposit accounts, MMDA accounts and escrow deposits	(19,633)	84,160
Net change in time deposits	43,260	23,750
Net change in brokered deposits	8,974	(2,466)
Net change in short-term borrowings	(28,600)	(7,911)
Payments on long-term borrowings	(2,000)	(7,000)
Proceeds from long-term borrowings	36,348	30,760
Proceeds from exercise of stock options	362	149
Cash dividends paid to common shareholders	(764)	(648)
Change in noncontrolling interest, net	(90)	53
Net cash flows from financing activities	37,857	120,847
Change in cash and cash equivalents	13,983	38,799
Cash and cash equivalents at beginning of period	21,991	22,419
Cash and cash equivalents at end of period	35,974	61,218
CASH PAID DURING THE PERIOD FOR:
Interest	6,159	4,303
Income taxes	662	760
NON-CASH INVESTING ACTIVITY
Real estate acquired in exchange for loans	320	721
RESTRICTED CASH
Federal Reserve Bank Reserve Requirements included in interest earning deposits	$ 4,478	$ 5,245

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

Note 1:   Basis of Presentation

The accompanying unaudited consolidated financial statements of Pathfinder Bancorp, Inc., (the “Company”), Pathfinder Bank (the “Bank”) and its other wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions for Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes necessary for a complete presentation of consolidated financial condition, results of operations and cash flows in conformity with generally accepted accounting principles.  In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included.  Certain amounts in the 2017 consolidated financial statements may have been reclassified to conform to the current period presentation.  These reclassifications had no effect on net income or comprehensive income as previously reported.  Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018 or any other interim period.  

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.  Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes.  These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.  Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.  Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value or when an asset or liability needs to be recorded contingent upon a future event.  Carrying assets and liabilities at fair value inherently results in more financial statement volatility.  The fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices or are provided by unaffiliated third-party sources, when available.  When third party information is not available, valuation adjustments are estimated in good faith by management.

Although the Company owns, through its subsidiary Pathfinder Risk Management Company, Inc., 51% of the membership interest in FitzGibbons Agency, LLC (“Agency”), the Company is required to consolidate 100% of the Agency within the consolidated financial statements.  The 49% of which the Company does not own is accounted for separately as noncontrolling interests within the consolidated financial statements.

XML

New Accounting Pronouncements

9 Months Ended

Sep. 30, 2018

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

New Accounting Pronouncements

Note 2:   New Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) and, to a lesser extent, other authoritative rulemaking bodies promulgate generally accepted accounting principles (“GAAP”) to regulate the standards of accounting in the United States.  From time to time, the FASB issues new GAAP standards, known as Accounting Standards Updates (“ASUs”) some of which, upon adoption, may have the potential to change the way in which the Company recognizes or reports within its consolidated financial statements.  The following presentation provides a description of standards that are not currently effective but could have an impact on the Company's consolidated financial statements upon adoption.

Standards Not Yet Adopted as of September 30, 2018

Standard:  Leases (ASU 2016-02: Leases [Topic 842])

Description:  The new guidance requires lessees to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months.  While the guidance requires all leases to be recognized in the balance sheet, there continues to be a differentiation between finance leases and operating leases for purposes of income statement recognition and cash flow statement presentation.  For finance leases, interest on the lease liability and amortization of the right-of-use asset will be recognized separately in the statement of income.  Repayments of principal on those lease liabilities will be classified within financing activities and payments of interest on the lease liability will be classified within operating activities in the statement of cash flows.  For operating leases, a single lease cost is recognized in the statement of income and allocated over the lease term, generally on a straight-line basis.  All cash payments are presented within operating activities in the statement of cash flows. The accounting applied by lessors is largely unchanged from existing GAAP, however, the guidance eliminates the accounting model for leveraged leases for leases that commence after the effective date of the guidance.

Required Date of Implementation:  January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  The Company occupies certain banking offices and uses certain equipment under noncancelable operating lease agreements which currently are not reflected in its consolidated balance sheet.  Upon adoption of the guidance, the Company expects to report increased assets and increased liabilities as a result of recognizing right-of-use assets and lease liabilities on its consolidated balance sheet. The Company was committed to $1.0 million of minimum lease payments under noncancelable operating lease agreements at September 30, 2018.  In addition, the Company leases office and similar use space, also under noncancelable operating lease agreements to unrelated entities within a limited number of its real estate locations.  The Company does not expect the new guidance will have a material impact to its consolidated statement of income.

____

Standard:  Leases (ASU 2018-10: Codification Improvements to Topic 842, Leases)

Description: The Board has an ongoing project on its agenda about improvements to clarify the Codification or to correct unintended application of guidance related to ASU 2016-02. Those items generally are not expected to have a significant effect on current accounting practice or create a significant administrative cost for most entities. The amendments in this Update are of a similar nature to the items typically addressed in the Codification improvements project. However, the Board decided to issue a separate Update for the improvements related to Update 2016-02 to increase stakeholders’ awareness of the amendments and to expedite the improvements.

Required Date of Implementation: January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  See comments, above, related to the adoption of ASU 2016-02

___

Standard:  Premium Amortization on Purchased Callable Debt Securities (ASU 2017-08: Receivables—Nonrefundable Fees and Other Costs [Subtopic 310-20]: Premium Amortization on Purchased Callable Debt Securities)

Description:  The amended guidance requires the premium on callable debt securities to be amortized to the earliest call date.  The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

Required Date of Implementation:  January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company does not expect the guidance to have a material impact on its consolidated financial statements.

____

Standard:  Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07: Compensation - Stock Compensation [Topic 718])

Description:  Consistent with the accounting requirement for employee share-based payment awards, under the new guidance, nonemployee share-based payment awards within the scope of Topic 718 are measured on the grant date at the grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.  The amendments in this Update affect all entities that enter into share-based payment transactions for acquiring goods and services from nonemployees.

Required Date of Implementation:  January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  The amendments should be applied using a prospective transition method. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

____

Standard:  Measurement of Credit Losses on Financial Instruments (ASU 2016-13: Financial Instruments—Credit Losses [Topic 326]: Measurement of Credit Losses on Financial Instruments)

Description: The amended guidance replaces the current incurred loss model for determining the allowance for credit losses. The guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected.  The allowance for credit losses will represent a valuation account that is deducted from the amortized cost basis of the financial assets to present their net carrying value at the amount expected to be collected. The income statement will reflect the measurement of credit losses for newly recognized financial assets as well as expected increases or decreases of expected credit losses that have taken place during the period. When determining the allowance, expected credit losses over the contractual term of the financial asset(s) (taking into account prepayments) will be estimated considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.  The amended guidance also requires recording an allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination.  The initial allowance for these assets will be added to the purchase price at acquisition rather than being reported as an expense.  Subsequent changes in the allowance will be recorded through the income statement as an expense adjustment.  In addition, the amended guidance requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The calculation of credit losses for available-for-sale securities will be similar to how it is determined under existing guidance.

Required Date of Implementation:  January 1, 2020 (early adoption permitted as of January 1, 2019)

Effect on Consolidated Financial Statements:  The Company is assessing the new guidance to determine what modifications to existing credit estimation processes may be required.  The Company expects that the new guidance will result in an increase in its allowance for credit losses as a result of considering credit losses over the expected life of its loan and debt securities portfolios.  Increases in the level of allowances will also reflect new requirements to include estimated credit losses on investment securities classified as held-to-maturity, if any.  The Company has formed an Implementation Committee, whose membership includes representatives of senior management, to develop plans that will encompass: (1) internal methodology changes (2) data collection and management activities, (3) internal communication requirements, and (4) estimation of the projected impact of this guidance.  The amount of any change in the allowance for credit losses resulting from the new guidance will ultimately be impacted by the provisions of this guidance as well as by the loan and debt security portfolios composition and asset quality at the adoption date, and economic conditions and forecasts at the time of adoption.

____

Standard:  Simplifying the Test for Goodwill Impairment (ASU 2017-04: Intangibles—Goodwill and Other [Topic 350]: Simplifying the Test for Goodwill Impairment)

Description:  Current guidance requires a two-step approach to determining if recorded goodwill is impaired.  In Step 1, reporting entities must first evaluate whether or not the carrying value of a reporting unit is greater than its fair value. In Step 2, if a reporting unit’s carrying value is greater than its fair value, then the entity should calculate the implied fair value of goodwill. If the carrying value of goodwill is more than the implied fair value, an impairment charge for the difference must be recorded.  The amended guidance eliminates Step 2 from the goodwill impairment test.  Therefore, under the new guidance, if the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of the recorded goodwill).

Required Date of Implementation: January 1, 2020 (early adoption permitted)

Effect on Consolidated Financial Statements:  The amendments should be applied using a prospective transition method. The Company does not expect the guidance will have a material impact on its consolidated financial statements, unless at some point in the future one of its reporting units were to fail Step 1 of the goodwill impairment test.

____

Standard:  Leases (ASU 2018-11: Codification Improvements to Topic 842, Leases)

Description:  The amendments in this Update provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (Topic 840, Leases). An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).  

The amendments in this Update provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

1. The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.

2. The lease component, if accounted for separately, would be classified as an operating lease.

If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842.

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose the following by class of underlying asset:

1. The fact that it elected the expedient

2. Which class(es) of underlying asset the lessor made the election to

3. The nature of (a) the lease component and nonlease component(s) that were combined as a result of applying the practical expedient and (b) any nonlease components that were not eligible for the practical expedient and, thus, not combined

4. The Topic the entity applies to the combined component (Topic 606 or Topic 842).

Required Date of Implementation: January 1, 2019 (early adoption permitted)

Effect on Consolidated Financial Statements:  See comments, above, related to the adoption of ASU 2016-02

____

Standard: Fair Value Measurement (ASU 2018-13:  Fair Value Measurement (Topic 820):  Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement

Description:  The Board is issuing the amendments in this Update as part of the disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. The amendments in this Update modify the disclosure requirements for entities such as the Company on fair value measurements in Topic 820, Fair Value Measurement:

The following disclosure requirements were removed from Topic 820:

1. The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy

2. The policy for timing of transfers between levels

3. The valuation processes for Level 3 fair value measurements

The following disclosure requirements were modified in Topic 820:

1. In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.

2. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.

3. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

The following disclosure requirements were added to Topic 820:

1. The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period

2. The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

Required Date of Implementation:  The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date.

Effect on Consolidated Financial Statements:  The Company does not expect the new guidance will have a material impact to its consolidated statements of condition or income.

____

Standard: Compensation (ASU 2018-14:  Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans)

Description:  The Board is issuing the amendments in this Update as part of the disclosure framework project. The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The following disclosure requirements are removed from Subtopic 715-20:

1. The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.

2. The amount and timing of plan assets expected to be returned to the employer.

3. Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.

4. The effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

The following disclosure requirements are added to Subtopic 715-20:

1. The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates.

2. An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

The amendments in this Update also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

1. The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets

2. The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

Required Date of Implementation:  The amendments in this Update are effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities.

Effect on Consolidated Financial Statements:  The Company does not expect the new guidance will have a material impact to its consolidated statements of condition or income.

____

Standard:  Derivatives and Hedging (ASU 2018-16: Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

Description:  Topic 815, Derivatives and Hedging, provides guidance on the risks associated with financial assets or liabilities that are permitted to be hedged. Among those risks is the risk of changes in fair values or cash flows of existing or forecasted issuances or purchases of fixed-rate financial assets or liabilities attributable to the designated benchmark interest rate (referred to as interest rate risk). At present in the United States, eligible benchmark interest rates are the interest rates on direct Treasury obligations of the U.S. government (UST), the London Interbank Offered Rate (LIBOR) swap rate, and the Overnight Index Swap (OIS) Rate based on the Fed Funds Effective Rate. Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, introduced the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate as the fourth permissible U.S. benchmark rate.

The amendments in this Update permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the UST, the LIBOR swap rate, the OIS rate based on the Fed Funds Effective Rate, and the SIFMA Municipal Swap Rate.

Required Date of Implementation:  The Company adopted ASU 2017-12 in the quarter ended June 30, 2018.  For public business entities that already have adopted the amendments in Update 2017-12, such as the Company, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

Effect on Consolidated Financial Statements:  The Company has certain assets, primarily in its investment securities portfolio, that have adjustable rates of interest based on LIBOR. To the extent that the Company utilizes hedging strategies involving those securities, or uses hedging strategies designed to modify the effective repricing characteristics of its fixed-rate asset or fixed-rate liabilities portfolios to floating-rate assets or floating-rate liabilities in the future the use of the liabilities in the future, the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes may have an effect on future results of operations.  The Company had no hedging activities in place at September 30, 2018 and does not expect the new guidance will have a material impact to its consolidated statements of condition or income.

XML

Earnings per Common Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Earnings per Common Share

Note 3:   Earnings per Common Share

Basic earnings per share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period.  Net income available to common shareholders is net income to Pathfinder Bancorp, Inc. less the total of preferred dividends declared, if any. Diluted earnings per share include the potential dilutive effect that could occur upon the assumed exercise of issued stock options using the Treasury Stock method.  Anti-dilutive stock options, not included in the computation below, were -0-for the three andnine months ended September 30, 2018 and were -0- for the three months ended September 30, 2017 and 30,754 for the nine months ended September 30, 2017.  Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating earnings per common share until they are committed to be released to plan participants.

The following table sets forth the calculation of basic and diluted earnings per share.  

	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands, except per share data)	2018		2017		2018		2017
Basic Earnings Per Common Share
Net income available to common shareholders	$	985	$	907	$	2,934	$	2,627
Weighted average common shares outstanding		4,195		4,090		4,157		4,072
Basic earnings per common share	$	0.23	$	0.22	$	0.71	$	0.65
Diluted Earnings Per Common Share
Net income available to common shareholders	$	985	$	907	$	2,934	$	2,627
Weighted average common shares outstanding		4,195		4,090		4,157		4,072
Effect of assumed exercise of stock options		84		108		100		106
Diluted weighted average common shares outstanding		4,279		4,198		4,257		4,178
Diluted earnings per common share	$	0.23	$	0.22	$	0.69	$	0.63

XML

Investment Securities

9 Months Ended

Sep. 30, 2018

Investments Debt And Equity Securities [Abstract]

Investment Securities

Note 4:   Investment Securities

The amortized cost and estimated fair value of investment securities are summarized as follows:

	September 30, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	22,213	$	-	$	(225	)	$	21,988
State and political subdivisions		23,765		-		(900	)		22,865
Corporate		17,453		191		(356	)		17,288
Asset backed securities		21,045		3		(175	)		20,873
Residential mortgage-backed - US agency		34,137		22		(1,126	)		33,033
Collateralized mortgage obligations - US agency		51,198		3		(1,996	)		49,205
Collateralized mortgage obligations - Private label		23,891		20		(415	)		23,496
Total		193,702		239		(5,193	)		188,748
Equity investment securities:
Common stock - financial services industry		205		-		-			205
Total		205		-		-			205
Total available-for-sale	$	193,907	$	239	$	(5,193	)	$	188,953
Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	3,985	$	-	$	(47	)	$	3,938
State and political subdivisions		5,304		14		(109	)		5,209
Corporate		6,196		6		(207	)		5,995
Residential mortgage-backed - US agency		3,691		1		(96	)		3,596
Collateralized mortgage obligations - US agency		2,953		1		(9	)		2,945
Collateralized mortgage obligations - Private label		3,955		19		(29	)		3,945
Total held-to-maturity	$	26,084	$	41	$	(497	)	$	25,628

	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	41,489	$	1	$	(154	)	$	41,336
State and political subdivisions		13,960		12		(291	)		13,681
Corporate		8,584		108		(92	)		8,600
Asset backed securities		6,662		12		(30	)		6,644
Residential mortgage-backed - US agency		36,214		23		(495	)		35,742
Collateralized mortgage obligations - US agency		54,481		-		(1,133	)		53,348
Collateralized mortgage obligations - Private label		11,193		62		(203	)		11,052
Total		172,583		218		(2,398	)		170,403
Equity investment securities:
Common stock - financial services industry		663		72		-			735
Total		663		72		-			735
Total available-for-sale	$	173,246	$	290	$	(2,398	)	$	171,138
Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	4,948	$	14	$	(14	)	$	4,948
State and political subdivisions		35,130		641		(311	)		35,460
Corporate		8,311		151		(159	)		8,303
Residential mortgage-backed - US agency		6,853		53		(10	)		6,896
Collateralized mortgage obligations - US agency		7,574		83		(215	)		7,442
Collateralized mortgage obligations - Private label		3,380		7		(10	)		3,377
Total held-to-maturity	$	66,196	$	949	$	(719	)	$	66,426

The amortized cost and estimated fair value of debt investments at September 30, 2018 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Available-for-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	5,320	$	5,314	$	2,306	$	2,296
Due after one year through five years		34,938		34,738		5,534		5,484
Due after five years through ten years		23,671		23,059		4,810		4,719
Due after ten years		20,547		19,903		2,835		2,643
Sub-total		84,476		83,014		15,485		15,142
Residential mortgage-backed - US agency		34,137		33,033		3,691		3,596
Collateralized mortgage obligations - US agency		51,198		49,205		2,953		2,945
Collateralized mortgage obligations - Private label		23,891		23,496		3,955		3,945
Totals	$	193,702	$	188,748	$	26,084	$	25,628

The Company’s investment securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	September 30, 2018
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(Dollars in thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSE's		3	$	(156	)	$	13,038		3	$	(69	)	$	6,930		6	$	(225	)	$	19,968
State and political subdivisions		15		(189	)		9,122		18		(711	)		12,090		33		(900	)		21,212
Corporate		11		(184	)		8,373		2		(172	)		1,613		13		(356	)		9,986
Asset backed securities		10		(154	)		15,327		1		(21	)		1,013		11		(175	)		16,340
Residential mortgage-backed - US agency		9		(269	)		8,975		18		(857	)		20,315		27		(1,126	)		29,290
Collateralized mortgage obligations - US agency		9		(198	)		15,033		26		(1,798	)		31,906		35		(1,996	)		46,939
Collateralized mortgage obligations - Private label		7		(283	)		13,989		6		(132	)		6,807		13		(415	)		20,796
Totals		64	$	(1,433	)	$	83,857		74	$	(3,760	)	$	80,674		138	$	(5,193	)	$	164,531
Held-to-Maturity Portfolio
US Treasury, agencies and GSE's		3	$	(20	)	$	2,965		1	$	(27	)	$	973		4	$	(47	)	$	3,938
State and political subdivisions		3		(8	)		1,390		6		(101	)		2,294		9		(109	)		3,684
Corporate		2		(47	)		1,266		1		(160	)		1,962		3		(207	)		3,228
Residential mortgage-backed - US agency		4		(85	)		2,939		1		(11	)		312		5		(96	)		3,251
Collateralized mortgage obligations - US agency		1		(9	)		1,002		-		-			-		1		(9	)		1,002
Collateralized mortgage obligations - Private label		-		-			-		2		(29	)		2,083		2		(29	)		2,083
Totals		13	$	(169	)	$	9,562		11	$	(328	)	$	7,624		24	$	(497	)	$	17,186

	December 31, 2017
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(Dollars in thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSE's		5	$	(105	)	$	27,359		4	$	(49	)	$	13,957		9	$	(154	)	$	41,316
State and political subdivisions		18		(24	)		2,480		12		(267	)		5,041		30		(291	)		7,521
Corporate		2		(19	)		1,791		1		(73	)		1,727		3		(92	)		3,518
Asset backed securities		2		(17	)		3,123		1		(13	)		742		3		(30	)		3,865
Residential mortgage-backed - US agency		15		(159	)		21,551		9		(336	)		10,463		24		(495	)		32,014
Collateralized mortgage obligations - US agency		14		(195	)		23,790		21		(938	)		25,395		35		(1,133	)		49,185
Collateralized mortgage obligations - Private label		4		(203	)		7,439		-		-			-		4		(203	)		7,439
Totals		60	$	(722	)	$	87,533		48	$	(1,676	)	$	57,325		108	$	(2,398	)	$	144,858
Held-to-Maturity Portfolio
US Treasury, agencies and GSE's		2	$	(2	)	$	1,990		1	$	(12	)	$	988		3	$	(14	)	$	2,978
State and political subdivisions		8		(55	)		5,668		11		(256	)		8,644		19		(311	)		14,312
Corporate		3		(10	)		1,412		1		(149	)		2,087		4		(159	)		3,499
Residential mortgage-backed - US agency		2		(10	)		1,909		-		-			-		2		(10	)		1,909
Collateralized mortgage obligations - US agency		2		(215	)		4,418		-		-			-		2		(215	)		4,418
Collateralized mortgage obligations - Private label		1		(10	)		1,119		-		-			-		1		(10	)		1,119
Totals		18	$	(302	)	$	16,516		13	$	(417	)	$	11,719		31	$	(719	)	$	28,235

Excluding the effects of changes in the characteristics of individual debt securities that potentially give rise to other-than-temporary impairment (“OTTI”), as described below, the fair market value of a debt security as of a particular measurement date is highly dependent upon prevailing market and economic environmental factors at the measurement date relative to the prevailing market and economic environmental factors present at the time the debt security was acquired.  The most significant market and environmental factors include, but are not limited to (1) the general level of interest rates, (2) the relationship between shorter-term interest rates and longer-term interest rates (referred to as the “slope” of the interest rate yield curve), (3) general bond market liquidity, (4) the recent and expected near-term volume of new issuances of similar debt securities, and (5) changes in the market values of individual loan collateral underlying mortgage-backed debt securities.  Changes in interest rates affect the fair market values of debt securities by influencing the discount rate applied to the securities’ future expected cash flows.  The higher the discount rate, the lower the resultant security price.  Conversely, the lower the discount rate, the higher the resultant security price.  In addition, the cumulative amount and timing of undiscounted cash flows of debt securities may be also affected by changes in interest rates.  For any given level of movement in the general market and economic environmental factors described above, the magnitude of any particular debt security’s price changes will also depend heavily upon security-specific factors such as (1) the duration of the security, (2) imbedded optionality contractually granted to the issuer of the security with respect to principal prepayments, and (3) changes in the level of market premiums demanded by investors for securities with imbedded credit risk (where applicable).

The Company conducts a formal review of investment securities on a quarterly basis for the presence of OTTI.  The Company assesses whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the statement of condition date.  Under these circumstances, OTTI is considered to have occurred (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not anticipated to be sufficient to recover the entire amortized cost basis.  The guidance requires that credit-related OTTI is recognized in earnings while non-credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”).  Non-credit-related OTTI is based on other factors, including illiquidity and changes in the general interest rate environment.  Presentation of OTTI is made in the consolidated statement of income on a gross basis, including both the portion recognized in earnings as well as the portion recorded in OCI.  The gross OTTI would then be offset by the amount of non-credit-related OTTI, showing the net as the impact on earnings.

Management does not believe any individual unrealized loss in securities within the portfolio as of September 30, 2018 represents OTTI.  At September 30, 2018, the Bank had the following securities, in a loss position for 12 months or more relative to their amortized historical cost, which were deemed to have no credit impairment, thus, the disclosed unrealized losses relate directly to changes in interest rates subsequent to the acquisition of the individual securities.  The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.

• 18 state and political subdivision securities, categorized as available-for-sale, with an aggregate amortized historical cost of $12.8 million and an aggregate market value of $12.1 million (unrealized aggregate loss of $711,000, or 5.6%).  Each of the securities maintains a credit rating established by one or more nationally-recognized statistical rating organizations (“NRSRO”) that is well above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.

• Two corporate securities, categorized as available-for-sale, with an aggregate amortized historical cost of $1.8 million and an aggregate market value of $1.6 million (unrealized loss of $172,000, or 10.7%).  The securities maintain credit ratings established by one or more NRSRO that are above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.  

• One privately-issued asset-backed security, categorized as available-for-sale, with a book value of $1.0 million and a market value of $1.0 million (unrealized loss of $21,000, or 2.1%) is rated above the minimum investment grade by one or more NRSRO and therefore, no credit-related OTTI is deemed to be present.

• Five privately-issued mortgage-backed securities, categorized as available-for-sale, with an aggregate amortized historical cost of $6.4 million and an aggregate market value of $6.3 million (unrealized loss of $123,000, or 2.0%).  These securities were unrated at the time of their issuance but remain significantly collateralized through subordination and, therefore, no credit-related OTTI is deemed to be present. In addition, one privately-issued mortgage-backed security, categorized as available-for-sale, with a book value of $518,000 and a market value of $509,000 (unrealized loss of $9,000, or 1.7%) is rated at the highest investment grade rating by one or more NRSRO and therefore, no credit-related OTTI is deemed to be present.

• Six state and political subdivision securities, categorized as held-to-maturity, with an aggregate amortized historical cost of $2.4 million and an aggregate market value of $2.3 million (unrealized aggregate loss of $101,000, or 4.4%).  Each of the securities maintains a credit rating established by one or more NRSRO that is above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.

• One corporate security, categorized as held-to-maturity, with an amortized historical cost of $2.1 million and a market value of $2.0 million (unrealized aggregate loss of $160,000, or 7.6%).  This security maintains a credit rating established by one or more NRSRO well above the minimum investment grade and, therefore, no credit-related OTTI is deemed to be present.

• Two privately-issued mortgaged-backed securities, categorized as held-to-maturity, with an amortized historical cost of $2.1 million and a market value of $2.1 million (aggregate unrealized loss of $29,000, or 1.4%).  These securities were unrated at the time of their issuance but remain significantly collateralized through subordination and, therefore, no credit-related OTTI is deemed to be present.

All other securities with market values less than their amortized historical costs for twelve or more months are issued by United States agencies or government sponsored enterprises and consist of mortgage-backed securities, collateralized mortgage obligations and direct agency financings.  These positions in US government agency and government-sponsored enterprises are deemed to have no credit impairment, thus, the disclosed unrealized losses relate directly to changes in interest rates subsequent to the acquisition of the individual securities.  The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.

In determining whether OTTI has occurred for equity securities, the Company considers the applicable factors described above and the length of time the equity security’s fair value has been below the carrying amount. The Company had no equity securities that were impaired at September 30, 2018 or December 31, 2017.

Gross realized gains (losses) on sales of securities for the indicated periods are detailed below:

	For the three months						For the nine months
	ended September 30,						ended September 30,
(In thousands)	2018			2017			2018			2017
Realized gains on investments	$	76		$	165		$	236		$	313
Realized gains on hedging activity		-			-			-			250
Realized losses on investments		(136	)		(57	)		(425	)		(249	)
	$	(60	)	$	108		$	(189	)	$	314
Gains on equity securities		-			-			26			-
	$	-		$	-		$	26		$	-

The Company adoptedASU 2017-12: Derivatives and Hedging [Topic 815]: Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2018, in the second quarter of 2018.  The amended guidance within this Update expands and clarifies hedge accounting for nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements, and simplifies the requirements for assessing effectiveness in a hedging relationship.  The Company did not have any hedging activities in the first half of 2018 but expects to utilize hedging in the future to improve the management of its risk profiles.  In order to facilitate potential future hedging activities, the Company transferred 52 investment securities with an aggregate amortized cost before transfer of $35.2 million from the held-to-maturity classification to the available-for-sale classification at the date of adoption.

As of September 30, 2018 and December 31, 2017, securities with a fair value of $103.1 million and $113.0 million, respectively, were pledged to collateralize certain municipal deposit relationships.  As of the same dates, securities with a fair value of $19.1 million and $19.9 million were pledged against the Company’s established borrowing arrangements.  

Management has reviewed its loan and mortgage-backed securities portfolios and determined that, to the best of its knowledge, only minimal exposure exists to sub-prime or other high-risk residential mortgages.  With limited exceptions in the Company’s investment portfolio involving the most senior tranches of securitized bonds, the Company is not in the practice of investing in, or originating, these types of investments or loans.

XML

Pension and Postretirement Benefits

9 Months Ended

Sep. 30, 2018

Compensation And Retirement Disclosure [Abstract]

Pension and Postretirement Benefits

Note 5:   Pension and Postretirement Benefits

The Company has a noncontributory defined benefit pension plan covering most employees. The plan provides defined benefits based on years of service and final average salary. On May 14, 2012, the Company informed its employees of its decision to freeze participation and benefit accruals under the plan, primarily to reduce some of the volatility in earnings that can accompany the maintenance of a defined benefit plan.  The plan was frozen on June 30, 2012.  Compensation earned by employees up to June 30, 2012 is used for purposes of calculating benefits under the plan but there are no future benefit accruals after this date.  Participants as of June 30, 2012 will continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work. In addition, the Company provides certain health and life insurance benefits for a limited number of eligible retired employees.  The healthcare plan is contributory with participants’ contributions adjusted annually; the life insurance plan is noncontributory.  Employees with less than 14 years of service as of January 1, 1995, are not eligible for the health and life insurance retirement benefits.

The composition of net periodic pension plan and postretirement plan costs for the indicated periods is as follows:

	Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
	For the three months ended September 30,												For the nine months ended September 30,
(In thousands)	2018			2017			2018			2017			2018			2017			2018			2017
Service cost	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Interest cost		119			118			5			2			355			355			16			6
Expected return on plan assets		(260	)		(236	)		-			-			(778	)		(709	)		-			-
Amortization of prior service credits		-			-			(1	)		-			-			-			(3	)		-
Amortization of net losses/(gains)		41			39			3			(2	)		123			115			9			(6	)
Net periodic benefit plan (benefit) cost	$	(100	)	$	(79	)	$	7		$	-		$	(300	)	$	(239	)	$	22		$	-

The Company made a contribution in the amount of $825,000 to the defined benefit pension plan during the second quarter of 2018.  The Company will evaluate the need for further contributions to the defined benefit pension plan during 2018.  The prepaid pension asset is recorded in other assets on the statement of condition as of September 30, 2018 and December 31, 2017.

XML

Loans

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Loans

Note 6:   Loans

Major classifications of loans at the indicated dates are as follows:

	September 30,			December 31,
(In thousands)	2018			2017
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	231,830		$	216,793
Construction		3,888			5,558
Total residential mortgage loans		235,718			222,351
Commercial loans:
Real estate		213,303			192,525
Lines of credit		48,496			51,285
Other commercial and industrial		60,984			50,097
Tax exempt loans		10,163			10,405
Total commercial loans		332,946			304,312
Consumer loans:
Home equity and junior liens		25,985			25,935
Other consumer		26,410			28,646
Total consumer loans		52,395			54,581
Total loans		621,059			581,244
Net deferred loan fees		(200	)		(413	)
Less allowance for loan losses		(7,804	)		(7,126	)
Loans receivable, net	$	613,055		$	573,705

Although the Bank may occasionally purchase or fund loan participation interests outside of its primary market areas, the Bank generally originates residential mortgage, commercial, and consumer loans largely to customers throughout Oswego and Onondaga counties. Although the Bank has a diversified loan portfolio, a substantial portion of its borrowers’ abilities to honor their loan contracts is dependent upon the counties’ employment and economic conditions.

The Bank acquired $15.6 million and $10.2 million of loans originated by an unrelated financial institution, located outside of the Bank’s market area, in January 2017 and April 2017, respectively.   The acquired loan pools represented a 90% participating interest in a total of 1,231 loans secured by liens on automobiles with maturities ranging primarily from two to six years. These loans are serviced through their respective maturities by the originating financial institution.  As of September 30, 2018 and December 31, 2017 there were 954 loans outstanding with a remaining outstanding carrying value of $14.8 million and 1,082 loans outstanding with a remaining outstanding carrying value of $19.6 million, respectively.  Since the acquisition of these loan pools, a total of 16 loans had cumulative net charge-offs totaling $89,000 with $44,000 in net charge-offs for the nine months ended September 30, 2018.

As of September 30, 2018 and December 31, 2017, residential mortgage loans with a carrying value of $153.1 million and $148.1 million, respectively, have been pledged by the Company to the Federal Home Loan Bank of New York (“FHLBNY”) under a blanket collateral agreement to secure the Company’s line of credit and term borrowings.  

Loan Origination / Risk Management

The Company’s lending policies and procedures are presented in Note 5 to the audited consolidated financial statements included in the 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2018 and have not changed.  As part of the execution of the Company’s overall balance sheet management strategies, the Bank will acquire participating interests in loans originated by unrelated third parties on a sporadic basis.  The purchase of participations in loans that are originated by third parties only occurs after the completion of thorough pre-acquisition due diligence.  Loans in which the Company acquires a participating interest are determined to meet, in all material respects, the Company’s internal underwriting policies, including credit and collateral suitability thresholds, prior to acquisition.  In addition, the financial condition of the originating financial institutions, which are generally retained as the ongoing loan servicing provider for participations acquired by the Bank, are analyzed prior to the acquisition of the participating interests and monitored on a regular basis thereafter for the life of those interests.

To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three portfolio segments, each with different risk characteristics but with similar methodologies for assessing risk.  Each portfolio segment is broken down into loan classes where appropriate.  Loan classes contain unique measurement attributes, risk characteristics, and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses.  Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class.  

The following table illustrates the portfolio segments and classes for the Company’s loan portfolio:

Portfolio Segment	Class
Residential Mortgage Loans	1-4 family first-lien residential mortgages
	Construction
Commercial Loans	Real estate
	Lines of credit
	Other commercial and industrial
	Tax exempt loans
Consumer Loans	Home equity and junior liens
	Other consumer

The following tables present the classes of the loan portfolio, not including net deferred loan costs, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:

	As of  September 30, 2018
			Special
(In thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	228,135	$	663	$	694	$	2,338	$	231,830
Construction		3,888		-		-		-		3,888
Total residential mortgage loans		232,023		663		694		2,338		235,718
Commercial loans:
Real estate		208,188		1,513		1,749		1,853		213,303
Lines of credit		48,170		164		122		40		48,496
Other commercial and industrial		59,847		379		624		134		60,984
Tax exempt loans		10,163		-		-		-		10,163
Total commercial loans		326,368		2,056		2,495		2,027		332,946
Consumer loans:
Home equity and junior liens		25,632		126		140		87		25,985
Other consumer		26,201		149		35		25		26,410
Total consumer loans		51,833		275		175		112		52,395
Total loans	$	610,224	$	2,994	$	3,364	$	4,477	$	621,059
	As of  December 31, 2017
			Special
(In thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	211,825	$	891	$	1,869	$	2,208	$	216,793
Construction		5,558		-		-		-		5,558
Total residential mortgage loans		217,383		891		1,869		2,208		222,351
Commercial loans:
Real estate		187,073		1,372		2,024		2,056		192,525
Lines of credit		50,507		195		523		60		51,285
Other commercial and industrial		48,738		407		532		420		50,097
Tax exempt loans		10,405		-		-		-		10,405
Total commercial loans		296,723		1,974		3,079		2,536		304,312
Consumer loans:
Home equity and junior liens		25,396		61		304		174		25,935
Other consumer		28,584		55		7		-		28,646
Total consumer loans		53,980		116		311		174		54,581
Total loans	$	568,086	$	2,981	$	5,259	$	4,918	$	581,244

Management has reviewed its loan portfolio and determined that, to the best of its knowledge, no material exposure exists to sub-prime or other high-risk residential mortgages.  The Company is not in the practice of originating these types of loans.

Nonaccrual and Past Due Loans

Loans are placed on nonaccrual when the contractual payment of principal and interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing.  

Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date.  

An age analysis of past due loans, not including net deferred loan costs, segregated by portfolio segment and class of loans, as of September 30, 2018 and December 31, 2017, are detailed in the following tables:

	As of  September 30, 2018
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	530	$	239	$	1,780	$	2,549	$	229,281	$	231,830
Construction		-		-		-		-		3,888		3,888
Total residential mortgage loans		530		239		1,780		2,549		233,169		235,718
Commercial loans:
Real estate		3,715		385		2,033		6,133		207,170		213,303
Lines of credit		3,354		-		40		3,394		45,102		48,496
Other commercial and industrial		517		237		387		1,141		59,843		60,984
Tax exempt loans		-		-		-		-		10,163		10,163
Total commercial loans		7,586		622		2,460		10,668		322,278		332,946
Consumer loans:
Home equity and junior liens		102		9		146		257		25,728		25,985
Other consumer		259		64		84		407		26,003		26,410
Total consumer loans		361		73		230		664		51,731		52,395
Total loans	$	8,477	$	934	$	4,470	$	13,881	$	607,178	$	621,059
	As of  December 31, 2017
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,196	$	925	$	1,931	$	4,052	$	212,741	$	216,793
Construction		-		-		-		-		5,558		5,558
Total residential mortgage loans		1,196		925		1,931		4,052		218,299		222,351
Commercial loans:
Real estate		720		2,171		1,430		4,321		188,204		192,525
Lines of credit		1,482		31		132		1,645		49,640		51,285
Other commercial and industrial		575		60		766		1,401		48,696		50,097
Tax exempt loans		-		-		-		-		10,405		10,405
Total commercial loans		2,777		2,262		2,328		7,367		296,945		304,312
Consumer loans:
Home equity and junior liens		94		74		262		430		25,505		25,935
Other consumer		192		50		63		305		28,341		28,646
Total consumer loans		286		124		325		735		53,846		54,581
Total loans	$	4,259	$	3,311	$	4,584	$	12,154	$	569,090	$	581,244

Nonaccrual loans, segregated by class of loan, were as follows:

	September 30,		December 31,
(In thousands)	2018		2017
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,858	$	2,088
		1,858		2,088
Commercial loans:
Real estate		2,132		1,545
Lines of credit		46		132
Other commercial and industrial		387		766
		2,565		2,443
Consumer loans:
Home equity and junior liens		146		300
Other consumer		109		63
		255		363
Total nonaccrual loans	$	4,678	$	4,894

The Company is required to disclose certain activities related to Troubled Debt Restructurings (“TDR”) in accordance with accounting guidance. Certain loans have been modified in a TDR where economic concessions have been granted to a borrower who is experiencing, or expected to experience, financial difficulties. These economic concessions could include a reduction in the loan interest rate, extension of payment terms, reduction of principal amortization, or other actions that it would not otherwise consider for a new loan with similar risk characteristics.

The Company is required to disclose new TDRs for each reporting period for which an income statement is being presented.  The pre-modification outstanding recorded investment is the principal loan balance less the provision for loan losses before the loan was modified as a TDR.  The post-modification outstanding recorded investment is the principal balance less the provision for loan losses after the loan was modified as a TDR.  Additional provision for loan losses is the change in the allowance for loan losses between the pre-modification outstanding recorded investment and post-modification outstanding recorded investment.  

The Company had no loans that have been modified as TDRs for the three months ended September 30, 2018.

The table below details a loan that has been modified as a TDR for the nine months ended September 30, 2018.

	For the nine months ended September 30, 2018
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Other commercial and industrial loans	1	$	300	$	300	$	-

The TDR evaluated for impairment for the nine months ended September 30, 2018, has been classified as a TDR due to economic concessions granted, which included an extended maturity date that will result in a delay in payment from the original contractual maturity.

 The table below details a loan that had been modified as a TDR for the three months ended September 30, 2017.

	For the three months ended September 30, 2017
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Commercial real estate loans	1	$	2,024	$	2,024	$	-

The table below details a loan that had been modified as a TDR for the nine months ended September 30, 2017.

	For the nine months ended September 30, 2017
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Commercial real estate loans	1	$	2,024	$	2,024	$	-

The TDR individually evaluated for impairment, for the three and nine months ended September 30, 2017, has been classified as a TDR due to economic concessions granted, which included extended interest only payment terms.

The Company is required to disclose loans that have been modified as TDRs within the previous 12 months in which there was payment default after the restructuring.  The Company defines payment default as any loans 90 days past due on contractual payments.

The Company had no loans that had been modified as TDRs during the twelve months prior to September 30, 2018, which had subsequently defaulted during the three or nine months ended September 30, 2018.

The Company had no loans that had been modified as TDRs during the twelve months prior to September 30, 2017, which had subsequently defaulted during the three months ended September 30, 2017.

The Company had one loan that had been modified as a TDR during the twelve months prior to September 30, 2017, which had subsequently defaulted during the nine months ended September 30, 2017.

When the Company modifies a loan within a portfolio segment that is individually evaluated for impairment, a potential impairment is analyzed either based on the present value of the expected future cash flows discounted at the interest rate of the original loan terms or the fair value of the collateral less costs to sell. If it is determined that the value of the loan is less than its recorded investment, then impairment is recognized as a component of the provision for loan losses, an associated increase to the allowance for loan losses or as a charge-off to the allowance for loan losses in the current period.

Impaired Loans

The following table summarizes impaired loan information by portfolio class at the indicated dates:

	September 30, 2018						December 31, 2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(In thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
With no related allowance recorded:
1-4 family first-lien residential mortgages	$	1,225	$	1,229	$	-	$	900	$	909	$	-
Commercial real estate		2,288		2,345		-		3,314		3,360		-
Commercial lines of credit		116		116		-		507		507		-
Other commercial and industrial		550		551		-		523		524		-
Home equity and junior liens		-		-		-		80		80		-
With an allowance recorded:
1-4 family first-lien residential mortgages		610		610		109		958		958		210
Commercial real estate		2,175		2,176		593		2,186		2,187		320
Commercial lines of credit		46		47		46		40		40		40
Other commercial and industrial		306		306		276		525		525		391
Home equity and junior liens		206		206		140		210		210		142
Total:
1-4 family first-lien residential mortgages		1,835		1,839		109		1,858		1,867		210
Commercial real estate		4,463		4,521		593		5,500		5,547		320
Commercial lines of credit		162		163		46		547		547		40
Other commercial and industrial		856		857		276		1,048		1,049		391
Home equity and junior liens		206		206		140		290		290		142
Totals	$	7,522	$	7,586	$	1,164	$	9,243	$	9,300	$	1,103

The following table presents the average recorded investment in impaired loans for the periods indicated:

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
1-4 family first-lien residential mortgages	$	1,840	$	1,343	$	1,846	$	1,477
Commercial real estate		4,497		5,185		4,976		4,996
Commercial lines of credit		186		438		365		422
Other commercial and industrial		947		905		1,001		958
Home equity and junior liens		207		213		228		282
Total	$	7,677	$	8,084	$	8,416	$	8,135

The following table presents the cash basis interest income recognized on impaired loans for the periods indicated:

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
1-4 family first-lien residential mortgages	$	16	$	13	$	48	$	34
Commercial real estate		62		89		128		184
Commercial lines of credit		4		4		25		16
Other commercial and industrial		5		6		24		20
Home equity and junior liens		3		3		9		7
Total	$	90	$	115	$	234	$	261

XML

Allowance for Loan Losses

9 Months Ended

Sep. 30, 2018

Allowance For Loan Losses [Abstract]

Allowance for Loan Losses

Note 7:   Allowance for Loan Losses

Summarized in the tables below are changes in the allowance for loan losses for the indicated periods and information pertaining to the allocation of the allowance for loan losses, balances of the allowance for loan losses, loans receivable based on individual, and collective impairment evaluation by loan portfolio class.  An allocation of a portion of the allowance to a given portfolio class does not limit the Company’s ability to absorb losses in another portfolio class.

	For the three months ended September 30, 2018
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	722		$	-		$	4,141		$	731		$	1,271
Charge-offs		(27	)		-			(31	)		(12	)		(1	)
Recoveries		1			-			-			-			-
Provisions (credits)		65			-			(170	)		66			(82	)
Ending balance	$	761		$	-		$	3,940		$	785		$	1,188
Ending balance: related to loans    individually evaluated for impairment		109			-			593			46			276
Ending balance: related to loans    collectively evaluated for impairment	$	652		$	-		$	3,347		$	739		$	912
Loans receivables:
Ending balance	$	231,830		$	3,888		$	213,303		$	48,496		$	60,984
Ending balance: individually    evaluated for impairment		1,835			-			4,463			162			856
Ending balance: collectively    evaluated for impairment	$	229,995		$	3,888		$	208,840		$	48,334		$	60,128
				Homeequity			Other
	Tax exempt			and junior liens			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	434		$	291		$	14		$	7,605
Charge-offs		-			-			(33	)		-			(104	)
Recoveries		-			5			6			-			12
Provisions (credits)		-			(18	)		166			264			291
Ending balance	$	1		$	421		$	430		$	278		$	7,804
Ending balance: related to loans    individually evaluated for impairment		-			140			-			-			1,164
Ending balance: related to loans    collectively evaluated for impairment	$	1		$	281		$	430		$	278		$	6,640
Loans receivables:
Ending balance	$	10,163		$	25,985		$	26,410					$	621,059
Ending balance: individually    evaluated for impairment		-			206			-						7,522
Ending balance: collectively    evaluated for impairment	$	10,163		$	25,779		$	26,410					$	613,537

	For the nine months ended September 30, 2018
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	865		$	-		$	3,589		$	735		$	1,214
Charge-offs		(219	)		-			(31	)		(62	)		(172	)
Recoveries		21			-			-			66			-
Provisions		94			-			382			46			146
Ending balance	$	761		$	-		$	3,940		$	785		$	1,188
				Home equity			Other
	Tax exempt			and junior liens			consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	514		$	208		$	-		$	7,126
Charge-offs		-			(17	)		(144	)		-			(645	)
Recoveries		-			6			29			-			122
Provisions (credits)		-			(82	)		337			278			1,201
Ending balance	$	1		$	421		$	430		$	278		$	7,804

	For the three months ended September 30, 2017
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	813		$	-		$	2,804		$	373		$	1,611
Charge-offs		-			-			-			(7	)		-
Recoveries		-			-			-			-			-
Provisions (credits)		(13	)		-			477			348			(543	)
Ending balance	$	800		$	-		$	3,281		$	714		$	1,068
Ending balance: related to loans    individually evaluated for impairment		181			-			14			40			381
Ending balance: related to loans    collectively evaluated for impairment	$	619		$	-		$	3,267		$	674		$	687
Loans receivables:
Ending balance	$	209,147		$	5,924		$	187,960		$	53,888		$	43,779
Ending balance: individually    evaluated for impairment		1,464			-			5,896			454			843
Ending balance: collectively    evaluated for impairment	$	207,683		$	5,924		$	182,064		$	53,434		$	42,936
				Home equity			Other
	Tax exempt			and junior liens			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	493		$	163		$	-		$	6,258
Charge-offs		-			-			(57	)		-			(64	)
Recoveries		-			5			9			-			14
Provisions (credits)		-			(8	)		88			71			420
Ending balance	$	1		$	490		$	203		$	71		$	6,628
Ending balance: related to loans    individually evaluated for impairment		-			142			-			-			758
Ending balance: related to loans    collectively evaluated for impairment	$	1		$	348		$	203		$	71		$	5,870
Loans receivables:
Ending balance	$	11,064		$	25,408		$	29,733					$	566,903
Ending balance: individually    evaluated for impairment		-			212			-						8,869
Ending balance: collectively    evaluated for impairment	$	11,064		$	25,196		$	29,733					$	558,034

	For the nine months ended September 30, 2017
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	759		$	-		$	2,935		$	397		$	1,658
Charge-offs		(156	)		-			(505	)		(60	)		(17	)
Recoveries		1			-			-			-			15
Provisions		196			-			851			377			(588	)
Ending balance	$	800		$	-		$	3,281		$	714		$	1,068
				Home equity			Other
	Tax exempt			and junior liens			consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	331		$	166		$	-		$	6,247
Charge-offs		-			(69	)		(97	)		-			(904	)
Recoveries		-			6			31			-			53
Provisions		-			222			103			71			1,232
Ending balance	$	1		$	490		$	203		$	71		$	6,628

The Company’s methodology for determining its allowance for loan losses includes an analysis of qualitative factors that are added to the historical loss rates in arriving at the total allowance for loan losses needed for this general pool of loans.  The qualitative factors include:

• Changes in national and local economic trends;

• The rate of growth in the portfolio;

• Trends of delinquencies and nonaccrual balances;

• Changes in loan policy; and

• Changes in lending management experience and related staffing.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation.  These qualitative factors, applied to each product class, make the evaluation inherently subjective, as it requires material estimates that may be susceptible to significant revision as more information becomes available.  Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan losses analysis and calculation.

The allocation of the allowance for loan losses summarized on the basis of the Company’s calculation methodology was as follows:

	September 30, 2018
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	109	$	-	$	593	$	46	$	276
Historical loss rate		114		-		87		18		24
Qualitative factors		538		-		3,260		721		888
Total	$	761	$	-	$	3,940	$	785	$	1,188
			Home equity		Other
	Tax exempt		and junior liens		consumer		Unallocated		Total
Specifically reserved	$	-	$	140	$	-	$	-	$	1,164
Historical loss rate		-		21		218		-		482
Qualitative factors		1		260		212		-		5,880
Other		-		-		-		278		278
Total	$	1	$	421	$	430	$	278	$	7,804

	September 30, 2017
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	181	$	-	$	14	$	40	$	381
Historical loss rate		106		-		121		77		14
Qualitative factors		513		-		3,146		597		673
Total	$	800	$	-	$	3,281	$	714	$	1,068
			Home equity		Other
	Tax exempt		and junior liens		consumer		Unallocated		Total
Specifically reserved	$	-	$	142	$	-	$	-	$	758
Historical loss rate		-		48		34		-		400
Qualitative factors		1		300		169		-		5,399
Other		-		-		-		71		71
Total	$	1	$	490	$	203	$	71	$	6,628

XML

Foreclosed Real Estate

9 Months Ended

Sep. 30, 2018

Real Estate Owned Disclosure Of Detailed Components [Abstract]

Foreclosed Real Estate

Note 8:   Foreclosed Real Estate

The Company is required to disclose the carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession of the property at each reporting period.

(Dollars in thousands)	Number of properties		September 30, 2018		Number of properties		December 31, 2017
Foreclosed residential real estate		5	$	268		5	$	468

At September 30, 2018, the Company reported $996,000 in residential real estate loans in the process of foreclosure.

XML

Guarantees

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Guarantees

Note 9:   Guarantees

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit.  Generally, all letters of credit, when issued have expiration dates within one year.  The credit risks involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers.  The Company generally holds collateral and/or personal guarantees supporting these commitments.  The Company had $2.0 million of standby letters of credit as of September 30, 2018.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.   The fair value of standby letters of credit was not significant to the Company’s consolidated financial statements.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 10:   Fair Value Measurements

Accounting guidance related to fair value measurements and disclosures specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 – Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs, minimize the use of unobservable inputs, to the extent possible, and considers counterparty credit risk in its assessment of fair value.

The Company used the following methods and significant assumptions to estimate fair value:

Investment securities: The fair values of available-for-sale and marketable equity securities are obtained from an independent third party and are based on quoted prices on nationally recognized securities exchanges where available (Level 1).  If quoted prices are not available, fair values are measured by utilizing matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).  Management made no adjustment to the fair value quotes that were received from the independent third party pricing service.Level 3 securities are assets whose fair value cannot be determined by using observable measures, such as market prices or pricing models. Level 3 assets are typically very illiquid, and fair values can only be calculated using estimates or risk-adjusted value ranges. Management applies known factors, such as currently applicable discount rates, to the valuation of those investments in order to determine fair value at the reporting date.

Impaired loans: Impaired loans are those loans in which the Company has measured impairment based on the fair value of the loan’s collateral or the discounted value of expected future cash flows.  Fair value is generally determined based upon market value evaluations by third parties of the properties and/or estimates by management of working capital collateral or discounted cash flows based upon expected proceeds.  These appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property), and the cost approach.  Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as, changes in absorption rates or market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition.  Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets.  These measurements are classified as Level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment.  A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.

Foreclosed real estate:  Fair values for foreclosed real estate are initially recorded based on market value evaluations by third parties, less costs to sell (“initial cost basis”).  Any write-downs required when the related loan receivable is exchanged for the underlying real estate collateral at the time of transfer to foreclosed real estate are charged to the allowance for loan losses.  Values are derived from appraisals, similar to impaired loans, of underlying collateral or discounted cash flow analysis.  Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the initial cost basis.  In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as, changes in absorption rates and market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition.  Either change could result in adjustment to lower the property value estimates indicated in the appraisals.  These measurements are classified as Level 3 within the fair value hierarchy.

The following tables summarizes assets measured at fair value on a recurring basis as of the indicated dates, segregated by the level of valuation inputs within the hierarchy utilized to measure fair value:

	September 30, 2018
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	-	$	21,988	$	-	$	21,988
State and political subdivisions		-		22,865		-		22,865
Corporate		-		17,288		-		17,288
Asset backed securities		-		20,873		-		20,873
Residential mortgage-backed - US agency		-		33,033		-		33,033
Collateralized mortgage obligations - US agency		-		49,205		-		49,205
Collateralized mortgage obligations - Private label		-		23,496		-		23,496
Total available-for-sale securities	$	-	$	188,748	$	-	$	188,748
Marketable equity securities	$	-	$	541	$	-	$	541

	December 31, 2017
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	-	$	41,336	$	-	$	41,336
State and political subdivisions		-		13,681		-		13,681
Corporate		-		8,600		-		8,600
Asset backed securities		-		6,644		-		6,644
Residential mortgage-backed - US agency		-		35,742		-		35,742
Collateralized mortgage obligations - US agency		-		53,348		-		53,348
Collateralized mortgage obligations - Private label		-		11,052		-		11,052
Equity investment securities:
Common stock - Financial services industry		-		-		515		515
Total available-for-sale securities	$	-	$	170,403	$	515	$	170,918

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the nine months ended September 30, 2018 were as follows:

(In thousands)	Common Stock - Financial Services Industry
Balance - December 31, 2017	$	515
Total gains realized/unrealized:
Included in earnings		-
Included in other comprehensive income		-
Settlements		-
Sales		-
Transfers to Level 2		(515	)
Balance - September 30, 2018	$	-
Changes in unrealized gains included in earnings related to assets still held at September 30, 2018	$	-

The following table summarizes the valuation techniques and significant unobservable inputs used for the Company's investments that are categorized within Level 3 of the fair value hierarchy at the indicated dates:

(In thousands)	At December 31, 2017
Investment Type	Fair Value		Valuation Techniques	Unobservable Input	Weight
Common Stock - Financial    Services Industry	$	515	Inputs to comparables	Weight ascribed to comparable companies	100%

Pathfinder Bank had the following assets measured at fair value on a nonrecurring basis as of September 30, 2018 and December 31, 2017: 

			September 30, 2018
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Impaired loans	$	-	$	-	$	1,859	$	1,859
Foreclosed real estate	$	-	$	-	$	232	$	232

			December 31, 2017
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Impaired loans	$	-	$	-	$	4,887	$	4,887
Foreclosed real estate	$	-	$	-	$	434	$	434

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were used to determine fair value at the indicated dates.

		Quantitative Information about Level 3 Fair Value Measurements
	Valuation	Unobservable	Range
	Techniques	Input	(Weighted Avg.)
At September 30, 2018
Impaired loans	Appraisal of collateral	Appraisal Adjustments	5% - 10% (5%)
	(Sales Approach)	Costs to Sell	7% - 13% (11%)
	Discounted Cash Flow
Foreclosed real estate	Appraisal of collateral	Appraisal Adjustments	15% - 15% (15%)
	(Sales Approach)	Costs to Sell	6% - 8% (7%)

		Quantitative Information about Level 3 Fair Value Measurements
	Valuation	Unobservable	Range
	Techniques	Input	(Weighted Avg.)
At December 31, 2017
Impaired loans	Appraisal of collateral	Appraisal Adjustments	5% - 30% (9%)
	(Sales Approach)	Costs to Sell	7% - 13% (11%)
	Discounted Cash Flow
Foreclosed real estate	Appraisal of collateral	Appraisal Adjustments	15% - 15% (15%)
	(Sales Approach)	Costs to Sell	6% - 8% (7%)

The Company owns a small percentage of the common stock of a single, otherwise unaffiliated, financial institution with a fair market value of $541,000 at September 30, 2018.  This financial institution had been recently formed, was relatively limited in the scope of its business activities, and was relatively small in asset size at the time the shares of common stock were initially acquired by the Company.  The shares of this financial institution are not, and have never been, listed on any public stock exchange.  Through December 31, 2017, the Company determined the fair market value of these shares using Level 3 methodologies.  The relatively unique characteristics of the institution precluded the use of significant inputs and value drivers observable in active markets through that date.  During the three months ended March 31, 2018, the Company’s management reevaluated the fair value methodology it had previously used with respect to this investment and determined that the institution’s increased size and current business activities had become reasonably comparable over time with applicable peer institutions.   Consequently, relevant significant inputs and value drivers observable in active markets were deemed to be present and available beginning with the three months ended March 31, 2018.  Accordingly, the Company transferred this asset from Level 3 to Level 2 at March 31, 2018 for purposes of the accompanying fair value disclosure. The investment was valued using Level 2 methodologies at September 30, 2018 and it is expected to be valued using Level 2 methodologies prospectively.  There have been no transfers of assets into or out of any fair value measurement during the three months ended September 30, 2018.

Required disclosures include fair value information of financial instruments, whether or not recognized in the consolidated statement of condition, for which it is practicable to estimate that value.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

The Company has various processes and controls in place to ensure that fair value is reasonably estimated. The Company performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. 

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective period-ends, and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

FASB ASC Topic 820 for Fair Value Measurements and Disclosures, the financial assets and liabilities were valued at a price that represents the Company’s exit price or the price at which these instruments would be sold or transferred.  

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.  The Company, in estimating its fair value disclosures for financial instruments, used the following methods and assumptions:

Cash and cash equivalents – The carrying amounts of these assets approximate their fair value and are classified as Level 1.

Investment securities – The fair values of available-for-sale, held-to-maturity and marketable equity securities are obtained from an independent third party and are based on quoted prices on nationally recognized exchange where available (Level 1).  If quoted prices are not available, fair values are measured by utilizing matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).  Management made no adjustment to the fair value quotes that were received from the independent third party pricing service.  Level 3 securities are assets whose fair value cannot be determined by using observable measures, such as market prices or pricing models. Level 3 assets are typically very illiquid, and fair values can only be calculated using estimates or risk-adjusted value ranges. Management applies known factors, such as currently applicable discount rates, to the valuation of those investments in order to determine fair value at the reporting date.

Federal Home Loan Bank stock – The carrying amount of these assets approximates their fair value and are classified as Level 2.

Net loans – For variable-rate loans that re-price frequently, fair value is based on carrying amounts.  The fair value of other loans (for example, fixed-rate commercial real estate loans, mortgage loans, and commercial and industrial loans) is estimated using discounted cash flow analysis, based on interest rates currently being offered in the market for loans with similar terms to borrowers of similar credit quality.  Loan value estimates include judgments based on expected prepayment rates.  The measurement of the fair value of loans, including impaired loans, is classified within Level 3 of the fair value hierarchy.

Accrued interest receivable and payable – The carrying amount of these assets approximates their fair value and are classified as Level 1.

Deposits – The fair values disclosed for demand deposits (e.g., interest-bearing and noninterest-bearing checking, passbook savings and certain types of money management accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts) and are classified within Level 1 of the fair value hierarchy.  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates of deposits to a schedule of aggregated expected monthly maturities on time deposits.  Measurements of the fair value of time deposits are classified within Level 2 of the fair value hierarchy.

Borrowings – Fixed/variable term “bullet” structures are valued using a replacement cost of funds approach.  These borrowings are discounted to the FHLBNY advance curve.  Option structured borrowings’ fair values are determined by the FHLB for borrowings that include a call or conversion option.  If market pricing is not available from this source, current market indications from the FHLBNY are obtained and the borrowings are discounted to the FHLBNY advance curve less an appropriate spread to adjust for the option. These measurements are classified as Level 2 within the fair value hierarchy.

Subordinated loans – The Company secures quotes from its pricing service based on a discounted cash flow methodology or utilizes observations of recent highly-similar transactions which result in a Level 2 classification.

The carrying amounts and fair values of the Company’s financial instruments as of the indicated dates are presented in the following table:

		September 30, 2018				December 31, 2017
	Fair Value	Carrying		Estimated		Carrying		Estimated
(In thousands)	Hierarchy	Amounts		Fair Values		Amounts		Fair Values
Financial assets:
Cash and cash equivalents	1	$	35,974	$	35,974	$	21,991	$	21,991
Investment securities - available-for-sale	2		188,953		188,953		170,623		170,623
Investment securities - available-for-sale	3		-		-		515		515
Investment securities - marketable equity	2		541		541		-		-
Investment securities - held-to-maturity	2		26,084		25,628		66,196		66,426
Federal Home Loan Bank stock	2		4,187		4,187		3,855		3,855
Net loans	3		613,055		598,372		573,705		570,439
Accrued interest receivable	1		2,915		2,915		3,047		3,047
Financial liabilities:
Demand Deposits, Savings, NOW and MMDA	1	$	490,282	$	490,282	$	510,176	$	510,176
Time Deposits	2		265,922		264,215		213,427		212,453
Borrowings	2		79,636		79,160		73,888		73,575
Subordinated loans	2		15,085		14,899		15,059		14,953
Accrued interest payable	1		326		326		186		186

XML

Interest Rate Derivatives

9 Months Ended

Sep. 30, 2018

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Interest Rate Derivatives

Note 11:   Interest Rate Derivatives

Derivative instruments are entered into by the Company primarily as a risk management tool.  Financial derivatives are recorded at fair value as other liabilities.  The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship. For a fair value hedge, changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or liability are recognized currently in earnings.  For a cash flow hedge, changes in the fair value of the derivative instrument, to the extent that it is effective, are recorded in other comprehensive income and subsequently reclassified to earnings as the hedged transaction impacts net income.  Any ineffective portion of a cash flow hedge is recognized currently in earnings.

On four occasions during the first half of 2017, the Company sold, and subsequently repurchased, a U.S. Treasury security in the approximate amount of $40.0 million for each transaction.  These transactions were intended to act as hedges against rising short-term interest rates.  The Company was in controlling possession of, but did not own, the securities at the time of each sale. The securities had been received by the Company, under industry-standard repurchase agreements, from an unrelated third party as collateral for a series of 30-day loans of approximately $40.0 million on each occasion which were made at market rates of interest to that third party. The security sale on each occasion provided the funds necessary to advance the loan to the third party and placed the Company in what is generally described as a “short position” with respect to the sold U.S. Treasury security.  These transactions acted as a hedge against rising short-term interest rates because the price of each sold security would be expected to decline in a rising short-term interest rate environment and could therefore be re-acquired at the conclusion of each 30-day loan period at a price lower than the price at which the security was originally sold.  Short-term rates rose over the combined duration of these transactions and, consequently, the Company recognized aggregate gains on the sale and repurchase of the securities in the amounts of$250,000 for the nine months ended September 30, 2017.  The transactions’ gains were characterized as capital gains for tax purposes.  These capital gains utilized existing, previously reserved-for, capital loss tax carryforwards that were established in 2013.  The Company recognized tax benefits related to these transactions of $96,000 for the nine months ended September 30, 2017.  The tax benefits arose from the reversal of reserves established in 2013 against the portion of the Company’s deferred tax asset related to existing capital loss carryforward positions.  The reserves were originally established due to the uncertainty of the Company’s ability to generate future capital gain income within the five-year statutory life of the capital loss carryforward position under the Internal Revenue Code. The recognized tax benefit from the reversal of those reserves reduced the Company’s effective tax rate from what would have been28.3% to 25.5% for the nine months ended September 30, 2017.  

The capital gain income and the additional recognized tax benefits derived from these transactions were partially offset by an additional $266,000 in after-tax interest expense on borrowings derived from additional pre-tax interest expense on those borrowings of $430,000 that reduced pretax net interest margin by that amount for the nine months ended September 30, 2017.  In total, after-tax net income increased by $80,000 for the nine months ended September 30, 2017 as a result of these hedging transactions.  The Company did not have any hedging activities during the nine months ended September 30, 2018.

The Company adoptedASU 2017-12: Derivatives and Hedging [Topic 815]: Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2018, in the second quarter of 2018.  The amended guidance within this Update expands and clarifies hedge accounting for nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements, and simplifies the requirements for assessing effectiveness in a hedging relationship.  The Company did not have any hedging activities during the nine months ended September 30, 2018, but expects to utilize hedging in the future to improve the management of its risk profiles.  In order to facilitate potential future hedging activities, the Company transferred 52 investment securities with an aggregate amortized cost before transfer of $35.2 million from the held-to-maturity classification to the available-for-sale classification at the date of adoption.

XML

Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2018

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Accumulated Other Comprehensive Income (Loss)

Note 12:   Accumulated Other Comprehensive Income (Loss)

Changes in the components of accumulated other comprehensive income (loss) (“AOCI”), net of tax, for the periods indicated are summarized in the table below.

	For the three months ended September 30, 2018
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(2,156	)	$	(3,248	)	$	(67	)	$	(5,471	)
Other comprehensive income before reclassifications		-			(456	)		4			(452	)
Amounts reclassified from AOCI		31			44			-			75
Ending balance	$	(2,125	)	$	(3,660	)	$	(63	)	$	(5,848	)

	For the three months ended September 30, 2017
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(1,468	)	$	(523	)	$	(429	)	$	(2,420	)
Other comprehensive income before reclassifications		-			(103	)		15			(88	)
Amounts reclassified from AOCI		22			(65	)		-			(43	)
Ending balance	$	(1,446	)	$	(691	)	$	(414	)	$	(2,551	)

	For the nine months ended September 30, 2018
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(2,220	)	$	(1,558	)	$	(430	)	$	(4,208	)
Other comprehensive income before reclassifications		-			(2,305	)		124			(2,181	)
Amounts reclassified from AOCI		95			140			-			235
Cumulative effect of change in measurement of equity    securities (1)		-			(53	)		-			(53	)
Cumulative effect of change in investment securities transfer (2)		-			116			243			359
Ending balance	$	(2,125	)	$	(3,660	)	$	(63	)	$	(5,848	)

(1) Cumulative effect of unrealized gain on marketable equity securities based on the adoption of ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities.

(2) Cumulative effect of unrealized gains on the transfer of 52 investment securities from held-to-maturity classification to available-for-sale classification based on the adoption of ASU 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

	For the nine months ended September 30, 2017
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Securities reclassified from AFS to HTM			Total
Beginning balance	$	(1,513	)	$	(1,845	)	$	(464	)	$	(3,822	)
Other comprehensive income before reclassifications		-			1,342			50			1,392
Amounts reclassified from AOCI		67			(188	)		-			(121	)
Ending balance	$	(1,446	)	$	(691	)	$	(414	)	$	(2,551	)

The following table presents the amounts reclassified out of each component of AOCI for the indicated period:

	Amount Reclassified							Amount Reclassified
	from AOCI (1)							from AOCI (1)
	(Unaudited)							(Unaudited)
(In thousands)	For the three months ended							For the nine months ended
Details about AOCI (1) components	September 30, 2018			September 30, 2017			Affected Line Item in the Statement of Income	September 30, 2018			September 30, 2017
Retirement plan items
Retirement plan net losses    recognized in plan expenses (2)	$	(43	)	$	(37	)	Salaries and employee benefits	$	(129	)	$	(109	)
Tax effect		12			15		Provision for income taxes		34			42
	$	(31	)	$	(22	)	Net Income	$	(95	)	$	(67	)
Available-for-sale securities
Realized gain on sale of securities	$	(60	)	$	108		Net gains on sales and redemptions of    investment securities	$	(189	)	$	314
Tax effect		16			(43	)	Provision for income taxes		49			(126	)
	$	(44	)	$	65		Net Income	$	(140	)	$	188

(1)Amounts in parentheses indicates debits in net income.

(2) These items are included in net periodic pension cost.  

      See Note 5 for additional information.

XML

Noninterest Income

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Noninterest Income

Note 13: Noninterest Income

The Company adopted the revenue recognition guidance effective January 1, 2018, and applied the new accounting guidance using a modified retrospective approach for reporting purposes.  A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, which are excluded from the scope of the amended guidance.

The Company recognizes revenue as it is earned.  The adoption of ASU 2014-09 required that credit card interchange revenue be presented net of rewards expense in noninterest income.  For the three months ended September 30, 2018 and 2017, the Company recognized credit cards reward program expense as a reduction of noninterest income in the amounts of $28,000and $29,000, respectively.  For the nine months ended September 30, 2018 and 2017, the Company recognized credit cards reward program expense as a reduction of noninterest income in the amounts of $66,000and $68,000, respectively.

The Company has included the following table regarding the Company’s noninterest income for the periods presented.

	For the three months					For the nine months
	ended September 30,					ended September 30,
(In thousands)	2018			2017		2018			2017
Service fees
Insufficient funds fees	$	218		$	224	$	618		$	617
Deposit related fees		49			46		148			141
ATM fees		24			25		72			74
Total service fees		291			295		838			832
Fee Income
Insurance commissions		172			175		632			627
Investment services revenue		70			40		218			186
ATM fees surcharge		71			65		178			170
Banking house rents collected		34			26		100			81
Total fee income		347			306		1,128			1,064
Card income
Debit card interchange fees		141			105		432			373
Merchant card fees		21			15		54			40
Total card income		162			120		486			413
Mortgage fee income and realized gain on sale of loans   and foreclosed real estate
Loan servicing fees		25			44		108			112
Net gains (losses) on sales of loans and foreclosed real estate		8			2		24			(43	)
Total mortgage fee income and realized gain on sale of    loans and foreclosed real estate		33			46		132			69
Total		833			767		2,584			2,378
Earnings and gain on bank owned life insurance		138			92		319			225
Net (losses) gains on sales and redemptions of investment    securities		(60	)		108		(189	)		314
Gains on equity securities		-			-		26			-
Other miscellaneous income		29			14		119			51
Total noninterest income	$	940		$	981	$	2,859		$	2,968

The following is a discussion of key revenues within the scope of the new revenue guidance:

• Service fees – Revenue is earned through insufficient funds fees, customer initiated activities or passage of time for deposit related fees, and ATM service fees. Transaction-based fees are recognized as the time the transaction is executed, which is the same time the Company’s performance obligation is satisfied.  Account maintenance fees are earned over the course of the month as the monthly maintenance performance obligation to the customer is satisfied.

• Fee income – Revenue is earned through commissions on insurance, investment products and investment advisory services, ATM surcharge fees, and banking house rents collected.  The Company earns investment advisory services fee income by providing investment management services to customers under investment management contracts.  As investment management services are provided over time, the performance obligation to customers is satisfied over time, and therefore, revenue is recognized over time.    

• Card income – Card income consists of interchange fees from consumer debit card networks and other related services.  Interchange rates are set by the card networks.  Interchange fees are based on purchase volumes and other factors and are recognized as transactions occur.

• Mortgage fee income and realized gain on sale of loans and foreclosed real estate – Revenue from mortgage fee income and realized gain on sale of loans and foreclosed real estate is earned through the origination of residential and commercial mortgage loans, sales of one-to-four family residential mortgage loans and sales of foreclosed real estate, and is earned as the individual transactions occur.

XML

Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

Note 14: Subsequent Events

On October 24, 2018, the Company contractually agreed to acquire a mixed-use commercial and office facility located in downtown Oswego, NY.  Management plans a multi-use strategy for the building, which will include development of a portion of the building for lease to unrelated third parties.   The acquisition will provide future tenant rental income, some additional flexible space for the Company’s use and is intended to provide support for the City of Oswego’s Downtown Revitalization Initiative.  The final acquisition price for the facility will be $1.8 million, of which a $200,000 deposit was capitalized in October 2018.  It is expected that the purchase transaction will be formally completed in the fourth quarter of 2018.  Under the contractual agreement, the Bank has prepossession development rights and plans to immediately begin the process of converting the structure for both tenant and internal uses.  The net financial impact of this transaction is not expected to be material to the operating results of the Company in future periods.  

XML

Earnings per Common Share (Tables)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Calculations of Basic and Diluted Earnings per Share

The following table sets forth the calculation of basic and diluted earnings per share.  

	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands, except per share data)	2018		2017		2018		2017
Basic Earnings Per Common Share
Net income available to common shareholders	$	985	$	907	$	2,934	$	2,627
Weighted average common shares outstanding		4,195		4,090		4,157		4,072
Basic earnings per common share	$	0.23	$	0.22	$	0.71	$	0.65
Diluted Earnings Per Common Share
Net income available to common shareholders	$	985	$	907	$	2,934	$	2,627
Weighted average common shares outstanding		4,195		4,090		4,157		4,072
Effect of assumed exercise of stock options		84		108		100		106
Diluted weighted average common shares outstanding		4,279		4,198		4,257		4,178
Diluted earnings per common share	$	0.23	$	0.22	$	0.69	$	0.63

XML

Investment Securities (Tables)

9 Months Ended

Sep. 30, 2018

Investments Debt And Equity Securities [Abstract]

Amortized Cost and Estimated Fair Value of Investment Securities

The amortized cost and estimated fair value of investment securities are summarized as follows:

	September 30, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	22,213	$	-	$	(225	)	$	21,988
State and political subdivisions		23,765		-		(900	)		22,865
Corporate		17,453		191		(356	)		17,288
Asset backed securities		21,045		3		(175	)		20,873
Residential mortgage-backed - US agency		34,137		22		(1,126	)		33,033
Collateralized mortgage obligations - US agency		51,198		3		(1,996	)		49,205
Collateralized mortgage obligations - Private label		23,891		20		(415	)		23,496
Total		193,702		239		(5,193	)		188,748
Equity investment securities:
Common stock - financial services industry		205		-		-			205
Total		205		-		-			205
Total available-for-sale	$	193,907	$	239	$	(5,193	)	$	188,953
Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	3,985	$	-	$	(47	)	$	3,938
State and political subdivisions		5,304		14		(109	)		5,209
Corporate		6,196		6		(207	)		5,995
Residential mortgage-backed - US agency		3,691		1		(96	)		3,596
Collateralized mortgage obligations - US agency		2,953		1		(9	)		2,945
Collateralized mortgage obligations - Private label		3,955		19		(29	)		3,945
Total held-to-maturity	$	26,084	$	41	$	(497	)	$	25,628

	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	41,489	$	1	$	(154	)	$	41,336
State and political subdivisions		13,960		12		(291	)		13,681
Corporate		8,584		108		(92	)		8,600
Asset backed securities		6,662		12		(30	)		6,644
Residential mortgage-backed - US agency		36,214		23		(495	)		35,742
Collateralized mortgage obligations - US agency		54,481		-		(1,133	)		53,348
Collateralized mortgage obligations - Private label		11,193		62		(203	)		11,052
Total		172,583		218		(2,398	)		170,403
Equity investment securities:
Common stock - financial services industry		663		72		-			735
Total		663		72		-			735
Total available-for-sale	$	173,246	$	290	$	(2,398	)	$	171,138
Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	4,948	$	14	$	(14	)	$	4,948
State and political subdivisions		35,130		641		(311	)		35,460
Corporate		8,311		151		(159	)		8,303
Residential mortgage-backed - US agency		6,853		53		(10	)		6,896
Collateralized mortgage obligations - US agency		7,574		83		(215	)		7,442
Collateralized mortgage obligations - Private label		3,380		7		(10	)		3,377
Total held-to-maturity	$	66,196	$	949	$	(719	)	$	66,426

Amortized Cost and Estimated Fair Value of Debt Investments by Contractual Maturity

The amortized cost and estimated fair value of debt investments at September 30, 2018 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Available-for-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	5,320	$	5,314	$	2,306	$	2,296
Due after one year through five years		34,938		34,738		5,534		5,484
Due after five years through ten years		23,671		23,059		4,810		4,719
Due after ten years		20,547		19,903		2,835		2,643
Sub-total		84,476		83,014		15,485		15,142
Residential mortgage-backed - US agency		34,137		33,033		3,691		3,596
Collateralized mortgage obligations - US agency		51,198		49,205		2,953		2,945
Collateralized mortgage obligations - Private label		23,891		23,496		3,955		3,945
Totals	$	193,702	$	188,748	$	26,084	$	25,628

Investment Securities' Gross Unrealized Losses and Fair Value by Investment Category and Length of Time that Individual Securities Have Continuous Unrealized Loss Position

The Company’s investment securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	September 30, 2018
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(Dollars in thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSE's		3	$	(156	)	$	13,038		3	$	(69	)	$	6,930		6	$	(225	)	$	19,968
State and political subdivisions		15		(189	)		9,122		18		(711	)		12,090		33		(900	)		21,212
Corporate		11		(184	)		8,373		2		(172	)		1,613		13		(356	)		9,986
Asset backed securities		10		(154	)		15,327		1		(21	)		1,013		11		(175	)		16,340
Residential mortgage-backed - US agency		9		(269	)		8,975		18		(857	)		20,315		27		(1,126	)		29,290
Collateralized mortgage obligations - US agency		9		(198	)		15,033		26		(1,798	)		31,906		35		(1,996	)		46,939
Collateralized mortgage obligations - Private label		7		(283	)		13,989		6		(132	)		6,807		13		(415	)		20,796
Totals		64	$	(1,433	)	$	83,857		74	$	(3,760	)	$	80,674		138	$	(5,193	)	$	164,531
Held-to-Maturity Portfolio
US Treasury, agencies and GSE's		3	$	(20	)	$	2,965		1	$	(27	)	$	973		4	$	(47	)	$	3,938
State and political subdivisions		3		(8	)		1,390		6		(101	)		2,294		9		(109	)		3,684
Corporate		2		(47	)		1,266		1		(160	)		1,962		3		(207	)		3,228
Residential mortgage-backed - US agency		4		(85	)		2,939		1		(11	)		312		5		(96	)		3,251
Collateralized mortgage obligations - US agency		1		(9	)		1,002		-		-			-		1		(9	)		1,002
Collateralized mortgage obligations - Private label		-		-			-		2		(29	)		2,083		2		(29	)		2,083
Totals		13	$	(169	)	$	9,562		11	$	(328	)	$	7,624		24	$	(497	)	$	17,186

	December 31, 2017
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(Dollars in thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSE's		5	$	(105	)	$	27,359		4	$	(49	)	$	13,957		9	$	(154	)	$	41,316
State and political subdivisions		18		(24	)		2,480		12		(267	)		5,041		30		(291	)		7,521
Corporate		2		(19	)		1,791		1		(73	)		1,727		3		(92	)		3,518
Asset backed securities		2		(17	)		3,123		1		(13	)		742		3		(30	)		3,865
Residential mortgage-backed - US agency		15		(159	)		21,551		9		(336	)		10,463		24		(495	)		32,014
Collateralized mortgage obligations - US agency		14		(195	)		23,790		21		(938	)		25,395		35		(1,133	)		49,185
Collateralized mortgage obligations - Private label		4		(203	)		7,439		-		-			-		4		(203	)		7,439
Totals		60	$	(722	)	$	87,533		48	$	(1,676	)	$	57,325		108	$	(2,398	)	$	144,858
Held-to-Maturity Portfolio
US Treasury, agencies and GSE's		2	$	(2	)	$	1,990		1	$	(12	)	$	988		3	$	(14	)	$	2,978
State and political subdivisions		8		(55	)		5,668		11		(256	)		8,644		19		(311	)		14,312
Corporate		3		(10	)		1,412		1		(149	)		2,087		4		(159	)		3,499
Residential mortgage-backed - US agency		2		(10	)		1,909		-		-			-		2		(10	)		1,909
Collateralized mortgage obligations - US agency		2		(215	)		4,418		-		-			-		2		(215	)		4,418
Collateralized mortgage obligations - Private label		1		(10	)		1,119		-		-			-		1		(10	)		1,119
Totals		18	$	(302	)	$	16,516		13	$	(417	)	$	11,719		31	$	(719	)	$	28,235

Gross Realized Gains (Losses) on Sale of Securities

Gross realized gains (losses) on sales of securities for the indicated periods are detailed below:

	For the three months						For the nine months
	ended September 30,						ended September 30,
(In thousands)	2018			2017			2018			2017
Realized gains on investments	$	76		$	165		$	236		$	313
Realized gains on hedging activity		-			-			-			250
Realized losses on investments		(136	)		(57	)		(425	)		(249	)
	$	(60	)	$	108		$	(189	)	$	314
Gains on equity securities		-			-			26			-
	$	-		$	-		$	26		$	-

XML

Pension and Postretirement Benefits (Tables)

9 Months Ended

Sep. 30, 2018

Compensation And Retirement Disclosure [Abstract]

Composition of Net Periodic Pension and Postretirement Plan Costs

The composition of net periodic pension plan and postretirement plan costs for the indicated periods is as follows:

	Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
	For the three months ended September 30,												For the nine months ended September 30,
(In thousands)	2018			2017			2018			2017			2018			2017			2018			2017
Service cost	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Interest cost		119			118			5			2			355			355			16			6
Expected return on plan assets		(260	)		(236	)		-			-			(778	)		(709	)		-			-
Amortization of prior service credits		-			-			(1	)		-			-			-			(3	)		-
Amortization of net losses/(gains)		41			39			3			(2	)		123			115			9			(6	)
Net periodic benefit plan (benefit) cost	$	(100	)	$	(79	)	$	7		$	-		$	(300	)	$	(239	)	$	22		$	-

XML

Loans (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Major Classification of Loans

Major classifications of loans at the indicated dates are as follows:

	September 30,			December 31,
(In thousands)	2018			2017
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	231,830		$	216,793
Construction		3,888			5,558
Total residential mortgage loans		235,718			222,351
Commercial loans:
Real estate		213,303			192,525
Lines of credit		48,496			51,285
Other commercial and industrial		60,984			50,097
Tax exempt loans		10,163			10,405
Total commercial loans		332,946			304,312
Consumer loans:
Home equity and junior liens		25,985			25,935
Other consumer		26,410			28,646
Total consumer loans		52,395			54,581
Total loans		621,059			581,244
Net deferred loan fees		(200	)		(413	)
Less allowance for loan losses		(7,804	)		(7,126	)
Loans receivable, net	$	613,055		$	573,705

Summary of Classes of Loan Portfolio

The following tables present the classes of the loan portfolio, not including net deferred loan costs, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:

	As of  September 30, 2018
			Special
(In thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	228,135	$	663	$	694	$	2,338	$	231,830
Construction		3,888		-		-		-		3,888
Total residential mortgage loans		232,023		663		694		2,338		235,718
Commercial loans:
Real estate		208,188		1,513		1,749		1,853		213,303
Lines of credit		48,170		164		122		40		48,496
Other commercial and industrial		59,847		379		624		134		60,984
Tax exempt loans		10,163		-		-		-		10,163
Total commercial loans		326,368		2,056		2,495		2,027		332,946
Consumer loans:
Home equity and junior liens		25,632		126		140		87		25,985
Other consumer		26,201		149		35		25		26,410
Total consumer loans		51,833		275		175		112		52,395
Total loans	$	610,224	$	2,994	$	3,364	$	4,477	$	621,059
	As of  December 31, 2017
			Special
(In thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	211,825	$	891	$	1,869	$	2,208	$	216,793
Construction		5,558		-		-		-		5,558
Total residential mortgage loans		217,383		891		1,869		2,208		222,351
Commercial loans:
Real estate		187,073		1,372		2,024		2,056		192,525
Lines of credit		50,507		195		523		60		51,285
Other commercial and industrial		48,738		407		532		420		50,097
Tax exempt loans		10,405		-		-		-		10,405
Total commercial loans		296,723		1,974		3,079		2,536		304,312
Consumer loans:
Home equity and junior liens		25,396		61		304		174		25,935
Other consumer		28,584		55		7		-		28,646
Total consumer loans		53,980		116		311		174		54,581
Total loans	$	568,086	$	2,981	$	5,259	$	4,918	$	581,244

Age Analysis of Past Due Loans Segregated by Portfolio Segment and Class of Loans

An age analysis of past due loans, not including net deferred loan costs, segregated by portfolio segment and class of loans, as of September 30, 2018 and December 31, 2017, are detailed in the following tables:

	As of  September 30, 2018
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	530	$	239	$	1,780	$	2,549	$	229,281	$	231,830
Construction		-		-		-		-		3,888		3,888
Total residential mortgage loans		530		239		1,780		2,549		233,169		235,718
Commercial loans:
Real estate		3,715		385		2,033		6,133		207,170		213,303
Lines of credit		3,354		-		40		3,394		45,102		48,496
Other commercial and industrial		517		237		387		1,141		59,843		60,984
Tax exempt loans		-		-		-		-		10,163		10,163
Total commercial loans		7,586		622		2,460		10,668		322,278		332,946
Consumer loans:
Home equity and junior liens		102		9		146		257		25,728		25,985
Other consumer		259		64		84		407		26,003		26,410
Total consumer loans		361		73		230		664		51,731		52,395
Total loans	$	8,477	$	934	$	4,470	$	13,881	$	607,178	$	621,059
	As of  December 31, 2017
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,196	$	925	$	1,931	$	4,052	$	212,741	$	216,793
Construction		-		-		-		-		5,558		5,558
Total residential mortgage loans		1,196		925		1,931		4,052		218,299		222,351
Commercial loans:
Real estate		720		2,171		1,430		4,321		188,204		192,525
Lines of credit		1,482		31		132		1,645		49,640		51,285
Other commercial and industrial		575		60		766		1,401		48,696		50,097
Tax exempt loans		-		-		-		-		10,405		10,405
Total commercial loans		2,777		2,262		2,328		7,367		296,945		304,312
Consumer loans:
Home equity and junior liens		94		74		262		430		25,505		25,935
Other consumer		192		50		63		305		28,341		28,646
Total consumer loans		286		124		325		735		53,846		54,581
Total loans	$	4,259	$	3,311	$	4,584	$	12,154	$	569,090	$	581,244

Nonaccrual Loans Segregated by Class of Loan

Nonaccrual loans, segregated by class of loan, were as follows:

	September 30,		December 31,
(In thousands)	2018		2017
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,858	$	2,088
		1,858		2,088
Commercial loans:
Real estate		2,132		1,545
Lines of credit		46		132
Other commercial and industrial		387		766
		2,565		2,443
Consumer loans:
Home equity and junior liens		146		300
Other consumer		109		63
		255		363
Total nonaccrual loans	$	4,678	$	4,894

Troubled Debt Restructurings on Financing Receivables

The table below details a loan that has been modified as a TDR for the nine months ended September 30, 2018.

	For the nine months ended September 30, 2018
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Other commercial and industrial loans	1	$	300	$	300	$	-

 The table below details a loan that had been modified as a TDR for the three months ended September 30, 2017.

	For the three months ended September 30, 2017
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Commercial real estate loans	1	$	2,024	$	2,024	$	-

The table below details a loan that had been modified as a TDR for the nine months ended September 30, 2017.

	For the nine months ended September 30, 2017
(In thousands)	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Additional provision for loan losses
Commercial real estate loans	1	$	2,024	$	2,024	$	-

Summary of Impaired Loans Information by Portfolio Class

The following table summarizes impaired loan information by portfolio class at the indicated dates:

	September 30, 2018						December 31, 2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(In thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
With no related allowance recorded:
1-4 family first-lien residential mortgages	$	1,225	$	1,229	$	-	$	900	$	909	$	-
Commercial real estate		2,288		2,345		-		3,314		3,360		-
Commercial lines of credit		116		116		-		507		507		-
Other commercial and industrial		550		551		-		523		524		-
Home equity and junior liens		-		-		-		80		80		-
With an allowance recorded:
1-4 family first-lien residential mortgages		610		610		109		958		958		210
Commercial real estate		2,175		2,176		593		2,186		2,187		320
Commercial lines of credit		46		47		46		40		40		40
Other commercial and industrial		306		306		276		525		525		391
Home equity and junior liens		206		206		140		210		210		142
Total:
1-4 family first-lien residential mortgages		1,835		1,839		109		1,858		1,867		210
Commercial real estate		4,463		4,521		593		5,500		5,547		320
Commercial lines of credit		162		163		46		547		547		40
Other commercial and industrial		856		857		276		1,048		1,049		391
Home equity and junior liens		206		206		140		290		290		142
Totals	$	7,522	$	7,586	$	1,164	$	9,243	$	9,300	$	1,103

Average Recorded Investment In Impaired Loans

The following table presents the average recorded investment in impaired loans for the periods indicated:

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
1-4 family first-lien residential mortgages	$	1,840	$	1,343	$	1,846	$	1,477
Commercial real estate		4,497		5,185		4,976		4,996
Commercial lines of credit		186		438		365		422
Other commercial and industrial		947		905		1,001		958
Home equity and junior liens		207		213		228		282
Total	$	7,677	$	8,084	$	8,416	$	8,135

Cash Basis Interest Income Recognized On Impaired Loans

The following table presents the cash basis interest income recognized on impaired loans for the periods indicated:

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
1-4 family first-lien residential mortgages	$	16	$	13	$	48	$	34
Commercial real estate		62		89		128		184
Commercial lines of credit		4		4		25		16
Other commercial and industrial		5		6		24		20
Home equity and junior liens		3		3		9		7
Total	$	90	$	115	$	234	$	261

XML

Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2018

Allowance For Loan Losses [Abstract]

Changes in the Allowance for Loan Losses

An allocation of a portion of the allowance to a given portfolio class does not limit the Company’s ability to absorb losses in another portfolio class.

	For the three months ended September 30, 2018
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	722		$	-		$	4,141		$	731		$	1,271
Charge-offs		(27	)		-			(31	)		(12	)		(1	)
Recoveries		1			-			-			-			-
Provisions (credits)		65			-			(170	)		66			(82	)
Ending balance	$	761		$	-		$	3,940		$	785		$	1,188
Ending balance: related to loans    individually evaluated for impairment		109			-			593			46			276
Ending balance: related to loans    collectively evaluated for impairment	$	652		$	-		$	3,347		$	739		$	912
Loans receivables:
Ending balance	$	231,830		$	3,888		$	213,303		$	48,496		$	60,984
Ending balance: individually    evaluated for impairment		1,835			-			4,463			162			856
Ending balance: collectively    evaluated for impairment	$	229,995		$	3,888		$	208,840		$	48,334		$	60,128
				Homeequity			Other
	Tax exempt			and junior liens			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	434		$	291		$	14		$	7,605
Charge-offs		-			-			(33	)		-			(104	)
Recoveries		-			5			6			-			12
Provisions (credits)		-			(18	)		166			264			291
Ending balance	$	1		$	421		$	430		$	278		$	7,804
Ending balance: related to loans    individually evaluated for impairment		-			140			-			-			1,164
Ending balance: related to loans    collectively evaluated for impairment	$	1		$	281		$	430		$	278		$	6,640
Loans receivables:
Ending balance	$	10,163		$	25,985		$	26,410					$	621,059
Ending balance: individually    evaluated for impairment		-			206			-						7,522
Ending balance: collectively    evaluated for impairment	$	10,163		$	25,779		$	26,410					$	613,537

	For the nine months ended September 30, 2018
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	865		$	-		$	3,589		$	735		$	1,214
Charge-offs		(219	)		-			(31	)		(62	)		(172	)
Recoveries		21			-			-			66			-
Provisions		94			-			382			46			146
Ending balance	$	761		$	-		$	3,940		$	785		$	1,188
				Home equity			Other
	Tax exempt			and junior liens			consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	514		$	208		$	-		$	7,126
Charge-offs		-			(17	)		(144	)		-			(645	)
Recoveries		-			6			29			-			122
Provisions (credits)		-			(82	)		337			278			1,201
Ending balance	$	1		$	421		$	430		$	278		$	7,804

	For the three months ended September 30, 2017
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	813		$	-		$	2,804		$	373		$	1,611
Charge-offs		-			-			-			(7	)		-
Recoveries		-			-			-			-			-
Provisions (credits)		(13	)		-			477			348			(543	)
Ending balance	$	800		$	-		$	3,281		$	714		$	1,068
Ending balance: related to loans    individually evaluated for impairment		181			-			14			40			381
Ending balance: related to loans    collectively evaluated for impairment	$	619		$	-		$	3,267		$	674		$	687
Loans receivables:
Ending balance	$	209,147		$	5,924		$	187,960		$	53,888		$	43,779
Ending balance: individually    evaluated for impairment		1,464			-			5,896			454			843
Ending balance: collectively    evaluated for impairment	$	207,683		$	5,924		$	182,064		$	53,434		$	42,936
				Home equity			Other
	Tax exempt			and junior liens			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	493		$	163		$	-		$	6,258
Charge-offs		-			-			(57	)		-			(64	)
Recoveries		-			5			9			-			14
Provisions (credits)		-			(8	)		88			71			420
Ending balance	$	1		$	490		$	203		$	71		$	6,628
Ending balance: related to loans    individually evaluated for impairment		-			142			-			-			758
Ending balance: related to loans    collectively evaluated for impairment	$	1		$	348		$	203		$	71		$	5,870
Loans receivables:
Ending balance	$	11,064		$	25,408		$	29,733					$	566,903
Ending balance: individually    evaluated for impairment		-			212			-						8,869
Ending balance: collectively    evaluated for impairment	$	11,064		$	25,196		$	29,733					$	558,034

	For the nine months ended September 30, 2017
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for loan losses:
Beginning Balance	$	759		$	-		$	2,935		$	397		$	1,658
Charge-offs		(156	)		-			(505	)		(60	)		(17	)
Recoveries		1			-			-			-			15
Provisions		196			-			851			377			(588	)
Ending balance	$	800		$	-		$	3,281		$	714		$	1,068
				Home equity			Other
	Tax exempt			and junior liens			consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1		$	331		$	166		$	-		$	6,247
Charge-offs		-			(69	)		(97	)		-			(904	)
Recoveries		-			6			31			-			53
Provisions		-			222			103			71			1,232
Ending balance	$	1		$	490		$	203		$	71		$	6,628

Schedule of Allowance for Loan Losses on Basis of Calculation Methodology

The allocation of the allowance for loan losses summarized on the basis of the Company’s calculation methodology was as follows:

	September 30, 2018
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	109	$	-	$	593	$	46	$	276
Historical loss rate		114		-		87		18		24
Qualitative factors		538		-		3,260		721		888
Total	$	761	$	-	$	3,940	$	785	$	1,188
			Home equity		Other
	Tax exempt		and junior liens		consumer		Unallocated		Total
Specifically reserved	$	-	$	140	$	-	$	-	$	1,164
Historical loss rate		-		21		218		-		482
Qualitative factors		1		260		212		-		5,880
Other		-		-		-		278		278
Total	$	1	$	421	$	430	$	278	$	7,804

	September 30, 2017
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	181	$	-	$	14	$	40	$	381
Historical loss rate		106		-		121		77		14
Qualitative factors		513		-		3,146		597		673
Total	$	800	$	-	$	3,281	$	714	$	1,068
			Home equity		Other
	Tax exempt		and junior liens		consumer		Unallocated		Total
Specifically reserved	$	-	$	142	$	-	$	-	$	758
Historical loss rate		-		48		34		-		400
Qualitative factors		1		300		169		-		5,399
Other		-		-		-		71		71
Total	$	1	$	490	$	203	$	71	$	6,628

XML

Foreclosed Real Estate (Tables)

9 Months Ended

Sep. 30, 2018

Real Estate Owned Disclosure Of Detailed Components [Abstract]

Carrying Amount Of Foreclosed Residential Real Estate Properties Held

The Company is required to disclose the carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession of the property at each reporting period.

(Dollars in thousands)	Number of properties		September 30, 2018		Number of properties		December 31, 2017
Foreclosed residential real estate		5	$	268		5	$	468

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value of Assets on Recurring Basis Segregated by Level of Valuation Inputs

The following tables summarizes assets measured at fair value on a recurring basis as of the indicated dates, segregated by the level of valuation inputs within the hierarchy utilized to measure fair value:

	September 30, 2018
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	-	$	21,988	$	-	$	21,988
State and political subdivisions		-		22,865		-		22,865
Corporate		-		17,288		-		17,288
Asset backed securities		-		20,873		-		20,873
Residential mortgage-backed - US agency		-		33,033		-		33,033
Collateralized mortgage obligations - US agency		-		49,205		-		49,205
Collateralized mortgage obligations - Private label		-		23,496		-		23,496
Total available-for-sale securities	$	-	$	188,748	$	-	$	188,748
Marketable equity securities	$	-	$	541	$	-	$	541

	December 31, 2017
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	-	$	41,336	$	-	$	41,336
State and political subdivisions		-		13,681		-		13,681
Corporate		-		8,600		-		8,600
Asset backed securities		-		6,644		-		6,644
Residential mortgage-backed - US agency		-		35,742		-		35,742
Collateralized mortgage obligations - US agency		-		53,348		-		53,348
Collateralized mortgage obligations - Private label		-		11,052		-		11,052
Equity investment securities:
Common stock - Financial services industry		-		-		515		515
Total available-for-sale securities	$	-	$	170,403	$	515	$	170,918

Summary of Changes in Level 3 Assets and Liabilities Measured at Estimated Fair Value on Recurring Basis

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the nine months ended September 30, 2018 were as follows:

(In thousands)	Common Stock - Financial Services Industry
Balance - December 31, 2017	$	515
Total gains realized/unrealized:
Included in earnings		-
Included in other comprehensive income		-
Settlements		-
Sales		-
Transfers to Level 2		(515	)
Balance - September 30, 2018	$	-
Changes in unrealized gains included in earnings related to assets still held at September 30, 2018	$	-

Summary of Valuation Techniques and Significant Unobservable Inputs Used for Investments are Categorized Within Level 3 Fair Value Hierarchy

The following table summarizes the valuation techniques and significant unobservable inputs used for the Company's investments that are categorized within Level 3 of the fair value hierarchy at the indicated dates:

(In thousands)	At December 31, 2017
Investment Type	Fair Value		Valuation Techniques	Unobservable Input	Weight
Common Stock - Financial    Services Industry	$	515	Inputs to comparables	Weight ascribed to comparable companies	100%

Summary of Fair Value Assets Measured on Nonrecurring Basis

Pathfinder Bank had the following assets measured at fair value on a nonrecurring basis as of September 30, 2018 and December 31, 2017: 

			September 30, 2018
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Impaired loans	$	-	$	-	$	1,859	$	1,859
Foreclosed real estate	$	-	$	-	$	232	$	232

			December 31, 2017
							Total Fair
(In thousands)	Level 1		Level 2		Level 3		Value
Impaired loans	$	-	$	-	$	4,887	$	4,887
Foreclosed real estate	$	-	$	-	$	434	$	434

Fair Value Inputs, Quantitative Information

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were used to determine fair value at the indicated dates.

		Quantitative Information about Level 3 Fair Value Measurements
	Valuation	Unobservable	Range
	Techniques	Input	(Weighted Avg.)
At September 30, 2018
Impaired loans	Appraisal of collateral	Appraisal Adjustments	5% - 10% (5%)
	(Sales Approach)	Costs to Sell	7% - 13% (11%)
	Discounted Cash Flow
Foreclosed real estate	Appraisal of collateral	Appraisal Adjustments	15% - 15% (15%)
	(Sales Approach)	Costs to Sell	6% - 8% (7%)

		Quantitative Information about Level 3 Fair Value Measurements
	Valuation	Unobservable	Range
	Techniques	Input	(Weighted Avg.)
At December 31, 2017
Impaired loans	Appraisal of collateral	Appraisal Adjustments	5% - 30% (9%)
	(Sales Approach)	Costs to Sell	7% - 13% (11%)
	Discounted Cash Flow
Foreclosed real estate	Appraisal of collateral	Appraisal Adjustments	15% - 15% (15%)
	(Sales Approach)	Costs to Sell	6% - 8% (7%)

Carrying Amounts and Fair Value of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments as of the indicated dates are presented in the following table:

		September 30, 2018				December 31, 2017
	Fair Value	Carrying		Estimated		Carrying		Estimated
(In thousands)	Hierarchy	Amounts		Fair Values		Amounts		Fair Values
Financial assets:
Cash and cash equivalents	1	$	35,974	$	35,974	$	21,991	$	21,991
Investment securities - available-for-sale	2		188,953		188,953		170,623		170,623
Investment securities - available-for-sale	3		-		-		515		515
Investment securities - marketable equity	2		541		541		-		-
Investment securities - held-to-maturity	2		26,084		25,628		66,196		66,426
Federal Home Loan Bank stock	2		4,187		4,187		3,855		3,855
Net loans	3		613,055		598,372		573,705		570,439
Accrued interest receivable	1		2,915		2,915		3,047		3,047
Financial liabilities:
Demand Deposits, Savings, NOW and MMDA	1	$	490,282	$	490,282	$	510,176	$	510,176
Time Deposits	2		265,922		264,215		213,427		212,453
Borrowings	2		79,636		79,160		73,888		73,575
Subordinated loans	2		15,085		14,899		15,059		14,953
Accrued interest payable	1		326		326		186		186

XML

Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2018

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax

Changes in the components of accumulated other comprehensive income (loss) (“AOCI”), net of tax, for the periods indicated are summarized in the table below.

	For the three months ended September 30, 2018
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(2,156	)	$	(3,248	)	$	(67	)	$	(5,471	)
Other comprehensive income before reclassifications		-			(456	)		4			(452	)
Amounts reclassified from AOCI		31			44			-			75
Ending balance	$	(2,125	)	$	(3,660	)	$	(63	)	$	(5,848	)

	For the three months ended September 30, 2017
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(1,468	)	$	(523	)	$	(429	)	$	(2,420	)
Other comprehensive income before reclassifications		-			(103	)		15			(88	)
Amounts reclassified from AOCI		22			(65	)		-			(43	)
Ending balance	$	(1,446	)	$	(691	)	$	(414	)	$	(2,551	)

	For the nine months ended September 30, 2018
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Unrealized Loss on Securities Transferred to Held-to-Maturity			Total
Beginning balance	$	(2,220	)	$	(1,558	)	$	(430	)	$	(4,208	)
Other comprehensive income before reclassifications		-			(2,305	)		124			(2,181	)
Amounts reclassified from AOCI		95			140			-			235
Cumulative effect of change in measurement of equity    securities (1)		-			(53	)		-			(53	)
Cumulative effect of change in investment securities transfer (2)		-			116			243			359
Ending balance	$	(2,125	)	$	(3,660	)	$	(63	)	$	(5,848	)

(1) Cumulative effect of unrealized gain on marketable equity securities based on the adoption of ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities.

(2) Cumulative effect of unrealized gains on the transfer of 52 investment securities from held-to-maturity classification to available-for-sale classification based on the adoption of ASU 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

	For the nine months ended September 30, 2017
(In thousands)	Retirement Plans			Unrealized Gains and Losses on Available- for-Sale Securities			Securities reclassified from AFS to HTM			Total
Beginning balance	$	(1,513	)	$	(1,845	)	$	(464	)	$	(3,822	)
Other comprehensive income before reclassifications		-			1,342			50			1,392
Amounts reclassified from AOCI		67			(188	)		-			(121	)
Ending balance	$	(1,446	)	$	(691	)	$	(414	)	$	(2,551	)

Schedule of Amounts Reclassified Out of Each Component of AOCI

The following table presents the amounts reclassified out of each component of AOCI for the indicated period:

	Amount Reclassified							Amount Reclassified
	from AOCI (1)							from AOCI (1)
	(Unaudited)							(Unaudited)
(In thousands)	For the three months ended							For the nine months ended
Details about AOCI (1) components	September 30, 2018			September 30, 2017			Affected Line Item in the Statement of Income	September 30, 2018			September 30, 2017
Retirement plan items
Retirement plan net losses    recognized in plan expenses (2)	$	(43	)	$	(37	)	Salaries and employee benefits	$	(129	)	$	(109	)
Tax effect		12			15		Provision for income taxes		34			42
	$	(31	)	$	(22	)	Net Income	$	(95	)	$	(67	)
Available-for-sale securities
Realized gain on sale of securities	$	(60	)	$	108		Net gains on sales and redemptions of    investment securities	$	(189	)	$	314
Tax effect		16			(43	)	Provision for income taxes		49			(126	)
	$	(44	)	$	65		Net Income	$	(140	)	$	188

(1)Amounts in parentheses indicates debits in net income.

(2) These items are included in net periodic pension cost.  

      See Note 5 for additional information.

XML

Noninterest Income (Tables)

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Summary of Noninterest Income

The Company has included the following table regarding the Company’s noninterest income for the periods presented.

	For the three months					For the nine months
	ended September 30,					ended September 30,
(In thousands)	2018			2017		2018			2017
Service fees
Insufficient funds fees	$	218		$	224	$	618		$	617
Deposit related fees		49			46		148			141
ATM fees		24			25		72			74
Total service fees		291			295		838			832
Fee Income
Insurance commissions		172			175		632			627
Investment services revenue		70			40		218			186
ATM fees surcharge		71			65		178			170
Banking house rents collected		34			26		100			81
Total fee income		347			306		1,128			1,064
Card income
Debit card interchange fees		141			105		432			373
Merchant card fees		21			15		54			40
Total card income		162			120		486			413
Mortgage fee income and realized gain on sale of loans   and foreclosed real estate
Loan servicing fees		25			44		108			112
Net gains (losses) on sales of loans and foreclosed real estate		8			2		24			(43	)
Total mortgage fee income and realized gain on sale of    loans and foreclosed real estate		33			46		132			69
Total		833			767		2,584			2,378
Earnings and gain on bank owned life insurance		138			92		319			225
Net (losses) gains on sales and redemptions of investment    securities		(60	)		108		(189	)		314
Gains on equity securities		-			-		26			-
Other miscellaneous income		29			14		119			51
Total noninterest income	$	940		$	981	$	2,859		$	2,968

XML

Basis of Presentation - Additional Information (Details)	Sep. 30, 2018
Nature of Operations [Line Items]
Consolidation of membership interest in Fitzgibbons	100.00%
FitzGibbons Agency LLC [Member] | Pathfinder Risk Management Company Inc [Member]
Nature of Operations [Line Items]
Membership interest own in Fitzgibbons through subsidiary	51.00%
Noncontrolling interest by subsidiary	49.00%

XML

New Accounting Pronouncements - Additional Information (Details) $ in Millions	Sep. 30, 2018 USD ($)
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Lessee, Operating Lease, Term of Contract	12 months
ASU 2016-02 [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Minimum lease payments under noncancelable operating lease agreements	$ 1.0

XML

Earnings per Common Share - Additional Information (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive stock options (in shares)	0	0	0	30,754

XML

Earnings per Common Share - Calculations of Basic and Diluted Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Basic Earnings Per Common Share [Abstract]
Net income available to common shareholders	$ 985	$ 907	$ 2,934	$ 2,627
Weighted average common shares outstanding (in shares)	4,195	4,090	4,157	4,072
Basic earnings per common share	$ 0.23	$ 0.22	$ 0.71	$ 0.65
Diluted Earnings Per Common Share [Abstract]
Net income available to common shareholders	$ 985	$ 907	$ 2,934	$ 2,627
Weighted average common shares outstanding (in shares)	4,195	4,090	4,157	4,072
Effect of assumed exercise of stock options (in shares)	84	108	100	106
Diluted weighted average common shares outstanding (in shares)	4,279	4,198	4,257	4,178
Diluted earnings per common share	$ 0.23	$ 0.22	$ 0.69	$ 0.63

XML

Investment Securities - Amortized Cost and Estimated Fair Value of Investment Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	$ 193,702
Total investment securities, amortized cost basis	193,907	$ 173,246
Gross Unrealized Gains	239	290
Gross Unrealized Losses	(5,193)	(2,398)
Estimated Fair Value	188,953	171,138
Held-to-maturity securities, debt maturities, Amortized Cost	26,084	66,196
Held to maturity, gross unrealized gains	41	949
Held to maturity, gross unrealized losses	(497)	(719)
Held-to-maturity Securities, Debt Maturities, Fair Value	25,628	66,426
US Treasury, Agencies and GSEs [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	22,213	41,489
Gross Unrealized Gains, Debt investment securities	0	1
Gross Unrealized Losses, Debt investment securities	(225)	(154)
Available-for-sale Securities, Debt investment securities	21,988	41,336
Held-to-maturity securities, debt maturities, Amortized Cost	3,985	4,948
Held to maturity, gross unrealized gains	0	14
Held to maturity, gross unrealized losses	(47)	(14)
Held-to-maturity Securities, Debt Maturities, Fair Value	3,938	4,948
State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	23,765	13,960
Gross Unrealized Gains, Debt investment securities	0	12
Gross Unrealized Losses, Debt investment securities	(900)	(291)
Available-for-sale Securities, Debt investment securities	22,865	13,681
Held-to-maturity securities, debt maturities, Amortized Cost	5,304	35,130
Held to maturity, gross unrealized gains	14	641
Held to maturity, gross unrealized losses	(109)	(311)
Held-to-maturity Securities, Debt Maturities, Fair Value	5,209	35,460
Corporate [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	17,453	8,584
Gross Unrealized Gains, Debt investment securities	191	108
Gross Unrealized Losses, Debt investment securities	(356)	(92)
Available-for-sale Securities, Debt investment securities	17,288	8,600
Held-to-maturity securities, debt maturities, Amortized Cost	6,196	8,311
Held to maturity, gross unrealized gains	6	151
Held to maturity, gross unrealized losses	(207)	(159)
Held-to-maturity Securities, Debt Maturities, Fair Value	5,995	8,303
Asset Backed Securities [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	21,045	6,662
Gross Unrealized Gains, Debt investment securities	3	12
Gross Unrealized Losses, Debt investment securities	(175)	(30)
Available-for-sale Securities, Debt investment securities	20,873	6,644
Residential Mortgage-Backed - US Agency [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	34,137	36,214
Gross Unrealized Gains, Debt investment securities	22	23
Gross Unrealized Losses, Debt investment securities	(1,126)	(495)
Available-for-sale Securities, Debt investment securities	33,033	35,742
Held-to-maturity securities, debt maturities, Amortized Cost	3,691	6,853
Held to maturity, gross unrealized gains	1	53
Held to maturity, gross unrealized losses	(96)	(10)
Held-to-maturity Securities, Debt Maturities, Fair Value	3,596	6,896
Collateralized Mortgage Obligations - US Agency [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	51,198	54,481
Gross Unrealized Gains, Debt investment securities	3	0
Gross Unrealized Losses, Debt investment securities	(1,996)	(1,133)
Available-for-sale Securities, Debt investment securities	49,205	53,348
Held-to-maturity securities, debt maturities, Amortized Cost	2,953	7,574
Held to maturity, gross unrealized gains	1	83
Held to maturity, gross unrealized losses	(9)	(215)
Held-to-maturity Securities, Debt Maturities, Fair Value	2,945	7,442
Collateralized Mortgage Obligations - Private Label [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	23,891	11,193
Gross Unrealized Gains, Debt investment securities	20	62
Gross Unrealized Losses, Debt investment securities	(415)	(203)
Available-for-sale Securities, Debt investment securities	23,496	11,052
Held-to-maturity securities, debt maturities, Amortized Cost	3,955	3,380
Held to maturity, gross unrealized gains	19	7
Held to maturity, gross unrealized losses	(29)	(10)
Held-to-maturity Securities, Debt Maturities, Fair Value	3,945	3,377
Debt Securities [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Totals, amortized cost	193,702	172,583
Gross Unrealized Gains, Debt investment securities	239	218
Gross Unrealized Losses, Debt investment securities	(5,193)	(2,398)
Available-for-sale Securities, Debt investment securities	188,748	170,403
Mutual funds Common Stock Financial Services Industry [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Amortized cost, equity securities	205	663
Gross Unrealized Gains, Equity investment securities	0	72
Gross Unrealized Losses, Equity investment securities	0	0
Available-for-sale Securities, Equity investment securities	205	735
Equity and Other Investments [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Amortized cost, equity securities	205	663
Gross Unrealized Gains, Equity investment securities	0	72
Gross Unrealized Losses, Equity investment securities	0	0
Available-for-sale Securities, Equity investment securities	$ 205	$ 735

XML

Investment Securities - Amortized Cost and Estimated Fair Value of Debt Investments by Contractual Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Available-for-sale securities, debt maturities, amortized cost [Abstract]
Due in one year or less	$ 5,320
Due after one year through five years	34,938
Due after five years through ten years	23,671
Due after ten years	20,547
Sub-total	84,476
Amortized cost	193,702
Available-for-sale securities, debt maturities, Estimated Fair Value [Abstract]
Due in one year or less	5,314
Due after one year through five years	34,738
Due after five years through ten years	23,059
Due after ten years	19,903
Sub-total	83,014
Available-for-sale securities, debt maturities, fair value, totals	188,748
Held-to-maturity Securities, debt maturities, amortized cost [Abstract]
Due in one year or less	2,306
Due after one year through five years	5,534
Due after five years through ten years	4,810
Due after ten years	2,835
Sub-total	15,485
Held-to-maturity securities, debt maturities, Amortized Cost	26,084	$ 66,196
Held-to-maturity Securities, debt maturities, Estimated Fair Value [Abstract]
Due in one year or less	2,296
Due after one year through five years	5,484
Due after five years through ten years	4,719
Due after ten years	2,643
Sub-total	15,142
Held-to-maturity securities at fair value	25,628	66,426
Residential Mortgage-Backed - US Agency [Member]
Available-for-sale securities, debt maturities, amortized cost [Abstract]
Amortized cost	34,137	36,214
Available-for-sale securities, debt maturities, Estimated Fair Value [Abstract]
Available-for-sale securities, debt maturities, fair value, totals	33,033
Held-to-maturity Securities, debt maturities, amortized cost [Abstract]
Held-to-maturity securities, debt maturities, Amortized Cost	3,691	6,853
Held-to-maturity Securities, debt maturities, Estimated Fair Value [Abstract]
Held-to-maturity securities at fair value	3,596	6,896
Collateralized Mortgage Obligations - US Agency [Member]
Available-for-sale securities, debt maturities, amortized cost [Abstract]
Amortized cost	51,198	54,481
Available-for-sale securities, debt maturities, Estimated Fair Value [Abstract]
Available-for-sale securities, debt maturities, fair value, totals	49,205
Held-to-maturity Securities, debt maturities, amortized cost [Abstract]
Held-to-maturity securities, debt maturities, Amortized Cost	2,953	7,574
Held-to-maturity Securities, debt maturities, Estimated Fair Value [Abstract]
Held-to-maturity securities at fair value	2,945	7,442
Collateralized Mortgage Obligations - Private Label [Member]
Available-for-sale securities, debt maturities, amortized cost [Abstract]
Amortized cost	23,891	11,193
Available-for-sale securities, debt maturities, Estimated Fair Value [Abstract]
Available-for-sale securities, debt maturities, fair value, totals	23,496
Held-to-maturity Securities, debt maturities, amortized cost [Abstract]
Held-to-maturity securities, debt maturities, Amortized Cost	3,955	3,380
Held-to-maturity Securities, debt maturities, Estimated Fair Value [Abstract]
Held-to-maturity securities at fair value	$ 3,945	$ 3,377

XML

Investment Securities - Investment Securities' Gross Unrealized Losses and Fair Value by Investment Category and Length of Time that Individual Securities Have Continuous Unrealized Loss Position (Details)	Sep. 30, 2018 USD ($) Security	Dec. 31, 2017 USD ($) Security
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	13	18
Number of securities in unrealized loss positions, twelve months or more | Security	11	13
Number of securities in unrealized loss positions | Security	24	31
Less than twelve months Fair Value	$ 9,562,000	$ 16,516,000
Twelve months or more Fair Value	7,624,000	11,719,000
Total Fair Value	17,186,000	28,235,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(169,000)	(302,000)
Twelve months or more Unrealized Losses	(328,000)	(417,000)
Total Unrealized Losses	$ (497,000)	$ (719,000)
US Treasury, Agencies and GSEs [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	3	5
Number of securities in unrealized loss positions, twelve months or more | Security	3	4
Number of securities in unrealized loss positions | Security	6	9
Less than twelve months Fair Value	$ 13,038,000	$ 27,359,000
Twelve months or more Fair Value	6,930,000	13,957,000
Total Fair Value	19,968,000	41,316,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(156,000)	(105,000)
Twelve months or more Unrealized Losses	(69,000)	(49,000)
Total Unrealized Losses	$ (225,000)	$ (154,000)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	3	2
Number of securities in unrealized loss positions, twelve months or more | Security	1	1
Number of securities in unrealized loss positions | Security	4	3
Less than twelve months Fair Value	$ 2,965,000	$ 1,990,000
Twelve months or more Fair Value	973,000	988,000
Total Fair Value	3,938,000	2,978,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(20,000)	(2,000)
Twelve months or more Unrealized Losses	(27,000)	(12,000)
Total Unrealized Losses	$ (47,000)	$ (14,000)
State and Political Subdivisions [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	15	18
Number of securities in unrealized loss positions, twelve months or more | Security	18	12
Number of securities in unrealized loss positions | Security	33	30
Less than twelve months Fair Value	$ 9,122,000	$ 2,480,000
Twelve months or more Fair Value	12,090,000	5,041,000
Total Fair Value	21,212,000	7,521,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(189,000)	(24,000)
Twelve months or more Unrealized Losses	(711,000)	(267,000)
Total Unrealized Losses	$ (900,000)	$ (291,000)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	3	8
Number of securities in unrealized loss positions, twelve months or more | Security	6	11
Number of securities in unrealized loss positions | Security	9	19
Less than twelve months Fair Value	$ 1,390,000	$ 5,668,000
Twelve months or more Fair Value	2,294,000	8,644,000
Total Fair Value	3,684,000	14,312,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(8,000)	(55,000)
Twelve months or more Unrealized Losses	(101,000)	(256,000)
Total Unrealized Losses	$ (109,000)	$ (311,000)
Corporate [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	11	2
Number of securities in unrealized loss positions, twelve months or more | Security	2	1
Number of securities in unrealized loss positions | Security	13	3
Less than twelve months Fair Value	$ 8,373,000	$ 1,791,000
Twelve months or more Fair Value	1,613,000	1,727,000
Total Fair Value	9,986,000	3,518,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(184,000)	(19,000)
Twelve months or more Unrealized Losses	(172,000)	(73,000)
Total Unrealized Losses	$ (356,000)	$ (92,000)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	2	3
Number of securities in unrealized loss positions, twelve months or more | Security	1	1
Number of securities in unrealized loss positions | Security	3	4
Less than twelve months Fair Value	$ 1,266,000	$ 1,412,000
Twelve months or more Fair Value	1,962,000	2,087,000
Total Fair Value	3,228,000	3,499,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(47,000)	(10,000)
Twelve months or more Unrealized Losses	(160,000)	(149,000)
Total Unrealized Losses	$ (207,000)	$ (159,000)
Asset Backed Securities [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	10	2
Number of securities in unrealized loss positions, twelve months or more | Security	1	1
Number of securities in unrealized loss positions | Security	11	3
Less than twelve months Fair Value	$ 15,327,000	$ 3,123,000
Twelve months or more Fair Value	1,013,000	742,000
Total Fair Value	16,340,000	3,865,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(154,000)	(17,000)
Twelve months or more Unrealized Losses	(21,000)	(13,000)
Total Unrealized Losses	$ (175,000)	$ (30,000)
Residential Mortgage-Backed - US Agency [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	9	15
Number of securities in unrealized loss positions, twelve months or more | Security	18	9
Number of securities in unrealized loss positions | Security	27	24
Less than twelve months Fair Value	$ 8,975,000	$ 21,551,000
Twelve months or more Fair Value	20,315,000	10,463,000
Total Fair Value	29,290,000	32,014,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(269,000)	(159,000)
Twelve months or more Unrealized Losses	(857,000)	(336,000)
Total Unrealized Losses	$ (1,126,000)	$ (495,000)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	4	2
Number of securities in unrealized loss positions, twelve months or more | Security	1	0
Number of securities in unrealized loss positions | Security	5	2
Less than twelve months Fair Value	$ 2,939,000	$ 1,909,000
Twelve months or more Fair Value	312,000	0
Total Fair Value	3,251,000	1,909,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(85,000)	(10,000)
Twelve months or more Unrealized Losses	(11,000)	0
Total Unrealized Losses	$ (96,000)	$ (10,000)
Collateralized Mortgage Obligations - US Agency [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	9	14
Number of securities in unrealized loss positions, twelve months or more | Security	26	21
Number of securities in unrealized loss positions | Security	35	35
Less than twelve months Fair Value	$ 15,033,000	$ 23,790,000
Twelve months or more Fair Value	31,906,000	25,395,000
Total Fair Value	46,939,000	49,185,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(198,000)	(195,000)
Twelve months or more Unrealized Losses	(1,798,000)	(938,000)
Total Unrealized Losses	$ (1,996,000)	$ (1,133,000)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	1	2
Number of securities in unrealized loss positions, twelve months or more | Security	0	0
Number of securities in unrealized loss positions | Security	1	2
Less than twelve months Fair Value	$ 1,002,000	$ 4,418,000
Twelve months or more Fair Value	0	0
Total Fair Value	1,002,000	4,418,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(9,000)	(215,000)
Twelve months or more Unrealized Losses	0	0
Total Unrealized Losses	$ (9,000)	$ (215,000)
Collateralized Mortgage Obligations - Private Label [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	7	4
Number of securities in unrealized loss positions, twelve months or more | Security	6	0
Number of securities in unrealized loss positions | Security	13	4
Less than twelve months Fair Value	$ 13,989,000	$ 7,439,000
Twelve months or more Fair Value	6,807,000	0
Total Fair Value	20,796,000	7,439,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(283,000)	(203,000)
Twelve months or more Unrealized Losses	(132,000)	0
Total Unrealized Losses	$ (415,000)	$ (203,000)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	0	1
Number of securities in unrealized loss positions, twelve months or more | Security	2	0
Number of securities in unrealized loss positions | Security	2	1
Less than twelve months Fair Value	$ 0	$ 1,119,000
Twelve months or more Fair Value	2,083,000	0
Total Fair Value	2,083,000	1,119,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	0	(10,000)
Twelve months or more Unrealized Losses	(29,000)	0
Total Unrealized Losses	$ (29,000)	$ (10,000)
Debt Securities [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities in unrealized loss positions, less than twelve months | Security	64	60
Number of securities in unrealized loss positions, twelve months or more | Security	74	48
Number of securities in unrealized loss positions | Security	138	108
Less than twelve months Fair Value	$ 83,857,000	$ 87,533,000
Twelve months or more Fair Value	80,674,000	57,325,000
Total Fair Value	164,531,000	144,858,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than twelve months Unrealized Losses	(1,433,000)	(722,000)
Twelve months or more Unrealized Losses	(3,760,000)	(1,676,000)
Total Unrealized Losses	$ (5,193,000)	$ (2,398,000)

XML

Investment Securities - Additional Information (Details)	9 Months Ended
	Sep. 30, 2018 USD ($) Security	Dec. 31, 2017 USD ($) Security
Held-to-maturity Securities [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	11	13
Held to maturity sale securities aggregate market value	$ 7,624,000	$ 11,719,000
Held-to-maturity securities unrealized aggregate loss	328,000	417,000
Gain (Loss) on Sale of Investments [Abstract]
Classification from investment securities from held-to-maturity to available-for-sale amortized cost before transfer	26,084,000	66,196,000
Securities pledged to collateralize deposit	103,100,000	113,000,000
Securities pledged to collateralize borrowing	$ 19,100,000	$ 19,900,000
ASU 2017-12 [Member]
Gain (Loss) on Sale of Investments [Abstract]
Number of investment securities classified from held-to-maturity to available-for-sale. | Security	52
Classification from investment securities from held-to-maturity to available-for-sale amortized cost before transfer	$ 35,200,000
Municipal Securities [Member]
Schedule of Available-for-sale Securities and Held-to-Maturity Securities [Line Items]
Months of unrealized loss positions	12 months
State and Political Subdivisions [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	18	12
Available for sale securities continuous unrealized loss position twelve months or more amortized historical cost basis	$ 12,800,000
Available for sale securities aggregate market value	12,090,000	$ 5,041,000
Available for sale securities unrealized aggregate loss	$ 711,000	$ 267,000
Available for sale securities unrealized aggregate loss percentage	5.60%
Held-to-maturity Securities [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	6	11
Held to maturity securities continuous unrealized loss position greater than twelve months amortized historical cost basis	$ 2,400,000
Held to maturity sale securities aggregate market value	2,294,000	$ 8,644,000
Held-to-maturity securities unrealized aggregate loss	$ 101,000	256,000
Held-to-maturity securities unrealized aggregate loss percentage	4.40%
Gain (Loss) on Sale of Investments [Abstract]
Classification from investment securities from held-to-maturity to available-for-sale amortized cost before transfer	$ 5,304,000	$ 35,130,000
Corporate [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	2	1
Available for sale securities continuous unrealized loss position twelve months or more amortized historical cost basis	$ 1,800,000
Available for sale securities aggregate market value	1,613,000	$ 1,727,000
Available for sale securities unrealized aggregate loss	$ 172,000	$ 73,000
Available for sale securities unrealized aggregate loss percentage	10.70%
Held-to-maturity Securities [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	1	1
Held to maturity securities continuous unrealized loss position greater than twelve months amortized historical cost basis	$ 2,100,000
Held to maturity sale securities aggregate market value	1,962,000	$ 2,087,000
Held-to-maturity securities unrealized aggregate loss	$ 160,000	149,000
Held-to-maturity securities unrealized aggregate loss percentage	7.60%
Gain (Loss) on Sale of Investments [Abstract]
Classification from investment securities from held-to-maturity to available-for-sale amortized cost before transfer	$ 6,196,000	$ 8,311,000
Fixed Rate, Private-label Asset-backed Security [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	1	1
Available for sale securities aggregate market value	$ 1,013,000	$ 742,000
Available for sale securities unrealized aggregate loss	$ 21,000	$ 13,000
Available for sale securities unrealized aggregate loss percentage	2.10%
Available for sale securities book value	$ 1,000,000
Fixed Rate, Private-label Mortgage-backed Securities Unrated [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	5
Available for sale securities continuous unrealized loss position twelve months or more amortized historical cost basis	$ 6,400,000
Available for sale securities aggregate market value	6,300,000
Available for sale securities unrealized aggregate loss	$ 123,000
Available for sale securities unrealized aggregate loss percentage	2.00%
Held-to-maturity Securities [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	2
Held to maturity securities continuous unrealized loss position greater than twelve months amortized historical cost basis	$ 2,100,000
Held to maturity sale securities aggregate market value	2,100,000
Held-to-maturity securities unrealized aggregate loss	$ 29,000
Held-to-maturity securities unrealized aggregate loss percentage	1.40%
Fixed Rate, Private-label Mortgage-backed Security Rated [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Number of securities in unrealized loss positions, twelve months or more | Security	1
Available for sale securities aggregate market value	$ 509,000
Available for sale securities unrealized aggregate loss	$ 9,000
Available for sale securities unrealized aggregate loss percentage	1.70%
Available for sale securities aggregate book value of securities rated at highest investment grade rating	$ 518,000

XML

Investment Securities - Gross Realized Gains (Losses) on Sale of Securities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Gain Loss On Sale Of Investments [Abstract]
Realized gains on investments	$ 76	$ 165	$ 236	$ 313
Realized gains on hedging activity	0	0	0	250
Realized losses on investments	(136)	(57)	(425)	(249)
Total	(60)	108	(189)	314
Gains on equity securities	0	0	26	0
Gain (losses) on sale of securities, net	$ 0	$ 0	$ 26	$ 0

XML

Pension and Postretirement Benefits - Additional Information (Details) - USD ($)	3 Months Ended	9 Months Ended
	Jun. 30, 2018	Sep. 30, 2018
Defined Benefit Plan Disclosure [Line Items]
Minimum years of service to participate in the health and life insurance benefits as of January 1, 1995		14 years
Pension Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Company contribution to defined benefit pension plan	$ 825,000

XML

Pension and Postretirement Benefits - Composition of Net Periodic Pension Plan and Postretirement Plan Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Pension Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 119	$ 118	$ 355	$ 355
Expected return on plan assets	(260)	(236)	(778)	(709)
Amortization of net losses/(gains)	41	39	123	115
Net periodic benefit plan (benefit) cost	(100)	(79)	(300)	(239)
Postretirement Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	5	2	16	6
Amortization of prior service credits	(1)		(3)
Amortization of net losses/(gains)	3	$ (2)	9	$ (6)
Net periodic benefit plan (benefit) cost	$ 7		$ 22

XML

Loans - Major Classification of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	$ 621,059	$ 581,244	$ 566,903
Net deferred loan fees	(200)	(413)
Less allowance for loan losses	(7,804)	(7,126)
Loans receivable, net	613,055	573,705
Residential Mortgage Loans [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	235,718	222,351
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	231,830	216,793	209,147
Residential Mortgage Loans [Member] | Construction [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	3,888	5,558
Commercial Loans [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	332,946	304,312
Commercial Loans [Member] | Real Estate [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	213,303	192,525	187,960
Commercial Loans [Member] | Lines of Credit [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	48,496	51,285	53,888
Commercial Loans [Member] | Other Commercial and Industrial [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	60,984	50,097	43,779
Commercial Loans [Member] | Tax Exempt Loans [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	10,163	10,405	11,064
Consumer Loans [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	52,395	54,581
Consumer Loans [Member] | Home Equity and Junior Liens [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	25,985	25,935	25,408
Consumer Loans [Member] | Other Consumer [Member]
Notes, Loans and Financing Receivable, Net [Abstract]
Total loans	$ 26,410	$ 28,646	$ 29,733

XML

Loans - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) Loan	Sep. 30, 2017 Loan	Sep. 30, 2018 USD ($) Loan Segment	Sep. 30, 2017 Loan	Dec. 31, 2017 USD ($) Loan	Apr. 30, 2017 USD ($)	Jan. 31, 2017 USD ($)
Accounts Notes And Loans Receivable [Line Items]
Loans acquired | $						$ 10,200,000	$ 15,600,000
Participating interest of acquired loan percentage			90.00%
Number of loans secured by liens on automobiles | Loan			1,231
Number of loans outstanding | Loan	954		954		1,082
Loans acquired carrying amount | $	$ 14,800,000		$ 14,800,000		$ 19,600,000
Number of acquired loan cumulative net charge-offs | Loan			16
Acquired loans cumulative net charge-offs | $			$ 89,000
Acquired loans net charge-offs | $			$ 44,000,000
Number of portfolio segment | Segment			3
Troubled Debt Restructuring During Prior Twelve Months [Member]
Accounts Notes And Loans Receivable [Line Items]
Number of loans | Loan	0
Number of loans subsequently defaulted | Loan	0	0	0	1
Residential Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Residential mortgage loans pledged to FHLBNY as blanket collateral | $	$ 153,100,000		$ 153,100,000		$ 148,100,000
Minimum [Member]
Accounts Notes And Loans Receivable [Line Items]
Maturity period of acquired loans			2 years
Maximum [Member]
Accounts Notes And Loans Receivable [Line Items]
Maturity period of acquired loans			6 years

XML

Loans - Summary of Classes of Loan Portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Financing Receivable Recorded Investment [Line Items]
Total loans	$ 621,059	$ 581,244	$ 566,903
Pass [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	610,224	568,086
Special Mention [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	2,994	2,981
Substandard [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	3,364	5,259
Doubtful [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	4,477	4,918
Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	235,718	222,351
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	231,830	216,793	209,147
Residential Mortgage Loans [Member] | Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	3,888	5,558
Residential Mortgage Loans [Member] | Pass [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	232,023	217,383
Residential Mortgage Loans [Member] | Pass [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	228,135	211,825
Residential Mortgage Loans [Member] | Pass [Member] | Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	3,888	5,558
Residential Mortgage Loans [Member] | Special Mention [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	663	891
Residential Mortgage Loans [Member] | Special Mention [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	663	891
Residential Mortgage Loans [Member] | Special Mention [Member] | Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	0	0
Residential Mortgage Loans [Member] | Substandard [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	694	1,869
Residential Mortgage Loans [Member] | Substandard [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	694	1,869
Residential Mortgage Loans [Member] | Substandard [Member] | Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	0	0
Residential Mortgage Loans [Member] | Doubtful [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	2,338	2,208
Residential Mortgage Loans [Member] | Doubtful [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	2,338	2,208
Residential Mortgage Loans [Member] | Doubtful [Member] | Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	0	0
Commercial Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	332,946	304,312
Commercial Loans [Member] | Real Estate [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	213,303	192,525	187,960
Commercial Loans [Member] | Lines of Credit [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	48,496	51,285	53,888
Commercial Loans [Member] | Other Commercial and Industrial [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	60,984	50,097	43,779
Commercial Loans [Member] | Tax Exempt Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	10,163	10,405	11,064
Commercial Loans [Member] | Pass [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	326,368	296,723
Commercial Loans [Member] | Pass [Member] | Real Estate [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	208,188	187,073
Commercial Loans [Member] | Pass [Member] | Lines of Credit [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	48,170	50,507
Commercial Loans [Member] | Pass [Member] | Other Commercial and Industrial [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	59,847	48,738
Commercial Loans [Member] | Pass [Member] | Tax Exempt Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	10,163	10,405
Commercial Loans [Member] | Special Mention [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	2,056	1,974
Commercial Loans [Member] | Special Mention [Member] | Real Estate [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	1,513	1,372
Commercial Loans [Member] | Special Mention [Member] | Lines of Credit [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	164	195
Commercial Loans [Member] | Special Mention [Member] | Other Commercial and Industrial [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	379	407
Commercial Loans [Member] | Special Mention [Member] | Tax Exempt Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	0	0
Commercial Loans [Member] | Substandard [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	2,495	3,079
Commercial Loans [Member] | Substandard [Member] | Real Estate [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	1,749	2,024
Commercial Loans [Member] | Substandard [Member] | Lines of Credit [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	122	523
Commercial Loans [Member] | Substandard [Member] | Other Commercial and Industrial [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	624	532
Commercial Loans [Member] | Substandard [Member] | Tax Exempt Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	0	0
Commercial Loans [Member] | Doubtful [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	2,027	2,536
Commercial Loans [Member] | Doubtful [Member] | Real Estate [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	1,853	2,056
Commercial Loans [Member] | Doubtful [Member] | Lines of Credit [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	40	60
Commercial Loans [Member] | Doubtful [Member] | Other Commercial and Industrial [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	134	420
Commercial Loans [Member] | Doubtful [Member] | Tax Exempt Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	0	0
Consumer Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	52,395	54,581
Consumer Loans [Member] | Home Equity and Junior Liens [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	25,985	25,935	25,408
Consumer Loans [Member] | Other Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	26,410	28,646	$ 29,733
Consumer Loans [Member] | Pass [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	51,833	53,980
Consumer Loans [Member] | Pass [Member] | Home Equity and Junior Liens [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	25,632	25,396
Consumer Loans [Member] | Pass [Member] | Other Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	26,201	28,584
Consumer Loans [Member] | Special Mention [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	275	116
Consumer Loans [Member] | Special Mention [Member] | Home Equity and Junior Liens [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	126	61
Consumer Loans [Member] | Special Mention [Member] | Other Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	149	55
Consumer Loans [Member] | Substandard [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	175	311
Consumer Loans [Member] | Substandard [Member] | Home Equity and Junior Liens [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	140	304
Consumer Loans [Member] | Substandard [Member] | Other Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	35	7
Consumer Loans [Member] | Doubtful [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	112	174
Consumer Loans [Member] | Doubtful [Member] | Home Equity and Junior Liens [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	87	174
Consumer Loans [Member] | Doubtful [Member] | Other Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Total loans	$ 25	$ 0

XML

Loans - Age Analysis of Past Due Loans Segregated by Portfolio Segment and Class of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Recorded Investment, Past Due [Line Items]
Total Past Due	$ 13,881	$ 12,154
Current	607,178	569,090
Total Loans Receivable	621,059	581,244	$ 566,903
30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	8,477	4,259
60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	934	3,311
90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	4,470	4,584
Residential Mortgage Loans [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	2,549	4,052
Current	233,169	218,299
Total Loans Receivable	235,718	222,351
Residential Mortgage Loans [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	530	1,196
Residential Mortgage Loans [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	239	925
Residential Mortgage Loans [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	1,780	1,931
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	2,549	4,052
Current	229,281	212,741
Total Loans Receivable	231,830	216,793	209,147
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	530	1,196
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	239	925
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	1,780	1,931
Residential Mortgage Loans [Member] | Construction [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	3,888	5,558
Total Loans Receivable	3,888	5,558
Residential Mortgage Loans [Member] | Construction [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Residential Mortgage Loans [Member] | Construction [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Residential Mortgage Loans [Member] | Construction [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Commercial Loans [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	10,668	7,367
Current	322,278	296,945
Total Loans Receivable	332,946	304,312
Commercial Loans [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	7,586	2,777
Commercial Loans [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	622	2,262
Commercial Loans [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	2,460	2,328
Commercial Loans [Member] | Real Estate [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	6,133	4,321
Current	207,170	188,204
Total Loans Receivable	213,303	192,525	187,960
Commercial Loans [Member] | Real Estate [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	3,715	720
Commercial Loans [Member] | Real Estate [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	385	2,171
Commercial Loans [Member] | Real Estate [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	2,033	1,430
Commercial Loans [Member] | Lines of Credit [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	3,394	1,645
Current	45,102	49,640
Total Loans Receivable	48,496	51,285	53,888
Commercial Loans [Member] | Lines of Credit [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	3,354	1,482
Commercial Loans [Member] | Lines of Credit [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	31
Commercial Loans [Member] | Lines of Credit [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	40	132
Commercial Loans [Member] | Other Commercial and Industrial [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	1,141	1,401
Current	59,843	48,696
Total Loans Receivable	60,984	50,097	43,779
Commercial Loans [Member] | Other Commercial and Industrial [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	517	575
Commercial Loans [Member] | Other Commercial and Industrial [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	237	60
Commercial Loans [Member] | Other Commercial and Industrial [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	387	766
Commercial Loans [Member] | Tax Exempt Loans [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	10,163	10,405
Total Loans Receivable	10,163	10,405	11,064
Commercial Loans [Member] | Tax Exempt Loans [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Commercial Loans [Member] | Tax Exempt Loans [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Commercial Loans [Member] | Tax Exempt Loans [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Consumer Loans [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	664	735
Current	51,731	53,846
Total Loans Receivable	52,395	54,581
Consumer Loans [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	361	286
Consumer Loans [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	73	124
Consumer Loans [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	230	325
Consumer Loans [Member] | Home Equity and Junior Liens [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	257	430
Current	25,728	25,505
Total Loans Receivable	25,985	25,935	25,408
Consumer Loans [Member] | Home Equity and Junior Liens [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	102	94
Consumer Loans [Member] | Home Equity and Junior Liens [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	9	74
Consumer Loans [Member] | Home Equity and Junior Liens [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	146	262
Consumer Loans [Member] | Other Consumer [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	407	305
Current	26,003	28,341
Total Loans Receivable	26,410	28,646	$ 29,733
Consumer Loans [Member] | Other Consumer [Member] | 30-59 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	259	192
Consumer Loans [Member] | Other Consumer [Member] | 60-89 Days Past Due [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	64	50
Consumer Loans [Member] | Other Consumer [Member] | 90 Days and Over [Member]
Recorded Investment, Past Due [Line Items]
Total Past Due	$ 84	$ 63

XML

Loans - Nonaccrual Loans Segregated by Class of Loan (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	$ 4,678	$ 4,894
Residential Mortgage Loans [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	1,858	2,088
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	1,858	2,088
Commercial Loans [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	2,565	2,443
Commercial Loans [Member] | Real Estate [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	2,132	1,545
Commercial Loans [Member] | Lines of Credit [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	46	132
Commercial Loans [Member] | Other Commercial and Industrial [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	387	766
Consumer Loans [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	255	363
Consumer Loans [Member] | Home Equity and Junior Liens [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	146	300
Consumer Loans [Member] | Other Consumer [Member]
Nonaccrual loans, Segregated by class of loans [Abstract]
Nonaccrual status loans	$ 109	$ 63

XML

Loans - Troubled Debt Restructurings on Financing Receivables (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017 USD ($) Loan	Sep. 30, 2018 USD ($) Loan	Sep. 30, 2017 USD ($) Loan
Other Commercial and Industrial Loans [Member]
Troubled Debt Restructuring, Modified [Abstract]
Number of loans | Loan		1
Pre-modification outstanding recorded investment		$ 300
Post-modification outstanding recorded investment		300
Additional provision for loan losses		$ 0
Commercial Real Estate Loans [Member]
Troubled Debt Restructuring, Modified [Abstract]
Number of loans | Loan	1		1
Pre-modification outstanding recorded investment	$ 2,024		$ 2,024
Post-modification outstanding recorded investment	2,024		2,024
Additional provision for loan losses	$ 0		$ 0

XML

Loans - Summary of Impaired Loans Information by Portfolio Class (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
With an allowance recorded [Abstract]
Related Allowance	$ 1,164	$ 1,103
Total [Abstract]
Recorded Investment	7,522	9,243
Unpaid Principal Balance	7,586	9,300
Related Allowance	1,164	1,103
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member]
With no related allowance recorded [Abstract]
Recorded Investment	1,225	900
Unpaid Principal Balance	1,229	909
With an allowance recorded [Abstract]
Recorded Investment	610	958
Unpaid Principal Balance	610	958
Related Allowance	109	210
Total [Abstract]
Recorded Investment	1,835	1,858
Unpaid Principal Balance	1,839	1,867
Related Allowance	109	210
Commercial Loans [Member] | Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded Investment	2,288	3,314
Unpaid Principal Balance	2,345	3,360
With an allowance recorded [Abstract]
Recorded Investment	2,175	2,186
Unpaid Principal Balance	2,176	2,187
Related Allowance	593	320
Total [Abstract]
Recorded Investment	4,463	5,500
Unpaid Principal Balance	4,521	5,547
Related Allowance	593	320
Commercial Loans [Member] | Lines of Credit [Member]
With no related allowance recorded [Abstract]
Recorded Investment	116	507
Unpaid Principal Balance	116	507
With an allowance recorded [Abstract]
Recorded Investment	46	40
Unpaid Principal Balance	47	40
Related Allowance	46	40
Total [Abstract]
Recorded Investment	162	547
Unpaid Principal Balance	163	547
Related Allowance	46	40
Commercial Loans [Member] | Other Commercial and Industrial [Member]
With no related allowance recorded [Abstract]
Recorded Investment	550	523
Unpaid Principal Balance	551	524
With an allowance recorded [Abstract]
Recorded Investment	306	525
Unpaid Principal Balance	306	525
Related Allowance	276	391
Total [Abstract]
Recorded Investment	856	1,048
Unpaid Principal Balance	857	1,049
Related Allowance	276	391
Consumer Loans [Member] | Home Equity and Junior Liens [Member]
With no related allowance recorded [Abstract]
Recorded Investment	0	80
Unpaid Principal Balance	0	80
With an allowance recorded [Abstract]
Recorded Investment	206	210
Unpaid Principal Balance	206	210
Related Allowance	140	142
Total [Abstract]
Recorded Investment	206	290
Unpaid Principal Balance	206	290
Related Allowance	$ 140	$ 142

XML

Loans - Summary of Average Recorded Investment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Average recorded investment [Abstract]
Average recorded investment in impaired loans	$ 7,677	$ 8,084	$ 8,416	$ 8,135
1-4 Family First Lien Residential Mortgages [Member]
Average recorded investment [Abstract]
Average recorded investment in impaired loans	1,840	1,343	1,846	1,477
Commercial Real Estate [Member]
Average recorded investment [Abstract]
Average recorded investment in impaired loans	4,497	5,185	4,976	4,996
Commercial Lines of Credit [Member]
Average recorded investment [Abstract]
Average recorded investment in impaired loans	186	438	365	422
Other Commercial and Industrial [Member]
Average recorded investment [Abstract]
Average recorded investment in impaired loans	947	905	1,001	958
Home Equity and Junior Liens [Member]
Average recorded investment [Abstract]
Average recorded investment in impaired loans	$ 207	$ 213	$ 228	$ 282

XML

Loans - Schedule of Cash Basis Interest Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Cash Basis Interest Recognized on Impaired Loans [Abstract]
Cash basis interest income recognized on impaired loans	$ 90	$ 115	$ 234	$ 261
1-4 Family First Lien Residential Mortgages [Member]
Cash Basis Interest Recognized on Impaired Loans [Abstract]
Cash basis interest income recognized on impaired loans	16	13	48	34
Commercial Real Estate [Member]
Cash Basis Interest Recognized on Impaired Loans [Abstract]
Cash basis interest income recognized on impaired loans	62	89	128	184
Commercial Lines of Credit [Member]
Cash Basis Interest Recognized on Impaired Loans [Abstract]
Cash basis interest income recognized on impaired loans	4	4	25	16
Other Commercial and Industrial [Member]
Cash Basis Interest Recognized on Impaired Loans [Abstract]
Cash basis interest income recognized on impaired loans	5	6	24	20
Home Equity and Junior Liens [Member]
Cash Basis Interest Recognized on Impaired Loans [Abstract]
Cash basis interest income recognized on impaired loans	$ 3	$ 3	$ 9	$ 7

XML

Allowance for Loan Losses - Changes in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Allowance for loan losses:
Beginning Balance	$ 7,605	$ 6,258	$ 7,126	$ 6,247
Charge-offs	(104)	(64)	(645)	(904)
Recoveries	12	14	122	53
Provisions (credits)	291	420	1,201	1,232
Ending balance	7,804	6,628	7,804	6,628
Ending balance: related to loans individually evaluated for impairment	1,164	758	1,164	758
Ending balance: related to loans collectively evaluated for impairment	6,640	5,870	6,640	5,870
Total Loans Receivable	621,059	566,903	621,059	566,903	$ 581,244
Ending balance: individually evaluated for impairment	7,522	8,869	7,522	8,869
Ending balance: collectively evaluated for impairment	613,537	558,034	613,537	558,034
Unallocated [Member]
Allowance for loan losses:
Beginning Balance	14	0
Charge-offs	0	0		0
Recoveries	0	0		0
Provisions (credits)	264	71	278	71
Ending balance	278	71	278	71
Ending balance: related to loans individually evaluated for impairment	0	0	0	0
Ending balance: related to loans collectively evaluated for impairment	278	71	278	71
Residential Mortgage Loans [Member]
Allowance for loan losses:
Total Loans Receivable	235,718		235,718		222,351
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Allowance for loan losses:
Beginning Balance	722	813	865	759
Charge-offs	(27)	0	(219)	(156)
Recoveries	1	0	21	1
Provisions (credits)	65	(13)	94	196
Ending balance	761	800	761	800
Ending balance: related to loans individually evaluated for impairment	109	181	109	181
Ending balance: related to loans collectively evaluated for impairment	652	619	652	619
Total Loans Receivable	231,830	209,147	231,830	209,147	216,793
Ending balance: individually evaluated for impairment	1,835	1,464	1,835	1,464
Ending balance: collectively evaluated for impairment	229,995	207,683	229,995	207,683
Residential Mortgage Loans [Member] | Residential Construction Mortgage [Member]
Allowance for loan losses:
Beginning Balance	0	0
Charge-offs	0	0
Recoveries	0	0
Provisions (credits)	0	0
Ending balance	0	0	0	0
Ending balance: related to loans individually evaluated for impairment	0	0	0	0
Ending balance: related to loans collectively evaluated for impairment	0	0	0	0
Total Loans Receivable	3,888	5,924	3,888	5,924
Ending balance: individually evaluated for impairment	0	0	0	0
Ending balance: collectively evaluated for impairment	3,888	5,924	3,888	5,924
Commercial Loans [Member]
Allowance for loan losses:
Total Loans Receivable	332,946		332,946		304,312
Commercial Loans [Member] | Real Estate [Member]
Allowance for loan losses:
Beginning Balance	4,141	2,804	3,589	2,935
Charge-offs	(31)	0	(31)	(505)
Recoveries	0	0
Provisions (credits)	(170)	477	382	851
Ending balance	3,940	3,281	3,940	3,281
Ending balance: related to loans individually evaluated for impairment	593	14	593	14
Ending balance: related to loans collectively evaluated for impairment	3,347	3,267	3,347	3,267
Total Loans Receivable	213,303	187,960	213,303	187,960	192,525
Ending balance: individually evaluated for impairment	4,463	5,896	4,463	5,896
Ending balance: collectively evaluated for impairment	208,840	182,064	208,840	182,064
Commercial Loans [Member] | Lines of Credit [Member]
Allowance for loan losses:
Beginning Balance	731	373	735	397
Charge-offs	(12)	(7)	(62)	(60)
Recoveries	0	0	66
Provisions (credits)	66	348	46	377
Ending balance	785	714	785	714
Ending balance: related to loans individually evaluated for impairment	46	40	46	40
Ending balance: related to loans collectively evaluated for impairment	739	674	739	674
Total Loans Receivable	48,496	53,888	48,496	53,888	51,285
Ending balance: individually evaluated for impairment	162	454	162	454
Ending balance: collectively evaluated for impairment	48,334	53,434	48,334	53,434
Commercial Loans [Member] | Other Commercial and Industrial [Member]
Allowance for loan losses:
Beginning Balance	1,271	1,611	1,214	1,658
Charge-offs	(1)	0	(172)	(17)
Recoveries	0	0		15
Provisions (credits)	(82)	(543)	146	(588)
Ending balance	1,188	1,068	1,188	1,068
Ending balance: related to loans individually evaluated for impairment	276	381	276	381
Ending balance: related to loans collectively evaluated for impairment	912	687	912	687
Total Loans Receivable	60,984	43,779	60,984	43,779	50,097
Ending balance: individually evaluated for impairment	856	843	856	843
Ending balance: collectively evaluated for impairment	60,128	42,936	60,128	42,936
Commercial Loans [Member] | Tax Exempt Loans [Member]
Allowance for loan losses:
Beginning Balance	1	1	1	1
Charge-offs	0	0		0
Recoveries	0	0		0
Provisions (credits)	0	0
Ending balance	1	1	1	1
Ending balance: related to loans individually evaluated for impairment	0	0	0	0
Ending balance: related to loans collectively evaluated for impairment	1	1	1	1
Total Loans Receivable	10,163	11,064	10,163	11,064	10,405
Ending balance: individually evaluated for impairment	0	0	0	0
Ending balance: collectively evaluated for impairment	10,163	11,064	10,163	11,064
Consumer Loans [Member]
Allowance for loan losses:
Total Loans Receivable	52,395		52,395		54,581
Consumer Loans [Member] | Home Equity and Junior Liens [Member]
Allowance for loan losses:
Beginning Balance	434	493	514	331
Charge-offs	0	0	(17)	(69)
Recoveries	5	5	6	6
Provisions (credits)	(18)	(8)	(82)	222
Ending balance	421	490	421	490
Ending balance: related to loans individually evaluated for impairment	140	142	140	142
Ending balance: related to loans collectively evaluated for impairment	281	348	281	348
Total Loans Receivable	25,985	25,408	25,985	25,408	25,935
Ending balance: individually evaluated for impairment	206	212	206	212
Ending balance: collectively evaluated for impairment	25,779	25,196	25,779	25,196
Consumer Loans [Member] | Other Consumer [Member]
Allowance for loan losses:
Beginning Balance	291	163	208	166
Charge-offs	(33)	(57)	(144)	(97)
Recoveries	6	9	29	31
Provisions (credits)	166	88	337	103
Ending balance	430	203	430	203
Ending balance: related to loans individually evaluated for impairment	0	0	0	0
Ending balance: related to loans collectively evaluated for impairment	430	203	430	203
Total Loans Receivable	26,410	29,733	26,410	29,733	$ 28,646
Ending balance: individually evaluated for impairment	0	0	0	0
Ending balance: collectively evaluated for impairment	$ 26,410	$ 29,733	$ 26,410	$ 29,733

XML

Allowance for Loan Losses - Schedule of Allowance for Loan Losses on Basis of Calculation Methodology (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	$ 1,164			$ 758
Historical loss rate	482			400
Qualitative factors	5,880			5,399
Other	278			71
Total	7,804	$ 7,605	$ 7,126	6,628	$ 6,258	$ 6,247
Unallocated [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	0			0
Historical loss rate	0			0
Qualitative factors	0			0
Other	278			71
Total	278	14		71	0
Residential Mortgage Loans [Member] | 1-4 Family First Lien Residential Mortgages [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	109			181
Historical loss rate	114			106
Qualitative factors	538			513
Total	761	722	865	800	813	759
Residential Mortgage Loans [Member] | Residential Construction Mortgage [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	0			0
Historical loss rate	0			0
Qualitative factors	0			0
Total	0	0		0	0
Commercial Loans [Member] | Real Estate [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	593			14
Historical loss rate	87			121
Qualitative factors	3,260			3,146
Total	3,940	4,141	3,589	3,281	2,804	2,935
Commercial Loans [Member] | Lines of Credit [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	46			40
Historical loss rate	18			77
Qualitative factors	721			597
Total	785	731	735	714	373	397
Commercial Loans [Member] | Other Commercial and Industrial [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	276			381
Historical loss rate	24			14
Qualitative factors	888			673
Total	1,188	1,271	1,214	1,068	1,611	1,658
Commercial Loans [Member] | Tax Exempt Loans [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	0			0
Historical loss rate	0			0
Qualitative factors	1			1
Other	0			0
Total	1	1	1	1	1	1
Consumer Loans [Member] | Home Equity and Junior Liens [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	140			142
Historical loss rate	21			48
Qualitative factors	260			300
Other	0			0
Total	421	434	514	490	493	331
Consumer Loans [Member] | Other Consumer [Member]
Allowance For Loan Losses On Basis Of Calculation Methodology Abstract
Specifically reserved	0			0
Historical loss rate	218			34
Qualitative factors	212			169
Other	0			0
Total	$ 430	$ 291	$ 208	$ 203	$ 163	$ 166

XML

Foreclosed Real Estate - Summary of Carrying Amount of Foreclosed Residential Real Estate Properties Held (Details) $ in Thousands	Sep. 30, 2018 USD ($) Property	Dec. 31, 2017 USD ($) Property
Real Estate Properties [Line Items]
Foreclosed real estate	$ 268	$ 468
Foreclosed Residential Real Estate [Member]
Real Estate Properties [Line Items]
Number of properties | Property	5	5
Foreclosed real estate	$ 268	$ 468

XML

Foreclosed Real Estate - Additional Information (Details)	Sep. 30, 2018 USD ($)
Real Estate Owned Disclosure Of Detailed Components [Abstract]
Residential real estate loans in the process of foreclosure	$ 996,000

XML

Guarantees - Additional Information (Details) $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($)
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Maximum amount of loss due to credit risk	$ 2.0

XML

Fair Value Measurements - Fair Value of Assets on Recurring Basis Segregated by Level of Valuation Inputs (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Equity investment securities:
Common stock - Financial services industry		$ 515
Marketable equity securities	$ 541
Level 2 [Member] | Total Fair Value [Member]
Equity investment securities:
Marketable equity securities	541	0
Recurring Basis [Member] | Total Fair Value [Member]
Debt investment securities:
US Treasury, agencies and GSEs	21,988	41,336
State and political subdivisions	22,865	13,681
Corporate	17,288	8,600
Asset backed securities	20,873	6,644
Residential mortgage-backed - US agency	33,033	35,742
Collateralized mortgage obligations - US agency	49,205	53,348
Collateralized mortgage obligations - Private label	23,496	11,052
Equity investment securities:
Common stock - Financial services industry		515
Total available-for-sale securities	188,748	170,918
Marketable equity securities	541
Recurring Basis [Member] | Level 1 [Member]
Debt investment securities:
US Treasury, agencies and GSEs	0	0
State and political subdivisions	0	0
Corporate	0	0
Asset backed securities	0	0
Residential mortgage-backed - US agency	0	0
Collateralized mortgage obligations - US agency	0	0
Collateralized mortgage obligations - Private label	0	0
Equity investment securities:
Common stock - Financial services industry		0
Total available-for-sale securities	0	0
Marketable equity securities	0
Recurring Basis [Member] | Level 2 [Member]
Debt investment securities:
US Treasury, agencies and GSEs	21,988	41,336
State and political subdivisions	22,865	13,681
Corporate	17,288	8,600
Asset backed securities	20,873	6,644
Residential mortgage-backed - US agency	33,033	35,742
Collateralized mortgage obligations - US agency	49,205	53,348
Collateralized mortgage obligations - Private label	23,496	11,052
Equity investment securities:
Common stock - Financial services industry		0
Total available-for-sale securities	188,748	170,403
Marketable equity securities	541
Recurring Basis [Member] | Level 3 [Member]
Debt investment securities:
US Treasury, agencies and GSEs	0	0
State and political subdivisions	0	0
Corporate	0	0
Asset backed securities	0	0
Residential mortgage-backed - US agency	0	0
Collateralized mortgage obligations - US agency	0	0
Collateralized mortgage obligations - Private label	0	0
Equity investment securities:
Common stock - Financial services industry		515
Total available-for-sale securities	0	$ 515
Marketable equity securities	$ 0

XML

Fair Value Measurements - Summary of Changes in Level 3 Assets and Liabilities Measured at Estimated Fair Value on Recurring Basis (Details) - Common Stock - Financial Services Industry [Member] $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Balance - December 31, 2017	$ 515
Included in earnings	0
Included in other comprehensive income	0
Settlements	0
Sales	0
Balance - September 30, 2018	0
Changes in unrealized gains included in earnings related to assets still held at September 30, 2018	0
Level 2 [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Transfers to Level 2	$ (515)

XML

Fair Value Measurements - Summary of Valuation Techniques and Significant Unobservable Inputs Used for Investments are Categorized Within Level 3 Fair Value Hierarchy (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Common Stock – Financial Services Industry	$ 515
Measurement Input, Comparability Adjustment [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Weight ascribed to comparable companies	100.00%

XML

Fair Value Measurements - Summary of Fair Value Assets Measured on Nonrecurring Basis (Details) - Nonrecurring Basis [Member] - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Total Fair Value [Member]
Nonrecurring basis [Abstract]
Impaired loans	$ 1,859	$ 4,887
Foreclosed real estate	232	434
Level 1 [Member]
Nonrecurring basis [Abstract]
Impaired loans	0	0
Foreclosed real estate	0	0
Level 2 [Member]
Nonrecurring basis [Abstract]
Impaired loans	0	0
Foreclosed real estate	0	0
Level 3 [Member]
Nonrecurring basis [Abstract]
Impaired loans	1,859	4,887
Foreclosed real estate	$ 232	$ 434

XML

Fair Value Measurements - Fair Value Inputs, Quantitative Information (Details) - Level 3 [Member] - Measurement Input, Discount Rate [Member]	Sep. 30, 2018	Dec. 31, 2017
Impaired Loans [Member] | Minimum [Member] | Appraisal of Collateral - Appraisal Adjustments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	5	5
Impaired Loans [Member] | Minimum [Member] | Appraisal of Collateral - Cost to Sell [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	7	7
Impaired Loans [Member] | Maximum [Member] | Appraisal of Collateral - Appraisal Adjustments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	10	30
Impaired Loans [Member] | Maximum [Member] | Appraisal of Collateral - Cost to Sell [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	13	13
Impaired Loans [Member] | Weighted Average [Member] | Appraisal of Collateral - Appraisal Adjustments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	5	9
Impaired Loans [Member] | Weighted Average [Member] | Appraisal of Collateral - Cost to Sell [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	11	11
Foreclosed Real Estate [Member] | Minimum [Member] | Appraisal of Collateral - Appraisal Adjustments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	15	15
Foreclosed Real Estate [Member] | Minimum [Member] | Appraisal of Collateral - Cost to Sell [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	6	6
Foreclosed Real Estate [Member] | Maximum [Member] | Appraisal of Collateral - Appraisal Adjustments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	15	15
Foreclosed Real Estate [Member] | Maximum [Member] | Appraisal of Collateral - Cost to Sell [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	8	8
Foreclosed Real Estate [Member] | Weighted Average [Member] | Appraisal of Collateral - Appraisal Adjustments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	15	15
Foreclosed Real Estate [Member] | Weighted Average [Member] | Appraisal of Collateral - Cost to Sell [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value inputs, discount rate	7	7

XML

Fair Value Measurements - Additional Information (Details)	Sep. 30, 2018 USD ($)
Common Stock [Member] | Unaffiliated [Member]
Fair Value Disclosures [Line Items]
Investment owned, at fair market value	$ 541,000

XML

Fair Value Measurements - Carrying Amounts and Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financial assets:
Investment securities - available-for-sale	$ 188,953	$ 171,138
Marketable equity securities, at fair value	541
Investment securities - held-to-maturity	25,628	66,426
Level 1 [Member] | Carrying Amounts [Member]
Financial assets:
Cash and cash equivalents	35,974	21,991
Accrued interest receivable	2,915	3,047
Financial liabilities:
Demand Deposits, Savings, NOW and MMDA	490,282	510,176
Accrued interest payable	326	186
Level 1 [Member] | Estimated Fair Values [Member]
Financial assets:
Cash and cash equivalents	35,974	21,991
Accrued interest receivable	2,915	3,047
Financial liabilities:
Demand Deposits, Savings, NOW and MMDA	490,282	510,176
Accrued interest payable	326	186
Level 2 [Member] | Carrying Amounts [Member]
Financial assets:
Investment securities - available-for-sale	188,953	170,623
Marketable equity securities, at fair value	541	0
Investment securities - held-to-maturity	26,084	66,196
Federal Home Loan Bank stock	4,187	3,855
Financial liabilities:
Time Deposits	265,922	213,427
Borrowings	79,636	73,888
Subordinated loans	15,085	15,059
Level 2 [Member] | Estimated Fair Values [Member]
Financial assets:
Investment securities - available-for-sale	188,953	170,623
Marketable equity securities, at fair value	541	0
Investment securities - held-to-maturity	25,628	66,426
Federal Home Loan Bank stock	4,187	3,855
Financial liabilities:
Time Deposits	264,215	212,453
Borrowings	79,160	73,575
Subordinated loans	14,899	14,953
Level 3 [Member] | Carrying Amounts [Member]
Financial assets:
Investment securities - available-for-sale	0	515
Net loans	613,055	573,705
Level 3 [Member] | Estimated Fair Values [Member]
Financial assets:
Investment securities - available-for-sale	0	515
Net loans	$ 598,372	$ 570,439

XML

Interest Rate Derivatives - Additional Information (Details)	6 Months Ended	9 Months Ended
	Jun. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) Security	Dec. 31, 2017 USD ($)
Derivative [Line Items]
Held-to-maturity securities, debt maturities, Amortized Cost			$ 26,084,000	$ 66,196,000
Derivative Financial Instruments [Abstract]
Proceeds from sale of U.S. Treasury securities	$ 40,000,000
Repurchase agreement period	30 days
Recognized gain on the sale and repurchase of securities		$ 250,000
Recognized tax benefits from reversal of reserves		$ 96,000
Effective tax rate		25.50%
Expected effective tax rate with no impact of hedging		28.30%
After tax interest expenses partially offset		$ 266,000
Reduction in pretax net interest margin		430,000
Increase in after-tax net income		$ 80,000
ASU 2017-12 [Member]
Derivative [Line Items]
Number of investment securities classified from held-to-maturity to available-for-sale. | Security			52
Held-to-maturity securities, debt maturities, Amortized Cost			$ 35,200,000

XML

Accumulated Other Comprehensive Income (Loss) - Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Balance				$ 62,144	$ 58,361
Other comprehensive income before reclassifications		$ (452)	$ (88)	(2,181)	1,392
Amounts reclassified from AOCI		75	(43)	235	(121)
Balance		63,563	62,389	63,563	62,389
ASU 2016-01 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[1]			(53)
ASU 2017-12 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[2]			359
Retirement Plans [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Balance		(2,156)	(1,468)	(2,220)	(1,513)
Other comprehensive income before reclassifications		0	0	0	0
Amounts reclassified from AOCI		31	22	95	67
Balance		(2,125)	(1,446)	(2,125)	(1,446)
Retirement Plans [Member] | ASU 2016-01 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[1]			0
Retirement Plans [Member] | ASU 2017-12 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[2]			0
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Balance		(3,248)	(523)	(1,558)	(1,845)
Other comprehensive income before reclassifications		(456)	(103)	(2,305)	1,342
Amounts reclassified from AOCI		44	(65)	140	(188)
Balance		(3,660)	(691)	(3,660)	(691)
Unrealized Gains and Losses on Available-for-Sale Securities [Member] | ASU 2016-01 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[1]			(53)
Unrealized Gains and Losses on Available-for-Sale Securities [Member] | ASU 2017-12 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[2]			116
Unrealized Loss on Securities Transferred to Held-to-Maturity [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Balance		(67)	(429)	(430)	(464)
Other comprehensive income before reclassifications		4	15	124	50
Amounts reclassified from AOCI		0	0	0	0
Balance		(63)	(414)	(63)	(414)
Unrealized Loss on Securities Transferred to Held-to-Maturity [Member] | ASU 2016-01 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[1]			0
Unrealized Loss on Securities Transferred to Held-to-Maturity [Member] | ASU 2017-12 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[2]			243
AOCI Attributable to Parent [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Balance		(5,471)	(2,420)	(4,208)	(3,822)
Balance		$ (5,848)	$ (2,551)	(5,848)	$ (2,551)
AOCI Attributable to Parent [Member] | ASU 2017-12 [Member]
Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Cumulative effect of change in equity securities and investment securities	[2]			$ 0

[1] Cumulative effect of unrealized gain on marketable equity securities based on the adoption of ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities.

[2] Cumulative effect of unrealized gains on the transfer of 52 investment securities from held-to-maturity classification to available-for-sale classification based on the adoption of ASU 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

XML

Accumulated Other Comprehensive Income (Loss) - Changes in the Components of Accumulated Other Comprehensive Income (Loss), Net of Tax (Parenthetical) (Details)	Sep. 30, 2018 Security
ASU 2017-12 [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Number of investment securities classified from held-to-maturity to available-for-sale.	52

XML

Accumulated Other Comprehensive Income (Loss) - Summary of Amounts Reclassified Out of Each Component of AOCI (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits		$ (3,317)	$ (2,960)	$ (9,830)	$ (8,629)
Net gains on sales and redemptions of investment securities		0	0	26	0
Provision for income taxes		(157)	(386)	(505)	(869)
Net income attributable to Pathfinder Bancorp Inc.		985	907	2,934	2,627
Reclassification out of Accumulated Other Comprehensive Income [Member] | Available-for-Sale Securities [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Net gains on sales and redemptions of investment securities	[1]	(60)	108	(189)	314
Provision for income taxes	[1]	16	(43)	49	(126)
Net income attributable to Pathfinder Bancorp Inc.	[1]	(44)	65	(140)	188
Reclassification out of Accumulated Other Comprehensive Income [Member] | Retirement Plans [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	[1],[2]	(43)	(37)	(129)	(109)
Provision for income taxes	[1],[2]	12	15	34	42
Net income attributable to Pathfinder Bancorp Inc.	[1],[2]	$ (31)	$ (22)	$ (95)	$ (67)

[1] Amounts in parentheses indicates debits in net income.

[2] These items are included in net periodic pension cost.

XML

Noninterest Income - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
ASU 2014-09 [Member]
Disaggregation Of Revenue [Line Items]
Expense recognized on credit card rewards in other costs of operations	$ 28,000	$ 29,000	$ 66,000	$ 68,000

XML

Noninterest Income - Summary of Noninterest Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation Of Revenue [Line Items]
Earnings and gain on bank owned life insurance	$ 138	$ 92	$ 319	$ 225
Net (losses) gains on sales and redemptions of investment securities	(60)	108	(189)	314
Gains on equity securities	0	0	26	0
Other miscellaneous income	29	14	119	51
Total noninterest income	940	981	2,859	2,968
Insufficient Funds Fees [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	218	224	618	617
Deposit Related Fees [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	49	46	148	141
ATM Fees [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	24	25	72	74
Service Fees [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	291	295	838	832
Insurance Commissions [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	172	175	632	627
Investment Services Revenue [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	70	40	218	186
ATM Fees Surcharge [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	71	65	178	170
Banking House Rents Collected [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	34	26	100	81
Fee Income [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	347	306	1,128	1,064
Debit Card Interchange Fees [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	141	105	432	373
Merchant Card Fees [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	21	15	54	40
Card Income [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	162	120	486	413
Loan Servicing Fees [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	25	44	108	112
Net Gains (Losses) on Sale of Loans and Foreclosed Real Estate [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	8	2	24	(43)
Total Mortgage Fee Income and Realized Gain on Sale of Loans and Foreclosed Real Estate [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	33	46	132	69
Service Fees, Fee Income, Card Income and Mortgage Fee Income and Realized Gain on Sale of Loans and Foreclosed Real Estate [Member]
Disaggregation Of Revenue [Line Items]
Noninterest income	$ 833	$ 767	$ 2,584	$ 2,378

XML

Subsequent Events - Additional Information (Details) - Subsequent Event [Member] - USD ($)		1 Months Ended
	Oct. 24, 2018	Oct. 31, 2018
Subsequent Event [Line Items]
Acquisition, price for the facility	$ 1,800,000
Acquisition price capitalized amount		$ 200,000