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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTER ENDED JUNE 30, 2004

SEC Exchange Act No. 000-23601

Pathfinder Bancorp, Inc.
(Exact name of Company as specified in its charter)

Federal
(State or jurisdiction of incorporation or organization)

16-1540137
(I.R.S. Employer Identification Number)


214 W. 1st Street
Oswego, New York 13126
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)

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

Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
--------

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X
----------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: There were 2,448,132 shares
of the Company's common stock outstanding as of August 6, 2004.



PATHFINDER BANCORP, INC.
INDEX



PART 1 FINANCIAL INFORMATION PAGE

Item 1. Financial Statements

Consolidated Statements of Condition 1
Consolidated Statements of Income 2 - 3
Consolidated Statements of Shareholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 8

Item 2. Management's Discussion and Analysis of Financial 9 - 16
Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosure about Market 17 - 18
Risk

Item 4. Control and Procedures 19

PART II OTHER INFORMATION 20 - 21

Item 1. Legal proceedings
Item 2. Change in securities, Use of Proceeds and Issuer
Purchases of Equity Securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K


SIGNATURES




PATHFINDER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003

June 30, December 31,
2004 2003
ASSETS
- ----------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)

Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,426 $ 5,803
Interest earning deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,083 2,911
- ----------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 14,509 8,714
Investment securities, at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . 75,280 57,559
Federal Home Loan Bank stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . 1,873 2,048
Mortgage loans held-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 3,520
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,210 188,717
Less: Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,835 1,715
- ----------------------------------------------------------------------------------------------------------------
Loans receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,375 187,002

Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,238 6,650
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,491 1,273
Foreclosed real estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 202
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,840 3,840
Intangible asset, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738 850
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,689 4,493
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,929 1,789
- ----------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $299,932 $277,940
================================================================================================================


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

Deposits:
Interest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $215,276 $191,104
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,577 15,790
- ----------------------------------------------------------------------------------------------------------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,853 206,894
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100 2,100
Long-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,260 38,860
Junior subordinated debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,155 -
Company obligated mandatorily redeemable preferred securities of subsidiary, Pathfinder
Statutory Trust I, holding solely junior subordinated debentures of the Company. . . . - 5,000
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,489 3,301
- ----------------------------------------------------------------------------------------------------------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,857 256,155

Shareholders' equity:
Preferred stock, authorized shares 1,000,000; no shares issued or outstanding
Common stock, par value $.01; authorized 10,000,000 shares;
2,935,419 and 2,919,386 shares issued; and 2,448,132 and 2,432,099
shares outstanding, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . 29 29
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,397 7,225
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,262 20,747
Accumulated other comprehensive (loss) income. . . . . . . . . . . . . . . . . . . . (1,056) 364
Unearned ESOP shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (55) (78)
Treasury Stock, at cost; 487,287 shares. . . . . . . . . . . . . . . . . . . . . . . (6,502) (6,502)
- ----------------------------------------------------------------------------------------------------------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,075 21,785
- ----------------------------------------------------------------------------------------------------------------

Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . . . . $299,932 $277,940
================================================================================================================


The accompanying notes are an integral part of the consolidated financial
statements.
1





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

For the three For the three
months ended months ended
June 30, 2004 June 30, 2003
- --------------------------------------------------------------------------------------------

(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,981 $3,214
Debt securities:
Taxable . . .. . . . . . . . . . . . . . . . . . . . . . . 585 538
Tax-exempt. .. . . . . . . . . . . . . . . . . . . . . . . 59 59
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 35 53
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 13
- --------------------------------------------------------------------------------------------
Total interest income. . . . . . . . . . . . . . . . . 3,682 3,877
- --------------------------------------------------------------------------------------------

INTEREST EXPENSE:
Interest on deposits. . . . . . . . . . . . . . . . . . . . 915 980
Interest on short-term borrowings . . . . . . . . . . . . . 7 3
Interest on long-term borrowings. . . . . . . . . . . . . . 474 549
Total interest expense . . . . . . . . . . . . . . . . 1,396 1,532
- --------------------------------------------------------------------------------------------

Net interest income . . . . . . . . . . . . . . . . 2,286 2,345
Provision for loan losses . . . . . . . . . . . . . . . . . 107 260
- --------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 2,179 2,085
- --------------------------------------------------------------------------------------------

OTHER INCOME:
Service charges on deposit accounts . . . . . . . . . . . . 227 216
Loan servicing fees . . . . . . . . . . . . . . . . . . . . 77 77
Increase in value of bank owned life insurance. . . . . . . 48 43
Net gain on sales of securities. . . . . . . . . . . . . . 330 355
Net gain on sales of loans/real estate. . . . . . . . . . . 41 136
Other charges, commissions & fees . . . . . . . . . . . . . 129 147
- --------------------------------------------------------------------------------------------
Total other income. . . . . . . . . . . . . . . . . 852 974
- --------------------------------------------------------------------------------------------

OTHER EXPENSES:
Salaries and employee benefits. . . . . . . . . . . . . . . 1,180 1,083
Building occupancy. . . . . . . . . . . . . . . . . . . . . 257 249
Data processing expenses. . . . . . . . . . . . . . . . . . 229 218
Professional and other services . . . . . . . . . . . . . . 182 194
Amortization of intangible asset. . . . . . . . . . . . . . 56 56
Other expenses. . . . . . . . . . . . . . . . . . . . . . . 423 540
- --------------------------------------------------------------------------------------------
Total other expenses. . . . . . . . . . . . . . . . 2,327 2,340
- --------------------------------------------------------------------------------------------

Income before income taxes. . . . . . . . . . . . . . . . . . 704 719
Provision for income taxes. . . . . . . . . . . . . . . . . . 182 202
- --------------------------------------------------------------------------------------------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . $ 522 $ 517
============================================================================================


NET INCOME PER SHARE - BASIC . . . . . . . . . . . . . . $ 0.21 $ 0.21
============================================================================================
NET INCOME PER SHARE - DILUTED . . . . . . . . . . . . . $ 0.21 $ 0.21
============================================================================================
DIVIDENDS PER SHARE. . . . . . . . . . . . . . . . . . . $ 0.10 $ 0.10
============================================================================================


The accompanying notes are an integral part of the consolidated financial
statements.
2




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


For the six For the six
months ended months ended
June 30, 2004 June 30, 2003
- --------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)

INTEREST INCOME:
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,971 $ 6,480
Debt securities: . . . . . . . . . . . . . . . . . . . . . .
Taxable . .. . . . . . . . . . . . . . . . . . . . . . . . 1,057 1,145
Tax-exempt.. . . . . . . . . . . . . . . . . . . . . . . . 107 121
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 71 107
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 25
- --------------------------------------------------------------------------------------------
Total interest income. . . . . . . . . . . . . . . . . 7,243 7,878
- --------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits. . . . . . . . . . . . . . . . . . . . 1,767 2,007
Interest on short-term borrowings . . . . . . . . . . . . . 16 6
Interest on long-term borrowings. . . . . . . . . . . . . . 970 1,119
- --------------------------------------------------------------------------------------------
Total interest expense . . . . . . . . . . . . . . . . 2,753 3,132
- --------------------------------------------------------------------------------------------

Net interest income . . . . . . . . . . . . . . . . 4,490 4,746
Provision for loan losses . . . . . . . . . . . . . . . . . 295 366
- --------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 4,195 4,380
- --------------------------------------------------------------------------------------------

OTHER INCOME:
Service charges on deposit accounts . . . . . . . . . . . . 462 377
Loan servicing fees . . . . . . . . . . . . . . . . . . . . 118 127
Increase in value of bank owned life insurance. . . . . . . 96 86
Net gain on sales of securities. . . . . . . . . . . . . . 484 521
Net gain on sales of loans/real estate .. . . . . . . . . . 121 178
Other charges, commissions & fees . . . . . . . . . . . . . 249 249
- --------------------------------------------------------------------------------------------
Total other income. . . . . . . . . . . . . . . . . 1,530 1,538
- --------------------------------------------------------------------------------------------

OTHER EXPENSES:
Salaries and employee benefits. . . . . . . . . . . . . . . 2,383 2,196
Building occupancy. . . . . . . . . . . . . . . . . . . . . 534 506
Data processing expenses. . . . . . . . . . . . . . . . . . 454 416
Professional and other services . . . . . . . . . . . . . . 328 357
Amortization of intangible asset. . . . . . . . . . . . . . 112 112
Other expenses. . . . . . . . . . . . . . . . . . . . . . . 766 954
- --------------------------------------------------------------------------------------------
Total other expenses. . . . . . . . . . . . . . . . 4,577 4,541
- --------------------------------------------------------------------------------------------

Income before income taxes. . . . . . . . . . . . . . . . . . 1,148 1,377
Provision for income taxes. . . . . . . . . . . . . . . . . . 303 367
- --------------------------------------------------------------------------------------------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . $ 845 $ 1,010
-------------- --------------


NET INCOME PER SHARE - BASIC . . . . . . . . . . . . . . $ 0.35 $ 0.42
============== ==============
NET INCOME PER SHARE - DILUTED . . . . . . . . . . . . . $ 0.34 $ 0.41
============== ==============
DIVIDENDS PER SHARE. . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.20
============== ==============


The accompanying notes are an integral part of the consolidated financial
statements.
3





PATHFINDER BANCORP, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003
(unaudited)

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


BALANCE, DECEMBER 31, 2003 . . . . . . . . . . 2,919 $ 29 $7,225 $20,747 $ 364 $(78) $(6,502) $21,785
Comprehensive income
Net income . . . . . . . . . . . . . . . . . . 845 845
Other comprehensive loss, net of tax
Unrealized net gains on securities . . . . . . (1,420) (1,420)
_______
Total Comprehensive loss . . . . . . . . . . . (575)
ESOP shares earned . . . . . . . . . . . . . . 47 23 70
Stock option exercised . . . . . . . . . . . . 16 0 125 125
Dividends declared ($.20 per share). . . . . . (330) (330)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 2004 . . . . . . . . . . . . 2,935 $ 29 $7,397 $21,262 $(1,056) $(55) $(6,502) $21,075
===============================================================================================================================






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

BALANCE, DECEMBER 31, 2002 . . . . . . . . . . 2,915 $ 29 $7,114 $19,746 $281 $(125) $(3,815) $23,230
Comprehensive income
Net income . . . . . . . . . . . . . . . . . . 1,010 $ 1,010
Other comprehensive income, net of tax
Unrealized net gains on securities . . . . . . 312 312
-----
Total Comprehensive income . . . . . . . . . . 1,322
ESOP shares earned . . . . . . . . . . . . . . 34 23 57
Stock option exercised . . . . . . . . . . . . 2 - 15 15
Treasury stock purchased . . . . . . . . . . . (2,652) (2,652)
Dividends declared ($.20 per share). . . . . . (484) (484)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 2003 . . . . . . . . . . . . 2,917 $ 29 $7,163 $20,272 $593 $(102) $(6,467) $21,488
===============================================================================================================================


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

4





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

June 30 June 30,
2004 2003
- ------------------------------------------------------------------------------

(Dollars in thousands)
OPERATING ACTIVITIES:

Net income . . . . . . . . . . . . . . . . . . . . . . $ 845 $ 1,010
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses. . . . . . . . . . . . . . . 295 366
ESOP and other stock-based compensation earned . . . . 70 57
Deferred income tax expense. . . . . . . . . . . . . . 32 -
Proceeds from sale of loans. . . . . . . . . . . . . . 7,263 6,577
Originations of loans held-for-sale. . . . . . . . . . (4,317) (8,514)
Net gain on sales of:
Real estate loans through foreclosure. . . . . . . . (30) (86)
Loans. . . . . . . . . . . . . . . . . . . . . . . . (91) (92)
Available-for-sale investment securities . . . . . . (484) (521)
Depreciation . . . . . . . . . . . . . . . . . . . . . 282 248
Amortization of intangible . . . . . . . . . . . . . . 112 112
Amortization of deferred financing costs . . . . . . . 15 15
Amortization of mortgage servicing rights. . . . . . . 81 -
Increase in surrender value of life insurance. . . . . (96) (86)
Net amortization of premiums on investment securities. 158 83
(Increase) decrease in interest receivable . . . . . . (218) 15
Net change in other assets and liabilities . . . . . . (981) 671
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES. . . 2,936 (145)
- --------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of investment securities available-for-sale . (28,842) (22,238)
Proceeds from maturities and principal reductions of
investment securities available-for-sale . . . . . . 4,906 11,079
Proceeds from sales:
Real estate acquired through foreclosure . . . . . . 100 415
Available-for-sale investment securities . . . . . . 4,350 7,676
Purchase of life insurance . . . . . . . . . . . . . . (1,100) -
Net decrease (increase) in loans . . . . . . . . . . . 2,159 (4,939)
Purchase of premises and equipment . . . . . . . . . . (870) (750)
- --------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES. . . . . . . . . . (19,297) (8,757)
- --------------------------------------------------------------------------------

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts
savings accounts, money market deposit accounts
and escrow deposits. . . . . . . . . . . . . . . . . 26,595 1,362
Net increase (decrease) in time deposits . . . . . . . 364 (1,361)
Payments on long-term borrowings . . . . . . . . . . . (4,600) -
Proceeds from long-term borrowings . . . . . . . . . . - 5,300
Proceeds from exercise of stock options. . . . . . . . 125 15
Cash dividends paid. . . . . . . . . . . . . . . . . . (328) (325)
Treasury stock purchased . . . . . . . . . . . . . . . - (2,652)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . 22,156 2,339
- --------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . 5,795 (6,563)
Cash and cash equivalents at beginning of period. . . . 8,714 13,740
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . $ 14,509 $ 7,177
================================================================================


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

5


PATHFINDER BANCORP, INC.

Notes to Financial Statements

(1) BASIS OF PRESENTATION

The accompanying unaudited financial statements were prepared in accordance with
the instructions for Form 10-Q and Regulation S-X and, therefore, do not include
information for footnotes necessary for a complete presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. 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,
2003 and for the three year period then ended. Therefore, only material changes
in financial condition and results of operations are discussed in the remainder
of Part 1.

Operating results for the three and six months ended June 30, 2004 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2004.

(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
and six months ended June 30, 2004 and 2003, using 2,436,878 and 2,416,888
weighted average common shares outstanding for the three months ended, and
2,430,468 and 2,431,556 for the six months ended, respectively. Diluted
earnings per share for the three months and six months ended June 30, 2004 and
2003 have been computed using 2,478,570 and 2,463,962 for the three months ended
and 2,477,102 and 2,477,236 for the six months ended, respectively. Diluted
earnings per share gives effect to weighted average shares that would be
outstanding assuming the exercise of issued stock options using the treasury
stock method.

(3) STOCK-BASED COMPENSATION

The Company's stock-based compensation plan is accounted for based on the
intrinsic value method set forth in Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related provisions.
Compensation expense for employee stock options is generally not recognized if
the exercise price of the option equals or exceeds the fair value of the stock
on the date of the grant. Compensation expense for restricted share awards is
ratably recognized over the period of vesting, usually the restricted period,
based on the fair value of the stock on the grant date.

As of December 31, 2003, the stock options previously issued by the Company were
fully vested. As such, there was no effect on pro forma net income for 2004.
The following table illustrates the effect on net income and earnings per share
for the three and six month period ended June 30, 2003, as if the Black-Scholes
fair value method described in SFAS No. 123, "Accounting for Stock-Based
Compensation", as amended, had been applied to the Company's stock-based
compensation plan:

6




For the three For the six
Months ended months ended
June 30, 2003 June 30, 2003
- ------------------------------------------------------------------------------

(In thousands, except per share data)
Net Income:
As reported. . . . . . . . . . . . . . . . . . $ 517 $ 1,010
Less: Total stock-based employee compensation
expense determined under Black-Scholes option
pricing model, net of tax effect . . . . . . . 7 14
- ------------------------------------------------------------------------------
Pro forma net income . . . . . . . . . . . . . $ 510 $ 996





For the three For the six
Months ended months ended
June 30, 2003 June 30, 2003
- -------------------------------------------------------

Earnings per share: Basic Diluted Basic Diluted
- -------------------------------------------------------

As reported . . . . $ 0.21 $ 0.21 $ 0.42 $ 0.41
Pro forma . . . . . $ 0.21 $ 0.21 $ 0.41 $ 0.40



For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options vesting period. Since changes in the
subjective input assumptions can materially affect the fair value estimates, the
existing model, in management's opinion does not necessarily provide a single
reliable measure of the fair value of its stock options. In addition, the pro
forma effect on reported net income and earnings per share for the periods
presented should not be considered representative of the pro forma effects on
reported net income and earnings per share for future periods.

(4) PENSION BENEFITS

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




FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
- ---------------------------------------------------------------

(In thousands)
Service cost. . . . . . . . . . $ 43 $ 38 $ 86 $ 76
Interest cost . . . . . . . . . 52 50 104 100
Expected return on plan assets. (63) (57) (126) (114)
Amortization of net losses. . . 24 26 48 52
- ---------------------------------------------------------------
Net periodic benefit cost . . . $ 56 $ 57 $ 112 $ 114
===============================================================


The Company previously disclosed in its financial statements for the year ended
December 31, 2003, that it expected to contribute $250,000 to its pension plan
in 2004. As of June 30, 2004, $128,000 had been contributed to this pension
plan. The Company presently anticipates contributing an additional $64,000 to
fund its pension plan in 2004. The reduction in the anticipated contribution
resulted from a reduction in the plan's accrual formula effective May 1, 2004.

(5) DIVIDEND RESTRICTIONS

The Company maintains a restricted capital account with a $1.0 million balance,
representing Pathfinder Bancorp, M.H.C.'s portion of dividends waived as of
June 30, 2004.

7


(6) COMPREHENSIVE INCOME

The components of other comprehensive (loss) income and related tax effects for
the three and six month period ended June 30, 2004 and 2003 are as follows:



For the three For the six
Months ended months ended
June 30, June 30,
2004 2003 2004 2003
- ----------------------------------------------------------------------------

(In thousands)
Gross change in unrealized gains on
securities available for sale. . . . $(2,388) $1,110 $(1,882) $1,047
Reclassification adjustment for gains
included in net income . . . . . . . (330) (355) (484) (521)
- ----------------------------------------------------------------------------
(2,718) 755 (2,366) 526
Tax effect . . . . . . . . . . . . . . 1,087 (305) 946 (214)
- ----------------------------------------------------------------------------
Net of tax amount. . . . . . . . . . . $(1,631) $ 450 $(1,420) $ 312
============================================================================


(7) 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 $998,000 of standby letters of credit as of June
30, 2004. 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 payment required under the corresponding guarantees.
The current amount of the liability as of June 30, 2004 for guarantees under
standby letters of credit issued is not material.

(8) NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51" which was revised in December 2003. This
Interpretation provides guidance for the consolidation of variable interest
entities (VIEs). Pathfinder Statutory Trust I qualifies as a variable interest
entity under FIN 46. Pathfinder Statutory Trust I issued mandatorily redeemable
preferred securities (Trust Preferred Securities) to third-party investors and
loaned the proceeds to the Company. Pathfinder Statutory Trust I holds, as it
sole asset, subordinated debentures issued by the Company.
FIN 46 required the Company to deconsolidate Pathfinder Statutory Trust I from
the consolidated financial statements as of March 31, 2004. There has been no
restatement of prior periods. The impact of this deconsolidation was to increase
junior subordinated debentures by $5,155,000 and reduce the mandatory redeemable
preferred securities line item by $5,000,000, which represented the trust
preferred securities of the trust. The Company's equity interest in the trust
subsidiary of $155,000, which had previously been eliminated in consolidation,
is now reported in "Other assets". For regulatory reporting purposes, the
Federal Reserve Board has indicated that the preferred securities will continue
to qualify as Tier 1 Capital subject to previously specified limitations, until
further notice. If regulators make a determination that Trust Preferred
Securities can no longer be considered in regulatory capital, the securities
become callable and the Company may redeem them. The adoption of FIN 46 did not
have an impact on the Company's results of operations or liquidity.

8



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

GENERAL

Throughout the Management's Discussion and Analysis ("MD&A") the term, "the
Company", refers to the consolidated entity of Pathfinder Bancorp, Inc.
Pathfinder Bank and Pathfinder Statutory Trust I are wholly owned subsidiaries
of Pathfinder Bancorp, Inc. Pathfinder Commercial Bank, Pathfinder REIT, Inc.
and Whispering Oaks Development Corp. represent wholly owned subsidiaries of
Pathfinder Bank. Pathfinder Statutory Trust I is not included in the
consolidated financial statements for the period ended June 30, 2004. At June
30, 2004, Pathfinder Bancorp, M.H.C., the Company's mutual holding company
parent, whose activities are not included in the M.D.&A held 64.7% of the
Company's common stock and the public held 35.3%.

The following discussion reviews the Company's financial condition at June 30,
2004 and the results of operations for the three and six months ended June 30,
2004 and June 30, 2003.

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

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

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

9

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 2003 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 financial statements and how those values are
determined. Based on the valuation techniques used and the sensitivity of
financial statement amounts to the methods, assumptions and estimates underlying
those amounts, management has identified the determination of the allowance for
loan losses to be the accounting area that requires the most subjective and
complex judgments, and as such could be the most subject to revision as new
information becomes available.

The allowance for loan losses represents management's estimate of probable loan
losses inherent in the loan portfolio. Determining the amount of the allowance
for loan losses is considered a critical accounting estimate because it requires
significant judgment and the use of estimates related to the amount and timing
of expected future cash flows on impaired loans, estimated losses on pools of
homogeneous loans based on historical loss experience, and consideration of
current economic trends and conditions, all of which may be susceptible to
significant change. The loan portfolio also represents the largest asset type
on the consolidated balance sheet. Note 1 to the Consolidated Financial
Statements describes the methodology used to determine the allowance for loan
losses, and a discussion of the factors driving changes in the amount of the
allowance for loan losses is included in this report.

The Company carries all of its investments at fair value with any unrealized
gains or losses reported net of tax as an adjustment to shareholders' equity.
Based on management's assessment, at June 30, 2004, the Company did not hold any
security that had a fair value decline that is currently expected to be other
than temporary. Consequently, any declines in a specific security's fair value
below amortized cost have not been provided for in the income statement. The
Company's ability to fully realize the value of its investment in various
securities, including corporate debt securities, is dependent on the underlying
creditworthiness of the issuing organization.

RESULTS OF OPERATIONS

Net income for the second quarter of 2004 was $522,000 as compared to net income
of $517,000 for the same quarter in 2003. Basic earnings per share was $0.21
per share for the quarters ended June 30, 2004 and 2003. The return on average

10


assets and return on shareholders' equity were 0.69% and 9.85%, respectively,
for the three months ended June 30, 2004, compared with 0.73% and 9.71%,
respectively, for the three months ended June 30, 2003. During the second
quarter of 2004 when compared to the second quarter of 2003, provision for loan
losses and other expenses decreased $153,000 and $13,000, respectively,
partially offset by decreases in net interest income and other income of $59,000
and $122,000, respectively. Management expects continued margin compression to
challenge earnings growth over the near term.

For the six months ended June 30, 2004, net income was $845,000, a decrease of
$165,000, or 16%, as compared to net income of $1.0 million in 2003. The
decrease in net income was primarily a result of a decline in net interest
income of $256,000, partially offset by declines in provisions for loan losses
and income taxes. Basic earnings per share decreased to $0.35 per share for the
six months ended June 30, 2004 from $0.42 for the same period in 2003. The
return on average assets and return on shareholders' equity were 0.57% and
7.79%, respectively for the six months ended June 30, 2004, compared with 0.72%
and 9.56% for the same period in 2003.

NET INTEREST INCOME

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

Net interest income, on a tax-equivalent basis, remained consistent at $2.3
million for the three months ended June 30, 2004, as compared to the same period
during 2003. The Company's net interest margin ratio for the second quarter of
2004 decreased to 3.34% from 3.74% when compared to the same quarter in 2003.
The decline in net interest income is attributable to lower market interest
rates which decreased earning asset yields to 5.36% from 6.16% when compared
to the same period during 2003. Average interest-earning assets increased
9% to $276.7 million at June 30, 2004 as compared to $253.1 million at June
30, 2003. The increase in average earning assets is primarily attributable
to a $16.4 million increase in investment securities, a $6.5 million increase in
interest-earning deposits and a $669,000 increase in loans receivable. Average
interest-bearing liabilities increased $20.9 million, while the cost of
funds decreased 41 basis points to 2.15% from 2.56% for the same period in
2003. The increase in the average balance of interest-bearing
liabilities resulted primarily from a $24.2 million growth in average
deposits, offset by a $3.4 million decrease in borrowed funds. The growth in
deposits was primarily in money management accounts and resulted from the
Company's focus on attracting new municipal deposit customers.

For the six months ended June 30, 2004, net interest income, on a tax-equivalent
basis, decreased $254,000, or 5%, as compared to the same period during 2003.
Net interest margin decreased 46 basis points, to 3.39% at June 30, 2004 from
3.85% at June 30, 2003. Average interest-earning assets increased 8% to
$268.0 million at June 30, 2004 as compared to $249.2 million at June 30,
2003, while the yield on interest earning assets declined 92 basis points to
5.44% from 6.36% for the comparable periods. The increase in average
earning assets is primarily attributable to a $10.7 million increase in
investment securities, a $5.0 million increase in interest-earning deposits and
a $3.1 million increase in loans receivable. Average interest-bearing
liabilities increased $15.6 million, while the cost of funds decreased 47
basis points to 2.19% from 2.66% for the same period in 2003. The
increase in the average balance of interest-bearing liabilities resulted
primarily from a $13.1 million growth in average deposits and a $2.6 million
increase in borrowed funds. The growth in deposits was primarily in money
management accounts and resulted primarily from the Company's focus on
attracting new municipal deposit customers.

11


INTEREST INCOME

Total interest income for the quarter ended June 30, 2004 decreased $195,000, or
5%, to $3.7 million from $3.9 million at the quarter ended June 30, 2003.
Average loans increased $669,000, with yields declining 52 basis points to 6.37%
for the second quarter of 2004. Average commercial loans increased $3.7
million, and experienced a decline in the average tax-equivalent yield of 41
basis points, to 5.87% from 6.28%, in 2003. The decrease in the yield on
commercial loans was affected, in part, by the offering of short-term notes to
municipalities beginning in 2003. The average balance of loans to municipal
entities was $3.0 million, having a tax-equivalent yield of 2.94%. The Company's
residential mortgage loan portfolio decreased $4.0 million, or 3%, when
comparing the second quarter of 2004 to the same period in 2003. The average
yield on the residential mortgage loan portfolio decreased 54 basis points to
6.07% in 2004 from 6.61% in 2003. New loans were originated at lower rates than
in the prior period and a large volume of existing mortgages had their rates
modified downward or were refinanced at lower rates. An increase in the average
balance of consumer loans of $1.4 million, or 9%, resulted from an increase in
home equity loans. The average yield declined 105 basis points, to 6.76% from
7.81% in 2003.

Average investment securities (taxable and tax-exempt) for the quarter ended
June 30, 2004 increased by $16.4 million, compared to the same period a year
ago, with an increase in tax-equivalent interest income from investments of
$30,000, or 4%, compared to 2003. The average tax-equivalent yield of the
portfolio declined 10 basis points, to 3.55% from 3.65%. The increase in the
average balance of investment securities is reflective of the expanded deposit
growth with local municipalities.

Total interest income for the six months ended June 30, 2004 decreased $635,000,
or 8%, when compared to the six months ended June 30, 2003. Average loans
increased $3.1 million, with yields declining 65 basis points to 6.33% from
6.98%. Average commercial loans increased $3.7 million, while the yield
decreased to 5.39% from 6.47% at June 30, 2003.

For the six months ended June 30, 2004, tax-equivalent interest income from
investment securities decreased $145,000, or 10%, compared to the same period in
2003. The average tax-equivalent yield of the portfolio declined 114 basis
points, to 3.62% from 4.76% and was offset by a $10.7 million increase in the
average balance of investment securities.

INTEREST EXPENSE

For the three months ended June 30, 2004, total interest expense decreased
$136,000, or 9%, to $1.4 million from $1.5 million for the same quarter in 2003.
Interest expense on deposits decreased $65,000, or 7%, as lower interest rates
favorably impacted the average rate paid on deposits, reducing it 36 basis
points to 1.69% in 2004 from 2.04% in 2003. The decrease in the cost of deposits
was partially offset by an increase in the average deposit balance to $216.4
million in 2004, from $192.1 million for the same period in 2003. In addition to
the decrease in the cost of deposits, interest expense on borrowings also
decreased by $71,000, or 13%, from the prior period.

For the six months ended June 30, 2004, interest expense decreased $379,000, or
12%, to $2.8 million from $3.1 million for the same period in 2003. This
decrease was partially offset by a $13.1 million increase in the average balance
of deposits and a $2.6 million increase in borrowed funds. Deposit expense for
the comparable periods declined $240,000, or 12%, as the average rate on
deposits decreased 37 basis points, to 1.71% from 2.08%. Interest expense on
borrowings declined 92 basis points to 4.38% from 5.30%.

12


PROVISION FOR LOAN LOSSES

The provision for loans losses was $107,000 for the second quarter of 2004 as
compared to $260,000 for the same period in 2003. The decrease in the provision
for the quarter primarily resulted from a decrease in commercial charge-offs for
the period. Non-performing loans totaled $3.0 million at June 30, 2004 and
December 31, 2003. Allowance for loan losses, as a percentage of loans,
increased slightly to 0.99% at June 30, 2004 compared to 0.91% as December 31,
2003.

For the six months ended June 30, 2004, the provision for loan losses was
$295,000 as compared to $366,000 for the same period in 2003.

NONINTEREST INCOME

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

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



Three Months Ended June 30, Six Months Ended June 30,
2004 2003 Change 2004 2003 Change
- ------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)

Service charges on deposit accounts. . . . . . . . $ 227 $ 216 $ 11 5.1% $ 462 $ 377 $ 85 22.5%
Loan servicing fees. . . . . . . . . . . . . . . . 77 77 - 0.0% 118 127 (9) -7.1%
Increase in value of bank owned life insurance . . 48 43 5 11.6% 96 86 10 11.6%
Net gains on sale of loans/foreclosed real estate. 41 136 (95) -69.9% 121 178 (57) -32.0%
Other operating income . . . . . . . . . . . . . . 129 147 (18) -12.2% 249 249 - 0.0%
- ------------------------------------------------------------------------------------------------------------------
Core noninterest income. . . . . . . . . . . . . . 522 619 (97) -15.7% 1,046 1,017 29 2.9%
Net gain on sales of securities. . . . . . . . . . 330 355 (25) -7.1% 484 521 (37) -7.1%
- ------------------------------------------------------------------------------------------------------------------
Total other income . . . . . . . . . . . . . . . . $ 852 $ 974 $ (122) -12.5% $1,530 $ 1,538 $ (8) -0.5%
==================================================================================================================


For the three months ended June 30, 2004, core noninterest income decreased
$97,000, or 16%, when compared with the three months ended June 30, 2003,
primarily due to a reduction in net gains on foreclosed real estate resulting
from the sale of a significant foreclosed real estate property in the second
quarter of 2003. The decrease in other operating income was associated with the
reduction in volume of investment services in comparable quarters. Income on
service charges on deposit accounts increased as the number of deposit accounts
increased, combined with an increase in income generated from the new consumer
overdraft protection program.

For the six months ended June 30, 2004, core noninterest income increased
primarily due to increased income generated on deposit accounts as new services
were introduced and consulting fees associated with those new services was
eliminated. This increase was offset by a decrease in net gains on sale of
foreclosed real estate.

The decrease in net gains on sales of investment securities for the three and
six months ended June 30, 2004, was the result of gains associated with the sale
of corporate debt securities in 2003.

NONINTEREST EXPENSE

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

13





Three Months Ended June 30, Six Months Ended June 30,
2004 2003 Change 2004 2003 Change
- ------------------------------------------------------------------------------------------------------
(Dollars in thousands)


Salaries and employee benefits . . $1,180 $1,083 $ 97 8.96% $2,383 $ 2,196 $ 187 8.52%
Building occupancy . . . . . . . . 257 249 8 3.21% 534 506 28 5.53%
Data processing. . . . . . . . . . 229 218 11 5.05% 454 416 38 9.13%
Professional and other services. . 182 194 (12) -6.19% 328 357 (29) -8.12%
Amortization of intangible assets. 56 56 - 0.00% 112 112 - 0.00%
Other operating. . . . . . . . . . 423 540 (117) -21.67% 766 954 (188) -19.71%
- ------------------------------------------------------------------------------------------------------
Total noninterest expense. . . . . $2,327 $2,340 $ (13) -0.56% $4,577 $ 4,541 $ 36 0.79%
=======================================================================================================


Total noninterest expense remained relatively consistent for the three and six
months ended June 30, 2004 and 2003. The decrease in professional and other
services and other operating expenses primarily resulted from operational costs
associated with a foreclosed real estate property in 2003 and personnel
realignment expenses in 2003, not recurring in 2004. The increase in salaries
and employee benefits resulted from increased pension and health insurance costs
and overall personnel costs due to increased staffing. The Company had 110 full
time equivalent employees at June 30, 2004 compared to 104 at June 30, 2003.
Building occupancy expense increases primarily resulted from depreciation
expenses associated with the new Fulton branch which opened in August of 2003.
The increase in data processing charges was due to depreciation expense
resulting from system hardware and software acquisitions, increased ATM
servicing charges and check processing charges incurred by the Commercial Bank.

INCOME TAX EXPENSE

Income taxes decreased $20,000 for the quarter ended June 30, 2004 as compared
to the same period in 2003, which was primarily attributable to a decrease in
the Company's pre-tax income. For the six months ended June 30, 2004, income
taxes decreased $64,000 when compared to the same period in 2003 which was
primarily attributable to a decrease in the Company's pre-tax income. The
effective tax rate for the first six months of 2004 was 26.4%, compared to 26.7%
for the year ended December 31, 2003.

CHANGES IN FINANCIAL CONDITION

ASSETS

Total assets increased approximately $22.0 million, or 8%, to $299.9 million at
June 30, 2004, from $277.9 million at December 31, 2003. The increase in total
assets was primarily the result of an increase in investment securities of $17.7
million, or 31%, a $5.8 million, or 67%, increase in cash and cash equivalents
and a $3.3 million, or 53%, increase in other assets. These increases were
partially offset by a decrease in net loans of $2.6 million, or 1%. The growth
in investment securities was primarily funded by the increase in municipal
deposits. The increase in cash and cash equivalents was primarily the result of
the increased deposit levels and loans sales to the secondary market. The
excess liquidity is expected to be invested primarily in the commercial real
estate portfolio and investment securities. The increase in other assets was
due to a $1.1 million purchase of life insurance policies relating to the new
executives and directors deferred compensation plan which was effective December
31, 2003.

LIABILITIES

Total liabilities increased $22.7 million, or 9%, to $278.9 million at June 30,
2004 from $256.2 million at December 31, 2003. The increase in liabilities is
primarily due to a $24.2 million growth in interest-bearing deposits, a $4.6
million decrease in long-term borrowings and a $2.8 million growth in
noninterest-bearing deposits. The growth in deposits primarily resulted from
the Company's focus on attracting new municipal deposit customers.

14


LOAN AND ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES

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



For the Period Ending
June 30, December 31, June 30,
2004 2003 2003
- -----------------------------------------------------------------------------------

(Dollars in thousands)

Nonaccrual loans:
Commercial. . . . . . . . . . . . . . . . . . . . $1,876 $1,677 $ 144
Consumer. . . . . . . . . . . . . . . . . . . . . 152 172 129
Real estate - Construction . . . . . . . . . . . 0 270 0
Mortgage . . . . . . . . . . 986 873 999
- -----------------------------------------------------------------------------------
Total nonaccrual loans. . . . . . . . . . . . . . 3,014 2,992 1,272
Loans past due 90 days or more and still accruing 0 0 0
- -----------------------------------------------------------------------------------
Total non-performing loans. . . . . . . . . . . . 3,014 2,992 1,272
Foreclosed real estate. . . . . . . . . . . . . . 305 202 1,582
- -----------------------------------------------------------------------------------
Total non-performing assets . . . . . . . . . . . 3,319 3,194 2,854
- -----------------------------------------------------------------------------------
Non-performing loans to total loans . . . . . . . 1.61% 1.59% 0.67%
Non-performing assets to total assets . . . . . . 1.11% 1.15% 1.01%
- -----------------------------------------------------------------------------------


Total nonperforming loans at June 30, 2004 were $3.0 million, or 1.61%, of total
loans as compared to $3.0 million, or 1.59%, of total loans at December 31,
2003. Foreclosed real estate increased to $305,000 at June 30, 2004 compared to
$202,000 at December 31, 2003. Nonperforming loans continue to be addressed
primarily through foreclosure proceedings. Management believes that adequate
reserves exist for any potential losses that may occur from the remediation
process.

The allowance for loan losses at June 30, 2004 was $1.8 million, or 0.99% of
period end loans, compared to $1.7 million, or 0.91% of period end loans, at
December 31, 2003. The increase as a percentage of loans is primarily the
result of the decline in gross loans.

CAPITAL

Shareholders' equity decreased $710,000, or 3%, to $21.0 million at June 30,
2004. The decrease in shareholders' equity primarily resulted from a $1.4
million increase in accumulated other comprehensive loss, offset by a $515,000
increase in retained earnings and a $172,000 increase in additional paid in
capital The Company added $845,000 to retained earnings through net income and
returned $330,000 to its shareholders in the form of cash dividends. The
Company's mutual holding company parent, Pathfinder Bancorp, M.H.C, waived the
dividend for the quarter ended June 30, 2004. (See Footnote 5).

Risk-based capital provides the basis for which all banks are evaluated in terms
of capital adequacy. Capital adequacy is evaluated primarily by the use of
ratios which measure capital against total assets, as well as against total
assets that are weighted based on defined risk characteristics. The Company's
goal is to maintain a strong capital position, consistent with the risk profile
of its subsidiary banks that supports growth and expansion activities while at
the same time exceeding regulatory standards. At June 30, 2004, 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%.

15


LIQUIDITY

Liquidity management involves the Company's ability to generate cash or
otherwise obtain funds at reasonable rates to support asset growth and reduce
assets to meet deposit withdrawals, to maintain reserve requirements, and to
otherwise operate the Company on an ongoing basis. The Company's primary
sources of funds are deposits, borrowed funds, amortization and prepayment of
loans and 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 Asset Liability Management Committee (ALCO) of the Company is responsible
for implementing the policies and guidelines for the maintenance of prudent
levels of liquidity. As of June 30, 2004, management believes that liquidity as
measured by the Company is in compliance with its policy guidelines.

16


ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's risk of loss arising from adverse changes in the fair value of
financial instruments, or market risk, is composed primarily of interest rate
risk. The management of interest rate sensitivity seeks to avoid fluctuating
net interest margins and to provide consistent net interest income through
periods of changing interest rates. The primary objective of the Company's
asset-liability management activities is to maximize net interest income while
maintaining acceptable levels of interest rate risk. The Company has an
Asset-Liability Management Committee (ALCO) which is responsible for
establishing policies to limit exposure to interest rate risk, and to ensure
procedures are established to monitor compliance with those policies. Those
procedures include reviewing the Company's assets and liability policies,
setting prices and terms on rate-sensitive products, and monitoring and
measuring the impact of interest rate changes on the Company's earnings and
capital. The Company's Board of Directors reviews the guidelines established by
ALCO.

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

In June of 2004, the Federal Reserve raised their key interest rate one quarter
of one percent for the first time in four years. An additional 25 basis point
increase was announced by the Federal Reserve in early August. Management
anticipates that the Federal Reserve will continue to raise its target interest
rate over the foreseeable future. Management will continue to seek to minimize
any reduction in net interest income in a period of rising interest rates to the
extent that it can resist raising its cost of funds during this period. The
Company is continuing to explore transactions and strategies to both increase
its net interest income and minimize its interest rate risk.

GAP ANALYSIS. At June 30, 2004, the total interest bearing liabilities maturing
or repricing within one year exceeded total interest-earning assets maturing or
repricing in the same period by $39.3 million, representing a cumulative
one-year gap ratio of a negative 13.07%.

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

The following table measures the Company's interest rate risk exposure in terms
of the percentage change in its net interest income and net portfolio value as a
result of hypothetical changes in 100 basis point increments in market interest
rates. The table quantifies the changes in net interest income and net
portfolio value to parallel shifts in the yield curve. The column "Percentage
Change in Net Interest Income" measures the change to the next twelve month's
projected net interest income, due to parallel shifts in the yield curve. The
column "Percentage Change in Net Portfolio Value" measures changes in the
current fair value of assets and liabilities to parallel shifts in the yield
curve. The column "NPV Capital Ratio" measures the ratio of the fair value of
net assets to the fair value of total assets at the base case and in 100 basis
point incremental interest rate shocks. Currently, the Company's model projects
a 300 basis point increase and a 100 basis point decrease during the next year.

17


With the federal funds rate at a record low, the Company's ALCO believed it was
a better measure of current risk assuming a minus 100 point scenario, as a minus
300 basis point reduction would be unlikely given that current short-term market
interest rates are already below 3.00%. The Company uses these percentage
changes as a means to measure interest rate risk exposure and quantifies those
changes against guidelines set by the Board of Directors as part of the
Company's Interest Rate Risk policy. The Company's current interest rate risk
exposure is within those guidelines set forth.




Change in NPV
Interest Capital Earnings Value
Rates Ratio at Risk as Risk
- --------- -------- --------- --------

300 . . . 7.14% -12.97% -33.23%
200 . . . 8.13% -8.51% -21.88%
100 . . . 9.08% -4.12% -10.37%
0 9.87% ---- ----
- -100. . . 10.14% 1.68% 4.96%

18


ITEM 4 - CONTROLS AND PROCEDURES

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

19


PART II - OTHER INFORMATION

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

None

ITEM 2 - CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUE OR PURCHASES OF EQUITY
- --------------------------------------------------------------------------------
SECURITIES
- ----------

Not applicable

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

Not applicable

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

The Company's Meeting of Shareholders was held on April 28, 2004. The following
are the items voted on and the results of the shareholder voting:

1. The election of Corte J. Spencer, Janette Resnick and Steven W. Thomas to
serve as directors of the Company, each for a term of three years or until his
successor has been elected and qualified.

Name For Withheld

Corte J. Spencer 2,134,262 916
Janette Resnick 2,134,395 783
Steven W. Thomas 2,134,262 916

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


Name Term Expires
Chris C. Gagas 2005
Thomas W. Schneider 2005
Chris R. Burritt 2005
Raymond W. Jung 2005
Bruce Manwaring 2006
L. William Nelson 2006
George P. Joyce 2006

2. The ratification of the appointment of Beard Miller Company LLP as
auditors for the Company.

For Against Abstain
Number of Votes 2,134,095 633 450

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

On June 30, 2004, the Board of Directors declared a $.10 cash dividend to
shareholders of record as of June 30, 2004, payable on July 15, 2004.

20


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -------------------------------------------------

(a)

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

10.1 Employment Agreement between the Bank and Thomas W. Schneider, President
and Chief Executive Officer
10.2 Employment Agreement between the Bank and Edward Mervine, Vice- President
and General Counsel
31.1 Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer
31.2 Rule 13a-14(a) / 15d-14(a) Certification of the Chief Financial Officer
32.1 Section 1350 Certification of the Chief Executive and Chief Financial
Officer


(b) Reports on Form 8-K

The Company has two Current Reports on Form 8-K during the second quarter
of the fiscal year ended June 30, 2004 dated April 28, and June 30, 2004
reporting press releases relating to the first quarter earnings release and the
announcement of the second quarter cash dividends, respectively.


21


SIGNATURES


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




PATHFINDER BANCORP, INC.
--------------------------



August 16, 2004 /s/ Thomas W. Schneider
- ---------------------------------------------------------------
Date: Thomas W. Schneider
President, Chief Executive Officer


August 16, 2004 /s/ James A. Dowd
- ---------------------------------------------------------------
Date: James A. Dowd
Vice President, Chief Financial Officer




EXHIBIT 10.1

PATHFINDER BANCORP, INC.
PATHFINDER BANK
EMPLOYMENT AGREEMENT


This Agreement is made effective as of the 28th day of June, 2004, by and
between Pathfinder Bank (the "Bank"), a New York chartered stock savings bank,
with its principal administrative office at 214 West First Street, Oswego, New
York 13126-2547, jointly with Pathfinder Bancorp, Inc, the sole stockholder of
the Bank, and Thomas W. Schneider (the "Executive"). Any reference to "Company"
herein shall mean Pathfinder Bancorp, Inc. or any successor thereto. Any
reference to "Employer" herein shall mean both the Bank and the Company or any
successors thereto

WHEREAS, the Employer wishes to assure itself of the services of Executive
for the period provided in this Agreement; and

WHEREAS, Executive is willing to serve in the employ of the Employer on a
full-time basis for said period.

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. POSITION AND RESPONSIBILITIES

During the period of his employment hereunder, Executive agrees to serve as
President and Chief Executive Officer of the Bank and as President and Chief
Executive Officer of the Company. During said period, Executive also agrees to
serve, if elected, as an officer and director of the Bank, the Company and of
any subsidiary or affiliate of the Employer. Failure to reelect Executive as
President and Chief Executive Officer of the Bank and the Company without the
consent of the Executive during the term of this Agreement shall constitute a
breach of this Agreement.

2. TERMS AND DUTIES

(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of
thirty-six (36) full calendar months thereafter. Commencing on the
first anniversary date of this Agreement, and continuing at each
anniversary date thereafter, the Agreement shall renew for an
additional year such that the remaining term shall be three (3) years
unless written notice is provided to Executive, at least ten (10) days
and not more than thirty (30) days prior to any such anniversary date,
that his employment shall cease at the end of thirty-six (36) months
following such anniversary date. Prior to each notice period for
non-renewal, the disinterested members of the Board of Directors of
the Bank ("Board") will conduct a comprehensive performance evaluation
and review of the Executive for purposes of determining whether to
extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.

(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all
his business time, attention, skill, and efforts to the faithful
performance of his duties hereunder including activities and services
related to the organization, operation and management of the Employer;
provided, however, that, with the approval of the Board, as evidenced
by a resolution of such Board, from time to time, Executive may serve,
or continue to serve, on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with
the Bank, or materially affect the performance of Executive's duties
pursuant to this Agreement.


(c) During the period of his employment hereunder, if Executive's term as
a director of the Bank or the Company expires, the Employer shall
nominate Executive to be re-elected to the Board of Directors of the
Bank and the Company. If re-elected by shareholders, Executive shall
serve as director.

3. COMPENSATION AND REIMBURSEMENT

(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The
Bank shall pay Executive as compensation a salary of not less than
$185,000 per year ("Base Salary"). Such Base Salary shall be payable
biweekly. During the period of this Agreement, Executive's Base Salary
shall be reviewed at least annually; the first such review will be
made no later than December 31, 2004. Such review shall be conducted
by a Committee designated by the Board, and the Board may increase
Executive's Base Salary. In addition to the Base Salary provided in
this Section 3(a), the Bank shall provide Executive at no cost to
Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.

(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from
immediately prior to the beginning of the term of this Agreement, and
the Bank will not, without Executive's prior written consent, make any
changes in such plans, arrangements or perquisites which would
adversely affect Executive's rights or benefits thereunder. Without
limiting the generality of the foregoing provisions of this Subsection
(b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to,
retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plans, medical coverage or
any other employee benefit plan or arrangement made available by the
Bank in the future to its senior executives and key management
employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as
provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or
arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.

(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Employer shall pay or reimburse Executive for all
reasonable travel and other reasonable expenses incurred by Executive
performing his obligations under this Agreement and may provide such
additional compensation in such form and such amounts as the Board may
from time to time determine.

(d) Compensation and reimbursement to be paid pursuant to paragraphs (a),
(b) and (c) of this Section 3 shall be paid by the Bank and the
Company, respectively on a pro rata basis based upon the amount of
service the Executive devotes to the Bank and Company, respectively.


4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 8 and 15.

(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term
of employment under this Agreement. As used in this Agreement, an
"Event of Termination" shall mean and include any one or more of the
following: (i) the termination by the Bank or the Company of
Executive's full-time employment hereunder for any reason other than,
(A) Disability or Retirement as defined in Section 6 below, (B) a
Change in Control, as defined in Section 5(a) hereof, or (C)
Termination for Cause as defined in Section 7 hereof; or (ii)
Executive's resignation from the Bank's or the Company's employ, upon
any (A) failure to elect or reelect or to appoint or reappoint
Executive as President and Chief Executive Officer, (B) material
change in Executive's function, duties, or responsibilities, which
change would cause Executive's position to become one of lesser
responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, (C) a relocation of Executive's
principal place of employment by more than 30 miles from its location
at the effective date of this Agreement, or a material reduction in
the benefits and perquisites to the Executive from those being
provided as of the effective date of this Agreement, (D) liquidation
or dissolution of the Bank or Company other than liquidations or
dissolutions that are caused by reorganizations that do not affect the
status of Executive, (E) failure of the Employer to nominate Executive
to be elected or re-elected as a director of the Bank or the Company,
or (F) breach of this Agreement by the Bank or the Company. Upon the
occurrence of any event described in clauses (ii)(A), (B), (C), (D),
(E) or (F), above, Executive shall have the right to elect to
terminate his employment under this Agreement by resignation upon
sixty (60) days prior written notice given within a reasonable period
of time not to exceed four calendar months after the initial event
giving rise to said right to elect. Notwithstanding the preceding
sentence, in the event of a continuing breach of this Agreement by the
Employer, the Executive, after giving due notice within the prescribed
time frame of an initial event specified above, shall not waive any of
his rights solely under this Agreement and this Section 4 by virtue of
the fact that Executive has submitted his resignation but has remained
in the employment of the Employer and is engaged in good faith
discussions to resolve any occurrence of an event described in clauses
(A), (B), (C), (D), (E) and (F) above.

(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Employer shall pay
Executive, or, in the event of his subsequent death, his beneficiary
or beneficiaries, or his estate, as the case may be, as severance pay
or liquidated damages, or both, a sum equal to three (3) times the sum
of (i) Base Salary and (ii) the highest rate of bonus awarded to the
Executive during the prior three years, , provided, however, that if
the Employer is not in compliance with its minimum capital
requirements or if such payments would cause the Employer's capital to
be reduced below its minimum capital requirements, such payments shall
be deferred until such time as the Employer is in capital compliance.
At the election of the Executive, which election is to be made on an
annual basis during the month of January, and which election is
irrevocable for the year in which made and upon the occurrence of an
Event of Termination, such payments shall be made in a lump sum or
paid monthly during the remaining term of the Agreement following the
Executive's termination. In the event that no election is made,
payment to the Executive will be made on a monthly basis during the
remaining term of the Agreement. Such payments shall not be reduced in
the event the Executive obtains other employment following termination
of employment.

(c) Notwithstanding the provisions of Sections 4(a) and (b), and in the
event that there has not been a Change in Control as defined in
Section 5(a) nor an Event of Termination, as defined in Section 4(a),
upon the voluntary termination by the Executive upon giving sixty days
notice to the Employer (which itself shall not be deemed to constitute
an "Event of Termination" as defined), the Employer, at the discretion
of the Board of Directors, shall pay Executive, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as


the case may be, a severance payment in an amount to be determined by
the Board of Directors at the time of such voluntary termination by
the Executive. Such severance payment shall not exceed three (3) times
the average of the three preceding years' Base Salary, including
bonuses and any other cash compensation paid to the Executive during
such years, and the amount of any benefits received pursuant to any
employee benefit plans, on behalf of the Executive, maintained by the
Employer during such years; provided, however, that if the Employer is
not in compliance with its minimum capital requirements or if such
payments would cause the Employer's capital to be reduced below its
minimum capital requirements, such payments shall be deferred ----
until such time as the Employer is in capital compliance, and provided
further, that in no event shall total severance compensation from all
sources exceed three times the Executive's Base Salary for the
immediately preceding year. At the election of the Executive, which
election is to be made on an annual basis during the month of January,
and which election is irrevocable for the year in which made and upon
the Executive's voluntary termination, any payments shall be made in a
lump sum or paid monthly during the remaining term of the Agreement
following the Executive's termination. In the event that no election
is made, any payment to the Executive will be made on a monthly basis
during the remaining term of the agreement. Such payments shall not be
reduced in the event the Executive obtains other employment following
termination of employment.

(d) Upon the occurrence of an Event of Termination, the Employer will
cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Employer for
Executive prior to his termination, provided that such benefits shall
not be provided in the event they should constitute an unsafe or
unsound banking practice relating to executive compensation and
employment contracts pursuant to applicable regulations, as is now or
hereafter in effect. Such coverage shall cease upon the expiration of
the remaining term of this Agreement.

(e) Upon the occurrence of an Event of Termination, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to any Stock Option Plan of the Bank or Company.

(f) Upon the occurrence of an Event of Termination, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to the Supplemental Executive Retirement Plan of the Bank or Company.

(g) Upon the occurrence of an Event of Termination, the Executive shall
become fully vested in and entitled to all benefits awarded to him
under the Bank's or the Company's Recognition and Retention Plan or
any restricted stock plan in effect.

5. CHANGE IN CONTROL

(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or Company. For purposes of
this Agreement, a "Change in Control" of the Bank or Company shall
mean a change in control of a nature that (i) would be required to be
reported in response to Item 1(a) of the current report on Form 8-K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"); or (ii)
results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners Loan Act, as amended, and applicable rules
and regulations promulgated thereunder, as in effect at the time of
the Change in Control (collectively, the "HOLA"); or (iii) without
limitation such a Change in Control shall be deemed to have occurred
at such time as (a) any "person" (as the term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of
the combined voting power of Company's outstanding securities except
for any securities purchased by the Employer's employee stock
ownership plan or trust; or (b) individuals who constitute the
Company's Board of Directors on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was


approved by the same Nominating Committee serving under an Incumbent
Board, shall be, for purposes of this clause (b), considered as though
he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially
all the assets of the Bank or the Company or similar transaction in
which the Bank or Company is not the surviving institution occurs; or
(d) a proxy statement soliciting proxies from stockholders of the
Company, by someone other than the current management of the Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or similar transaction with one or more
corporations or financial institutions, and as a result such proxy
solicitation a plan of reorganization, merger consolidation or similar
transaction involving the Company is approved by the requisite vote of
the Company's stockholders; or (e) a tender offer is made for 25% or
more of the voting securities of the Company and the shareholders
owning beneficially or of record 25% or more of the outstanding
securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have
been accepted by the tender offeror. Notwithstanding anything to the
contrary herein, a "Change in Control" of the Bank or the Company
shall not be deemed to have occurred in the event of a conversion of
Pathfinder Bancorp, MHC to stock holding company form.

(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred, Executive shall be entitled to the
benefits provided in paragraphs (c), (d), (e), (f), (g) and (h) of
this Section 5 upon his subsequent termination of employment at any
time during the term of this Agreement, regardless of whether such
termination results from (i) his resignation or (ii) his dismissal
upon the Change in Control.

(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Employer shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or
his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the greater of the payments due for
the remaining term of the Agreement or 2.99 times the average of the
five preceding years' Base Salary, including bonuses and any other
cash compensation paid to the Executive during such years, and the
amount of any contributions made to any employee benefit plans, on
behalf of the Executive, maintained by the Employer during such years,
(hereinafter referred to as "Payment". Such Payment shall be made by
the Employer on the Date of Termination. At the election of the
Executive, which election shall be made on an annual basis during the
month of January, and which election is irrevocable for the year in
which made and upon the occurrence of a Change in Control, such
Payment may be made in a lump sum or paid in equal monthly
installments during the thirty-six (36) months following the
Executive's termination. In the event that no election is made,
payment of the Payment to the Executive will be made pro-rata on a
monthly basis during the remaining term of the Agreement.

(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Employer will cause to be continued
life, medical, dental and disability coverage substantially identical
to the coverage maintained by the Employer for Executive prior to his
severance. Such coverage and payments shall cease upon the expiration
of thirty-six (36) months.

(e) Upon the occurrence of a Change in Control, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to any Stock Option Plan of the Bank or Company.

(f) Upon the occurrence of a Change in Control, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to the Supplemental Executive Retirement Plan of the Bank or Company.

(g) Upon the occurrence of a Change in Control, the Executive shall become
fully vested in and entitled to all benefits awarded to him under the
Bank's or the Company's Recognition and Retention Plan or any
restricted stock plan in effect.

(h) Notwithstanding the preceding paragraphs of this Section 5, in the
event that:


(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits")
would be deemed to include an "excess parachute payment" under
Section 280G of the Internal Revenue Code or any successor
thereto, and

(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar
($1.00) less than an amount equal to the total amount of payments
permissible under Section 280G of the Internal Revenue Code or
any successor thereto, then the Termination Benefits to be paid
to Executive shall be so reduced so as to be a Non-Triggering
Amount.

(i) Notwithstanding the foregoing, there will be no reduction in the
Payment otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of
temporary disability.

(j) Any Payment made to Executive pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with 12 U.S.C.
1818(k) and any applicable regulations promulgated thereunder.

(k) The Executive shall not be entitled to immediately receive Payment
pursuant to this Section 5 if the Employer is not in compliance with
its minimum capital requirements or if such Payment would cause the
Employer's capital to be reduced below its minimum capital
requirements. In such event, Payment shall be deferred until such
times as the Employer is in capital compliance and provided further,
that in such event the Payment shall not exceed three times the
Executive's Base Salary for the immediately preceding year.

6. TERMINATION UPON RETIREMENT OR DISABILITY

Termination by the Employer of the Executive based on "Retirement" shall
mean termination in accordance with the Employer's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Employer and
other plans to which Executive is a party.

In the event Executive is unable to perform his duties under this Agreement
on a full-time basis for a period of six (6) consecutive months by reason of
illness or other physical or mental disability, the Employer may terminate this
Agreement, provided that the Employer shall continue to be obligated to pay the
Executive his Base Salary for one year, and provided further that any amounts
actually paid to Executive pursuant to any disability insurance or other similar
such program which the Employer has provided or may provide on behalf of its
employees or pursuant to any workman's or social security disability program
shall not reduce the compensation to be paid to the Executive pursuant to this
paragraph.

In the event of Executive's death during the term of the Agreement, his
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid Executive's Base Salary as defined in Paragraph 3(a)
at the rate in effect at the time Executive's death for the remaining term of
the Agreement.

7. TERMINATION FOR CAUSE

The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of


fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the
acts or omissions shall be measured against standards generally prevailing in
the financial services industry. For purposes of this paragraph, no act or
failure to act on the part of Executive shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Employer. Notwithstanding the foregoing, Executive shall not be
deemed to have been Terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-fourths of the members of the Boards of Directors of the
Company and the Bank at a meeting of said Boards called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Boards), finding that in the good
faith opinion of the Boards, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any unexercised stock options granted to
Executive under any stock option plan of the Bank, the Company or any subsidiary
or affiliate thereof, shall become null and void effective upon Executive's
receipt of Notice of Termination for Cause pursuant to Section 8 hereof, and
shall not be exercisable by Executive at any time subsequent to such Termination
for Cause.

8. NOTICE

(a) Any purported termination by the Employer or by Executive shall be
communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of Executive's employment under the provision so indicated.

(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not
be less than thirty (30) days from the date such Notice of Termination
is given).

(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon
the occurrence of a Change in Control and voluntary termination by the
Executive in which case the Date of Termination shall be the date
specified in the Notice, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction
(the time for appeal having expired and no appeal having been
perfected) and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Employer will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, Base Salary) and continue
Executive as a participant in all compensation, benefit and insurance
plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this
Agreement, provided such dispute is resolved within nine months after
the Date of Termination specified in the Notice or Termination;
notwithstanding the foregoing no compensation or benefits shall be
paid to Executive in the event the Executive is Terminated for Cause.
In the event that such Termination for Cause is found to have been
wrongful or such dispute is otherwise decided in Executive's favor,
the Executive shall be entitled to receive all compensation and
benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within such
nine- month period, the Employer shall not be obligated, upon final
resolution of such dispute, to pay Executive compensation and other
payments accruing more than nine months from the Date of the
Termination specified in the Notice of Termination. Amounts paid under
this Section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts
due under this Agreement.


9. POST-TERMINATION OBLIGATIONS

(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 9
during the term of this Agreement and for one (1) full year after the
expiration or termination hereof.

(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in
connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.

(c) The Employer's obligation to tender the payment of Payment and
Termination Benefits pursuant to Sections 4 and 5 hereof shall be
conditioned upon the Executive's prior written resignations from
membership in the Boards of Directors of the Bank and the Company.

10. NON-COMPETITION

(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4(c) hereof, Executive agrees not to compete with the Bank
and/or the Company for a period of one (1) year following such
termination in any city, town or county in which the Bank and/or the
Company has an office or has filed an application for regulatory
approval to establish an office, determined as of the effective date
of such termination, except as agreed to pursuant to a resolution duly
adopted by the Board. Executive agrees that during such period and
within said cities, towns and counties, Executive shall not work for
or advise, consult or otherwise serve with, directly or indirectly,
any entity whose business materially competes with the depository,
lending or other business activities of the Bank and/or the Company.
The parties hereto, recognizing that irreparable injury will result to
the Bank and/or the Company, its business and property in the event of
Executive's breach of this Subsection 10(a) agree that in the event of
any such breach by Executive, the Bank and/or the Company will be
entitled, in addition to any other remedies and damages available, to
an injunction to restrain the violation hereof by Executive,
Executive's partners, agents, servants, employers, employees and all
persons acting for or with Executive. Nothing herein will be construed
as prohibiting the Bank and/or the Company from pursuing any other
remedies available to the Bank and/or the Company for such breach or
threatened breach, including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Employer
and affiliates thereof, as it may exist from time to time, is a
valuable, special and unique asset of the business of the Employer.
Executive will not, during or after the term of his employment,
disclose any knowledge of the past, present, planned or considered
business activities of the Employer or affiliates thereof to any
person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, Executive may disclose any
knowledge of banking, financial and/or economic principles, concepts
or ideas which are not solely and exclusively derived from the
business plans and activities of the Employer, and Executive may
disclose any information regarding the Bank or the Company which is
otherwise publicly available. In the event of a breach or threatened
breach by the Executive of the Provisions of this Section 10, the
Employer will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present,
planned or considered business activities of the Employer or
affiliates thereof, or from rendering any services to any person,
firm, corporation, other entity to whom such knowledge, in whole or in
part, has been disclosed or is threatened to be disclosed. Nothing
herein will be construed as prohibiting the Employer from pursuing any
other remedies available to the Bank for such breach or threatened
breach, including the recovery of damages from Executive.


11. SOURCE OF PAYMENTS

All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Company, however, guarantees
payment and provision of all amounts and benefits due hereunder to Executive
and, if such amounts and benefits due from the Bank are not timely paid or
provided by the Bank, such amounts and benefits shall be paid or provided by the
Company.

12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS

(a) This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the
Employer or any predecessor of the Employer and Executive, except that
this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided. No
provision of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available
to him without reference to this Agreement.

(b) In the event that the provisions of this Agreement are in conflict
with the provisions of the Bank's or the Company's Stock Option Plan,
Supplemental Executive Retirement Plan, or Recognition and Retention
Plan (or any such restricted stock plan in effect) in which Executive
participates, this Agreement shall govern; provided further, however,
that this Agreement shall not supercede provisions that specifically
received prior approval by vote of shareholders of the Company.

13. NO ATTACHMENT

(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation, or to
execution, attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involuntary, to affect
any such action shall be null, void, and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Employer and their respective successors and
assigns.

14. MODIFICATION AND WAIVER

(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and
each such waiver shall operate only as to the specific term or
condition waived and shall not constitute a waiver of such term or
condition for the future as to any act other than that specifically
waived.

15. REQUIRED PROVISIONS

(a) The Employer may terminate the Executive's employment at any time, but
any termination by the Employer, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other
benefits under this Agreement. Executive shall not have the right to
receive compensation or other benefits for any period after
Termination for Cause as defined in Section 7 hereinabove.

(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Employer's affairs
by a notice served under Section 8(e)(3) (12 U.S.C. 1818(e)(3)) or


8(g) (12 U.S.C. 1818(g)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, the Employer's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Employer
may in its discretion (i) pay the Executive all or part of the
compensation withheld while their Agreement obligations were suspended
and (ii) reinstate (in whole or in part) any of the obligations which
were suspended.

(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Employer's affairs by an order
issued under Section 8(e) (12 U.S.C. 1818(e)) or 8(g) (12 U.S.C.
1818(g)) of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
all obligations of the Employer under this Agreement shall terminate
as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

(d) If the Employer is in default as defined in Section 3(x) (12 U.S.C.
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
all obligations of the Employer under this Agreement shall terminate
as of the date of default, but this paragraph shall not affect any
vested rights of the contracting parties.

(e) All obligations of the Employer under this Agreement shall be
terminated, except to the extent determined that continuation of the
Agreement is necessary for the continued operation of the institution,
(i) by the Federal Deposit Insurance Corporation ("FDIC"), at the time
FDIC enters into an agreement to provide assistance to or on behalf of
the Employer under the authority contained in Section 13(c) (12)
U.S.C. 1823(c)) of the Federal Deposit Insurance Act, as amended by
the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) when the Employer is determined by the FDIC to be in an
unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.

16. SEVERABILITY

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

17. HEADINGS FOR REFERENCE ONLY

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

18. GOVERNING LAW

This Agreement shall be governed by the laws of the State of New York, but
only to the extent not superseded by federal law.


19. ARBITRATION

Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.

20. PAYMENT OF LEGAL FEES

All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Employer, provided that the dispute or interpretation has
been settled by Executive and the Employer or resolved in the Executive's favor.

21. INDEMNIFICATION

The Employer shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Employer (whether or not he continues to be a director or
officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements (such settlements must be
approved by the Boards of Directors of the Employer). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Employer, however, such indemnification shall not extend to
matters as to which Executive is finally adjudged to be liable for willful
misconduct in the performance of his duties. No Indemnification shall be paid
that would violate 12 U.S.C. 1828(K) or any regulations promulgated thereunder.

22. SUCCESSOR TO THE EMPLOYER

The Employer shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Employer's obligations
under this Agreement, in the same manner and to the same extent that the
Employer would be required to perform if no such succession or assignment had
taken place.



SIGNATURES


IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed
and its seal to be affixed hereunto by its duly authorized officer, and
Executive has signed this Agreement, on the day and date first above written.

ATTEST: PATHFINDER BANK


/s/ Melissa A. Miller By: /s/ Janette Resnick
________________________ ___________________________
Secretary Janette Resnick
Chairman


ATTEST: PATHFINDER BANCORP, INC.


/s/ Melissa A. Miller By: /s/ Janette Resnick
________________________ ___________________________
Secretary Janette Resnick
Chairman


WITNESS: EXECUTIVE


/s/ Tonya Crisafulli By: /s/ Thomas W. Schneider
_________________________ ____________________________
Thomas W. Schneider



EXHIBIT 10.2
PATHFINDER BANCORP, INC.
PATHFINDER BANK
EMPLOYMENT AGREEMENT


This Agreement is made effective as of the 28th day of June, 2004, by and
between Pathfinder Bank (the "Bank"), a New York chartered stock savings bank,
with its principal administrative office at 214 West First Street, Oswego, New
York 13126-2547, jointly with Pathfinder Bancorp, Inc, the sole stockholder of
the Bank, and Edward A. Mervine (the "Executive"). Any reference to "Company"
herein shall mean Pathfinder Bancorp, Inc. or any successor thereto. Any
reference to "Employer" herein shall mean both the Bank and the Company or any
successors thereto

WHEREAS, the Employer wishes to assure itself of the services of Executive
for the period provided in this Agreement; and

WHEREAS, Executive is willing to serve in the employ of the Employer on a
full-time basis for said period.

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. POSITION AND RESPONSIBILITIES

During the period of his employment hereunder, Executive agrees to serve as
Vice-President and General Counsel of the Bank and as President and
Vice-President and General Counsel of the Company. During said period,
Executive also agrees to serve, if elected, as an officer and director of the
Bank, the Company and of any subsidiary or affiliate of the Employer. Failure
to reelect Executive as Vice-President and General Counsel of the Bank and the
Company without the consent of the Executive during the term of this Agreement
shall constitute a breach of this Agreement.

2. TERMS AND DUTIES

(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of
thirty-six (36) full calendar months thereafter. Commencing on the
first anniversary date of this Agreement, and continuing at each
anniversary date thereafter, the Agreement shall renew for an
additional year such that the remaining term shall be three (3) years
unless written notice is provided to Executive, at least ten (10) days
and not more than thirty (30) days prior to any such anniversary date,
that his employment shall cease at the end of thirty-six (36) months
following such anniversary date. Prior to each notice period for
non-renewal, the disinterested members of the Board of Directors of
the Bank ("Board") will conduct a comprehensive performance evaluation
and review of the Executive for purposes of determining whether to
extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.

(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all
his business time, attention, skill, and efforts to the faithful
performance of his duties hereunder including activities and services
related to the legal needs of the Employer; provided, however, that,
Executive, , hold any offices or positions in, companies or
organizations, which, in such Board's judgment, will not present any
conflict of interest with the Bank, or materially affect the
performance of Executive's duties pursuant to this Agreement.
Moreover, the Executive may continue to practice law independently of
his employment provided (1) said practice does not routinely require
in excess of 10 hours per week of the executive's time and (2) does
not present a conflict of interest to the Bank unless said conflict is
waived by the Bank or Employer.


3. COMPENSATION AND REIMBURSEMENT

(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The
Bank shall pay Executive as compensation a salary of not less than
$115,500per year ("Base Salary"). Such Base Salary shall be payable
biweekly. During the period of this Agreement, Executive's Base Salary
shall be reviewed at least annually. Such review shall be conducted by
a Committee designated by the Board, and the Board may increase
Executive's Base Salary. In addition to the Base Salary provided in
this Section 3(a), the Bank shall provide Executive at no cost to
Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.

(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from
immediately prior to the beginning of the term of this Agreement, and
the Bank will not, without Executive's prior written consent, make any
changes in such plans, arrangements or perquisites which would
adversely affect Executive's rights or benefits thereunder. Without
limiting the generality of the foregoing provisions of this Subsection
(b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to,
retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plans, medical coverage or
any other employee benefit plan or arrangement made available by the
Bank in the future to its senior executives and key management
employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as
provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or
arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.

(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Employer shall pay or reimburse Executive for all
reasonable travel and other reasonable expenses incurred by Executive
performing his obligations under this Agreement and may provide such
additional compensation in such form and such amounts as the Board may
from time to time determine.

(d) Compensation and reimbursement to be paid pursuant to paragraphs (a),
(b) and (c) of this Section 3 shall be paid by the Bank and the
Company, respectively on a pro rata basis based upon the amount of
service the Executive devotes to the Bank and Company, respectively.


4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 8 and 15.

(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term
of employment under this Agreement. As used in this Agreement, an
"Event of Termination" shall mean and include any one or more of the
following: (i) the termination by the Bank or the Company of
Executive's full-time employment hereunder for any reason other than,
(A) Disability or Retirement as defined in Section 6 below, (B) a
Change in Control, as defined in Section 5(a) hereof, or (C)
Termination for Cause as defined in Section 7 hereof; or (ii)
Executive's resignation from the Bank's or the Company's employ, upon
any (A) failure to elect or reelect or to appoint or reappoint
Executive as Vice-President and General Counsel, (B) material change
in Executive's function, duties, or responsibilities, which change
would cause Executive's position to become one of lesser
responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, (C) a relocation of Executive's
principal place of employment by more than 30 miles from its location
at the effective date of this Agreement, or a material reduction in
the benefits and perquisites to the Executive from those being
provided as of the effective date of this Agreement, (D) liquidation
or dissolution of the Bank or Company other than liquidations or
dissolutions that are caused by reorganizations that do not affect the
status of Executive, (E, or (E) breach of this Agreement by the Bank.
Upon the occurrence of any event described in clauses (ii)(A), (B),
(C), (D), or (E), above, Executive shall have the right to elect to
terminate his employment under this Agreement by resignation upon
sixty (60) days prior written notice given within a reasonable period
of time not to exceed four calendar months after the initial event
giving rise to said right to elect. Notwithstanding the preceding
sentence, in the event of a continuing breach of this Agreement by the
Employer, the Executive, after giving due notice within the prescribed
time frame of an initial event specified above, shall not waive any of
his rights solely under this Agreement and this Section 4 by virtue of
the fact that Executive has submitted his resignation but has remained
in the employment of the Employer and is engaged in good faith
discussions to resolve any occurrence of an event described in clauses
(A), (B), (C), (D), () and (E) above.

(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Employer shall pay
Executive, or, in the event of his subsequent death, his beneficiary
or beneficiaries, or his estate, as the case may be, as severance pay
or liquidated damages, or both, a sum equal to three (3) times the sum
of (i) Base Salary and (ii) the highest rate of bonus awarded to the
Executive during the prior three years, , provided, however, that if
the Employer is not in compliance with its minimum capital
requirements or if such payments would cause the Employer's capital to
be reduced below its minimum capital requirements, such payments shall
be deferred until such time as the Employer is in capital compliance.
At the election of the Executive, which election is to be made on an
annual basis during the month of January, and which election is
irrevocable for the year in which made and upon the occurrence of an
Event of Termination, such payments shall be made in a lump sum or
paid monthly during the remaining term of the Agreement following the
Executive's termination. In the event that no election is made,
payment to the Executive will be made on a monthly basis during the
remaining term of the Agreement. Such payments shall not be reduced in
the event the Executive obtains other employment following termination
of employment.

(c) Notwithstanding the provisions of Sections 4(a) and (b), and in the
event that there has not been a Change in Control as defined in
Section 5(a) nor an Event of Termination, as defined in Section 4(a),
upon the voluntary termination by the Executive upon giving sixty days
notice to the Employer (which itself shall not be deemed to constitute
an "Event of Termination" as defined), the Employer, at the discretion
of the Board of Directors, shall pay Executive, or in the event of his


subsequent death, his beneficiary or beneficiaries, or his estate, as
the case may be, a severance payment in an amount to be determined by
the Board of Directors at the time of such voluntary termination by
the Executive. Such severance payment shall not exceed three (3) times
the average of the three preceding years' Base Salary, including
bonuses and any other cash compensation paid to the Executive during
such years, and the amount of any benefits received pursuant to any
employee benefit plans, on behalf of the Executive, maintained by the
Employer during such years; provided, however, that if the Employer is
not in compliance with its minimum capital requirements or if such
payments would cause the Employer's capital to be reduced below its
minimum capital requirements, such payments shall be deferred until
such time as the Employer is in capital compliance, and provided
further, that in no event shall total severance compensation from all
sources exceed three times the Executive's Base Salary for the
immediately preceding year. At the election of the Executive, which
election is to be made on an annual basis during the month of January,
and which election is irrevocable for the year in which made and upon
the Executive's voluntary termination, any payments shall be made in a
lump sum or paid monthly during the remaining term of the Agreement
following the Executive's termination. In the event that no election
is made, any payment to the Executive will be made on a monthly basis
during the remaining term of the agreement. Such payments shall not be
reduced in the event the Executive obtains other employment following
termination of employment.

(d) Upon the occurrence of an Event of Termination, the Employer will
cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Employer for
Executive prior to his termination, provided that such benefits shall
not be provided in the event they should constitute an unsafe or
unsound banking practice relating to executive compensation and
employment contracts pursuant to applicable regulations, as is now or
hereafter in effect. Such coverage shall cease upon the expiration of
the remaining term of this Agreement.

(e) Upon the occurrence of an Event of Termination, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to any Stock Option Plan of the Bank or Company.

(f) Upon the occurrence of an Event of Termination, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to Supplemental Executive Retirement Plan of the Bank or Company
applicable to him, if any

(g) Upon the occurrence of an Event of Termination, the Executive shall
become fully vested in and entitled to all benefits awarded to him
under the Bank's or the Company's Recognition and Retention Plan or
any restricted stock plan in effect.

5. CHANGE IN CONTROL

(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or Company. For purposes of
this Agreement, a "Change in Control" of the Bank or Company shall
mean a change in control of a nature that (i) would be required to be
reported in response to Item 1(a) of the current report on Form 8-K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"); or (ii)
results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners Loan Act, as amended, and applicable rules
and regulations promulgated thereunder, as in effect at the time of
the Change in Control (collectively, the "HOLA"); or (iii) without
limitation such a Change in Control shall be deemed to have occurred
at such time as (a) any "person" (as the term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of
the combined voting power of Company's outstanding securities except
for any securities purchased by the Employer's employee stock
ownership plan or trust; or (b) individuals who constitute the
Company's Board of Directors on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was
approved by the same Nominating Committee serving under an Incumbent
Board, shall be, for purposes of this clause (b), considered as though
he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially
all the assets of the Bank or the Company or similar transaction in
which the Bank or Company is not the surviving institution occurs; or
(d) a proxy statement soliciting proxies from stockholders of the
Company, by someone other than the current management of the Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or similar transaction with one or more
corporations or financial institutions, and as a result such proxy
solicitation a plan of reorganization, merger consolidation or similar
transaction involving the Company is approved by the requisite vote of
the Company's stockholders; or (e) a tender offer is made for 25% or


more of the voting securities of the Company and the shareholders
owning beneficially or of record 25% or more of the outstanding
securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have
been accepted by the tender offeror. Notwithstanding anything to the
contrary herein, a "Change in Control" of the Bank or the Company
shall not be deemed to have occurred in the event of a conversion of
Pathfinder Bancorp, MHC to stock holding company form.

(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred, Executive shall be entitled to the
benefits provided in paragraphs (c), (d), (e), (f), (g) and (h) of
this Section 5 upon his subsequent termination of employment at any
time during the term of this Agreement, regardless of whether such
termination results from (i) his resignation or (ii) his dismissal
upon the Change in Control.

(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Employer shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or
his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the greater of the payments due for
the remaining term of the Agreement or 2.99 times the average of the
five preceding years' Base Salary, including bonuses and any other
cash compensation paid to the Executive during such years, and the
amount of any contributions made to any employee benefit plans, on
behalf of the Executive, maintained by the Employer during such years,
(hereinafter referred to as "Payment". Such Payment shall be made by
the Employer on the Date of Termination. At the election of the
Executive, which election shall be made on an annual basis during the
month of January, and which election is irrevocable for the year in
which made and upon the occurrence of a Change in Control, such
Payment may be made in a lump sum or paid in equal monthly
installments during the thirty-six (36) months following the
Executive's termination. In the event that no election is made,
payment of the Payment to the Executive will be made pro-rata on a
monthly basis during the remaining term of the Agreement.
(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Employer will cause to be continued
life, medical, dental and disability coverage substantially identical
to the coverage maintained by the Employer for Executive prior to his
severance. Such coverage and payments shall cease upon the expiration
of thirty-six (36) months.

(e) Upon the occurrence of a Change in Control, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to any Stock Option Plan of the Bank or Company.

(f) Upon the occurrence of a Change in Control, Executive shall become
fully vested in and entitled to all benefits granted to him pursuant
to Supplemental Executive Retirement Plan of the Bank or Company ,
applicable to him, if any.

(g) Upon the occurrence of a Change in Control, the Executive shall become
fully vested in and entitled to all benefits awarded to him under the
Bank's or the Company's Recognition and Retention Plan or any
restricted stock plan in effect.

(h) Notwithstanding the preceding paragraphs of this Section 5, in the
event that:

(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits")
would be deemed to include an "excess parachute payment" under
Section 280G of the Internal Revenue Code or any successor
thereto, and

(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar
($1.00) less than an amount equal to the total amount of payments
permissible under Section 280G of the Internal Revenue Code or
any successor thereto, then the Termination Benefits to be paid
to Executive shall be so reduced so as to be a Non-Triggering
Amount.


(i) Notwithstanding the foregoing, there will be no reduction in the
Payment otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of
temporary disability.

(j) Any Payment made to Executive pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with 12 U.S.C.
1818(k) and any applicable regulations promulgated thereunder.

(k) The Executive shall not be entitled to immediately receive Payment
pursuant to this Section 5 if the Employer is not in compliance with
its minimum capital requirements or if such Payment would cause the
Employer's capital to be reduced below its minimum capital
requirements. In such event, Payment shall be deferred until such
times as the Employer is in capital compliance and provided further,
that in such event the Payment shall not exceed three times the
Executive's Base Salary for the immediately preceding year.

6. TERMINATION UPON RETIREMENT OR DISABILITY

Termination by the Employer of the Executive based on "Retirement" shall
mean termination in accordance with the Employer's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Employer and
other plans to which Executive is a party.

In the event Executive is unable to perform his duties under this Agreement
on a full-time basis for a period of six (6) consecutive months by reason of
illness or other physical or mental disability, the Employer may terminate this
Agreement, provided that the Employer shall continue to be obligated to pay the
Executive his Base Salary for one year, and provided further that any amounts
actually paid to Executive pursuant to any disability insurance or other similar
such program which the Employer has provided or may provide on behalf of its
employees or pursuant to any workman's or social security disability program
shall not reduce the compensation to be paid to the Executive pursuant to this
paragraph.

In the event of Executive's death during the term of the Agreement, his
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid Executive's Base Salary as defined in Paragraph 3(a)
at the rate in effect at the time Executive's death for the remaining term of
the Agreement.

7. TERMINATION FOR CAUSE

The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated


duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the
acts or omissions shall be measured against standards generally prevailing in
the financial services industry. For purposes of this paragraph, no act or
failure to act on the part of Executive shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Employer. Notwithstanding the foregoing, Executive shall not be
deemed to have been Terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-fourths of the members of the Boards of Directors of the
Company and the Bank at a meeting of said Boards called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Boards), finding that in the good
faith opinion of the Boards, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any unexercised stock options granted to
Executive under any stock option plan of the Bank, the Company or any subsidiary
or affiliate thereof, shall become null and void effective upon Executive's
receipt of Notice of Termination for Cause pursuant to Section 8 hereof, and
shall not be exercisable by Executive at any time subsequent to such Termination
for Cause.

8. NOTICE

(a) Any purported termination by the Employer or by Executive shall be
communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of Executive's employment under the provision so indicated.

(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not
be less than thirty (30) days from the date such Notice of Termination
is given).

(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon
the occurrence of a Change in Control and voluntary termination by the
Executive in which case the Date of Termination shall be the date
specified in the Notice, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction
(the time for appeal having expired and no appeal having been
perfected) and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Employer will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, Base Salary) and continue
Executive as a participant in all compensation, benefit and insurance
plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this
Agreement, provided such dispute is resolved within nine months after
the Date of Termination specified in the Notice or Termination;
notwithstanding the foregoing no compensation or benefits shall be
paid to Executive in the event the Executive is Terminated for Cause.
In the event that such Termination for Cause is found to have been
wrongful or such dispute is otherwise decided in Executive's favor,
the Executive shall be entitled to receive all compensation and
benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within such
nine- month period, the Employer shall not be obligated, upon final
resolution of such dispute, to pay Executive compensation and other
payments accruing more than nine months from the Date of the
Termination specified in the Notice of Termination. Amounts paid under
this Section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts
due under this Agreement.


9. POST-TERMINATION OBLIGATIONS

(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 9
during the term of this Agreement and for one (1) full year after the
expiration or termination hereof.

(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in
connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.

10. NON-COMPETITION

(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4(c) hereof, Executive agrees not to compete with the Bank
and/or the Company for a period of one (1) year following such
termination in any city, town or county in which the Bank and/or the
Company has an office or has filed an application for regulatory
approval to establish an office, determined as of the effective date
of such termination, except as agreed to pursuant to a resolution duly
adopted by the Board. Executive agrees that during such period and
within said cities, towns and counties, Executive shall not work for
or advise, consult or otherwise serve with, directly or indirectly,
any entity whose business materially competes with the depository,
lending or other business activities of the Bank and/or the Company.
The parties hereto, recognizing that irreparable injury will result to
the Bank and/or the Company, its business and property in the event of
Executive's breach of this Subsection 10(a) agree that in the event of
any such breach by Executive, the Bank and/or the Company will be
entitled, in addition to any other remedies and damages available, to
an injunction to restrain the violation hereof by Executive,
Executive's partners, agents, servants, employers, employees and all
persons acting for or with Executive. Nothing herein will be construed
as prohibiting the Bank and/or the Company from pursuing any other
remedies available to the Bank and/or the Company for such breach or
threatened breach, including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Employer
and affiliates thereof, as it may exist from time to time, is a
valuable, special and unique asset of the business of the Employer.
Executive will not, during or after the term of his employment,
disclose any knowledge of the past, present, planned or considered
business activities of the Employer or affiliates thereof to any
person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, Executive may disclose any
knowledge of banking, financial and/or economic principles, concepts
or ideas which are not solely and exclusively derived from the
business plans and activities of the Employer, and Executive may
disclose any information regarding the Bank or the Company which is
otherwise publicly available. In the event of a breach or threatened
breach by the Executive of the Provisions of this Section 10, the
Employer will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present,
planned or considered business activities of the Employer or
affiliates thereof, or from rendering any services to any person,
firm, corporation, other entity to whom such knowledge, in whole or in
part, has been disclosed or is threatened to be disclosed. Nothing
herein will be construed as prohibiting the Employer from pursuing any
other remedies available to the Bank for such breach or threatened
breach, including the recovery of damages from Executive.


11. SOURCE OF PAYMENTS

All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Company, however, guarantees
payment and provision of all amounts and benefits due hereunder to Executive
and, if such amounts and benefits due from the Bank are not timely paid or
provided by the Bank, such amounts and benefits shall be paid or provided by the
Company.

12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS

(a) This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the
Employer or any predecessor of the Employer and Executive, except that
this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided. No
provision of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available
to him without reference to this Agreement.

(b) In the event that the provisions of this Agreement are in conflict
with the provisions of the Bank's or the Company's Stock Option Plan,
Supplemental Executive Retirement Plan, or Recognition and Retention
Plan (or any such restricted stock plan in effect) in which Executive
participates, this Agreement shall govern; provided further, however,
that this Agreement shall not supercede provisions that specifically
received prior approval by vote of shareholders of the Company.

13. NO ATTACHMENT

(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation, or to
execution, attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involuntary, to affect
any such action shall be null, void, and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Employer and their respective successors and
assigns.

14. MODIFICATION AND WAIVER

(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and
each such waiver shall operate only as to the specific term or
condition waived and shall not constitute a waiver of such term or
condition for the future as to any act other than that specifically
waived.

15. REQUIRED PROVISIONS

(a) The Employer may terminate the Executive's employment at any time, but
any termination by the Employer, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other
benefits under this Agreement. Executive shall not have the right to
receive compensation or other benefits for any period after
Termination for Cause as defined in Section 7 hereinabove.

(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Employer's affairs


by a notice served under Section 8(e)(3) (12 U.S.C. 1818(e)(3)) or
8(g) (12 U.S.C. 1818(g)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, or if the Executive is suspended ffrom the practice of
law the Employer's obligations under this Agreement shall be suspended
as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, or if the Executive's
suspension to practice is reversed, the Employer may in its discretion
(i) pay the Executive all or part of the compensation withheld while
their Agreement obligations were suspended and (ii) reinstate (in
whole or in part) any of the obligations which were suspended.

(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Employer's affairs by an order
issued under Section 8(e) (12 U.S.C. 1818(e)) or 8(g) (12 U.S.C.
1818(g)) of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
or if the Executive is disbarred from the practice of law, all
obligations of the Employer under this Agreement shall terminate as of
the effective date of the order, but vested rights of the contracting
parties shall not be affected.

(d) If the Employer is in default as defined in Section 3(x) (12 U.S.C.
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
all obligations of the Employer under this Agreement shall terminate
as of the date of default, but this paragraph shall not affect any
vested rights of the contracting parties.

(e) All obligations of the Employer under this Agreement shall be
terminated, except to the extent determined that continuation of the
Agreement is necessary for the continued operation of the institution,
(i) by the Federal Deposit Insurance Corporation ("FDIC"), at the time
FDIC enters into an agreement to provide assistance to or on behalf of
the Employer under the authority contained in Section 13(c) (12)
U.S.C. 1823(c)) of the Federal Deposit Insurance Act, as amended by
the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) when the Employer is determined by the FDIC to be in an
unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.

16. SEVERABILITY

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

17. HEADINGS FOR REFERENCE ONLY

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

18. GOVERNING LAW

This Agreement shall be governed by the laws of the State of New York, but
only to the extent not superseded by federal law.


19. ARBITRATION

Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.

20. PAYMENT OF LEGAL FEES

All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Employer, provided that the dispute or interpretation has
been settled by Executive and the Employer or resolved in the Executive's favor.

21. INDEMNIFICATION

The Employer shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been an officer
of the Employer (whether or not he continues to be an officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements (such settlements must be approved by the
Boards of Directors of the Employer). If such action, suit or proceeding is
brought against Executive in his capacity as an officer of the Employer,
however, such indemnification shall not extend to matters as to which Executive
is finally adjudged to be liable for willful misconduct in the performance of
his duties. No Indemnification shall be paid that would violate 12 U.S.C.
1828(K) or any regulations promulgated thereunder.

22. SUCCESSOR TO THE EMPLOYER

The Employer shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Employer's obligations
under this Agreement, in the same manner and to the same extent that the
Employer would be required to perform if no such succession or assignment had
taken place.




SIGNATURES


IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed
and its seal to be affixed hereunto by its duly authorized officer, and
Executive has signed this Agreement, on the day and date first above written.

ATTEST: PATHFINDER BANK


/s/ Melissa A. Miller By: /s/ Thomas W. Schneider
_________________________ ___________________________________
Secretary Thomas W. Schneider
President and Chief Executive Officer


ATTEST: PATHFINDER BANCORP, INC.



/s/ Melissa A. Miller By: /s/ Thomas W. Schneider
_________________________ ___________________________________
Secretary Thomas W. Schneider
President and Chief Executive Officer


WITNESS: EXECUTIVE


Karen Moskal By: /s/ Edward A. Mervine
_________________________ ___________________________________
Edward A.Mervine


EXHIBIT 31.1

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

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Thomas W. Schneider, President and Chief Executive Officer, certify
that:

1. I have reviewed the June 30, 2004 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)) 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) 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
(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors:
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


August 16, 2004 /s/ Thomas W. Schneider
________________ ____________________________
Date Thomas W. Schneider
President and Chief Executive Officer



EXHIBIT 31.2

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

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, James A. Dowd, Vice President and Chief Financial Officer, certify that:

1. I have reviewed the June 30, 2004 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)) 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) 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
(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors:
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


August 16, 2004 /s/ James A. Dowd
___________________ ___________________________________
Date James A. Dowd
Vice President and Chief Financial Officer


EXHIBIT 32.1

Section 1350 Certification of the Chief Executive and Chief Financial Officer

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



Thomas W. Schneider, President and Chief Executive Officer, and James A. Dowd,
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 June 30, 2004 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; and

2. the information contained in the report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

The purpose of this statement is solely to comply with Title 18, Chapter 63,
Section 1350 of the United States Code, as amended by Section 906 of the
Sarbanes-Oxley Act of 2002.





August 16, 2004 /s/ Thomas W. Schneider
___________________ ___________________________________
Date Thomas W. Schneider
President and Chief Executive Officer


August 16, 2004 /s/ James A. Dowd
___________________ ___________________________________
Date James A. Dowd
Vice President and Chief Financial Officer