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Pathfinder Bancorp, Inc. ("Company") (NASDAQ:PBHC), the holding company for Pathfinder Bank ("Bank") issued an update to its earnings release furnished on a Current Report on Form 8-K on February 1, 2020 (the "Original Press Release") reporting its financial results at and for the three and twelve months ended December 31, 2020. This updated Press Release (the "Updated Press Release") is being furnished to revise pretax net income and related financial information for the three and twelve months ended December 31, 2020. Two revisions to pretax net income were made related to loan interest income and operating expenses that reduced pretax net income, before tax effects, for the three and twelve months ended December 31, 2020 by $359,000 and $300,000, respectively. In aggregate, therefore, these two revisions to the previously reported results of operations reduced pretax net income by $659,000 for the three and twelve months ended December 31, 2020 with a corresponding reduction in income tax expense of $138,000 for the same three and twelve month periods. In total, the Company reduced its provision for income taxes by $659,000, of which $521,000 was in recognition of expected net operating loss carryback claims with New York State. Net income after taxes was unchanged for the three and twelve months ended December 31, 2020 with no changes to reported basic and diluted earnings per share. Total assets and liabilities decreased at December 31, 2020 by $140,000, as compared to the originally reported balances, with no changes to the Company's shareholders' equity at that date resulting from these revisions.
Specifically, loan interest income was reduced by $359,000 for the three and twelve months ended December 31, 2020 when three real estate loans, with outstanding aggregate principal balances of $7.9 million, were moved into nonaccrual status at December 31, 2020. This reclassification into nonaccrual status followed a review of their classification in relation to their payment histories, including payment activity in the first two months of 2021, after the expiration of their initial 180-day Covid-19 pandemic-related loan payment deferral periods. The placement of these three loans into nonaccrual status decreased the net interest margin percentage (as reported in the Original Press Release) by 12 basis points from 2.87% to 2.75% for the three months ended December 31, 2020 and by three basis points from 2.91% to 2.88% for the twelve months ended December 31, 2020.
As a result of reclassifying the three loans with an aggregate outstanding balance of $7.9 million as nonaccrual loans at December 31, 2020, certain asset quality metrics were also revised from the Original Press Release. The allowance for loan losses expressed as a percentage of nonperforming loans was reduced 35.31% from 95.20% (as reported in the Original Press Release) to 59.89%. Similarly, at December 31, 2020 the ratio of nonperforming loans to period end loans was increased 95 basis points from 1.63% (as reported in the Original Press Release) to 2.58% and the ratio of nonperforming loans to total assets was increased 65 basis points from 1.09% (as reported in the Original Press Release) to 1.74%.
Noninterest expenses were increased by $300,000 in this Updated Press Release from a total of $6.5 million (as reported in the Original Press Release) to $6.8 million for the three months ended December 31, 2020. Noninterest expenses were increased by $300,000 from a total of $24.8 million (as reported in the Original Press Release) to $25.1 million for the twelve months ended December 31, 2020. The revision was made to accrue for certain additional personnel expenses distributed in March 2021 primarily related to performance incentives that were increased as a result of a final review of staff performance during the Covid-19 pandemic.
Finally, income tax expense was decreased by $659,000 for the three and twelve months ended December 31, 2020. Income tax expense was reduced from $688,000 (as reported in the Original Press Release) to $29,000 in this Updated Press Release for the three months ended December 31, 2020 and was reduced $659,000 from $2.0 million (as reported in the Original Press Release) to $1.3 million in this Updated Press Release for the twelve months ended December 31, 2020. The reductions in income tax expense were partially due to the $659,000 reduction of pretax net income, discussed above and, more significantly, a result of the recognition of $521,000 in expected New York State tax refunds stemming from the completion of a series of amended tax returns that were filed in January 2021. These amended returns applied carryback claims for New York State net operating losses, generated in 2018 and 2019 under amendments to the New York State Tax Code that were adopted by the Company in 2018, to the previously filed 2015-2017 tax years. Management determined that these estimated refunds from New York State had become probable and estimable at December 31, 2020 under Generally Accepted Accounting Principles and should, therefore, be recognized in 2020. The effective tax rate was 1.5% and 15.9% for the three and twelve month periods ended December 31, 2020, respectively.
Posted In: PBHC
