Core earnings, which represent earnings exclusive of impairment charges inthe investment securities portfolio, resulted in net income of $1.3million, or $.53 per diluted share for the nine months ended September 30,2008. These earnings resulted in a return on average assets and return onaverage equity of .51% and 7.95% respectively. Management believes thatthe presentation of core earnings is more representative of the results ofoperations and the ongoing earnings potential of the company.

The Company recorded impairment charges on investment security holdingstotaling $1.3 million, net of the related tax benefits, during the 3rdquarter of 2008. These charges relate to Company holdings in a seniorunsecured note issued by Lehman Brothers Holdings, Inc., a position in theAMF Large Cap Equity Fund, and holdings in the AMF Ultra Short MortgageFund. In addition, during the second quarter of 2008, the Company recordedan investment security impairment charge of $205,000, net of taxes, on theAMF Ultra Short Mortgage Fund.

"The financial crisis that deepened in the third quarter, including thebankruptcy filing of Lehman Brothers Holdings, has resulted in impairmentcharges on three security holdings that have significantly impacted whatotherwise are solid results for the first nine months of this year,"according to Thomas W. Schneider, President and CEO. "Security positionsin a $1 million Lehman Brothers Bond, a large cap equity mutual fund, and amortgage-backed security mutual fund, have been marked to market atSeptember 30, 2008 to values that have resulted in unrealized losses ofapproximately $1.5 million, net of tax, year-to-date," Schneider stated.

"Exclusive of these securities charges," Schneider continued, "theCompany's core earnings show significant improvement over prior periods.Core earnings for the quarter ended September 30, 2008 were $474,000compared to $306,000 in the prior year. Year-to-date core earnings for2008 were $1.3 million compared to $637,000. Exclusive of the securitiesimpairment charges, year to date return on equity is 7.95% compared to4.03% in the prior year and basic core earnings per share of $.53 year todate compared to $.26 in the prior year."

"While the impaired securities losses are extremely disappointing, our corebusiness continues to grow successfully," Schneider said. "We have hadstrong loan growth over the last twelve months with total loans increasing$27 million, or 12.7%, with good portfolio diversification betweenresidential, commercial and consumer loans. The Central New York regionremains resilient through this current economic cycle and we continue toprovide loans to creditworthy individuals and businesses. The Bank's netinterest margin continues to expand and operating expenses have remainedstable. We have been increasing our provision for loan losses commensuratewith our loan portfolio growth and the risk environment inherent in aweakened national economy."

"We are a well capitalized bank," Schneider continued, "and we remain readyto serve the loan and deposit needs of our community. We are cautiouslyoptimistic, despite the current economic down cycle, for three primaryreasons: 1) we believe our business model of prudent lending andmanagement into a well-known local market has been validated by the eventsthat led to the current crisis; 2) the Central New York market has not beensubject to over valued real estate assets and will suffer less than otherregions of the country during this economic downturn; and 3) we areexperiencing decreased competitive forces and believe opportunities will bepresent as other banks consolidate."

Net interest income for the quarter ended September 30, 2008, increased 29%when compared to the same period during 2007. Interest income increased$359,000, or 8%, combined with a decrease in interest expense of $269,000,or 13%. Net interest rate spread increased to 3.29% for the third quarterof 2008 from 2.85% for the same period in 2007. Average interest-earningassets increased 14% to $321.4 million for the quarter ended September 30,2008 as compared to $282.5 million for the same quarter of 2007. The yieldon interest-earning assets decreased 29 basis points to 5.84% compared to6.13% for the same period in 2007. The increase in average earning assetsis primarily attributable to a $26.4 million increase in the averagebalance of the loan portfolio, an $11.5 million increase in the averagebalance of the investment securities portfolio, and an increase in theaverage balance of interest earning deposits of $887,000. Averageinterest-bearing liabilities increased $33.9 million and the cost of fundsdecreased 73 basis points to 2.55% from 3.28% for the same period in 2007.The increase in average interest-bearing liabilities resulted primarilyfrom a $26.8 million and a $7.1 million increase in the average balance ofborrowed funds and deposits, respectively. The borrowed funds areprimarily short and mid-term advances from the Federal Home Loan Bank ofNew York.

The provision for loan losses for the quarter ended September 30, 2008increased to $270,000 from $155,000 for the same period in 2007. Theincreased provision is reflective of a growing loan portfolio and one moreheavily weighted to commercial term and commercial real estate, which havehigher inherent risk characteristics than a traditional consumer realestate portfolio, as well as a general weakening in economic conditions.The Company's ratio of the allowance for loan losses to period-end loansincreased to 0.92% at September 30, 2008 as compared to 0.76% at December31, 2007. Nonperforming loans to period-end loans increased to 1.10% atSeptember 30, 2008 from 0.71% at December 31, 2007. Generallydelinquencies have risen above the lows experienced in recent history.While these current levels are not outside of the bank's historicdelinquency trends, the generally weak economic conditions nationally andthe strain on consumer discretionary income have caused management tocarefully monitor and quickly react to these trends. In this regard, thecompany has expanded its levels of loan loss provisioning and formed anasset quality committee whose purpose is to identify and react to negativeportfolio trends. Management believes the financial strength of theindividual borrowers, combined with the related value of any underlyingcollateral, will not result in any recorded loss beyond currentlyestablished reserves.

Non-interest income, exclusive of gains and losses from the sale ofsecurities, loans and foreclosed real estate, increased to $718,000 for thequarter ended September 30, 2008 compared to $670,000 for the same quarterin the prior year. The increase in non-interest income is primarilyattributable to an increase in service charges on deposit accounts andincreased debit card and ATM usage fees.

The increase in net securities losses, during the 3rd quarter of 2008 ascompared to the same period in 2007, is a result of recording another-than-temporary impairment charge of $875,000 relating to theCompany's $1,000,000 holdings in a senior unsecured note issued by LehmanBrothers Holdings Inc., which filed a Chapter 11 Bankruptcy petition onSeptember 15, 2008. In addition to this charge, the Company also recordedanother-than-temporary impairment charge of $690,000 relating to holdings inthe AMF Large Cap Equity Fund and $269,000 relating to holdings in the AMFUltra Short Mortgage Fund. At September 30, 2008, the total carrying valueof the Company's remaining investment in the AMF Large Cap Equity Fund isapproximately $2,192,000. The carrying value of the AMF Ultra ShortMortgage Fund at September 30, 2008 is $2,804,000.

Non-interest expenses increased $50,000, or 2%, for the quarter endedSeptember 30, 2008, when compared to the same period in the prior year. Anincrease in salaries and employee benefits of $21,000 was primarily due tomerit based wage adjustments. Building occupancy expenses were $26,000higher than the comparable quarter of 2007 as a result of increases in bothdepreciation and equipment maintenance. Professional and other servicesexpense increased $28,000 primarily from advertising campaigns andinvestment management fees. Other operating expenses increased $34,000 dueto expenses related to other real estate owned and office supplies. Theseincreases were offset by decreases in information technology andamortization expenses. Amortization expense decreased $55,000 as coredeposit intangibles, from a 2002 branch acquisition, became fully amortizedin October 2007. Information technology expenses were $4,000 lower thanthe comparable quarter of 2007 as a result of decreased depreciation.

Troubled Asset Relief Program - Capital Purchase Program

The board of directors and management are presently analyzing the potentialmerits of participating in the Capital Purchase Program (CPP) of theTreasury Department's Troubled Asset Relief Program (TARP). It is thegeneral view of the board and management that in the present nationaleconomic risk environment, enhancing the Company's capital ratios is bothprudent, given the current climate, and potentially opportunistic as wemove into the next business cycle. Additionally, any increase to capitalwill continue to support the bank's lending activities to individuals,families, and businesses in our community.

Statement Regarding Non-GAAP Financial Measures

This release contains supplemental financial information determined bymethods other than in accordance with Accounting Principles GenerallyAccepted in the United States of America ("GAAP"). The Company'smanagement believes that such non-GAAP financial measures are useful tomanagement and investors as it enhances their ability to evaluate andcompare the Company's operating results from period to period in ameaningful manner, as operating results excluding other than temporaryimpairment charges on its investment security holdings are essential inunderstanding the financial performance of the Company, and is morerepresentative of the basis that management utilizes to monitor financialperformance. Readers are cautioned that non-GAAP measures should not beconsidered as an alternative to any measure of performance as promulgatedunder GAAP, and should consider the impairment charges recorded during2008 in assessing the Company's performance. Non-GAAP measures havelimitations as analytical tools, and investors should not consider them inisolation or as a substitute for analyzing the Company's performance underGAAP, nor are they necessarily comparable to non-GAAP measures presented byother companies.

About Pathfinder Bancorp, Inc.

Pathfinder Bancorp, Inc. is the mid-tier holding company of PathfinderBank, a New York chartered savings bank headquartered in Oswego, New York.The Bank has seven full service offices located in its market areaconsisting of Oswego County. Financial highlights for Pathfinder Bancorp,Inc. are attached. Presently, the only business conducted by PathfinderBancorp, Inc. is the 100% ownership of Pathfinder Bank and PathfinderStatutory Trust I.

This release may contain certain forward-looking statements, which arebased on management's current expectations regarding economic, legislative,and regulatory issues that may impact the Company's earnings in futureperiods. Factors that could cause future results to vary materially fromcurrent management expectations include, but are not limited to, generaleconomic conditions, changes in interest rates, deposit flows, loan demand,real estate values, and competition; changes in accounting principles,policies, or guidelines; changes in legislation or regulation; andeconomic, competitive, governmental, regulatory, and technological factorsaffecting the Company's operations, pricing, products, and services.

PATHFINDER BANCORP, INC. FINANCIAL HIGHLIGHTS (dollars in thousands except per share amounts) For the three months For the nine months ended September 30, ended September 30, (Unaudited) (Unaudited) -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- ---------Condensed Income Statement Interest and dividend income $ 4,659 $ 4,300 $ 13,665 $ 12,906 Interest expense 1,878 2,147 5,835 6,504 --------- --------- --------- --------- Net interest income 2,781 2,153 7,830 6,402 Provision for loan losses 270 155 550 280 --------- --------- --------- --------- Net interest income after provision for loan losses 2,511 1,998 7,280 6,122 Noninterest income 718 670 2,069 1,910 Net (losses) gains on securities, loans and foreclosed real estate (1,893) 122 (2,229) 150 Noninterest expense 2,462 2,412 7,408 7,397 --------- --------- --------- --------- Income before taxes (1,126) 378 (288) 785 (Benefit)/provision for income taxes (288) 72 (82) 148 --------- --------- --------- --------- Net (loss)/income $ (838) $ 306 $ (206) $ 637 ========= ========= ========= =========Key Earnings Ratios Return on average assets -0.97% 0.39% -0.08% 0.27% Return on average equity -15.65% 5.80% -1.25% 4.03% Net interest margin (tax equivalent) 3.50% 3.10% 3.38% 3.04%Share and Per Share Data Basic weighted average shares outstanding 2,484,832 2,483,532 2,483,944 2,482,886 ab $ (0.34) $ 0.12 $ (0.08) $ 0.26 Diluted earnings per share (0.34) 0.12 (0.08) 0.26 Cash dividends per share 0.1025 0.1025 0.308 0.308 Book value per share - - 8.33 8.48 Reconciliation Table for Non-GAAP Financial Measures For the three For the nine months ended months ended September 30, 2008 September 30, 2008 ------------------ ------------------ Net Loss $ (838,000) $ (206,000) Other than temporary impairment charge - investments 1,834,000 2,176,000 Related tax benefit (522,000) * (659,000) * ------------------ ------------------ Core earnings $ 474,000 $ 1,311,000 ================== ================== Return on average assets -0.97% -0.08% Other-than-temporary impairment, net of tax 1.53% 0.59% ------------------ ------------------ Core earnings return on average assets 0.56% 0.51% ================== ================== Return on average equity -15.65% -1.25% Other than temporary impairment, net of tax 24.50% 9.20% ------------------ ------------------ Core earnings return on average equity 8.85% 7.95% ================== ================== Diluted earnings per share ($ 0.34) ($ 0.08) Other than temporary impairment, net of tax 0.53 0.61 ------------------ ------------------ Core earnings, diluted earnings per share $ 0.19 $ 0.53 ================== ================== * Net of a deferred tax asset valuation reserve of $212,000 for the three month and nine month period, respectively. (Unaudited) (Unaudited) September 30, December 31, September 30, 2008 2007 2007 ------------- ------------- -------------Selected Balance Sheet Data Assets $ 352,895 $ 320,691 $ 313,841 Earning assets 321,397 290,192 283,444 Total loans 243,223 222,749 215,855 Deposits 264,753 251,085 255,919 Borrowed Funds 57,155 38,410 28,010 Trust Preferred Debt 5,155 5,155 5,155 Shareholders' equity 20,698 21,704 21,056Asset Quality Ratios Net loan charge-offs (annualized) to average loans -0.01% 0.08% 0.08% Allowance for loan losses to period end loans 0.92% 0.76% 0.76% Allowance for loan losses to nonperforming loans 83.71% 107.04% 80.72% Nonperforming loans to period end loans 1.10% 0.71% 0.94% Nonperforming assets to total assets 0.85% 0.77% 0.75%

CONTACT:Thomas W. SchneiderPresident, CEOJames A. DowdVice President, CFOTelephone: (315) 343-0057