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 March 31, 2009





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 Company as Specified in its Charter)





FEDERAL
            16-1540137(State
      or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
      Employer Identification Number)





214 West First Street,
Oswego, NY 13126


(Address
of Principal Executive Office) (Zip Code)





(315)
343-0057


(Issuer's
Telephone Number including area code)








Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  YES T        NO
*





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


YES T        NO
*





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





Large
accelerated filer*   Accelerated
filer*   Non-accelerated
filer*   Smaller
reporting company  T




(Do
not check if a smaller reporting company)






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





As of May
14, 2009, there were 2,972,119 shares issued and 2,484,832 shares outstanding of
the Registrant’s Common Stock.





Table of Contents










PATHFINDERBANCORP, INC.


INDEX











PARTI - FINANCIAL INFORMATION
            
            PAGE
      NO.Item
      1.
            Consolidated Financial Statements
      (Unaudited)Consolidated
      Statements of Condition
            
            3Consolidated
      Statements of Income
            
            4Consolidated
      Statements of Changes in Shareholders' Equity
            
            5Consolidated
      Statements of Cash Flows
            
            6Notes to Consolidated Financial
    Statements
            
            7Item
      2.
            Management's Discussion and Analysis of Financial
      Condition
            
            12and
      Results of OperationsItem
      3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            
            19Item
      4T.
            Controls and Procedures
            
            19PART II - OTHER INFORMATION
            
            20Item
      1.
            Legal
      proceedingsItem
      1A.
            Risk
      FactorsItem
      2.
            Unregistered
      sales of equity securities and use of proceedsItem
      3.
            Defaults
      upon senior securitiesItem
      4.
            Submission
      of matters to a vote of security holdersItem
      5.
            Other
      informationItem
      6.
            ExhibitsSIGNATURES
            
            21EXHIBITS
            
            22





Table of Contents


PART I FINANCIAL INFORMATION


Item
1 – Consolidated Financial Statements





PathfinderBancorp, Inc.


Consolidated
Statements of Condition


(Unaudited)


March
      31,
                        
                        
                        December
      31,(In thousands, except share
      data)
                        
                        2009
                        
                        
                        2008ASSETS:Cash
      and due from banks
                        
                        
                        $8,726
                        
                        
                        
                        $7,365Interest
      earning deposits
                        
                        
                        8,004
                        
                        
                        
                        313Total
      cash and cash equivalents
                        
                        
                        16,730
                        
                        
                        
                        7,678Investment
      securities, at fair value
                        
                        
                        74,567
                        
                        
                        
                        72,138Federal
      Home Loan Bank stock, at cost
                        
                        
                        1,893
                        
                        
                        
                        2,549Loans
                        
                        
                        247,979
                        
                        
                        
                        249,872Less:
      Allowance for loan losses
                        
                        
                        2,553
                        
                        
                        
                        2,472Loans
      receivable, net
                        
                        
                        245,426
                        
                        
                        
                        247,400Premises
      and equipment, net
                        
                        
                        7,315
                        
                        
                        
                        7,450Accrued
      interest receivable
                        
                        
                        1,561
                        
                        
                        
                        1,678Foreclosed
      real estate
                        
                        
                        380
                        
                        
                        
                        335Goodwill
                        
                        
                        3,840
                        
                        
                        
                        3,840Bank
      owned life insurance
                        
                        
                        6,787
                        
                        
                        
                        6,731Other
      assets
                        
                        
                        3,081
                        
                        
                        
                        2,961Total
      assets
                        
                        
                        $361,580
                        
                        
                        
                        $352,760LIABILITIES AND SHAREHOLDERS'
      EQUITY:Deposits:Interest-bearing
                        
                        
                        $266,531
                        
                        
                        
                        $243,288Noninterest-bearing
                        
                        
                        26,499
                        
                        
                        
                        26,150Total
      deposits
                        
                        
                        293,030
                        
                        
                        
                        269,438Short-term
      borrowings
                        
                        
                        1,000
                        
                        
                        
                        17,575Long-term
      borrowings
                        
                        
                        36,400
                        
                        
                        
                        34,400Junior
      subordinated debentures
                        
                        
                        5,155
                        
                        
                        
                        5,155Other
      liabilities
                        
                        
                        6,185
                        
                        
                        
                        6,697Total
      liabilities
                        
                        
                        341,770
                        
                        
                        
                        333,265Shareholders'
      equity:Preferred
      stock, authorized shares 1,000,000; no shares issued or
      outstandingCommon
      stock, par value $0.01; authorized 10,000,000 shares;2,972,119
      and 2,484,832 shares issued and outstanding respectively
                        
                        
                        30
                        
                        
                        
                        30Additional
      paid in capital
                        
                        
                        7,909
                        
                        
                        
                        7,909Retained
      earnings
                        
                        
                        21,777
                        
                        
                        
                        21,198Accumulated
      other comprehensive loss
                        
                        
                        (3,404
                        )
                        
                        
                        (3,140
                        )Treasury
      stock, at cost; 487,287 shares
                        
                        
                        (6,502
                        )
                        
                        
                        (6,502
                        )Total
      shareholders' equity
                        
                        
                        19,810
                        
                        
                        
                        19,495Total
      liabilities and shareholders' equity
                        
                        
                        $361,580
                        
                        
                        
                        $352,760The
      accompanying notes are an integral part of the consolidated financial
      statements.







Page
- 3-
 Table of Contents


Pathfinder
Bancorp, Inc.


Consolidated
Statements of Income


(Unaudited)


For
      the three
                        
                        
                        For
      the threemonths
      ended
                        
                        
                        months
      ended(In
      thousands, except per share data)
                        
                        March
      31, 2009
                        
                        
                        March
      31, 2008Interest
      and dividend income:Loans,
      including fees
                        
                        
                        $3,627
                        
                        
                        
                        $3,638Debt
      securities:Taxable
                        
                        
                        711
                        
                        
                        
                        680Tax-exempt
                        
                        
                        10
                        
                        
                        
                        23Dividends
                        
                        
                        81
                        
                        
                        
                        115Other
                        
                        
                        1
                        
                        
                        
                        44Total
      interest income
                        
                        
                        4,430
                        
                        
                        
                        4,500Interest
      expense:Interest
      on deposits
                        
                        
                        1,297
                        
                        
                        
                        1,599Interest
      on short-term borrowings
                        
                        
                        14
                        
                        
                        
                        134Interest
      on long-term borrowings
                        
                        
                        406
                        
                        
                        
                        355Total
      interest expense
                        
                        
                        1,717
                        
                        
                        
                        2,088Net
      interest income
                        
                        
                        2,713
                        
                        
                        
                        2,412Provision
      for loan losses
                        
                        
                        135
                        
                        
                        
                        145Net
      interest income after provision for loan losses
                        
                        
                        2,578
                        
                        
                        
                        2,267Noninterest
      income:Service
      charges on deposit accounts
                        
                        
                        351
                        
                        
                        
                        379Increase
      in value of bank owned life insurance
                        
                        
                        56
                        
                        
                        
                        67Loan
      servicing fees
                        
                        
                        56
                        
                        
                        
                        90Net
      gains on sales of investment securities
                        
                        
                        87
                        
                        
                        
                        -Net
      gains on sales of loans and foreclosed real estate
                        
                        
                        80
                        
                        
                        
                        6Debit
      card interchange fees
                        
                        
                        64
                        
                        
                        
                        66Other
      charges, commissions and fees
                        
                        
                        105
                        
                        
                        
                        96Total
      noninterest income
                        
                        
                        799
                        
                        
                        
                        704Noninterest
      expense:Salaries
      and employee benefits
                        
                        
                        1,372
                        
                        
                        
                        1,337Building
      occupancy
                        
                        
                        323
                        
                        
                        
                        346Data
      processing expenses
                        
                        
                        339
                        
                        
                        
                        309Professional
      and other services
                        
                        
                        172
                        
                        
                        
                        219Other
      expenses
                        
                        
                        367
                        
                        
                        
                        314Total
      noninterest expenses
                        
                        
                        2,573
                        
                        
                        
                        2,525Income
      before income taxes
                        
                        
                        804
                        
                        
                        
                        446Provision
      for income taxes
                        
                        
                        225
                        
                        
                        
                        114Net
      income
                        
                        
                        $579
                        
                        
                        
                        $332Net
      income per share - basic
                        
                        
                        $0.23
                        
                        
                        
                        $0.13Net
      income per share - diluted
                        
                        
                        $0.23
                        
                        
                        
                        $0.13Dividends
      per share
                        
                        
                        $0.0000
                        
                        
                        
                        $0.1025





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





Page
- 4-
 Table of Contents













Pathfinder
      Bancorp, Inc.Consolidated
      Statements of Changes in Shareholders' EquityThree
      Months Ended March 31, 2009 and March 31, 2008(Unaudited)





AccumulatedAdditional
                            
                            
                            
                            
                            
                            Other
      Com-Common
      Stock Issued
                            
                            
                            Paid
      in
                            
                            
                            Retained
                            
                            
                            prehensive
                            
                            
                            Treasury(In
      thousands, except share data)
                            
                            Shares
                            
                            
                            Amount
                            
                            
                            Capital
                            
                            
                            Earnings
                            
                            
                            Loss
                            
                            
                            Stock
                            
                            
                            TotalBalance,
      January 1, 2009
                            
                            
                            2,972,119
                            
                            
                            
                            $30
                            
                            
                            
                            $7,909
                            
                            
                            
                            $21,198
                            
                            
                            
                            $(3,140
                            )
                            
                            
                            $(6,502
                            )
                            
                            
                            $19,495Comprehensive
      income:Net
      income
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            579
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            579Other
      comprehensive loss, net of tax:Unrealized
      holding losses on securitiesavailable
      for sale (net of $1 tax benefit)
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (306
                            )
                            
                            
                            
                            
                            
                            
                            (306
                            )Retirement
      plan net losses and transitionobligation
      recognized in plan expenses(net
      of $28 tax expense)
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            42
                            
                            
                            
                            
                            
                            
                            
                            42Total
      Comprehensive income
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            315Balance,
      March 31, 2009
                            
                            
                            2,972,119
                            
                            
                            
                            $30
                            
                            
                            
                            $7,909
                            
                            
                            
                            $21,777
                            
                            
                            
                            $(3,404
                            )
                            
                            
                            $(6,502
                            )
                            
                            
                            $19,810Balance,
      January 1, 2008
                            
                            
                            2,971,019
                            
                            
                            
                            $30
                            
                            
                            
                            $7,900
                            
                            
                            
                            $21,734
                            
                            
                            
                            $(1,458
                            )
                            
                            
                            $(6,502
                            )
                            
                            
                            $21,704Cumulative
      effect of a change in accountingprinciple
      upon the change in definedemployee
      benefit plans' measurement dateunder
      SFAS 158 (net of $8 tax expense)
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (48
                            )
                            
                            
                            13
                            
                            
                            
                            
                            
                            
                            
                            (35
                            )Comprehensive
      income:Net
      income
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            332
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            332Other
      comprehensive income, net of tax:Unrealized
      holding gains on securitiesavailable
      for sale (net of $150 tax expense)
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            226
                            
                            
                            
                            
                            
                            
                            
                            226Total
      Comprehensive income
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            558Dividends
      declared ($0.1025 per share)
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (255
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (255
                            )Balance,
      March 31, 2008
                            
                            
                            2,971,019
                            
                            
                            
                            $30
                            
                            
                            
                            $7,900
                            
                            
                            
                            $21,763
                            
                            
                            
                            $(1,219
                            )
                            
                            
                            $(6,502
                            )
                            
                            
                            $21,972





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











Page
- 5-
 Table of Contents

















Pathfinder
Bancorp, Inc.


Consolidated
Statements of Cash Flows


(Unaudited)


For the three
                          
                          
                          For the threemonths ended
                          
                          
                          months ended(In
      thousands)
                          
                          March 31, 2009
                          
                          
                          March 31, 2008OPERATING
      ACTIVITIESNet
      income
                          
                          
                          $579
                          
                          
                          
                          $332Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Provision
      for loan losses
                          
                          
                          135
                          
                          
                          
                          145Proceeds
      from sales of loans
                          
                          
                          5,590
                          
                          
                          
                          -Originations
      of loans held-for-sale
                          
                          
                          (5,510
                          )
                          
                          
                          -Realized
      gains on sales of:Foreclosed
      real estate
                          
                          
                          -
                          
                          
                          
                          (6
                          )Loans
                          
                          
                          (80
                          )
                          
                          
                          -Available-for-sale
      investment securities
                          
                          
                          (87
                          )
                          
                          
                          -Depreciation
                          
                          
                          163
                          
                          
                          
                          180Amortization
      of mortgage servicing rights
                          
                          
                          6
                          
                          
                          
                          8Earnings
      on bank owned life insurance
                          
                          
                          (56
                          )
                          
                          
                          (67
                          )Net
      (accretion) amortization of premiums and discounts on investment
      securities
                          
                          
                          (214
                          )
                          
                          
                          21Decrease
      in accrued interest receivable
                          
                          
                          117
                          
                          
                          
                          42Net
      change in other assets and liabilities
                          
                          
                          (340
                          )
                          
                          
                          (698
                          )Net
      cash provided by (used in) operating activities
                          
                          
                          303
                          
                          
                          
                          (43
                          )INVESTING
      ACTIVITIESPurchase
      of investment securities available-for-sale
                          
                          
                          (12,627
                          )
                          
                          
                          (18,489
                          )Net
      proceeds from the redemption of Federal Home Loan Bank
    stock
                          
                          
                          656
                          
                          
                          
                          185Proceeds
      from maturities and principal reductions ofinvestment
      securities available-for-sale
                          
                          
                          3,633
                          
                          
                          
                          7,679Proceeds
      from sale of:Available-for-sale
      investment securities
                          
                          
                          6,559
                          
                          
                          
                          -Real
      estate acquired through foreclosure
                          
                          
                          -
                          
                          
                          
                          168Net
      decrease (increase) in loans
                          
                          
                          1,794
                          
                          
                          
                          (750
                          )Purchase
      of premises and equipment
                          
                          
                          (28
                          )
                          
                          
                          (14
                          )Net
      cash used in investing activities
                          
                          
                          (13
                          )
                          
                          
                          (11,221
                          )FINANCING
      ACTIVITIESNet
      increase in demand deposits, NOW accounts, savings
    accounts,money
      market deposit accounts, MMDA accounts and escrow deposits
                          
                          
                          16,425
                          
                          
                          
                          13,919Net
      increase in time deposits
                          
                          
                          7,167
                          
                          
                          
                          6,372Net
      repayments on short-term borrowings
                          
                          
                          (16,575
                          )
                          
                          
                          (10,400
                          )Payments
      on long-term borrowings
                          
                          
                          -
                          
                          
                          
                          (1,700
                          )Proceeds
      from long-term borrowings
                          
                          
                          2,000
                          
                          
                          
                          8,000Cash
      dividends paid
                          
                          
                          (255
                          )
                          
                          
                          (93
                          )Net
      cash provided by financing activities
                          
                          
                          8,762
                          
                          
                          
                          16,098Increase
      in cash and cash equivalents
                          
                          
                          9,052
                          
                          
                          
                          4,834Cash
      and cash equivalents at beginning of period
                          
                          
                          7,678
                          
                          
                          
                          10,213Cash
      and cash equivalents at end of period
                          
                          
                          $16,730
                          
                          
                          
                          $15,047CASH
      PAID DURING THE PERIOD FOR:Interest
                          
                          
                          $1,700
                          
                          
                          
                          $2,040Income
      Taxes
                          
                          
                          521
                          
                          
                          
                          116NON-CASH
      INVESTING ACTIVITYTransfer
      of loans to foreclosed real estate
                          
                          
                          45
                          
                          
                          
                          112The
      accompanying notes are an integral part of the consolidated financial
      statements.









Page
- 6-
 Table of Contents


Pathfinder
Bancorp, Inc.


Note
to Consolidated Financial Statements


(Unaudited)





(1) Basis of Presentation




The
accompanying unaudited consolidated financial statements of Pathfinder Bancorp,
Inc. and its wholly owned subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information, the instructions for Form 10-Q and Article 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
generally accepted accounting principles.  In the opinion of
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included.  Certain amounts
in the 2008 consolidated financial statements have been reclassified to conform
to the current period presentation.  These reclassifications had no
effect on net income as previously reported.




The
following material under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is written with the presumption
that the users of the interim financial statements have read, or have access to,
the Company's latest audited financial statements and notes thereto, together
with Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 2008 and for the two 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 months ended March 31, 2009, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2009.




(2)
Earnings per Share




Basic
earnings per share has been computed by dividing net income by the weighted
average number of common shares outstanding throughout the three months ended
March 31, 2009 and 2008, using 2,484,832 and 2,483,732 weighted average common
shares outstanding, respectively.  Diluted earnings per share for the
three months ended March 31, 2009 and 2008, have been computed using 2,484,832
and 2,488,927 weighted average common shares outstanding,
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.  There was no dilutive effect
during the three months ended March 31, 2009 since the current trading price of
the Company’s common stock is lower that the average strike price of the
outstanding stock options.  The number of dilutive options excluded
from the diluted earnings per share calculation was 8,461 for the three months
ended March 31, 2009.




(3)
Pension and Postretirement Benefits





On
January 1, 2008, the Company recorded a $48,000 charge to retained earnings,
representing the cumulative effect adjustment upon adopting the measurement date
transition rule for the Company’s pension plan and post retirement benefit
plan.  In accordance with SFAS 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, measurement date
provisions, plan assets and obligations are to be measured as of the employer’s
balance sheet date.  The Company previously measured its pension plan
as of October 1 of each year.  As a result of the measurement date
provisions, the Company decreased its pension plan asset with a corresponding
charge to retained earnings, representing the net periodic benefit cost for the
period between the October 1, 2007 measurement date and January 1,
2008.





The
composition of net periodic pension plan costs for the three months ended March
31, is as follows:





(In
      thousands)
                    
                    2009
                    
                    
                    2008Service
      cost
                    
                    
                    $57
                    
                    
                    
                    $53Interest
      cost
                    
                    
                    83
                    
                    
                    
                    79Expected
      return on plan assets
                    
                    
                    (68
                    )
                    
                    
                    (112
                    )Amortization
      of net losses
                    
                    
                    65
                    
                    
                    
                    16Net
      periodic benefit cost
                    
                    
                    $137
                    
                    
                    
                    $36





Page
- 7-
 Table of Contents


The
composition of net periodic postretirement plan costs for the three months ended
March 31, is as follows:





(In
      thousands)
                    
                    2009
                    
                    
                    2008Service
      cost
                    
                    
                    $1
                    
                    
                    
                    $1Interest
      cost
                    
                    
                    5
                    
                    
                    
                    5Amortization
      of transition obligation
                    
                    
                    5
                    
                    
                    
                    5Net
      periodic benefit cost
                    
                    
                    $11
                    
                    
                    
                    $11





The
Company anticipates making a non-recurring contribution to the defined benefit
pension plan of approximately $2,000,000 during the second quarter of
2009.  The large contribution is being made to reduce the overall plan
funding shortfall and mitigate anticipated pension expense increases on a going
forward basis.





(4)
Comprehensive Income





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





The
components of other comprehensive income and related tax effects for the three
months ended March 31 are as follows:





(In
      thousands)
                  
                  2009
                  
                  
                  2008Unrealized
      holding (losses) gains on securities available for sale:Unrealized
      holding (losses) gains arising during the period
                  
                  
                  $(220
                  )
                  
                  
                  $376Reclassification
      adjustment for net gains included in net income
                  
                  
                  (87
                  )
                  
                  
                  -Net
      unrealized (losses) gains on securities available for sale
                  
                  
                  (307
                  )
                  
                  
                  376Defined
      benefit pension and post retirement plans:Reclassification
      adjustment for amortization of benefit plans'net
      loss and transition obligation recognized in netperiodic
      expense
                  
                  
                  70
                  
                  
                  
                  -Net
      change in defined benefit plan
                  
                  
                  70
                  
                  
                  
                  -Other
      comprehensive (loss) income before tax
                  
                  
                  (237
                  )
                  
                  
                  376Tax
      effect
                  
                  
                  (27
                  )
                  
                  
                  (150
                  )Other
      comprehensive (loss) income
                  
                  
                  $(264
                  )
                  
                  
                  $226





The
components of accumulated other comprehensive loss and related tax effects for
the periods indicated are as follows:





March
      31,
                
                
                December
      31,(In
      thousands)
                
                2009
                
                
                2008Unrealized
      losses on securities available for sale(net
      of tax benefit 2009 - $206; 2008 - $205)
                
                
                $(1,359
                )
                
                
                $(1,053
                )Net
      pension losses(net
      of tax benefit 2009 - $1,326; 2008 - $1,352)
                
                
                (1,988
                )
                
                
                (2,027
                )Net
      post-retirement losses and transition obligation(net
      of tax benefit 2009 - $38; 2008 - $40)
                
                
                (57
                )
                
                
                (60
                )$(3,404
                )
                
                
                $(3,140
                )








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(5)
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 $1.6 million
of standby letters of credit as of March 31, 2009.  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 March 31,
2009, for guarantees under standby letters of credit issued is not
material.





(6)
Fair Value Measurements





Effective
January 1, 2008, the Company adopted SFAS No. 157, which provides a framework
for measuring and disclosing fair value under generally accepted accounting
principles.  SFAS No. 157 requires disclosures about the fair value of
assets and liabilities recognized in the balance sheet in periods subsequent to
initial recognition, whether the measurements are made on a recurring basis (for
example, available-for-sale investment securities) or on a nonrecurring basis
(for example, impaired loans).





SFAS 157
specifies a hierarchy of valuation techniques based on whether the inputs to
those valuation techniques are observable or unobservable. Observable inputs
reflect market data obtained from independent sources, while unobservable inputs
reflect our market assumptions. In accordance with SFAS 157, these two types of
inputs have created the following fair value hierarchy:





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





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





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





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





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





Investment
securities:  The fair values of securities available for sale are
obtained from an independent third party and are based on quoted prices on
nationally recognized exchange (Level 1), where available.  If quoted
prices are not available, fair values are measured by utilizing matrix pricing,
which is a mathematical technique used widely in the industry to value debt
securities without relying exclusively on quoted prices for specific securities
but rather by relying on the securities’ relationship to other benchmark quoted
securities (Level 2).  Management made no adjustment to the fair value
quotes that were received from the independent third party pricing
service.





Impaired
loans: Impaired loans are those that are accounted for under SFAS 114, Accounting by Creditors for
Impairment of a Loan, in which the Company has measured impairment
generally based on the fair value of the loan’s collateral.  Fair
value is generally determined based upon independent third party appraisals of
the properties, or discounted cash flows based upon expected
proceeds.  These assets are included as Level 3 fair values, based
upon the lowest level of input that is significant to the fair value
measurements.  The fair value consists of loan balances less their
valuation allowances as determined under SFAS 114.





Foreclosed
real estate:  Properties acquired through foreclosure, or by deed in
lieu of foreclosure, are recorded at their fair value less estimated disposal
costs.  Fair value is generally determined based upon independent
third party appraisals of the properties, or discounted cash flows based upon
expected proceeds.   These assets are included as Level 3 fair
values, based upon the lowest level of input that is significant to the fair
value measurements.








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- 9-
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The
following tables summarize financial assets measured at fair value on a
recurring basis as of March 31, 2009 and December 31, 2008, segregated by the
level of valuation inputs within the hierarchy utilized to measure fair
value:





At
      March 31, 2009Total
      Fair(In
      thousands)
                
                Level
      1
                
                
                Level
      2
                
                
                Level
      3
                
                
                ValueAssets:Investment
      securities available for sale
                
                
                $1,539
                
                
                
                $73,028
                
                
                
                $-
                
                
                
                $74,567At
      December 31, 2008Total
      Fair(In
      thousands)
                
                Level
      1
                
                
                Level
      2
                
                
                Level
      3
                
                
                ValueAssets:Investment
      securities available for sale
                
                
                $1,918
                
                
                
                $70,220
                
                
                
                $-
                
                
                
                $72,138








Certain
financial assets and financial liabilities are measured at fair value on a
nonrecurring basis; that is, the instruments are not measured at fair value on
an ongoing basis but are subject to fair value adjustments in certain
circumstances (for example, when there is evidence of
impairment).  The following tables summarize financial assets measured
at fair value on a nonrecurring basis as of March 31, 2009 and December 31,
2008, segregated by the level of valuation inputs within the hierarchy utilized
to measure fair value:





At
      March 31, 2009Total
      Fair(In
      thousands)
                  
                  Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3
                  
                  
                  ValueAssets:Impaired
      loans
                  
                  
                  $-
                  
                  
                  
                  $-
                  
                  
                  
                  $354
                  
                  
                  
                  $354Foreclosed
      real estate
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  380
                  
                  
                  
                  380At
      December 31, 2008Total
      Fair(In
      thousands)
                  
                  Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3
                  
                  
                  ValueAssets:Impaired
      loans
                  
                  
                  $-
                  
                  
                  
                  $-
                  
                  
                  
                  $295
                  
                  
                  
                  $295Foreclosed
      real estate
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  335
                  
                  
                  
                  335





(7)
New Accounting Pronouncements





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





In
December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets”.  This FSP amends SFAS 132(R),
“Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to
provide guidance on an employer’s disclosures about plan assets of a defined
benefit pension or other postretirement plan.  The disclosures about
plan assets required by this FSP shall be provided for fiscal years ending after
December 15, 2009.  The Company is currently reviewing the effect this
new pronouncement will have on its consolidated financial
statements.





In April
2009, the Financial Accounting Standards Board (FASB) issued FASB Staff
Position (FSP) No. FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly(FSP FAS
157-4).  FASB Statement 157, Fair Value Measurements,
defines fair




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value as
the price that would be received to sell the asset or transfer the liability in
an orderly transaction (that is, not a forced liquidation or distressed sale)
between market participants at the measurement date under current market
conditions. FSP FAS 157-4 provides additional guidance on determining when the
volume and level of activity for the asset or liability has significantly
decreased. The FSP also includes guidance on identifying circumstances when a
transaction may not be considered orderly.  FSP FAS 157-4 provides a
list of factors that a reporting entity should evaluate to determine whether
there has been a significant decrease in the volume and level of activity for
the asset or liability in relation to normal market activity for the asset or
liability. When the reporting entity concludes there has been a significant
decrease in the volume and level of activity for the asset or liability, further
analysis of the information from that market is needed and significant
adjustments to the related prices may be necessary to estimate fair value in
accordance with Statement 157.  This FSP clarifies that when there has
been a significant decrease in the volume and level of activity for the asset or
liability, some transactions may not be orderly. In those situations, the entity
must evaluate the weight of the evidence to determine whether the transaction is
orderly. The FSP provides a list of circumstances that may indicate that a
transaction is not orderly. A transaction price that is not associated with an
orderly transaction is given little, if any, weight when estimating fair
value.  This FSP is effective for interim and annual reporting periods
ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009.  An entity early adopting FSP FAS
157-4 must also early adopt FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments.  The Company is currently
reviewing the effect this new pronouncement will have on its consolidated
financial statements.





In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments(FSP FAS 115-2 and FAS
124-2).   FSP FAS 115-2 and FAS 124-2 clarifies the interaction
of the factors that should be considered when determining whether a debt
security is other-than-temporarily impaired. For debt securities, management
must assess whether (a) it has the intent to sell the security and
(b) it is more likely than not that it will be required to sell the
security prior to its anticipated recovery. These steps are done before
assessing whether the entity will recover the cost basis of the investment.
Previously, this assessment required management to assert it has both the intent
and the ability to hold a security for a period of time sufficient to allow for
an anticipated recovery in fair value to avoid recognizing an
other-than-temporary impairment. This change does not affect the need to
forecast recovery of the value of the security through either cash flows or
market price.  In instances when a determination is made that an
other-than-temporary impairment exists but the investor does not intend to sell
the debt security and it is not more likely than not that it will be required to
sell the debt security prior to its anticipated recovery, FSP FAS 115-2 and FAS
124-2 changes the presentation and amount of the other-than-temporary impairment
recognized in the income statement. The other-than-temporary impairment is
separated into (a) the amount of the total other-than-temporary impairment
related to a decrease in cash flows expected to be collected from the debt
security (the credit loss) and (b) the amount of the total
other-than-temporary impairment related to all other factors. The amount of the
total other-than-temporary impairment related to the credit loss is recognized
in earnings. The amount of the total other-than-temporary impairment related to
all other factors is recognized in other comprehensive income.  This
FSP is effective for interim and annual reporting periods ending after
June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009.  An entity early adopting FSP FAS 115-2 and FAS
124-2 must also early adopt FSP FAS 157-4,Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not
Orderly.  The Company is currently reviewing the effect this
new pronouncement will have on its consolidated financial
statements.





In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments(FSP FAS 107-1 and APB 28-1).  FSP FAS
107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion
No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods.  This FSP is effective for
interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009.  An
entity early adopting FSP FAS 107-1 and APB 28-1 must also early adopt FSP FAS
157-4,Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderlyand FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments.The Company is currently
reviewing the effect this new pronouncement will have on its consolidated
financial statements.




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




General





Throughout
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 II are wholly
owned subsidiaries of Pathfinder Bancorp, Inc., however, Pathfinder Statutory
Trust II is not consolidated for reporting purposes.  Pathfinder
Commercial Bank, Pathfinder REIT, Inc. and Whispering Oaks Development Corp. are
wholly owned subsidiaries of Pathfinder Bank.  At March 31, 2009,
Pathfinder Bancorp, M.H.C, the Company’s mutual holding company parent, whose
activities are not included in the consolidated financial statements or the
MD&A, held 63.7% of the Company’s outstanding common stock and public
shareholders held the remaining 36.3% of the common stock.







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The
following discussion reviews the Company's financial condition at March 31, 2009
and the results of operations for the three months ended March 31, 2009 and
March 31, 2008.





Statement
Regarding Forward-Looking Statements





When used
in this quarterly report the words or phrases “will likely result”, “are
expected to”, “will continue”, “is anticipated”, “estimate”, ”project” or
similar expression are intended to identify “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995.  Such statements are subject to certain risks and uncertainties.
By identifying these forward-looking statements for you in this manner, the
Company is alerting you to the possibility that its actual results and financial
condition may differ, possibly materially, from the anticipated results and
financial condition indicated in these forward-looking statements. 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 various factors 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.  Additionally,
all statements in this document, including forward-looking statements, speak
only as of the date they are made, and the Company undertakes no obligation to
update any statement in light of new information or future 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 and
other loans, investment securities and other assets, and its cost of funds
consisting of interest paid on deposits and borrowings.  The Company's
net income also is affected by its provision for loan losses, as well as by the
amount of noninterest income, including income from fees, service charges and
servicing rights, net gains and losses on sales of securities, loans and
foreclosed real estate, and noninterest expense such as employee compensation
and benefits, occupancy and equipment costs, data processing costs and income
taxes.  Earnings of the Company also are affected significantly by
general economic and competitive conditions, particularly changes in market
interest rates, government policies and actions of regulatory authorities, of
which these events are beyond the control of the Company.  In
particular, the general level of market interest rates tends to be highly
cyclical.





Application
of Critical Accounting Policies





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





The most
significant accounting policies followed by the Company are presented in Note 1
to the consolidated financial statements included in the 2008 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 allowance for
loan losses, deferred income taxes, pension obligations, the evaluation of
investment securities for other than temporary impairment and the estimation of
fair values for accounting and disclosure purposes to be the accounting areas
that require the most subjective and complex judgments, and as such, could be
the most subject to revision as new information becomes available.





The
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 statement of condition.  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.





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Deferred
income tax assets and liabilities are determined using the liability
method.  Under this method, the net deferred tax asset or liability is
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases as well as net operating and capital loss carry
forwards.  Deferred tax assets and liabilities are measured using
enacted tax rates applied to taxable income in the years in which those
temporary differences are expected to be recovered or settled.  The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income tax expense in the period that includes the enactment
date.  To the extent that current available evidence about the future
raises doubt about the likelihood of a deferred tax asset being realized, a
valuation allowance is established.  The judgment about the level of
future taxable income, including that which is considered capital, is inherently
subjective and is reviewed on a continual basis as regulatory and business
factors change.





Pension
and post-retirement benefit plan liabilities and expenses are based upon
actuarial assumptions of future events, including fair value of plan assets,
interest rates, rate of future compensation increases and the length of time the
Company will have to provide those benefits. The assumptions used by management
are discussed in Note 11 to the consolidated financial statements.





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, except
for security impairment losses, which are charged to earnings.  The
Company's ability to fully realize the value of its investments in various
securities, including corporate debt securities, is dependent on the underlying
creditworthiness of the issuing organization.  In evaluating the
security portfolio for other-than-temporary impairment losses, management
considers (1) the length of time and the extent to which the fair value has been
less than cost, (2) the financial condition and near-term prospects of the
issuer, and (3) the intent and ability of the Company to retain its investment
in the issuer for a period of time sufficient to allow for any anticipated
recovery in fair value.  Management continually analyzes the portfolio
to determine if further impairment has occurred that may be deemed as
other-than-temporary.  Further charges are possible depending on
future economic conditions.





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





Fair
values for securities available for sale are obtained from an independent third
party pricing service.  Where available, fair values are based on
quoted prices on a nationally recognized securities exchange.  If
quoted prices are not available, fair values are measured using quoted market
prices for similar benchmark securities.  Management made no
adjustments to the fair value quotes that were provided by the pricing
source.  The fair values of foreclosed real estate and the underlying
collateral value of impaired loans are typically determined based on appraisals
by third parties, less estimated costs to sell. If necessary, appraisals are
updated to reflect changes in market conditions.





Overview





Net
income was $579,000, or $0.23 per basic and diluted share, for the three months
ended March 31, 2009, as compared to $332,000, or $0.13 per basic and diluted
share, for the same period in 2008.  The Company has continued efforts
to expand its lending and deposit relationships within the small business
community.  These efforts have helped the Company transform its
statement of condition from one more concentrated in residential loans and
retail deposits to a more diversified mix of residential, consumer, and
commercial relationships.


On an
average balance basis, total commercial loans comprised 33.4% of the total gross
loan portfolio for the quarter ended March 31, 2009 compared to 31.6% for the
quarter ended March 31, 2008.





The
Company sold approximately $4.5 million in municipal investment portfolio
holdings and $5.5 million of fixed rate residential real estate loans during the
first quarter.  These efforts, combined with other deposit gathering
efforts, were undertaken to improve the Company’s overall liquidity position and
reduce its reliance on wholesale borrowings. Short-term borrowings decreased
$16.6 million, or 94%, when compared to December 31, 2008.  Long-term
borrowings increased $2.0 million, or 6%, when compared to December 31,
2008.





Results
of Operations





The
return on average assets and return on average shareholders' equity were 0.65%
and 11.67%, respectively, for the three months ended March 31, 2009, compared
with 0.40% and 5.94%, respectively, for the three months ended March 31,
2008.  During the first quarter of 2009, when compared to the first
quarter of 2008, net interest income increased $301,000.  The
provision for loan losses decreased $10,000, noninterest income increased
$95,000 and noninterest expenses increased $48,000.








Page
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Net
Interest Income





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





Net
interest income, on a tax-equivalent basis increased to $2.7 million for the
three months ended March 31, 2009, from $2.5 million for the three months ended
March 31, 2008.  The Company's net interest margin for the first
quarter of 2009 increased to 3.37% from 3.21% when compared to the same quarter
in 2008.  Significant reductions in short-term interest rates have
resulted in a positively sloped yield curve.  Reductions in the
Company’s cost of funds, combined with efforts to maintain the current levels of
earning asset yields have resulted in an expansion of the Company’s net interest
margin. The increase in net interest income is attributable to a decrease of 71
basis points in the average cost of interest bearing liabilities, and was offset
by a decrease of 51 basis points in the average yield earned on earning
assets.  Average interest-earning assets increased 9% to $334.3
million at March 31, 2009, as compared to $305.8 million at March 31,
2008.  The increase in average earning assets is primarily
attributable to a $24.7 million increase in loans receivable, and a $3.6 million
increase in interest earning deposits.  Average interest-bearing
liabilities increased  $23.6 million to $306.4 million from $282.9
million at March 31, 2008. The increase in the average balance of
interest-bearing liabilities resulted primarily from a $4.5 million increase in
average borrowings and a $19.0 million increase in average
deposits.





Interest
Income





Total
interest income, on a tax-equivalent basis, for the quarter ended March 31,
2009, decreased $70,000, or 1.6%, to $4.4 million from $4.5 million for the
quarter ended March 31, 2008.





The
average balance of loans increased $24.7 million to $248.2 million, with yields
decreasing 68 basis points to 5.87% for the first quarter of
2009.  Average residential real estate loans increased $7.2 million,
or 6%, and experienced a decrease in the average yield to 5.61% from 5.85% in
the comparable quarter of 2008.   Average commercial real estate
loans increased $9.9 million, while the average yield on those loans decreased
to 6.76% from 7.58% from the year earlier period. Average commercial loans
increased $5.8 million and experienced a decrease in the average yield of 203
basis points, to 5.08% for the quarter ended March 31, 2009, from 7.11%, in the
quarter ended March 31, 2008. The decrease in the average yield on commercial
loans was primarily the result of new commercial loan origination activity
taking place at yields lower than the average yield on the existing commercial
loan portfolio, combined with the downward repricing of the existing adjustable
rate commercial loan portfolio into the current, historically low, interest rate
environment Average consumer loans increased $2.0 million, or 8%, while the
average yield decreased by 145 basis points.





Average
investment securities (taxable and tax-exempt) for the quarter ended March 31,
2009, increased by $225,000, with an increase in tax-equivalent interest income
from investments of $57,000, or 7%, when compared to the first quarter of
2008.  The average tax-equivalent yield of the portfolio increased 30
basis points, to 4.82% from 4.52%.





Interest
Expense





Total
interest expense decreased $371,000 for the three months ended March 31, 2009,
compared to the same quarter in 2008, as the cost of funds decreased 71 basis
points to 2.24% in 2009 from 2.95% in 2008.  Although each category of
deposits, as well as the level of borrowings, increased in 2009 over the first
quarter of 2008, the associated cost of funds decreased sufficiently to lower
the overall interest expense incurred.  Average time deposits
increased $14.5 million, but were offset by a 77 basis point reduction in the
cost of funds.  The average balance of NOW accounts increased to $25.5
million at March 31, 2009 from $22.9 million in 2008, and was offset by a 34
basis point reduction in the cost of funds.  Additionally, the average
balance of money market demand accounts increased to $34.2 million at March 31,
2009 from $33.1 million at March 31, 2008 and was offset by a decrease in the
cost of funds to 0.92% from 2.61%.  Average money management accounts
increased $515,000, but were also offset by a 34 basis point reduction in the
cost of funds.  Interest expense on borrowings decreased by $69,000,
or 14%, from the prior period as a result of a 295 basis point decrease in the
cost of funds on the junior subordinated debenture that resulted from a
reduction in its index rate which is based on 3-month LIBOR combined with the
cost of funds on other borrowings decreasing 81 basis points to 3.74% at March
31, 2009.  The decrease in the cost of funds was partially offset by a
$4.5 million increase in the average balance of total borrowed
funds.





Provision
for Loan Losses





The
provision for loan losses for the quarter ended March 31, 2009 decreased
$10,000, or 6.9%, from the same period in 2008.  , The Company
continues to provide for loan losses to reflect the growing loan portfolio and
to reflect a loan portfolio composition that is more heavily weighted to
commercial term and commercial real estate, which have higher inherent risk
characteristics than a consumer real estate portfolio, as well as a general
weakening in economic conditions.  The Company's ratio of allowance
for loan losses to period-end




Page
- 14-
 Table of Contents


loans
increased to 1.03% at March 31, 2009 as compared to 0.99% at December 31,
2008.  Nonperforming loans to period end loans decreased to 0.89% at
March 31, 2009 from 0.93% at December 31, 2008. The decrease in nonperforming
loans is primarily the result of improvements in the delinquency status of
commercial loan relationships.  Management believes that the existing
reserves provided on these loans are sufficient to cover anticipated
losses.





Noninterest
Income





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





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





Three
      Months Ended March 31,(in
      thousands)
                      
                      2009
                      
                      
                      2008
                      
                      
                      ChangeService
      charges on deposit accounts
                      
                      
                      $351
                      
                      
                      
                      $379
                      
                      
                      
                      $(28
                      )
                      
                      
                      -7.4
                      %Earnings
      on bank owned life insurance
                      
                      
                      56
                      
                      
                      
                      67
                      
                      
                      
                      (11
                      )
                      
                      
                      -16.4
                      %Loan
      servicing fees
                      
                      
                      56
                      
                      
                      
                      90
                      
                      
                      
                      (34
                      )
                      
                      
                      -37.8
                      %Debit
      card interchange fees
                      
                      
                      64
                      
                      
                      
                      66
                      
                      
                      
                      (2
                      )
                      
                      
                      -3.0
                      %Other
      charges, commissions and fees
                      
                      
                      105
                      
                      
                      
                      96
                      
                      
                      
                      9
                      
                      
                      
                      9.4
                      %Noninterest
      income before gains (losses)
                      
                      
                      632
                      
                      
                      
                      698
                      
                      
                      
                      (66
                      )
                      
                      
                      -9.5
                      %Net
      gains on sales of investment securities
                      
                      
                      87
                      
                      
                      
                      -
                      
                      
                      
                      87
                      
                      
                      
                      -100.0
                      %Net
      gains on sales of loans and foreclosed real estate
                      
                      
                      80
                      
                      
                      
                      6
                      
                      
                      
                      74
                      
                      
                      
                      1233.3
                      %Total
      noninterest income
                      
                      
                      $799
                      
                      
                      
                      $704
                      
                      
                      
                      $95
                      
                      
                      
                      13.5
                      %





For the
three months ended March 31, 2009, noninterest income before gains (losses)
decreased $66,000, or 9.5%, when compared with the three months ended March 31,
2008. The decrease in service charges on deposit accounts was primarily
attributable to the decrease in usage of our extended overdraft
product.  This is attributed to a reduction in consumer spending as a
result of the current stressed economic conditions. The decrease in loan
servicing fees was primarily attributable to non-recurring fees that were
collected for commercial loans in 2008.  The decrease in noninterest
income before gains (losses) was offset by an increase in net gains on sales of
investment securities and loans.  The increase in net gains on sales
of investment securities and net gains on sales of loans and foreclosed real
estate is due to the gains recognized on the sale of $4.5 million in municipal
securities and $5.5 million in 30-year fixed rate residential
mortgages.





Noninterest
Expense





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





Three
      Months Ended March 31,(In
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  ChangeSalaries
      and employee benefits
                  
                  
                  $1,372
                  
                  
                  
                  $1,337
                  
                  
                  
                  $35
                  
                  
                  
                  2.6
                  %Building
      occupancy
                  
                  
                  323
                  
                  
                  
                  346
                  
                  
                  
                  (23
                  )
                  
                  
                  -6.6
                  %Data
      processing
                  
                  
                  339
                  
                  
                  
                  309
                  
                  
                  
                  30
                  
                  
                  
                  9.7
                  %Professional
      and other services
                  
                  
                  172
                  
                  
                  
                  219
                  
                  
                  
                  (47
                  )
                  
                  
                  -21.5
                  %Other
      operating
                  
                  
                  367
                  
                  
                  
                  314
                  
                  
                  
                  53
                  
                  
                  
                  16.9
                  %Total
      noninterest expense
                  
                  
                  $2,573
                  
                  
                  
                  $2,525
                  
                  
                  
                  $48
                  
                  
                  
                  1.9
                  %





Total
noninterest expense increased $48,000 for the three months ended March 31, 2009
when compared to the same period for 2008. The increase in salaries and employee
benefits was primarily due to normal merit increases and incentive based
compensation costs.  Data processing costs increased $30,000, or 9.7%
due to an increase in maintenance fees and Internet banking charges from greater
customer access.  A $53,000, or 16.9%, increase in other expenses was
due to an increase in FDIC assessments on deposits.  Pathfinder Bank
offset 90% of its Deposit Insurance Fund assessments with available one-time
assessment credits during the first two quarters of 2008 and took the remaining
balance of the credit against the third quarter assessment.  For the
first nine months of 2008, credits utilized to offset amounts assessed for
Pathfinder Bank totaled $76,000.  Assessments for Pathfinder Bank in
March 2009 were not offset by credits.  These increases were offset by
decreases of $47,000 and $23,000 in professional and other services and building
occupancy, respectively.  The decreases were the result of
non-recurring charges that were expensed in 2008.






Page
- 15-
 Table of Contents


On
December 22, 2008, the FDIC published a final rule that raises the current
deposit insurance assessment rates uniformly for all institutions by 7 basis
points (to a range from 12 to 50 basis points) effective for the first quarter
of 2009.  On February 27, 2009, the FDIC also issued a final rule that
revises the way the FDIC calculates federal deposit insurance assessment rates
beginning in the second quarter of 2009.  Under the new rule, the
total base assessment rate will range from 7 to 77.5 basis points of the
institution’s deposits, depending on the risk category of the institution and
the institution’s levels of unsecured debt, secured liabilities, and brokered
deposits.  Additionally, the FDIC issued an interim rule that would
impose a special 20 basis points assessment on June 30, 2009, which would be
collected on September 30, 2009. However, the FDIC has indicated a willingness
to decrease the special assessment to 10 basis points under certain
circumstances concerning the overall financial health of the insurance fund.
Special assessments of 10 and 20 basis points would result in additional expense
of approximately $300,000 to $600,000, respectively. The interim rule also
allows for additional special assessments.  Since the filing of the
Company’s Form 10-K, there have been additional developments at the federal
level, which leads the Company to believe that Pathfinder Bank’s special
assessment will be on the lower end of the possible range previously
discussed.  The FDIC has yet to issue a final ruling in that
regard.





Income
Tax Expense





Income
taxes increased $111,000 for the quarter ended March 31, 2009, as compared to
the same period in 2008. The effective tax rate was 28% and 25.6% for the three
months ended March 31, 2009 and March 31, 2008, respectively.  The
increase in income tax expense and effective tax rate in 2009 in comparison to
2008, resulted from a higher pretax income of $358,000, combined with a
reduction of income earned on tax-exempt investment securities.  The
Company has reduced its tax rate from the statutory rate primarily through the
ownership of tax-exempt investment securities, bank owned life insurance and
other tax saving strategies.





Changes
in Financial Condition





Assets





Total
assets increased approximately $8.8 million, or 2.5%, to $361.6 million at March
31, 2009, from $352.8 million at December 31, 2008.  The increase in
total assets was primarily the result of an increase of $9.1 million, or 118%,
in cash and cash equivalents and a $2.4 million increase in investment
securities, offset by a $2.0 million decrease in net loans
receivable.  The increase in cash and cash equivalents was primarily
the result of interest earning deposits held at the Federal Home Loan Bank,
which were generated from increased deposits combined with the proceeds received
from the sale of municipal investments and residential real estate
loans.  Investment securities portfolio growth is being driven by the
purchase of mortgage-backed securities and agency securities with excess
liquidity generated by deposit growth.   The decrease in loans
reflects normal amortization of the lending portfolio, which was only partially
offset by new loan originations in the first quarter.  The Company
continues to transform its traditional thrift balance sheet toward that of a
community bank with a more diverse mix of residential, consumer and commercial
loans.





The
Company presently holds in its investment portfolio a $2.8 million investment in
a no-load mutual fund, which invests primarily in mortgage-related
instruments.  The fund holds mortgage-backed bonds and securities
issued by government-sponsored mortgage entities and by private
companies.  The underlying assets are comprised of variable rate,
adjustable rate and fixed-rate residential mortgage and home equity loans,
..  As a result of the recent problems in the real estate and mortgage
securities markets, the fair value of the fund has declined and, accordingly,
the Company’s recorded other-than-temporary impairment charges of 18% of the
value during 2008.  The value of the investment in the fund has
declined further below its cost basis by approximately $383,000 as of March 31,
2009.  The current fund value is not a compilation of the daily
trading prices of the underlying securities, but rather is derived from matrix
pricing in an illiquid market, thus it is more reflective of liquidation pricing
than of the Fund’s true fair value.  Fund cash flows have been
uninterrupted, as no individual security has experienced a default of
contractual principal or interest payments. The Fund continues to reinvest
excess cash flows into short-term federal agency backed mortgage-backed
securities, thus improving the overall risk profile of the Fund.  Many
of the Government’s initiative to reinvigorate the economy and improve asset
valuations are just beginning to take effect.  Significant
improvements in market conditions should be realized in the near
term.  Management has displayed the intent and ability to hold this
security until its value improves.  Given all these facts, it is
management’s opinion that the current carrying value of the Fund is reasonable
and that additional adjustments to the Fund’s carrying value are not necessary
at this time.




In
addition to the mutual fund backed by mortgage-related instruments, the Company
also holds a $2.2 million investment in a mutual fund consisting of investment
grade, dividend paying common stocks of large capitalization companies
(companies with market capitalization in excess of $5
billion).  Management recorded an other-than-temporary impairment
charge of 24% of the Funds value in 2008.  The value of the investment
in this fund has declined further below its cost basis by approximately $653,000
as of March 31, 2009. The overall value of the fund has continued to improve
during 2009.  As of May 6th, the unrealized loss associated with the
Company’s holdings in the fund has decreased to approximately $455,000,
representing a 30% improvement since March 31, 2009.  Management
believes that the underlying investment grade securities represent equity
positions in well-managed companies with a diverse cross section of various
industries.  Management has performed a review of each underlying
holding comprising the Fund. The review and analysis indicates that there are no
individually impaired holdings and there is no indication that the profitability
of the individual companies is impaired beyond the current economic
cycle.  The Fund




Page
- 16-
 Table of Contents


value is
highly correlated to the overall stock market performance and management
believes that the market will return to previous valuation levels over the next
economic cycle.  Many of the Government’s initiatives to reinvigorate
the economy are just beginning to take effect and significant improvements in
overall market conditions should be realized in the near
term.  Management has the intent and ability to hold this security
until its value improves.  As such, the recent decline in market
value, since the September 30, 2008 write-down for impairment, is not considered
to be other-than-temporary.


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




Liabilities





Total
liabilities increased $8.5 million, or 2.6%, to $341.8 million at March 31,
2009, from $333.3 million at December 31, 2008.  Deposits increased
$23.6 million, or 8.8%, and long-term borrowings increased $2.0
million.  These increases were offset by a reduction in short-term
borrowings of $16.6 million, or 94.3%.  The increase in deposits was
the result of an increase of $20.5 million in municipal customer deposits, with
the balance coming from increased retail deposits.  The municipal
deposit increase was driven by the receipt of tax revenues by our municipal
customers.





Loan
and Asset Quality and Allowance for Loan Losses





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








March
      31,
                    
                    
                    December
      31,(In
      thousands)
                    
                    2009
                    
                    
                    2008Nonaccrual
      loans:Commercial
      real estate and commercial
                    
                    
                    $1,072
                    
                    
                    
                    $1,455Consumer
                    
                    
                    191
                    
                    
                    
                    254Real
      estate - mortgage
                    
                    
                    937
                    
                    
                    
                    614Total
      nonaccrual loans
                    
                    
                    2,200
                    
                    
                    
                    2,323Total
      nonperforming loans
                    
                    
                    2,200
                    
                    
                    
                    2,323Foreclosed
      real estate
                    
                    
                    380
                    
                    
                    
                    335Total
      nonperforming assets
                    
                    
                    $2,580
                    
                    
                    
                    $2,658Nonperforming
      loans to total loans
                    
                    
                    0.89
                    %
                    
                    
                    0.93
                    %Nonperforming
      assets to total assets
                    
                    
                    0.71
                    %
                    
                    
                    0.75
                    %





Total
nonperforming loans decreased 5% at March 31, 2009, when compared to December
31, 2008.  The decrease in nonperforming loans was primarily the
result of the improvement in the delinquency status of commercial loan
relationships.  Management believes that the underlying collateral and
associated guarantees, combined with the existing reserves provided, are
adequate to cover potential losses that may occur from the remediation
process.





The
allowance for loan losses at March 31, 2009 and December 31, 2008 was $2.6
million and $2.5 million, or 1.03% and 0.99% of period end loans,
respectively.





Capital





Shareholders'
equity at March 31, 2009, was $19.8 million as compared to $19.5 million at
December 31, 2008.  The Company added $579,000 to retained earnings
through net income.  The increase to retained earnings was offset by
an increase of $264,000 in accumulated other comprehensive loss, which increased
to $3.4 million from $3.1 million at December 31, 2008. Unrealized holding
losses on securities, net of tax, resulted in an increase in accumulated other
comprehensive loss of $306,000.  This was offset by $42,000 of
amortization of retirement plan losses, net of tax expense.  No
dividend was declared  during the first quarter of 2009.  In
April of 2009 the Board of Directors announced that the Company had declared a
cash dividend of $.03 per share on the Company’s common stock relating to the
fiscal quarter ending March 31, 2009.  The dividend will be payable to
all shareholders of record on May 15, 2009 and will be paid on May 29,
2009.  The current dividend level represents an approximately 71%
reduction for the fiscal year 2008 dividend levels.  The Board of
Directors and Management of the company believe it is in the best interest of
the shareholders to conserve capital at this time.





Page
- 17-
 Table of Contents


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
March 31, 2009, 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, meet deposit withdrawals,
maintain reserve requirements, and otherwise operate the Company on an ongoing
basis.  The Company's primary sources of funds are deposits, borrowed
funds, amortization and prepayment of loans and maturities of investment
securities and other short-term investments, and earnings and funds provided
from operations.  While scheduled principal repayments on loans are a
relatively predictable source of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition.  The Company manages the pricing of deposits to maintain
a desired deposit balance.  In addition, the Company invests excess
funds in short-term interest-earning and other assets, which provide liquidity
to meet lending requirements.





The
Company's liquidity has been enhanced by its membership in the 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.





The
Company has a number of existing credit facilities available to
it.  Total credit available under the existing lines is approximately
$72.5 million.  At March 31, 2009, the Company has $37.4 outstanding
against the existing lines with $35.1 million available.





The Asset
Liability Management Committee of the Company is responsible for implementing
the policies and guidelines for the maintenance of prudent levels of
liquidity.  As of March 31, 2009, management reported to the Board of
Directors that the Company is in compliance with its liquidity policy
guidelines.





Item 3 – Quantitative and Qualitative Disclosures About Market
Risk





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





Item 4T  - 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.






Page
- 18-
 Table of Contents


PART II - OTHER INFORMATION





Item
1 - Legal Proceedings





None





Item
1A – Risk Factors





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





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





None





Item
3 - Defaults Upon Senior Securities





None





Item
4 - Submission of Matters to a Vote of Security Holders





None





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





Page
- 19-


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.








May 15,
2009                                                    /s/ Thomas W.
Schneider


Date:                       
                                         Thomas
W. Schneider


President
and Chief Executive Officer





May 15,
2009                                   /s/ James A.
Dowd


Date:                                                                  James
A. Dowd


Senior Vice President and Chief Financial Officer







Page
- 20-


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







Certification
      of Chief Executive Officer
                            
                            Pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002I,
      Thomas W. Schneider, President and Chief Executive Officer, certify
      that:1.I
      have reviewed this Quarterly Report on Form 10-Q of Pathfinder Bancorp,
      Inc.;2.Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;3.Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;4.The
      registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
                            (b)Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting, to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;(c)Evaluated
      the effectiveness of the registrant's disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation; and(d)Disclosed
      in this report any change in the registrant's internal control over
      financial reporting that occurred during the registrant's most recent
      fiscal quarter (the registrant's fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the registrant's internal control over financial
      reporting; and5.The
      registrant's other certifying officer and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the registrant's auditors and the audit committee of the registrant's
      board of directors:(a)All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information;
and(b)Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.May
      15, 2009
                          /s/ Thomas W. Schneider
                            Thomas
      W. Schneider
                            President
      and Chief Executive Officer







Page
- 21-
 Table of Contents


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





Certification
      of Chief Financial Officer
                    
                    Pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002I,  James
      A. Dowd, Senior Vice President and Chief Financial Officer, certify
      that:1.I
      have reviewed this Quarterly Report on Form 10-Q of Pathfinder Bancorp,
      Inc.;2.Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a   material fact necessary
      to make the statements made, in light of the circumstances under which
      such statements were made, not misleading with respect to the period
      covered by this report;3.Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;4.The
      registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
                    (b)Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting, to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;(c)Evaluated
      the effectiveness of the registrant's disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation; and(d)Disclosed
      in this report any change in the registrant's internal control over
      financial reporting that occurred during the registrant's most recent
      fiscal quarter (the registrant's fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the registrant's internal control over financial
      reporting; and5.The
      registrant's other certifying officer and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the registrant's auditors and the audit committee of the registrant's
      board of directors:(a)All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information;
and(b)Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.May
      15, 2009
                  /s/ James A. Dowd
                    James
      A. Dowd
                    Senior
      Vice President and Chief Financial Officer





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





Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002Thomas
      W. Schneider, President and Chief Executive Officer, and James A. Dowd,
      Senior Vice President and Chief Financial Officer of Pathfinder Bancorp,
      Inc. (the "Company"), each certify in his capacity as an officer of the
      Company that he has reviewed the Quarterly Report of the Company on Form
      10-Q for the quarter ended March 31, 2009 and that to the best of his
      knowledge:1.the
      report fully complies with the requirements of Sections 13(a) of the
      Securities Exchange Act of 1934; and2.the
      information contained in the report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.The
      purpose of this statement is solely to comply with Title 18, Chapter 63,
      Section 1350 of the United States Code, as amended by Section 906 of the
      Sarbanes-Oxley Act of 2002.May
      15, 2009
                  /s/ Thomas W. Schneider
                    Thomas
      W. Schneider
                    President
      and Chief Executive OfficerMay
      15, 2009
                  /s/ James A. Dowd
                    James
      A. Dowd
                    Senior
      Vice President and Chief Financial
Officer












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