Pathfinder Bancorp, Inc. Announces Financial Results for the First Quarter of 2026

Pathfinder Bancorp, Inc. (“Pathfinder” or the “Company”) (Nasdaq: PBHC) announced its financial results for the first quarter ended March 31, 2026. The holding company for Pathfinder Bank (“the Bank”) reported net income attributable to common shareholders of $2.4 million or $0.38 per diluted share in the first quarter of 2026, compared to a net loss of $5.6 million, or $0.88 per diluted share in the fourth quarter of 2025 and net income of $3.0 million or $0.47 per diluted share in the first quarter of 2025. First Quarter 2026 Highlights and Key Developments First quarter 2026 net income reflected a $168,000 provision benefit attributed to lower net charge offs and overall credit performance that resulted in a small reserve reduction for loans in the first three months of this year. Fourth quarter 2025’s net loss resulted primarily from an $11.2 million credit loss provision expense, reflecting a risk-based reserve build that increased the allowance for credit losses (“ACL”) following a forward-looking assessment of loans with unique risk characteristics identified through a comprehensive review of approximately 90% of the Bank’s commercial portfolio. First quarter 2025 provision expense was $457,000.Specific reserves, including those previously established in conjunction with last year’s comprehensive commercial portfolio review, represented 63.8% of the Company’s ACL at the end of the first quarter of 2026. The ACL was $29.0 million, or 3.24% of total loans, on March 31, 2026, compared to $29.4 million, or 3.28% of loans, on December 31, 2025, and $17.4 million, or 1.91% of loans, on March 31, 2025.Loans totaled $895.2 million at March 31, 2026, compared to $896.7 million at December 31, 2025, and $912.2 million on March 31, 2025. Commercial loans grew to $549.5 million or 61.4% of total loans at March 31, 2026, compared to $543.7 million at December 31, 2025, and $542.7 million at March 31, 2025.Deposits totaled $1.21 billion at March 31, 2026, compared to $1.18 billion at December 31, 2025, and $1.26 billion at March 31, 2025. Core deposits grew to $993.7 million or 82.01% of total deposits at March 31, 2026, compared to $947.2 million at December 31, 2025, and $990.2 million at March 31, 2025.Net interest income was $10.3 million in the first quarter of 2026, compared to $10.5 million in the fourth quarter of 2025 and $11.4 million in the first quarter of 2025. Net interest margin (“NIM”) was 3.10% in the first quarter of 2026, compared to 3.09% in the linked quarter and 3.31% in the year-ago period. Approximately $347,000 of net interest income and 10 basis points of NIM in the year-ago period reflected 2024 interest recovered from loans removed from nonaccrual status and income from prepayment fees in the first quarter of 2025.Noninterest expense of $8.7 million represented 2.48% of average assets on an annualized basis in the first quarter of 2026, compared to $9.2 million or 2.51% of average assets in the fourth quarter of 2025 and $8.4 million or 2.33% of average assets in the first quarter of 2025.The efficiency ratio was 75.65% in the first quarter of 2026, compared to 74.96% for the fourth quarter of 2025 and 67.19% in the first quarter of 2025(1).Pre-tax, pre-provision (“PTPP”) net income was $2.8 million in the first quarter of 2026, compared to $3.1 million for the fourth quarter 2025 and $4.1 million in the first quarter of 2025(1). Quarterly cash dividends payable to common stockholders of $0.10 per share were declared on March 30, 2026 and are payable on May 8, 2026. “We’re pleased to report first quarter results that included positive earnings momentum, core-deposit and commercial-loan growth, and sequential-quarter NIM expansion, as well as lower net charge offs and overall credit performance that benefited from the comprehensive portfolio review and meaningful risk-based reserve build completed last year,” President and Chief Executive Officer James Dowd said. “We believe that the Company is appropriately reserved for potential exposures to the commercial credits with unique risk characteristics that we identified in 2025’s portfolio review.” Dowd added, “Throughout 2026, we intend to continue strengthening Pathfinder’s relationship-based core deposit base and driving high-quality commercial loan growth, while intensifying efforts to prudently increase local residential and consumer lending within in our Central New York markets, supported by significant liquidity, a strong balance sheet, and a robust credit framework.” (1) Non-GAAP financial metric. See “Notes on Non-GAAP Financial Measures” and non-GAAP reconciliation included herein for the most directly comparable financial measures. Net Interest Income and Net Interest Margin First quarter 2026 net interest income was $10.3 million, a decrease of $170,000, or 1.6%, from the fourth quarter of 2025. A decrease in total interest and dividend income of $792,000 in the first quarter of 2026, from the linked quarter, was primarily attributed to an average yield decrease of 13 basis points on all interest-earning assets. A 26 basis point decrease in average loan yields in the first quarter of 2026, from the linked quarter, is primarily driven by the transfer of three commercial relationships to nonperforming status as well as maturities and payoffs of higher yielding loans and their replacement with new originations at lower rates. A 17 basis point increase in taxable securities average yield in the first quarter of 2026, from the linked quarter, reflected a decline in average taxable investment securities balances which the Company views as temporary. In addition, average balances of loans, taxable securities and tax-exempt securities declined in the first quarter of 2026, from the linked quarter, by $2.8 million, $23.4 million and $314,000, respectively. Compared to the linked quarter, first quarter 2026 income from loan interest, taxable securities, tax-exempt securities and dividends decreased by $626,000, $82,000, $50,000, and $34,000, respectively, while income from federal funds sold remained flat. A decrease in total interest expense in the first quarter of 2026, from the linked quarter, of $622,000 was attributed to a 17 basis point decline in the average cost of total interest-bearing liabilities, including a reduction of 23 basis points in the average cost of interest-bearing deposits that was partially offset by increases of 6 basis points in the average cost of borrowings and 161 basis points in the average cost of subordinated loans. Fourth quarter 2025 average cost of subordinated loans benefited by 136 basis points, or $103,000, from a reversal of deferred expenses related to subordinated notes that reset from fixed to floating-rate interest after October 15, 2025. First quarter 2026 NIM was 3.10%, compared to 3.09% in the linked quarter. The 1 basis point increase from the linked quarter resulted from a reduction in the cost of interest-bearing deposits and other liabilities, which more than offset lower earning asset yields. First quarter 2026 net interest income was $10.3 million, a decrease of $1.1 million, or 9.4%, from the year-ago period. Approximately $347,000 of first quarter 2025 net interest income reflected 2024 interest recovered from loans removed from nonaccrual status and income from prepayment fees. A decrease in total interest and dividend income of $1.9 million in the first quarter of 2026, from the year-ago period, was primarily attributed to an average yield decrease of 38 basis points on all interest-earning assets. Average loan yields decreased 49 basis points from the year-ago period, reflecting in part a 15 basis point benefit recognized in the first quarter of 2025 attributable to 2024 interest recovered on loans removed from nonaccrual status and income from prepayment fees. The remaining decrease was driven by maturities and payoffs of higher-yielding loans, new originations at lower rates, and elevated nonperforming loans for which specific reserves were established as appropriate prior to the first quarter of 2026. A 14 basis point decrease in taxable securities average yield in the first quarter of 2026, from the year-ago period, reflected a decline in average taxable investment securities balances which the Company views as temporary, as well as decrease in average yield due to a declining rate environment. In addition, average balances of loans, taxable securities and tax-exempt securities declined in the first quarter of 2026, from the year-ago period, by $14.1 million, $39.3 million, and $1.0 million, respectively. Compared to the year-ago period, first quarter 2026 decreases in income from loan interest, taxable securities, tax-exempt securities, and dividends of $1.3 million, $586,000, $67,000, and $44,000, respectively, were partially offset by an increase in income from federal funds sold of $73,000. A decrease in total interest expense in the first quarter of 2026, from the year-ago period, of $868,000 was attributed to a 22 basis point decline in the average cost of total interest-bearing liabilities, including a reduction of 31 basis points in the average cost of interest-bearing deposits that was partially offset by an increase of 34 basis points in the average cost of borrowings, as well as an increase of 230 basis points in the average cost of subordinated loans that reset from bearing fixed to floating-rate interest after October 15, 2025. First quarter 2026 NIM was 3.10%, compared to 3.31% in the year-ago period. The decrease of 21 basis points primarily reflected lower earning asset yields that more than offset the reduction in the cost of interest-bearing deposits and other liabilities. In addition, approximately 10 basis points of NIM in the year-ago period reflected 2024 interest recovered from loans removed from nonaccrual status and income from prepayment fees in the first quarter of 2025. Noninterest Income First quarter 2026 noninterest income totaled $1.1 million, including a loss of $203,000 for fair value adjustments made in the period to $6.3 million in substandard loans that were transferred to held-for-sale status in the fourth quarter of 2025. Active sale negotiations remain ongoing. Fourth quarter 2025 noninterest income of $1.3 million included a loss of $398,000 that was recorded with the initial transfer of these same loans to held-for-sale status, as well as a loss of $37,000 on the sale of premises and equipment, and a reduction of $115,000 for final settlement costs associated with the insurance agency business sold in October 2024. First quarter 2025 noninterest income totaled $1.2 million. Compared to the linked quarter, first quarter 2026 noninterest income reflected increases of $27,000 in debit card interchange fees and $26,000 in earnings and gain on BOLI, as well as a decrease of $5,000 in service charges on deposit accounts. In addition, compared to the linked quarter, first quarter 2026 noninterest income also reflected increases of $53,000 in gains on sales of loans and foreclosed real estate and $14,000 in loan servicing fees, as well as decreases of $591,000 in net unrealized gains on marketable equity securities and $2,000 in net realized losses on sales and redemptions of investment securities. Net unrealized gains on marketable equity securities, which include two limited partnership equity method investments, remains a variable contributor to noninterest income, decreasing $591,000 in the first quarter of 2026 from the linked quarter. Compared to the year-ago period, first quarter 2026 noninterest income reflected increases of $94,000 in earnings and gains on BOLI, $138,000 in debit card interchange fees, and $2,000 in service charges on deposit accounts. In addition, compared to the year-ago period, first quarter 2026 noninterest income included increases of $121,000 in gains on sales of loans and foreclosed real estate and $3,000 in net realized losses on sales and redemptions of investment securities, as well as decreases of $142,000 in net unrealized gains on marketable equity securities and $12,000 in loan servicing fees. Net unrealized gains on marketable equity securities, which include two limited partnership equity method investments, remains a variable contributor to noninterest income, decreasing $142,000 in the first quarter of 2026 from the year-ago quarter. Noninterest ExpenseNoninterest expense totaled $8.7 million in the first quarter of 2026, compared to $9.2 million in the fourth quarter of 2025 and $8.4 million in the first quarter of 2025. Salaries and benefits expense was $4.9 million in the first quarter of 2026, decreasing $67,000 from the linked quarter and increasing $407,000 from the year-ago period. The decrease from the linked period primarily reflected seasonally higher employee benefit expenses and a year-end pension plan expense adjustment in the fourth quarter of 2025, partially offset by general increases in salaries and seasonal payroll tax fluctuations recognized during the first quarter of 2026. The increase from the year-ago period was primarily driven by general increases in salaries and strategic changes in workforce composition since early 2025, with the addition of more senior, key personnel across the organization, as well as higher payroll taxes and stock-based compensation in the first quarter of 2026. Building and occupancy expense was $1.3 million in the first quarter of 2026, decreasing $10,000 from the linked quarter and decreasing $20,000 from the year-ago quarter. The decreases from the linked and year-ago quarters reflected modest reductions across multiple building and occupancy expense categories, partially offset by higher utilities costs. Data processing expense was $733,000 in the first quarter of 2026, increasing $35,000 from the linked quarter and increasing $67,000 from the year-ago period. The increases from the linked and year-ago quarters reflected higher costs primarily associated with data, ATM, and other technology maintenance costs. Other expenses were $475,000 in the first quarter of 2026, decreasing $323,000 from the linked quarter and $216,000 from the year-ago period. The decrease from the linked quarter reflected a one-time $100,000 charitable contribution and $162,000 in fees related to the aforementioned loans held-for-sale during the fourth quarter of 2025. The year-over-year decrease reflected a heightened focus on practices and procedures as they relate to procurement, vendors, and accounts-payable, as well as a general emphasis on operating expense discipline. Annualized noninterest expense represented 2.48% of average assets in the first quarter of 2026, compared to 2.51% and 2.33% in the linked and year-ago periods. The efficiency ratio was 75.65% in the first quarter of 2026 compared to 74.96% and 67.19% in the linked and year-ago periods, respectively(2). (2) Non-GAAP financial metric. See “Notes on Non-GAAP Financial Measures” and non-GAAP reconciliation included herein for the most directly comparable financial measures. Net IncomeFirst quarter 2026 net income attributable to common shareholders was $2.4 million, or $0.38 per basic and diluted share, compared to a fourth quarter 2025 net loss attributable to common shareholders of $5.6 million, or $0.89 per basic share and $0.88 per diluted share, and first quarter 2025 net income of $3.0 million, or $0.48 per basic share and $0.47 per diluted share. Statement of Financial ConditionAs of March 31, 2026, the Company’s statement of financial condition reflects total assets of $1.42 billion, compared to $1.43 billion on December 31, 2025, and $1.50 billion on March 31, 2025. Loans totaled $895.2 million on March 31, 2026, decreasing $1.5 million or 0.2% during the first quarter of 2026 and $16.9 million or 1.9% from one year prior. Consumer and residential loans totaled $347.0 million on March 31, 2026, decreasing $7.3 million or 2.1% during the first quarter of 2026 and $24.0 million or 6.5% from one year prior. Commercial loans totaled $549.5 million on March 31, 2026, increasing $5.8 million or 1.1% during the first quarter of 2026 and $6.7 million or 1.2% from one year prior. Investment securities totaled $401.6 million on March 31, 2026, decreasing $11.6 million or 2.8% from the linked quarter and $42.5 million or 9.6% from the year-ago period. The decrease from December 31, 2025 was primarily due to $16.6 million of prepayments in mortgage obligation securities and $2.1 million of calls. The decrease from March 31, 2025 was primarily driven by $47.4 million in prepayments and $17.2 million in calls. With respect to liabilities, deposits totaled $1.21 billion on March 31, 2026, increasing $27.9 million or 2.4% during the first quarter of 2026 and decreasing $52.8 million or 4.2% from one year prior. The increase from December 31, 2025 reflects growth in MMDA deposits and both interest- and non-interest-bearing demand deposits, partially offset by runoff of higher-cost time deposits. The decrease from March 31, 2025 was primarily driven by runoff of higher-cost brokered deposits and time deposits, partially offset by growth in MMDA deposits and both interest- and non-interest-bearing demand deposits. Core deposits totaled $993.7 million on March 31, 2026, increasing $46.5 million or 4.9% during the first quarter of 2026 and increasing $3.5 million or 0.4% from one year prior. Shareholders’ equity totaled $123.6 million on March 31, 2026, increasing $1.1 million or 0.9% during the first quarter of 2026 and decreasing $1.3 million or 1.1% from one year prior. The increase from December 31, 2025 primarily reflected a $1.8 million increase in retained earnings, a $1.3 million decrease in accumulated other comprehensive loss (“AOCL”) and a $705,000 increase in additional paid in capital. Asset QualityThe Company’s asset quality metrics reflect ongoing efforts the Bank is undertaking as part of its commitment to continuously improve its credit risk management approach. Nonperforming loans were $38.2 million, or 4.26% of total loans on March 31, 2026, compared to $27.6 million, or 3.07%, of total loans on December 31, 2025, and $13.2 million or 1.45% of total loans on March 31, 2025. The increase primarily reflected certain legacy loans associated with two commercial relationships that may have been less than 90 days delinquent but were identified as having unique risk characteristics through the Company’s 2025 portfolio review, and specific reserves for these exposures were established as appropriate prior to the first quarter of 2026. Net charge-offs (“NCOs”) after recoveries declined to $284,000, or an annualized 0.13% of average loans in the first quarter of 2026, from $604,000, or 0.27%, in the linked quarter and $340,000, or 0.15% in the year-ago period. First quarter 2026 NCOs benefited from $481,000 in recoveries in the first three months of the year, primarily attributed to one commercial loan relationship recovery of $312,500. A credit loss provision benefit of $168,000 was recorded in the first quarter of 2026, reflecting lower net charge offs and overall credit performance that resulted in a small reserve release in the first three months of this year. Provision for credit loss expense was $11.2 million in the linked quarter, reflecting a $10.8 million increase in the Company’s ACL in the period in conjunction with December 2025’s completion of the Company’s comprehensive commercial loan portfolio review. Provision expense was $457,000 in the year-ago period. The Company believes it is sufficiently collateralized and reserved, with an ACL of $29.0 million on March 31, 2026, compared to $29.4 million on December 31, 2025, and $17.4 million on March 31, 2025. As a percentage of total loans, ACL represented 3.24% on March 31, 2026, 3.28% on December 31, 2025, and 1.91% on March 31, 2025. Specific reserves, including those established in conjunction with 2025’s comprehensive commercial portfolio review, represented 63.8% of the Company’s ACL at the end of the first quarter of 2026. Liquidity The Company has diligently ensured a strong liquidity profile as of March 31, 2026 to meet its ongoing financial obligations. The Bank’s liquidity management, as evaluated by its cash reserves and operational cash flows from loan repayments and investment securities, remains robust and is effectively managed by the institution’s leadership. The Bank’s analysis indicates that expected cash inflows from loans and investment securities are more than sufficient to meet all projected financial obligations. Total deposits were $1.21 billion on March 31, 2026, compared to $1.18 billion on December 31, 2025, and $1.26 billion on March 31, 2026. Core deposits, as a percentage of total deposits, represented 82.01% on March 31, 2026, compared to 79.78% on December 31, 2025, and 78.31% on March 31, 2025. The Bank continues to implement strategic initiatives to enhance its core deposit franchise, including targeted marketing campaigns and customer engagement programs aimed at deepening banking relationships and enhancing deposit stability. On March 31, 2026, Pathfinder Bancorp had an available additional funding capacity of $138.5 million with the Federal Home Loan Bank of New York and $45.0 million with the Federal Reserve Bank, which complements its liquidity reserves. Moreover, the Bank maintains additional unused credit lines totaling $15.0 million, which provide a buffer for additional funding needs. These facilities, including access to the Federal Reserve’s Discount Window, are part of a comprehensive liquidity strategy that ensures flexibility and readiness to respond to any funding requirements. Cash Dividend DeclaredOn March 30, 2026, Pathfinder’s Board of Directors declared a cash dividend of $0.10 per share for holders of both voting common and non-voting common stock. In addition, this dividend also extends to the notional shares of the Company’s warrants. Shareholders registered by April 17, 2026 will be eligible for the dividend, which is scheduled for disbursement on May 8, 2026. This distribution aligns with Pathfinder Bancorp’s philosophy of consistent and reliable delivery of shareholder value. Evaluating the Company’s market performance, the closing stock price as of March 31, 2026 stood at $12.76 per share. This positions the annualized dividend yield at 3.13%.... Read more

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