UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K

X  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal ended December 31, 2007.
                                       or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to ______________.

Commission file number: 000-23601
                        ---------
                            PATHFINDER BANCORP, INC.
                            ------------------------
             (Exact name of registrant as specified in its charter)
FEDERAL                                                     16-1540137
----------------------------------------------------------------------
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                        Identification No.)

214 WEST FIRST STREET
OSWEGO, NY                                              13126
-------------------------------------------------------------
(Address of principal executive offices)              (Zip Code)

      Registrant's telephone number, including area code:  (315) 343-0057
                                                           --------------

          Securities registered pursuant to Section 12(b) of the Act:

Title of each class               Name of each exchange on which registered
----------------------------------------------------------------------

Common Stock, $0.01 par value         The NASDAQ Stock Market

        Securities registered pursuant to Section 12(g) of the Act: None

Indicate  by  check  mark  if the registrant is a well-known seasoned issuer, as
defined  in  Rule  405  of  the  Securities  Act.  YES           NO  X

Indicate  by  check  mark  if  the  registrant  is  not required to file reports
pursuant  to  Section  13  or  Section  15(d)  of  the  Act.  YES   NO  X

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 X        NO

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  (Sec.229.405  of this chapter) is not contained herein, and
will  not  be  contained,  to  the best of registrant's knowledge, in definitive
proxy  or  information  statements incorporated by reference in Part III of this
Form  10-K  or  any  amendment  to  this  Form  10-K.   X

Indicate  by  check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.  See
definitions  of  "large  accelerated  filer,"  "accelerated  filer" and "smaller
reporting  company"  in  Rule  12b-2  of  the  Exchange  Act.  (Check  one):

Large accelerated filer      Accelerated filer     Non-accelerated filer
Smaller reporting company X

                 (Do not check if a smaller reporting company)

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

The  aggregate  market  value of the voting and non-voting common equity held by
non-affiliates  of  the Registrant, computed by reference to the last sale price
on  June  30,  2007, as reported by the Nasdaq Capital Market, was approximately
$9.5  million.

As of March 13, 2008, there were 2,971,019 shares issued and 2,483,732 shares
outstanding  of the Registrant's Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE:

(1)  Proxy Statement  for  the  2008  Annual  Meeting  of  Stockholders  of  the
     Registrant  (Part  III).
(2)  Annual Report to Stockholders (Part II and IV).

<PAGE>

                               TABLE OF CONTENTS

                            FORM 10-K ANNUAL REPORT
                               FOR THE YEAR ENDED
                               DECEMBER 31, 2007
                            PATHFINDER BANCORP, INC.
                                                                        Page
PART I
     Item 1.     Business                                                 1
     Item 1A.    Risk Factors                                             9
     Item 1B.    Unresolved Staff Comments                               11
     Item 2.     Properties                                              12
     Item 3.     Legal Proceedings                                       12
     Item 4.     Submission of Matters to a Vote of Security Holders     12

PART II
     Item 5.     Market for the Registrant's Common Equity, Related
                   Stockholder Matters and Issuer Purchases of Equity
                   Securities                                            13
     Item 6.     Selected Financial Data                                 14
     Item 7.     Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                   15
     Item 8.     Financial Statements and Supplementary Data             31
     Item 9.     Changes In and Disagreements with Accountants on
                   Accounting and Financial Disclosure                   64
     Item 9A.(T) Controls and Procedures                                 64
     Item 9B.    Other Information                                       64

PART III
     Item 10.     Directors, Executive Officers and Corporate Governance 65
     Item 11.     Executive Compensation                                 65
     Item 12.     Security Ownership of Certain Beneficial Owners
                    and Management and Related Stockholder Matters       65
     Item 13.     Certain Relationships and Related Transactions,
                    and Director Independence                            65
     Item 14.     Principal Accountant Fees and Services                 65

PART IV
     Item 15.     Exhibits and Financial Statement Schedules             66

<PAGE>

PART  I

ITEM  1:  BUSINESS

GENERAL

PATHFINDER  BANCORP,  INC.

Pathfinder  Bancorp,  Inc.  (the  "Company")  is  a Federally chartered mid-tier
holding  company headquartered in Oswego, New York.  The primary business of the
Company  is  its  investment  in  Pathfinder  Bank  (the  "Bank") and Pathfinder
Statutory Trust I.  The Company is majority owned by Pathfinder Bancorp, M.H.C.,
a  federally-chartered  mutual  holding  company (the "Mutual Holding Company").
At December 31, 2007, the Mutual Holding Company held 1,583,239 shares of Common
Stock  and  the  public  held  900,493  shares  of  Common  Stock (the "Minority
shareholders").  At December 31, 2007, Pathfinder Bancorp, Inc. had total assets
of  $320.7 million, total deposits of $251.1 million and shareholders' equity of
$21.7  million.

The  Company's executive office is located at 214 West First Street, Oswego, New
York  and  the  telephone  number  at  that  address  is  (315)  343-0057.

PATHFINDER  BANK

The Bank is a New York-chartered savings bank headquartered in Oswego, New York.
The  Bank operates from its main office as well as six branch offices located in
its  market  area  consisting of Oswego County and the contiguous counties.  The
Bank's  deposits  are  insured  by  the  Federal  Deposit  Insurance Corporation
("FDIC").  The  Bank  was chartered as a New York savings bank in 1859 as Oswego
City  Savings  Bank.  The  Bank  is a customer-oriented institution dedicated to
providing  mortgage  loans  and  other  traditional  financial  services  to its
customers.  The  Bank  is  committed  to  meeting  the  financial  needs  of its
customers  in  Oswego  County,  New  York,  and  the  contiguous  counties.

The  Bank  is  primarily engaged in the business of attracting deposits from the
general  public in the Bank's market area, and investing such deposits, together
with other sources of funds, in loans secured by one- to four-family residential
real  estate  and commercial real estate.  At December 31, 2007, $171.3 million,
or  78%  of  the  Bank's total loan portfolio consisted of loans secured by real
estate,  of  which  $125.8  million,  or  73%,  were  loans  secured  by one- to
four-family  residences  and  $45.5  million, or 27%, were secured by commercial
real  estate.  Additionally,  $21.4 million, or 12%, of total real estate loans,
were  secured  by  second liens on residential properties that are classified as
consumer  loans.  The  Bank  also  originates commercial and consumer loans that
totaled  $25.3  million  and  $3.9  million, respectively, or 13%, of the Bank's
total  loan  portfolio.  The  Bank invests a portion of its assets in securities
issued by the United States Government agencies and sponsored enterprises, state
and  municipal  obligations, corporate debt securities, mutual funds, and equity
securities.  The  Bank  also  invests  in  mortgage-backed  securities primarily
issued  or  guaranteed  by  United States Government sponsored enterprises.  The
Bank's  principal sources of funds are deposits, principal and interest payments
on  loans  and  borrowings  from  correspondent  financial  institutions.  The
principal  source of income is interest on loans and investment securities.  The
Bank's  principal  expenses  are  interest  paid  on  deposits,  and  employee
compensation  and  benefits.

The  Bank's  executive  office  is located at 214 West First Street, Oswego, New
York,  and  its  telephone  number  at  that  address  is  (315)  343-0057.

Pathfinder  Bank formed a limited purpose commercial bank subsidiary, Pathfinder
Commercial Bank, in October of 2002.  Pathfinder Commercial Bank was established
to  serve  the  depository  needs  of  public  entities  in  its  market  area.

In  April  1999,  the  Bank  established  Pathfinder  REIT,  Inc.  as the Bank's
wholly-owned  real  estate  investment  trust subsidiary.  At December 31, 2007,
Pathfinder  REIT,  Inc.  held  $25.4  million  in mortgages and mortgage related
assets.  Recent  legislation  proposed  by  the  New  York State legislature may
significantly  impact  the  tax  treatment  accorded  REITs.  Enactment  of this
legislation  would increase the state tax rate for the Company.  All disclosures
in  the Form 10-K relating to the Bank's loans and investments include loans and
investments  that  are  held  by  Pathfinder  REIT,  Inc.
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The  Bank also has 100% ownership in Whispering Oaks Development Corp., which is
retained  in case the need to operate or develop foreclosed real estate emerges.
This  subsidiary  is  currently  inactive.

MARKET  AREA  AND  COMPETITION

The  economy  in  the  Bank's  market area is manufacturing-oriented and is also
significantly dependent upon the State University of New York College at Oswego.
The  major manufacturing employers in the Bank's market area are Entergy Nuclear
Northeast,  Novelis,  Constellation, NRG and Huhtamaki.  The Bank is the largest
depository  institution  headquartered  in  Oswego  County.  However,  the  Bank
encounters  competition  from  a  variety  of  sources.  The Bank's business and
operating  results are significantly affected by the general economic conditions
prevalent  in  its  market  areas.

The  Bank  encounters  strong  competition  both  in  attracting deposits and in
originating  real  estate  and  other  loans.  Its  most  direct competition for
deposits  has  historically  come  from  commercial  and  savings banks, savings
associations  and credit unions in its market area.  Competition for loans comes
from  such  financial  institutions  as well as mortgage banking companies.  The
Bank  expects  continued strong competition in the foreseeable future, including
increased  competition  from  "super-regional"  banks  entering  the  market  by
purchasing  large  commercial  banks  and savings banks.  Many such institutions
have  greater  financial and marketing resources available to them than does the
Bank.  The  Bank  competes  for  savings  deposits by offering depositors a high
level  of  personal  service  and a wide range of competitively priced financial
services.  The  Bank  competes  for  real  estate  loans  primarily  through the
interest  rates  and  loan  fees  it  charges  and  advertising,  as  well as by
originating and holding in its portfolio mortgage loans which do not necessarily
conform  to  secondary market underwriting standards.  The recent turmoil in the
residential  mortgage  sector  of  the  United States economy has caused certain
competitors  to  be  less effective in the market place.  While Central New York
did not experience the level of speculative lending and borrowing in residential
real  estate that has deeply impacted other regions on a national basis, certain
mortgage  brokers  and finance companies are either no longer operating, or have
limited aggressive lending practices.  Additionally, as certain money center and
large  regional  banks grapple with the fallout from sub-prime lending products,
their  ability  to  compete  as effectively has been muted.  Management believes
that  these  conditions  have  created  a  window  of  lessened  competition for
residential  loans,  and  to  a  lesser  extent,  commercial  real estate loans.

REGULATION  AND  SUPERVISION

GENERAL

The Bank is a New York-chartered stock savings bank and its deposit accounts are
insured  up to applicable limits by the FDIC through the Deposit  Insurance Fund
("DIF  ").  The  Bank  is  subject to extensive regulation by the New York State
Banking  Department  (the  "Department"),  as  its chartering agency, and by the
FDIC,  as  its  deposit  insurer  and  primary  federal  regulator.  The Bank is
required to file reports with, and is periodically examined by, the FDIC and the
Superintendent  of  the  Department  concerning  its  activities  and  financial
condition  and  must  obtain regulatory approvals prior to entering into certain
transactions,  including,  but  not  limited to, mergers with or acquisitions of
other  banking institutions.  The Bank is a member of the Federal Home Loan Bank
of New York ("FHLBNY") and is subject to certain regulations by the Federal Home
Loan  Bank  System.  The  Company  and  the  Mutual  Holding Company are federal
chartered.  Consequently,  they  are  subject  to  regulations  of the Office of
Thrift Supervision ("OTS") as savings and loan holding companies.  Any change in
such  regulations,  whether by the Department, the FDIC, or the OTS could have a
material  adverse impact on the Bank, the Company or the Mutual Holding Company.

Regulatory  requirements  applicable  to  the  Bank,  the Company and the Mutual
Holding  Company  are  referred  to  below  or  elsewhere  herein.

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<PAGE>

NEW  YORK  BANK  AND  FDIC  REGULATION

The  Bank derives its lending, investment and other authority primarily from the
applicable  provisions  of New York State Banking Law and the regulations of the
Department,  as  limited  by  FDIC  regulations.  In  particular, the applicable
provisions  of  New  York  State  Banking  Law  and  regulations  governing  the
investment  authority  and activities of an FDIC insured state-chartered savings
bank  have  been  substantially  limited  by  the  Federal  Deposit  Insurance
Corporation  Improvement  Act of 1991 ("FDICIA") and the FDIC regulations issued
pursuant  thereto.  Under  these  laws and regulations, savings banks, including
the  Bank,  may  invest in real estate mortgages, consumer and commercial loans,
certain  types  of  debt securities, including certain corporate debt securities
and  obligations  of  federal, state and local governments and agencies, certain
types  of  corporate equity securities and certain other assets.  New York State
chartered  savings  banks  may  also  invest in subsidiaries under their service
corporation  investment  authority.  A savings bank may use this power to invest
in  corporations that engage in various activities authorized for savings banks,
plus  any  additional  activities, which may be authorized by the Banking Board.
Under  FDICIA and the FDIC's implementing regulations, the Bank's investment and
service  corporation  activities  are  limited  to  activities permissible for a
national  bank  unless  the  FDIC  otherwise  permits  it.

The  FDIC and the Superintendent have broad enforcement authority over the Bank.
Under  this authority, the FDIC and the Superintendent have the ability to issue
formal  or  informal  orders  to  correct violations of law or unsafe or unsound
banking  practices.

FDIC  INSURANCE  ON  DEPOSITS

The  Bank  is  a member of the DIF, which is administered by the FDIC.  Deposits
are  insured up to applicable limits by the FDIC and such insurance is backed by
the  full  faith  and  credit  of  the  U.S.  Government.

The Federal Deposit Insurance Reform Act of 2005 was signed into law on February
8, 2006, and gives the FDIC increased flexibility in assessing premiums on banks
and  savings  associations, including the Bank, to pay for deposit insurance and
in  managing  its deposit insurance reserves.  The reform legislation provides a
credit  to  all  insured  institutions,  based  on  the  amount of their insured
deposits  at  year-end  1996,  to offset the premiums that they may be assessed:
combines  the  BIF  and  SAIF  to form a single Deposit Insurance Fund; increase
deposit insurance to $250,000 for Individual Retirement Accounts; and authorizes
inflation-based  increases in deposit insurance on other accounts every 5 years,
beginning  in  2001.  In connection with the reform act of 2005, the Company has
received  communication  from the FDIC disclosing how insurance premiums will be
calculated  for  2007  and  forward,  as  well  as  the preliminary statement of
one-time assessment credit.  Management estimates that this one time credit will
offset  premiums assessed, beginning in July 2007, for a period of approximately
18-21  months.

REGULATORY  CAPITAL  REQUIREMENTS

The FDIC has adopted risk-based capital guidelines to which the Bank is subject.
The guidelines establish a systematic analytical framework that makes regulatory
capital  requirements  more  sensitive  to  differences  in  risk profiles among
banking  organizations.  The  Bank  is  required  to  maintain certain levels of
regulatory  capital in relation to regulatory risk-weighted assets. The ratio of
such regulatory capital to regulatory risk-weighted assets is referred to as the
Bank's  "risk-based  capital ratio." Risk-based capital ratios are determined by
allocating  assets  and  specified off-balance sheet items to four risk-weighted
categories ranging from 0% to 100%, with higher levels of capital being required
for  the  categories  perceived  as  representing  greater  risk.

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<PAGE>

These  guidelines divide a savings bank's capital into two tiers. The first tier
("Tier  I")  includes  common  equity, retained earnings, certain non-cumulative
perpetual preferred stock (excluding auction rate issues) and minority interests
in  equity  accounts  of  consolidated  subsidiaries,  less  goodwill  and other
intangible  assets  (except  mortgage servicing rights and purchased credit card
relationships subject to certain limitations). Supplementary ("Tier II") capital
includes,  among  other  items,  cumulative perpetual and long-term limited-life
preferred  stock,  mandatory  convertible  securities,  certain  hybrid  capital
instruments, term subordinated debt and the allowance for loan and lease losses,
subject  to  certain  limitations,  less  required deductions. Savings banks are
required  to  maintain a total risk-based capital ratio of at least 8%, of which
at  least  4%  must  be  Tier  I  capital.

In  addition,  the FDIC has established regulations prescribing a minimum Tier I
leverage  ratio  (Tier  I  capital  to adjusted total assets as specified in the
regulations).  These  regulations provide for a minimum Tier I leverage ratio of
3%  for banks that meet certain specified criteria, including that they have the
highest  examination rating and are not experiencing or anticipating significant
growth.  All  other banks are required to maintain a Tier I leverage ratio of 3%
plus  an  additional  cushion of at least 100 to 200 basis points.  The FDIC and
the  other  federal banking regulators have proposed amendments to their minimum
capital  regulations  to  provide  that the minimum leverage capital ratio for a
depository  institution that has been assigned the highest composite rating of 1
under  the  Uniform Financial Institutions Rating System will be 3% and that the
minimum  leverage  capital ratio for any other depository institution will be 4%
unless  a  higher  leverage  capital  ratio  is  warranted  by  the  particular
circumstances  or  risk  profile  of  the depository institution.  The FDIC may,
however,  set  higher leverage and risk-based capital requirements on individual
institutions  when  particular circumstances warrant. Savings banks experiencing
or  anticipating  significant  growth  are  expected to maintain capital ratios,
including  tangible  capital  positions,  well  above  the  minimum  levels.

LIMITATIONS  ON  DIVIDENDS  AND  OTHER  CAPITAL  DISTRIBUTIONS

The  FDIC  has the authority to use its enforcement powers to prohibit a savings
bank  from  paying  dividends if, in its opinion, the payment of dividends would
constitute  an  unsafe  or  unsound  practice.  Federal  law  also prohibits the
payment  of dividends by a bank that will result in the bank failing to meet its
applicable  capital  requirements  on  a  pro  forma  basis.  New  York law also
restricts  the  Bank  from  declaring  a dividend which would reduce its capital
below  the  amount  required  to be maintained by state law and regulation.  The
Company is also subject to the OTS capital distribution rules by virtue of being
an  OTS  regulated  mutual  holding  company.

PROMPT  CORRECTIVE  ACTION

The  federal  banking  agencies  have  promulgated  regulations to implement the
system  of  prompt  corrective  action  required  by  federal  law.  Under  the
regulations, a bank shall be deemed to be (i) "well capitalized" if it has total
risk-based  capital  of 10% or more, has a Tier I risk-based capital ratio of 6%
or more, has a Tier I leverage capital ratio of 5% or more and is not subject to
any  written capital order or directive; (ii) "adequately capitalized" if it has
a  total  risk-based  capital  ratio  of 8% or more, a Tier I risk-based capital
ratio  of 4% or more and a Tier I leverage capital ratio of 4% or more (3% under
certain  circumstances)  and does not meet the definition of "well capitalized";
(iii) "undercapitalized" if it has a total risk-based capital ratio that is less
than  8%,  a  Tier  I  risk-based capital ratio that is less than 4% or a Tier I
leverage  capital  ratio  that is less than 4% (3% under certain circumstances);
(iv) "significantly undercapitalized" if it has a total risk-based capital ratio
that  is less than 6%, a Tier I risk-based capital ratio that is less than 3% or
a  Tier  I  leverage  capital  ratio  that  is less than 3%; and (v) "critically
undercapitalized"  if  it has a ratio of tangible equity to total assets that is
equal  to  or  less  than  2%.  Federal  law  and  regulations  also  specify
circumstances  under  which  a  federal  banking  agency  may  reclassify a well
capitalized  institution as adequately capitalized and may require an adequately
capitalized  institution to comply with supervisory actions as if it were in the
next  lower  category  (except  that the FDIC may not reclassify a significantly
undercapitalized  institution  as  critically  undercapitalized).

Based  on  the foregoing, the Bank currently meets the criteria to be classified
as  a  "well  capitalized"  savings  institution.

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<PAGE>

TRANSACTIONS  WITH  AFFILIATES  AND  INSIDERS

Under  current  federal  law,  transactions  between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act
and  its implementing regulations. An affiliate of a savings bank is any company
or  entity  that controls, is controlled by, or is under common control with the
savings  bank, other than a subsidiary of the savings bank. In a holding company
context,  at  a  minimum,  the  parent holding company of a savings bank and any
companies  which are controlled by such parent holding company are affiliates of
the  savings bank. Generally, Section 23A limits the extent to which the savings
bank  or  its  subsidiaries  may  engage  in "covered transactions" with any one
affiliate  to  an  amount  equal to 10% of such savings bank's capital stock and
surplus  and  contains  an  aggregate  limit  on  all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus. The term
"covered transaction" includes the making of loans or other extensions of credit
to  an  affiliate; the purchase of assets from an affiliate, the purchase of, or
an  investment  in, the securities of an affiliate; the acceptance of securities
of  an  affiliate as collateral for a loan or extension of credit to any person;
or  issuance  of  a  guarantee,  acceptance, or letter of credit on behalf of an
affiliate.  Section  23A  also  establishes specific collateral requirements for
loans  or  extensions  of  credit  to,  or guarantees, acceptances on letters of
credit  issued  on  behalf  of  an  affiliate. Section 23B requires that covered
transactions  and  a  broad  list  of  other  specified transactions be on terms
substantially  the  same,  or  no  less  favorable,  to  the savings bank or its
subsidiary  as  similar  transactions  with  non affiliates.

Further,  Section  22(h)  of  the  Federal  Reserve  Act  and  its  implementing
regulations  restrict  a  savings  bank  with  respect  to  loans  to directors,
executive  officers,  and  principal stockholders. Under Section 22(h), loans to
directors,  executive  officers  and  stockholders  who  control,  directly  or
indirectly,  10%  or  more  of  voting  securities of a savings bank and certain
related  interests  of  any  of the foregoing, may not exceed, together with all
other  outstanding  loans  to  such persons and affiliated entities, the savings
bank's  total  unimpaired  capital  and  unimpaired  surplus. Section 22(h) also
prohibits  loans  above  amounts  prescribed  by the appropriate federal banking
agency  to  directors,  executive  officers, and stockholders who control 10% or
more  of voting securities of a stock savings bank, and their respective related
interests, unless such loan is approved in advance by a majority of the board of
directors  of the savings bank. Any "interested" director may not participate in
the  voting.  Further,  pursuant to Section 22(h), loans to directors, executive
officers  and  principal  stockholders  must  generally  be  made  on  terms
substantially  the  same as offered in comparable transactions to other persons.
Section  22(g) of the Federal Reserve Act places additional limitations on loans
to  executive  officers.

FEDERAL  HOLDING  COMPANY  REGULATION

GENERAL.  The  Company and the Mutual Holding Company are non diversified mutual
savings  and  loan holding companies within the meaning of the Home Owners' Loan
Act.  The Company and the Mutual Holding Company are registered with the OTS and
are  subject  to  OTS  regulations,  examinations,  supervision  and  reporting
requirements.  As  such,  the OTS has enforcement authority over the Company and
the  Mutual  Holding  Company,  and  their non-savings institution subsidiaries.
Among  other  things,  this  authority  permits  the OTS to restrict or prohibit
activities  that  are  determined to be a serious risk to the subsidiary savings
institution.

PERMITTED ACTIVITIES.  Under OTS regulation and policy, a mutual holding company
and  a  federally  chartered  mid-tier holding company, such as the Company, may
engage  in  the  following  activities:  (i) investing in the stock of a savings
association;  (ii)  acquiring  a  mutual  association through the merger of such
association  into a savings association subsidiary of such holding company or an
interim  savings  association  subsidiary of such holding company; (iii) merging
with  or  acquiring  another  holding  company,  one  of whose subsidiaries is a
savings association; (iv) investing in a corporation, the capital stock of which
is  available  for  purchase by a savings association under federal law or under
the  law  of  any state where the subsidiary savings association or associations
share their home offices; (v) furnishing or performing management services for a
savings  association  subsidiary  of  such  company;  (vi)  holding, managing or
liquidating  assets owned or acquired from a savings subsidiary of such company;
(vii)  holding  or managing properties used or occupied by a savings association

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subsidiary  of such company; (viii) acting as trustee under deeds of trust; (ix)
any  other  activity  (A)  that  the  Federal  Reserve Board, by regulation, has
determined  to  be  permissible for bank holding companies under Section 4(c) of
the  Bank  Holding  Company  Act  of  1956,  unless  the Director of the OTS, by
regulation,  prohibits  or limits any such activity for savings and loan holding
companies;  or  (B)  in  which  multiple savings and loan holding companies were
authorized (by regulation) to directly engage on March 5, 1987; (x) any activity
permissible  for  financial  holding  companies  under  Section 4(k) of the Bank
Holding  Company  Act, including securities and insurance underwriting; and (xi)
purchasing,  holding,  or  disposing  of  stock  acquired  in  connection with a
qualified  stock issuance if the purchase of such stock by such savings and loan
holding  company  is  approved  by  the  Director.  If  a mutual holding company
acquires or merges with another holding company, the holding company acquired or
the holding company resulting from such merger or acquisition may only invest in
assets  and  engage  in  activities  listed in (i) through (xi) above, and has a
period  of  two  years  to  cease any nonconforming activities and divest of any
nonconforming  investments.

The Home Owners' Loan Act prohibits a savings and loan holding company, directly
or  indirectly,  or  through  one  or  more subsidiaries, from acquiring another
savings  association  or holding company thereof, without prior written approval
of  the  OTS.  It  also  prohibits the acquisition or retention of, with certain
exceptions,  more  than  5%  of  a  non  subsidiary  savings  association, a non
subsidiary  holding  company,  or a non subsidiary company engaged in activities
other  than  those  permitted  by  the  Home  Owners'  Loan Act; or acquiring or
retaining control of an institution that is not federally insured. In evaluating
applications  by holding companies to acquire savings associations, the OTS must
consider the financial and managerial resources, future prospects of the company
and  association  involved,  the  effect  of  the acquisition on the risk to the
insurance  fund,  the  convenience  and  needs  of the community and competitive
factors.

The  OTS  is  prohibited  from  approving any acquisition that would result in a
multiple  savings  and  loan holding company controlling savings associations in
more  than  one state, subject to two exceptions: (i) the approval of interstate
supervisory  acquisitions  by  savings  and loan holding companies, and (ii) the
acquisition  of  a savings institution in another state if the laws of the state
of  the  target  savings institution specifically permit such acquisitions.  The
states  vary  in  the  extent  to  which they permit interstate savings and loan
holding  company  acquisitions.

WAIVERS  OF  DIVIDENDS  BY  MUTUAL HOLDING COMPANY.  OTS regulations require the
Mutual  Holding  Company to notify the OTS of any proposed waiver of its receipt
of  dividends  from  the  Company.  The  OTS  may  object  to  such  waivers.

CONVERSION  OF THE MUTUAL HOLDING COMPANY TO STOCK FORM.  OTS regulations permit
the  Mutual  Holding  Company to convert from the mutual form of organization to
the  capital stock form of organization (a "Conversion Transaction").  There can
be  no  assurance  when,  if  ever, a Conversion Transaction will occur, and the
Board  of  Directors  has no current intention or plan to undertake a Conversion
Transaction.  In  a Conversion Transaction a new holding company would be formed
as  the successor to the Company (the "New Holding Company"), the Mutual Holding
Company's  corporate  existence  would  end,  and certain depositors of the Bank
would  receive  the  right to subscribe for additional shares of the New Holding
Company.  In  a  Conversion  Transaction,  each  share  of  common stock held by
stockholders  other  than  the  Mutual Holding Company ("Minority Stockholders")
would  be automatically converted into a number of shares of common stock of the
New  Holding  Company  determined  pursuant  an exchange ratio that ensures that
Minority Stockholders own the same percentage of common stock in the New Holding
Company  as  they  owned  in  the  Company  immediately  prior to the Conversion
Transaction.  Under  OTS regulations, Minority Stockholders would not be diluted
because  of  any  dividends  waived  by  the  Mutual Holding Company (and waived
dividends would not be considered in determining an appropriate exchange ratio),
in  the  event  the  Mutual  Holding  Company converts to stock form.  The total
number  of  shares  held by Minority Stockholders after a Conversion Transaction
also  would  be increased by any purchases by Minority Stockholders in the stock
offering  conducted  as  part  of  the  Conversion  Transaction.

--------------------------------------------------------------------------------
                                     Page 6
<PAGE>

FEDERAL  SECURITIES  LAW

The  common  stock  of the Company is registered with the SEC under the Exchange
Act.  The  Company  is  subject  to the information, proxy solicitation, insider
trading  restrictions  and other requirements of the SEC under the Exchange Act.

The Company Common Stock held by persons who are affiliates (generally officers,
directors  and  principal stockholders) of the Company may not be resold without
registration  or unless sold in accordance with certain resale restrictions.  If
the  Company  meets  specified  current  public  information  requirements, each
affiliate  of  the  Company  is  able  to  sell  in  the  public market, without
registration,  a  limited  number  of  shares  in  any  three-month  period.

FEDERAL  RESERVE  SYSTEM

The  Federal  Reserve  Board  requires  all  depository institutions to maintain
noninterest-bearing  reserves  at  specified  levels  against  their transaction
accounts  (primarily  checking, money management and NOW checking accounts).  At
December  31,  2007, the Bank was in compliance with these reserve requirements.

FEDERAL  COMMUNITY  REINVESTMENT  REGULATION

Under  the Community Reinvestment Act, as amended (the "CRA"), as implemented by
FDIC  regulations,  a  savings bank has a continuing and affirmative obligation,
consistent  with  its safe and sound operation, to help meet the credit needs of
its  entire community, including low and moderate income neighborhoods.  The CRA
does  not  establish  specific  lending  requirements  or programs for financial
institutions  nor does it limit an institution's discretion to develop the types
of  products  and  services  that  it believes are best suited to its particular
community,  consistent  with  the CRA.  The CRA requires the FDIC, in connection
with  its  examination  of  a  savings  institution, to assess the institution's
record of meeting the credit needs of its community and to take such record into
account  in its evaluation of certain applications by such institution.  The CRA
requires  the  FDIC  to  provide  a  written  evaluation of an institution's CRA
performance  utilizing  a  four-tiered  descriptive  rating  system.  The Bank's
latest  CRA  rating  was  "satisfactory."

NEW  YORK  STATE  COMMUNITY  REINVESTMENT  REGULATION

The Bank is subject to provisions of the New York State Banking Law which impose
continuing  and  affirmative  obligations upon banking institutions organized in
New  York State to serve the credit needs of its local community ("NYCRA") which
are substantially similar to those imposed by the CRA.  Pursuant to the NYCRA, a
bank must file an annual NYCRA report and copies of all federal CRA reports with
the  Department.  The  NYCRA  requires the Department to make a biennial written
assessment of a bank's compliance with the NYCRA, utilizing a four-tiered rating
system  and  make  such  assessment  available  to  the  public.  The NYCRA also
requires  the  Superintendent to consider a bank's NYCRA rating when reviewing a
bank's  application  to engage in certain transactions, including mergers, asset
purchases  and the establishment of branch offices or automated teller machines,
and  provides  that  such  assessment may serve as a basis for the denial of any
such  application.

The Bank's NYCRA rating as of its latest examination was "satisfactory."

--------------------------------------------------------------------------------
                                     Page 7
<PAGE>

THE  USA  PATRIOT  ACT

The USA PATRIOT Act ("the PATRIOT Act") was signed into law on October 26, 2001.
The  PATRIOT  Act  gives  the federal government new powers to address terrorist
threats  through  enhanced  domestic  security  measures,  expanded surveillance
powers,  increased  information  sharing  and  broadened  anti-money  laundering
requirements.  The  PATRIOT  Act  also  requires the federal banking agencies to
take  into  consideration the effectiveness of controls designed to combat money
laundering  activities  in  determining  whether  to  approve  a merger or other
acquisition  application  of  a member institution.  Accordingly, if the Company
were  to  engage  in  a  merger  or other acquisitions, its controls designed to
combat  money laundering would be considered as part of the application process.
The  Company  and  the  Bank  have  established policies, procedures and systems
designed  to  comply  with  these  regulations.

SARBANES-OXLEY  ACT  OF  2002

The  Sarbanes-Oxley  Act of 2002 ("Sarbanes Oxley")  was signed into law on July
30, 2002.  Sarbanes-Oxley is a law that addresses, among other issues, corporate
governance,  auditing  and  accounting, executive compensation, and enhanced and
timely  disclosure  of  corporate information.  As directed by Section 302(a) of
Sarbanes-Oxley,  the Company Chief Executive Officer and Chief Financial Officer
are  each required to certify that the company's quarterly and annual reports do
not  contain  any  untrue  statement of a material fact.  The rules have several
requirements, including having these officers certify that: they are responsible
for  establishing, maintaining and regularly evaluating the effectiveness of our
internal  controls;  they  have made certain disclosures to our auditors and the
audit  committee of the Board of Directors about our internal controls; and they
have  included  information  in  our  quarterly  and  annual reports about their
evaluation  and  whether  there  have  been  significant changes in our internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the  evaluation.  Recently  revised  dates  for  compliance with
Section  404 have given non-accelerated filers some relief by extending the date
for compliance with auditor attestation requirements to the year ending December
31,  2008.  There  is  presently  a  proposal with the SEC that could extend the
auditor  attestation  requirement  another year, or for the year ending December
31,  2009.  We have existing policies, procedures and systems designed to comply
with these regulations, and are further enhancing and documenting such policies,
procedures  and  systems  to ensure continued compliance with these regulations.

The  Company  maintains an Internet website located at www.pathfinderbank.com on
                                                       ----------------------
which,  among other things, the Company makes available, free of charge, various
reports  that  it  files  with  or  furnishes  to  the  Securities  and Exchange
Commission,  including its Annual Report on Form 10-K, quarterly reports on Form
10-Q,  and  current reports on Form 8-K.  The Company has also made available on
its  website  its  Audit  Committee  Charter,  Compensation  Committee  Charter,
Governance  Guidelines  and Code of Ethics.  These reports are made available as
soon  as  reasonably practicable after these reports are filed with or furnished
to  the  Securities  and  Exchange  Commission.

The  Company's  Annual  Report  on  Form  10-K  may be accessed on the Company's
website  at  www.pathfinderbank.com.
             ----------------------

FEDERAL  AND  STATE  TAXATION

FEDERAL  TAXATION

The  following  discussion  of  federal  taxation  is intended only to summarize
certain  pertinent  federal  income  tax  matters  and  is  not  a comprehensive
description  of  the  tax  rules  applicable  to  the  Company  or  the  Bank.

BAD  DEBT  RESERVES.  Prior  to the Tax Reform Act of 1996 ("the 1996 Act"), the
Bank  was  permitted  to  establish  a  reserve for bad debts and to make annual
additions  to  the  reserve.  These  additions  could,  within specified formula
limits,  be  deducted  in arriving at the Bank's taxable income.  As a result of
the  1996  Act,  the Bank must use the small bank experience method in computing
its  bad  debt  deduction  beginning  with  its  1996  Federal  tax  return.

--------------------------------------------------------------------------------
                                     Page 8
<PAGE>

TAXABLE  DISTRIBUTIONS  AND RECAPTURE.  Prior to the 1996 Act, bad debt reserves
created  prior  to January 1, 1988 were subject to recapture into taxable income
should  the  Bank fail to meet certain thrift asset and definitional tests.  New
federal  legislation  eliminated these thrift related recapture rules.  However,
under current law, pre-1988 reserves remain subject to recapture should the Bank
cease  to  retain  a  bank  or  thrift  charter  or  make  certain  non-dividend
distributions.

MINIMUM  TAX.   The  Internal  Revenue  Code  imposes an alternative minimum tax
("AMT")  at  a  rate of 20% on a base of regular taxable income plus certain tax
preferences  ("alternative  minimum  taxable  income"  or  "AMTI").  The  AMT is
payable  to  the  extent  such  AMTI  is  in excess of an exemption amount.  Net
operating  losses  can  offset  no  more  than 90% of AMTI.  Certain payments of
alternative  minimum  tax may be used as credits against regular tax liabilities
in  future  years.

NET  OPERATING  LOSS  CARRYOVERS.  A  financial  institution  may carry back net
operating  losses  to  the  preceding  two  taxable  years  and  forward  to the
succeeding  20  taxable  years.  This  provision  applies  to losses incurred in
taxable  years  beginning  after  August  5,  1997.

Neither the Internal Revenue Service or New York State have examined our federal
or  state  tax  returns  within  the  past  5  years.

STATE  TAXATION

NEW  YORK  TAXATION.  The Bank is subject to the New York State Franchise Tax on
Banking Corporations in an annual amount equal to the greater of (i) 8.0% of the
Bank's  "entire net income" allocable to New York State during the taxable year,
or  (ii) the applicable alternative minimum tax.  The alternative minimum tax is
generally  the  greater of (a) 0.01% of the value of the Bank's assets allocable
to  New York State with certain modifications, (b) 3% of the Bank's "alternative
entire  net income" allocable to New York State, or (c) $250.  Entire net income
is  similar  to  federal  taxable  income,  subject to certain modifications and
alternative  entire  net  income  is  equal to entire net income without certain
modifications.  Net  operating  losses  arising  in  the  current  period can be
carried  forward  to  the  succeeding  20  taxable  years.

ITEM 1A: RISK FACTORS

The material risks and uncertainties that management believes affect the Company
are  described  below.  The  risks and uncertainties described below are not the
only ones facing the Company. Additional risks and uncertainties that management
is  not  aware  of or that management currently deems immaterial may also impair
the  Company's  business operations. This report is qualified in its entirety by
these  risk factors. If any of the following risks actually occur, the Company's
financial  condition and results of operations could be materially and adversely
affected.

CHANGES  IN  INTEREST  RATES  CAN  HAVE  AN  ADVERSE  EFFECT  ON  PROFITABILITY

The  Company's  earnings  and  cash  flows  are  largely  dependent upon its net
interest  income.  Net interest income is the difference between interest income
earned  on  interest  earning assets such as loans and investment securities and
interest  expense  paid  on  interest  bearing  liabilities such as deposits and
borrowed  funds.  Interest  rates  are highly sensitive to many factors that are
beyond  the  Company's  control,  including  general  economic  conditions,
competition,  and  policies of various governmental and regulatory agencies and,
in  particular, the Board of Governors of the Federal Reserve System. Changes in
monetary  policy,  including changes in interest rates, could influence not only
the  interest  the  Company  receives on loans and investment securities and the
amount  of  interest  it pays on deposits and borrowings, but such changes could
also  affect  (i)  the Company's ability to originate loans and obtain deposits,
(ii) the fair value of the Company's financial assets and liabilities, and (iii)
the  average  duration  of the Company's assets and liabilities. If the interest
rates  paid  on deposits and other borrowings increase at a faster rate than the
interest  rates  received  on  loans  and  other  investments, the Company's net
interest  income,  and therefore earnings, could be adversely affected. Earnings
could  also  be  adversely  affected if the interest rates received on loans and

--------------------------------------------------------------------------------
                                     Page 9
<PAGE>

other investments fall more quickly than the interest rates paid on deposits and
other  borrowings.

Although  management  believes  it has implemented effective asset and liability
management  strategies  to  reduce  the potential effects of changes in interest
rates  on  the  Company's  results  of  operations, any substantial, unexpected,
prolonged  change  in market interest rates could have a material adverse effect
on  the  Company's  financial  condition  and  results  of  operations.

ALLOWANCE FOR LOAN LOSSES MAY BE INSUFFICIENT

The  Company's loan customers may not repay their loans according to their terms
and  the  collateral  securing the payment of these loans may be insufficient to
assure  repayment.  The  Company  may  experience significant loan losses, which
would  have  a  material  adverse  effect  on earnings. Management makes various
assumptions  and  judgments  about  the  collectibility  of  the loan portfolio,
including the creditworthiness of borrowers and the value of the real estate and
other  assets  serving  as  collateral  for  the  repayment  of  loans.

The  Company  maintains  an allowance for loan losses in an attempt to cover any
loan losses inherent in the portfolio. In determining the size of the allowance,
management  relies on an analysis of the loan portfolio based on historical loss
experience,  volume  and  types  of  loans, trends in classification, volume and
trends in delinquencies and non-accruals, national and local economic conditions
and  other  pertinent  information.  If  those  assumptions  are  incorrect, the
allowance  may not be sufficient to cover future loan losses and adjustments may
be  necessary to allow for different economic conditions or adverse developments
in  the  loan  portfolio.  In addition, regulatory agencies review the Company's
allowance  for  loan  losses and may require additions to the allowance based on
their  judgment  about  information  available  to  them  at  the  time of their
examination. An increase in the Company's allowance for loan losses would reduce
its  earnings.

EXTENSIVE REGULATION AND SUPERVISION

The  Company,  primarily through its principal subsidiaries, Pathfinder Bank and
Pathfinder  Commercial  Bank,  and  certain non-bank subsidiaries, is subject to
extensive  federal and state regulation and supervision. Banking regulations are
primarily intended to protect depositors' funds, federal deposit insurance funds
and  the  banking  system as a whole, not shareholders. These regulations affect
the  Company's  lending  practices,  capital  structure,  investment  practices,
dividend policy and growth, among other things. The Company is also subject to a
number of federal laws, which, among other things, require it to lend to various
sectors  of the economy and population, and establish and maintain comprehensive
programs relating to anti-money laundering and customer identification. Congress
and federal regulatory agencies continually review banking laws, regulations and
policies  for  possible  changes. Changes to statutes, regulations or regulatory
policies,  including  changes  in  interpretation or implementation of statutes,
regulations  or  policies,  could  affect  the  Company  in  substantial  and
unpredictable  ways. Such changes could subject the Company to additional costs,
limit  the types of financial services and products it may offer and/or increase
the  ability  of  non-banks  to offer competing financial services and products,
among  other  things. Failure to comply with laws, regulations or policies could
result  in  sanctions  by  regulatory  agencies,  civil  money  penalties and/or
reputation  damage,  which could have a material adverse effect on the Company's
business,  financial  condition  and  results  of  operations.  The  Company's
compliance  with  certain of these laws will be considered by banking regulators
when  reviewing  bank  merger  and  bank holding company acquisitions. While the
Company  has  policies  and  procedures designed to prevent any such violations,
there  can  be  no  assurance  that  such  violations  will  not  occur. See the
"Regulation  and  Supervision"  section  in  Item  1,  "Business" and Note 17 to
consolidated  financial statements included in Item 8, "Financial Statements and
Supplementary  Data",  which  are  located  elsewhere  in  this  report.

--------------------------------------------------------------------------------
                                   Page 10
<PAGE>

LOCAL MARKET ECONOMIES

The  Company's business is concentrated in Oswego and parts of Onondaga counties
of  New  York  State.  The  economy  in  the  Company's  market  area  is
manufacturing-oriented and dependent on the State University of New York College
at Oswego.  As a result, its financial condition, results of operations and cash
flows  are subject to changes if there are changes in the economic conditions in
these  areas. A prolonged period of economic recession or other adverse economic
conditions  in  one  or  both of these areas could have a negative impact on the
Company. The Company can provide no assurance that conditions in its market area
economies  will  not deteriorate in the future and that such deterioration would
not  have  a  material  adverse  effect  on  the  Company.

COMPETITION  IN  THE  FINANCIAL  SERVICES  INDUSTRY

The  Company faces substantial competition in all areas of its operations from a
variety  of  different  competitors,  many of which are larger and may have more
financial  resources.  The  Company  competes  with other providers of financial
services  such  as  other  bank holding companies, commercial and savings banks,
savings  and  loan  associations,  credit unions, money market and mutual funds,
mortgage  companies,  title  agencies, asset managers, insurance companies and a
growing  list  of  other  local,  regional and national institutions which offer
financial  services.  If  the  Company is unable to compete effectively, it will
lose market share and income generated from loans, deposits, and other financial
products  will  decline.

LOSS  OF  EXECUTIVE  OFFICERS  OR  OTHER  KEY  PERSONNEL

Our  success  depends,  to  a  great  extent, upon the services of our executive
officers.  The unexpected loss of these individuals could have an adverse effect
on our operations.  From time to time, we also need to recruit personnel to fill
vacant positions for experienced lending officers and branch staff.  Competition
for  qualified personnel in the banking industry is significant, and there is no
assurance  that  we will continue to be successful in attracting, recruiting and
retaining  the  necessary  skilled managerial, sales and technical personnel for
the  successful  operation  of  our existing lending, operations, accounting and
administrative  functions  or to support the needs of our organization resulting
from future growth.  Our inability to hire or retain key personnel could have an
adverse  effect  on  the  Company's  results  of  operations.

ITEM 1B:  UNRESOLVED STAFF COMMENTS

None

--------------------------------------------------------------------------------
                                   Page 11
<PAGE>

ITEM 2: PROPERTIES

The  Bank  conducts  its business through its main office located in Oswego, New
York, and six branch offices located in Oswego County.  The following table sets
forth  certain  information concerning the main office and each branch office of
the  Bank  at  December  31,  2007.  The  aggregate net book value of the Bank's
premises  and  equipment  was $7.8 million at December 31, 2007.  For additional
information regarding the Bank's properties, see Note 7 to Notes to Consolidated
Financial  Statements.

<TABLE>
<CAPTION>

LOCATION                   OPENING DATE  OWNED/LEASED
-----------------------------------------------------
<S>                        <C>           <C>
Main Office                     1874        Owned
214 West First Street
Oswego, New York  13126

Plaza Branch                    1989        Owned (1)
Route 104, Ames Plaza
Oswego, New York  13126

Mexico Branch                   1978        Owned
Norman & Main Streets
Mexico, New York  13114

Oswego East Branch              1994        Owned
34 East Bridge Street
Oswego, New York  13126

Lacona Branch                   2002        Owned
1897 Harwood Drive
Lacona, New York 13083

Fulton Branch                   2003        Owned (2)
5 West First Street South
Fulton, New York  13069

Central Square Branch           2005        Owned
3025 East Ave
Central Square, New York 13036
</TABLE>

(1)  The building is owned; the underlying land is leased with an annual rent of
     $20,000
(2)  The building is owned; the underlying land is leased with an annual rent of
     $28,000

ITEM  3:  LEGAL  PROCEEDINGS

There  are  various  claims  and  lawsuits  to which the Company is periodically
involved incident to the Company's business.  In the opinion of management, such
claims and lawsuits in the aggregate are not expected to have a material adverse
impact  on  the  Company's  consolidated  financial  condition  and  results  of
operations.

ITEM  4:  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

No matters were submitted during the fourth quarter of fiscal 2007 to a vote of
the Company's shareholders.

--------------------------------------------------------------------------------
                                   Page 12
<PAGE>

PART  II

ITEM  5:  MARKET  FOR REGISTRANT'S COMMON STOCK, RELATED SECURITY HOLDER MATTERS
AND  ISSUER  PURCHASES  OF  EQUITY  SECURITIES

Pathfinder  Bancorp,  Inc.'s common stock currently trades on the Nasdaq Capital
Market  under  the  symbol  "PBHC".  There were 457 shareholders of record as of
March  13,  2008.  The  following  table sets forth the high and low closing bid
prices  and  dividends paid per share of common stock for the periods indicated:

<TABLE>
<CAPTION>
                                       DIVIDEND
QUARTER ENDED:         HIGH      LOW       PAID
-----------------------------------------------
<S>                 <C>      <C>      <C>
December 31, 2007   $10.880  $ 9.070  $  0.1025
September 30, 2007   12.390    9.350     0.1025
June 30, 2007        13.250   11.930     0.1025
March 31, 2007       14.000   12.780     0.1025
-----------------------------------------------
December 31, 2006   $16.000  $13.037  $  0.1025
September 30, 2006   14.370   11.700     0.1025
June 30, 2006        13.070   11.750     0.1025
March 31, 2006       14.130   11.000     0.1025
-----------------------------------------------
</TABLE>

DIVIDENDS AND DIVIDEND HISTORY

The Company has historically paid regular quarterly cash dividends on its common
stock,  and  the Board of Directors presently intends to continue the payment of
regular  quarterly  cash dividends, subject to the need for those funds for debt
service and other purposes.  Payment of dividends on the common stock is subject
to  determination and declaration by the Board of Directors and will depend upon
a  number  of factors, including capital requirements, regulatory limitations on
the  payment  of  dividends,  Pathfinder  Bank  and  its subsidiaries results of
operations  and  financial  condition,  tax considerations, and general economic
conditions.  The  Company's  mutual holding company, Pathfinder Bancorp, M.H.C.,
may  elect  to  waive  or  receive  dividends  each  time the Company declares a
dividend.  The  election  to  waive  the  dividend  receipt  requires  prior
non-objection  of  the  OTS.  Pathfinder  Bancorp,  M.H.C.  elected to waive its
dividend  for  the  quarters  ended June 30, 2007 and December 31, 2007.  During
2008,  Pathfinder  Bancorp, M.H.C. expects to waive two quarterly dividends, and
the  OTS  has  issued  its  non-objection  letter  thereto.

--------------------------------------------------------------------------------
                                   Page 13
<PAGE>

ITEM  6:  SELECTED  FINANCIAL  DATA

Pathfinder  Bancorp,  Inc.  ("the  Company") is the parent company of Pathfinder
Bank  and  Pathfinder  Statutory  Trust  I.  Pathfinder Bank has three operating
subsidiaries - Pathfinder Commercial Bank, Pathfinder REIT, Inc., and Whispering
Oaks  Development  Corp.

The  following selected consolidated financial data sets forth certain financial
highlights  of  the  Company  and  should  be  read  in  conjunction  with  the
consolidated  financial  statements  and  related  notes,  and the "Management's
Discussion  and  Analysis  of  Financial  Condition and  Results  of Operations"
included  elsewhere  in  this  annual  report  on   Form  10-K.

<TABLE>
<CAPTION>
                                                  2007       2006       2005       2004       2003
                                                ---------  ---------  ---------  ---------  ---------
<S>                                             <C>        <C>        <C>        <C>        <C>
YEAR END (In thousands)
Total assets                                    $320,691   $301,382   $296,948   $302,037   $277,940
Loans receivable, net                            221,046    201,713    187,889    185,125    187,002
Deposits                                         251,085    245,585    236,377    236,672    206,894
Shareholders' Equity                              21,704     20,850     20,928     21,826     21,785
FOR THE YEAR (In thousands)
Net interest income                             $  8,667   $  8,346   $  8,742   $  8,905   $  9,337
Noninterest income                                 3,042      2,615      2,040      3,047      2,608
Core noninterest income (a)                        2,622      2,396      2,333      1,996      1,740
Noninterest expense                                9,838      9,668     10,060      9,307      9,094
Net income                                         1,122      1,028        462      1,405      1,652
PER SHARE
Net income (basic)                              $   0.45   $   0.42   $   0.19   $   0.58   $   0.68
Book value                                          8.74       8.45       8.50       8.91       8.96
Tangible book value (b)                             7.19       6.82       6.77       7.04       7.03
Cash dividends declared                             0.41       0.41       0.41      0.405       0.40
RATIOS
Return on average assets                            0.36%      0.34%      0.15%      0.47%      0.59%
Return on average equity                            5.27       4.86       2.16       6.45       7.61
Return on average tangible equity (b)               6.47       6.04       2.72       8.17       9.77
Average equity to average assets                    6.82       7.03       6.95       7.29       7.77
Dividend payout ratio (c)                          62.03      66.73     147.84      47.54      39.41
Allowance for loan losses to loans receivable       0.76       0.74       0.89       0.98       0.91
Net interest rate spread                            2.81       2.92       3.07       3.22       3.53
Noninterest income to average assets                0.98       0.87       0.66       1.02       0.93
Core noninterest income to average assets (a)       0.84       0.80       0.76       0.67       0.62
Noninterest expense to average assets               3.15       3.21       3.28       3.12       3.26
Efficiency ratio (d)                               84.02      88.19      93.30      77.87      76.13
</TABLE>

(a)  Core noninterest income excludes net (losses) gains on sales and impairment
     of  investment  securities  and  net  (losses)  gains on sales of loans and
     foreclosed real estate.
(b)  Tangible equity excludes intangible assets.
(c)  The  dividend  payout  ratio is calculated using dividends declared and not
     waived  by the Company's mutual holding company parent, Pathfinder Bancorp,
     M.H.C.,  divided  by  net income.
(d)  The efficiency  ratio  is  calculated as noninterest expense divided by the
     sum  of  net  interest  income  and  noninterest  income.
--------------------------------------------------------------------------------
                                     Page 14
<PAGE>

ITEM  7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

INTRODUCTION

Throughout  the  Management's  Discussion  and  Analysis ("MD&A") the term, "the
Company",  refers  to  the  consolidated  entity  of  Pathfinder  Bancorp,  Inc.
Pathfinder  Bank  and Pathfinder Statutory Trust I are wholly owned subsidiaries
of  Pathfinder  Bancorp,  Inc.,  however,  Pathfinder  Statutory  Trust I is not
consolidated  for reporting purposes (see Note 10).  Pathfinder Commercial Bank,
Pathfinder  REIT,  Inc.  and  Whispering Oaks Development Corp. represent wholly
owned  subsidiaries  of  Pathfinder  Bank.  At  December  31,  2007,  Pathfinder
Bancorp,  M.H.C,  the  Company's mutual holding company parent, whose activities
are  not  included  in  the MD&A, held 63.7% of the Company's outstanding common
stock  and  the  public  held  36.3%.

When  used in this Annual Report the words or phrases "will likely result", "are
expected  to",  "will  continue",  "is  anticipated",  "estimate",  "project" or
similar  expression are intended to identify "forward-looking statements" within
the  meaning  of  the  Private  Securities  Litigation Reform Act of 1995.  Such
statements  are  subject  to  certain  risks and uncertainties, including, among
other  things,  changes  in  economic  conditions  in the Company's market area,
changes  in  policies  by  regulatory  agencies, fluctuations in interest rates,
demand for loans in the Company's market areas and competition, that could cause
actual results to differ materially from historical earnings and those presently
anticipated  or  projected.  The  Company wishes to caution readers not to place
undue  reliance  on  any such forward-looking statements, which speak only as of
the  date  made.  The  Company  wishes to advise readers that the factors listed
above  could  affect  the  Company's  financial  performance and could cause the
Company's  actual  results  for  future  periods  to  differ materially from any
opinions  or  statements expressed with respect to future periods in any current
statements.

The  Company  does  not  undertake, and specifically declines any obligation, to
publicly  release  the  results  of  any  revisions,  which  may  be made to any
forward-looking  statements to reflect events or circumstances after the date of
such  statements  or  to  reflect the occurrence of anticipated or unanticipated
events.

The  Company's business strategy is to operate as a well-capitalized, profitable
and  independent  community bank dedicated to providing value-added products and
services  to our customers.  Generally, the Company has sought to implement this
strategy  by  emphasizing  retail  deposits  as  its primary source of funds and
maintaining  a  substantial part of its assets in locally-originated residential
first  mortgage  loans,  loans to business enterprises operating in its markets,
and  in  investment  securities.  Specifically,  the Company's business strategy
incorporates  the  following  elements:  (i)  operating  as  an  independent
community-oriented  financial institution; (ii) maintaining capital in excess of
regulatory  requirements;  (iii)  emphasizing  investment  in one-to-four family
residential mortgage loans, loans to small businesses and investment securities;
and  (iv)  maintaining  a  strong  retail  deposit  base.

The  Company's  net  income  is  primarily dependent on its net interest income,
which  is  the  difference  between interest income earned on its investments in
mortgage  and  other loans, investment securities and other assets, and its cost
of  funds  consisting  of  interest  paid on deposits and other borrowings.  The
Company's  net income also is affected by its provision for loan losses, as well
as  by  the  amount  of  noninterest income, including income from fees, service
charges and servicing rights, net gains and losses on sales of securities, loans
and  foreclosed  real  estate,  and  noninterest  expense  such  as  employee
compensation  and benefits, occupancy and equipment costs, data processing costs
and  income  taxes.  Earnings  of the Company also are affected significantly by
general  economic  and  competitive  conditions,  particularly changes in market
interest rates, government policies and actions of regulatory authorities, which
events  are beyond the control of the Company.  In particular, the general level
of  market  rates  tends  to  be  highly  cyclical.

--------------------------------------------------------------------------------
                                   Page 15
<PAGE>

APPLICATION  OF  CRITICAL  ACCOUNTING  POLICIES

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 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  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 other
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 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 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 determination of the allowance for loan losses to
be  the accounting area that requires the most subjective and complex judgments,
and  as  such  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  and 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.  The  loan portfolio also represents the largest asset type
on  the  consolidated  balance  sheet.  Note  1  to  the  consolidated financial
statements  describes  the  methodology used to determine the allowance for loan
losses,  and  a  discussion  of the factors driving changes in the amount of the
allowance  for  loan  losses  is  included  in  this  report.

The  Company  carries  all  of  its  security investments at fair value with any
unrealized gains or losses reported net of tax as an adjustment to shareholders'
equity.  Based on management's assessment, at December 31, 2007, the Company did
not  hold  any security that had a fair value decline that is currently expected
to be other than temporary.  Consequently, any declines in a specific security's
fair  value  below amortized cost have not been provided for in the consolidated
income  statement.  The  Company's  ability  to  fully  realize the value of its
investment  in  various  securities,  including  corporate  debt  securities, is
dependent  on  the  underlying  creditworthiness  of  the  issuing organization.

EXECUTIVE  SUMMARY

Total  deposits  for the Company increased 2%, to $251.1 million at December 31,
2007,  while  the  average balance of deposits increased $17.4 million to $255.8
million  at  December  31, 2007.  The Company will continue to focus on building
market  share  in  the  Central  Square  and  Fulton  markets where the existing
Pathfinder  share  of  the  market is less than 20%.  In all other market areas,
Pathfinder  currently  has  the  majority  of  the current deposit market share.
Pathfinder  seeks  to  continue  to  develop  core  deposit relationships in all
markets  through  the acquisition of demand deposit relationships.  Efforts will
also  be  focused  on the expansion of commercial deposit relationships with the
bank's  existing  commercial  lending  relationships.

--------------------------------------------------------------------------------
                                   Page 16
<PAGE>

Total  assets  increased  6%,  primarily  in  the  loan  and investment security
portfolios.  The  loan  portfolio  increased  10%  with  net  growth in all loan
categories.  The Company expects to concentrate on continued commercial mortgage
and  commercial  loan  portfolio  growth during 2008. The ratio of nonperforming
assets  to  total assets was 0.77% at December 31, 2007 compared to 0.54% in the
prior  year. The decrease in asset quality is primarily the result of a $394,000
increase  in  foreclosed  real  estate,  combined  with  a $354,000 increase in
non-performing  residential  real  estate  loans.

Net  income  for  2007 was $1.1 million, or $0.45 per share, as compared to $1.0
million,  or  $0.42  per  share, in 2006.   Increased service charges on deposit
accounts  and  an  increase in net gains on investment securities contributed to
the  increase  in  net  income  from  2006.  Net  interest  margin  compression
negatively  impacted  earnings  during  2007.

On  March 22, 2007, the Company entered into a junior subordinated debenture for
$5.2  million,  with  interest  adjustable  quarterly at a 1.65% spread over the
3-month  LIBOR.  The  Company used the proceeds from that issuance to retire its
original junior subordinated debenture on June 27, 2007, at its first call date.
The  original  obligation was for $5.2 million, adjustable quarterly at a spread
of  3.45%  over  the  3-month  LIBOR.  The  new  issuance  and retirement of the
original  junior  subordinated  debenture  resulted  in  an  approximate pre-tax
savings of $29,000 to the Company in 2007.  Future pre-tax annual savings on the
new  debenture  will  amount  to  approximately  $92,000.

The  Company  experienced  net interest margin compression to 3.07% in 2007 from
3.11%  in  2006.  Net  interest income increased 4% to $8.8 million for the year
ended December 31, 2007.  The Federal Reserve increased its federal funds target
rate  17 times since June of 2004, resulting in a total increase of 4.25% during
that  period.  While  these  short-term  market  interest  rates  increased,
longer-term  market interest rates remained relatively unchanged, resulting in a
"flattening"  of  the  market yield curve.  During this extended period in which
the yield curve was flat, net interest margin compression was significant as the
Company's  deposits and borrowings repriced faster than the longer term interest
earning  assets,  loans  and security investments.  Beginning in August of 2007,
the  Federal  Reserve  Bank  began  providing  economic  stimulus in the form of
reductions  in  the  short-term  interest  rate  reductions to the federal funds
target  rate.  As  a result, the market yield curve now has some positive slope,
and  the  lower  shorter  term  rate  environment  has  allowed  management  to
aggressively  lower  deposit and borrowing costs while engaging in activities to
retain yield on our securities and loan portfolios. This will continue to be the
Company's  primary  emphasis  over  the near term - to enhance net interest rate
spread  and  margin  as  the  market  yield  curve  steepens.

The  Company's  efforts  to  enhance  other income during 2007 by increasing the
customer  deposit  base  and  increasing  overdraft,  returned  check  and
non-sufficient  fund  charges  to  be  more  reflective  with  local competition
resulted  in  an 8% increase in service charges on deposit accounts during 2007.
The  Company  continues to explore cost saving strategies to minimize the growth
of  operating  expenses.  The  Company's  efforts  resulted  in  an  increase in
noninterest  expense  of  approximately  $170,000, or 2%, while Company revenues
increased  $748,000,  or  6.8%,  during  2007.

RESULTS  OF  OPERATIONS

Net income for 2007 was $1.1 million, an increase of $94,000, or 9%, compared to
net  income  of  $1.0  million  for  2006.  Basic and diluted earnings per share
increased to $0.45 per share for the year ended December 31, 2007 from $0.42 and
$0.41  per  share respectively, for the year ended December 31, 2006.  Return on
average  equity  increased  to  5.27%  in  2007  from  4.86%  in  2006.

--------------------------------------------------------------------------------
                                   Page 17
<PAGE>

Net  interest  income,  on  a  tax  equivalent basis, increased $329,000, or 4%,
primarily  resulting  from volume increases in the commercial and consumer loans
interest-earning asset categories which were partially offset by volume and rate
increases  within  time  deposits.  Provision for loan losses for the year ended
December  31,  2007  increased  $342,000  reflecting the increased inherent risk
within the expanding commercial lending activities and the overall growth in the
total  loan  portfolio  and  general weakening economic conditions.  The Company
experienced  a  9% increase in noninterest income, exclusive of securities gains
and  losses,  primarily attributable to increased deposit levels and the related
service  charges  associated  with checking accounts, an increase in issued Visa
Debit  cards  and  increased usage from the existing customer base and increased
in-house  investment  sales  revenue.  Noninterest  expense  increased 2% due to
increases  in  personnel  expense,  building  occupancy,  data  processing  and
professional  and other services, partially offset by reductions in amortization
of  intangibles  and  other  expenses.

NET  INTEREST  INCOME

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

Net  interest  income,  on a tax-equivalent basis, increased $329,000, or 4%, to
$8.8  million  for the year ended December 31, 2007, as compared to $8.5 million
for  the  year  ended  December 31, 2006.  The Company's net interest margin for
2007 decreased to 3.07% from 3.11% in 2006.  The increase in net interest income
is  attributable  to  an  increase  in  the  average balance of interest earning
assets,  combined  with  increased  yields  on  interest  earning assets and was
partially  offset  by  an  increase in the cost of interest-bearing liabilities.
The  average  balance of interest-earning assets increased $13.7 million, or 5%,
during 2007 and the average balance of interest-bearing liabilities increased by
$8.1  million,  or  3%.  The increase in the average balance of interest earning
assets  primarily  resulted from a $15.8 million increase in the average balance
of  the  loan  portfolio  and  a $3.3 million increase in the average balance of
interest  earning  deposits,  offset  by a $5.4 million reduction in the average
balance  of  the  security  investment  portfolio.  The  increase in the average
balance of interest-bearing liabilities primarily resulted from a $15.3 million,
or 7%, increase in the average balance of deposits, offset by a $7.2 million, or
19%,  decrease  in the average balance of borrowed funds.  Interest income, on a
tax-equivalent  basis,  increased $1.4 million, or 9%, during 2007, as the yield
on  interest  earning  assets  increased  to  6.08%  in 2007 from 5.86% in 2006.
Interest  expense  on  deposits  increased  $1.4 million, or 26%, as the cost of
deposits  rose  to  2.96%  in  2007  from  2.51%  in  2006.  Interest expense on
borrowings  decreased  $315,000,  or  15%, during 2007 as the average balance of
borrowed  fund decreased $7.2 million, or 19%, offset by an increase in the cost
of  borrowed  funds  to  5.52%  in  2007  from  5.31%  in  2006.

--------------------------------------------------------------------------------
                                   Page 18
<PAGE>

AVERAGE  BALANCES  AND  RATES

The  following  table sets forth information concerning average interest-earning
assets  and  interest-bearing  liabilities  and  the  yields  and rates thereon.
Interest  income  and  resultant  yield  information  in the table is on a fully
tax-equivalent  basis  using  marginal federal income tax rates of 34%. 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.  Non-accrual  loans  have  been  included  in  interest-earning assets for
purposes  of  these  calculations.

<TABLE>
<CAPTION>
                                                          For the Years Ended December 31,
---------------------------------------------------------------------------------------------------------
                                                        2007                          2006
---------------------------------------------------------------------------------------------------------
                                                                   Average                         Average
                                            Average                Yield /    Average               Yield/
(Dollars in thousands)                      Balance     Interest     Cost     Balance   Interest     Cost
---------------------------------------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>       <C>        <C>        <C>
Interest-earning assets:
 Real estate loans residential              $120,079   $   6,945     5.78%  $119,417   $   6,876     5.76%
 Real estate loans commercial                 43,573       3,309     7.59%    35,076       2,705     7.71%
 Commercial loans                             23,710       1,976     8.33%    19,961       1,574     7.88%
 Consumer loans                               23,011       1,894     8.23%    20,153       1,641     8.14%
 Taxable investment securities                66,230       2,881     4.35%    66,788       2,658     3.97%
 Tax-exempt investment securities              5,446         258     4.74%    10,240         481     4.70%
 Interest-earning deposits                     5,050         211     4.18%     1,779          91     5.12%
----------------------------------------------------------------------------------------------------------
  Total interest-earning assets             $287,099   $  17,474     6.08%  $273,414   $  16,026     5.86%
----------------------------------------------------------------------------------------------------------
Noninterest-earning assets:
 Other assets                                 27,774                          31,600
 Allowance for loan losses                    (1,583)                         (1,661)
 Net unrealized losses
   on available for sale securities           (1,372)                         (2,142)
----------------------------------------------------------------------------------------------------------
  Total  Assets                             $311,918                        $301,211
==========================================================================================================
Interest-bearing liabilities:
 NOW accounts                               $ 22,235   $     113     0.51%  $ 21,094   $     102     0.48%
 Money management accounts                    11,348          89     0.78%    13,318         110     0.83%
 MMDA accounts                                23,682         937     3.96%    20,608         786     3.81%
 Savings and club accounts                    53,359         279     0.52%    58,997         266     0.45%
 Time deposits                               122,333       5,483     4.48%   103,596       4,203     4.06%
 Junior subordinated debentures                6,454         511     7.81%     5,155         448     8.57%
 Borrowings                                   25,063       1,230     4.91%    33,589       1,608     4.79%
----------------------------------------------------------------------------------------------------------
  Total Interest-bearing liabilities        $264,474   $   8,642     3.27%  $256,357   $   7,523     2.93%
----------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
 Demand deposits                              22,828                          20,745
 Other liabilities                             3,338                           2,943
----------------------------------------------------------------------------------------------------------
  Total liabilities                          290,640                         280,045
----------------------------------------------------------------------------------------------------------
Shareholders' equity                          21,278                          21,166
----------------------------------------------------------------------------------------------------------
  Total liabilities & shareholders' equity  $311,918                        $301,211
==========================================================================================================
Net interest income                                    $   8,832                       $   8,503
Net interest rate spread                                             2.81%                           2.93%
Net interest margin                                                  3.07%                           3.11%
==========================================================================================================
Ratio of average interest-earning assets
 to average interest-bearing liabilities                           108.55%                         106.55%
==========================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                        For the Years Ended December 31,
---------------------------------------------------------------------------
                                                       2005
---------------------------------------------------------------------------
                                                                    Average
                                             Average                  Yield/
(Dollars in thousands)                       Balance     Interest      Cost
---------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>
Interest-earning assets:
 Real estate loans residential               $121,875   $   7,092     5.82%
 Real estate loans commercial                  29,385       2,181     7.42%
 Commercial loans                              17,563       1,135     6.46%
 Consumer loans                                19,257       1,418     7.36%
 Taxable investment securities                 74,496       2,728     3.66%
 Tax-exempt investment securities              13,202         681     5.16%
 Interest-earning deposits                      3,041          71     2.33%
---------------------------------------------------------------------------
  Total interest-earning assets              $278,819   $  15,306     5.49%
Noninterest-earning assets:
 Other assets                                  31,455
 Allowance for loan losses                     (1,835)
 Net unrealized losses
   on available for sale securities            (1,307)
---------------------------------------------------------------------------
  Total  Assets                              $307,132
===========================================================================
Interest-bearing liabilities:
 NOW accounts                                $ 19,877   $     107     0.54%
 Money management accounts                     16,096         138     0.86%
 MMDA accounts                                 25,284         697     2.76%
 Savings and club accounts                     65,558         291     0.44%
 Time deposits                                 93,732       3,086     3.29%
 Junior subordinated debentures                 5,155         351     6.72%
 Borrowings                                    37,348       1,686     4.51%
---------------------------------------------------------------------------
  Total Interest-bearing liabilities         $263,050   $   6,356     2.42%
---------------------------------------------------------------------------
Noninterest-bearing liabilities:
 Demand deposits                               19,324
 Other liabilities                              3,416
---------------------------------------------------------------------------
  Total liabilities                           285,790
---------------------------------------------------------------------------
Shareholders' equity                           21,342
---------------------------------------------------------------------------
  Total liabilities & shareholders' equity   $307,132
===========================================================================
Net interest income                                     $   8,950
Net interest rate spread                                              3.07%
Net interest margin                                                   3.21%
===========================================================================
Ratio of average interest-earning assets
 to average interest-bearing liabilities                            105.99%
 </TABLE>
--------------------------------------------------------------------------------
                                   Page 19
<PAGE>

INTEREST  INCOME

Changes  in  interest  income are derived as a result of the volume of loans and
securities,  as measured by changes in the respective average balance and by the
related  yields  on  those  balances.  Interest income on a tax-equivalent basis
increased  $1.4 million, or 9%.  Average loans increased 8% in 2007, with yields
increasing  12 basis points to 6.70%. The Company's average residential mortgage
loan  portfolio increased $660,000, or 1%, when comparing the year 2007 to 2006.
The  average  yield on the residential mortgage loan portfolio increased 2 basis
points  to  5.78%  in 2007 from 5.76% in 2006. The average balance of commercial
real  estate  increased $8.5 million, or 24%, while the yield decreased to 7.59%
in  2007  from  7.71%  in  2006.  Average commercial loans increased 19% and the
tax-equivalent  yield  increased  35  basis  points to 8.23% in 2007 compared to
7.88%,  in  2006.  An  increase in the average balance of consumer loans of $2.9
million,  or  14%,  resulted  from an increase in home equity loans. The average
yield increased 9 basis points, to 8.23% from 8.14% in 2006, primarily resulting
from  the  increase  in  home  equity loans, which are based on the Bank's prime
rate.

Interest  income on investment securities decreased 1% from 2006, resulting from
a  decrease  in  the  average  balance  of  investment  securities  (taxable and
tax-exempt)  by $5.4 million, or 7%, to $71.7 million in 2007 from $77.0 million
in  2006.  The  decrease  in  the  average  balance  of investment securities is
primarily the result of cash flows generated from security portfolio maturities,
amortization  and  sales  being  utilized  to  fund  loan  portfolio growth. The
tax-equivalent  yield  increased  24 basis points to 4.32% in 2007 from 4.08% in
2006.

INTEREST  EXPENSE

Changes  in  interest  expense are derived as a result of the volume of deposits
and  borrowings as measured by changes in the respective average balances and by
the  related  interest costs on those balances.  Interest expense increased $1.1
million,  or  15%,  in 2007, when compared to 2006.  The increase in the cost of
funds  resulted  from  an  increase  in  the  average  cost  of interest-bearing
liabilities  of  34  basis points, to 3.27% in 2007 from 2.93% at 2006, combined
with  an  $8.1  million  increase  in  the  average  balance of interest-bearing
liabilities during 2007.  The average cost of deposits increased 45 basis points
to  2.96%  during 2007 from 2.51% for 2006.  The increase in the cost of average
deposits resulted from higher short-term interest rates in the first 8 months of
2007 compared to 2006, combined with a shift from lower cost savings products to
the  higher  cost time deposits.  The average cost of MMDA accounts increased 15
basis  points  and  the  cost  of  time deposits increased 42 basis points.  The
average  balance  of  deposits increased $15.3 million to $233.0 million at 2007
from  $217.6  million  at 2006.  The increase in the average balance of deposits
primarily  resulted  from a $1.2 million, or 5%, increase in the average balance
of  municipal  deposits  and  a  $14.1  million,  or 7%, increase in the average
balance  of  retail  deposits.  The  cost  of  junior  subordinated  debentures
decreased 76 basis points, decreasing interest expense by $63,000, that resulted
from the issuance of new subordinated debentures at a rate of 3-month LIBOR plus
1.65%,  which  paid  off  subordinated  debentures  at 3 month LIBOR plus 3.45%.

--------------------------------------------------------------------------------
                                   Page 20
<PAGE>

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
changing  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.

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31,
                                    --------------------------------------------------------
                                          2007 VS. 2006                2006 VS. 2005
                                   INCREASE/(DECREASE) DUE TO     INCREASE/(DECREASE) DUE TO
                                   ----------------------------------------------------------
                                                          TOTAL                        TOTAL
                                                       INCREASE                      INCREASE
(In thousands)                       VOLUME    RATE   (DECREASE)  VOLUME      RATE  (DECREASE)
---------------------------------------------------------------------------------------------
INTEREST INCOME:
<S>                                 <C>      <C>      <C>        <C>      <C>       <C>
 Real estate loans residential       $  42   $  27     $   69     $(143)  $  (73)    $ (216)
 Real estate loans commercial          647     (43)       604       436       88        524
 Commercial loans                      310      92        402       167      272        439
 Consumer loans                        235      18        253        68      155        223
 Taxable investment securities         (23)    230        207      (296)     224        (72)
 Tax-exempt investment securities     (227)      4       (223)     (143)     (56)      (199)
 Interest-earning deposits             140     (20)       120       (39)      60         21
---------------------------------------------------------------------------------------------
    Total interest income            1,123     309      1,432        50      670        720
---------------------------------------------------------------------------------------------

INTEREST EXPENSE:

 NOW  accounts                           5       6         11         7      (12)        (5)
 Money management accounts             (15)     (6)       (21)      (23)      (5)       (28)
 MMDA accounts                         119      32        151      (145)     234         89
 Savings and club accounts             (26)     39         13       (31)       6        (25)
 Time deposits                         831     450      1,281       326      791      1,117
 Junior subordinated debentures        105     (42)        63         -       97         97
 Borrowings                           (418)     39       (379)     (177)      99        (78)
----------------------------------------------------------------------------------------------
    Total interest expense             601     518      1,119       (43)   1,210      1,167
---------------------------------------------------------------------------------------------
Net change in net interest income    $ 522   $(209)    $  313     $  93   $ (540)    $ (447)
=============================================================================================
</TABLE>
--------------------------------------------------------------------------------
                                   Page 21
<PAGE>

NONINTEREST  INCOME

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

The following table sets forth certain information on noninterest income for the
years  indicated.

<TABLE>
<CAPTION>
                                                          FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
(In thousands)                                                       2007       2006
------------------------------------------------------------------------------------------
<S>                                                               <C>       <C>

Service charges on deposit accounts                               $ 1,474     $1,371
Loan servicing fees                                                   250        224
Increase in the value of bank owned life insurance                    225        225
Debit card interchange fees                                           246        189
Other charges, commissions and fees                                   427        387
-------------------------------------------------------------------------------------
Core noninterest income                                           $ 2,622     $2,396
Net gains on sales and impairment of investment securities            378        299
Net gains (losses) on sales of loans and foreclosed real estate        42        (80)
---------------------------------------------------------------------------------------
Total noninterest income                                          $ 3,042     $2,615
=======================================================================================
</TABLE>

Noninterest  income in 2007 increased 16%, when compared to 2006, as a result of
a  9%  increase  in  core  noninterest income and a 92% increase in the non-core
items,  net  gains (losses) on sales and impairment of investment securities and
net gains (losses) on sales of loans and foreclosed real estate. Service charges
on deposit accounts increased 8% as deposit related charges were increased to be
more  in  line  with  local  competition  and  the  number  of  deposit accounts
increased,  creating  a  higher volume of fee-generating transactions, including
overdrafts,  nonsufficient  funds,  debit  cards  and  ATM  transactions.  Loan
servicing  fees increased 12% due to a reduction in the amortization of mortgage
servicing  rights  and  increased late charges on mortgage and commercial loans.
Other  charges,  commissions  and  fees  increased 10% due to increased internal
investment services activity and related revenue and increased foreign ATM usage
fees.  Investment  security  gains  increased $79,000, when compared to the 2006
period resulting primarily from the gain recognized on the sale of the Company's
holdings in the common stock of Fannie Mae, offset by a slightly lower long-term
capital  gain  recorded in the fourth quarter of 2007 than was recorded in 2006.
Net  gains  on  the sale of loans/foreclosed real estate increased $122,000 when
compared to the prior year primarily due to losses recorded on the sale of eight
foreclosed  real  estate properties during 2006.  In 2007, gains were recognized
on  the  sale  of  four  foreclosed  properties.

NONINTEREST  EXPENSE

The  following  table  sets forth certain information on noninterest expense for
the  years  indicated.

<TABLE>
<CAPTION>
                         FOR THE YEARS ENDED DECEMBER 31,
                        --------------------------------
(In thousands)                      2007         2006
-------------------------------------------------------
<S>                                <C>         <C>
Salaries and employee benefits     $5,094      $5,007
Building occupancy                  1,254       1,203
Data processing expenses            1,333       1,278
Professional and other services       769         615
Amortization of intangible asset      182         223
Other expenses                      1,206       1,342
-----------------------------------------------------
Total noninterest expense          $9,838      $9,668
=====================================================
</TABLE>
--------------------------------------------------------------------------------
                                   Page 22
<PAGE>

Noninterest  expenses increased $170,000, or 2%, for the year ended December 31,
2007 when compared to 2006.  Salaries and employee benefits increased 2% in 2007
primarily  due  to  normal salary merit increases and incentive compensation.  A
25%  increase  in  professional  and other services expense was primarily due to
consulting  expenses  associated  with  the  on-going  SOX 404 process review, a
customer  base risk analysis for BSA compliance and a direct mail campaign aimed
at  attracting  new  deposit  customers.  The  decrease  in  other  expenses was
primarily  due  to  a reduction in expenses associated with insurance and travel
and training.  Additionally, the write-off of losses on ATM transactions and bad
checks  was  lower  in  2007  when  compared  to the same period in 2006 and the
deferred  financing  expense  associated  with  the  original  Statutory  Trust
financing  was  fully  amortized  in  June  eliminating  $15,000  in  expense.

INCOME  TAX  EXPENSE

In  2007,  the  Company  reported  income  tax expense of $384,000 compared with
$242,000 in 2006.  The effective tax rate increased to 25% in 2007 compared to a
tax  rate  of 19% in 2006.  The increase in income tax expense and effective tax
rate  in  2007 resulted from a higher pretax income of $236,000, combined with a
reduction of income earned on tax-exempt investment securities.  The Company has
reduced  its tax rate from the statutory rate primarily through the ownership of
tax-exempt investment securities, bank owned life insurance and other tax saving
strategies.

CHANGES  IN  FINANCIAL  CONDITION

INVESTMENT  SECURITIES

The  investment  portfolio represents 23% of the Company's earning assets and is
designed  to  generate  a  favorable  rate  of  return consistent with safety of
principal  while  assisting  the  Company  in  meeting  the  liquidity needs and
interest  rate risk strategies of the Company.  All of the Company's investments
are  classified  as  available  for  sale.  The  Company  invests  in securities
consisting  primarily of mortgage-backed securities, securities issued by United
States  Government  agencies  and  sponsored  enterprises,  state  and municipal
obligations,  mutual  funds,  equity securities, investment grade corporate debt
instruments,  and  common stock issued by the Federal Home Loan Bank of New York
(FHLBNY).  By investing in these types of assets, the Company reduces the credit
risk  of  its  asset  base, but must accept lower yields than would typically be
available  on  alternative  loan  products.  Our  mortgage  backed  securities
portfolio  is  comprised  predominantly of pass-through securities guaranteed by
either  Fannie  Mae,  Freddie  Mac or Ginnie Mae and does not, to our knowledge,
include  any  securities  backed  by  sub-prime  or  other  high risk mortgages.

Investment  securities  increased $2.9 million, to $67.1 million at December 31,
2007  from  $64.2  million  at  December  31,  2006.  The increase in investment
securities  was  primarily attributable to the $4.0 million purchase of mortgage
backed  securities  in  the  fourth  quarter  of  2007.

The  following  table  sets forth the carrying value of the Company's investment
portfolio  at  December  31:

<TABLE>
<CAPTION>
                                                         AT DECEMBER 31,
                                                  -----------------------------
(In thousands)                                        2007      2006      2005
-------------------------------------------------------------------------------
INVESTMENT SECURITIES:          <S>               <C>       <C>       <C>
  US Treasury and agencies                        $  18,672   $19,966   $20,713
  State and political subdivisions                    5,342     5,870    11,177
  Corporate                                           6,392     5,575     5,936
  Mortgage-backed                                    28,615    25,481    31,565
  Equity securities and FHLB stock                    2,706     2,406     2,626
  Mutual funds                                        6,514     6,336     6,177
-------------------------------------------------------------------------------
                                                     68,241    65,634    78,194
Unrealized loss on available for sale portfolio      (1,103)   (1,415)   (2,150)
-------------------------------------------------------------------------------
    Total investment securities                   $  67,138   $64,219   $76,044
===============================================================================
</TABLE>

--------------------------------------------------------------------------------
                                   Page 23
<PAGE>

The  following  table  sets forth the scheduled maturities, amortized cost, fair
values  and  average  yields for the Company's investment securities at December
31,  2007. Yield is calculated on the amortized cost to maturity and adjusted to
a  fully  tax-equivalent  basis.

<TABLE>
<CAPTION>
                                          ONE YEAR OR LESS      ONE TO FIVE YEARS       FIVE TO TEN YEARS
                                 ------------------------------------------------------------------------
                                                 ANNUALIZED              ANNUALIZED              ANNUALIZED
                                     AMORTIZED     WEIGHTED   AMORTIZED    WEIGHTED   AMORTIZED    WEIGHTED
(Dollars in thousands)                    COST    AVG YIELD        COST   AVG YIELD       COST    AVG YIELD
------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>             <C>         <C>             <C>         <C>
DEBT INVESTMENT SECURITIES:
  US Treasury and agencies           $    6,499        3.76%  $   10,157      4.62%    $  2,016        4.83%
  State and political subdivisions        1,010        3.36%       2,855      3.55%       1,477        3.94%
  Corporate                               1,250        5.10%       2,021      5.33%         990        4.75%
------------------------------------------------------------------------------------------------------------
    Total                            $    8,759        3.91%  $   15,033      4.51%    $  4,483        4.52%
------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES:
  Mortgage-backed                    $      127        4.00%  $    6,619      4.18%     $  3,181        5.12%
------------------------------------------------------------------------------------------------------------
    Total                            $      127        4.00%  $    6,619      4.18%     $  3,181        5.12%
------------------------------------------------------------------------------------------------------------
OTHER NON-MATURITY INVESTMENTS:
  Mutual funds                       $    6,514        3.25%  $        -         -      $      -           -
  Equity securities and FHLB stock        2,706        5.36%           -         -             -           -
------------------------------------------------------------------------------------------------------------
    Total                            $    9,220        3.87%  $        -         -      $      -           -
------------------------------------------------------------------------------------------------------------
  Total investment securities        $   18,106        3.89%  $   21,652      4.41%     $  7,664        4.77%
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                       MORE THAN TEN YEARS        TOTAL INVESTMENT SECURITIES
                                  -----------------------------------------------------------
                                                ANNUALIZED                          ANNUALIZED
                                   AMORTIZED      WEIGHTED     AMORTIZED     FAIR     WEIGHTED
(Dollars in thousands)                  COST     AVG YIELD          COST    VALUE    AVG YIELD
----------------------------------------------------------------------------------------------
<S>                                <C>         <C>             <C>         <C>      <C>
DEBT INVESTMENT SECURITIES:
  US Treasury and agencies           $     -            -       $18,672    $18,646       4.34%
  State and political subdivisions         -            -         5,342      5,327       3.57%
  Corporate                            2,131         5.13%        6,392      6,027       5.03%
----------------------------------------------------------------------------------------------
   Total                             $ 2,131         5.13%      $30,406    $30,000       4.35%
-------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES:
  Mortgage-backed                    $18,688         5.00%      $28,615    $28,377       4.56%
----------------------------------------------------------------------------------------------
   Total                             $18,688         5.00%      $28,615    $28,377       4.56%
----------------------------------------------------------------------------------------------
OTHER NON-MATURITY INVESTMENTS:
  Mutual funds                       $     -            -       $ 6,514    $ 6,043       3.25%
  Equity securities and FHLB stock         -            -         2,706      2,718       5.36%
----------------------------------------------------------------------------------------------
   Total                             $     -            -       $ 9,220    $ 8,761       3.87%
--------------------------------------------------------------------------------------------------
  Total investment securities        $20,819         5.01%      $68,241    $67,138       4.37%
==============================================================================================
</TABLE>

The  above noted yield information does not give effect to changes in fair value
that  are  reflected  in  the  changes  to  consolidated  shareholders'  equity.

LOANS  RECEIVABLE

Loans  receivable  represent 77% of the Company's earning assets and account for
the  greatest  portion  of  total  interest  income.  The  Company  emphasizes
residential  real  estate  financing  and  anticipates a continued commitment to
financing  the  purchase or improvement of residential real estate in its market
area.  The  Company  also  extends  credit  to businesses within its marketplace
secured  by  commercial  real  estate,  equipment,  inventories  and  accounts
receivable.  It  is  anticipated  that  small  business  lending  in the form of
mortgages,  term  loans,  leases,  and  lines  of  credit  will provide the most
opportunity for balance sheet and revenue growth over the near term.  Commercial

--------------------------------------------------------------------------------
                                   Page 24
<PAGE>

and  municipal  loans comprise 11% of the total loan portfolio.  At December 31,
2007,  87%  of  the Company's total loan portfolio consisted of loans secured by
real  estate,  of  which  20%  consisted  of  commercial  real  estate  loans.

<TABLE>
<CAPTION>
                                                       December 31,
                                  ----------------------------------------------------
<S>                               <C>            <C>       <C>       <C>       <C>
(In thousands)                             2007      2006      2005      2004      2003
---------------------------------------------------------------------------------------
Residential real estate (1)       $     126,666  $118,494  $119,707  $123,898  $128,989
Commercial real estate                   45,490    40,501    31,845    29,874    31,278
Commercial and municipal loans           25,288    23,001    18,334    16,834    15,090
Consumer loans                           25,305    21,213    19,682    18,505    16,880
---------------------------------------------------------------------------------------
  Total loans receivable          $     222,749  $203,209  $189,568  $189,111  $192,237
=======================================================================================
</TABLE>

(1)  Includes  loans  held  for  sale.

The  following  table  shows  the amount of loans outstanding as of December 31,
2007 which, based on remaining scheduled repayments of principal, are due in the
periods  indicated.  Demand loans having no stated schedule of repayments and no
stated  maturity,  and  overdrafts are reported as one year or less.  Adjustable
and  floating  rate loans are included in the period on which interest rates are
next  scheduled  to  adjust  rather  than the period in which they contractually
mature,  and  fixed  rate  loans  are  included in the period in which the final
contractual  repayment  is  due.  Deferred  loan costs of $845,000 have not been
included  in  a  maturity  category.

<TABLE>
<CAPTION>
                                 Due Under   Due 1-5    Due Over
(In thousands)                    One Year    Years    Five Years    Total
--------------------------------------------------------------------------
<S>                              <C>         <C>       <C>          <C>
Real estate:
 Commercial real estate           $ 15,019  $ 28,707   $  1,764  $ 45,490
 Residential real estate            60,355    58,873      6,593   125,821
-----------------------------------------------------------------------------
                                  $ 75,374  $ 87,580   $  8,357  $171,311
-----------------------------------------------------------------------------
 Commercial and municipal loans     21,033     2,845      1,410    25,288
 Consumer                           13,045    10,885      1,375    25,305
----------------------------------------------------------------------------
   Total loans                    $109,452  $101,310   $ 11,142  $221,904
=============================================================================
Interest rates:
 Fixed                              30,357    60,252     10,088   100,697
 Variable                           79,095    41,058      1,054   121,207
-----------------------------------------------------------------------------
 Total Loans                      $109,452  $101,310   $ 11,142  $221,904
=============================================================================
</TABLE>

Total  loans  receivable  increased  10%  when  compared  to  the  prior  year.
Residential  real  estate loans increased $8.2 million, or 7%, during 2007.  The
residential  real  estate  portfolio consists of 55% in fixed-rate mortgages and
45%  in  adjustable-rate mortgages.  The increase in the residential real estate
portfolio  is principally due to an increase in 5-year adjustable rate mortgages
of  $6.9 million and a $2.1 million increase in 30-year fixed rate loans, offset
by  a  decrease  in  the  3/1  and 10/1 adjustable rate mortgage portfolio.  The
increase  in  the  adjustable rate mortgage portfolio primarily resulted from an
increase  in  customer demand for the Company's hybrid adjustable rate mortgages
("ARM"s).  Hybrid  ARMs  have  rates  that  are  fixed  for  an  initial  period
(principally  3,  5, 7 or 10 years) and then convert to one-year adjustable rate
mortgages.  The Company does not originate sub-prime, Alt-A, negative amortizing
or  other  higher  risk  structured  residential  mortgages.

Commercial real estate loans increased $5.0 million, or 12%, from the prior year
as  new  loan  products  and  relationships  were  added  to  the  portfolio.

--------------------------------------------------------------------------------
                                   Page 25
<PAGE>

Commercial  loans,  including  loans  to  municipalities, increased 10% over the
prior  year  to  $25.3 million at December 31, 2007.  The increase in commercial
loans  was  primarily  the result of new lending relationships with an expanding
commercial customer base, combined with a $1.4 million increase in the municipal
loan  portfolio.  The  Company  has  continued its efforts to transform its more
traditional  thrift  balance  sheet,  which  emphasized  residential real estate
lending, to a more diversified balance sheet which includes a greater proportion
of  commercial  lending  products.

Consumer  loans,  which  include  second  mortgage  loans,  home equity lines of
credit,  direct  installment  and revolving credit loans, increased 19% to $25.3
million  at  December  31, 2007.  The increase resulted from an increase in home
equity  lines of credit and second mortgage loans.  The Company has promoted its
home  equity  products  by  offering the customer loans with no closing costs at
competitive market rates.  Management feels these loans are an attractive use of
funds  and  will  continue  to  promote  home  equity  products  in  2008.

NONPERFORMING  LOANS  AND  ASSETS

The  following  table  represents information concerning the aggregate amount of
nonperforming  assets:

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                               ----------------------------------------------
(Dollars in Thousands)                              2007     2006     2005     2004     2003
--------------------------------------------------------------------------------------------
<S>                                             <C>             <C>      <C>      <C>      <C>
Nonaccrual loans:
  Commercial real estate and commercial           $  521   $  481   $  757   $  776   $1,677
  Consumer                                           150      125       89      122      172
  Residential real estate                            920      566      834      953    1,143
--------------------------------------------------------------------------------------------
Total nonaccrual loans                            $1,591   $1,172   $1,680   $1,851   $2,992
---------------------------------------------------------------------------------------------
  Total non-performing loans                      $1,591   $1,172   $1,680   $1,851   $2,992
---------------------------------------------------------------------------------------------
Foreclosed real estate                               865      471      743      798      202
---------------------------------------------------------------------------------------------
  Total non-performing assets                     $2,456   $1,643   $2,423   $2,649   $3,194
---------------------------------------------------------------------------------------------
Non-performing loans to total loans                 0.71%    0.57%    0.89%    0.98%    1.59%
Non-performing assets to total assets               0.77%    0.54%    0.82%    0.88%    1.15%
---------------------------------------------------------------------------------------------
Interest income that would have been recorded
  under the original terms of the loans           $   71   $   53   $   34   $   64   $   75
---------------------------------------------------------------------------------------------
</TABLE>

The  asset  quality  of  the  Company's loan portfolio has deteriorated slightly
during  2007.  Total  nonperforming  assets  (nonperforming loans and foreclosed
real  estate)  at  December  31,  2007 were 0.77% of total assets as compared to
0.54% of total assets at December 31, 2006.  Total nonperforming loans (past due
90  days  or  more)  increased  $419,000,  or 36%, during 2007.  The increase in
nonperforming loans is primarily the result of increased residential real estate
delinquencies.  Total  nonperforming  residential  mortgages  increased $354,000
during  2007.  Management  believes that the increase is being driven by general
economic conditions in the market area. Total delinquent loans (those 30 days or
more  delinquent) as a percentage of total loans were 2.40% at December 31, 2007
compared  to  2.05%  at  December  31, 2006.  Approximately 58% of the Company's
nonperforming  loans at December 31, 2007 are secured by residential real estate
with  loss  potential  expected  to be manageable within the allocated reserves.

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.  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 present value of
future  cash  flows discounted at the historical effective interest rate, except
that  all  collateral-dependent  loans are measured for impairment based on fair
value  of  the  collateral.  The  Company  used  the fair value of collateral to

--------------------------------------------------------------------------------
                                   Page 26
<PAGE>

measure  impairment on commercial and commercial real estate loans.  At December
31,  2007  and  2006,  the  Company had $193,000 and $98,000 in loans which were
deemed  to  be  impaired,  having  valuation  allowances of $71,000 and $24,000,
respectively.

Management  has  identified additional potential problem loans totaling $724,000
as  of  December  31,  2007.  These  loans  have  been  internally classified as
substandard or lower, yet are not currently considered past due or in nonaccrual
status. Management  has identified potential credit problems which may result in
the  borrower not being able to comply with the current loan repayment terms and
which  may  result  in  it  being  included  in  subsequent  past due reporting.
Management  believes  that  the current allowance for loan losses is adequate to
cover  probable  credit  losses  in  the  current  loan  portfolio.

ALLOWANCE  FOR  LOAN  LOSSES

The  allowance  for  loan  losses  is  a  reserve established through charges to
expense  in  the  form  of  a  provision  for  loan  losses  and reduced by loan
charge-offs  net of recoveries.  Allowance for loan losses represents the amount
available  for  probable  credit  losses  in  the  Company's  loan  portfolio as
estimated  by  management.  The  Company  maintains an allowance for loan losses
based  upon  a  monthly  evaluation  of  known  and  inherent  risks in the loan
portfolio,  which  includes a review of the balances and composition of the loan
portfolio as well as analyzing the level of delinquencies in each segment of the
loan  portfolio.  The  Company  uses  a  general  allocation  method  for  the
residential  real  estate and  consumer loan pools based upon a methodology that
uses  loss factors applied to loan balances and reflects actual loss experience,
delinquency  trends  and  current  economic  conditions.  The  Company  reviews
individually, commercial real estate and commercial loans greater than $150,000,
that  are  not  accruing interest and risk rated under the Company's risk rating
system,  as  special  mention, substandard, doubtful or loss to determine if the
loans  require  an  impairment  reserve.  If  impairment  is  noted, the Company
establishes  a  specific  reserve  allocation.  The  specific  allocation  is
determined  based  on the most recent valuation of the loan's collateral and the
customer's  ability to pay.  For all other commercial real estate and commercial
loans, the Company uses the general allocation method that establishes a reserve
for  each  risk  rating  category.  The general allocation method for commercial
real  estate and commercial loans considers the same factors that are considered
when  evaluating residential real estate and consumer loan pools.  The allowance
for  loan  losses reflects management's best estimate of probable loan losses at
December  31,  2007.

The  allowance  for  loan  losses  was  $1.7 million at December 31, 2007, a 14%
increase  from December 31, 2006.  The allowance for loan losses as a percentage
of  total  loans increased to 0.76% at December 31, 2007 from 0.74% in the prior
year.  Net  loan  charge-offs  were $158,000 during 2007 compared to $206,000 in
2006.  The majority of the current year charge-off activity is the result of the
write  down of one commercial lending relationship.  The increase in the current
year  provisioning  was a result of a deterioration in the overall asset quality
of  the  Company's  residential real estate portfolio.  Management believes that
the  asset  quality deterioration is being driven by general economic conditions
in  the market area.  However, current delinquency levels are more reflective of
historic  norms as compared to the reduced delinquency levels experienced in the
prior  12 to 18 months.  In addition, the current year provisioning was impacted
by  the  increased risk characteristics associated with the expanding commercial
lending  activities,  as  well  as  growth  in  the  overall  loan  portfolio.

--------------------------------------------------------------------------------
                                   Page 27
<PAGE>

The  following  table  sets forth the allocation of allowance for loan losses by
loan  category  for  the  periods indicated.  The allocation of the allowance by
category  is  not  necessarily indicative of future losses and does not restrict
the  use  of  the  allowance  to  absorb  losses  in  any  category.

<TABLE>
<CAPTION>
                                          2007              2006               2005               2004               2003
                                    -------------------------------------------------------------------------------------------
                                             % GROSS           % GROSS            % GROSS            % GROSS            % GROSS
(Dollars in thousands)              AMOUNT     LOANS   AMOUNT    LOANS    AMOUNT    LOANS    AMOUNT    LOANS    AMOUNT    LOANS
-------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>
Commercial real estate and loans   $   956     31.8%  $   985     31.3%  $ 1,282     26.5%  $ 1,483     24.7%  $ 1,218     24.1%
Consumer loans                         283     11.3%      339     10.4%      289     10.4%      270      9.8%      120      8.8%
Residential real estate                464     56.9%      172     58.3%      108     63.1%       74     65.5%      377     67.1%
--------------------------------------------------------------------------------------------------------------------------------
  Total                            $ 1,703    100.0%  $ 1,496    100.0%  $ 1,679    100.0%  $ 1,827    100.0%  $ 1,715    100.0%
================================================================================================================================
</TABLE>

The following table sets forth the roll forward of the allowance for loan losses
for the periods indicated, and related ratios.

<TABLE>
<CAPTION>
(Dollars in thousands)                           2007     2006     2005     2004     2003
-----------------------------------------------------------------------------------------
<S>                                            <C>      <C>      <C>      <C>      <C>
Balance at beginning of year                   $1,496   $1,679   $1,827   $1,715   $1,481
Provisions charged to operating expenses          365       23      311      738      598
------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off
  Commercial real estate and loans                  -        -       25       41        3
  Consumer                                         27       18       14       20       17
  Residential real estate                          23        4       10        -       17
------------------------------------------------------------------------------------------
 Total recoveries                                  50       22       49       61       37
------------------------------------------------------------------------------------------
Loans charged off:
  Commercial real estate and loans                (85)    (114)    (284)    (439)    (128)
  Consumer                                        (77)     (89)    (137)    (126)    (189)
  Residential real estate                         (46)     (25)     (87)    (122)     (84)
------------------------------------------------------------------------------------------
 Total charged-off                               (208)    (228)    (508)    (687)    (401)
------------------------------------------------------------------------------------------
 Net charge-offs                                 (158)    (206)    (459)    (626)    (364)
------------------------------------------------------------------------------------------
Balance at end of year                         $1,703   $1,496   $1,679   $1,827   $1,715
==========================================================================================
Net charge-offs to average loans outstanding     0.08%    0.11%    0.24%    0.33%    0.19%
==========================================================================================
Allowance for loan losses to year-end loans      0.76%    0.74%    0.89%    0.98%    0.91%
==========================================================================================
</TABLE>

DEPOSITS

The  Company's  deposit  base  is  drawn  from seven full-service offices in its
market area.  The deposit base consists of demand deposits, money management and
money  market  deposit  accounts, savings and time deposits. During 2007, 52% of
the Company's average deposit base of $255.8 million consisted of core deposits.
Core  deposits  are  considered to be more stable and provide the Company with a
lower  cost source of funds.  The Company will continue to emphasize retail core
deposits  by  maintaining  its  network  of  full  service offices and providing
depositors  with  a  full  range  of  deposit  product  offerings.  Pathfinder
Commercial  Bank  will  seek  business  growth  by  focusing  on  its  local
identification  and  service  excellence.  The  Commercial  Bank  had an average
balance  of  $28.9 million in municipal deposits in 2007, primarily concentrated
in  money  market  deposit  accounts.

Average  deposits  increased  $17.4  million, or 7%, when compared to 2006.  The
increase in average deposits primarily related to a $1.2 million increase in the
average  balance  of  municipal  deposits and a $16.2 million increase in retail
deposits.

--------------------------------------------------------------------------------
                                   Page 28
<PAGE>

The  Company's  average  deposit  mix  in 2007, as compared to 2006, reflected a
shift  from  savings and club deposits to time deposits.   The Company's average
demand  deposits,  interest  and  noninterest  bearing, represented 18% of total
average  deposits  for  both  2007  and  2006.  The  Company's  MMDA  accounts
represented  9%  of  total  deposits  for both 2007 and 2006. The Company's time
deposit  accounts represented 48% of total deposits, up 4 percentage points from
the same period in 2006. The Company promotes its MMDA and time deposit accounts
by  offering  competitive  rates  to  retain existing and attract new customers.

At December 31, 2007, time deposits in excess of $100,000 totaled $33.0 million,
or 28%, of time deposits and 13% of total deposits.  At December 31, 2006, these
deposits  totaled  $32.8  million,  or  32%  of  time  deposits and 13% of total
deposits.

The  following  table indicates the amount of the Bank's certificates of deposit
of  $100,000  or more sorted by time remaining until maturity as of December 31,
2007:

<TABLE>
<CAPTION>
(In thousands)
------------------------------------
Remaining Maturity
<S>                         <C>
Three Months or less        $ 6,417
Three through Six months      8,457
Six through twelve months     7,277
Over twelve months           10,865
-----------------------------------
    Total                   $33,016
===================================
</TABLE>

BORROWINGS

Short-term  borrowings  are  comprised  primarily  of  advances  and  overnight
borrowing  at  the  FHLBNY.  There  were  $18.4 million in short-term borrowings
outstanding  at  December  31,  2007.  At  December  31,  2006,  there  were  no
short-term  borrowings  outstanding.

Information  regarding  short-term  borrowings  during  2007,  2006  and  2005:

<TABLE>
<CAPTION>
(Dollars in thousands)                         2007      2006      2005
-----------------------------------------------------------------------
<S>                                          <C>       <C>       <C>
Maximum outstanding at any month end         $18,400   $15,000   $15,000
Average amount outstanding during the year     4,528     5,321     5,692
Average interest rate during the year           5.05%     4.99%     3.57%
=========================================================================
</TABLE>

At  December  31,  2007,  the weighted average interest rate associated with the
Company's  short-term  borrowings  was  approximately  4.92%.

Long-term  borrowed funds consist of advances and repurchase agreements from the
FHLBNY  and  junior  subordinated  debentures.  Long-term borrowed funds totaled
$25.2  million at December 31, 2007 as compared to $31.5 million at December 31,
2006.

CAPITAL

Shareholders'  equity  increased $854,000 to $21.7 million at December 31, 2007.
The  Company  added  $1.1 million to retained earnings through net income, which
was  offset  by  cash  dividends  returned  to  its  shareholders  of  $695,000.
Accumulated  other  comprehensive  loss  decreased  $313,000  to $1.5 million at
December  31, 2007, resulting from the amortization of SFAS No. 158, net of tax,
which  resulted  in $125,000 of accumulated other comprehensive income, combined
with unrealized gains on securities available for sale, net of tax, of $188,000.
Capital  increased  $114,000  due  to the exercise of stock options during 2007.

--------------------------------------------------------------------------------
                                   Page 29
<PAGE>

The  Company's mutual holding company parent, Pathfinder Bancorp, M.H.C., waived
its  right  to  receive  the  dividend  for the quarters ended June 30, 2007 and
December  31,  2007.

Risk-based capital provides the basis for which all banks are evaluated in terms
of  capital  adequacy.  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 defined risk characteristics.  The Company's
goal  is to maintain a strong capital position, consistent with the risk profile
of  its  subsidiary banks that supports growth and expansion activities while at
the  same time exceeding regulatory standards.  At December 31, 2007, Pathfinder
Bank  exceeded  all  regulatory  required  minimum  capital  ratios  and 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 6% and a
total  risk-based  capital ratio exceeding 10%.  See Note 17 in the accompanying
financial  statements  for  the  Company's  and  the  Bank's  ratios.

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  manages  the pricing of deposits to maintain a desired deposit 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 membership in the 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, trust preferred security offerings, 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 costs and/or losses on the sale
of  securities  or  loans.

The  Asset  Liability  Management Committee (ALCO) of the Company is responsible
for  implementing  the  policies  and  guidelines for the maintenance of prudent
levels of liquidity.  As of December 31, 2007, the Company is in compliance with
its  policy  guidelines  with  regard  to  liquidity.

Despite  the  fact  that  the junior subordinated note was not contractually due
until  2032,  we  called  the  note  in  June  2007 and replaced it with a newly
originated junior subordinated note with a lower carrying cost. In addition, the
Company,  in  the conduct of ordinary business operations, routinely enters into
contracts  for services.  These contracts may require payment for services to be
provided  in  the  future  and  may  also  contain penalty clauses for the early
termination  of  the  contract.  Management  is  not  aware  of  any  additional
commitments  or contingent liabilities, which may have a material adverse impact
on  the  liquidity  or  capital  resources  of  the  Company.

OFF-BALANCE  SHEET  ARRANGEMENTS

The  Company  is also 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  December  31,  2007,  the Company had $29.3 million in
outstanding  commitments  to  extend  credit and standby letters of credit.  See
Note  15  in  the  accompanying  financial  statements.

--------------------------------------------------------------------------------
                                   Page 30
<PAGE>

ITEM  8:  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

INDEX  TO  CONSOLIDATED  FINANCIAL  STATEMENTS
PATHFINDER  BANCORP,  INC
                                                                       Page

Management's Report On Internal Control Over Financial Reporting        32
Report of Independent Registered Public Accounting Firm                 33
Consolidated Statements of Condition                                    34
Consolidated Statements of Income                                       35
Consolidated Statements of Changes in Shareholders' Equity              36
Consolidated Statements of Cash Flows                                   37
Notes to Consolidated Financial Statements                              38

--------------------------------------------------------------------------------
                                   Page 31
<PAGE>

MANAGEMENT'S  REPORT  ON  INTERNAL  CONTROL  OVER  FINANCIAL  REPORTING

The  Company's  management  is  responsible  for  establishing  and  maintaining
adequate  internal  control over financial reporting, as such term is defined in
Rules  13a-15(f)  and  15d-15(f)  of  the  Securities  Exchange  Act of 1934, as
amended.  Because  of  its inherent limitations, internal control over financial
reporting  may  not  prevent  or  detect misstatements. Also, projections of any
evaluation  of  effectiveness  to  future  periods  are subject to the risk that
controls  may  become  inadequate  because of changes in conditions, or that the
degree  of compliance with policies or procedures may deteriorate. The Company's
internal  control  over  financial  reporting  is  a  process designed under the
supervision of the Company's principal executive officer and principal financial
officer  to  provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the Company's financial statements for external
reporting  purposes  in  accordance  with  United  States  generally  accepted
accounting  principles.

Under  the  supervision  and with the participation of management, including the
Company's  principal  executive  officer  and  principal  financial officer, the
Company  conducted  an  evaluation  of the effectiveness of its internal control
over financial reporting based on the framework in Internal Control - Integrated
Framework  issued  by  the Committee of Sponsoring Organizations of the Treadway
Commission.  Based  on its evaluation under that framework, management concluded
that the Company's internal control over financial reporting was effective as of
December  31,  2007.  In  addition,  based  on  our  assessment,  management has
determined  that  there  were  no  material weaknesses in the Company's internal
controls  over  financial  reporting.

This  annual  report  does  not  include  an attestation report of the Company's
independent  registered  public  accounting firm regarding internal control over
financial  reporting.  Management's report was not subject to attestation by the
Company's  independent  registered  public accounting firm pursuant to temporary
rules  of  the  Securities  and  Exchange  Commission that permit the Company to
provide  only  management's  report  in  this  annual  report.



/s/ Thomas W. Schneider            /s/  James A. Dowd
-----------------------            ------------------
Thomas W. Schneider                James A. Dowd
President & Chief Executive        Senior Vice President and Chief Financial
Officer                            Officer

Oswego, New York
March 29, 2008


--------------------------------------------------------------------------------
                                   Page 32
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




                              [GRAPHIC OMITED]





To the Board of Directors and Shareholders
Pathfinder Bancorp, Inc.
Oswego, New York

     We  have  audited  the accompanying consolidated statements of condition of
Pathfinder  Bancorp, Inc. and subsidiaries as of December 31, 2007 and 2006, and
the  related  consolidated statements of income, changes in shareholders' equity
and  cash flows for the years then ended.  Pathfinder Bancorp, Inc.'s management
is  responsible for these consolidated financial statements.  Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.

     We  conducted  our  audits  in  accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we  plan  and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is  not  required  to  have,  nor  were  we  engaged to perform, an audit of its
internal  control over financial reporting. Our audits included consideration of
internal  control  over  financial  reporting  as  a  basis  for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing  an  opinion  on  the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the consolidated financial statements, assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial  statement presentation. We believe that our
audits  provide  a  reasonable  basis  for  our  opinion.

     In  our  opinion,  the  consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Pathfinder  Bancorp, Inc. and subsidiaries as of December 31, 2007 and 2006, and
the  consolidated results of their operations and their cash flows for the years
then  ended  in  conformity with accounting principles generally accepted in the
United  States  of  America.

     As  discussed  in  Note  11  to  the consolidated financial statements, the
Company  changed  its  method  of accounting for its defined benefit pension and
postretirement  benefit  plans  in  2006.




                                   /s/  BEARD  MILLER  COMPANY  LLP

Beard Miller Company LLP
Harrisburg, Pennsylvania
March 29, 2008

--------------------------------------------------------------------------------
                                   Page 33
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION

                                                                                      DECEMBER 31,
                                                                                ----------------------
(In thousands, except share data)                                                    2007        2006
------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>
ASSETS:
 Cash and due from banks                                                          $  9,908   $  7,068
 Interest earning deposits                                                             305      6,655
------------------------------------------------------------------------------------------------------
     Total cash and cash equivalents                                                10,213     13,723
 Investment securities, at fair value                                               65,010     62,640
 Federal Home Loan Bank stock, at cost                                               2,128      1,579
 Loans                                                                             222,749    203,209
 Less: Allowance for loan losses                                                     1,703      1,496
------------------------------------------------------------------------------------------------------
     Loans receivable, net                                                         221,046    201,713
 Premises and equipment, net                                                         7,807      7,597
 Accrued interest receivable                                                         1,673      1,694
 Foreclosed real estate                                                                865        471
 Goodwill                                                                            3,840      3,840
 Intangible asset, net                                                                   -        181
 Bank owned life insurance                                                           6,437      6,212
 Other assets                                                                        1,672      1,732
------------------------------------------------------------------------------------------------------
     Total assets                                                                 $320,691   $301,382
======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
 Deposits:
  Interest-bearing                                                                $228,319   $225,003
  Noninterest-bearing                                                               22,766     20,582
------------------------------------------------------------------------------------------------------
     Total deposits                                                                251,085    245,585
 Short-term borrowings                                                              18,400          -
 Long-term borrowings                                                               20,010     26,360
 Junior subordinated debentures                                                      5,155      5,155
 Other liabilities                                                                   4,337      3,432
------------------------------------------------------------------------------------------------------
     Total liabilities                                                             298,987    280,532
 Shareholders' equity:
   Preferred stock, authorized shares 1,000,000; no shares issued or outstanding
   Common stock, par value $0.01; authorized 10,000,000 shares;
     2,971,019 and 2,953,619 shares issued; and 2,483,732 and
     2,466,332 shares outstanding, respectively                                         30         29
   Additional paid-in-capital                                                        7,899      7,786
   Retained earnings                                                                21,734     21,307
   Accumulated other comprehensive loss                                             (1,457)    (1,770)
   Treasury stock, at cost; 487,287 shares                                          (6,502)    (6,502)
------------------------------------------------------------------------------------------------------
     Total shareholders' equity                                                     21,704     20,850
------------------------------------------------------------------------------------------------------
     Total liabilities and shareholders' equity                                   $320,691   $301,382
======================================================================================================
</TABLE>

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

--------------------------------------------------------------------------------
                                   Page 34
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME


                                                                  YEARS ENDED DECEMBER 31,
                                                                  -------------------------
(In thousands, except per share data)                                   2007         2006
---------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>
INTEREST AND DIVIDEND INCOME:
  Loans, including fees                                             $ 14,047    $ 12,764
  Debt securities:
   Taxable                                                             2,529       2,364
   Tax-exempt                                                            170         357
  Dividends                                                              352         292
  Other                                                                  211          92
-----------------------------------------------------------------------------------------
       Total interest income                                          17,309      15,869
-----------------------------------------------------------------------------------------
INTEREST EXPENSE:
  Interest on deposits                                                 6,901       5,467
  Interest on short-term borrowings                                      229         265
  Interest on long-term borrowings                                     1,512       1,791
-----------------------------------------------------------------------------------------
       Total interest expense                                          8,642       7,523
-----------------------------------------------------------------------------------------
          Net interest income                                          8,667       8,346
PROVISION FOR LOAN LOSSES                                                365          23
-----------------------------------------------------------------------------------------
          Net interest income after provision for loan losses          8,302       8,323
-----------------------------------------------------------------------------------------
NONINTEREST INCOME:
  Service charges on deposit accounts                                  1,474       1,371
  Increase in value of bank owned life insurance                         225         225
  Loan servicing fees                                                    250         224
  Net gains on sales of investment securities                            378         299
  Net gains (losses) on sales of loans and foreclosed real estate         42         (80)
  Debit card interchange fees                                            246         189
  Other charges, commissions and fees                                    427         387
-----------------------------------------------------------------------------------------
          Total noninterest income                                     3,042       2,615
-----------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
  Salaries and employee benefits                                       5,094       5,007
  Building occupancy                                                   1,254       1,203
  Data processing expenses                                             1,333       1,278
  Professional and other services                                        769         615
  Amortization of intangible asset                                       181         223
  Other expenses                                                       1,207       1,342
-----------------------------------------------------------------------------------------
          Total noninterest expenses                                   9,838       9,668
-----------------------------------------------------------------------------------------
Income before income taxes                                             1,506       1,270
Provision for income taxes                                               384         242
-----------------------------------------------------------------------------------------
Net income                                                          $  1,122    $  1,028
=========================================================================================
Net income per share - basic                                        $   0.45    $   0.42
=========================================================================================
Net income per share - diluted                                      $   0.45    $   0.41
=========================================================================================
Dividends per share                                                 $   0.41    $   0.41
=========================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

--------------------------------------------------------------------------------
                                   Page 35
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                                                         Accumulated
                                                                 Additional               Other Com-
                                            Common Stock Issued    Paid-In    Retained    prehensive    Treasury
(In thousands, except per share data)         Shares    Amount     Capital    Earnings       Loss        Stock      Total
-------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>        <C>      <C>       <C>         <C>           <C>         <C>
BALANCE, JANUARY 1,  2006                    2,950,419    $  29   $ 7,721      $20,965     $ (1,285)    $(6,502)  $20,928
Comprehensive income:
  Net income                                                                     1,028                              1,028
  Other comprehensive income, net of tax:
     Unrealized net gains on securities                                                         436                   436
                                                                                                                    -----
TOTAL COMPREHENSIVE INCOME                                                                                          1,464
Stock options exercised, including
  $42 tax benefit                                3,200        -        65                                              65
Dividends declared ($0.41 per share)                                              (686)                              (686)
Adjustment to initially apply FASB
  Statement No. 158, net of tax                                                               (921)                  (921)
--------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2006                   2,953,619    $  29   $ 7,786      $21,307     $(1,770)     $(6,502)  $20,850
==========================================================================================================================
Comprehensive income:
  Net income                                                                     1,122                              1,122
  Other comprehensive income, net of tax:
     Unrealized net gains on securities                                                        188                    188
     Pension plan gains and losses and
      past service liability not
      recognized in pension expense                                                            125                    125
                                                                                                                    -----
TOTAL COMPREHENSIVE INCOME:                                                                                         1,435
Stock options exercised                         17,400        1       113                                             114
Dividends declared ($0.41 per share)                                              (695)                              (695)
--------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2007                   2,971,019    $  30   $ 7,899      $21,734     $(1,457)     $(6,502)  $21,704
==========================================================================================================================
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statementconsolidated statements of changes in shareholders' equity

--------------------------------------------------------------------------------
                                   Page 36
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                               Years Ended December 31,
(In thousands)                                                                      2007        2006
--------------------------------------------------------------------------------------------------------
<S>                                                                             <C>       <C>
OPERATING ACTIVITIES:
 Net Income                                                                     $   1,122   $  1,028
 Adjustments to reconcile net income to net cash provided by operating
     activities:
   Provision for loan losses                                                          365         23
   Deferred income tax expense (benefit)                                              465        (67)
   Proceeds from sale of loans                                                      3,000      1,739
   Originations of loans held-for-sale                                             (2,973)    (1,715)
   Realized (gains) losses on sales of:
     Foreclosed real estate                                                           (15)       104
     Loans                                                                            (27)       (24)
     Premises and equipment                                                             -        (13)
     Available-for-sale investment securities                                        (378)      (299)
   Depreciation                                                                       734        754
   Amortization of intangible asset                                                   181        223
   Amortization of deferred financing costs                                            15         30
   Amortization of mortgage servicing rights                                           46         95
   Increase in value of bank owned life insurance                                    (225)      (225)
   Net amortization of premiums and discounts on investment securities                144        162
   Decrease (increase) in interest receivable                                          21        (16)
   Net change in other assets and liabilities                                         449        646
-----------------------------------------------------------------------------------------------------
       Net cash provided by operating activities                                    2,924      2,445
-----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
   Purchase of investment securities available-for-sale                           (23,503)   (13,030)
   Net (purchase) redemption of Federal Home Loan Bank stock                         (549)       226
   Proceeds from maturities and principal reductions of
    investment securities available-for-sale                                       18,951     19,528
   Proceeds from sale:
     Available-for-sale investment securities                                       2,728      5,973
     Real estate acquired through foreclosure                                         276        504
     Premises and equipment                                                            34        146
   Net increase in loans                                                          (20,362)   (13,087)
   Purchase of premises and equipment                                                (978)      (464)
-----------------------------------------------------------------------------------------------------
       Net cash used in investing activities                                      (23,403)      (204)
-----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
   Net increase  (decrease) in demand deposits, NOW accounts, savings accounts,
    money management and MMDA deposit accounts and escrow deposits                  5,368    (14,109)
   Net increase in time deposits                                                      132     23,317
   Net proceeds from (repayments on) short-term borrowings                         18,400     (2,000)
   Payments on long-term borrowings                                               (11,350)    (3,000)
   Proceeds from long-term borrowings                                               5,000          -
   Proceeds from junior subordinated debentures                                     5,155          -
   Payments on junior subordinated debentures                                      (5,155)         -
   Proceeds from exercise of stock options                                            114         23
   Tax benefit upon exercise of stock options                                           -         42
   Cash dividends                                                                    (695)      (686)
-----------------------------------------------------------------------------------------------------
       Net cash provided by financing activities                                   16,969      3,587
-----------------------------------------------------------------------------------------------------
  (Decrease) increase in cash and cash equivalents                                 (3,510)     5,828
Cash and cash equivalents at beginning of period                                   13,723      7,895
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                      $  10,213   $ 13,723
=====================================================================================================
CASH PAID DURING THE PERIOD FOR:
 Interest                                                                       $   8,553   $  7,543
 Income taxes paid                                                                    185          5
NON-CASH INVESTING ACTIVITY:
 Conversion of Parent Company receivables to loans receivable                           -      1,096
 Transfer of loans to foreclosed real estate                                          664        336

</TABLE>

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

--------------------------------------------------------------------------------
                                   Page 37
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1:  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

NATURE  OF  OPERATIONS

The  accompanying  consolidated  financial  statements  include  the accounts of
Pathfinder  Bancorp,  Inc.  (the  "Company")  and  its  wholly owned subsidiary,
Pathfinder  Bank  (the  "Bank").  The  Bank  has  three  wholly  owned operating
subsidiaries,  Pathfinder Commercial Bank, Whispering Oaks Development Corp. and
Pathfinder  REIT,  Inc.  All  inter-company  accounts  and  activity  have  been
eliminated  in  consolidation.  The  Company has seven offices located in Oswego
County.  The Company is primarily engaged in the business of attracting deposits
from  the  general  public  in  the  Company's  market  area, and investing such
deposits,  together with other sources of funds, in loans secured by one-to-four
family  residential  real  estate,  commercial  real estate, business assets and
investment  securities.

Pathfinder  Bancorp,  M.H.C.,  (the  "Holding Company") a mutual holding company
whose  activity  is  not included in the accompanying financial statements, owns
approximately  63.7%  of the outstanding common stock of the Company.  Salaries,
employee  benefits  and  rent approximating $144,000 and $127,000 were allocated
from  the Company to the Holding Company during 2007 and 2006, respectively.  As
of December 31, 2007, the Bank had a loan receivable from the Holding Company of
$1,085,000.

USE  OF  ESTIMATES  IN  THE  PREPARATION  OF  FINANCIAL  STATEMENTS

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United States of America requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and  disclosure of contingent assets and liabilities at the date of
the  financial  statements  and  the  reported  amounts of revenues and expenses
during  the  reporting period. Actual results could differ from those estimates.
Management  has  identified  the allowance for loan losses and the evaluation of
securities  for  other than temporary impairment to be the accounting areas that
require  the  most  subjective  and complex judgments, and as such, could be the
most  subject  to  revision  as  new  information  becomes  available.

The Company is subject to the regulations of various governmental agencies.  The
Company  also  undergoes  periodic examinations by the regulatory agencies which
may  subject  it to further changes with respect to asset valuations, amounts of
required  loss  allowances,  and  operating  restrictions  resulting  from  the
regulators'  judgments  based  on  information  available to them at the time of
their  examinations.

SIGNIFICANT  GROUP  CONCENTRATIONS  OF  CREDIT  RISK

Most  of the Company's activities are with customers located primarily in Oswego
and parts of Onondaga counties of New York State.  Note 3 discusses the types of
securities  that  the Company invests in.  Note 4 discusses the types of lending
that  the  Company  engages  in.  The  Company  does  not  have  any significant
concentrations  to  any  one  industry  or  customer.

--------------------------------------------------------------------------------
                                   Page 38
<PAGE>

ADVERTISING

The  Company  follows the policy of charging the costs of advertising to expense
as  incurred.  Advertising  costs  included  in  other  operating  expenses were
$297,000  and  $300,000  for  the  years  ended  December  31,  2007  and  2006,
respectively.

CASH  AND  CASH  EQUIVALENTS

Cash  and  cash  equivalents  include  cash  on hand, amounts due from banks and
interest-bearing  deposits  (with  original  maturity  of three months or less).

INVESTMENT  SECURITIES

The  Company  classifies  investment  securities  as  available-for-sale.
Available-for-sale  securities  are  reported at fair value, with net unrealized
gains  and losses reflected as a separate component of shareholders' equity, net
of the applicable income tax effect. None of the Company's investment securities
have  been  classified  as  trading  or  held-to-maturity  securities.

Gains  or  losses on investment security transactions are based on the amortized
cost  of the specific securities sold.  Premiums and discounts on securities are
amortized  and accreted into income using the interest method over the period to
first  call  or  maturity.

The  Company monitors investment securities for impairment on a quarterly basis.
Declines  in  the fair value of investment securities below cost that are deemed
to  be  other-than-temporary  are  reflected in earnings as realized losses.  In
estimating  other-than-temporary impairment losses, management considers (1) the
length  of  time and the extent to which the fair value has been less than cost,
(2)  the  financial condition and near-term prospects of the issuer, and (3) the
intent  and  ability of the Company to retain its investment in the issuer for a
period  of  time sufficient to allow for any anticipated recovery in fair value.

FEDERAL  HOME  LOAN  BANK  STOCK

Federal law requires a member institution of the Federal Home Loan Bank ("FHLB")
system  to hold stock of its district FHLB according to a predetermined formula.
The  stock  is  carried  at  cost.

MORTGAGE  LOANS  HELD-FOR-SALE

Mortgage  loans  held-for-sale  are  carried at the lower of cost or fair value.
Fair  value  is  determined in the aggregate.  There were no forward commitments
outstanding  as  of  December  31,  2007  and  2006.

TRANSFERS  OF  FINANCIAL  ASSETS

Transfers of financial assets, including sales of loans and loan participations,
are  accounted  for as sales, when control over the assets has been surrendered.
Control  over transferred assets is deemed to be surrendered when (1) the assets
have  been isolated from the Company, (2) the transferee obtains the right (free
of  conditions  that constrain it from taking advantage of that right) to pledge
or  exchange  the  transferred  assets,  and  (3)  the Company does not maintain
effective control over the transferred assets through an agreement to repurchase
them  before  their  maturity.

--------------------------------------------------------------------------------
                                   Page 39
<PAGE>

LOANS

The  Company grants mortgage, commercial and consumer loans to customers.  Loans
that management has the intent and ability to hold for the foreseeable future or
until  maturity  or  pay-off, generally are stated at unpaid principal balances,
less  the  allowance  for loan losses and net deferred loan origination fees and
costs.  The  ability  of  the  Company's  debtors  to  honor  their contracts is
dependent  upon  the  real  estate and general economic conditions in the market
area.  Interest  income  is generally recognized when income is earned using the
interest method. Nonrefundable loan fees received and related direct origination
costs  incurred  are  deferred and amortized over the life of the loan using the
interest  method,  resulting  in  a constant effective yield over the loan term.
Deferred  fees  are  recognized  into  income  and deferred costs are charged to
income  immediately  upon  prepayment  of  the  related  loan.

ALLOWANCE  FOR  LOAN  LOSSES

The  allowance  for  loan  losses is established as losses are estimated to have
occurred  through  a  provision for loan losses charge to earnings.  Loan losses
are  charged against the allowance when management believes the uncollectibility
of  a loan balance is confirmed.  Subsequent recoveries, if any, are credited to
the allowance.  The Company periodically evaluates the adequacy of the allowance
for loan losses in order to maintain the allowance at a level that is sufficient
to  absorb  probable  and  estimable  credit  losses.

The  allowance  consists  of  specific,  general and unallocated components.  It
includes amounts specifically allocated to impaired loans.  A loan is considered
impaired, based on current information and events, if it is probable the Company
will  be  unable to collect the scheduled payments of principal or interest when
due according to the contractual terms of the loan agreement.  Specific reserves
are  established  based  on  the  fair  market value of underlying collateral or
discounted  cash  flows,  as  appropriate,  when those values are lower than the
carrying  value  of  the  loan.  The  allowance  is  also  comprised  of general
reserves,  which  are  established  by  applying  loss  factors to the aggregate
balance  of major loan categories or pools of smaller balance homogeneous loans.
The  loss  factors  are  determined  by  management  based  on  an evaluation of
historical  loss  experience,  delinquency  trends,  volume  and type of lending
conducted, and the impact of current economic conditions in the market area.  An
unallocated  component of the allowance may be maintained to cover uncertainties
that  could  affect  management's  estimate of probable losses.  The unallocated
component  reflects  the  margin  of  imprecision  inherent  in  the  underlying
assumptions used in the methodologies for estimating specific and general losses
in  the portfolio.  While management uses the best information available to make
evaluations,  future adjustments to the allowance may be necessary if conditions
differ  substantially  from  the  assumptions  used  in  making  the evaluation.

INCOME  RECOGNITION  ON  IMPAIRED  AND  NON-ACCRUAL  LOANS

Loans, including impaired loans, are generally classified as non-accrual if they
are  past due as to maturity or payment of principal or interest for a period of
more  than  90  days.  When  a  loan is classified as non-accrual and the future
collectibility of the recorded loan balance is doubtful, collections of interest
and  principal  are  generally  applied as a reduction to principal outstanding.

--------------------------------------------------------------------------------
                                   Page 40
<PAGE>

When  future  collectibility  of the recorded loan balance is expected, interest
income  may  be recognized on a cash basis. In the case where a non-accrual loan
had  been  partially  charged  off,  recognition  of interest on a cash basis is
limited to that which would have been recognized on the recorded loan balance at
the  contractual  interest rate. Cash interest receipts in excess of that amount
are  recorded  as  recoveries  to  the  allowance  for  loan  losses until prior
charge-offs  have  been  fully  recovered.

OFF-BALANCE  SHEET  CREDIT  RELATED  FINANCIAL  INSTRUMENTS

In  the ordinary course of business, the Company has entered into commitments to
extend  credit,  including  commitments  under  standby letters of credit.  Such
financial  instruments  are  recorded  when  they  are  funded.

PREMISES  AND  EQUIPMENT

Premises  and  equipment  are  stated  at  cost,  less accumulated depreciation.
Depreciation  is  computed  on  a  straight-line basis over the estimated useful
lives  of  the  related assets, ranging up to 40 years for premises and 10 years
for  equipment.  Maintenance  and  repairs  are charged to operating expenses as
incurred.  The  asset  cost  and  accumulated  depreciation are removed from the
accounts  for  assets sold or retired and any resulting gain or loss is included
in  the  determination  of  income.

FORECLOSED  REAL  ESTATE

Properties  acquired through foreclosure, or by deed in lieu of foreclosure, are
recorded  at  their  fair  value  less  estimated  disposal costs. Fair value is
determined  based  on  a  current  appraisal  and inspection.  Costs incurred in
connection  with  preparing  the  foreclosed  real  estate  for  disposition are
capitalized  to  the  extent  that  they  enhance  the overall fair value of the
property.  Write  downs  of,  and  expenses  related  to, foreclosed real estate
holdings  included  in noninterest expense were $98,000 and $111,000 in 2007 and
2006,  respectively.

INTANGIBLE  ASSETS

Intangible  assets  represent core deposit intangibles and goodwill arising from
acquisitions.  Core  deposit  intangibles  represent the premium the Company has
paid  for  deposits  acquired  in excess of the cost incurred had the funds been
purchased  in the capital markets.  Core deposit intangibles were amortized on a
straight-line  basis  over a period of five years.  As of October 2007, all core
deposit intangibles are fully amortized.  Goodwill represents the excess cost of
an  acquisition over the fair value of the net assets acquired.  Goodwill is not
amortized  but  is  evaluated  annually  for  impairment.

MORTGAGE  SERVICING  RIGHTS

Originated  mortgage  servicing  rights  are recorded at their fair value at the
time  of  transfer  and  are  amortized  in proportion to and over the period of
estimated  net  servicing  income or loss.  The carrying value of the originated
mortgage  servicing  rights  is  periodically  evaluated  for  impairment.

--------------------------------------------------------------------------------
                                   Page 41
<PAGE>

STOCK-BASED  COMPENSATION

Compensation  costs  related  to share-based payment transactions are recognized
based  on  the  grant-date  fair  value  of the stock-based compensation issued.
Compensation  costs  are  recognized  over  the period that an employee provides
service in exchange for the award.  No options were granted during 2007 or 2006,
and  all  outstanding  options  were  fully  vested  on  January  1,  2006  and,
accordingly,  there  was  no  impact  to  the  Company's  consolidated financial
position  or  results  of  operations  for  the  periods  presented.

RETIREMENT  BENEFITS

The  Company  has  established  tax  qualified  retirement  plans  covering
substantially  all full-time employees and certain part-time employees.  Pension
expense  under  these  plans  is  charged  to current operations and consists of
several  components  of  net pension cost based on various actuarial assumptions
regarding  future  experience  under  the  plans.

In  2006,  the  Company  adopted SFAS 158, which required the recognition of the
underfunded  status  of  pension  and  other postretirement benefit plans on the
consolidated  statements  of condition.  Under SFAS 158, gains and losses, prior
service  costs  and  credits, and any remaining transition amounts under SFAS 87
and SFAS 106 that have not yet been recognized through net periodic benefit cost
are  recognized  in  accumulated  other  comprehensive loss, net of tax effects,
until  they  are  amortized  as  a  component  of  net  periodic  cost.

In  addition,  the  Company  has unfunded deferred compensation and supplemental
executive  retirement  plans  for  selected  current  and  former  employees and
officers  that  provide benefits that cannot be paid from a qualified retirement
plan  due  to  Internal  Revenue Code restrictions. These plans are nonqualified
under  the  Internal  Revenue Code, and assets used to fund benefit payments are
not  segregated  from  other  assets  of  the  Company, therefore, in general, a
participant's  or  beneficiary's  claim  to  benefits  under these plans is as a
general  creditor.

INCOME  TAXES

Provisions  for  income taxes are based on taxes currently payable or refundable
and  deferred  income  taxes  on  temporary differences between the tax basis of
assets  and  liabilities and their reported amounts in the financial statements.
Deferred  tax  assets and liabilities are reported in the consolidated financial
statements  at  currently  enacted  income tax rates applicable to the period in
which  the  deferred  tax  assets and liabilities are expected to be realized or
settled.

EARNINGS  PER  SHARE

Basic  earnings  per  share  are computed by dividing net income by the weighted
average  number  of  common  shares  outstanding  throughout each year.  Diluted
earnings  per  share  gives  effect  to  weighted  average  shares that would be
outstanding  assuming  the  exercise  of issued stock options using the treasury
stock  method.

OTHER  COMPREHENSIVE  (LOSS)  INCOME

Accounting  principles  generally  accepted  in  the  United  States of America,
require  that  recognized revenue, expenses, gains and losses be included in net
income.  Although  certain changes in assets and liabilities, such as unrealized
gains  and  losses  on available-for-sale securities, and unrecognized gains and
losses,  prior  service  costs  and transition assets or obligations for defined
benefit  pension  and post-retirement plans are reported as a separate component
of the shareholders' equity section of the consolidated statements of condition,
such  items,  along  with  net  income,  are components of comprehensive income.
--------------------------------------------------------------------------------
                                   Page 42
<PAGE>

The  components  of  other  comprehensive income and related tax effects for the
years  ended  December  31,  are  as  follows:

<TABLE>
<CAPTION>

(In thousands)                                                          2007    2006
------------------------------------------------------------------------------------
<S>                                                                   <C>      <C>

Unrealized holding gains on securities available for sale:
   Unrealized holding gains arising during the year                    $ 690   $1,034
   Reclassification adjustment for gains included in net income         (378)    (299)
--------------------------------------------------------------------------------------
     Net unrealized gains on securities available for sale               312      735
--------------------------------------------------------------------------------------
Defined benefit pension and post-retirement plans:
   Additional plan losses                                                103        -
   Reclassification adjustment for amortization of plans' net loss
     and past service liability recognized in net periodic expense       105        -
--------------------------------------------------------------------------------------
     Net change in defined benefit plans asset                           208        -
--------------------------------------------------------------------------------------
Other comprehensive income before tax                                    520      735
Tax effect                                                              (207)    (299)
--------------------------------------------------------------------------------------
Other comprehensive income                                             $ 313   $  436
======================================================================================
</TABLE>

The  components  of  accumulated  other  comprehensive  loss, net of related tax
effects,  at  December  31,  are  as  follows:

<TABLE>
<CAPTION>

(In thousands)                                                          2007       2006
---------------------------------------------------------------------------------------
<S>                                                                   <C>       <C>
Unrealized losses on securities available for sale (net of tax
  benefit 2007 - $441; 2006 - $566)                                   $  (661)  $   (849)
Net pension losses and past service liability (net of tax
  benefit 2007 - $495; 2006 - $566)                                      (742)      (848)
Net post-retirement losses and past service liability (net of tax
  benefit 2007 - $36; 2006 - $48)                                         (54)       (73)
-----------------------------------------------------------------------------------------
                                                                      $(1,457)  $ (1,770)
=========================================================================================
</TABLE>

RECLASSIFICATIONS

Certain  amounts  in  the  2006  consolidated  financial  statements  have  been
reclassified  to  conform  to  the  current  year  presentation.  These
reclassifications  had  no  effect  on  net  income  as  previously  reported.

NOTE  2:  NEW  ACCOUNTING  PRONOUNCEMENTS

In  July  2006,  the  FASB  issued  FASB  Interpretation  No. 48, Accounting for
Uncertainty  in  Income  Taxes-An Interpretation of FASB Statement No. 109 ("FIN
48"),  which  clarifies  the  accounting  for uncertainty in tax positions. This
Interpretation  requires  that companies recognize in their financial statements
the  impact of a tax position, if that position is more likely than not of being
sustained  on audit, based on the technical merits of the position. In May 2007,
the  FASB issued FASB Staff Position ("FSP") FIN 48-1, "Definition of Settlement
in  FASB  Interpretation No. 48" (FSP FIN 48-1).  FSP FIN 48-1 provides guidance
on  how  to  determine  whether  a  tax  position is effectively settled for the
purpose  of recognizing previously unrecognized tax benefits.  The provisions of
FIN  48  and  FSP FIN 48-1 were effective for years beginning after December 15,
2006,  with the cumulative effect of the change in accounting principle recorded
as  an  adjustment  to  opening  retained  earnings.  The  Company  adopted  the
provisions  of FIN 48 and FSP FIN 48-1, as required, on January 1, 2007, with no
impact  on  the  Company's  consolidated  financial  position  and  results  of
operations,  as  a  result  of  no  significant  unrecognized tax benefits being
identified.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, ("SFAS
157") which defines fair value, establishes a framework for measuring fair value
under  GAAP,  and  expands  disclosures  about fair value measurements. SFAS 157

--------------------------------------------------------------------------------
                                   Page 43
<PAGE>

applies  to  other  accounting  pronouncements that require or permit fair value
measurements.  The  new  guidance  is  effective  for  the Company for financial
statements  issued  after  January  1,  2008,  including  interim  periods.  The
adoption  of  SFAS  157  will  not have a significant impact on our consolidated
financial  position,  results  of  operations  or  cash  flows, although it will
increase  disclosures  required  in  our  consolidated  financial  statements.

In  February  2008,  the FASB issued FASB Staff Position (FSP) 157-2, "Effective
Date  of  FASB  Statement No. 157," that permits a one-year deferral in applying
the  measurement  provisions  of  Statement  No. 157 to non-financial assets and
non-financial  liabilities  (non-financial  items)  that  are  not recognized or
disclosed at fair value in an entity's financial statements on a recurring basis
(at  least  annually). Therefore, if the change in fair value of a non-financial
item  is  not required to be recognized or disclosed in the financial statements
on  an  annual  basis  or  more frequently, the effective date of application of
Statement  157  to  that  item  is  deferred  until fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years. The adoption of
FSP  157-2  will  not  have  a  significant impact on the consolidated financial
position  or  results  of  operations.

In  February  2007,  the  FASB  issued  SFAS  No. 159, The Fair Value Option for
Financial  Assets  and  Financial  Liabilities  - Including an Amendment of FASB
Statement  No.  115,  ("SFAS 159"). This standard permits an entity to choose to
measure  many  financial instruments and certain other items at fair value. Most
of  the provisions in SFAS 159 are elective; however, the amendment to SFAS 115,
Accounting for Certain Investments in Debt and Equity Securities, applies to all
entities  with  available-for-sale  and  trading  securities.  The FASB's stated
objective  in  issuing  this  standard  is  as  follows:  "to  improve financial
reporting  by  providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without  having  to  apply complex hedge accounting provisions."  The fair value
option  established  by  SFAS  159  permits  all  entities  to choose to measure
eligible items at fair value at specified election dates. A business entity will
report  unrealized gains and losses on items for which the fair value option has
been  elected  in  earnings  at  each  subsequent reporting date. The fair value
option: (a) may be applied instrument by instrument, with a few exceptions, such
as  investments otherwise accounted for by the equity method; (b) is irrevocable
(unless  a  new  election  date  occurs);  and  (c)  is  applied  only to entire
instruments  and  not to portions of instruments.  SFAS 159 is effective for the
Company  as  of  January 1, 2008. The Company does not expect its implementation
will  have  a significant impact on the Company's financial condition or results
of  operations.

In  December 2007, the FASB issued Statement No. 141, (R) Business Combinations.
This Statement establishes principles and requirements for how the acquirer of a
business  recognizes  and  measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. The Statement also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose  to enable users of the financial statements to evaluate the nature and
financial  effects  of  the  business  combination.  The  guidance  will  become
effective  for  the  Company January 1, 2009. This new pronouncement will impact
the  Company's  accounting for business combinations completed beginning January
1,  2009.

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in
Consolidated  Financial  Statements-an  amendment  of ARB No. 51. This Statement
establishes  accounting  and reporting standards for the noncontrolling interest
in  a  subsidiary and for the deconsolidation of a subsidiary. The guidance will
become  effective  for the Company January 1, 2009.  The Company does not expect
the  adoption  of  SFAS  No.160  to  have  a material impact on its consolidated
financial  statements.

Staff  Accounting Bulletin No. 109 (SAB 109), "Written Loan Commitments Recorded
at  Fair  Value  Through  Earnings"  expresses  the views of the staff regarding
written  loan  commitments that are accounted for at fair value through earnings
under  generally  accepted  accounting  principles.  To  make  the staff's views
consistent  with  current authoritative accounting guidance, the SAB revises and
rescinds  portions of SAB No. 105, "Application of Accounting Principles to Loan
Commitments."  Specifically,  the  SAB  revises  the  SEC  staff's  views  on

--------------------------------------------------------------------------------
                                   Page 44
<PAGE>

incorporating  expected  net  future  cash  flows  related  to  loan  servicing
activities  in  the fair value measurement of a written loan commitment. The SAB
retains  the  staff's  views  on  incorporating  expected  net future cash flows
related  to internally-developed intangible assets in the fair value measurement
of  a  written loan commitment. The staff expects registrants to apply the views
in  Question  1 of SAB 109 on a prospective basis to derivative loan commitments
issued  or  modified  in  fiscal quarters beginning after December 15, 2007. The
Company  does  not  expect  SAB  109  to have a material impact on its financial
statements.

NOTE 3: INVESTMENT SECURITIES - AVAILABLE-FOR-SALE

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

<TABLE>
<CAPTION>
                                               DECEMBER 31, 2007
                                   ---------------------------------------------
<S>                                <C>         <C>        <C>         <C>
                                                    GROSS         GROSS ESTIMATED
                                     AMORTIZED UNREALIZED    UNREALIZED      FAIR
(In thousands)                            COST      GAINS        LOSSES     VALUE
----------------------------------------------------------------------------------
Bond investment securities:
  US Treasury and agencies           $   18,672    $   27      $   (53)  $ 18,646
  State and political subdivisions        5,342         5          (20)     5,327
  Corporate                               6,392         1         (366)     6,027
  Mortgage-backed                        28,615        87         (325)    28,377
---------------------------------------------------------------------------------
     Total                               59,021       120         (764)    58,377
Equity investments                        7,092        14         (473)     6,633
---------------------------------------------------------------------------------
Total investment securities          $   66,113    $  134      $(1,237)  $ 65,010
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                               DECEMBER 31, 2006
                                   ---------------------------------------------
<S>                                <C>         <C>        <C>         <C>
                                                     GROSS        GROSS ESTIMATED
                                      AMORTIZED UNREALIZED   UNREALIZED      FAIR
(In thousands)                             COST     GAINS       LOSSES      VALUE
-----------------------------------------------------------------------------------
Bond investment securities:
  US Treasury and agencies           $   19,966    $    -      $  (557)  $ 19,4096
  State and political subdivisions        5,870         -          (79)      5,791
  Corporate                               5,575        18          (79)      5,514
  Mortgage-backed                        25,481        53         (638)     24,896
----------------------------------------------------------------------------------
     Total                               56,892        71       (1,353)     55,610
Equity investments                        7,163        91         (224)      7,030
----------------------------------------------------------------------------------
Total investment securities          $   64,055    $  162      $(1,577)   $ 62,640
==================================================================================
</TABLE>

Gross  gains  of $385,000 and $325,000 for 2007 and 2006, respectively and gross
losses  of  $7,000  and $26,000 for 2007 and 2006, respectively were realized on
sales  and  calls  of  securities.  The  tax  expense  related  to  net gains on
investment  securities  was  $147,000  for  2007  and  $117,000  for  2006.

Investment  securities  with  a  carrying  value of approximately $29,545,000 at
December  31,  2007  were pledged to collateralize certain deposit and borrowing
arrangements.

The  amortized cost and estimated fair value of debt investments at December 31,
2007  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.

--------------------------------------------------------------------------------
                                   Page 45
<PAGE>

<TABLE>
<CAPTION>
                                          AMORTIZED    ESTIMATED
(In thousands)                                 COST   FAIR VALUE
---------------------------------------------------------------
<S>                                      <C>         <C>
Due in one year or less                  $    8,759  $     8,736
Due after one year through five years        15,033       14,982
Due after five years through ten years        4,483        4,426
Due after ten years                           2,131        1,856
Mortgage-backed securities                   28,615       28,377
----------------------------------------------------------------
Totals                                   $   59,021  $    58,377
================================================================
</TABLE>

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,  is  as  follows:

<TABLE>
<CAPTION>
                                                                      December 31, 2007
                                            ---------------------------------------------------------------------
                                            Less than Twelve Months   Twelve Months or More        Total
                                            ---------------------------------------------------------------------
                                              Unrealized      Fair      Unrealized     Fair    Unrealized   Fair
(In thousands)                                    Losses     Value          Losses    Value        Losses  Value
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>         <C>           <C>       <C>        <C>
US Treasury and agency securities                $   (1)    $1,004      $   (52)    $ 10,599     $   (53)  $11,603
State and political subdivision securities            -          -          (20)       3,362         (20)    3,362
Corporate securities                                (94)       885         (272)       3,692        (366)    4,577
Mortgage-backed securities                          (16)     4,973         (309)      17,169        (325)   22,142
Equity investment securities                         (2)        12         (471)       6,043        (473)    6,055
------------------------------------------------------------------------------------------------------------------
                                                 $ (113)    $6,874      $(1,124)    $ 40,865     $(1,237)  $47,739
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                                      December 31, 2006
                                            ---------------------------------------------------------------------
                                            Less than Twelve Months   Twelve Months or More        Total
                                            ---------------------------------------------------------------------
                                              Unrealized      Fair      Unrealized     Fair    Unrealized   Fair
(In thousands)                                    Losses     Value          Losses    Value        Losses  Value
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>         <C>           <C>       <C>        <C>
US Treasury and agency securities                     (1)   1,996         (556)   17,413         (557)   19,409
State and political subdivision securities            (1)     439          (78)    5,218          (79)    5,657
Corporate securities                                   -        -          (79)    3,887          (79)    3,887
Mortgage-backed securities                            (1)     198         (637)   22,525         (638)   22,723
Equity investment securities                        (136)   2,747          (88)    3,366         (224)    6,113
---------------------------------------------------------------------------------------------------------------
                                             $      (139)  $5,380  $    (1,438)  $52,409  $    (1,577)  $57,789
===============================================================================================================
</TABLE>

The Company reviews its securities portfolio for potential impairment issues at
least quarterly.  No impairment losses were recorded during 2007 or 2006.

At December 31, 2007, 48 mortgage-backed and 14 US Treasury and agency
securities have unrealized losses.  These unrealized losses relate principally
to changes in interest rates subsequent to the acquisition of specific
securities.  None of the securities in this category had an unrealized loss that
exceeded 4% of their carrying amount and a majority had unrealized losses
totaling less than 3% of their carrying amount.  The Company has the intent and
ability to hold the individual securities to maturity or market price recovery.

At  December  31,  2007,  11  state  and  political  subdivision securities have
unrealized  losses.  In  analyzing  the issuer's financial condition, management
considers  the  industry  analyst's reports, financial performance and projected
target  prices of investment analysts within a one-year time frame.  None of the
securities  in this category had an unrealized loss that exceeded 2% of carrying

--------------------------------------------------------------------------------
                                   Page 46
<PAGE>

value  and  a  majority  had unrealized losses totaling less than 1% of carrying
value.  The Company has the intent and ability to hold the individual securities
to  maturity  or  market  price  recovery.  Due  to  recent negative market news
concerning various municipal bond insurers, management has reviewed its holdings
in  municipal bonds in order to determine any potential exposure to the troubled
insurers.  Management  has reviewed its holdings and identified the current bond
insurers  credit  rating  and  the  underlying  credit  rating  of  the  issuer.
Management  continues  to stay apprised of the issues affecting the insurers and
currently  feels  that  no  impairment  writedowns  are  needed.

At  December 31, 2007, 5 corporate securities had unrealized losses.  Two of the
corporate securities represent trust preferred issuances from large money center
financial  institutions.  These  securities were issued at spreads to LIBOR that
are  significantly  lower  than  currently  originated  similar  issuances.  Two
additional  holdings  represent  shorter term financial sector bonds whose value
has  been negatively impacted by changes in interest rates since their issuance,
combined  with  the  recent  turmoil in the mortgage market.  Management has the
intent  and  ability  to  hold  these  securities  to  maturity.  The  remaining
security's unrealized loss is less than $1,000 and is thus deemed insignificant.

At  December 31, 2007, 4 equity and other securities had unrealized losses.  One
of  these  securities  is  a  mutual  fund  backed by short-term adjustable rate
mortgage-backed  securities  and has an unrealized loss of 3% of carrying value.
The  unrealized loss relates principally to changes in interest rates subsequent
to  the  acquisition  of  the mutual fund.  A second equity security is a mutual
fund  consisting  primarily of investment grade dividend-paying common stocks of
large  capitalization  companies,  i.e., companies with market capitalization in
excess  of  $5  billion.  A  review  of  the  underlying securities indicates no
individually impaired holdings and there is no indication that the profitability
of  these  corporations  is  impaired  beyond  the  economic cycle. As such, the
decline  in  investment is not considered to be other-than-temporarily impaired.
The  remaining two securities had a combined total unrealized loss of $4,000 and
were  deemed  to  be  insignificant.

NOTE  4:  LOANS

Major  classifications  of  loans  at  December  31,  are  as  follows:

<TABLE>
<CAPTION>

(In thousands)                        2007      2006
----------------------------------------------------
REAL ESTATE MORTGAGES:
<S>                              <C>        <C>
Conventional                     $122,045   $115,588
Construction                        3,776      2,160
Commercial                         45,490     40,501
-----------------------------------------------------
                                  171,311    158,249
-----------------------------------------------------
OTHER LOANS:
Consumer                            3,926      3,248
Home Equity/Second Mortgage        21,379     17,965
Lease financing                       777        623
Commercial                         20,576     19,890
Municipal loans                     3,935      2,488
-----------------------------------------------------
                                   50,593     44,214
-----------------------------------------------------
Total loans                       221,904    202,463
-----------------------------------------------------
Net deferred loan costs               845        746
Less allowance for loan losses     (1,703)    (1,496)
-----------------------------------------------------
Loans receivable, net            $221,046   $201,713
=====================================================
</TABLE>

The  Company  grants  mortgage and consumer loans to customers throughout Oswego
and  parts  of  Onondaga  counties.  Although the Company has a diversified loan
portfolio,  a  substantial  portion  of  its  debtor's  ability  to  honor their
contracts  is  dependent  upon the counties' employment and economic conditions.

--------------------------------------------------------------------------------
                                   Page 47
<PAGE>

The  following  represents  the  activity  associated with loans to officers and
directors and their affiliated entities during the year ended December 31, 2007:

<TABLE>
<CAPTION>
(In thousands)
--------------------------------------
<S>                            <C>
Balance at beginning of year   $ 4,701
Originations                       360
Principal payments              (1,226)
---------------------------------------
Balance at end of year         $ 3,835
=======================================
</TABLE>

NOTE  5:  ALLOWANCE  FOR  LOAN  LOSSES

Changes  in  the  allowance  for loan losses for the year ended December 31, are
summarized  as  follows:

<TABLE>
<CAPTION>
 (In thousands)                 2007     2006
-----------------------------------------------
<S>                            <C>      <C>
Balance at beginning of year   $1,496   $1,679
Recoveries credited                50       22
Provision for loan losses         365       23
Loans charged-off                (208)    (228)
-----------------------------------------------
Balance at end of year         $1,703   $1,496
===============================================
</TABLE>

The  following  is a summary of information pertaining to impaired loans for the
years  ended  December  31:

<TABLE>
<CAPTION>
(In thousands)                                   2007     2006
--------------------------------------------------------------
<S>                                             <C>     <C>
Impaired loans without a valuation allowance    $1,312  $   -
Impaired loans with a valuation allowance          409     98
--------------------------------------------------------------
Total impaired loans                            $1,721  $  98
==============================================================
Valuation allowance related to impaired loans   $  152  $  24
==============================================================
Average investment in impaired loans            $1,749  $  91
==============================================================
Interest income recognized on impaired loans    $   92  $   1
==============================================================
Interest income recognized on a cash basis on
impaired loans                                  $    -  $   -
==============================================================
</TABLE>

The amount of loans on which the Company has ceased accruing interest aggregated
approximately  $1,591,000  and  $1,172,000  at  December  31,  2007  and  2006,
respectively.  There  were  no  loans  past  due  ninety  days or more and still
accruing  interest  at  December  31,  2007  or  2006.

NOTE  6:  SERVICING

Loans  serviced  for  others  are  not included in the accompanying consolidated
statements  of  condition.  The  unpaid principal balances of mortgage and other
loans  serviced for others were $50,409,000 and $53,100,000 at December 31, 2007
and  2006,  respectively.

The balance of capitalized servicing rights included in other assets at December
31,  2007  and  2006,  was  $43,000  and  $65,000,  respectively.

The  following  summarizes  mortgage-servicing rights capitalized and amortized:

<TABLE>
<CAPTION>
 (In thousands)                         2007   2006
----------------------------------------------------
<S>                                     <C>    <C>
Mortgage servicing rights capitalized   $  24  $  14
Mortgage servicing rights amortized        46     95
====================================================
</TABLE>

--------------------------------------------------------------------------------
                                   Page 48
<PAGE>

NOTE  7:  PREMISES  AND  EQUIPMENT

A  summary  of  premises  and  equipment  at  December  31,  is  as  follows:

<TABLE>
<CAPTION>
(In thousands)                        2007     2006
---------------------------------------------------
<S>                                <C>      <C>
Land                               $ 1,226  $ 1,226
Buildings                            6,963    6,458
Furniture, fixture and equipment     6,861    6,401
Construction in progress                66      130
---------------------------------------------------
                                   $15,116  $14,215
Less: Accumulated depreciation       7,309    6,618
---------------------------------------------------
                                   $ 7,807  $ 7,597
===================================================
</TABLE>

NOTE  8:  GOODWILL  AND  INTANGIBLE  ASSETS

A  summary  of  intangible  assets  at  December  31,  is  as  follows:

<TABLE>
<CAPTION>
                                      2007                     2006
                           -------------------------------------------------
                             GROSS                     GROSS
                          CARRYING   ACCUMULATED    CARRYING   ACCUMULATED
 (In thousands)             AMOUNT  AMORTIZATION      AMOUNT  AMORTIZATION
----------------------------------------------------------------------------
<S>                       <C>        <C>             <C>        <C>
Goodwill                  $  3,840    $     -        $ 3,840      $    -
Core deposit intangible      1,111     (1,111)         1,111        (930)
</TABLE>

Core deposit intangibles became fully amortized in October 2007. Amortization of
goodwill  and  the  core  deposit  intangible  is  deductible  for tax purposes.

NOTE  9:  DEPOSITS

A  summary  of  deposits  at  December  31,  is  as  follows:

<TABLE>
<CAPTION>
 (In thousands)                            2007      2006
---------------------------------------------------------
<S>                                  <C>  <C>       <C>
Savings accounts                       $ 50,789  $ 52,506
Time accounts                            86,588    86,696
Time accounts over $100,000              33,016    32,776
Money management accounts                 9,657    12,630
MMDA accounts                            24,882    17,615
Demand deposit interest-bearing          20,467    19,875
Demand deposit noninterest-bearing       22,766    20,582
Mortgage escrow funds                     2,920     2,905
---------------------------------------------------------
                                       $251,085  $245,585
=========================================================
</TABLE>

--------------------------------------------------------------------------------
                                   Page 49
<PAGE>

At December 31, 2007,  the scheduled maturities of time deposits are as follows:

<TABLE>
<CAPTION>
(In thousands)
-----------------------------
<S>                 <C>
YEAR OF MATURITY:
2008                $ 77,396
2009                  26,940
2010                   4,533
2011                   4,918
2012                   2,257
Thereafter             3,560
----------------------------
                    $119,604
============================
</TABLE>

NOTE  10:  BORROWED  FUNDS

The  composition  of  borrowings  at  December  31  is  as  follows:

<TABLE>
<CAPTION>

 (In thousands)                            2007     2006
---------------------------------------------------------
<S>                                  <C>      <C>
SHORT-TERM FHLB ADVANCES:
  FHLB Advances                         $ 9,000  $     -
  Overnight Line of Credit with FHLB      9,400        -
--------------------------------------------------------
   Total short-term borrowings          $18,400  $     -
========================================================
LONG-TERM:
  FHLB Repurchase agreements            $ 2,400  $ 2,400
  FHLB advances                          17,610   23,960
--------------------------------------------------------
    Total long-term borrowings          $20,010  $26,360
========================================================
</TABLE>

The  principal  balance,  interest  rate  and  maturity  of the above fixed rate
borrowings  at  December  31,  2007  is  as  follows:

<TABLE>
<CAPTION>
<S>                                     <C>           <C>
TERM                                      PRINCIPAL     RATES
------------------------------------------------------------------
(Dollars in thousands)
  Short-term advances with FHLB            $ 18,400   4.13%-5.52%
==================================================================
  Long-term:
   Repurchase agreements (due in 2009)        2,400   5.56%-5.76%
------------------------------------------------------------------
   Advances with FHLB
     due in 2008                              6,610   2.67%-5.98%
     due in 2009                              3,000   4.03%-6.00%
     due in 2010                              5,000         4.39%
     due in 2012                              3,000         4.91%
------------------------------------------------------------------
         Total advances with FHLB          $ 17,610
------------------------------------------------------------------
         Total long-term borrowings        $ 20,010
------------------------------------------------------------------
  Total  borrowings                        $ 38,410
==================================================================
</TABLE>

The  repurchase  agreements  with  the  Federal  Home  Loan  Bank  ("FHLB")  are
collateralized  by  certain  investment  securities  having  a carrying value of
$2,558,000 at December 31, 2007.  The collateral is under the Company's control.
The  line  of  credit  agreement  with  the FHLB is used for liquidity purposes.
Interest  on this line is determined at the time of borrowing.  The average rate
paid  on  the  overnight  line  during 2007 approximated 5.12%.  At December 31,
2007, $22,314,000 was available under the overnight line.  As a companion to the
overnight  line  with  the  FHLB,  the  Company  also  has access to a One-Month
Overnight Repricing Line of Credit.  This allows the Company to borrow funds for

--------------------------------------------------------------------------------
                                   Page 50
<PAGE>

a  term  of  one  month  which  reprice daily over the term, thus freeing up the
overnight line for daily liquidity needs.  The Company has $31,714,000 available
under  this  facility,  yet has never accessed the one-month overnight repricing
line.  In addition to the overnight line of credit program, the Company also has
access  to  the FHLB's Term Advance Program under which it can borrow at various
terms  and  interest rates.  Residential mortgage loans with a carrying value of
$66,681,000 and FHLB stock with a carrying value of $2,138,000 have been pledged
by the Company under a blanket collateral agreement to secure the Company's line
of  credit and term borrowings.  The Company also maintains a $5,000,000 line of
credit  with  a  correspondent  bank.  Interest on the line is determined at the
time  of borrowing.  The Company did not draw on the line during 2007.  In order
to  utilize  the line, the Company is required to secure the outstanding balance
with  marketable  investment  securities.

The  Company has a non-consolidated subsidiary trust, Pathfinder Statutory Trust
II,  of  which  100%  of  the  common equity is owned by the Company.  The Trust
issued  $5,000,000  of  30  year  floating rate Company-obligated pooled capital
securities  of Pathfinder Statutory Trust II.  The Company borrowed the proceeds
of  the  capital  securities from its subsidiary by issuing floating rate junior
subordinated  deferrable interest debentures having substantially similar terms.
The  capital  securities mature in 2037 and are treated as Tier 1 capital by the
Federal Deposit Insurance Corporation and the Office of Thrift Supervision.  The
capital  securities  of the trust are a pooled trust preferred fund of Preferred
Term  Securities VI, Ltd. and are tied to the 3-month LIBOR plus 1.65% (6.64% at
December  31, 2007) with a five-year call provision.  The Company guarantees all
of  these  securities.

The Company's equity interest in the trust subsidiary of $155,000 is reported in
"Other  assets".  For  regulatory  reporting purposes, the Federal Reserve Board
has  indicated  that the preferred securities will continue to qualify as Tier 1
Capital  subject  to  previously specified limitations, until further notice. If
regulators make a determination that Trust Preferred Securities can no longer be
considered in regulatory capital, the securities become callable and the Company
may  redeem  them.

The  Company  retired its original trust preferred issuance of $5,000,000 during
June  2007,  at its earliest call date.  The original issuance of pooled capital
securities were tied to the 3-month LIBOR plus 3.45%.  The proceeds from the new
issuance,  Pathfinder  Statutory  Trust  II,  were  used  to retire the original
issuance,  Pathfinder  Statutory  Trust  I.

NOTE  11:  EMPLOYEE  BENEFITS  AND  DEFERRED  COMPENSATION  AND  SUPPLEMENTAL
RETIREMENT  PLANS

The  Company  has  a  noncontributory  defined  benefit  pension  plan  covering
substantially  all  employees. The plan provides defined benefits based on years
of  service  and final average salary. In addition, the Company provides certain
health  and  life  insurance  benefits  for  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  Company uses an October 1 measurement date for the defined benefit plan and
postretirement  benefit  plan.

--------------------------------------------------------------------------------
                                   Page 51
<PAGE>

The  following  tables  set forth the changes in the plans' benefit obligations,
fair  value  of  plan assets and the prepaid plans' funded status as of December
31:

<TABLE>
<CAPTION>
                                                          PENSION BENEFITS  POSTRETIREMENT BENEFITS
                                                      ---------------------------------------------
(In thousands)                                              2007       2006       2007      2006
--------------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>         <C>      <C>
CHANGE IN BENEFIT OBLIGATIONS:
  Benefit obligation at beginning of year               $  4,439    $  4,361     $ 346     $ 354
  Service cost                                               196         193         3         2
  Interest cost                                              273         252        21        20
  Actuarial gain (loss)                                       83        (203)      (13)      (10)
  Benefits paid                                             (148)       (164)      (22)      (20)
-------------------------------------------------------------------------------------------------
Benefit obligations at end of year                         4,843       4,439       335       346
-------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS:
  Fair value of plan assets at beginning of year           4,338       4,070         -         -
  Actual return on plan assets                               565         297         -         -
  Benefits paid                                             (148)       (164)      (22)      (20)
  Employer contributions                                     222         135        22        20
-------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                   4,977       4,338         -         -
-------------------------------------------------------------------------------------------------
Funded Status - asset (liability)                       $    134     $  (101)    $(335)    $(346)
=================================================================================================
</TABLE>

Amounts  recognized  in  accumulated other comprehensive loss as of December 31,
<TABLE>
<CAPTION>

 (In thousands)                         2007    2006
----------------------------------------------------
<S>                                  <C>  <C>     <C>
Unrecognized transition obligation     $   79  $   97
Net loss                                1,248   1,438
-----------------------------------------------------
                                        1,327   1,535
Tax effect                                531     614
-----------------------------------------------------
                                       $  796  $  921
=====================================================
</TABLE>

The  accumulated  benefit obligation for the defined benefit plan was $3,953,000
and  $3,710,000 at December 31, 2007 and 2006, respectively.  The postretirement
plan  had an accumulated benefit obligation of $335,000 and $346,000 at December
31,  2007  and  2006,  respectively.

The  significant  assumptions  used in determining the benefit obligations as of
December  31,  2007  and  2006  are  as  follows:

<TABLE>
<CAPTION>
                                                     PENSION BENEFITS   POSTRETIREMENT BENEFITS
                                                 ----------------------------------------------
                                                        2007    2006         2007     2006
-----------------------------------------------------------------------------------------------
<S>                                               <C>          <C>        <C>        <C>
Weighted average discount rate                         6.63%    6.25%        6.63%    6.25%
Expected long term rate of return on plan assets       9.00%    9.00%           -        -
Rate of increase in future compensation levels         4.00%    3.00%           -        -
===========================================================================================
</TABLE>

--------------------------------------------------------------------------------
                                   Page 52
<PAGE>

Assumed  health  care  cost trend rates have a significant effect on the amounts
reported for the postretirement health care plan.   The annual rates of increase
in  the  per  capita  cost of covered medical and prescription drug benefits for
year-end  calculations  were  assumed  to  be 7.75% and 9.0%, respectively.  The
rates  were  assumed  to  decrease gradually to 3.75% in 2012 and remain at that
level  thereafter.  A  one-percentage point change in the health care cost trend
rates  would  have  the  following  effects:

<TABLE>
<CAPTION>
                                                 1 PERCENTAGE    1 PERCENTAGE
                                                        POINT           POINT
(In thousands)                                       INCREASE        DECREASE
----------------------------------------------------------------------------
<S>                                                <C>              <C>
Effect on total of service and interest
    cost components                                   $  1           $ (1)
Effect on post retirement benefit obligation             9             (9)
==========================================================================
</TABLE>

The  composition  of  the  net  periodic  benefit  plan cost for the years ended
December  31,  2007  and  2006  is  as  follows:

<TABLE>
<CAPTION>
                                         PENSION BENEFITS   POSTRETIREMENT BENEFITS
                                        -------------------------------------------
(In thousands)                             2007     2006         2007      2006
-----------------------------------------------------------------------------------
<S>                                     <C>       <C>           <C>        <C>
Service cost                            $  196     $ 193        $   3    $   2
Interest cost                              273       252           21       20
Amortization of transition obligation        -         -           18       18
Amortization of gains and losses            87       110            -        -
Expected return on plan assets            (392)     (368)           -        -
----------------------------------------------------------------------------------
Net periodic benefit plan cost          $  164     $ 187        $  42    $  40
==================================================================================
</TABLE>

The  significant  assumptions  used in determining the net periodic benefit plan
cost  for  years  ended  December  31  were  as  follows:

<TABLE>
<CAPTION>
                                                     PENSION BENEFITS   POSTRETIREMENT BENEFITS
                                                -----------------------------------------------
                                                      2007       2006        2007        2006
-----------------------------------------------------------------------------------------------
<S>                                               <C>         <C>         <C>        <C>
Weighted average discount rate                        6.25%     5.88%        6.25%     5.88%
Expected long term rate of return on plan assets      9.00%     9.00%           -         -
Rate of increase in future compensation levels        3.00%     3.00%           -         -
===============================================================================================
</TABLE>

The  long-term  rate-of-return-on-assets  assumption was set based on historical
returns  earned  by  equities  and  fixed income securities, adjusted to reflect
expectations  of  future  returns  as applied to the plan's target allocation of
asset  classes.  Equities  and fixed income securities were assumed to earn real
rates of return in the ranges of 5-9.0% and 2-6.0%, respectively.  The long-term
inflation rate was estimated to be 3.0%.  When these overall return expectations
are  applied  to  the  plan's  target allocation, the expected rate of return is
determined  to  be  9.0%, which is roughly the midpoint of the range of expected
return.

The  Company's pension plan weighted-average asset allocations at October 1, the
measurement  date,  by  asset  category  are  as  follows:

<TABLE>
<CAPTION>

ASSET CATEGORY     2007    2006
-------------------------------
<S>                <C>    <C>
Equity securities    70%    73%
Debt securities      30%    27%
-------------------------------
Total               100%   100%
===============================
</TABLE>

Plan  assets  are  invested  in  six  diversified  investment  funds  of the RSI
Retirement  Trust  (the  "Trust"), a no load series open-ended mutual fund.  The
investment  funds  include  four  equity mutual funds and two bond mutual funds,

--------------------------------------------------------------------------------
                                   Page 53
<PAGE>

each  with  its  own  investment objectives, investment strategies and risks, as
detailed  in the Trust's prospectus.  The Trust has been given discretion by the
Plan Sponsor to determine the appropriate strategic asset allocation versus plan
liabilities,  as  governed by the Trust's Statement of Investment Objectives and
Guidelines  (the  "Guidelines").

The  long-term  investment  objective is to be invested 65% in equity securities
(equity  mutual  funds)  and 35% in debt securities (bond mutual funds).  If the
plan  is  under  funded  under  the  Guidelines,  the  bond fund portion will be
temporarily  increased  to  50% in order to lessen asset value volatility.  When
the plan is no longer under funded, the bond fund portion will be decreased back
to 35%.  Asset rebalancing is scheduled when the investment mix varies more than
10%  from  the  target  (i.e.,  a  20%  target  range).

The investment goal is to achieve investment results that will contribute to the
proper  funding  of the pension plan by exceeding the rate of inflation over the
long-term.  In  addition,  investment  managers  for  the  Trust are expected to
provide  above  average  performance  when  compared  to  their  peer  managers.
Performance volatility is also monitored.  Risk/volatility is further managed by
the  distinct  investment  objectives  of  each  of  the  Trust  funds  and  the
diversification  within  each  fund.

For  the  fiscal  year  ending December 31, 2008, the Bank expects to contribute
approximately  $233,000  to  the  Plans.

The  following  benefit  payments,  which  reflect  expected  future service, as
appropriate,  are  expected  to  be  paid.

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
--------------------------
(In thousands)
<S>                         <C>
2008                        $  185
2009                           190
2010                           194
2011                           200
2012                           211
Years 2013- 2017             1,398
==================================
</TABLE>

On  September  29,  2006,  FASB  issued  SFAS No. 158, Employers' Accounting for
Defined  Benefit  Pension  and  Other  Postretirement  Plans ("SFAS 158"), which
amends  SFAS  87  and  SFAS  106  to  require  recognition  of the overfunded or
underfunded  status  of  pension  and  other postretirement benefit plans on the
balance  sheet.  Under  SFAS  158,  gains  and  losses,  prior service costs and
credits,  and  any  remaining transition amounts under SFAS 87 and SFAS 106 that
have not yet been recognized through net periodic benefit cost are recognized in
accumulated  other  comprehensive  income,  net  of  tax effects, until they are
amortized  as  a component of net periodic cost. The measurement date - the date
at which the benefit obligation and plan assets are measured - is required to be
the  company's  fiscal  year  end.  SFAS  158  became  effective for the Company
December  13,  2006,  except  for  the  measurement  date  provisions, which are
effective  for  fiscal  years ending after December 31, 2008.  The effect of the
implementation  was to increase accumulated other comprehensive loss by $921,000
(net  of related deferred tax effect of $614,000), decrease prepaid pension cost
by  $1,414,000  and  increase  accrued  post  retirement  benefit  by  $121,000.

In  2007,  and  for each year going forward, the accumulated other comprehensive
loss,  recorded  at  the  time  of  SFAS 158 implementation, will be adjusted to
reflect  (a)  how  much  gain  or  loss,  prior  service  cost  and  transition
asset/liability  is  included  in that year's expenses, (b) new gains and losses
during  the  year  and  (c)  any  new  plan  changes.

For  the  year ended December 31, 2007, the accumulated other comprehensive loss
was  amortized  by  $125,000  (net  of  related deferred tax effect of $83,000).

The  Company  also offers a 401(k) plan to its employees.  Contributions to this
plan  by  the  Company  were  $148,000  for  2007  and  2006,  each.

--------------------------------------------------------------------------------
                                   Page 54
<PAGE>

The  Company  maintains  optional deferred compensation plans for its directors,
and  certain  executive  officers, whereby fees and income normally received are
deferred and paid by the Company based upon a payment schedule commencing at age
65  and  continues monthly for 10 years. Directors must serve on the board for a
minimum  of  5 years to be eligible for the Plan. At December 31, 2007 and 2006,
other liabilities include approximately $1,660,000 and $1,556,000, respectively,
relating  to  deferred compensation. Deferred compensation expense for the years
ended  December  31,  2007  and  2006  amounted  to  approximately  $212,000 and
$240,000,  respectively.

The  Company  has  a  supplemental  executive retirement plan for the benefit of
certain  executive  officers.  At  December 31, 2007 and 2006, other liabilities
include  approximately  $366,000  and  $396,000  accrued  under  these  plans.
Compensation  expense includes approximately $49,000 and $51,000 relating to the
supplemental  executive  retirement  plan  for  2007  and  2006,  respectively.

To  fund  the  benefits  under  these  plans, the Company is the owner of single
premium  life insurance policies on participants in the non-qualified retirement
plans.  At  December  31,  2007  and  2006, the cash value of these policies was
$6,437,000  and  $6,212,000,  respectively.

NOTE  12:  STOCK  BASED  COMPENSATION  PLANS

In  February  1997,  the  Board of Directors approved an option plan and granted
options  thereunder  with  an  exercise  price  equal to the market value of the
Company's  shares  at  the  date  of  grant.  Under the Stock Option Plan, up to
132,249  options  had  been  authorized for grant of incentive stock options and
nonqualified  stock  options.

In  July 2001, the Board approved the issuance of 38,499 stock options remaining
in the 1997 Stock Option Plan.  The exercise price was equal to the market value
of the Company's shares at the date of grant ($8.34).  The options granted under
the  issuance have a 10-year term with one-third vesting upon grant date and the
remaining  vesting  and  becoming  exercisable  ratably  over  a  2-year period.

Activity  in  the  Stock  Option  Plan  is  as  follows:
<TABLE>
<CAPTION>
                                                       WEIGHTED
                                       OPTIONS          AVERAGE       OPTIONS
(Shares in thousands)              OUTSTANDING   EXERCISE PRICE   EXERCISABLE
-----------------------------------------------------------------------------
<S>                                <C>           <C>              <C>
Outstanding at January 1, 2006              41   $          7.41           41
   Exercised                                (4)             7.35
-----------------------------------------------------------------------------
Outstanding at December 31, 2006            37   $          7.53           37
   Exercised                               (17)             6.60
-----------------------------------------------------------------------------
Outstanding at December 31, 2007            20   $          8.34           20
=============================================================================
</TABLE>

The  aggregate  intrinsic  value  of a stock option represents the total pre-tax
intrinsic  value (the amount by which the current market value of the underlying
stock exceeds the exercise price of the option) that would have been received by
the  option  holders  had all option holders exercised their options on December
31,  2007.  This  amount  changes  based  on  changes in the market value of the
Company's  stock.  At  December  31,  2007, the aggregate intrinsic value of all
outstanding  and  exercisable  stock  options  approximated  $38,000.

The  total  intrinsic  value of stock options exercised during 2007 approximated
$64,000.

At  December  31, 2007, the 19,950 options outstanding all had an exercise price
of  $8.34  and  an  average  remaining  contractual  life  of  3.5  years.

No  new options have been granted since July 2001.  All outstanding options were
fully  vested  as  of  July  2003.

--------------------------------------------------------------------------------
                                   Page 55
<PAGE>

NOTE  13:  INCOME  TAXES

The  provision for income tax expense (benefit) for the years ended December 31,
is  as  follows:

<TABLE>
<CAPTION>
 (In thousands)                 2007    2006
--------------------------------------------
<S>                           <C>     <C>
Current                         $ 432  $ 309
Deferred                          (48)   (67)
---------------------------------------------
                                $ 384  $ 242
=============================================
</TABLE>

The  provision  for  income  taxes  includes  the  following:

<TABLE>
<CAPTION>
 (In thousands)                 2007    2006
--------------------------------------------
<S>                            <C>     <C>
Federal Income Tax             $ 405   $ 267
New York State Franchise Tax     (21)    (25)
=============================================
                               $ 384   $ 242
=============================================
</TABLE>

The components of net deferred tax asset, included in other assets as of
December 31, are as follows:

<TABLE>
<CAPTION>
 (In thousands)                                2007      2006
-------------------------------------------------------------
<S>                                          <C>       <C>
ASSETS:
  Deferred compensation                        $   783   $   760
  Allowance for loan losses                        659       583
  Postretirement benefits                          129        88
  Pension                                            -        85
  Mortgage recording tax credit carryforward       408       364
  Investment securities                            441       566
  Other                                             94       142
-----------------------------------------------------------------
                                               $ 2,514   $ 2,588
=================================================================
LIABILITIES:
  Pension                                      $   (52)  $     -
  Depreciation                                    (517)     (573)
  Accretion                                        (57)      (38)
  Loan origination fees                           (335)     (289)
  Intangible assets                               (651)     (536)
  Prepaid expenses                                (107)      (83)
-----------------------------------------------------------------
                                               $(1,719)  $(1,519)
=================================================================
Net deferred tax asset                         $   795   $ 1,069
=================================================================
</TABLE>

Realization  of  deferred  tax assets is dependent upon the generation of future
taxable  income  or  the existence of sufficient taxable income within the carry
back  period.  A valuation allowance is provided when it is more likely than not
that  some portion, or all of the deferred tax assets, will not be realized.  In
assessing the need for a valuation allowance, management considers the scheduled
reversal of the deferred tax liabilities, the level of historical taxable income
and  the  projected future level of taxable income over the periods in which the
temporary  differences  comprising  the  deferred tax assets will be deductible.
Based  on  its  assessment, management determined that no valuation allowance is
necessary.

--------------------------------------------------------------------------------
                                   Page 56
<PAGE>

A  reconciliation  of  the  federal  statutory  income tax rate to the effective
income  tax  rate  for  the  years  ended  December  31,  is  as  follows:

<TABLE>
<CAPTION>
                                          2007    2006
-------------------------------------------------------
<S>                                       <C>    <C>
Federal statutory income tax rate         34.0%   34.0%
State tax                                 (0.9)   (1.3)
Tax-exempt interest income, net of TEFRA  (6.1)  (11.1)
Increase in value of life insurance       (5.1)   (6.0)
Other                                      3.6     3.5
-------------------------------------------------------
Effective income tax rate                 25.5%   19.1%
=======================================================
</TABLE>

The  adoption  of  FIN  48  at  January  1,  2007  did not have an impact on the
Company's  financial  statements.  At  January  1,  2007, (date of adoption) and
December  31,  2007, the Company did  not have any uncertain tax positions.  The
Company's  policy  is  to  recognize  interest and penalties on unrecognized tax
benefits,  if  any,  in  income  tax  expense  in the Consolidated Statements of
Income.  The  tax years subject to examination by the taxing authorities are the
years  ended  December  31,  2006,  2005,  2004  and  2003.

NOTE  14:  EARNINGS  PER  SHARE

The following is a reconciliation of basic to diluted earnings per share for the
years  ended  December  31:

<TABLE>
<CAPTION>
(In thousands, except per share data)   EARNINGS   SHARES   EPS
---------------------------------------------------------------
<S>                                    <C>        <C>     <C>
2007 Net Income                        $   1,122
     Basic EPS                             1,122   2,483  $0.45
     Effect of dilutive securities
       Stock options                          -       4
---------------------------------------------------------------
     Diluted EPS                       $   1,122   2,487  $0.45
===============================================================
2006 Net Income                        $   1,028
     Basic EPS                             1,028   2,464  $0.42
     Effect of dilutive securities
       Stock options                           -      19
---------------------------------------------------------------
     Diluted EPS                       $   1,028   2,483  $0.41
===============================================================
</TABLE>

NOTE  15:  COMMITMENTS  AND  CONTINGENCIES

The  Company  is 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.  Such  commitments involve, to varying degrees, elements of
credit  risk in excess of the amount recognized in the consolidated statement of
condition. The contractual amount of those commitments to extend credit reflects
the  extent  of  involvement  the  commitment  has  in  this particular class of
financial  instrument.  The  Company's  exposure  to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend  credit  is  represented by the contractual amount of the instrument. The
Company's  exposure  to  credit loss is represented by the contractual amount of
these  commitments.   The  Company  uses  the  same  credit  policies  in making
commitments  as  it  does  for  on-balance  sheet  instruments.

--------------------------------------------------------------------------------
                                   Page 57
<PAGE>

At  December  31,  2007  and  2006,  the  following  financial  instruments were
outstanding  whose  contract  amounts  represent  credit  risk:

<TABLE>
<CAPTION>
                                                CONTRACT AMOUNT
                                             -------------------
(In thousands)                                    2007      2006
----------------------------------------------------------------
<S>                                          <C>               <C>
Commitments to grant loans                   $   9,677   $ 9,388
Unfunded commitments under lines of credit      17,912    17,260
Standby letters of credit                        1,744       271
================================================================
</TABLE>

Commitments  to  extend  credit  are agreements to lend to a customer as long as
there  is no violation of any condition established in the contract. Commitments
generally  have  fixed  expiration  dates  or  other termination clauses and may
require  payment  of a fee. Since some of the commitment amounts are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent  future  cash  requirements.  The  Company  evaluates  each customer's
creditworthiness  on a case-by-case basis. The amount of collateral obtained, if
deemed  necessary  by  the  Company  upon  extension  of  credit,  is  based  on
management's  credit evaluation of the counter party. Collateral held varies but
may  include residential real estate and income-producing commercial properties.
Loan  commitments  outstanding  at  December  31, 2007 with fixed interest rates
amounted to approximately $6.3 million. Loan commitments, including unused lines
of  credit,  outstanding  at  December  31,  2007  with  variable interest rates
amounted  to  approximately  $23.0  million.  These outstanding loan commitments
carry  current  market  rates.

Unfunded commitments under standby letters of credit, revolving credit lines and
overdraft protection agreements are commitments for possible future extensions
of credit to existing customers.  These lines of credit usually do not contain a
specified maturity date and may not be drawn upon to the total extent to which
the Company is committed.

Outstanding letters of credit written are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party.  The majority
of these standby letters of credit expire within the next twelve months.  The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending other loan commitments.  The Bank requires collateral
supporting these letters of credit as deemed necessary.  Management believes
that the proceeds obtained through a liquidation of such collateral would be
sufficient to cover the maximum potential amount of future payments required
under the corresponding guarantees.  The amount of the liability as of December
31, 2007 and 2006 for guarantees under standby letters of credit issued is not
material.

The Company leases land and leasehold improvements under agreements that expire
in various years with renewal options over the next 30 years.  Rental expense,
included in operating expenses, amounted to $63,000 and $62,000, in 2007 and
2006, respectively.  In October 2002, the Company entered into a land lease with
one of its directors on an arms-length basis. In January 2006, the Company
entered into a lease with Pathfinder Bancorp, MHC, for the use of a training
facility.  This lease was also executed on an arms-length basis.  The rent
expense paid to the related parties during 2007 and 2006 was $43,000 and
$42,000, respectively. Approximate minimum rental commitments for the
noncancelable operating leases are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
-----------------------------------
<S>                            <C>
(In thousands)
2008                           $ 65
2009                             65
2010                             65
2011                             52
2012                             43
Thereafter                       20
-----------------------------------
Total minimum lease payments   $310
===================================
</TABLE>

--------------------------------------------------------------------------------
                                   Page 58
<PAGE>

NOTE  16:  DIVIDENDS  AND  RESTRICTIONS

The  Board  of  Directors  of Pathfinder Bancorp, M.H.C., determines whether the
Holding  Company  will  waive  or receive dividends declared by the Company each
time  the  Company  declares  a dividend, which is expected to be on a quarterly
basis. The Holding Company may elect to receive dividends and utilize such funds
to  pay  expenses  or  for  other  allowable  purposes.  The  Office  of  Thrift
Supervision ("OTS") has indicated that (i) the Holding Company shall provide the
OTS  annually  with written notice of its intent to waive its dividends prior to
the  proposed  date  of  the  dividend,  and the OTS shall have the authority to
approve  or  deny  any  dividend  waiver  request;  (ii) if a waiver is granted,
dividends  waived  by  the  Holding  Company will be excluded from the Company's
capital  accounts  for  purposes  of  calculating  dividend payments to minority
shareholders.  During 2007, the Company paid cash dividends totaling $325,000 to
the Holding Company. For the second and fourth quarters ending June 30, 2007 and
December 31, 2007, respectively, the Holding Company waived the right to receive
its  portion  of  the  cash dividends declared on June 26, 2007 and December 20,
2007,  respectively,  which  totaled $325,000.  During 2006, the Holding Company
waived  dividends  totaling  $325,000.

The  Company's ability to pay dividends to its shareholders is largely dependent
on the Bank's ability to pay dividends to the Company.  In addition to state law
requirements and the capital requirements discussed in Note 17 the circumstances
under  which  the  Bank  may  pay  dividends  are  limited  by federal statutes,
regulations  and  policies.  The  amount  of retained earnings legally available
under  these  regulations  approximated  $2,110,000  as  of  December  31, 2007.
Dividends  paid  by  the  Bank  to the Company would be prohibited if the effect
thereof  would  cause  the Bank's capital to be reduced below applicable minimum
capital  requirements.

NOTE  17:  REGULATORY  MATTERS

The  Bank  is subject to various regulatory capital requirements administered by
the  federal  banking agencies. Failure to meet minimum capital requirements can
initiate  certain  mandatory  and  possibly  additional discretionary actions by
regulators  that,  if  undertaken,  could  have  a direct material effect on the
Company's  financial  statements.  Under  capital  adequacy  guidelines  and the
regulatory  framework  for prompt corrective action, the Bank must meet specific
capital  guidelines  that  involve  quantitative  measures  of  their  assets,
liabilities,  and certain off-balance sheet items as calculated under regulatory
accounting  practices.  The capital amounts and classifications are also subject
to  qualitative  judgments  by the regulators about components, risk weightings,
and  other  factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain amounts and ratios (set forth in the table below)
of total and Tier 1 capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier 1 capital (as defined) to average assets (as
defined). Management believes, as of December 31, 2007, that the Bank meets all
capital adequacy requirements to which it is subject.

As  of  December  31, 2007, the Bank's most recent notification from the Federal
Deposit  Insurance Corporation categorized the Bank as "well-capitalized", under
the  regulatory  framework  for  prompt corrective action.  To be categorized as
"well-capitalized",  the  Bank must maintain total risk based, Tier 1 risk-based
and  Tier  1  leverage  ratios  as  set  forth in the tables below. There are no
conditions  or  events  since  that  notification  that management believes have
changed  the  Bank's  category.
--------------------------------------------------------------------------------
                                   Page 59
<PAGE>

The  Bank's  actual  capital amounts and ratios as of December 31, 2007 and 2006
are  also  presented  in  the  following  table.

<TABLE>
<CAPTION>                                                                              Minimum
                                                                                      To Be "Well-
                                                                    Minimum           Capitalized"
                                                                   For Capital         Under Prompt
                                                     Actual     Adequacy Purposes  Corrective Provisions
                                                --------------------------------------------------------
(Dollars in thousands)                           Amount  Ratio    Amount   Ratio      Amount   Ratio
-------------------------------------------------------------------------------------------------------
<S>                                           <C>      <C>     <C>      <C>     <C>      <C>
As of December 31, 2007:
  Total Core Capital (to Risk-Weighted Assets)  $25,447   12.2%  $16,648    8.0%      $20,810   10.0%
  Tier 1 Capital (to Risk-Weighted Assets)      $23,744   11.4%  $ 8,324    4.0%      $12,486    6.0%
  Tier 1 Capital (to Average Assets)            $23,744    7.7%  $12,437    4.0%      $15,548    5.0%
=====================================================================================================
As of December 31, 2006:
  Total Core Capital (to Risk-Weighted Assets)  $24,676   12.9%  $15,297    8.0%      $19,121   10.0%
  Tier 1 Capital (to Risk-Weighted Assets)      $23,180   12.1%  $ 7,648    4.0%      $11,472    6.0%
  Tier 1 Capital (to Average Assets)            $23,180    7.7%  $11,987    4.0%      $14,984    5.0%
=====================================================================================================
</TABLE>

The Bank is required to maintain average balances on hand or with the Federal
Reserve Bank.  At December 31, 2007 and 2006, these reserve balances amounted to
$2,130,000 and $1,856,000, respectively.

NOTE 18: FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS  No.  107,  Disclosure  About Fair Value of Financial Instruments, requires
disclosure  of  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.

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
year-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
year-end.

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 approximate fair value.

INVESTMENT  SECURITIES  -  fair  values of securities are based on quoted market
prices, where available.  If quoted market prices are not available, fair values
are  based  on  quoted  market  prices  of  comparable  instruments.

--------------------------------------------------------------------------------
                                   Page 60
<PAGE>

LOANS  AND  MORTGAGE  LOANS  HELD-FOR-SALE - the fair values of portfolio loans,
commercial  and  commercial  real  estate are estimated using an option adjusted
discounted  cash flow model that discounts future cash flows using recent market
interest  rates,  market  volatility  and  credit  spread  assumptions.  All non
accrual  loans  are  assumed  to  be  carried  at  their  fair  value.

FEDERAL  HOME  LOAN  BANK STOCK - the carrying amounts reported approximate fair
value.

MORTGAGE  SERVICING  RIGHTS  -  the  carrying  amount  approximates  fair value.

ACCRUED  INTEREST  RECEIVABLE  AND  PAYABLE  -  the  carrying amounts of accrued
interest  receivable  and  payable  approximate  their  fair  values.

DEPOSIT  LIABILITIES  -  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).  Fair
values  for  fixed-rate certificates of deposit are estimated using a discounted
cash  flow  calculation  that  applies interest rates currently being offered on
certificates of deposits to a schedule of aggregated expected monthly maturities
on  time  deposits.

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 value 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.

OFF-BALANCE  SHEET INSTRUMENTS - Fair values for the Company's off-balance sheet
instruments  are  based  on  fees  currently  charged  to  enter  into  similar
agreements,  taking  into  account the remaining terms of the agreements and the
counterparties'  credit  standing.

The  carrying  amounts and fair values of the Company's financial instruments as
of  December  31  are  presented  in  the  following  table:

<TABLE>
<CAPTION>
                                          2007                           2006
                                 -----------------------------------------------------
                                  CARRYING    ESTIMATED          CARRYING    ESTIMATED
(Dollars in thousands)            AMOUNTS   FAIR VALUES          AMOUNTS   FAIR VALUES
--------------------------------------------------------------------------------------
<S>                              <C>        <C>           <C>   <C>        <C>
FINANCIAL ASSETS:
Cash and cash equivalents        $  10,213   $  10,213        $  13,723     $  13,723
Investment securities               65,010      65,010           62,640        62,640
Net loans                          221,046     224,397          201,713       200,555
Federal Home Loan Bank Stock         2,128       2,128            1,579         1,579
Accrued interest receivable          1,673       1,673            1,694         1,694
Mortgage servicing rights               43          43               65            65
-------------------------------------------------------------------------------------
FINANCIAL LIABILITIES:
Deposits                         $ 251,085   $ 251,655        $ 245,585     $ 246,236
Borrowed funds                      38,410      38,192           26,360        26,173
Junior subordinated debentures       5,155       5,155            5,155         5,155
Accrued interest payable               250         250              161           161
-------------------------------------------------------------------------------------
OFF-BALANCE SHEET INSTRUMENTS:
Standby letters of credit        $       -   $       -        $       -     $       -
Commitments to extend credit             -           -                -             -
-------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                                   Page 61
<PAGE>

NOTE  19:  PARENT  COMPANY  -  FINANCIAL  INFORMATION

The  following  represents  the  condensed  financial  information of Pathfinder
Bancorp,  Inc.  as  of  and  for  the  years  ended  December  31:

<TABLE>
<CAPTION>
STATEMENTS OF CONDITION                                           2007      2006
--------------------------------------------------------------------------------
<S>                                                          <C>       <C>
(In thousands)
ASSETS
  Cash                                                         $   178   $   100
  Investments                                                       20        24
  Investment in bank subsidiary                                 26,587    25,529
  Investment in non-bank subsidiary                                155       155
  Other assets                                                      16       317
---------------------------------------------------------------------------------
     Total assets                                              $26,956   $26,125
=================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
  Accrued liabilities                                               97       120
  Junior subordinated debentures                                 5,155     5,155
  Shareholders' equity                                          21,704    20,850
---------------------------------------------------------------------------------
     Total liabilities and shareholders' equity                $26,956   $26,125
=================================================================================


STATEMENTS OF INCOME                                              2007      2006
--------------------------------------------------------------------------------
(In thousands)
INCOME:
  Dividends from bank subsidiary                               $   900   $     -
  Dividends from non-bank subsidiary                                15        13
  Dividends on other investments                                    70         7
  Realized gain on sale of securities                                -         6
---------------------------------------------------------------------------------
     Total income                                                  985        26
---------------------------------------------------------------------------------
EXPENSES:
  Interest                                                         511       450
  Operating                                                         93       126
---------------------------------------------------------------------------------
     Total expenses                                                604       576
---------------------------------------------------------------------------------
Income (loss) before taxes and equity in undistributed net
  income of subsidiary                                             381      (550)
Tax benefit (expense)                                               (2)       94
---------------------------------------------------------------------------------
Income (loss) before equity in undistributed net income
  of subsidiary                                                    379      (456)
Equity in undistributed net income of subsidiary                   743     1,484
---------------------------------------------------------------------------------
Net income                                                     $ 1,122   $ 1,028
=================================================================================

--------------------------------------------------------------------------------
                                   Page 62
<PAGE>

STATEMENTS OF CASH FLOWS                                          2007      2006
-------------------------------------------------------------------------------
(In thousands)
OPERATING ACTIVITIES
  Net Income                                                  $ 1,122   $ 1,028
  Equity in undistributed earnings of subsidiaries               (743)   (1,484)
  Realized gain on sale of investment securities                    -        (6)
  Amortization of deferred financing costs                         15        30
  Other operating activities                                      265       908
--------------------------------------------------------------------------------
     Net cash provided by operating activities                    659       476
--------------------------------------------------------------------------------
INVESTING ACTIVITIES
  Purchase of investments                                           -       (24)
  Proceeds from sale of investments                                 -        24
  Investment in unconsolidated subsidiary trust                  (155)        -
  Liquidation of unconsolidated subsidiary trust                  155         -
 -------------------------------------------------------------------------------
     Net cash provided by investing activities                      -         -
--------------------------------------------------------------------------------
FINANCING ACTIVITIES
  Proceeds from exercise of stock options                         114        23
  Proceeds from issuance of subordinated debt                   5,155         -
  Redemption of subordinated debt                              (5,155)        -
  Tax benefit upon exercise of stock options                        -        42
  Cash dividends                                                 (695)     (686)
--------------------------------------------------------------------------------
     Net cash used in financing activities                       (581)     (621)
--------------------------------------------------------------------------------
     Increase (decrease) in cash and cash equivalents              78      (145)
  Cash and cash equivalents at beginning of year                  100       245
---------------------------------------------------------------------------------
  Cash and cash equivalents  at end of year                    $  178   $   100
=================================================================================
</TABLE>
--------------------------------------------------------------------------------
                                   Page 63
<PAGE>

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A(T): CONTROLS AND PROCEDURES

REPORT OF MANAGEMENT'S RESPONSIBILITY

Management  is  responsible  for  preparation  of  the  consolidated  financial
statements  and  related financial information contained in all sections of this
Annual  Report  on  Form  10-K, including the determination of amounts that must
necessarily  be based on judgments and estimates. It is the belief of management
that  effective internal controls over financial reporting have been designed to
produce  reliable financial statements that have been prepared in conformity, in
all material respects, with generally accepted accounting principles appropriate
in  the  circumstances,  and that the financial information appearing throughout
this  annual  report  is  consistent,  in  all  material  respects,  with  the
consolidated  financial  statements.

The  Audit  Committee  of the Board of Directors, composed solely of independent
directors,  meets  periodically with the Company's management, internal auditors
and  independent  registered public accounting firm, Beard Miller Company LLP to
review  matters  relating  to  the  quality  of  financial  reporting,  internal
accounting  control,  and  the nature, extent, and results of audit efforts. The
internal  auditors  and independent public accounting firm have unlimited access
to  the  Audit  Committee  to  discuss  all  such  matters.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management's  responsibilities related to establishing and maintaining effective
disclosure  controls  and  procedures  include  maintaining  effective  internal
controls  over  financial  reporting  that  are  designed  to  produce  reliable
financial statements in accordance with accounting principles generally accepted
in  the  United States. As disclosed in the Report on Management's Assessment of
Internal  Control  Over  Financial  Reporting  which  is  set  forth in Item 8 -
"Financial  Statements  and  Supplementary  Data" on page 31 and is incorporated
herein  by  reference,  management  assessed  the  Company's  system of internal
control  over  financial  reporting  as  of  December  31,  2007, in relation to
criteria for effective internal control over financial reporting as described in
"Internal Control - Integrated Framework," issued by the Committee of Sponsoring
Organizations  of  the Treadway Commission. Based on this assessment, management
believes  that,  as  of  December  31, 2007, its system of internal control over
financial  reporting  met  those  criteria  and  is  effective.

This  annual  report  does  not  include  an attestation report of the Company's
registered  public  accounting  firm  regarding  internal control over financial
reporting.  Management's  report was not subject to attestation by the Company's
independent registered public accounting firm pursuant to temporary rules of the
Securities  and  Exchange  Commission  that  permit  the Company to provide only
management's  report  in  this  annual  report.


CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company's internal control over financial reporting
that  occurred  during  the  Company's  last fiscal quarter that have materially
affected,  or are reasonably likely to materially affect, the Company's internal
control  over  financial  reporting.

ITEM  9B:  OTHER  INFORMATION

None

--------------------------------------------------------------------------------
                                   Page 64
<PAGE>

PART  III

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE,  COMPLIANCE  WITH  SECTIONS  16  (A)  OF  EXCHANGE  ACT

(a)  Information  concerning  the  directors  of  the Company is incorporated by
     reference hereunder in the Company's Proxy Materials for the Annual Meeting
     of  Stockholders.
(b)  Set forth  below  is  information  concerning the Executive Officers of the
     Company  at  December  31,  2007.


NAME                   AGE    POSITIONS  HELD  WITH  THE  COMPANY
Thomas  W.  Schneider   46    President  and  Chief  Executive  Officer
James  A.  Dowd,  CPA   40    Senior  Vice President, Chief Financial Officer
Edward  A.  Mervine     51    Senior  Vice  President,  General  Counsel
Melissa  A.  Miller     50    Senior  Vice  President,  Chief Operating Officer
Ronald Tascarella       49    Senior  Vice  President,  Chief  Credit  Officer

ITEM  11:  EXECUTIVE  COMPENSATION

Information  with  respect  to management compensation and transactions required
under  this  item  is incorporated by reference hereunder in the Company's Proxy
Materials for the Annual Meeting of Stockholders under the caption "Compensation
Committee".

ITEM  12:  SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED  STOCKHOLDER  MATTERS

The  information  contained  under the sections captioned "Voting Securities and
Principal  Holders Thereof " is incorporated by reference to the Company's Proxy
Materials  for  its  Annual  Meeting  of  Stockholders.

ITEM  13:  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS,  AND  DIRECTOR
INDEPENDENCE

The  information  required  by  this  item  is  set  forth  under  the  caption
"Transactions  with  Certain  Related Persons" in the Definitive Proxy Materials
for  the Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM  14:  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

The  information required by this item is set forth under the caption "Audit and
Related  Fees"  in  the  Definitive  Proxy  Materials  for the Annual Meeting of
Stockholders  and  is  incorporated  herein  by  reference.

--------------------------------------------------------------------------------
                                   Page 65
<PAGE>

PART  IV

ITEM  15:  EXHIBITS  AND  FINANCIAL  STATEMENT  SCHEDULES

(a)(1)Financial  Statements  - The Company's consolidated financial statements,
     for the years ended December 31, 2007 and 2006, together with the Report of
     Independent  Registered  Public  Accounting  Firm are filed as part of this
     Form  10-K  report.  See  "Item  8:  Financial Statements and Supplementary
     Data."  The  supplemental  financial  information  listed  and  appearing
     hereafter  should  be  read  in  conjunction  with the financial statements
     included  in  this  report.

(a)(2) Financial  Statement  Schedules  - All financial statement schedules have
     been  omitted  as  the  required  information  is  inapplicable or has been
     included  in  the  "Item  7:  Management  Discussion  and  Analysis."

(b)  Exhibits

3.1  Certificate  of  Incorporation  of  Pathfinder  Bancorp, Inc. (Incorporated
     herein  by reference to the Company's Current Report on Form 8-K dated June
     25,  2001)

3.2  Bylaws of Pathfinder Bancorp, Inc. (Incorporated herein by reference to the
     Company's  Quarterly Report on Form 10-Q dated August 15, 2005 and November
     28,  2007)

4.   Form of  Stock Certificate of Pathfinder Bancorp, Inc. (Incorporated herein
     by  reference  to  the  Company's Current Report on Form 8-K dated June 25,
     2001)

10.1 Form of  Pathfinder  Bank  1997  Stock  Option Plan (Incorporated herein by
     reference  to  the  Company's  S-8  file  no.  333-53027)

10.2 Form of  Pathfinder  Bank 1997 Recognition and Retention Plan (Incorporated
     by  reference  to  the  Company's  S-8  file  no.  333-53027)

10.3 2003 Executive Deferred Compensation Plan (Incorporated herein by reference
     to  the Company's Quarterly Report on Form 10-Q for the quarter ended March
     31,  2004  file  no.  000-23601)

10.4 2003 Trustee  Deferred  Fee  Plan  (Incorporated herein by reference to the
     Company's  Quarterly  Report  on  Form 10-Q for the quarter ended March 31,
     2004  file  no.  000-23601)

10.5 Employment  Agreement  between  the Bank and Thomas W. Schneider, President
     and  Chief  Executive  Officer  (Incorporated by reference to the Company's
     Quarterly  Report on Form 10-Q for the quarter ended June 30, 2004 file no.
     000-23601)

10.6 Employment  Agreement  between  the  Bank  and  Edward  A.  Mervine,  Vice
     President,  General Counsel and Secretary (Incorporated by reference to the
     Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
     file  no.  000-23601)

10.7 Change  of  Control  Agreement  between  the  Bank  and  Ronald  Tascarella
     (Incorporated  by reference to the Company's Annual Report on Form 10-K for
     the  year  ended  December  31,  2006  file  no.  000-23601)

10.8 Change  of  Control  Agreement  between  the  Bank  and  James  A.  Dowd
     (Incorporated  by reference to the Company's Annual Report on Form 10-K for
     the  year  ended  December  31,  2006  file  no.  000-23601)

10.9 Change  of  Control  Agreement  between  the  Bank  and  Melissa  A. Miller
     (Incorporated  by reference to the Company's Annual Report on Form 10-K for
     the  year  ended  December  31,  2006  file  no.  000-23601)

14.  Code of Ethics (Incorporated by reference to the Company's Annual Report on
     Form  10-K  for  the  year  ended  December  31,  2003)

21.  Subsidiaries  of  the  Company

--------------------------------------------------------------------------------
                                   Page 66
<PAGE>

23.  Consent  of  Bear  Miller  Company  LLP

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

32.1 Section  1350  Certification  of  the  Chief  Executive and Chief Financial
     Officer

--------------------------------------------------------------------------------
                                   Page 67
<PAGE>



SIGNATURES

Pursuant  to  the  requirements  of Section 13 of the Securities Exchange Act of
1934,  the Company has duly caused this report to be signed on its behalf by the
undersigned,  thereunto  duly  authorized.

                                  Pathfinder  Bancorp,  Inc.

Date:  March 31, 2008             By:  /s/  Thomas  W.  Schneider
                                  Thomas  W.  Schneider
                                  President  and  Chief  Executive  Officer

Pursuant to the requirements of the Securities Exchange of 1934, this report has
been  signed  below  by the following persons on behalf of the Registrant and in
the  capacities  and  on  the  dates  indicated.


                                  By: /s/ Janette Resnick,
                                  Janette Resnick, Chairman of the Board
                                  Date:  March 31, 2008

<TABLE>
<CAPTION>

<S>   <C>                                        <C>      <C>
By:    /s/ Thomas W. Schneider                    By:     /s/ Chris R. Burritt
       Thomas W. Schneider, President and Chief          Chris R. Burritt, Director
       Executive Officer
       (Principal Executive Officer)
Date:  March 31, 2008                             Date:  March 31, 2008

By:    /s/ James A. Dowd                          By:    /s/ George P. Joyce
       James A. Dowd, Senior Vice President and          George P. Joyce, Director
       Chief Financial Officer
       (Principal Financial Officer)
Date:  March 31, 2008                             Date:  March 31, 2008

By:    /s/ Shelley Tafel                          By:    /s/ Corte J. Spencer
       Shelley Tafel                                     Corte J. Spencer, Director
       Vice President, Controller                 Date:  March 31, 2008
       (Principal Accounting Officer)
Date:  March 31, 2008                             By:    /s/ Lloyd Stemple
                                                         Lloyd Stemple, Director
By:    /s/ Bruce E. Manwaring                     Date:  March 31, 2008
       Bruce E. Manwaring, Director
Date:  March 31, 2008

By:    /s/ L. William Nelson, Jr.
       L. William Nelson, Jr. Director
Date:  March 31, 2008

By:    /s/ Steven W. Thomas
       Steven W. Thomas, Director
Date:  March 31, 2008
</TABLE>

--------------------------------------------------------------------------------
                                   Page 68
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT 21: SUBSIDIARIES OF THE COMPANY

Company                      Percent Owned
------------------------------------------
<S>                          <C>
Pathfinder Bank (1)                100%
Pathfinder Statutory Trust         100%
</TABLE>

(1)  Pathfinder  Commercial  Bank,  Pathfinder  REIT,  Inc.  and Whispering Oaks
     Development  Corp.  100%  owned  by  Pathfinder  Bank

EXHIBIT  23:  CONSENT  OF  BEARD  MILLER  COMPANY  LLP

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Pathfinder  Bancorp,  Inc.
Oswego,  New  York

We  hereby  consent  to  the  incorporation  by  reference  in  the Registration
Statement  on Form S-8 (No. 333-53027) of Pathfinder Bancorp, Inc. of our report
dated  March  29, 2008, relating to the consolidated financial statements  which
appears  in  this  Form  10-K.



                                      /s/  BEARD  MILLER COMPANY LLP

Beard Miller Company LLP
Harrisburg, Pennsylvania
March  29,  2008

--------------------------------------------------------------------------------
                                   Page 69
<PAGE>


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,  President and Chief Executive Officer, certify that:

1.  I have reviewed this Annual report on Form 10-K 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  officers  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.

March 31, 2008             /s/  Thomas  W.  Schneider
                           Thomas  W.  Schneider
                           President  and  Chief  Executive  Officer
--------------------------------------------------------------------------------
                                   Page 70
<PAGE>

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,  Senior Vice President and Chief Financial Officer, certify
that:

1.  I have reviewed this Annual report on Form 10-K 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  officers  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.

March 31, 2008          /s/  James  A.  Dowd
                        James  A.  Dowd
                        Senior  Vice  President  and  Chief  Financial  Officer

--------------------------------------------------------------------------------
                                   Page 71
<PAGE>

EXHIBIT  32.1  SECTION  1350  CERTIFICATION  OF  THE  CHIEF  EXECUTIVE AND CHIEF
FINANCIAL  OFFICER

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

Thomas  W.  Schneider, President and Chief Executive Officer, and James A. Dowd,
Senior  Vice  President  and Chief Financial Officer of Pathfinder Bancorp, Inc.
(the  "Company"), each certify in his capacity as an officer of the Company that
he has reviewed the Annual Report of the Company on Form 10-K for the year ended
December  31,  2007  and  that  to  the  best  of  his  knowledge:

1.   the report  fully  complies  with  the requirements of Section 13(a) 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.

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.

March 31, 2008          /s/  Thomas  W.  Schneider
                        Thomas  W.  Schneider
                        President  and  Chief  Executive  Officer

March 31, 2008          /s/  James  A.  Dowd
                        James  A.  Dowd
                        Senior  Vice  President  and  Chief  Financial  Officer
--------------------------------------------------------------------------------
                                   Page 72
<PAGE>