UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                          _____________________________

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the quarterly period ending June 30, 2006

                                       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             (I.R.S. Employer
 of Incorporation or Organization)         Identification Number)

                     214 West First Street, Oswego, NY 13126
                     ---------------------------------------
               (Address of Principal Executive Office) (Zip Code)

                                 (315) 343-0057
                                 --------------
               (Registrant's Telephone Number including area code)


     Indicate  by  check  mark  whether the Registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  twelve 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 whether the Registrant is a large accelerated filer,
an  accelerated  filer,  or  a  non-accelerated  filer.  See  definition  of
"accelerated  filer  and  large accelerated filer" in Rule 12b-2 of the Exchange
Act.  (Check  one):

Large Accelerated  Filer [ ] Accelerated  Filer  [] Non-Accelerated  Filer  [X]

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act).    Yes  [  ]       No  [X]

     As  of  August  11,  2006  there were 2,950,419 shares issued and 2,463,132
shares  outstanding  of  the  Registrant's  Common  Stock.


<PAGE>
                            PATHFINDER BANCORP, INC.
                                      INDEX



PART 1     FINANCIAL INFORMATION                                      PAGE NO.

           Item 1. Consolidated Financial Statements
                   Consolidated Statements of Condition                   1
                   Consolidated Statements of Income                      2-3
                   Consolidated Statements of Shareholders' Equity        4
                   Consolidated Statements of Cash Flows                  5
                   Notes to Consolidated Financial Statements             6-10

           Item 2. Management's Discussion and Analysis of Financial
                        Condition and Results of Operations               11-20

           Item 3. Quantitative and Qualitative Disclosure about Market   21-22
                        Risk

           Item 4. Controls and Procedures                                23


PART II    OTHER INFORMATION                                              24-25

           Item 1.  Legal Proceedings
           Item 1A. Risk Factors
           Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
           Item 3.  Defaults Upon Senior Securities
           Item 4.  Submission of Matters to a Vote of Security Holders
           Item 5.  Other Information
           Item 6.     Exhibits


SIGNATURES

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1-CONSOLIDATED FINANCIAL STATEMENTS
------ ---------------------------------

<TABLE>
<CAPTION>

                                          PATHFINDER  BANCORP, INC.
                                     CONSOLIDATED STATEMENTS OF CONDITION
                               JUNE 30, 2006 (UNAUDITED) AND DECEMBER 31, 2005


                                                                                    June 30,    December 31,
ASSETS                                                                                2006          2005
-------------------------------------------------------------------------------------------------------------

(Dollars in thousands except per share data)
<S>                                                                                <C>         <C>
Cash and due from banks                                                            $   7,386   $       7,309
Interest earning deposits                                                                317             586
-------------------------------------------------------------------------------------------------------------
    Total cash and cash equivalents                                                    7,703           7,895
Investment securities, at fair value                                                  72,329          74,239
Federal Home Loan Bank stock, at cost                                                  2,024           1,805
Loans                                                                                192,850         189,568
   Less: Allowance for loan losses                                                     1,664           1,679
-------------------------------------------------------------------------------------------------------------
     Loans receivable, net                                                           191,186         187,889
Premises and equipment, net                                                            7,721           8,020
Accrued interest receivable                                                            1,650           1,678
Foreclosed real estate                                                                   887             743
Goodwill                                                                               3,840           3,840
Intangible asset, net                                                                    293             404
Bank owned life insurance                                                              6,087           5,987
Other assets                                                                           3,233           4,448
-------------------------------------------------------------------------------------------------------------
     Total assets                                                                  $ 296,953   $     296,948
=============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------

Deposits:
  Interest-bearing                                                                 $ 212,574   $     216,136
  Noninterest-bearing                                                                 19,497          20,241
-------------------------------------------------------------------------------------------------------------
     Total deposits                                                                  232,071         236,377
Short-term borrowings                                                                  7,900           2,000
Long-term borrowings                                                                  28,360          29,360
Junior subordinated debentures                                                         5,155           5,155
Other liabilities                                                                      2,888           3,128
-------------------------------------------------------------------------------------------------------------
     Total liabilities                                                               276,374         276,020

Shareholders' equity:
   Preferred stock, authorized shares 1,000,000; no shares issued or outstanding
   Common stock, par value $.01; authorized 10,000,000 shares;
    2,950,419 shares issued;  and 2,463,132  shares outstanding, respectively             29              29
   Additional paid in capital                                                          7,721           7,721
   Retained earnings                                                                  21,166          20,965
   Accumulated other comprehensive loss                                               (1,835)         (1,285)
   Treasury stock, at cost; 487,287 shares                                            (6,502)         (6,502)
-------------------------------------------------------------------------------------------------------------
     Total shareholders' equity                                                       20,579          20,928
-------------------------------------------------------------------------------------------------------------

     Total liabilities and shareholders' equity                                    $ 296,953   $     296,948
=============================================================================================================

</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                       -1
<PAGE>

<TABLE>
<CAPTION>

                                    PATHFINDER  BANCORP, INC.
                                CONSOLIDATED STATEMENTS OF INCOME
                                           (UNAUDITED)

                                                                  For the three   For the three
                                                                   months ended   months ended
                                                                 June 30, 2006    June 30, 2005
------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)

INTEREST INCOME:
<S>                                                             <C>              <C>
 Loans, including fees                                          $        3,137   $        2,929
 Debt securities:
Taxable                                                                    626              659
Tax-exempt                                                                  98              135
 Dividends                                                                  67               56
 Other                                                                       4                8
------------------------------------------------------------------------------------------------
       Total interest income                                             3,932            3,787
------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
  Interest on deposits                                                   1,279            1,031
  Interest on short-term borrowings                                        116               39
  Interest on long-term borrowings                                         458              456
------------------------------------------------------------------------------------------------
       Total interest expense                                            1,853            1,526
------------------------------------------------------------------------------------------------

          Net interest income                                            2,079            2,261
  Provision for loan losses                                                  1               66
------------------------------------------------------------------------------------------------
          Net interest income after provision for loan losses            2,078            2,195
------------------------------------------------------------------------------------------------

OTHER INCOME:
  Service charges on deposit accounts                                      350              319
  Loan servicing fees                                                       58               44
  Earnings on bank owned life insurance                                     51               45
  Net losses on sales of investment securities                              (7)               -
  Net gains on sales of loans and foreclosed real estate                     2                -
  Other charges, commissions and fees                                      152              138
-------------------------------------------------------------------------------------------------
          Total other income                                               606              546
------------------------------------------------------------------------------------------------

OTHER EXPENSES:
  Salaries and employee benefits                                         1,183            1,253
  Building occupancy                                                       306              287
  Data processing expenses                                                 306              319
  Professional and other services                                          116              222
  Amortization of intangible asset                                          55               55
  Other expenses                                                           344              374
------------------------------------------------------------------------------------------------
          Total other expenses                                           2,310            2,510
------------------------------------------------------------------------------------------------

Income before income taxes                                                 374              231
Provision for income taxes                                                  71               (3)
------------------------------------------------------------------------------------------------
NET INCOME                                                      $          303   $          234
================================================================================================

     NET INCOME PER SHARE - BASIC                               $         0.12   $         0.10
================================================================================================
     NET INCOME PER SHARE - DILUTED                             $         0.12   $         0.09
================================================================================================
     DIVIDENDS PER SHARE                                        $       0.1025   $       0.1025
================================================================================================

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.
                                       -2
<PAGE>
<TABLE>
<CAPTION>

                                    PATHFINDER  BANCORP, INC.
                                CONSOLIDATED STATEMENTS OF INCOME
                                           (UNAUDITED)


                                                                  For the six      For the six
                                                                 months ended     months ended
                                                                 June 30, 2006    June 30, 2005
-----------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S>                                                             <C>              <C>
INTEREST INCOME:
 Loans, including fees                                          $        6,194   $        5,818
 Debt securities:
Taxable                                                                  1,267            1,263
Tax-exempt                                                                 196              238
 Dividends                                                                 128              107
 Other                                                                      12               59
-----------------------------------------------------------------------------------------------
       Total interest income                                             7,797            7,485

INTEREST EXPENSE:
  Interest on deposits                                                   2,528            2,061
  Interest on short-term borrowings                                        177               49
  Interest on long-term borrowings                                         896              915
-----------------------------------------------------------------------------------------------
       Total interest expense                                            3,601            3,025
-----------------------------------------------------------------------------------------------
          Net interest income                                            4,196            4,460
  Provision for loan losses                                                 23              138
-----------------------------------------------------------------------------------------------
          Net interest income after provision for loan losses            4,173            4,322
-----------------------------------------------------------------------------------------------


OTHER INCOME:
  Service charges on deposit accounts                                      721              593
  Loan servicing fees                                                      105               85
  Earnings on bank owned life insurance                                    100               89
  Net losses on sales of securities                                         (9)               -
  Net losses on sales of loans/real estate                                  (5)             (12)
  Other charges, commissions & fees                                        287              280
-----------------------------------------------------------------------------------------------
          Total other income                                             1,199            1,035
-----------------------------------------------------------------------------------------------

OTHER EXPENSES:
  Salaries and employee benefits                                         2,458            2,517
  Building occupancy                                                       622              562
  Data processing expenses                                                 630              639
  Professional and other services                                          231              400
  Amortization of intangible asset                                         111              111
  Other expenses                                                           669              701
-----------------------------------------------------------------------------------------------
          Total other expenses                                           4,721            4,930
-----------------------------------------------------------------------------------------------
Income before income taxes                                                 651              427
Provision for income taxes                                                 108               44
-----------------------------------------------------------------------------------------------
NET INCOME                                                      $          543   $          383
===============================================================================================
     NET INCOME PER SHARE - BASIC                               $         0.22   $         0.16
===============================================================================================
     NET INCOME PER SHARE - DILUTED                             $         0.22   $         0.15
===============================================================================================
     DIVIDENDS PER SHARE                                        $        0.205   $        0.205
===============================================================================================
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.
                                       -3
<PAGE>
<TABLE>
<CAPTION>

                                                 PATHFINDER BANCORP, INC.
                                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                     SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005
                                                       (unaudited)


                                                                                                Accumulated
                                                                      Additional                 Other Com-     Unearned
                                                     Common Stock      Paid in     Retained     prehensive       ESOP
                                                  Shares     Amount     Capital     Earnings   Income (Loss)     Shares
                                               ------------  -------  -----------  ----------  --------------  ----------
<S>                                            <C>           <C>      <C>          <C>         <C>             <C>
(Dollars in thousands, except per share data)
BALANCE, DECEMBER 31, 2005                        2,950,419  $    29  $     7,721  $  20,965   $      (1,285)  $       -
Comprehensive income (loss)
Net income                                                                               543
Other comprehensive loss, net of tax
Unrealized net losses on securities                                                                     (550)

Total Comprehensive Loss
Dividends declared ($.2050 per share)                                                   (342)
                                               -------------------------------------------------------------------------
BALANCE, JUNE 30, 2006                            2,950,419  $    29  $     7,721  $  21,166   $      (1,835)  $       -
                                               ============  =======  ===========  ==========  ==============  ==========

                                                Treasury

                                                 Stock      Total
                                               ----------  --------
<S>                                            <C>         <C>
(Dollars in thousands, except per share data)
BALANCE, DECEMBER 31, 2005                     $  (6,502)  $20,928
Comprehensive income (loss)
Net income                                                     543
Other comprehensive loss, net of tax
Unrealized net losses on securities                           (550)
                                                           --------
Total Comprehensive Loss                                        (7)
Dividends declared ($.2050 per share)                         (342)
                                               --------------------
BALANCE, JUNE 30, 2006                         $  (6,502)  $20,579
                                               ==========  ========

                                                                                                Accumulated
                                                                      Additional                 Other Com-     Unearned
                                                     Common Stock      Paid in     Retained     prehensive       ESOP
                                                  Shares     Amount     Capital     Earnings   Income (Loss)     Shares
                                               ------------  -------  -----------  ----------  --------------  ----------

<S>                                            <C>           <C>      <C>          <C>         <C>             <C>


BALANCE, DECEMBER 31, 2004                        2,937,419  $    29  $     7,453  $  21,186   $        (307)  $     (33)
Comprehensive income (loss)
Net income                                                                               383
Other comprehensive loss, net of tax
Unrealized net losses on securities                                                                     (338)

Total Comprehensive Income
ESOP shares earned                                                             40                                     22
Stock option exercised                               13,000        -           86
Dividends declared ($.2050 per share)                                                   (341)
                                                                                   ----------

BALANCE, JUNE 30, 2005                            2,950,419  $    29  $     7,579  $  21,228   $        (645)  $     (11)
                                               ============  =======  ===========  ==========  ==============  ==========


                                               Treasury
                                                 Stock      Total
                                               ----------  --------
<S>                                            <C>         <C>


BALANCE, DECEMBER 31, 2004                     $  (6,502)  $21,826
Comprehensive income (loss)
Net income                                                     383
Other comprehensive loss, net of tax
Unrealized net losses on securities                           (338)
                                                           --------
Total Comprehensive Income                                      45
ESOP shares earned                                              62
Stock option exercised                                          86
Dividends declared ($.2050 per share)                         (341)
                                               --------------- ----

BALANCE, JUNE 30, 2005                         $  (6,502)  $21,678
                                               ==========  ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.
                                       -4
<PAGE>
<TABLE>
<CAPTION>

                               PATHFINDER BANCORP, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)


                                                         For the six     For the six
                                                         months ended    months ends
                                                           June 30,       June 30,
                                                             2006           2005
                                                        --------------  -------------
(Dollars in thousands)
<S>                                                     <C>             <C>
OPERATING ACTIVITIES
Net income                                              $         543   $        383
Adjustments to reconcile net income to net cash
  provided by operating activities:
Provision for loan losses                                          23            138
ESOP shares earned                                                  -             62
Proceeds from sale of loans                                         -          2,443
Realized (gains) losses on sale of:
  Real estate through foreclosure                                   5             19
  Loans                                                             -             (7)
  Available-for-sale investment securities                          9              -
  Premises and equipment                                           (8)             -
Depreciation                                                      377            332
Amortization of intangible asset                                  111            111
Amortization of deferred financing costs                           15             15
Amortization of mortgage servicing rights                          55             65
Earnings on bank owned life insurance                            (100)           (89)
Net amortization of premiums on investment securities              65            182
Decrease (increase) in interest receivable                         28           (178)
Net change in other assets and liabilities                      1,267             24
-------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                       2,390          3,500
-------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of investment securities available-for-sale          (10,943)       (19,615)
Purchase of FHLB stock                                         (2,597)        (1,009)
Proceeds from maturities and principal reductions of
  investment securities available-for-sale                      9,930          6,491
Proceeds from the redemption of FHLB stock                      2,378            614
Proceeds from sale:
  Real estate acquired through foreclosure                         50            169
  Available-for-sale investment securities                      1,941              -
  Premises and equipment                                          145
Net increase in loans                                          (3,523)        (1,622)
Purchase of premises and equipment                               (215)          (777)
-------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                          (2,834)       (15,749)
-------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net decrease in demand deposits, NOW accounts
  savings accounts, money market deposit accounts
  and escrow deposits                                         (10,435)        (6,717)
Net increase in time deposits                                   6,129          7,284
Increase in short-term borrowings                               5,900          9,900
Payments on long-term borrowings                               (1,000)        (2,000)
Proceeds from exercise of stock options                             -             86
Cash dividends paid                                              (342)          (340)
-------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                         252          8,213
-------------------------------------------------------------------------------------
  DECREASE IN CASH AND CASH EQUIVALENTS                          (192)        (4,036)
 Cash and cash equivalents at beginning of period               7,895         14,325
-------------------------------------------------------------------------------------
  CASH AND CASH EQUIVALENTS AT END OF PERIOD            $       7,703   $     10,289
=====================================================================================

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.
                                       -5
<PAGE>

PATHFINDER BANCORP, INC.

Notes to Financial Statements

(1) BASIS OF PRESENTATION

The  accompanying  unaudited  consolidated  financial  statements  of Pathfinder
Bancorp,  Inc.  and  its  wholly  owned  subsidiaries  (the "Company") have been
prepared  in  accordance  with U.S. generally accepted accounting principles for
interim  financial information and the instructions for Form 10-Q and Article 10
of  Regulation S-X.  Accordingly, they do not include all of the information and
footnotes  necessary  for  a  complete  presentation  of  consolidated financial
position,  results  of  operations,  and  cash  flows  in  conformity  with U.S.
generally  accepted  accounting  principles.  Certain  amounts  in  the  2005
consolidated  financial  statements  have  been  reclassified  to conform to the
current  period  presentation.  These  reclassifications  had  no  effect on net
income  as  previously reported.  In the opinion of management, all adjustments,
consisting  of  normal  recurring  accruals,  considered  necessary  for  a fair
presentation  have  been  included.


The  following  material under the heading "Management's Discussion and Analysis
of  Financial  Condition  and  Results  of  Operations"  was  written  with  the
presumption  that  the  users  of the interim financial statements have read, or
have  access  to,  the  Company's  latest audited financial statements and notes
thereto,  together  with  Management's  Discussion  and  Analysis  of  Financial
Condition  and  Results  of Operations as of December 31, 2005 and for the three
year period then ended.  Therefore, only material changes in financial condition
and  results  of  operations  are  discussed  in  the  remainder  of  Part  1.

Operating  results  for  the  three  and  six months ended June 30, 2006 are not
necessarily  indicative  of the results that may be expected for the year ending
December  31,  2006.


(2)  EARNINGS  PER  SHARE

Basic earnings per share have been computed by dividing net income by the
weighted average number of common shares outstanding throughout the three months
and six months ended June 30, 2006 and 2005, using 2,463,132 and 2,452,357
weighted average common shares outstanding for the three months ended, and
2,463,132 and 2,449,889 for the six months ended, respectively.  Diluted
earnings per share for the three months and six months ended June 30, 2006 and
2005 have been computed using 2,480,947 and 2,487,229 for the three months ended
and 2,481,360 and 2,486,999 for the six months ended, respectively.  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.

                                       -6
<PAGE>

(3)  PENSION  BENEFITS

The  composition  of net periodic benefit plan cost for the three months and six
months  ended  June  30,  2006  and  2005  is  as  follows:

<TABLE>
<CAPTION>
                                  FOR THE THREE MONTHS        FOR THE SIX MONTHS
                                      ENDED JUNE 30,             ENDED JUNE 30,
----------------------------------------------------------------------------------
                                   2006          2005         2006         2005
                                 ---------  --------------  ---------  ------------
<S>                              <C>        <C>             <C>        <C>
(In thousands)
Service cost                     $     48   $          38   $     96   $        76
Interest cost                          63              57        126           114
Expected return on plan assets        (92)            (71)      (184)         (142)
Amortization of net losses             28              24         56            48
----------------------------------------------------------------------------------
Net periodic benefit cost        $     47   $          48   $     94   $        96
==================================================================================
</TABLE>

The  Company previously disclosed in its financial statements for the year ended
December  31,  2005, that it expected to contribute $192,000 to its pension plan
in 2006.  As of June 30, 2006, $90,000 had been contributed to the pension plan.


(4)  DIVIDEND  RESTRICTIONS

The  Company maintains a restricted capital account with a $1.7 million balance,
representing  Pathfinder  Bancorp, MHC's  portion of dividends waived as of June
30,  2006.


(5)  COMPREHENSIVE  LOSS

The components of other comprehensive loss and related tax effects for the three
and  six  month  periods  ended  June  30,  2006  and  2005  are  as  follows:

<TABLE>
<CAPTION>

                                            FOR THE THREE MONTHS       FOR THE SIX MONTHS
                                               ENDED JUNE 30,             ENDED JUNE 30,
                                             2006          2005         2006         2005
                                           ---------  --------------  ---------  ------------
<S>                                        <C>        <C>             <C>        <C>

(In thousands)
Gross change in unrealized gains (losses)
  on securities available for sale         $   (829)  $         807   $   (917)  $      (565)
Reclassification adjustment for (gains)
  losses included in net income                   7               -          9             -
---------------------------------------------------------------------------------------------
                                               (822)            807       (908)         (565)
Tax effect                                      329            (322)       358           227
---------------------------------------------------------------------------------------------
Net of tax amount                          $   (493)  $         485   $   (550)  $      (338)
=============================================================================================
</TABLE>

                                       -7
<PAGE>

(6)  GUARANTEES

The  Company  does  not  issue  any  guarantees  that  would  require  liability
recognition  or  disclosure,  other than its standby letters of credit.  Standby
letters  of  credit written are conditional commitments issued by the Company to
guarantee  the  performance  of  a  customer  to  a third party.  Generally, all
letters  of  credit,  when  issued  have  expiration dates within one year.  The
credit  risk  involved  in  issuing letters of credit is essentially the same as
those that are involved in extending loan facilities to customers.  The Company,
generally,  holds  collateral  and/or  personal  guarantees  supporting  these
commitments.  The  Company  had $123,000 of standby letters of credit as of June
30,  2006.  Management believes that the proceeds obtained through a liquidation
of collateral and the enforcement of guarantees would be sufficient to cover the
potential amount of future payments required under the corresponding guarantees.
The  current  amount  of  the liability as of June 30, 2006 for guarantees under
standby  letters  of  credit  issued  is  not  material.

(7)  STOCK  BASED  COMPENSATION

Prior  to  2006,  the  Company  accounted for stock-based compensation issued to
directors  and  employees  using  the  intrinsic value method in accordance with
Accounting  Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to
Employees"  (APB  25).  This  method  required  that  compensation  expense  be
recognized  to  the extent that the fair value of the stock exceeds the exercise
price  of  the  stock  award  at  the  grant date. The Company generally did not
recognize  compensation expense related to stock option awards because the stock
options  generally  had  fixed  terms  and exercise prices that were equal to or
greater  than  the  fair  value of the Company's common stock at the grant date.

Effective  January  1,  2006, the Company adopted Financial Accounting Standards
Board  (FASB)  Statement  No. 123(R), Share-Based Payment, ("SFAS 123(R)"). SFAS
123(R)  requires  compensation costs related to share-based payment transactions
to  be  recognized  in  the income statement (with limited exceptions) using the
modified  prospective  method  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.  As of the
date  of  adoption  of SFAS 123(R), the Company's options were fully granted and
vested,  there was no impact to the Company's consolidated financial position or
results  of  operations.

In  conjunction  with SFAS 123 (R), the Company also adopted FASB Staff Position
("FSP") SFAS 123(R)-2, "Practical Accommodation to the Application of Grant Date
as  Defined  in  SFAS  123(R)"  effective January 1, 2006. FSP 123(R)-2 provides
guidance  on  the  application  of  grant  date  as  defined  in SFAS 123(R). In
accordance  with  this standard a grant date of an award exists if (a) the award
is  a  unilateral  grant,  and (b) the key terms and conditions of the award are
expected to be communicated to an individual recipient within a relatively short
time  period  from  the  date of approval. The adoption of this standard did not
impact  our consolidated financial position, results of operations or cash flows
for  the  three  or  six-month  period  ended  June  30,  2006.

In  November  2005, the FASB issued final FSP No. 123(R)-3, "Transition Election
Related  to  Accounting  for the Tax Effects of Share-Based Payment Awards." The
FSP  provides  an  alternative  method  of  calculating excess tax benefits (the
Additional  Paid-in  Capital "APIC" pool) from the method defined in SFAS 123(R)
for  share-based payments. A one-time election to adopt the transition method in
this  FSP  is  available to those entities adopting SFAS 123(R) using either the
modified  retrospective  or modified prospective method. Up to one year from the
initial adoption of SFAS 123(R) or effective date of the FSP is provided to make
this  one-time  election.  However,  until an entity makes its election, it must
follow  the  guidance  in SFAS 123(R). We are currently evaluating the potential
impact  of  calculating  the APIC pool with this alternative method and have not
yet  determined  which  method  we  will  adopt,  or  the expected impact on our
financial  position  or  results  of  operations.

                                       -8
<PAGE>

In  February 2006, the FASB issued FSP No. 123(R)-4, "Classifications of Options
and  Similar  Instruments  Issued  as  Employee Compensation That Allow for Cash
Settlement  upon the Occurrence of a Contingent Event." The position amends SFAS
123(R)  to incorporate that a cash settlement feature that can be exercised only
upon the occurrence of a contingent event that is outside the employee's control
does  not  meet certain conditions in SFAS 123(R) until it becomes probable that
the  event  will occur. The guidance in this FSP was required to be applied upon
initial  adoption  of  SFAS  123(R). The Company does not have any option grants
that  allow  for  cash  settlement.

(8)  NEW  ACCOUNTING  PRONOUNCEMENTS

In  January  2006, the Company adopted Financial Accounting Standard Board Staff
Position  SFAS  No.  115-1  and  FAS 124-1, "The Meaning of Other-Than-Temporary
Impairment  and  Its Application to Certain Investments." The FSP addresses when
an  investment  is  considered  impaired,  whether  the  impairment  is
other-than-temporary  and  the  measurement  of an impairment loss. The FSP also
includes  accounting  considerations  subsequent  to  the  recognition  of  an
other-than-temporary  impairment  and  requires  certain  disclosures  about
unrealized losses that have not been recognized as other-than-temporary. The FSP
did  not  have  a  significant  impact  on  the Company's consolidated financial
position  or  results  of  operations.

In January 2006, the Company adopted FASB Interpretation No. 47, "Accounting for
Conditional  Asset  Retirement Obligations - an interpretation of SFAS No. 143,"
("FIN  47").  This  Interpretation  provides  clarification  with respect to the
timing  of  liability  recognition  for  legal  obligations  associated with the
retirement  of  tangible  long-lived  assets  when  the  timing and/or method of
settlement  of the obligation are conditional on a future event. The adoption of
FIN  47  did  not  impact  the  Company's  consolidated  financial  statements.

In  January 2006, the Company adopted SFAS No. 154, Accounting Changes and Error
Corrections  ("SFAS  154").  SFAS  No. 154 requires retroactive application of a
voluntary  change  in  accounting principle to prior period financial statements
unless  it  is  impracticable. SFAS 154 also requires that a change in method of
depreciation, amortization, or depletion for long-lived, non-financial assets be
accounted for as a change in accounting estimate that is affected by a change in
accounting  principle. The adoption of the provisions of SFAS 154 did not have a
material  impact  on  the  Company's  consolidated  financial  statements.

In  January 2006, the Company adopted FASB Staff Position FAS 13-1 ("FSP 13-1"),
which  requires  companies  to  expense  rental  costs associated with ground or
building operating leases that are incurred during a construction period, versus
capitalizing  these  rental  costs.  The  adoption  of  FSP  13-1 did not have a
material  impact on the Company's consolidated financial condition or results of
operations.

In  February  2006,  the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial  Instruments  ("SFAS 155"). SFAS 155 amends FASB Statement No. 133 and
FASB  Statement  No. 140, and improves the financial reporting of certain hybrid
financial  instruments  by  requiring more consistent accounting that eliminates
exemptions  and  provides  a  means  to  simplify  the  accounting  for  these
instruments.  Specifically,  SFAS  155  allows  financial  instruments that have
embedded  derivatives  to  be  accounted for as a whole (eliminating the need to
bifurcate  the derivative from its host) if the holder elects to account for the
whole  instrument  on  a  fair value basis. The Company is required to adopt the
provisions  of  SFAS  155, as applicable, beginning in 2007. Management does not
believe  the  adoption  of SFAS 155 will have a material impact on the Company's
consolidated  financial  position  and  results  of  operations.

In  March  2006,  the  FASB  issued  SFAS  No. 156, Accounting for Servicing of
Financial  Assets -An Amendment of FASB Statement No. 140 ("SFAS 156"). SFAS 156
requires  that  all  separately  recognized  servicing  assets  and  servicing
liabilities  be  initially measured at fair value, if practicable. The statement
permits,  but  does  not require, the subsequent measurement of servicing assets
and  servicing  liabilities at fair value. SFAS 156 is effective for the Company

                                       -9
<PAGE>

beginning  in  2007.  The Company does not believe that the adoption of SFAS 156
will  have  a  significant  effect  on  its  consolidated  financial statements.

In  July  2006,  the  Financial  Accounting  Standards  Board (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. The provisions of FIN 48 are effective for
fiscal  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 is evaluating the impact of this new pronouncement on its
consolidated  financial  statements.


                                     -10
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

GENERAL

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.  Pathfinder Commercial Bank, Pathfinder REIT, Inc.
and  Whispering  Oaks  Development,  Inc.  are  the wholly owned subsidiaries of
Pathfinder  Bank.   At  June  30,  2006,  Pathfinder Bancorp, MHC, the Company's
mutual  holding  company  parent, whose activities are not included in the MD&A,
held  64.3%  of  the  Company's  common stock while the public held 35.7% of the
Company's  common  stock.

The  following  discussion reviews the Company's financial condition at June 30,
2006  and  the results of operations for the three and six months ended June 30,
2006  and  June  30,  2005.

This  Quarterly  Report contains certain "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  result  of  any  revisions  that  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  net  income  is  primarily dependent on its net interest income,
which  is  the  difference  between interest income earned on its investments in
mortgage  loans,  investment  securities  and other loans, and its cost of funds
consisting  of  interest paid on deposits and borrowed funds.  The Company's net
income  is  also  affected  by  its provision for loan losses, as well as by the
amount  of  other  income,  including  income  from  fees and service charges on
deposit  accounts,  net  gains  and  losses  on  sales  of securities, loans and
foreclosed  real  estate,  and  other  expenses  such  as  salaries and employee
benefits,  building  occupancy  and  equipment costs, data processing 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.

                                     -11
<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 of America and
follow  practices  within the banking industry.  Application of these principles
requires management to make estimates, assumptions and judgments that affect the
amounts  reported  in  the  consolidated  financial  statements and accompanying
notes.  These  estimates,  assumptions  and  judgments  are based on information
available  as  of  the  date  of  the financial statements; accordingly, as this
information changes, the financial statements could reflect different estimates,
assumptions  and judgments.  Certain 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 included in the 2005 Annual
Report  on Form 10-K ("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 consolidated 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 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 June 30, 2006, 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.

                                     -12
<PAGE>

EXECUTIVE  SUMMARY

Net  income was $303,000, or $0.12 per diluted share, for the three months ended
June  30, 2006 as compared to $234,000, or $0.09 per diluted share, for the same
period  in  2005.  For  the six months ended June 30, 2006, the Company reported
net  income  of $543,000, or $0.22 per diluted share as compared to $383,000, or
$0.15 per diluted share, for the same period in 2005.  The Company continued its
efforts  toward  transforming  its  traditional thrift balance sheet with mostly
residential  loans  as  interest  earning assets toward that of a community bank
with  a  more  diverse mix of residential, consumer and commercial loans.  On an
average  balance  basis, commercial loans comprise 25.9% of the total gross loan
portfolio  at  June  30, 2006, as compared to 25.0% of the portfolio at December
31,  2005.  Asset  quality  continues to improve during 2006 as reflected by the
improvement  in  the  non-performing  loan  ratios.

Short-term borrowings increased $5.9 million during the first half of 2006.  The
short-term  borrowings  were  entered  into  as  a  replacement  for  outflow of
municipal deposits from two large rate-sensitive customers toward the end of the
first  quarter.

On  April  23,  2006,  Alliance  Bank N.A. announced it had reached a definitive
agreement  to  merge  with  the  parent  company  of Oswego County National Bank
(OCNB).  OCNB,  formerly,  Oswego  County Savings Bank has been domiciled in the
city  of  Oswego  since  its  founding  in  1870  and has been the primary local
competitor  for  Pathfinder  Bank.  In management's view, the absorption of OCNB
into  Alliance  Bank,  a  $900  million bank headquartered in Syracuse, NY, will
provide  both  challenges  and opportunities for Pathfinder Bank.  The challenge
will  be  the  ability  of a larger competitor to more actively and aggressively
market  within  the  primary  business  area  of Pathfinder Bank.  Opportunities
exist,  as management believes that it's unique competencies and differentiators
are  more  closely  matched  by a locally domiciled bank, than one headquartered
outside  our  primary market area.  Opportunities may exist to garner additional
business  opportunities with the traditional customer base of OCNB which is more
apt  to  conduct  its  business  with  a  local  bank.

RESULTS  OF  OPERATIONS

The  return  on average assets and return on shareholders' equity were 0.40% and
5.85%,  respectively,  for  the  three months ended June 30, 2006, compared with
0.30% and 4.38%, respectively, for the three months ended June 30, 2005.  During
the  second  quarter  of  2006, when compared to the second quarter of 2005, net
interest  income  decreased  $182,000,  offset  by a $200,000 reduction in other
expenses, a decrease in the provision for loan losses of $65,000 and an increase
in  other  income,  exclusive of net gains on sales of securities and loans/real
estate,  by  $65,000,  or  12%.

For  the six months ended June 30, 2006, net interest income decreased $264,000,
or  6%,  when compared to the six months ended June 30, 2005.  This decrease was
offset by a reduction in other expenses of $209,000, or 4%, an increase in other
income,  exclusive of net gains on sales of securities and loans/real estate, of
$166,000,  or  16%,  and  an  83%,  or $115,000, reduction in provision for loan
losses.

NET  INTEREST  INCOME

Net  interest  income  is  the  Company's primary source of operating income for
payment  of  operating expenses and providing for loan losses.  It is the amount
by  which  interest  earned  on  interest-earning deposits, loans and investment
securities,  exceeds  the  interest  paid on deposits and other interest-bearing
liabilities.  Changes  in  net  interest  income  and  net interest margin ratio

                                     -13
<PAGE>

result  from  the  interaction  between  the  volume and composition of interest
earning  assets,  interest-bearing  liabilities,  related  yields and associated
funding  costs.

For  the  three  months  ended  June  30,  2006,  net  interest  income,  on  a
tax-equivalent basis, decreased to $2.1 million from $2.3 million, when compared
to  the  same  quarter of 2005.  The Company's net interest margin ratio for the
second  quarter  of 2006 decreased to 3.11% from 3.30% when compared to the same
quarter  in  2005.  Management expects continued margin compression to adversely
impact  earnings,  as  we perceive the yield curve will continue to be flat over
the near term. The decline in net interest income was attributable to the higher
rates  paid  on  both deposits and borrowings, offset by an increase of 34 basis
points  in  average  interest-earning  asset  yields.  Average  interest-earning
assets  decreased  3%  to  $273.5 million at June 30, 2006 as compared to $281.2
million  at  June  30, 2005. The decrease in average interest-earning assets was
primarily attributable to an $11.1 million decrease in investment securities and
a  $1.1  million decrease in interest-earning deposits, offset by a $4.5 million
increase  in  loans  receivable.  Average interest-bearing liabilities decreased
$8.8  million,  and the cost of funds increased 59 basis points to 2.88% for the
quarter  ended  June  30,  2006,  from  2.29%  for the same period in 2005.  The
decrease  in  the  average  balance  of  interest-bearing  liabilities  resulted
primarily  from a $10.0 million reduction in average  deposits, partially offset
by  a  $1.2  million  increase  in  borrowed  funds.  The  reduction in deposits
principally  occurred  in  the  municipal  money  management accounts due to the
cyclical  nature  of  the  tax  collections  and expenditures of local municipal
entities.  The  sharp  increase  in  cost  of funds can be attributed to the 200
basis  point  increase  in  short-term  interest  rates over the past 12 months,
combined  with  a  $7.8  million  deposit  migration  from lower earning savings
accounts  to  higher  yielding  certificates  of  deposit.

For the six months ended June 30, 2006, net interest income, on a tax-equivalent
basis,  decreased $271,000, to $4.3 million, from $4.6 million at June 30, 2005.
Net  interest  margin  decreased 13 basis points, to 3.12% at June 30, 2006 from
3.25%  at  June 30, 2005. Average interest-earning assets decreased 6% to $274.8
million  at  June 30, 2006 as compared to $280.7 million at June 30, 2005, while
the  yield  on  interest-earning  assets increased 34 basis points to 5.74% from
5.40%  for  the  comparable  periods.   The decrease in average interest-earning
assets  was  primarily  attributable  to  a  $5.2 million decrease in investment
securities  and  a $4.7 million decrease in interest-earning deposits, partially
offset  by  a  $4.0  million  increase  in  loans  receivable.  Average
interest-bearing  liabilities  decreased  $5.9  million  and  the  cost of funds
increased  50 basis points to 2.78% for the six months ended June 30, 2006, from
2.28%  for  the  same  period  in  2005.  The  decrease in the  average  balance
of  interest-bearing  liabilities  resulted  primarily  from  a  $6.4  million
reduction  in  average  deposits,  partially  offset  by  a $487,000 increase in
borrowed  funds.

INTEREST  INCOME

Total interest income, on a tax-equivalent basis, for the quarter ended June 30,
2006  increased  $133,000,  or  4%,  to  $4.0  million from $3.9 million for the
quarter  ended  June  30,  2005.  The  average  balance  of loans increased $4.5
million  to  $192.0 million, with yields increasing 28 basis points to 6.55% for
the second quarter of 2006.  Average commercial real estate loans increased $5.4
million,  and  the  yield  on those loans increased to 7.69% from 7.62% in 2005.
Average  commercial loans increased $2.9 million, and experienced an increase in
the  average  tax-equivalent  yield of 124 basis points, to 8.18% from 6.94%, in
2005.  Average  consumer  loans  increased  $523,000,  or 3%, and experienced an
increase  in  yield of 80 basis points.  The increase in the yield on commercial
and  consumer loans was primarily the result of new commercial loan originations
occurring  at  market  rates  significantly  higher  than  the  weighted average
existing  portfolio  rate  as  well  as  the  adjustable  rate  portions  of the
portfolios  repricing  upward in connection with upward adjustments in the prime
rate.  Increases  in  the  average  balance  of  consumer  and  commercial  loan
portfolios  were  offset by decreases in the average balance of residential real
estate  loan  portfolios  and  municipal  loans.  The  average  balance  of  the
residential real estate portfolio decreased $3.3 million, or 3%, combined with a

                                     -14
<PAGE>

slight  decrease  in yield to 5.77% from 5.80% for the same period in 2005.  The
Company's  municipal  loan  portfolio decreased $965,000, or 26%, when comparing
the second quarter of 2006 to the same period in 2005.  The average yield on the
municipal  loan  portfolio  increased  to  5.56% in 2006 from 3.25% for the same
period  in  2005.

Average  investment  securities  (taxable  and tax-exempt) for the quarter ended
June 30, 2006 decreased by $11.1 million when compared to the same period a year
ago,  with  a  decrease  in  tax-equivalent  interest income from investments of
$68,000,  or  8%,  compared  to  the  second  quarter  of  2005.  The  average
tax-equivalent  yield  of the portfolio increased 19 basis points, to 4.07% from
3.88%.  The  decrease  in average investment securities was primarily due to the
December  2005  sale of agency and municipal securities which had been purchased
as collateral for the additional municipal deposit relationships acquired during
2004  and  2005.  Additional  securities  were  sold during the first and second
quarters  of  2006  as  a  result  of  the  outflow  of  municipal  deposits.

Total  interest income, on a tax-equivalent basis, for the six months ended June
30,  2006  increased $302,000, or 4%, when compared to the six months ended June
30, 2005.  Average loans increased $4.0 million, with yields increasing 27 basis
points  to  6.49%  from  6.22%.  The  average  balance of commercial real estate
increased  $4.4  million,  with  yields  increasing to 7.63% from 7.43%, average
commercial  loans  increased  $2.8 million, with yields increasing to 8.09% from
6.73%  and  average  consumer loans increased $685,000 with yields increasing to
7.87%  from 7.09% at June 30, 2005.  These increases were offset by decreases in
the  average  balance  of  residential  real  estate and municipal loans of $3.3
million  and  $591,000,  respectively.

For  the  six  months  ended  June 30, 2006, tax-equivalent interest income from
investment  securities  decreased $31,000, or 2%, compared to the same period in
2005.   The  average  tax-equivalent  yield  of the portfolio increased 16 basis
points,  to  4.02% from 3.86%, offset by a $5.1  million decrease in the average
balance  of  investment  securities.

INTEREST  EXPENSE

Total  interest  expense  increased $327,000 for the three months ended June 30,
2006,  when  compared  to  the  same  quarter  in 2005.  Deposit expense for the
comparable  periods  increased  $248,000,  or  24%,  as the average rate paid on
higher  yielding money management accounts increased 58 basis points to 2.51% in
2006 from 1.93% in 2005.  The cost of time deposits increased 73 basis points as
existing  time  deposits  matured  and repriced into higher rates and new higher
priced  promotional  products  were  offered, combined with a 9% increase in the
average  balance  of  time  deposit accounts to $99.7 million in 2006 from $91.8
million  in 2005.  The cost of other interest-bearing deposits increased 5 basis
points,  to  0.46%  from 0.41% combined with an 8%, or $6.8 million, decrease in
the average balance of these deposits.  Interest expense on borrowings increased
by  $79,000,  or  16%,  from the prior period, resulting from an increase in the
cost  of  borrowed  funds  to 5.26% from 4.66%, combined with an increase in the
average  balance of borrowed funds of $1.2 million.  The increase in the cost of
borrowings  primarily  resulted from an increase in the cost of the $5.0 million
LIBOR  (London  Interbank  Offered Rate) based junior subordinated debentures to
8.58%  from  6.36%.

For  the six months ended June 30, 2006, interest expense increased $576,000, or
19%, to $3.6 million from $3.0 million for the same period in 2005.  The average
deposit  balance  decreased $6.4 million, offset by a 48 basis point increase in
the  cost  of deposits to 2.32% from 1.84%. The cost of borrowed funds increased
47  basis  points  to  5.16%  from  4.69%, partially offset by a decrease in the
average  balance  of  borrowed  funds  by  $487,000,  or  1%.

PROVISION  FOR  LOAN  LOSSES

Provision  for  loan  losses  for  the  quarter ended June 30, 2006 decreased to
$1,000  from  $66,000  for  the  same  period  in 2005, primarily as a result of
improved  asset  quality  and  stable  loan  balances.  The  Company's  ratio of

                                     -15
<PAGE>

allowance for loan losses to period end loans has decreased to 0.86% at June 30,
2006  from  1.00%  at  June  30,  2005.  Nonperforming loans to period end loans
decreased  to  0.73%  at  June  30,  2006  from  1.08%  at  June  30,  2005.

For  the  six  months  ended  June  30,  2006, the provision for loan losses was
$23,000  as compared to $138,000 for the same period in 2005 primarily resulting
from  a decrease in the level of charge-offs to $49,000 for the six months ended
June  30,  2006 compared to $86,000 in 2005 and continued improvement in overall
asset  quality.

OTHER  INCOME

The  Company's  other  income  is primarily comprised of fees charged 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 other income for the
periods indicated:

<TABLE>
<CAPTION>

                                              Three Months Ended June 30,             Six Months Ended June 30,
                                         2006     2005    $Change   % Change    2006      2005    $Change   % Change
                                        -------  -------  --------  ---------  -------  --------  --------  ---------
(Dollars in thousands)
<S>                                     <C>      <C>      <C>       <C>        <C>      <C>       <C>       <C>
Service charges on deposit accounts     $  350   $   319  $    31        9.7%  $  721   $   593   $   128       21.6%
Loan servicing fees                         58        44       14       31.8%     105        85        20       23.5%
Earnings on bank owned life insurance       51        45        6       13.3%     100        89        11       12.4%
Net gains/(losses) on sale of loans/         2         -        2          -       (5)      (12)        7      -58.3%
  foreclosed real estate
Other operating income                     152       138       14       10.1%     287       280         7        2.5%
---------------------------------------------------------------------------------------------------------------------
Core noninterest income                    613       546       67       12.3%   1,208     1,035       173       16.7%
Net losses on sales of securities           (7)        -       (7)         -       (9)        -        (9)         -
---------------------------------------------------------------------------------------------------------------------
Total other income                      $  606   $   546  $    60       11.0%  $1,199   $ 1,035   $   164       15.8%
=====================================================================================================================

</TABLE>

For  the  three  months  ended  June  30,  2006,  core other income reflected an
increase  of $67,000, or 12%, when compared with the three months ended June 30,
2005.  Income  from service charges on deposit accounts increased because of the
number  of deposit accounts increased primarily attributable to the opening of a
new  branch, combined with an increase in fees associated with deposit accounts.
The  increase  in  loan  servicing  fees  was  primarily  due  to an increase in
commercial loan volume, offset by a reduction in internal mortgage closing legal
fees  as  the Company switched to an outside legal service for all closings. The
increase  in other operating income primarily resulted from fees associated with
Pathfinder  Bank  debit  card  usage  and fees generated by investment services.

For  the six months ended June 30, 2006, core other income increased $173,000 or
17%,  when  compared  with  the six months ended June 30, 2005.  The increase in
core  income  for  the six months ended June 30 2006, was primarily due to a fee
enhancement  program  on  deposit  accounts which began in the second quarter of
2005  and  an  increase  in  loan  servicing  fees  from commercial loan volume.

The  increase  in the net losses on sales of investment securities for the three
and  six  month  period  was  the result of the sale of corporate bonds in 2006.
There  were  no  investment  security  sale  transactions  during  the first two
quarters  of  2005.

                                     -16
<PAGE>

OTHER  EXPENSES

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

<TABLE>
<CAPTION>

                                         Three Months Ended June 30,            Six Months Ended June 30,
                                     2006    2005    $Change   % Change    2006    2005    $Change   % Change
                                    ------  -------  --------  ---------  ------  -------  --------  ---------
(Dollars in thousands)
<S>                                 <C>     <C>      <C>       <C>        <C>     <C>      <C>       <C>
Salaries and employee benefits      $1,183  $ 1,253  $   (70)      -5.6%  $2,458  $ 2,517  $   (59)      -2.3%
Building occupancy                     306      287       19        6.6%     622      562       60       10.7%
Data processing                        306      319      (13)      -4.1%     630      639       (9)      -1.4%
Professional and other services        116      222     (106)     -47.7%     231      400     (169)     -42.3%
Amortization of intangible assets       55       55        -        0.0%     111      111        -        0.0%
Other operating                        344      374      (30)      -8.0%     669      701      (32)      -4.6%
--------------------------------------------------------------------------------------------------------------
Total noninterest expense           $2,310  $ 2,510  $  (200)      -8.0%  $4,721  $ 4,930  $  (209)      -4.2%
==============================================================================================================
</TABLE>

For  the  three months and six months ended June 30, 2006, salaries and employee
benefits  decreased  as  a  result  of  personnel  realignment,  a  reduction in
commissions  paid  and  a  reduction  in  stock  based  compensation expense, as
compared  with  the  three and six months ended June 30, 2005.  These reductions
were  offset by an increase in personnel expenses associated with the opening of
a  new  branch in June 2005.  The Company had 103 full time equivalent employees
at  June  30,  2006  compared  to 113 at June 30, 2005. The increase in building
occupancy  expense  for  the  three  and  six  months  ended  June 30, 2006, was
primarily  the  result  of  the  operation  of  the  new  Central Square branch,
including  maintenance,  property  taxes,  utilities  and  telephone  expenses,
combined  with  the recording of additional depreciation expense on the building
and  equipment.  The  decrease  in data processing charges for the three and six
months  ended  June 30, 2006 was due to a reduction in internet banking expenses
and  ATM  processing  fees  as the number of ATM machines in operation declined,
offset  by increased depreciation expense and maintenance expense resulting from
system  hardware  and  software  acquisitions.  The decrease in professional and
other  services  was  primarily due to consulting expenses associated with a fee
enhancement  program,  a  leadership  training program, strategic planning and a
capital  market analysis which occurred in 2005 with no similar expense in 2006.
The  reduction  in  other operating expenses for the three and six month periods
was primarily due to lower ORE expenses due to the reduction in properties held,
a  lower  FDIC  assessment for the first quarter of 2006, a gain recorded on the
sale of premises and equipment, lower ATM courier expenses (as the amount of ATM
machines  in  operation has decreased) and a reduction in mortgage recording tax
expense  attributable  to  lower  volume  of  residential mortgage originations.
These  decreases  were  partially  offset by increases in New York State Banking
Department  exam  expenses  and  increased  travel  and  training  expenses.

INCOME  TAX  EXPENSE

Income  taxes  increased $74,000 for the quarter ended June 30, 2006 as compared
to  the  same  period  in  2005,  which  was  attributable to an increase in the
Company's  pre-tax  income  and  a decrease in tax-exempt interest income.   The
effective tax rate was 16.6% for the six months ended June 30, 2006. The Company
continues  to  strive  to  reduce its tax rate from the statutory rate primarily
through  the  ownership  of  tax-exempt  investment  securities, bank owned life
insurance and other tax savings strategies.  The enactment of proposed state tax
legislation,  which  would limit the benefit derived from Real Estate Investment
Trusts,  would  result  in  a  higher  effective state tax rate for the Company.

                                     -17
<PAGE>

CHANGES  IN  FINANCIAL  CONDITION

ASSETS

Total  assets remained constant at $296.9 million at June 30, 2006 when compared
to  December 31, 2005. Loans receivable increased $3.3 million, or 2%, offset by
a decrease in investment securities of $1.9 million and a $1.2 million reduction
in other assets.  The increase in loans receivable was primarily the result of a
$5.2  million,  $1.0  million and $500,000 increase in the commercial adjustable
real  estate, commercial loan and adjustable residential real estate portfolios,
respectively.   These  increases were offset by reductions of $1.7 million, $1.3
million  and  $500,000  in commercial fixed real estate loans, residential fixed
real  estate  and  municipal  loan  portfolios,  respectively.  The  decrease in
investment  securities  was  primarily  the result of a $1.0 million increase in
portfolio  unrealized  losses  and  amortization  and  prepayments  within  the
mortgage-backed  security  portfolio.

At  June  30,  2006,  the  securities  balance included a net unrealized loss on
available  for  sale  securities of $3.1 million, compared with a net unrealized
loss  of  $2.1  million  at  December  31, 2005.  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  8%  of the book value of the Company.  The Company has the
intent and ability to hold the individual securities to maturity or market price
recovery.

LIABILITIES

Total  liabilities  increased  slightly  to $276.4 million at June 30, 2006 from
$276.0  million  at December 31, 2005.    The slight increase in liabilities was
due  to  a  $5.9  million  increase  in  short-term borrowings, offset by a $4.3
million  decrease  in  deposits  and  a  $1.0  million  reduction  in  long-term
borrowings.  The  increase  in short-term borrowings was a result of the deposit
outflows  of  municipal  customers that caused the Company to rely on short-term
wholesale borrowings for liquidity needs. The decrease in deposits was primarily
attributable  to  the cyclical declines in the deposit balances of certain large
municipal  customers.

LOAN  AND  ASSET  QUALITY  AND  ALLOWANCE  FOR  LOAN  LOSSES

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

<TABLE>
<CAPTION>



                                                     For the        Period        Ending
(Dollars in thousands)                               June 30,    December 31,    June 30,
                                                       2006          2005          2005
-----------------------------------------------------------------------------------------
<S>                                                 <C>         <C>             <C>
Nonaccrual loans:
Commercial                                          $     376   $         757   $     633
Consumer                                                   78              89         106
Real estate -  Construction                                 0               0           0
               Mortgage                                   964             834       1,290
-----------------------------------------------------------------------------------------
Total nonaccrual loans                                  1,418           1,680       2,029
Loans past due 90 days or more and still accruing           0               0           0
-----------------------------------------------------------------------------------------
Total non-performing loans                              1,418           1,680       2,029
Foreclosed real estate                                    887             743         878
-----------------------------------------------------------------------------------------
Total non-performing assets                             2,305           2,423       2,907
-----------------------------------------------------------------------------------------
Non-performing loans to total loans                      0.73%           0.89%       1.08%
Non-performing assets to total assets                    0.78%           0.82%       0.94%
-----------------------------------------------------------------------------------------

</TABLE>

                                     -18
<PAGE>

Total  nonperforming loans and foreclosed real estate at June 30, 2006 decreased
4.9%  when  compared  to December 31, 2005.  Nonperforming loans continued to be
addressed  primarily  through  increased  collection  efforts  and  foreclosure
proceedings.  Management believes that adequate reserves exist for any potential
losses  that  may  occur  from  the  remediation  process.

The  allowance  for  loan  losses at June 30, 2006 was $1.7 million, or 0.86% of
period  end  loans,  compared  to $1.7 million, or 0.89% of period end loans, at
December  31,  2005.

CAPITAL

Shareholders'  equity  decreased  $349,000,  or 2%, to $20.6 million at June 30,
2006.  The  decrease  in shareholders' equity primarily resulted from a $550,000
increase  in  accumulated other comprehensive loss offset by a $201,000 increase
in  retained  earnings.  The Company added $543,000 to retained earnings through
net  income  and  returned  $342,000  to  its  shareholders  in the form of cash
dividends.  The Company's mutual holding company parent, Pathfinder Bancorp, MHC
waived  the  dividend  for  the  quarter ended June 30, 2006.  (See Footnote 4).

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 June 30, 2006, 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%.

LIQUIDITY

Liquidity  management  involves  the  Company's  ability  to  generate  cash  or
otherwise  obtain  funds  at reasonable rates to support asset growth and reduce
assets  to  meet  deposit  withdrawals, to maintain reserve requirements, and to
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 mortgage backed securities 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, and utilizes
short-term  borrowings  as  a  source  of  liquidity  when  necessary.

The  Company's liquidity has been enhanced by its membership in the Federal Home
Loan  Bank  of  New York, 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.

                                     -19
<PAGE>

The  Asset  Liability  Management  Committees of the Company are responsible for
implementing  the  policies and guidelines for the maintenance of prudent levels
of  liquidity.  As  of  June  30,  2006,  management  reported  to  the Board of
Directors  that  the  Company  is  in  compliance  with  its  liquidity  policy
guidelines.

                                     -20
<PAGE>

ITEM  3  -  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

The  Company  continues  to  aggressively  pursue delinquent loan relationships.
While  this  aggressive  pursuit,  combined  with conservative provisioning, has
improved  the  overall  quality  of  the  loan  portfolio,  it has resulted in a
temporary  increase  in  other  real estate.  The Company's risk of loss arising
from adverse changes in the fair value of financial instruments, or market risk,
is  composed  primarily  of interest rate risk.  The management of interest rate
sensitivity  seeks  to  avoid  fluctuating  net  interest margins and to provide
consistent  net interest income through periods of changing interest rates.  The
primary  objective  of the Company's asset-liability management activities is to
maximize  net  interest  income  while maintaining acceptable levels of interest
rate  risk.  The  Company  has  Asset-Liability  Management Committees which are
responsible  for  establishing policies to limit exposure to interest rate risk,
and  to  ensure  procedures  are  established  to  monitor compliance with those
policies.  Those procedures include reviewing the Company's assets and liability
policies,  setting  prices  and terms on rate-sensitive products, and monitoring
and  measuring the impact of interest rate changes on the Company's earnings and
capital.  The Company's Board of Directors reviews the guidelines established by
these  committees.

From  2001  until June 2004, the Federal Reserve lowered interest rates thirteen
times  by  a  total  of  550  basis points.  These interest rate reductions have
caused  significant  repricing  of Pathfinder Bank's interest-earning assets and
interest-bearing  liabilities.  Efforts  have been made to shorten the repricing
duration  of  its rate sensitive assets by purchasing investment securities with
maturities  within the next 3 to 5 years and promoting portfolio ARM (adjustable
rate  mortgage)  and hybrid ARM products.  In addition, the Company has extended
the  duration of its rate sensitive liabilities by lengthening the maturities of
its existing borrowings and offering certificates of deposit with three and four
year  terms  which  allow  depositors  to  make a one-time election, at any time
during  the  term  of  the  certificate  of  deposit,  to adjust the rate of the
instrument  to  the then prevailing rate for the certificate of deposit with the
same  term.

Since  June  of 2004, the Federal Reserve has raised its key short-term interest
rate 250 basis points. Net interest margin compression has resulted as the yield
curve  flattened  from  sharp  increases  in  short-term  interest  rates  while
longer-term  rates  have remained relatively stable. Management will continue to
seek  to  minimize  any  reduction  in net interest income in a period of rising
short-term  interest  rates to the extent that it can resist raising its cost of
funds during this period.  The Company is continuing to explore transactions and
strategies  to  both  increase its net interest income and minimize its interest
rate  risk.

GAP ANALYSIS.  At June 30, 2006, the total interest-bearing liabilities maturing
or  repricing within one year exceeded total interest-earning assets maturing or
repricing  in  the  same  period  by  $35.5  million,  representing a cumulative
one-year  gap  ratio  of  a  negative  11.94%.

EARNINGS  AT  RISK AND VALUE AT RISK.  Management believes the simulation of net
interest  income  (Earnings  at Risk) and net portfolio value (Value at Risk) in
different  interest  rate  environments  provides  a  more meaningful measure of
interest  rate  risk.  Income simulation analysis captures both the potential of
all  assets  and  liabilities to mature or reprice and the probability that they
will  do  so.  Income  simulation  also  attends  to  the relative interest rate
sensitivities  of  these  items,  and  projects  their behavior over an extended
period  of  time.  Finally,  income  simulation permits management to assess the
probable effects on the balance sheet not only of changes in interest rates, but
also  of  proposed  strategies  for  responding  to  them.  Net  portfolio value
represents  the  fair  value  of  net  assets (determined as the market value of
assets  minus  the  market  value  of  liabilities  using a discounted cash flow
technique).

                                     -21
<PAGE>

The  following table measures the Company's interest rate risk exposure in terms
of the percentage change in its net interest income and net portfolio value as a
result  of hypothetical changes in 100 basis point increments in market interest
rates.  The  table  quantifies  the  changes  in  net  interest  income  and net
portfolio  value  to parallel shifts in the yield curve.  The column "Percentage
Change  in  Net  Interest Income" measures the change to the next twelve month's
projected  net  interest income, due to parallel shifts in the yield curve.  The
column  "Percentage  Change  in  Net  Portfolio  Value"  measures changes in the
current  fair  value  of  assets and liabilities to parallel shifts in the yield
curve.  The  column  "NPV Capital Ratio" measures the ratio of the fair value of
net  assets  to the fair value of total assets at the base case and in 100 basis
point  incremental  interest  rate  shocks.  The  Company  uses these percentage
changes  as  a means to measure interest rate risk exposure and quantifies those
changes  against  guidelines  set  by  the  Board  of  Directors  as part of the
Company's  Interest  Rate  Risk  policy.


<TABLE>
<CAPTION>

                      Percentage      Percentage
Change in    NPV       Change in      Change in
Interest   Capital   Net Interest   Net Portfolio
Rates       Ratio       Income          Value
---------  --------  -------------  --------------
<S>        <C>       <C>            <C>
300           8.34%        -13.07%         -26.25%
200           9.10%         -8.31%         -17.83%
100           9.86%         -4.24%          -8.96%
0             ----           ----            ----
-100         10.88%          1.36%           5.10%
-200         10.65%         -0.22%           4.57%
-300         10.13%         -3.84%           1.03%

</TABLE>

                                     -22
<PAGE>

ITEM  4  -  CONTROLS  AND  PROCEDURES

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

                                     -23
<PAGE>

PART  II  -  OTHER  INFORMATION

ITEM 1 - LEGAL PROCEEDINGS
--------------------------

None

ITEM 1A - RISK FACTORS
----------------------

There have been no significant changes in the risk factors affecting Pathfinder
Bancorp, Inc. that were identified in Item 1A of Part 1 of the Company's Form
10-K for the year ended December 31, 2005.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
--------------------------------------------------------------------

None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
----------------------------------------

None

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

The Company's Annual Meeting of Shareholders was held on April 26, 2006.  The
following are the items voted on and the results of the shareholder voting:

1.     The election of Bruce E. Manwaring, L. William Nelson, George P. Joyce
and Lloyd "Buddy" Stemple to serve as directors of the Company, each for a term
of three years or until his successor has been elected and qualified.

          Name                   For          Withheld

     Bruce E. Manwaring       2,427,820         9,282
     L. William Nelson        2,427,820         9,282
     George P. Joyce          2,421,816        15,286
     Lloyd "Buddy" Stemple    2,420,316        16,786

     Set forth below are the names of the other directors of the Company and
their terms of office.

          Name               Term Expires

     Steven W. Thomas            2007
     Corte J. Spencer            2007
     Janette Resnick             2007
     Chris C. Gagas              2008
     Thomas W. Schneider         2008
     Chris R. Burritt            2008


2.     The ratification of the appointment of Beard Miller Company LLP as
auditors for the Company for the year ending December 31, 2006.

                            For       Against     Abstain

     Number of Votes     2,433,639     3,313        150

                                     -24
<PAGE>


ITEM 5 - OTHER INFORMATION
--------------------------

None

ITEM 6 - EXHIBITS
-----------------

Exhibit No.          Description
-----------          -----------

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

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

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

                                     -25
<PAGE>



SIGNATURES


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


     PATHFINDER BANCORP, INC.
     ------------------------
                  (Registrant)


August 14, 2006          /s/ Thomas W. Schneider
                         -----------------------
Date:                    Thomas W. Schneider
                         President, Chief Executive Officer

August 14, 2006          /s/ James A. Dowd
                         ----------------
Date:                    James A. Dowd
                         Senior Vice President, Chief Financial Officer