Edgar Filing: PATHFINDER BANCORP INC

March 31, 2005

Dear Shareholder:

We cordially invite you to attend the Annual Meeting of Shareholders of
Pathfinder Bancorp, Inc. (the "Company"). The Annual Meeting will be held at the
Econolodge, 70 East First Street, Oswego, New York at 10:00 a.m., Eastern Time,
on April 27, 2005.

The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the Annual Meeting we will also report on the
operations of the Company. Directors and officers of the Company, as well as a
representative of our independent auditors, will be present to respond to
questions that shareholders may properly present.

The Annual Meeting is being held so that shareholders may consider the election
of directors and the ratification of the appointment of Beard Miller Company
LLP as the Company's auditors for fiscal year 2005.

For the reasons set forth in the Proxy Statement, the Board of Directors
unanimously recommends a vote
"FOR" the election of directors and the ratification of the appointment
of Beard Miller Company LLP as the Company's auditors.

On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting. Your
vote is important, regardless of the number of shares that you own.

Sincerely,

Thomas W. Schneider
President and Chief Executive Officer

PATHFINDER BANCORP, INC.
214 WEST FIRST STREET
OSWEGO, NEW YORK 13126
(315) 343-0057

NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 2005

Notice is hereby given that the Annual Meeting of Pathfinder Bancorp, Inc.,
(the "Company") will be held at the Econolodge, 70 East First Street, Oswego,
New York on April 27, 2005 at 10:00 a.m., Eastern Time.

A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.

The Annual Meeting is for the purpose of considering and acting upon:

1) The election of three Directors to the Board of Directors;
2) The ratification of the appointment of Beard Miller Company LLP as
auditors for the Company for the fiscal year ending December 31, 2005;

such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.

Any action may be taken on the foregoing proposals at the Annual Meeting on
the date specified above, or on any date or dates to which the Annual Meeting
may be adjourned. Shareholders of record at the close of business on March 15,
2005 are the shareholders entitled to vote at the Annual Meeting, and any
adjournments thereof.

EACH SHAREHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE SHAREHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.

By Order of the Board of Directors

Edward A. Mervine
Secretary

March 31, 2005

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IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT

PATHFINDER BANCORP, INC.
214 WEST FIRST STREET
OSWEGO, NEW YORK 13126
(315) 343-0057

ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2005

THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES
ON BEHALF OF THE BOARD OF DIRECTORS OF PATHFINDER BANCORP, INC. (THE "COMPANY")
TO BE USED AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY (THE "ANNUAL
MEETING"), WHICH WILL BE HELD AT THE ECONOLODGE, 70 EAST FIRST STREET, OSWEGO,
NEW YORK ON APRIL 27, 2005, AT 10:00 A.M., EASTERN TIME, AND ALL ADJOURNMENTS OF
THE ANNUAL MEETING. THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND THIS PROXY STATEMENT ARE FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT
MARCH 31, 2005.

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REVOCATION OF PROXIES
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Shareholders who sign the proxies we are soliciting will retain the right
to revoke them in the manner described below. Unless so revoked, the shares
represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon.
WHERE NO INSTRUCTIONS ARE INDICATED, VALIDLY EXECUTED PROXIES WILL BE VOTED
"FOR" THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT. IF ANY OTHER MATTERS ARE
PROPERLY BROUGHT BEFORE THE ANNUAL MEETING THE PERSONS NAMED IN THE ACCOMPANYING
PROXY WILL VOTE THE SHARES AS DIRECTED BY A MAJORITY OF THE BOARD OF
DIRECTORS IN ATTENDANCE AT THE ANNUAL MEETING ON SUCH MATTERS, IF ANY, THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.

Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address shown above, by delivering to the
Company a duly executed proxy bearing a later date, or by attending the Annual
Meeting and voting in person. The presence at the Annual Meeting of any
shareholder who had returned a proxy will not revoke the proxy unless the
shareholder delivers his or her ballot in person at the Annual Meeting or
delivers a written revocation to the Secretary of the Company prior to the
voting of the proxy. If you are a shareholder whose shares are not registered
in your name, you will need appropriate documentation from your record holder to
vote in person at the Annual Meeting.

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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of the Company's common stock, par value $0.01 per share
(the "Common Stock") as of the close of business on March 15, 2005 (the "Record
Date") are entitled to one vote for each share they own. As of the Record Date,
the Company had 2,937,419 shares of Common Stock issued and 2,450,132 shares of
Common Stock outstanding of which 1,583,239 were held by Pathfinder Bancorp,
M.H.C. (the "Mutual Holding Company"), and 866,893 of which were held by
shareholders other than the Mutual Holding Company ("Minority Shareholders").
The presence in person or by proxy of a majority of the outstanding shares of
Common Stock entitled to vote is necessary to constitute a quorum at the Annual
Meeting. Broker non-votes and proxies marked abstain will be counted for
purposes of determining that a quorum is present. As to the election of
Directors, shareholders may cast their votes "For" or "Withheld". As to the
ratification of Auditors, shareholders may cast their votes "For", "Against" or
"Abstain". Directors are elected by a plurality of votes cast, without regard

to either broker non-votes, or proxies as to which the authority to vote
for the nominees being proposed is withheld. The affirmative vote of holders of
a majority of the total votes cast at the Annual Meeting in person or by proxy,
without regard to broker non-votes or proxies as to which shareholders abstain,
is required for ratification of Beard Miller Company LLP as the Company's
auditors. Because the Mutual Holding Company owns a majority of the outstanding
shares and has indicated its intention to vote "For" the proposals, passage of
the proposals is assured.

Persons and groups who beneficially own in excess of five percent of the
Common Stock are required to file certain reports with the Securities and
Exchange Commission (the "SEC") regarding such ownership. The following table
sets forth, as of the Record Date, the shares of Common Stock beneficially owned
by Directors individually, by executive officers individually, by executive
officers and Directors as a group and by each person who was the beneficial
owner of more than five percent of the Company's outstanding shares of Common
Stock.

Amount of Shares
Owned and Nature Percentage of Shares
Name and Address of Of Beneficial of Common Stock
Beneficial Owners Ownership (1)(4) Outstanding
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DIRECTORS AND EXECUTIVE OFFICERS (2):

Chris C. Gagas . . . . . . . . . . . . 78,158 (5) 3.19%
Thomas W. Schneider. . . . . . . . . . 6,280 (6) .26
Chris R. Burritt . . . . . . . . . . . 4,800 (7) .20
George P. Joyce. . . . . . . . . . 1,775 .07
Bruce E. Manwaring . . . . . . . . 14,215 .58
L. William Nelson, Jr. . . . . . . . . 27,250 (8) 1.11
Janette Resnick. . . . . . . . . . . . 2,900 (9) .12
Corte J. Spencer . . . . . . . . . . . 14,500 (10) .59
Steven W. Thomas . . . . . . . . . 7,825 .32
James A. Dowd. . . . . . . . . . . . . 6,830 (11) .28
Gregory L. Mills . . . . . . . . . . . 3,370 (12) .14
Melissa A. Miller. . . . . . . . . . . 3,501 (13) .14
Edward A. Mervine. . . . . . . . 753 .03
John F. Devlin . . . . . . . . . . 428 .02
Rhonda L. Hutchins . . . . . . . . 2,040 .08

All Directors and Executive Officers
as a Group (15 persons) (3). . . . . . 174,625 7.13

PRINCIPAL SHAREHOLDERS:

Pathfinder Bancorp, M.H.C. (3) . . . 1,583,239 64.62
214 West First Street
Oswego, New York 13126

Pathfinder Bancorp, M.H.C. and all 1,757,864 71.75
Directors and Executive Officers

Pathfinder Bank (4). . . . . . . . 5,576 .23
Employee Stock Ownership Plan
214 West First Street
Oswego, New York 13126

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1) A person is deemed to be the beneficial owner for purposes of this
table, of any shares of Common Stock if he has shared voting or
investment power with respect to such security, or has a right to
acquire beneficial ownership at any time within 60 days from the
Record Date. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares. Includes all shares held
directly as well as by spouses and minor children, in trust and other
indirect ownership, over which shares the named individuals
effectively exercise sole or shared voting and investment power.
Unless otherwise indicated, the named individual has sole voting and
investment power.

2) The mailing address for each person listed is 214 West First Street,
Oswego, New York 13126.

3) All of the Company's directors are also directors of the Mutual
Holding Company. Three of the Company's executive officers are also
executive officers of the Mutual Holding Company.

4) Includes 92,574 shares, of which 5,576 are unallocated and as to which
the Employee Stock Ownership Plan (the "ESOP") trustee has sole voting
and investment power and 86,998 of which are allocated and as to which
the ESOP trustee has shared voting and sole investment power.

5) Mr. Gagas has sole voting and investment power over all shares
reported.

6) Mr. Schneider has sole voting and investment power over 5,980 shares
and shared voting and investment power over 300 shares. Also includes
450 shares underlying options which are exercisable within 60 days
from the record date.
7) Mr. Burritt has sole voting and investment power over 4,650 shares and
shared voting and investment power over 150 shares. Also includes
3,700 shares underlying options which are exercisable within 60 days
from the record date.

8) Mr. Nelson has sole voting and investment power over 8,770 shares and
shared voting and investment power over 18,480 shares. Also includes
4,700 shares underlying options which are exercisable within 60 days
from the record date.

9) Ms. Resnick has sole voting power over 2,600 shares and shared voting
and investment power over 300 shares.

10) Mr. Spencer has sole voting and investment power over all shares
reported. Also includes 7,450 shares underlying options which are
exercisable within 60 days of the record date.

11) Mr. Dowd has sole voting and investment power over all shares
reported.

12) Mr. Mills has sole voting and investment power over 3,330 shares and
shared voting and investment power over 40 shares.

13) Ms. Miller has sole voting and investment power over all shares
reported. Also includes 950 shares underlying options which are
exercisable within 60 days from the record date.

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PROPOSAL 1 - ELECTION OF DIRECTORS
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The Company's Board of Directors is currently composed of nine members. The
Company's bylaws provide that one-third of the Directors are to be elected
annually. Directors of the Company are generally elected to serve for a
three-year period and until their respective successors shall have been elected
and qualify. Three Directors will be elected at the Annual Meeting, each to
serve for a three-year period and until their respective successors shall have
been elected and qualify. The Board of Directors has nominated to serve as
Directors, Chris C. Gagas, Thomas W. Schneider and Chris R. Burritt.

The table below sets forth certain information regarding the composition of
the Company's Board of Directors, including the terms of office of Board
members. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Annual Meeting for the election of the nominees
identified below. If the nominee is unable to serve, the shares represented by
all such proxies will be voted for the election of such substitute as the Board
of Directors may recommend. At this time, the Board of Directors knows of no
reason why any of the nominees would be unable to serve if elected. Except as
indicated herein, there are no arrangements or understandings between any
nominee and any other person pursuant to which such nominee was selected.

CURRENT
DIRECTOR TERM TO
NAME (1) AGE POSITION HELD SINCE (2) EXPIRE
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NOMINEES

Chris C. Gagas . . . . . . . . 73 Director 1966 2008
Thomas W. Schneider. . . . . . 43 President, CEO 2001 2008
Chris R. Burritt . . . . . . . 51 Director 1986 2008

DIRECTORS CONTINUING IN OFFICE

Bruce E. Manwaring . . . . . . 63 Director 1984 2006
L. William Nelson, Jr. . . . . 60 Director 1986 2006
George P. Joyce. . . . . . . . 53 Director 2000 2006
Steven W. Thomas . . . . . . . 42 Director 2000 2007
Corte J. Spencer . . . . . . . 61 Director 1984 2007
Janette Resnick. . . . . . . . 62 Chairman of the Board 1996 2007

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(1) The mailing address for each person listed is 214 West First Street,
Oswego, New York 13126. Each of the persons listed is also a Director
of Pathfinder Bancorp, M.H.C., which owns the majority of the
Company's issued and outstanding shares of Common Stock. Information
regarding the Common Stock beneficially owned by each director is set
forth under "Voting Securities and Principal Holders Thereof".
(2) Dates prior to 1995 reflect initial appointment to the Board of
Trustees of the mutual predecessor to Pathfinder Bank.

The principal occupation during the past five years of each Director and
Executive Officer is set forth below. All Directors and Executive Officers have
held their present positions for five years unless otherwise stated.

JANETTE RESNICK, Chair of the Board is retired. Prior to her retirement in
2003, she was the Executive Director of Oswego County Opportunities, a private,
not for profit human services agency located in Oswego and Fulton, New York.

CHRIS C. GAGAS is retired. Until his retirement on January 14, 2000, Mr.
Gagas was also President and Chief Executive Officer of the Company and its
principal subsidiary, Pathfinder Bank. Mr. Gagas had served as an officer of the
Company since 1986.

CHRIS R. BURRITT is the president and general manager of R.M. Burritt
Motors, Inc./Chris Cross, Inc., an automobile dealership located in Oswego, New
York.

BRUCE E. MANWARING is the Chamberlain for the City of Oswego. Prior to his
appointment in 1999, Mr. Manwaring was the owner of Oswego Printing Co. located
in Oswego, New York.

WILLIAM NELSON, JR. is the owner and manager of Nelson Funeral Home located
in Oswego, New York.

STEVEN W. THOMAS is a licensed real estate broker and a developer. Until
recently, Mr. Thomas owned and operated five Dunkin Donuts franchises and two
hotels in Oswego County. Mr. Thomas additionally is involved in numerous
commercial development projects in Oswego County and operates a marina in Fair
Haven, New York, known as the Boathouse. Mr. Thomas is also a member of Surelock
Industries, LLC, a local wood floor manufacturer.

GEORGE P. JOYCE is the owner and operator of Laser Transit, Ltd., Lacona,
New York, a Central New York logistics services provider. Mr. Joyce is also the
general manager of Oswego Warehousing, Inc., Oswego, NY.

CORTE J. SPENCER is the Chief Executive Officer and Administrator of Oswego
Hospital and the managing director of Oswego Health, Inc. located in Oswego, New
York.

EXECUTIVE OFFICERS OF THE COMPANY WHO ARE DIRECTORS

THOMAS W. SCHNEIDER is the President and Chief Executive Officer of the
Company and the Bank. Prior to his appointment as President in 2000, Mr.
Schneider was the Executive Vice President and Chief Financial Officer of the
Company and the Bank.

INDEPENDENCE OF DIRECTORS

The Company's common stock is listed on the NASDAQ Small Cap Market. The
Board of Directors of the Company has considered the NASDAQ listing requirements
for "Independence" of Directors, and although the Company may be exempt as a
"controlled" company pursuant to NASDAQ rules, it has determined, nonetheless,
that all of its Directors with the exception of Mr. Schneider are "Independent".
Our independent directors will hold executive sessions no less than twice a
year. Shareholders who wish to communicate with the Chairman or with the
independent directors as a group may do so by writing to the Secretary of the
Corporation at Pathfinder Bank, 214 West First Street, Oswego, New York 13126.
The Secretary will forward said communication to the independent directors or
Chairman as requested by the shareholder.

EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT DIRECTORS

JAMES A. DOWD, age 37, CPA is a Vice President and Chief Financial Officer
of the Company and the Bank. Mr. Dowd is responsible for the accounting and
finance departments.

GREGORY L. MILLS, age 44, is a Vice President of the Company and the Bank.
Mr. Mills is responsible for branch administration, marketing and security.

MELISSA A. MILLER, age 47, is a Vice President and Chief Operating Officer
of the Company and the Bank. Ms. Miller is responsible for deposit operations,
compliance, and information services.

EDWARD A. MERVINE, age 48, is Vice President, General Counsel and Secretary
for the Company and the Bank. Prior to joining the Company in 2002, Mr. Mervine
was a partner in the law firm of Bond Schoeneck & King, LLP.

JOHN F DEVLIN, age 40, is Vice President and Senior Commercial Lender for
the Company and the Bank. Prior to joining the Company in 2002, Mr. Devlin
served as Assistant Vice President and Commercial Loan Officer for Alliance
Bank, NA.

RHONDA L. HUTCHINS, age 46, is Vice President, Retail Lending, for the
Company and the Bank. Prior to joining the Company in 1997, Ms. Hutchins worked
in loan originations for Homestead Financial out of Syracuse, New York.

OWNERSHIP REPORTS BY OFFICERS AND DIRECTORS

The Common Stock of the Company is registered with the SEC pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act"). The
officers and directors of the Company and beneficial owners of greater than 10%
of the Company's Common Stock ("10% beneficial owners") are required to file
reports on Forms 3, 4 and 5 with the SEC disclosing beneficial ownership and
changes in beneficial ownership of the Common Stock. SEC rules require
disclosure in the Company's Proxy Statement or Annual Report on Form 10-K of the
failure of an officer, director or 10% beneficial owner of the Company's Common
Stock to file a Form 3, 4, or 5 on a timely basis. All of the Company's officers
and directors timely filed these reports.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The business of the Board of Directors is conducted through meetings and
activities of the Board and its committees. During the year ended December 31,
2004, the Board of Directors held 12 regular and no special meetings. During the
year ended December 31, 2004, no director attended fewer than 75% percent of the
total meetings of the Board of Directors and committees on which such director
served.

The Compensation Committee meets periodically to review the performance of
officers and employees and to determine compensation programs and adjustments.
The entire Board of Directors ratifies the recommendations of the Compensation
Committee. In the year ending December 31, 2004, the Compensation Committee
consisted of directors Gagas, Manwaring, Resnick, Spencer and Nelson. All of
these Directors are "independent" pursuant to NASDAQ listing requirements. The
Compensation Committee met two times during the year ended December 31, 2004.

The Nominating/Governance Committee meets several times a year to address
issues concerning corporate governance, succession planning, and to nominate
directors to fulfill the terms of the upcoming year. In the year ended December
31, 2004, the Nominating/Governance Committee was comprised of directors Gagas,
Burritt, Joyce, Resnick and Spencer, all of whom are "independent" pursuant to
the NASDAQ listing requirements. The Nominating/Governance Committee has a
charter in the form of governance guidelines which is available in the Company's
website at WWW.PATHFINDERBANK.COM.

Among other things, the functions of the Nominating/Governance Committee
include the following:

- to lead the search for individuals qualified to become members of the
Board and to select director nominees to be presented for shareholder
approval;

- to review and monitor compliance with the requirements for board
independence; and

- to review the committee structure and make recommendations to the
Board regarding committee membership.

The Nominating/Governance Committee identifies nominees by first evaluating
the current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to the
Company's business and who are willing to continue in service are first
considered for re-nomination, balancing the value of continuity of service by
existing members of the Board with that of obtaining a new perspective. If any
member of Board does not wish to continue in service, or if the Committee or the
Board decides not to re-nominate a member for re-election, or if the size of the
Board is increased, the Committee would solicit suggestions for director
candidates from all Board members. In addition, the Committee is authorized by
its charter to engage a third party to assist in the identification of director
nominees. The Nominating/Governance Committee would seek to identify a candidate
who, at a minimum, satisfies the following criteria:

- has personal and professional ethics and integrity and whose values
are compatible with the Company's;

- has had experiences and achievements that have given him or her the
ability to exercise and develop good business judgment;

- is willing to devote the necessary time to the work of the Board and
its committees, which includes being available for Board and committee
meetings;

- is familiar with the communities in which the company operates and/or
is actively engaged in community activities;

- is involved in other activities or interests that do not create a
conflict with his or her responsibilities to the Company and its
shareholders; and

- has the capacity and desire to represent the balanced, best interest
of the shareholders of the Company as a group, and not primarily a
special interest group or constituency.

The Nominating/Governance Committee will also take into account whether a
candidate satisfies the criteria for "independence" under the Nasdaq corporate
governance listing standards and, if a nominee is sought for service on the
Audit Committee, the financial and accounting expertise of a candidate,
including whether an individual qualifies as an Audit Committee Financial
Expert.

The Nominating/Governance Committee will consider candidates for the Board
of Directors recommended by shareholders. In order to make a recommendation to
the Board of Directors, a shareholder must own no less than 500 shares of the
corporation. Shareholders who are so qualified may send their recommendations to
the Secretary of the Company for forwarding to the Nominating/Governance
Committee. In light of the due diligence required to evaluate recommendations,
said recommendations for the Nominating/Governance candidate for the 2006 annual
meeting must be made by June 30, 2005.

Shareholders can submit the names of candidates for Director by writing to
our Corporate Secretary, at 214 West First Street, Oswego, New York 13126. The
submission must include the following information:

- the name and address of the shareholder as it appears on the Company's
books, and number of shares of the Company's common stock that are
owned beneficially by such shareholder (if the shareholder is not a
holder of record, appropriate evidence of the shareholder's ownership
will be required).

- the name, address and contact information for the candidate, and the
number of shares of common stock of the Company that are owned by the
candidate (if the candidate is not a holder of record, appropriate
evidence of the shareholder's ownership should be provided).

- a statement of the candidate's business and educational experience.

- such other information regarding the candidate as would be required to
be included in the proxy statement pursuant to SEC Regulation 14A.

- a statement detailing any relationship between the candidate and the
Company.

- a statement detailing any relationship between the candidate and any
customer, supplier or competitor of the Company.

- detailed information about any relationship or understanding between
the proposing shareholder and the candidate and

- a statement that the candidate is willing to be considered and willing
to serve as a director if nominated and elected.

The Nominating/Governance Committee will consider shareholder recom-
mendations made in accordance with the above similarly to any other nominee
proposed by any other source. The Company has not paid a fee to any third party
to identify or evaluate any potential nominees. Moreover, the Nominating/
Governance Committee has not received within the last year a recommended nominee
from a shareholder who beneficially owned more than five percent (5%) of the
company's common stock for at least one (1) year, or from a group of
shareholders owning more than five (5%) percent of the common stock.

The Audit Committee consists of directors Manwaring, Nelson, Spencer and
Joyce. The Audit Committee meets on a periodic basis with the internal auditor
to review audit programs and the results of audits of specific areas, on
regulatory compliance issues, as well as to review information to further their
financial literacy skills. The Audit Committee meets with the independent
auditors to review quarterly and annual filings, the results of the annual audit
and other related matters. The Chairman of the Audit Committee may meet with the
independent auditors on quarterly filing issues in lieu of the entire committee.
Each member of the Audit Committee is "independent" as defined in the listing
standards of NASDAQ and SEC Rule 10A-3. The Company's Board of Directors has
adopted a written charter for the Audit Committee, which is available on the
Company's website at WWW.PATHFINDERBANK.COM.

The Audit Committee maintains an understanding of the Company's key areas
of financial risk and assesses the steps management takes to minimize and manage
such risks; selects and evaluates the qualifications and performance of the
independent auditors, ensures that the internal and external auditors maintain

no relationship with management and/or the Company that would impede their
ability to provide independent judgment; oversees the adequacy of the systems of
internal control; reviews the nature and extent of any significant changes in
accounting principles; and oversees that management has established and
maintained processes reasonably calculated to ensure the Company's compliance
with all applicable law, regulations, corporate policies and other matters
contained in the Company's Code of Ethics which is available on the Company's
website at WWW.PATHFINDERBANK.COM. The Audit Committee has established
procedures for the confidential, anonymous submission by employees of concerns
regarding accounting or auditing matters.

The Board of Directors of Pathfinder Bancorp, Inc. has determined that
Bruce E. Manwaring, chairman of the Audit Committee in 2003, 2004 and 2005,
qualifies as a financial expert serving on the committee. Mr. Manwaring meets
the criteria established by the Securities and Exchange Commission as follows:

- Mr. Manwaring maintains an understanding of generally accepted
accounting principles and financial statements and has the ability to
assess the application of such principles in connection with
accounting for estimates, accruals and reserves.

- Mr. Manwaring has garnered comparable experience preparing and
analyzing financial statements in his current position as the
Chamberlain of the City of Oswego, which he has held since his
appointment in 1999.

- Mr. Manwaring has earned a Bachelor of Science degree majoring in
accounting from the State University of New York, College at Oswego
and has successfully passed the Uniform Certified Pubic Accountancy
Examination.

- Through his work experience and education, Mr. Manwaring has developed
a thorough understanding of internal controls and financial reporting
procedures, as well as a detailed understanding of audit committee
functions.

The Board of Directors has also determined that Mr. Manwaring meets the
definition of independent as prescribed by the NASDAQ listing requirements.

CHANGE OF AUDITORS

During 2003, the Company analyzed the service provided by, and associated
costs of, its external auditing firm. After reviewing proposals from a number of
independent accounting firms, the Board of Directors approved the appointment of
Beard Miller Company LLP as auditors for the fiscal year ended December 31,
2003. The Company's previous auditor, PricewaterhouseCoopers, LLP ("PwC") was
engaged for the examination of the first two quarters Form 10-Q filings during
2003. PwC also performed an audit of the consolidated financial statements for
the year ended December 31, 2002. Their report on the financial statement did
not contain an adverse opinion or a disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope, or accounting principles. During the
year ended December 31, 2002 and from December 31, 2002 through the effective
date of the PwC termination, there have been no disagreements between the
Registrant and PwC on any matter of accounting principles or practice, financial
statement disclosure, or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of PwC, would have caused PwC to make reference to
the subject matter of such disagreement in connection with their report on the
financial statement for such year.

During the year ended December 31, 2002, and from December 31, 2002 until
the effective date of the dismissal of PwC, PwC did not advise the Registrant of
any of the following matters:

1) That the internal controls necessary for the Registrant to develop
reliable financial statements did not exist.

2) That information had come to PwC's attention that had lead it to no
longer be able to rely on management's representations, or that had
made it unwilling to be associated with the financial statements
prepared by management;

3) That there was a need to expand significantly the scope of the audit
of the Registrant, or that information had come to PwC's attention
that if further investigated: (i) may materially impact the fairness
or reliability of either a previously-issued audit report or
underlying financial statements, or the financial statements issued or
to be issued covering the fiscal periods subsequent to the date of the

most recent financial statement covered by an audit report (including
information that may prevent it from rendering an unqualified audit
report on those financial statements) or (ii) may cause it to be
unwilling to rely on management's representation or be associated with
the Registrant's financial statements and that, due to its dismissal,
PwC did not so expand the scope of its audit or conduct such further
investigation;

4) That information had come to PwC's attention that it had concluded
materially impacted the fairness or reliability of either: (i) a
previously-issued audit report or the underlying financial statements
or (ii) the financial statements issued or to be issued covering the
fiscal period subsequent to the date of the most recent financial
statements covered by an audit report (including information that,
unless resolved to the accountant's satisfaction, would prevent it
from rendering an unqualified report on those financial statements),
or that, due to its dismissal, there were no such unresolved issues as
of the date of its dismissal.

During the two years ended December 31, 2002, and from December 31, 2002
through the engagement of Beard Miller Company LLP as the Registrant's
independent accountant, neither the Registrant nor anyone on its behalf had
consulted Beard Miller Company LLP with respect to any accounting, auditing or
financial reporting issues involving the Registrant. In particular, there was no
discussion with the Registrant regarding the application of accounting
principles to a specified transaction, the type of audit opinion that might be
rendered on the financial statement, or any related item.

The following is a discussion of fees related to services provided to the
Company.

AUDIT AND AUDIT RELATED FEES

Beard Miller Company LLP billed the Company a total of $69,283 for the
audit of the Company's 2004 annual financial statements and for the review of
the related Forms 10-Q. During the fiscal year ended December 31, 2003, Beard
Miller Company LLP billed the company a total of $59,003 for the audit of the
Company's 2003 annual financial statement and its review of the 2003 third
quarter Form 10-Q filing.

Aggregate fees billed for PwC's review of the first two quarters Form 10-Q
filings during the fiscal year 2003 were $21,500. Total billing by PwC for the
audit of the Company's 2002 annual financial statement and Form 10-Q filings was
$74,500.

There have been no audit related fees billed to the Company by Beard Miller
Company LLP or PwC, LLP in either of the two proceeding fiscal years.

The Audit Committee considered whether the provision of non-audit services
was compatible with maintaining the independence of its auditors. The Audit
Committee concluded that performing such services in 2003 did not affect the
auditors' independence in performing their function as auditors of the Company.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF
INDEPENDENT AUDITOR

The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
particular service or category of services and is generally subject to a
specific budget. The Audit Committee has delegated pre-approval authority to its
Chairman when expedition of services is necessary. The independent auditors and
management are required to periodically report to the full Audit Committee
regarding the extent of services provided by the independent auditors in
accordance with this pre-approval, and the fees for the services performed to
date. None of the tax fees and other fees paid in 2003 were approved per the
Audit Committee's pre-approval policies (which had not been implemented at the
time such fees were paid).

ALL OTHER FEES

Aggregate fees billed for other services rendered by Beard Miller Company
LLP or PwC for the Company during the fiscal years ended December 31, 2004, and
2003 were as follows:

2004 2003
-------------------------------------------------------------------------------
Recurring and non-recurring tax services

Beard Miller Company LLP. . . . . . . . $22,600 $12,000
PwC. . . . . . . . . . . . . . . . . . . . 1,250 22,300
All other fees
Beard Miller Company LLP. . . . . . . . . $ 0 $ 0
PwC. . . . . . . . . . . . . . . . . . . . $ 5,000 $ 1,500

Recurring and non-recurring tax services include assistance in connection
with the New York State Franchise tax examination.

The all other fees category represents fees billed in connection with the
annual services pertaining to the SFAS No. 106 actuarial valuation of the
company's medical, dental, and life insurance benefit plans.

AUDIT COMMITTEE REPORT

In accordance with rules recently established by the SEC, the Audit
Committee has prepared the following report for inclusion in this proxy
statement:

As part of its ongoing activities, the Audit Committee has:

- Reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended December
31, 2004;

- Discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications
with Audit Committees, as amended; and

- Received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has discussed with
the independent auditors their independence.

- Considered the compatibility of non-audit services described above
with maintaining auditor independence.

Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004.

This report has been provided by the Audit Committee:

Messrs, Jung, Resnick, Spencer, Manwaring, and Nelson.

PERFORMANCE GRAPH

Set forth hereunder is a performance graph comparing (a) the total return
on the Common Stock for the period beginning on January 1, 1999 through December
31, 2004, (b) the cumulative total return on stocks included in the Nasdaq
Composite Index over such period, and (c) the yearly cumulative total return on
stocks included in the NL Thrift Index over such period. The cumulative total
return on the Common Stock was computed assuming the reinvestment of cash
dividends during the fiscal year.

There can be no assurance that the Common Stock's performance will continue
in the future with the same or similar trend depicted in the graph. The Company
will not make or endorse any predictions as to future stock performance.

[GRAPHIC OMITTED]

PERIOD ENDING
--------------------------------------------------------------------------------
INDEX 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
-------------------------------------------------------------------------------

PATHFINDER BANCORP, INC. 100.00 72.79 160.00 181.68 233.81 217.37
NASDAQ - TOTAL US 100.00 60.82 48.16 33.11 49.93 54.49
SNL THRIFTS INDEX 100.00 159.68 170.68 203.60 288.23 321.15

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The full Board of Directors of the Company determines the salaries to be
paid each year to the executive officers of the Company.

REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

Under SEC rules, the Company is required to disclose certain data and
information regarding compensation and benefits of its Chief Executive Officer
and other executive officers. The disclosure includes the use of tables and a
report explaining the rationale for and considerations that led to fundamental
executive compensation decisions affecting these individuals. In fulfilling this
requirement, the Board of Directors of the Company has prepared the following
report for inclusion in this proxy statement.

The Compensation Committee of the Board of Directors (the "Committee") is
comprised of Directors Chris Burritt, Chris Gagas, William Nelson, Janette
Resnick and Corte Spencer, all of whom are "independent" pursuant to NASDAQ
listing rules. The Committee annually reviews the performance of the Chief
Executive Officer and other executive officers and recommends to the Board of
Directors changes to base compensation as well as the amount of any bonus to be
awarded. In determining whether the base salary of an officer should be
increased, the Committee and the Board of Directors take into account individual
performance, performance of the Company and information regarding compensation
paid to executives of peer group institutions made to executives performing
similar duties for financial institutions in the Bank's market area.

While the Committee and the Board of Directors do not use strict numerical
formulas to determine changes in compensation for the Chief Executive Officer
and Vice Presidents, and while they weigh a variety of different factors in
their deliberations, they have emphasized and will continue to emphasize
earnings, profitability, earnings contribution to capital, capital strength,
asset quality, and return on tangible equity as factors in setting the
compensation of the Chief Executive Officer and senior officers. Non-
quantitative factors considered by the Committee and the Board of Directors in
fiscal 2004 included general management oversight of the Company, the quality of
communication with the Board of Directors, and the productivity of employees.
Finally, the Committee and the Board of Directors considered the standing of the
Company with customers and the community, as evidenced by customer and community
complaints and compliments. While the Committee and the Board of Directors
considered each of the quantitative and non-quantitative factors described
above, such factors were not assigned a specific weight in evaluating the
performance of the Chief Executive Officer and Vice Presidents.

The Board of Directors approved salary increases totaling $32,500 for the
Company and Bank's seven executive officers including Mr. Schneider. Mr.
Schneider does not participate in the Board of Director's consideration of his
compensation. There was no increase in Mr. Schneider's base salary during fiscal
year 2004.

This has been provided by the Board of Directors: Chris C. Gagas, Thomas W.
Schneider, Chris R. Burritt, George P. Joyce, Bruce E. Manwaring, L. William
Nelson, Jr., Janette Resnick, Corte J. Spencer and Stephen W. Thomas.

DIRECTORS' COMPENSATION

Each non-employee director, with the exception of the Board Chairman and
the Audit Committee Chairman, receives an annual retainer of $9,000, a meeting
fee of $500 for each Board meeting attended and $300 for each committee meeting
attended. The Board Chairman receives an additional retainer of $10,000. The
Audit Committee Chairman receives an additional retainer of $5,000 and the
chairman of all other committees receives an additional $100 for each committee
meeting in which they serve in the capacity of committee chairman. Employee
directors do not receive monthly meeting fees. The Company paid a total of
$188,050 in director fees during the year ending December 31, 2004.

EXECUTIVE COMPENSATION

The following table sets forth for the years ended December 31, 2004, 2003
and 2002, certain information as to the total remuneration paid by the Company
to Mr. Schneider, the Company's Chief Executive Officer, and to Mr. Mervine, the
Company's Vice-President, General Counsel and Secretary. No other executive
officers received compensation exceeding $100,000 for the year ended December
31, 2004.

SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
--------------------------------------------------------------------------------------------------------------------------
Fiscal
Years Other Restricted
Ended Annual Stock Options/ All Other
Name and December Salary Bonus Compensation Award SARs Compensation
Principal Position /(1)/ 31 ($) /(2)/ ($) ($)/(3)/ ($)/(4)/ (#)/(5)/ Payouts ($)/(3)/
----------------------------------------------------------------------------------------------------------------------------

Thomas W. Schneider. . . 2004 $185,000 $10,000 - - - - $19,049
President and Chief. . . 2003 $180,000 $20,000 - - - - $17,553
Executive Officer. . . . 2002 $155,000 $10,000 - - 983 - $14,496

Edward Mervine, Esq. . . 2004 $117,250 $ 6,000 - - - - $ 5,200
Vice President, General. 2003 $114,000 $ 7,500 - - - - $ 4,800
Counsel 2002 $105,000 $10,000 - - - - $ 4,815

(1) No other executive officer received salary and bonuses that in the
aggregate exceeded $100,000.
(2) Includes compensation deferred at the election of the named individual
under the Company's cafeteria plan.
(3) The aggregate amount of such benefits did not exceed the lesser of
$50,000 or 10% of cash compensation for the named individuals.
(4) Amount represents compensation associated with the vested portion of
stock awards granted under the Management Recognition and Retention
Plan.
(5) Amount represents the vested portion of option shares granted under
the Stock Option Plan.

BENEFITS

MEDICAL AND LIFE INSURANCE AND EDUCATIONAL ASSISTANCE. The Company provides
full-time employees with medical and life and accidental death and dismemberment
insurance. In addition, the Company maintains a "cafeteria plan" for employees,
which permits qualifying employees to allocate a portion of their compensation,
on a pre-tax basis, for the payment of medical, dental and dependent care
expenses as well as the payment of certain insurance premiums. The Company also
offers educational assistance to full-time employees who have worked for the
Company for at least one year and who desire to take courses at any accredited
school of learning. The Company also provides long-term disability income
insurance for all employees equal to the lesser of $6,000 per month or 60% of
the employee's basic monthly earnings.

DEFINED BENEFIT PLAN. The Company maintains a tax-qualified noncontributory
defined benefit plan ("Retirement Plan"). All salaried employees age 21 or older
who have worked for the Company for at least one year and have been credited
with 1,000 or more hours of employment with the Company during the year are
eligible to accrue benefits under the Retirement Plan. The Company contributes
annually to the Retirement Plan an amount necessary to satisfy the actuarially
determined minimum funding requirements in accordance with the Employee
Retirement Income Security Act of 1974 ("ERISA").

At the normal retirement age of 65 the plan is designed to provide a life
annuity. The retirement benefit provided is equal to 1.5% of a participant's
average monthly compensation for periods after May 1, 2004, and 2.0% of the
participant's average monthly compensation for credited service prior to May 1,
2004 based on the average of the three consecutive years during the last 10
years of employment which provides the highest monthly average compensation
multiplied by the participant's years of credited service (not to exceed 30
years) to the normal retirement date. Retirement benefits also are payable upon

retirement due to early and late retirement. Benefits also are paid from the
Retirement Plan upon a Participant's disability or death. A reduced benefit is
payable upon early retirement at or after age 60, or the completion of 30 years
of service with the Company. Upon termination of employment other than as
specified above, a participant who was employed by the Company for a minimum of
five years is eligible to receive his or her accrued benefit reduced or early
retirement or a deferred retirement benefit commencing on such participant's
normal retirement date. Benefits are payable in various annuity forms. At
December 31, 2004, the market value of the Retirement Plan trust fund was
approximately $3,337,500. For the plan year ended September 30, 2004, the
Company made a contribution of $190,000 to the Retirement Plan.

The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in plan year 2004,
expressed in the form of a single life annuity for the final average salary and
benefit service classification specified below.

YEARS OF BENEFIT SERVICE AT RETIREMENT
---------------------------------------------------
FINAL
AVERAGE
COMPENSATION 15 20 25 30
---------------------------------------------------

25,000. . . $ 7,417 $ 9,917 $12,417 $ 14,917
50,000. . . $14,833 $19,833 $24,833 $ 29,833
75,000. . . $22,250 $29,750 $37,250 $ 44,750
100,000 . . $29,667 $39,667 $49,667 $ 59,667
125,000 . . $37,083 $49,583 $62,083 $ 74,583
200,000 (1) $59,333 $79,333 $99,333 $119,333
---------------------------------------------------

Under Section 401(a)(17) of the Code, the maximum amount of compensation
that may be taken into account under the Retirement Plan in the 2004 Plan Year
is $205,000.

As of December 31, 2004, Thomas W. Schneider had 16 years of credited
service (i.e., benefit service), and Edward A. Mervine had 3 years of credited
service under the Retirement Plan.

EMPLOYEE SAVINGS PLAN. The Company maintains the Employee Savings Plan
which is a qualified, tax-exempt profit sharing plan with a cash or deferred
feature that is tax-qualified under Section 401(k) of the Internal Revenue Code
(the "401(k) Plan"). All employees who have attained age 21 and have completed
at least one year of employment during which they worked at least 1,000 hours
are eligible to participate.

Participants may contribute, and receive a deduction for, up to 25% of
compensation to the 401 (k) Plan. For these purposes, "compensation" includes
total compensation (including salary reduction contributions made under the
401(k) Plan or the flexible benefits plan sponsored by the Company), but does
not include compensation in excess of $200,000. The Company, in its discretion,
may match participants' salary reduction contributions based upon Company
profits for the current fiscal year. All employee contributions and earnings
thereon are fully and immediately vested. All employer matching contributions
vest at the rate of 20% per year beginning at the end of a participant's third
year of service with the Company until a participant is 100% vested after seven
years of service. Participants also will vest in employer matching contributions
when they reach the normal retirement age of 65 or later, or upon death or
disability regardless of years of service.

Plan benefits will be paid to each participant in a lump sum. At December
31, 2004, the market value of the 401(k) Plan trust fund was approximately
$2,079,700. For the plan year ended December 31, 2004, the Company made a
contribution in the amount of $92,000 to the 401(k) Plan Trust of which $1,480
was contributed on behalf of Mr. Schneider, and $3,080 was contributed on behalf
of Mr. Mervine.

EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME MASTER AGREEMENT. The Company
maintains a non-tax-qualified executive supplemental retirement income master
agreement (the "Master Agreement") for qualifying executives of the Company. One
executive and the former Chairman of the Board are currently eligible to
participate in the Master Agreement. The Master Agreement provides a
supplemental retirement income benefit in an annual amount equal to highest
average compensation received by the executive during any 36 month period while
employed by the Company, multiplied by a wage replacement percentage designated
in the individual executive's joinder agreement, less the actual annual amount
available to the executive from the Company's other tax-qualified or
nonqualified plans. Benefits under the Master Agreement are payable to the
executive upon the benefit age designated in the individual executive's joinder
agreement. Benefits will be payable in monthly installments beginning on the
executive's benefit age and continuing for a period of months designated in the
individual executive's joinder agreement. Payments to an executive, or to his
beneficiary, may be made from the Master Agreement upon the executive's death,
total or permanent disability, or termination of service with the Company.

The Master Agreement is considered an unfunded plan for tax and ERISA
purposes. All obligations arising under the Master Agreement are payable from
the general assets of the Company. During the year ended December 31, 2004, a
contribution totaling $15,100 was made on behalf of Mr. Schneider.

STOCK OPTION PLAN. The Pathfinder Bancorp, Inc. 1997 Stock Option Plan (the
"Stock Option Plan") authorizes the grant of stock options and limited rights to
purchase 132,251 shares of Common Stock. The Stock Option Plan authorizes grants
of (i) options intended to qualify as "incentive stock options," (ii) options
that do not qualify as incentive stock options ("non-statutory options") and
(iii) limited rights (described below) that are exercisable only upon a change
in control of the Company (as defined). Non-employee directors are eligible to
receive only non-statutory options. No options were granted during the past
fiscal year.

On December 19, 2000, the Board of Directors accepted the voluntary
rescission of all issued and unvested incentive stock options and non-statutory
stock options under the Pathfinder Bank 1997 Stock Option Plan.

In July 2001, the Board approved the re-issuance of 38,499 stock options
remaining in the 1997 Stock Option Plan. The exercise price is equal to the
market value of the Company's shares at the date of grant ($8.335). The options
granted under the re-issuance have a 10-year term. At December 31, 2004, all
options have vested under the Stock Option Plan.

Simultaneously with the grant of any stock option, the Committee may grant
a Dividend Equivalent Right with respect to all or some of the shares covered by
such stock option. The Dividend Equivalent Right provides the grantee with a
separate cash benefit equal to 100% of the amount of any extraordinary dividend
on shares of Common Stock subject to a stock option. Under the terms of the
Stock Option Plan, an extraordinary dividend is any dividend paid on shares of
Common Stock that exceeds the Company's weighted average cost of interest
bearing liabilities for the current and preceding three quarters. Upon the
payment of an extraordinary dividend, Dividend Equivalent Right will receive at
the time the related stock option vests cash or some other payment as determined
under the Stock Option Plan, equal to 100% of the extraordinary dividend paid on
shares of Common Stock plus any earnings thereon, minus any tax withholding
amounts. The Dividend Equivalent Right is transferable only when the underlying
stock option is transferable and under the same conditions.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Acquired Value Options at The-Money Options at
Name Upon Exercise Realized Fiscal Year-End Fiscal Year-End
Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------------------

Thomas W. Schneider 1,000 $ 9,265 450/0 $3,740/$0

The Board of Directors may amend, suspend or terminate the Stock Option
Plan except that such amendments may not impair awards previously granted.
Shareholders of the Company must approve any amendment to the Stock Option Plan
that would increase the number of options, decrease an option exercise price,
extend the term of the Stock Option Plan or any option, or change the persons or
category of persons eligible to be granted options. The exercise of options will
have a dilutive effect on the ownership interests of existing shareholders.
Further, the exercise of options may render more difficult or discourage a
merger, tender offer or other takeover attempt even if such transaction or event
would be beneficial to shareholders generally, the assumption of control by a
holder of a large block of the Company's securities, a proxy contest or the
removal of incumbent management.

RECOGNITION AND RETENTION PLAN. The Board of Directors of the Company
adopted the 1997 Recognition and Retention Plan (the "Recognition Plan") as a
method of providing certain employees and non-employee directors of the Company
with a proprietary interest in the Company and to provide these individuals with
an incentive to increase the value of the Company.

The Stock Benefits Committee, composed of the non-employee directors of the
Company, administers the Recognition Plan, and makes awards to officers and
employees pursuant to the Recognition Plan. Awards to non-employee directors are
fixed by the terms of the Recognition Plan. Awards of Common Stock that have not
vested under the Recognition Plan ("Restricted Stock") are nontransferable and
nonassignable. Participants in the Recognition Plan become vested in shares of
Restricted Stock over a six-year period beginning on January 24, 1999; provided,
however, that the Stock Benefits Committee may accelerate or extend the vesting
rate on any awards made to officers and employees after the effective date of
the Recognition Plan. On December 19, 2000, the Board of Directors accepted the
voluntary rescission of all issued and unvested awards under the 1997
Recognition and Retention Plan. Accordingly, the shares, which would have been
earned by participants in the years 2000, 2001 and 2002 will be retained by the
Recognition Plan. The Recognition Plan currently holds 15,750 shares as
nongranted. Awards to executive officers and outside directors become fully
vested upon termination of employment or service due to normal retirement, death
or disability, or following a termination of employment or service in connection
with a change in control (as defined therein) of the Company. Upon termination
of employment or service for any other reason, unvested shares are forfeited.
When a participant's Restructured Stock vests, the participant will recognize
ordinary income equal to the fair market value of the shares vested, unless the
participant previously made an irrevocable election to be taxed on the shares of
Restricted Stock awarded to him in the year of the award. The amount of income
recognized by a participant will be a deductible expense of the Company for
Federal income tax purposes. A participant is entitled to receive any cash
dividends paid on the Restricted Stock both before and after vesting of the
Restricted Stock. Stock dividends declared by the Company and paid on Restricted
Stock that have not vested are subject to the same restrictions as the
Restricted Stock until such shares vest.

Set forth below is certain information as of December 31, 2004 regarding
equity compensation to directors, director's emeriti and executive officers of
the Company approved by shareholders. Other than the employee stock ownership
plan, the Company did not have any equity plans in place that were not approved
by shareholders.

Number of securities to be
issued upon exercise of Number of securities
outstanding options and Weighted average remaining available for
Plan rights exercise price issuance under plan
-----------------------------------------------------------------------------------------------------------

Equity compensation to directors
and executive officers approved by
shareholders 69,800 $7.12 30

TRANSACTIONS WITH CERTAIN RELATED PERSONS

The Sarbanes-Oxley Act of 2002 generally prohibits an issuer from (i)
extending or maintaining credit; (ii) arranging for the extension of credit; or
(iii) renewing an extension of credit in the form of a personal loan for an
officer or director. There are several exceptions to this general prohibition,

however, one of which is applicable to the Company. Namely, this prohibition
does not apply to loans made by a depository institution that is insured by the
FDIC and is subject to the insider lending restrictions of the Federal Reserve
Act. All loans to the Company's directors and officers by the Bank are made in
conformity with the Federal Reserve Act and regulations promulgated thereunder.

All other transactions between the Company and its executive officers,
directors, holders of 10% or more of the shares of its Common Stock and
affiliates thereof, are on terms no less favorable to the Company than could
have been obtained by it in arm's-length negotiations with unaffiliated persons.
Such transactions must be approved by a majority of independent outside
directors of the Company not having any interest in the transaction.

SHAREHOLDER COMMUNICATIONS

The Board of Directors of the Company has established a process for
shareholders to send communications to a director by either United States
mail or electronic mail. Any shareholder who desires to communicate
directly with the directors of the Company should send their communication
to Board of Directors, Pathfinder Bancorp, Inc., 214 West First Street,
Oswego, New York 13126 or by email to DIRECTORS@PATHFINDERBANK.COM. The
communication should indicate that the author is a shareholder and if
shares are not held of record, should include appropriate evidence of stock
ownership. Depending on the subject matter, management will:

- Forward the communication to the Director or Directors to whom it is
addressed;

- Attempt to handle the inquiry directly, for example where it is a
request for information about the Company or it is a stock-related
matter; or

- Not forward the communication if it is primarily commercial in nature,
relates to an improper or irrelevant topic, or is unduly hostile,
threatening, illegal or otherwise inappropriate.

At each Board meeting, management shall present a summary of all
communications received since the last meeting that were not forwarded and makes
those communications available to the Directors.

CODE OF ETHICS

The Company has adopted a Code of Ethics that is applicable to the
officers, directors and employees of the Company, including the Company's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. The Code of
Ethics is available on the Company's website at WWW.PATHFINDERBANK.COM.
Amendments to and waivers from the Code of Ethics will also be disclosed on the
Company's website.

--------------------------------------------------------------------------------
PROPOSAL 2 -RATIFICATION OF APPOINTMENT OF AUDITORS
--------------------------------------------------------------------------------

The Audit Committee of the Company has approved the engagement of Beard
Miller Company LLP, to be the Company's auditors for the 2005 fiscal year,
subject to the ratification of the engagement by the Company's shareholders. At
the Annual Meeting, shareholders will consider and vote on the ratification of
the engagement of Beard Miller Company LLP, for the Company's fiscal year ending
December 31, 2005. A representative of Beard Miller Company LLP, is expected to
attend the Meeting to respond to appropriate questions and to make a statement
if he so desires.

In order to ratify the selection of Beard Miller Company LLP, as the
auditors for the 2005 fiscal year, the proposal must receive at least a majority
of the votes cast, either in person or by proxy, in favor of such ratification.
The Audit Committee and the Board of Directors recommends a vote "FOR" the
ratification of Beard Miller Company LLP, as auditors for the 2005 fiscal year.

--------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
--------------------------------------------------------------------------------

In order to be eligible for inclusion in the proxy materials for next
year's Annual Meeting of Shareholders, any shareholder proposal to take action
at such meeting must be received at the Company's executive office, 214 West
First Street, Oswego, New York 13126, no later than December 2, 2005. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Securities Exchange Act of 1934.

--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------

The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in the Proxy Statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment. The
Board of Directors intends to exercise its discretionary authority to the
fullest extent permitted under the Securities Exchange Act of 1934.

The Bylaws of the Company provide an advance notice procedure for certain
business, or nominations to the Board of Directors, to be brought before an
annual meeting. In order for a shareholder to properly bring business before an
annual meeting, or to propose a nominee to the Board, the shareholder must give
written notice to the Secretary of the Company at least five (5) days before the
date fixed for such meeting. The notice must include the shareholder's name,
record address, and number of shares owned by the shareholder, describe briefly
the proposed business, the reasons for bringing the business before the annual
meeting, and any material interest of the shareholder in the proposed business.

In the case of nominations to the Board, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement and proxy relating to an annual
meeting any shareholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.

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MISCELLANEOUS
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The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.

BY ORDER OF THE BOARD OF DIRECTORS

Edward A. Mervine
Secretary

Oswego, New York
March 31, 2005

PLEASE MARK VOTES
AS IN THIS EXAMPLE
| X |

REVOCABLE PROXY
PATHFINDER BANCORP, INC.

ANNUAL MEETING OF STOCKHOLDERS
April 27, 2005

The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned
to vote all shares of Common Stock of the Company which the undersigned is
entitled to vote at. An Annual Meeting of Stockholders ("Meeting") will be
held at the Econolodge, 70 East First Street, Oswego, New York on April 27,
2005 at 10:00 a.m., Eastern Time. The official proxy committee is authorized to
cast all votes to which the undersigned is entitled as follows:

1) The election as directors of all nominees listed below except as
marked to the contrary below)

For
All
For Withhold Except
|__| |__| |__|

Chris C. Gagas
Thomas E. Schneider
Chris R. Burritt

INSTRUCTION: To withhold your vote for one or more nominees, write the name of
the nominee(s) on the lines below.
_____________________________________
_____________________________________

2) The ratification of Beard Miller Company LLP as independent auditors
for the year ended December 31, 2005.

For Against Abstain
|__| |__| |__|

PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING |__|

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED AS
DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
PROPOSITIONS STATED ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING,
THIS PROXY WILL BE VOTED BY THE ABOVE-NAMED PROXIES AT THE DIRECTION OF A
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.

PLEASE BE SURE TO SIGN AND DATE THIS PROXY IN THE BOX BELOW.

DATE

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STOCKHOLDER SIGN ABOVE_________CO-HOLDER (IF ANY) SIGN ABOVE

DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.

PATHFINDER BANCORP, INC.

Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Annual Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Stockholders, or by the filing of a later proxy statement
prior to a vote being taken on a particular proposal at the Meeting.

The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting and a proxy statement dated
March ___, 2005.

Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If shares are held jointly, each should sign.

PLEASE COMPLETE AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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