Pathfinder Bancorp, Inc. :PBHC-US: Earnings Analysis: Q4, 2016 By the Numbers : April 4, 2017

Pathfinder Bancorp, Inc. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 6.35 million, Net Earnings of USD 0.96 million.
  • Net interest income margins widened from 80.46% to 81.21% compared to the same period last year.
  • Net loan assets changed 14.40% compared to same period last year and 3.98% from previous period, total deposits changed 24.61% compared to same period last year and 10.06% from previous period.
  • Change in operating cash flow of 12.64% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 6.35 6.26 6.02 5.84 5.95
Revenue Growth (%YOY) 6.7 6.97 6.89 8.81 4.31
Earnings (mil) 0.96 0.82 0.83 0.66 0.78
Earnings Growth (%YOY) 22.79 -7.34 19.88 24.95 -6.35
Net Margin (%) 15.1 13.09 13.82 11.32 13.12
EPS 0.23 0.2 0.2 0.15 0.18
Return on Equity (%) 6.52 5.49 5.58 3.96 4.2
Return on Assets (%) 0.52 0.47 0.5 0.41 0.51

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, PBHC-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if PBHC-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 1.41% and earnings by 16.95% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by the following factors: (1) Year-on-year improvements in net interest income margins from 80.46% to 81.21% and (2) improvement in loan loss provisions. As a result, net interest income after provisions margins improved from 74.66% to 76.94% compared to the same period last year. Loan loss provisions as a percentage of net interest income were 5.25% this period and 7.21% a year ago.

Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 14.40% compared to the same period last year and 3.98% from the previous period. Total deposits changed 24.61% compared to the same period last year and 10.06% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

PBHC-US‘s year-on-year change in operating cash flow of 12.64% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 17.36% to 19.72% and (2) one-time items. The company’s pretax margins are now 19.72%, compared to 17.36% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Pathfinder Bancorp, Inc. is a holding company, which engages in the investment on its subsidiary, Pathfinder Bank. The Bank attracts deposits from the general public in the bank’s area, and investing such deposits, together with other sources of funds, in loans secured by family residential real estate, commercial real estate, small business loans, and consumer loans. It also invest in securities, which consist of securities issued by the United States Government and its agencies and sponsored enterprises, state and municipal obligations, corporate debt securities, mutual funds, and equity securities. The company was founded on June 11, 2014 and is headquartered in Oswego, NY.

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