UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                          _____________________________

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the quarterly period ending September 30, 2006

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the transition period from _______ to _______

                        COMMISSION FILE NUMBER: 000-23601
                                                ---------

                            PATHFINDER BANCORP, INC.
                            ------------------------
             (Exact Name of Registrant as Specified in its Charter)

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

                     214 West First Street, Oswego, NY 13126
                     ---------------------------------------
               (Address of Principal Executive Office) (Zip Code)

                                 (315) 343-0057
                                 --------------
               (Registrant's Telephone Number including area code)


     Indicate  by  check  mark  whether the Registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  twelve 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 a large accelerated filer,
an  accelerated  filer,  or  a  non-accelerated  filer.  See  definition  of
"accelerated  filer  and  large accelerated filer" in Rule 12b-2 of the Exchange
Act.  (Check  one):

Large Accelerated  Filer [ ] Accelerated  Filer [ ]  Non-Accelerated  Filer[X]

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act).    Yes  [  ]       No  [X]

     As  of  November  13, 2006 there were 2,951,819 shares issued and 2,464,532
shares  outstanding  of  the  Registrant's  Common  Stock.

<PAGE>


                            PATHFINDER BANCORP, INC.
                                      INDEX



PART 1     FINANCIAL INFORMATION                                       PAGE NO.

           Item 1.     CONSOLIDATED 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        6-10

          Item 2.      Management's Discussion and Analysis of Financial
                        Condition and Results of Operations                11-19

          Item 3.      Quantitative and Qualitative Disclosure
                        about Market Risk                                  20-21

          Item 4.      Controls and Procedures                             22


PART II   OTHER INFORMATION                                                23

          Item 1.      Legal Proceedings
          Item 1A.     Risk Factors
          Item 2.      Unregistered Sales of Equity Securities and
                          Use of Proceeds
          Item 3.      Defaults Upon Senior Securities
          Item 4.      Submission of Matters to a Vote of Security Holders
          Item 5.      Other Information
          Item 6.      Exhibits


SIGNATURES                                                                24

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1- CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------
<TABLE>
<CAPTION>

                                             PATHFINDER  BANCORP, INC.
                                       CONSOLIDATED STATEMENTS OF CONDITION
                               SEPTEMBER 30, 2006 (UNAUDITED) AND DECEMBER 31, 2005


                                                                                    September 30,    December 31,
ASSETS                                                                                  2006             2005
------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                                                                <C>              <C>
Cash and due from banks                                                            $        8,547   $       7,309
Interest earning deposits                                                                     257             586
                                                                                   ---------------  --------------
    Total cash and cash equivalents                                                         8,804           7,895
Investment securities, at fair value                                                       69,058          74,239
Federal Home Loan Bank stock, at cost                                                       1,772           1,805
Loans                                                                                     197,463         189,568
   Less: Allowance for loan losses                                                          1,631           1,679
                                                                                   ---------------  --------------
     Loans receivable, net                                                                195,832         187,889

Premises and equipment, net                                                                 7,602           8,020
Accrued interest receivable                                                                 1,636           1,678
Foreclosed real estate                                                                        497             743
Goodwill                                                                                    3,840           3,840
Intangible asset, net                                                                         238             404
Bank owned life insurance                                                                   6,137           5,987
Other assets                                                                                2,587           4,448
                                                                                   ---------------  --------------
     Total assets                                                                  $      298,003   $     296,948
                                                                                   ===============  ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
  Interest-bearing                                                                 $      216,026   $     216,136
  Non interest-bearing                                                                      21,895          20,241
                                                                                   ---------------  --------------
     Total deposits                                                                       237,921         236,377
Short-term borrowings                                                                       3,300           2,000
Long-term borrowings                                                                       27,360          29,360
Junior subordinated debentures                                                              5,155           5,155
Other liabilities                                                                           2,902           3,128
                                                                                   ---------------  --------------
     Total liabilities                                                                    276,638         276,020

Shareholders' equity:
   Preferred stock, authorized shares 1,000,000; no shares issued or outstanding
   Common stock, par value $.01; authorized 10,000,000 shares;
    2,951,819 and 2,950,419 shares issued;  and 2,464,532 and 2,463,132  shares
       outstanding, respectively                                                               29              29
   Additional paid in capital                                                               7,732           7,721
   Retained earnings                                                                       21,083          20,965
   Accumulated other comprehensive loss                                                      (977)         (1,285)
   Treasury stock, at cost; 487,287 shares                                                 (6,502)         (6,502)
                                                                                   ---------------  --------------
     Total shareholders' equity                                                            21,365          20,928
                                                                                   ---------------  --------------
     Total liabilities and shareholders' equity                                    $      298,003   $     296,948
                                                                                   ===============  ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                        1
<PAGE>

<TABLE>
<CAPTION>

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


                                                                       For the three         For the three
                                                                        months ended          months ended
                                                                     September 30, 2006    September 30, 2005
                                                                    --------------------  --------------------
(Dollars in thousands, except per share data)
<S>                                                                 <C>                   <C>
INTEREST INCOME:

Loans, including fees                                              $          3,222   $             3,006
Debt securities:
 Taxable                                                                        561                   621
 Tax-exempt                                                                      98                   138
Dividends                                                                        82                    61
Other                                                                             4                     3
                                                                   -----------------    ------------------
       Total interest income                                                  3,967                 3,829
                                                                   -----------------    ------------------
INTEREST EXPENSE:
  Interest on deposits                                                        1,376                 1,061
  Interest on short-term borrowings                                              78                   107
  Interest on long-term borrowings                                              456                   459
       Total interest expense                                                 1,910                 1,627
                                                                   -----------------    ------------------
          Net interest income                                                 2,057                 2,202
  Provision for loan losses                                                       -                    91
                                                                   -----------------    ------------------
          Net interest income after provision for loan losses                 2,057                 2,111
                                                                   -----------------    ------------------

OTHER INCOME:
  Service charges on deposit accounts                                           338                   356
  Loan servicing fees                                                            55                    61
  Earnings on bank owned life insurance                                          50                    44
  Net losses on sales of investment securities                                    -                  (192)
  Net (losses) gains on sales of loans and foreclosed real estate               (29)                   42
  Other charges, commissions and fees                                           130                   138
                                                                   -----------------    ------------------
          Total other income                                                    544                   449
                                                                   -----------------    ------------------
OTHER EXPENSES:
  Salaries and employee benefits                                              1,307                 1,290
  Building occupancy                                                            291                   318
  Data processing expenses                                                      328                   325
  Professional and other services                                               121                   172
  Amortization of intangible asset                                               55                    55
  Other expenses                                                                289                   333
                                                                   -----------------    ------------------
          Total other expenses                                                2,391                 2,493
                                                                   -----------------    ------------------
Income before income taxes                                                      210                    67
Provision for income tax expense (benefit)                                       40                   (49)
                                                                   -----------------    ------------------
NET INCOME                                                          $           170     $             116
                                                                    ================    ==================
     NET INCOME PER SHARE - BASIC                                   $          0.07     $            0.05
                                                                    ================    ==================
     NET INCOME PER SHARE - DILUTED                                 $          0.07     $            0.05
                                                                    ================    ==================
     DIVIDENDS PER SHARE                                            $        0.1025     $          0.1025
                                                                    ================    ==================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                        2
<PAGE>

<TABLE>
<CAPTION>
                                         PATHFINDER  BANCORP, INC.
                                     CONSOLIDATED STATEMENTS OF INCOME
                                                (UNAUDITED)


                                                                    For the nine          For the nine
                                                                    months ended          months ended
                                                                 September 30, 2006    September 30, 2005
                                                                --------------------  --------------------
(Dollars in thousands, except per share data)
<S>                                                             <C>                   <C>
INTEREST INCOME:
 Loans, including fees                                          $             9,416   $             8,824
 Debt securities:
Taxable                                                                       1,828                 1,884
Tax-exempt                                                                      294                   376
 Dividends                                                                      210                   168
 Other                                                                           16                    62
                                                                   -----------------    ------------------
       Total interest income                                                 11,764                11,314
                                                                   -----------------    ------------------
INTEREST EXPENSE:
  Interest on deposits                                                        3,904                 3,122
  Interest on short-term borrowings                                             263                   156
  Interest on long-term borrowings                                            1,344                 1,374
                                                                   -----------------    ------------------
       Total interest expense                                                 5,511                 4,652
                                                                   -----------------    ------------------
          Net interest income                                                 6,253                 6,662
  Provision for loan losses                                                      23                   229
                                                                   -----------------    ------------------
          Net interest income after provision for loan losses                 6,230                 6,433
                                                                   -----------------    ------------------

OTHER INCOME:
  Service charges on deposit accounts                                         1,059                   949
  Loan servicing fees                                                           160                   146
  Earnings on bank owned life insurance                                         150                   133
  Net losses on sales of securities                                              (9)                 (192)
  Net (losses) gains on sales of loans/real estate                              (34)                   30
  Other charges, commissions & fees                                             417                   418
                                                                   -----------------    ------------------
          Total other income                                                  1,743                 1,484
                                                                   -----------------    ------------------

OTHER EXPENSES:
  Salaries and employee benefits                                              3,765                 3,807
  Building occupancy                                                            913                   880
  Data processing expenses                                                      958                   964
  Professional and other services                                               352                   572
  Amortization of intangible asset                                              166                   166
  Other expenses                                                                958                 1,034
                                                                   -----------------    ------------------
          Total other expenses                                                7,112                 7,423
                                                                   -----------------    ------------------
Income before income taxes                                                      861                   494
Provision for income tax expense (benefit)                                      148                    (5)
                                                                   -----------------    ------------------
NET INCOME                                                      $               713     $             499
                                                                ====================    ==================
     NET INCOME PER SHARE - BASIC                               $              0.29     $            0.20
                                                                ====================    ==================
     NET INCOME PER SHARE - DILUTED                             $              0.29     $            0.20
                                                                ====================    ==================
     DIVIDENDS PER SHARE                                        $            0.3075     $           0.3075
                                                                ====================    ==================
</TABLE>

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

                                        3
<PAGE>

<TABLE>
<CAPTION>

                                                  PATHFINDER BANCORP, INC.
                                 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2005
                                                         (unaudited)


                                                                                                  Accumulated
                                                                      Additional                    Other Com-     Unearned
                                                   Common Stock         Paid in      Retained       prehensive       ESOP
                                                  Shares     Amount     Capital      Earnings     Income (Loss)     Shares
                                               ------------  -------  -----------  -------------  --------------  ----------
<S>                                            <C>           <C>      <C>          <C>            <C>             <C>
(Dollars in thousands, except per share data)
BALANCE, DECEMBER 31, 2005                        2,950,419  $    29  $     7,721  $     20,965   $      (1,285)  $       -
Comprehensive income
Net income                                                                                  713
Other comprehensive income, net of tax
Unrealized net gains on securities                                                                          308

Total Comprehensive Income
Stock options exercised                               1,400        -           11
Dividends declared ($.3075 per share)                                                      (595)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2006                       2,951,819  $    29  $     7,732  $     21,083   $        (977)  $       -
=============================================================================================================================

BALANCE, DECEMBER 31, 2004                        2,937,419  $    29  $     7,453  $     21,186   $        (307)  $     (33)
Comprehensive income
Net income                                                                                  499
Other comprehensive income, net of tax
Unrealized net losses on securities                                                                        (328)

Total Comprehensive Income
ESOP shares earned                                                             55                                        33
Stock options exercised                              13,000        -           86
Dividends declared ($.3075 per share)                                                      (593)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2005                       2,950,419  $    29  $     7,594  $     21,092   $        (635)  $       -
=============================================================================================================================



                                                Treasury
                                                 Stock      Total
                                               ----------  --------
<S>                                            <C>         <C>
(Dollars in thousands, except per share data)
BALANCE, DECEMBER 31, 2005                     $  (6,502)  $20,928
Comprehensive income
Net income                                                     713
Other comprehensive income, net of tax
Unrealized net gains on securities                             308
                                                           --------
Total Comprehensive Income                                   1,021

Stock options exercised                                         11
Dividends declared ($.3075 per share)                         (595)
-------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2006                    $  (6,502)  $21,365
===================================================================

BALANCE, DECEMBER 31, 2004                     $  (6,502)  $21,826
Comprehensive income
Net income                                                     499
Other comprehensive income, net of tax
Unrealized net losses on securities                           (328)
                                                           --------
Total Comprehensive Income                                     171

ESOP shares earned                                              88
Stock options exercised                                         86
Dividends declared ($.3075 per share)                         (593)
-------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2005                    $  (6,502)  $21,578
===================================================================
</TABLE>

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

                                        4
<PAGE>

<TABLE>
<CAPTION>

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


                                                               For the nine     For the nine
                                                               months ended      months ends
                                                               September 30,    September 30,
                                                                   2006             2005
                                                              ---------------  ---------------
(Dollars in thousands)
<S>                                                           <C>              <C>
OPERATING ACTIVITIES
Net income                                                    $          713   $          499
Adjustments to reconcile net income to net cash
  provided by operating activities:
Provision for loan losses                                                 23              229
ESOP shares earned                                                         -               88
Deferred income tax expense                                              277              133
Realized losses (gains) on sale of:
  Real estate through foreclosure                                         34                7
  Loans                                                                    -              (37)
  Available-for-sale investment securities                                 9              192
  Premises and equipment                                                 (13)               -
Depreciation                                                             561              518
Amortization of intangible asset                                         166              166
Amortization of deferred financing costs                                  23               23
Amortization of mortgage servicing rights                                 77               22
Earnings on bank owned life insurance                                   (150)            (133)
Net amortization of premiums on investment securities                    116              279
Decrease (increase) in interest receivable                                42             (139)
Net change in other assets and liabilities                              (214)            (259)
                                                              ---------------  ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                              1,664            1,588
                                                              ---------------  ---------------

INVESTING ACTIVITIES
Purchase of investment securities available-for-sale                 (10,985)         (19,642)
Net (purchase) redemption of FHLB stock                                   33              131
Proceeds from maturities and principal reductions of
  investment securities available-for-sale                            15,792            9,183
Proceeds from sale:
  Portfolio loans                                                          -            8,897
  Real estate acquired through foreclosure                               456              414
  Available-for-sale investment securities                               771                -
  Premises and equipment                                                 145                -
Net increase in loans                                                 (7,114)          (6,021)
Purchase of premises and equipment                                      (275)            (949)
                                                              ---------------  ---------------
NET CASH USED IN INVESTING ACTIVITIES                                 (1,177)          (7,987)
                                                              ---------------  ---------------

FINANCING ACTIVITIES
Net decrease in demand deposits, NOW accounts
  savings accounts, money market deposit accounts
  and escrow deposits                                                (10,226)          (4,641)
Net increase in time deposits                                         11,770            8,821
Increase in short-term borrowings                                      1,300            1,000
Payments on long-term borrowings                                      (2,000)          (4,000)
Proceeds from exercise of stock options                                   11               86
Cash dividends paid                                                     (433)            (429)
                                                              ---------------  ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                422              837
                                                              ---------------  ---------------

   INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                      909           (5,562)
 Cash and cash equivalents at beginning of period                      7,895           14,325
                                                              ---------------  ---------------
  CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $        8,804   $        8,763
                                                              ===============  ===============

NONCASH INVESTING ACTIVITY:
  Conversion of Parent Company advances to loans receivable   $        1,101   $            -
  Transfer of loans to foreclosed real estate                            249              558
</TABLE>

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

                                        5
<PAGE>
                            PATHFINDER BANCORP, INC.


Notes to Financial Statements

(1) BASIS OF PRESENTATION

The  accompanying  unaudited  consolidated  financial  statements  of Pathfinder
Bancorp,  Inc.  and  its  wholly  owned  subsidiaries  (the "Company") have been
prepared  in  accordance  with U.S. generally accepted accounting principles for
interim  financial information and the instructions for Form 10-Q and Article 10
of  Regulation S-X.  Accordingly, they do not include all of the information and
footnotes  necessary  for  a  complete  presentation  of  consolidated financial
position,  results  of  operations,  and  cash  flows  in  conformity  with U.S.
generally  accepted  accounting  principles.  Certain  amounts  in  the  2005
consolidated  financial  statements  have  been  reclassified  to conform to the
current  period  presentation.  These  reclassifications  had  no  effect on net
income  as  previously reported.  In the opinion of management, all adjustments,
consisting  of  normal  recurring  accruals,  considered  necessary  for  a fair
presentation  have  been  included.

The  following  material under the heading "Management's Discussion and Analysis
of  Financial  Condition  and  Results  of  Operations"  was  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, 2005 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 nine months ended September 30, 2006 are not
necessarily  indicative  of the results that may be expected for the year ending
December  31,  2006.

(2)  EARNINGS  PER  SHARE

Basic  earnings  per  share  have  been  computed  by dividing net income by the
weighted average number of common shares outstanding throughout the three months
and nine months ended September 30, 2006 and 2005, using 2,463,482 and 2,461,328
weighted  average  common  shares  outstanding  for  the three months ended, and
2,463,250  and  2,453,744  for  the  nine  months  ended,  respectively. Diluted
earnings per share for the three months and nine months ended September 30, 2006
and  2005  have been computed using 2,483,465 and 2,488,418 for the three months
ended  and  2,482,069  and  2,487,478  for  the nine 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.
                                        6
<PAGE>

(3)  PENSION  BENEFITS

The  composition of net periodic benefit plan cost for the three months and nine
months  ended  September  30,  2006  and  2005  is  as  follows:

<TABLE>
<CAPTION>
                                  FOR THE THREE MONTHS     FOR THE NINE MONTHS
                                   ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                   2006          2005       2006          2005
---------------------------------------------------------------------------------
<S>                              <C>        <C>              <C>        <C>
(In thousands)
Service cost                     $     48   $    38          $    144   $  114
Interest cost                          63        57               189      171
Expected return on plan assets        (92)      (71)             (276)    (213)
Amortization of net losses             28        24                84       72
---------------------------------------------------------------------------------
Net periodic benefit cost        $     47   $    48          $    141   $  144
=================================================================================
</TABLE>

The  Company previously disclosed in its financial statements for the year ended
December  31,  2005, that it expected to contribute $192,000 to its pension plan
in 2006.  As of September 30, 2006, $135,000 had been contributed to the pension
plan.

(4)  COMPREHENSIVE  INCOME  (LOSS)

The  components of other comprehensive income (loss) and related tax effects for
the  three  and  nine  month  periods  ended  September 30, 2006 and 2005 are as
follows:

<TABLE>
<CAPTION>
                                            FOR THE THREE MONTHS     FOR THE NINE MONTHS
                                             ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                             2006          2005       2006          2005
------------------------------------------------------------------------------------------
<S>                                        <C>        <C>              <C>        <C>
(In thousands)
Gross change in unrealized gains (losses)
  on securities available for sale         $  1,430   $   (175)       $    513   $ (739)
Reclassification adjustment for (gains)
  losses included in net income                   -        192               9      192
------------------------------------------------------------------------------------------
                                              1,430         17             522     (547)
Tax effect                                     (572)        (7)           (214)     219
------------------------------------------------------------------------------------------
Net of tax amount                          $    858   $     10        $    308   $ (328)
==========================================================================================
</TABLE>

(5) GUARANTEES

The  Company  does  not  issue  any  guarantees  that  would  require  liability
recognition  or  disclosure,  other  than its standby letters of credit. Standby
letters  of  credit written are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Generally, all letters
of  credit,  when  issued have expiration dates within one year. The credit risk
involved  in issuing letters of credit is essentially the same as those that are
involved  in  extending  loan  facilities  to customers. The Company, generally,
holds  collateral  and/or  personal guarantees supporting these commitments. The
Company  had  $216,000  of  standby  letters of credit as of September 30, 2006.
Management  believes  that  the  proceeds  obtained  through  a  liquidation  of
collateral  and  the  enforcement of guarantees would be sufficient to cover the
potential amount of future payments required under the corresponding guarantees.
The  current  amount  of  the  liability as of September 30, 2006 for guarantees
under  standby  letters  of  credit  issued  is  not  material.

                                        7
<PAGE>

(6)  STOCK  BASED  COMPENSATION

Prior  to  2006,  the  Company  accounted for stock-based compensation issued to
directors  and  employees  using  the  intrinsic value method in accordance with
Accounting  Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to
Employees"  (APB  25).  This  method  required  that  compensation  expense  be
recognized  to  the extent that the fair value of the stock exceeds the exercise
price  of  the  stock  award  at  the  grant date. The Company generally did not
recognize  compensation expense related to stock option awards because the stock
options  generally  had  fixed  terms  and exercise prices that were equal to or
greater  than  the  fair  value of the Company's common stock at the grant date.

Effective  January  1,  2006, the Company adopted Financial Accounting Standards
Board  (FASB)  Statement  No. 123(R), Share-Based Payment, ("SFAS 123(R)"). SFAS
123(R)  requires  compensation costs related to share-based payment transactions
to  be  recognized  in  the income statement (with limited exceptions) using the
modified  prospective  method  based  on  the  grant-date  fair  value  of  the
stock-based  compensation  issued.  Compensation  costs  are recognized over the
period  that  an employee provides service in exchange for the award.  As of the
date  of  adoption  of SFAS 123(R), the Company's options were fully granted and
vested,  and  accordingly,  there  was  no  impact to the Company's consolidated
financial  position  or  results  of  operations.

In  conjunction  with  SFAS 123(R), the Company also adopted FASB Staff Position
("FSP") SFAS 123(R)-2, "Practical Accommodation to the Application of Grant Date
as  Defined  in  SFAS  123(R)"  effective January 1, 2006. FSP 123(R)-2 provides
guidance  on  the  application  of  grant  date  as  defined  in SFAS 123(R). In
accordance  with  this standard a grant date of an award exists if (a) the award
is  a  unilateral  grant,  and (b) the key terms and conditions of the award are
expected to be communicated to an individual recipient within a relatively short
time  period  from  the  date of approval. The adoption of this standard did not
impact  our consolidated financial position, results of operations or cash flows
for  the  three  or  nine-month  periods  ended  September  30,  2006.

In  November  2005, the FASB issued final FSP No. 123(R)-3, "Transition Election
Related  to  Accounting  for the Tax Effects of Share-Based Payment Awards." The
FSP  provides  an  alternative  method  of  calculating excess tax benefits (the
Additional  Paid-in  Capital  "APIC"pool) from the method defined in SFAS 123(R)
for  share-based payments. A one-time election to adopt the transition method in
this  FSP  is  available to those entities adopting SFAS 123(R) using either the
modified  retrospective  or modified prospective method. Up to one year from the
initial adoption of SFAS 123(R) or effective date of the FSP is provided to make
this  one-time  election.  However,  until an entity makes its election, it must
follow  the  guidance  in SFAS 123(R). We are currently evaluating the potential
impact  of  calculating  the APIC pool with this alternative method and have not
yet  determined  which  method  we  will  adopt,  or  the expected impact on our
consolidated  financial  position  or  results  of  operations.

In  February 2006, the FASB issued FSP No. 123(R)-4, "Classifications of Options
and  Similar  Instruments  Issued  as  Employee Compensation That Allow for Cash
Settlement  upon the Occurrence of a Contingent Event." The position amends SFAS
123(R)  to incorporate that a cash settlement feature that can be exercised only
upon the occurrence of a contingent event that is outside the employee's control
does  not  meet certain conditions in SFAS 123(R) until it becomes probable that
the  event  will occur. The guidance in this FSP was required to be applied upon
initial  adoption  of  SFAS  123(R). The Company does not have any option grants
that  allow  for  cash  settlement.

                                        8
<PAGE>

(7)  NEW  ACCOUNTING  PRONOUNCEMENTS

In  February  2006,  the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial  Instruments  ("SFAS 155"). SFAS 155 amends FASB Statement No. 133 and
FASB  Statement  No. 140, and improves the financial reporting of certain hybrid
financial  instruments  by  requiring more consistent accounting that eliminates
exemptions  and  provides  a  means  to  simplify  the  accounting  for  these
instruments.  Specifically,  SFAS  155  allows  financial  instruments that have
embedded  derivatives  to  be  accounted for as a whole (eliminating the need to
bifurcate  the derivative from its host) if the holder elects to account for the
whole  instrument  on  a  fair value basis. The Company is required to adopt the
provisions  of  SFAS  155, as applicable, beginning in 2007. Management does not
believe  the  adoption  of SFAS 155 will have a material impact on the Company's
consolidated  financial  position  and  results  of  operations.

 In  March  2006,  the  FASB  issued  SFAS  No. 156, Accounting for Servicing of
Financial  Assets -An Amendment of FASB Statement No. 140 ("SFAS 156"). SFAS 156
requires  that  all  separately  recognized  servicing  assets  and  servicing
liabilities  be  initially measured at fair value, if practicable. The statement
permits,  but  does  not require, the subsequent measurement of servicing assets
and  servicing  liabilities at fair value. SFAS 156 is effective for the Company
beginning  in  2007.  The Company does not believe that the adoption of SFAS 156
will  have  a  significant  effect  on  its  consolidated  financial statements.

In  July  2006,  the  Financial  Accounting  Standards  Board (FASB) issued FASB
Interpretation  No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes-an
interpretation  of  FASB  Statement  No.  109"  (FIN  48),  which  clarifies the
accounting  for  uncertainty in tax positions. This Interpretation requires that
companies  recognize in their financial statements the impact of a tax position,
if  that  position is more likely than not of being sustained on audit, based on
the technical merits of the position. The provisions of FIN 48 are effective for
fiscal  years  beginning  after December 15, 2006, with the cumulative effect of
the change in accounting principle recorded as an adjustment to opening retained
earnings.  The Company is evaluating the impact of this new pronouncement on its
consolidated  financial  statements.

In  September  2006,  the  FASB  issued  FASB  Statement  No.  157,  Fair  Value
Measurements,  which  defines  fair value, establishes a framework for measuring
fair  value  under  GAAP, and expands disclosures about fair value measurements.
FASB  Statement  No. 157 applies to other accounting pronouncements that require
or  permit  fair value measurements. The new guidance is effective for financial
statements  issued  for  fiscal years beginning after November 15, 2007, and for
interim  periods  within  those  fiscal  years.  We are currently evaluating the
potential  impact,  if  any,  of  the  adoption of FASB Statement No. 157 on our
consolidated  financial  position,  results  of  operations  and  cash  flows.

On  September  29,  2006, the Financial Accounting Standards Board "FASB" issued
SFAS  No.  158,  Employers'  Accounting  for  Defined  Benefit Pension and Other
Postretirement  Plans ("SFAS 158"), which amends SFAS 87 and SFAS 106 to require
recognition  of  the  overfunded  or  underfunded  status  of  pension and other
postretirement  benefit  plans  on  the balance sheet. Under SFAS 158, gains and
losses,  prior  service  costs and credits, and any remaining transition amounts
under  SFAS  87  and  SFAS  106  that  have  not yet been recognized through net
periodic  benefit  cost  will  be  recognized in accumulated other comprehensive
income,  net  of  tax  effects,  until  they are amortized as a component of net
periodic  cost.  The measurement date - the date at which the benefit obligation
and  plan assets are measured - is required to be the company's fiscal year end.
SFAS  158 is effective for publicly-held companies for fiscal years ending after
December  15,  2006,  except  for  the  measurement  date  provisions, which are
effective  for  fiscal  years  ending  after  December  15, 2008. The Company is
currently  analyzing  the  effects  of  SFAS  158  but  does  not  expect  its
implementation  will  have  a  significant  impact  on  the  Company's financial
conditions  or  results  of  operations.

On September 13, 2006, the Securities and Exchange Commission "SEC" issued Staff
Accounting  Bulletin No. 108 ("SAB 108"). SAB 108 provides interpretive guidance
on  how  the  effects  of  the carryover or reversal of prior year misstatements

                                        9
<PAGE>

should be considered in quantifying a potential current year misstatement. Prior
to  SAB  108,  companies  might  evaluate the materiality of financial statement
misstatements  using either the income statement or balance sheet approach, with
the  income  statement  approach  focusing  on  new  misstatements  added in the
current  year,  and the balance sheet approach focusing on the cumulative amount
of  misstatement  present in a company's balance sheet. Misstatements that would
be  material  under  one  approach  could  be viewed as immaterial under another
approach,  and  not  be  corrected.  SAB  108  now  requires that companies view
financial  statement misstatements as material if they are material according to
either  the income statement or balance sheet approach. The Company has analyzed
SAB 108 and determined that upon adoption it will have no impact on the reported
results  of  operations  or  financial  conditions.

                                       10
<PAGE>

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,  Inc.  are  the wholly owned subsidiaries of
Pathfinder Bank.   At September 30, 2006, Pathfinder Bancorp, MHC, the Company's
mutual  holding  company  parent, whose activities are not included in the MD&A,
held  64.2%  of  the  Company's  common stock while the public held 35.8% of the
Company's  common  stock.

The  following discussion reviews the Company's financial condition at September
30,  2006  and  the  results  of  operations for the three and nine months ended
September  30,  2006  and  September  30,  2005.

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  other  income,  including  income  from  fees and service charges on
deposit  accounts,  net  gains  and  losses  on  sales  of securities, loans and
foreclosed  real  estate,  and  other  expenses  such  as  salaries and employee
benefits,  building  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.

APPLICATION  OF  CRITICAL  ACCOUNTING  POLICIES

The  Company's consolidated financial statements are prepared in accordance with
accounting  principles  generally  accepted  in the United States of America and
follow  practices  within the banking industry.  Application of these principles
requires management to make estimates, assumptions and judgments that affect the

                                       11
<PAGE>

amounts  reported  in  the  consolidated  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 2005 Annual
Report  on Form 10-K ("the Consolidated Financial Statements").  These policies,
along  with the disclosures presented in the other financial statement notes and
in  this  discussion,  provide  information  on  how  significant  assets  and
liabilities  are  valued  in the consolidated financial statements and how those
values  are  determined.  Based  on  the  valuation  techniques  used  and  the
sensitivity  of  financial  statement  amounts  to  the methods, assumptions and
estimates  underlying those amounts, management has identified the 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 September 30, 2006, 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 consolidated 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.

EXECUTIVE  SUMMARY

Net  income was $170,000, or $0.07 per diluted share, for the three months ended
September  30, 2006 as compared to $116,000, or $0.05 per diluted share, for the
same  period in 2005.  For the nine months ended September 30, 2006, the Company
reported  net  income  of  $713,000,  or  $0.29 per diluted share as compared to
$499,000,  or $0.20 per diluted share, for the same period in 2005.  The Company
continued  its  efforts toward transforming its traditional thrift balance sheet
with  mostly  residential  loans  as  interest  earning  assets toward that of a
community  bank  with a more diverse mix of residential, consumer and commercial
loans.  On  an  average  balance  basis,  commercial loans comprise 26.2% of the
total  gross  loan  portfolio  for  the nine months ended September 30, 2006, as
compared  to 25.0% of the portfolio in 2005.  Asset quality continues to improve

                                       12
<PAGE>

during 2006 as reflected by the improvement in the ratio of non-performing loans
to  period end loans to 0.69% at September 30, 2006, from 0.88% at September 30,
2005.

On  April  23,  2006,  Alliance  Bank N.A. announced it had reached a definitive
agreement  to  merge  with  the  parent  company  of Oswego County National Bank
(OCNB).  OCNB,  formerly,  Oswego  County Savings Bank has been domiciled in the
city  of  Oswego  since  its  founding  in  1870  and has been the primary local
competitor  for  Pathfinder  Bank.  In management's view, the absorption of OCNB
into  Alliance  Bank,  a  $900  million bank headquartered in Syracuse, NY, will
provide  both  challenges  and opportunities for Pathfinder Bank.  The challenge
will  be  the  ability  of a larger competitor to more actively and aggressively
market  within  the  primary  business  area  of Pathfinder Bank.  Opportunities
exist,  as management believes that it's unique competencies and differentiators
are  more  closely  matched  by a locally domiciled bank, than one headquartered
outside  our  primary market area.  Opportunities may exist to garner additional
business  relationships  with the traditional customer base of OCNB that is more
apt  to  conduct  its  business  with  a  local  bank.

RESULTS  OF  OPERATIONS

The  return  on average assets and return on shareholders' equity were 0.23% and
3.21%,  respectively,  for  the  three months ended September 30, 2006, compared
with  0.15%  and  2.16%,  respectively, for the three months ended September 30,
2005.  During  the  third quarter of 2006, when compared to the third quarter of
2005,  net interest income decreased $145,000, combined with a decrease in other
income,  exclusive of net gains on sales of securities and loans/real estate, by
$26,000,  or  4%,  offset by a $102,000, or 4%, reduction in other expenses.  No
provision  for  loan  losses  was  made  in  the  quarter.

The  return  on average assets and return on shareholders' equity were 0.32% and
4.53%, respectively, for the nine months ended September 30, 2006, compared with
0.22%  and  3.10%,  respectively,  for the nine months ended September 30, 2005.
For  the  nine  months  ended  September 30, 2006, net interest income decreased
$409,000,  or  6%,  when  compared  to the nine months ended September 30, 2005.
This decrease was offset by a reduction in other expenses of $311,000, or 4%, an
increase  in  other  income,  exclusive  of net gains on sales of securities and
loans/real  estate,  of  $140,000,  or  9%, and a 90%, or $206,000, reduction in
provision  for  loan  losses.

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 interest
earning  assets,  interest-bearing  liabilities,  related  yields and associated
funding  costs.

For  the  three  months  ended  September  30,  2006,  net interest income, on a
tax-equivalent basis, decreased to $2.1 million from $2.2 million, when compared
to  the  same  quarter of 2005.  The Company's net interest margin for the third
quarter  of 2006 decreased to 3.11% from 3.21% when compared to the same quarter
in  2005.  Management  expects  continued margin compression to adversely impact
earnings,  as we anticipate the yield curve will continue to be flat or inverted
over  the  near term. The decline in net interest income was attributable to the
higher  rates paid of 54 basis points on both deposits and borrowings, offset by
an  increase  of  40  basis  points  in  average  interest-earning asset yields.
Average  interest-earning  assets  decreased  3% to $270.3 million for the three
months  ended  September  30,  2006  as compared to $279.6 million for the three
months ended September 30, 2005. The decrease in average interest-earning assets
was primarily attributable to a $14.4 million decrease in investment securities,
offset  by a $5.0 million increase in loans receivable. Average interest-bearing
liabilities  decreased  $9.7  million,  and the cost of funds increased 54 basis

                                       13
<PAGE>

points  to  3.03%  for  the quarter ended September 30, 2006, from 2.49% for the
same  period  in  2005. The decrease in the average balance of interest- bearing
liabilities  resulted  primarily from an $8.3 million decrease in borrowed funds
and  a  $1.4  million  decrease  in  average  deposits. The decrease in deposits
principally  occurred  in  the  municipal  money  management  accounts  due  to
fluctuating  deposit activities of the local municipal entities. The increase in
cost  of  funds  can be attributed to the 175 basis point increase in short-term
interest  rates  over  the  past  12  months,  combined  with  a  change  in the
composition  of  deposits  as  $8.2  million in deposits shifted from lower cost
savings  accounts  to  higher  cost  certificates  of  deposit.

For  the  nine  months  ended  September  30,  2006,  net  interest income, on a
tax-equivalent basis, decreased $417,000, to $6.4 million, from $6.8 million for
the  nine  months  ended  September  30, 2005.  Net interest margin decreased 12
basis  points,  to 3.12% for the nine months ended September 30, 2006 from 3.24%
for  the  nine  months ended September 30, 2005. Average interest-earning assets
decreased  3%  to $273.1 million for the nine months ended September 30, 2006 as
compared  to  $280.3 million for the nine months ended September 30, 2005, while
the  yield  on  interest-earning  assets increased 36 basis points to 5.81% from
5.45%  for  the  comparable  periods.   The decrease in average interest-earning
assets  was  primarily  attributable  to  an $8.3 million decrease in investment
securities  and  a $3.3 million decrease in interest-earning deposits, partially
offset by a $4.4 million increase in loans receivable.  Average interest-bearing
liabilities  decreased  $7.6  million while the cost of funds increased 52 basis
points  to  2.86%  for  the nine months ended September 30, 2006, from 2.34% for
the  same  period  in  2005.  The  decrease  in  the  average  balance  of
interest-bearing  liabilities  resulted  from a $5.2 million decrease in average
deposits  and  a  $2.4  million  decrease  in  borrowed  funds.

INTEREST  INCOME

Total  interest  income,  on  a  tax-equivalent  basis,  for  the  quarter ended
September  30, 2006 increased $137,000, or 4%, to $4.0 million from $3.9 million
for  the  quarter  ended  September  30,  2005.  The  average  balance  of loans
increased $5.0 million to $194.7 million, with yields increasing 29 basis points
to  6.64%  for  the third quarter of 2006.  Average commercial real estate loans
increased  $6.6  million,  and  the yield on those loans increased to 7.77% from
7.30%  in 2005. Average commercial loans increased $2.5 million, and experienced
an  increase  in  the  average yield of 19 basis points, to 8.59% from 8.40%, in
2005.  Average  consumer  loans  increased  $915,000,  or 5%, and experienced an
increase  in  yield of 88 basis points.  The increase in the yield on commercial
and  consumer  loans was primarily the result of new loan originations occurring
at market rates higher than the weighted average existing portfolio rate as well
as the adjustable rate portions of the portfolios repricing upward in connection
with  Federal  Reserve  increases  in  the  prime rate. Increases in the average
balance  of  consumer and commercial loan portfolios were offset by decreases in
the  average  balance  of  residential real estate loan portfolios and municipal
loans.  The  average  balance of the residential real estate portfolio decreased
$4.1  million,  or  3%,  combined  with a slight decrease in yield to 5.75% from
5.79%  for  the  same  period  in  2005.  The Company's municipal loan portfolio
decreased  $951,000, or 5%, when comparing the third quarter of 2006 to the same
period  in  2005.  The  average  tax  equivalent  yield  on  the  municipal loan
portfolio  increased  to  5.87%  in the third quarter of 2006 from 4.32% for the
same  period  in  2005.

Average  investment  securities  (taxable  and tax-exempt) for the quarter ended
September 30, 2006 decreased by $14.4 million when compared to the same period a
year  ago, with a decrease in tax-equivalent interest income from investments of
$79,000,  or  9%,  compared  to  the  third  quarter  of  2005.  The  average
tax-equivalent  yield  of the portfolio increased 31 basis points, to 4.13% from
3.82%.  The  decrease  in average investment securities was primarily due to the
December  2005  sale of agency and municipal securities which had been purchased
as collateral for the additional municipal deposit relationships acquired during
2004  and  2005.  Additional  securities  were  sold during the first and second
quarters  of  2006  following  the  decrease  in  municipal  deposits.

                                       14
<PAGE>

Total  interest  income,  on  a  tax-equivalent basis, for the nine months ended
September  30,  2006 increased $442,000, or 4%, when compared to the nine months
ended  September  30,  2005.  Average loans increased $4.4 million, with average
yields  increasing  27 basis points to 6.54% from 6.27%.  The average balance of
commercial real estate increased $4.9 million, with average yields increasing to
7.72%  from 7.39%, average commercial loans increased $2.9 million, with average
yields  increasing  to  8.16%  from  7.31%  and average consumer loans increased
$764,000  with  average yields increasing to 8.06% from 7.24% for the nine moths
September  30,  2005.  These  increases  were offset by decreases in the average
balance  of  residential  real  estate  and  municipal loans of $3.5 million and
$712,000,  respectively.

For  the  nine  months  ended September 30, 2006, tax-equivalent interest income
from  investment  securities  decreased  $109,000,  or  4%, compared to the same
period in 2005.   The average tax-equivalent yield of the portfolio increased 22
basis  points,  to  4.06%  from 3.84%, offset by an $8.3 million decrease in the
average  balance  of  investment  securities.

INTEREST  EXPENSE

Total  interest  expense increased $283,000 for the three months ended September
30,  2006,  when  compared to the same quarter in 2005.  Deposit expense for the
comparable  periods  increased  $315,000,  or  30%,  as the average rate paid on
higher cost money management accounts increased 46 basis points to 2.52% in 2006
from 2.06% in 2005.  The cost of time deposits also increased 86 basis points as
existing  time  deposits  matured and rolled over into higher cost deposits.  In
addition,  the  Bank  introduced  new  higher cost promotional deposit products,
combined  with a 14% increase in the average balance of time deposit accounts to
$104.7  million  in  2006  from  $92.2  million  in  2005.  The  cost  of  other
interest-bearing  deposits  increased  slightly to 0.47% from 0.45%, offset by a
6%,  or  $4.8  million,  decrease  in  the  average  balance  of these deposits.
Interest  expense  on  borrowings  decreased  by  $32,000, or 6%, from the prior
period,  resulting  from  a decrease in the average balance of borrowed funds of
$8.3  million,  or  17%,  offset by an increase in the cost of borrowed funds to
5.42%  from  4.75%.  The  increase  in the cost of borrowings primarily resulted
from an increase in the cost of the $5.0 million LIBOR (London Interbank Offered
Rate) based junior subordinated debentures to 8.88% from 6.91%.  The cost of the
junior  subordinated  debenture  adjusts  quarterly.

For  the  nine  months  ended  September  30,  2006,  interest expense increased
$859,000, or 19%, to $5.5 million from $4.7 million for the same period in 2005.
The  average  deposit balance decreased $5.2 million, offset by a 53 basis point
increase in the cost of deposits to 2.41% from 1.88%. The cost of borrowed funds
increased 53 basis points to 5.24% from 4.71%, partially offset by a decrease in
the  average  balance  of  borrowed  funds  by  $2.4  million,  or  6%.

PROVISION  FOR  LOAN  LOSSES

No  provision  for loan losses was made for the quarter ended September 30, 2006
reflecting  the Bank's improved asset quality.  The Company's ratio of allowance
for loan losses to period end loans has decreased to 0.83% at September 30, 2006
from  0.97%  at  September  30,  2005.  Nonperforming  loans to period end loans
decreased  to  0.68%  at  September  30,  2006 from 0.89% at September 30, 2005.

For  the nine months ended September 30, 2006, the provision for loan losses was
$23,000  as compared to $229,000 for the same period in 2005 primarily resulting
from a decrease in the level of charge-offs to $86,000 for the nine months ended
September  30,  2006  compared  to $255,000 in 2005 and continued improvement in
overall  asset  quality.

                                       15
<PAGE>

NONINTEREST  INCOME

The  Company's  noninterest  income  is  primarily  comprised of fees charged 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
periods  indicated:

<TABLE>
<CAPTION>
                                           Three Months Ended September 30,
                                           2006    2005   $Change   % Change
-----------------------------------------------------------------------------
(Dollars in thousands)
<S>                                     <C>     <C>      <C>        <C>
Service charges on deposit accounts     $   338   $ 356   $   (18)   -5.1%
Loan servicing fees                          55      61        (6)   -9.8%
Earnings on bank owned life insurance        50      44         6    13.6%
Other operating income                      130     138        (8)   -5.8%
-----------------------------------------------------------------------------
Core other income                           573     599       (26)   -4.3%
Net gains/(losses) on sale of loans/
  foreclosed real estate                    (29)     42       (71) -169.0%
Net losses on sales of securities             -    (192)      192  -100.0%
-----------------------------------------------------------------------------
Total other income                      $   544   $ 449   $    95    21.2%
=============================================================================

                                         Nine Months Ended September 30,
                                           2006    2005   $Change   % Change
-----------------------------------------------------------------------------
(Dollars in thousands)
<S>                                     <C>     <C>      <C>         <C>
Service charges on deposit accounts     $ 1,059   $ 949   $   110    11.6%
Loan servicing fees                         160     146        14     9.6%
Earnings on bank owned life insurance       150     133        17    12.8%
Other operating income                      417     418        (1)   -0.2%
-----------------------------------------------------------------------------
Core other income                         1,786   1,646       140     8.5%
Net gains/(losses) on sale of loans/
  foreclosed real estate                   (34)      30       (64) -213.3%
Net losses on sales of securities           (9)    (192)      183   -95.3%
-----------------------------------------------------------------------------
Total other income                      $1,743   $1,484   $   259    17.5%
=============================================================================
</TABLE>

For  the  three  months  ended September 30, 2006, core other income reflected a
decrease  of $26,000, or 4%, when compared with the three months ended September
30,  2005.  Income  from service charges on deposit accounts decreased primarily
due  to  lower  net collected fees on checking account activity. The decrease in
other  operating  income  primarily  resulted from a decrease in fees associated
with foreign ATM usage, partially offset by an increase in Pathfinder Bank debit
card  usage.

For  the  nine  months  ended  September  30,  2006, core other income increased
$140,000  or  9%,  when  compared with the nine months ended September 30, 2005.
The  increase was primarily due to a fee enhancement program on deposit accounts
which  began  in  the  second  quarter  of  2005.

The  increase in the net losses on sales of loans/foreclosed real estate for the
three and nine month period was the result of the sale of four ORE properties in
the  third  quarter  of  2006.  Additionally,  a  gain  on the sale of loans was
recorded  in  the  third  quarter  of 2005.  There were no loan sales during the
first  nine  months  of  2006.

The  decrease  in the net losses on sales of investment securities for the three
and  nine  month  period  was  primarily  due to a $192,000 other than temporary
impairment charge recorded in the third quarter of 2005, with no similar charges
taken  in  2006.

NONINTEREST  EXPENSES

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

<TABLE>
<CAPTION>
                                       Three Months Ended September 30,
                                       2006    2005   $Change   % Change
--------------------------------------------------------------------------
(Dollars in thousands)
<S>                                 <C>     <C>      <C>        <C>
Salaries and employee benefits      $ 1,307  $1,290  $    17      1.3%
Building occupancy                      291     318      (27)    -8.5%
Data processing                         328     325        3      0.9%
Professional and other services         121     172      (51)   -29.7%
Amortization of intangible assets        55      55        -      0.0%
Other operating                         289     333      (44)   -13.2%
-------------------------------------------------------------------------
Total noninterest expense           $ 2,391  $2,493  $  (102)    -4.1%
-------------------------------------------------------------------------


                                       Nine Months Ended September 30,
                                       2006    2005   $Change   % Change
------------------------------------------------------------------------
(Dollars in thousands)
<S>                                 <C>     <C>     <C>        <C>
Salaries and employee benefits      $ 3,765  $3,807  $   (42)    -1.1%
Building occupancy                      913     880       33      3.8%
Data processing                         958     964       (6)    -0.6%
Professional and other services         352     572     (220)   -38.5%
Amortization of intangible assets       166     166        -      0.0%
Other operating                         958   1,034      (76)    -7.4%
-------------------------------------------------------------------------
Total noninterest expense           $ 7,112  $7,423  $  (311)    -4.2%
=========================================================================
</TABLE>
                                       16
<PAGE>

Total  noninterest  expense  decreased  $102,000  for  the  three  months  ended
September  30,  2006, when compared to the same quarter of 2005. The decrease in
building  occupancy  expense  for the three months ended September 30, 2006, was
primarily  the  result  of  a  reduction  of  machine  maintenance  expenses and
nonrecurring  expenses associated with branch facility improvements in 2005. The
decrease  in  professional  and other expenses for the three-month period ending
September  30,  2006,  was primarily due to costs associated with a company wide
leadership training program and process improvement initiatives that occurred in
2005.  The  decrease  in  other operating expenses was primarily attributable to
lower  expenses  associated  with  foreclosed real estate, a reduction in office
supplies and a reduction in costs associated with home equity loan originations.

Total noninterest expense decreased $311,000 for the nine months ended September
30, 2006 when compared to the same period of 2005. The reduction in salaries and
employee  benefits was primarily due to a personnel realignment in December 2005
and  a  reduction  of  expenses recognized on the employee stock ownership plan.
These reductions were offset by an increase in staffing costs for the new branch
that opened in June of 2005. The decrease in professional and other services was
primarily  due  to  the  2005  expenses  associated with the leadership training
program  and  process  improvement initiatives. The reduction in other operating
expenses  was  primarily  due  to  a  reduction in office supply expenses, lower
expenses  associated  with  home  equity  loan  origination  costs  and mortgage
recording  tax  expenses,  a  reduction  in  expenses on ORE property due to the
number  of  foreclosed  properties held and the recording of gains recognized on
the  sale  of  fixed assets. Building occupancy costs increased primarily due to
the  full nine months of operation of the new Central Square branch which opened
in  June  2005,  combined  with  increased  depreciation  expenses.

INCOME TAX EXPENSE

Income  taxes  increased  $89,000  and  $153,000  for the quarter ended and nine
months ended September 30, 2006, respectively, as compared to the same period in
2005.  These increases were attributable to an increase in the Company's pre-tax
income  and  a  decrease in tax-exempt interest income.   The effective tax rate
was 19.0% for the three months and 17.2% for the nine months ended September 30,
2006.  The Company continues to strive to reduce its tax rate from the statutory
rate of 34% primarily through the ownership of tax-exempt investment securities,
bank  owned  life  insurance and other tax savings strategies.  The enactment of
proposed  state tax legislation, which would limit the benefit derived from Real
Estate  Investment Trusts, would result in a higher effective state tax rate for
the  Company,  if  passed.

CHANGES  IN  FINANCIAL  CONDITION

ASSETS

Total  assets  increased  to  $298.0  million  at September 30, 2006 from $296.9
million  at  December  31, 2005. Loans receivable increased $7.9 million, or 4%,
offset by a decrease in investment securities of $5.2 million and a $1.9 million
reduction  in  other assets.  The increase in loans receivable was primarily the
result  of  a  $5.0  million  increase in commercial real estate, a $1.9 million
increase in commercial loans and a $1.3 million increase in consumer loans.  The
decrease  in  investment securities was primarily the result of amortization and
prepayments  within  the  mortgage-backed securities and government and agencies
portfolio.

At  September 30, 2006, the securities balance included a net unrealized loss on
available  for  sale securities of $1.6 million, as compared to a net unrealized
loss  of  $2.2  million  at  December  31,  2005. These unrealized losses relate
principally  to  changes  in  interest  rates  subsequent  to the acquisition of
specific  securities.  None of the securities in this category had an unrealized
loss  that  exceeded  8%  of the book value of the Company.  The Company has the
intent and ability to hold the individual securities to maturity or market price
recovery.

                                       17
<PAGE>

The  decrease  in  other  assets  is  primarily  due  to  the  elimination  of
inter-company  balances  between the Bank and the Company which were paid off by
the  origination  of  two  commercial  loans  in  May  of  2006.

LIABILITIES

Total  liabilities  increased  slightly  to $276.6 million at September 30, 2006
from  $276.0 million at December 31, 2005.    The slight increase in liabilities
was  due  to a $1.5 million increase in non-interest bearing deposits and a $1.3
million  increase in short-term borrowings, offset by a $2.0 million decrease in
long-term  borrowings.  Short-term  borrowings were increased to replace deposit
outflows from municipal customers. The increase in non-interest bearing deposits
was primarily attributable to new business account relationships and the opening
of  the  new  Central  Square  branch  in  June  of  2005.

LOAN  AND  ASSET  QUALITY  AND  ALLOWANCE  FOR  LOAN  LOSSES

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

<TABLE>
<CAPTION>
                                                                   For the Period Ending
---------------------------------------------------------------------------------------------------
(Dollars in thousands)                               September 30,    December 31,    September 30,
                                                         2006             2005            2005
---------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>             <C>
Nonaccrual loans:
Commercial                                          $          468   $         757   $        336
Consumer                                                       130              89            126
Real estate -  Construction                                      0               0              0
               Mortgage                                        749             834          1,179
----------------------------------------------------------------------------------------------------
Total nonaccrual loans                                       1,347           1,680          1,641
Loans past due 90 days or more and still accruing                0               0              0
----------------------------------------------------------------------------------------------------
Total non-performing loans                                   1,347           1,680          1,641
Foreclosed real estate                                         497             743            935
----------------------------------------------------------------------------------------------------
Total non-performing assets                         $        1,844   $       2,423   $      2,576
====================================================================================================
Non-performing loans to total loans                           0.68%           0.89%          0.88%
Non-performing assets to total assets                         0.62%           0.82%          0.85%
====================================================================================================

</TABLE>

Total  nonperforming  loans  and  foreclosed  real  estate at September 30, 2006
decreased  19.8%  when  compared  to  December  31, 2005.  The sharp decrease in
commercial  nonaccrual  loans  is a result of the workout of one commercial loan
relationship  and the foreclosure on the real estate of another relationship. No
loss  of  principle  or  interest  was  recognized  from  either  situation.
Nonperforming  loans  continued  to  be  addressed  primarily  through increased
collection  efforts and foreclosure proceedings. The decrease in foreclosed real
estate  is  a  result  of  a conscious effort on the bank's part to aggressively
market  foreclosed  properties and reduce the amount of time that they are being
carried.  Management  believes that adequate reserves exist for potential losses
that  may  occur.

The  allowance  for loan losses at September 30, 2006 was $1.6 million, or 0.83%
of  period end loans, compared to $1.7 million, or 0.89% of period end loans, at
December  31,  2005.

CAPITAL

Shareholders'  equity  increased  $437,000, or 2%, to $21.4 million at September
30,  2006.  The  increase  in  shareholders'  equity  primarily  resulted from a
$308,000  reduction  in  accumulated  other  comprehensive  loss and $118,000 in
retained  earnings.  The Company added $713,000 to retained earnings through net
income  and returned $595,000 to its shareholders in the form of cash dividends.
The  Company's  mutual  holding company parent, Pathfinder Bancorp, MHC accepted
the  dividend  for  the  quarter  ended  September  30,  2006.

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

                                       18
<PAGE>

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 September 30, 2006, Pathfinder
Bank  exceeded  all  regulatory  required  minimum  capital  ratios  and met the
regulatory  definition  of  a  "well-capitalized"  institution,  i.e. a leverage
capital ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 6% and a
total  risk-based  capital  ratio  exceeding  10%.

LIQUIDITY

Liquidity  management  involves  the  Company's  ability  to  generate  cash  or
otherwise  obtain  funds  at reasonable rates to support asset growth 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 mortgage backed securities 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, and utilizes
short-term  borrowings  as  a  source  of  liquidity  when  necessary.

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  Committees of the Company are responsible for
implementing  the  policies and guidelines for the maintenance of prudent levels
of  liquidity.  As  of  September  30, 2006, management reported to the Board of
Directors  that  the  Company  is  in  compliance  with  its  liquidity  policy
guidelines.

                                       19
<PAGE>

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 Asset-
Liability  Management Committees which are 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  these  committees.

From  2001  until June 2004, the Federal Reserve lowered interest rates thirteen
times  by  a  total  of  550  basis points.  These interest rate reductions have
caused  significant  repricing  of Pathfinder 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.

Since  June  of 2004, the Federal Reserve has raised its key short-term interest
rate 425 basis points. Net interest margin compression has resulted as the yield
curve  flattened  from  sharp  increases  in  short-term  interest  rates  while
longer-term  rates  have remained relatively stable. Management will continue to
seek  to  minimize  any  reduction  in net interest income in a period of rising
short-term  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  September  30,  2006, the total interest-bearing liabilities
maturing  or  repricing  within  one year exceeded total interest-earning assets
maturing  or  repricing  in  the  same  period  by $31.4 million, representing a
cumulative  one-year  gap  ratio  of  a  negative  10.56%.

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).

                                       20
<PAGE>

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.  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.

<TABLE>
<CAPTION>
                      Percentage      Percentage
Change in    NPV       Change in      Change in
Interest   Capital   Net Interest   Net Portfolio
Rates       Ratio       Income          Value
--------------------------------------------------
<S>        <C>       <C>            <C>
 300          7.23%        -17.64%         -33.70%
 200          8.23%        -11.60%         -22.82%
 100          9.21%         -5.72%         -11.48%
   0           ----           ----            ----
-100         10.66%          2.71%           7.40%
-200         10.58%          2.00%           8.44%
-300         10.14%         -0.65%           5.64%
</TABLE>

                                       21
<PAGE>

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.

                                       22
<PAGE>

PART  II  -  OTHER  INFORMATION

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

None

ITEM 1A - RISK FACTORS
----------------------

There have been no significant changes in the risk factors affecting Pathfinder
Bancorp, Inc. that were identified in Item 1A of Part 1 of the Company's Form
10-K for the year ended December 31, 2005.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
--------------------------------------------------------------------

None

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

None

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

None

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

None

ITEM 6 - EXHIBITS
-----------------

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

31.1               Rule 13a-14(a) / 15d-14(a) Certification of the Chief
                     Executive Officer
31.2               Rule 13a-14(a) / 15d-14(a) Certification of the Chief
                     Financial Officer
32.1               Section 1350 Certification of the Chief Executive
                     Officer and Chief Financial Officer

                                       23
<PAGE>


SIGNATURES


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


     PATHFINDER BANCORP, INC.
     ------------------------
           (Registrant)


November 14, 2006        /s/ Thomas W. Schneider
-----------------        -----------------------
Date:                    Thomas W. Schneider
                         President, Chief Executive Officer


November 14, 2006        /s/ James A. Dowd
-----------------        ----------------
Date:                    James A. Dowd
                         Senior Vice President, Chief Financial Officer

                                       24
<PAGE>

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 certify that:

1.     I have reviewed the September 30, 2006 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.


November 14, 2006         /s/ Thomas W. Schneider
-----------------         -----------------------
Date                      Thomas W. Schneider
                          President and Chief Executive Officer

<PAGE>

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 certify that:

1.     I have reviewed the September 30, 2006 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.


November 14, 2006         /s/ James A. Dowd
-----------------         -----------------
Date                      James A. Dowd
                          Senior Vice President and Chief Financial
                            Officer
<PAGE>


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 September 30, 2006 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.





November 14, 2006             /s/ Thomas W. Schneider
-----------------             -----------------------
Date                          Thomas W. Schneider
                              President and Chief Executive Officer


November 14, 2006             /s/ James A. Dowd
-----------------             -----------------
Date                          James A. Dowd
                              Senior Vice President and Chief Financial
                              Officer
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{"company-data": {"conformed-name": "PATHFINDER BANCORP INC", "cik": "0001046188", "assigned-sic": "6036", "irs-number": "161540137", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-23601", "film-number": "061216210"}, "business-address": {"street1": "214 W FIRST ST", "city": "OSWEGO", "state": "DE", "zip": "13126", "phone": "3153430057"}, "mail-address": {"street1": "214 W FIRST ST", "city": "OSWEGO", "state": "DE", "zip": "13126"}}
UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                          _____________________________

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the quarterly period ending September 30, 2006

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the transition period from _______ to _______

                        COMMISSION FILE NUMBER: 000-23601
                                                ---------

                            PATHFINDER BANCORP, INC.
                            ------------------------
             (Exact Name of Registrant as Specified in its Charter)

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

                     214 West First Street, Oswego, NY 13126
                     ---------------------------------------
               (Address of Principal Executive Office) (Zip Code)

                                 (315) 343-0057
                                 --------------
               (Registrant's Telephone Number including area code)

     Indicate  by  check  mark  whether the Registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  twelve 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 a large accelerated filer,
an  accelerated  filer,  or  a  non-accelerated  filer.  See  definition  of
"accelerated  filer  and  large accelerated filer" in Rule 12b-2 of the Exchange
Act.  (Check  one):

Large Accelerated  Filer [ ] Accelerated  Filer [ ]  Non-Accelerated  Filer[X]

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act).    Yes  [  ]       No  [X]

     As  of  November  13, 2006 there were 2,951,819 shares issued and 2,464,532
shares  outstanding  of  the  Registrant's  Common  Stock.
PATHFINDER BANCORP, INC.
                                      INDEX

PART 1     FINANCIAL INFORMATION                                       PAGE NO.

           Item 1.     CONSOLIDATED 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        6-10

          Item 2.      Management's Discussion and Analysis of Financial
                        Condition and Results of Operations                11-19

          Item 3.      Quantitative and Qualitative Disclosure
                        about Market Risk                                  20-21

          Item 4.      Controls and Procedures                             22

PART II   OTHER INFORMATION                                                23

          Item 1.      Legal Proceedings
          Item 1A.     Risk Factors
          Item 2.      Unregistered Sales of Equity Securities and
                          Use of Proceeds
          Item 3.      Defaults Upon Senior Securities
          Item 4.      Submission of Matters to a Vote of Security Holders
          Item 5.      Other Information
          Item 6.      Exhibits

SIGNATURES                                                                24
PART I - FINANCIAL INFORMATION

ITEM 1- CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------
PATHFINDER  BANCORP, INC.
                                       CONSOLIDATED STATEMENTS OF CONDITION
                               SEPTEMBER 30, 2006 (UNAUDITED) AND DECEMBER 31, 2005

                                                                                    September 30,    December 31,
ASSETS                                                                                  2006             2005
------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Cash and due from banks                                                            $        8,547   $       7,309
Interest earning deposits                                                                     257             586
                                                                                   ---------------  --------------
    Total cash and cash equivalents                                                         8,804           7,895
Investment securities, at fair value                                                       69,058          74,239
Federal Home Loan Bank stock, at cost                                                       1,772           1,805
Loans                                                                                     197,463         189,568
   Less: Allowance for loan losses                                                          1,631           1,679
                                                                                   ---------------  --------------
     Loans receivable, net                                                                195,832         187,889

Premises and equipment, net                                                                 7,602           8,020
Accrued interest receivable                                                                 1,636           1,678
Foreclosed real estate                                                                        497             743
Goodwill                                                                                    3,840           3,840
Intangible asset, net                                                                         238             404
Bank owned life insurance                                                                   6,137           5,987
Other assets                                                                                2,587           4,448
                                                                                   ---------------  --------------
     Total assets                                                                  $      298,003   $     296,948
                                                                                   ===============  ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
  Interest-bearing                                                                 $      216,026   $     216,136
  Non interest-bearing                                                                      21,895          20,241
                                                                                   ---------------  --------------
     Total deposits                                                                       237,921         236,377
Short-term borrowings                                                                       3,300           2,000
Long-term borrowings                                                                       27,360          29,360
Junior subordinated debentures                                                              5,155           5,155
Other liabilities                                                                           2,902           3,128
                                                                                   ---------------  --------------
     Total liabilities                                                                    276,638         276,020

Shareholders' equity:
   Preferred stock, authorized shares 1,000,000; no shares issued or outstanding
   Common stock, par value $.01; authorized 10,000,000 shares;
    2,951,819 and 2,950,419 shares issued;  and 2,464,532 and 2,463,132  shares
       outstanding, respectively                                                               29              29
   Additional paid in capital                                                               7,732           7,721
   Retained earnings                                                                       21,083          20,965
   Accumulated other comprehensive loss                                                      (977)         (1,285)
   Treasury stock, at cost; 487,287 shares                                                 (6,502)         (6,502)
                                                                                   ---------------  --------------
     Total shareholders' equity                                                            21,365          20,928
                                                                                   ---------------  --------------
     Total liabilities and shareholders' equity                                    $      298,003   $     296,948
                                                                                   ===============  ==============
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
                                                                     September 30, 2006    September 30, 2005
                                                                    --------------------  --------------------
(Dollars in thousands, except per share data)
INTEREST INCOME:

Loans, including fees                                              $          3,222   $             3,006
Debt securities:
 Taxable                                                                        561                   621
 Tax-exempt                                                                      98                   138
Dividends                                                                        82                    61
Other                                                                             4                     3
                                                                   -----------------    ------------------
       Total interest income                                                  3,967                 3,829
                                                                   -----------------    ------------------
INTEREST EXPENSE:
  Interest on deposits                                                        1,376                 1,061
  Interest on short-term borrowings                                              78                   107
  Interest on long-term borrowings                                              456                   459
       Total interest expense                                                 1,910                 1,627
                                                                   -----------------    ------------------
          Net interest income                                                 2,057                 2,202
  Provision for loan losses                                                       -                    91
                                                                   -----------------    ------------------
          Net interest income after provision for loan losses                 2,057                 2,111
                                                                   -----------------    ------------------

OTHER INCOME:
  Service charges on deposit accounts                                           338                   356
  Loan servicing fees                                                            55                    61
  Earnings on bank owned life insurance                                          50                    44
  Net losses on sales of investment securities                                    -                  (192)
  Net (losses) gains on sales of loans and foreclosed real estate               (29)                   42
  Other charges, commissions and fees                                           130                   138
                                                                   -----------------    ------------------
          Total other income                                                    544                   449
                                                                   -----------------    ------------------
OTHER EXPENSES:
  Salaries and employee benefits                                              1,307                 1,290
  Building occupancy                                                            291                   318
  Data processing expenses                                                      328                   325
  Professional and other services                                               121                   172
  Amortization of intangible asset                                               55                    55
  Other expenses                                                                289                   333
                                                                   -----------------    ------------------
          Total other expenses                                                2,391                 2,493
                                                                   -----------------    ------------------
Income before income taxes                                                      210                    67
Provision for income tax expense (benefit)                                       40                   (49)
                                                                   -----------------    ------------------
NET INCOME                                                          $           170     $             116
                                                                    ================    ==================
     NET INCOME PER SHARE - BASIC                                   $          0.07     $            0.05
                                                                    ================    ==================
     NET INCOME PER SHARE - DILUTED                                 $          0.07     $            0.05
                                                                    ================    ==================
     DIVIDENDS PER SHARE                                            $        0.1025     $          0.1025
                                                                    ================    ==================
The accompanying notes are an integral part of the consolidated financial
statements.

                                        2
PATHFINDER  BANCORP, INC.
                                     CONSOLIDATED STATEMENTS OF INCOME
                                                (UNAUDITED)

                                                                    For the nine          For the nine
                                                                    months ended          months ended
                                                                 September 30, 2006    September 30, 2005
                                                                --------------------  --------------------
(Dollars in thousands, except per share data)
INTEREST INCOME:
 Loans, including fees                                          $             9,416   $             8,824
 Debt securities:
Taxable                                                                       1,828                 1,884
Tax-exempt                                                                      294                   376
 Dividends                                                                      210                   168
 Other                                                                           16                    62
                                                                   -----------------    ------------------
       Total interest income                                                 11,764                11,314
                                                                   -----------------    ------------------
INTEREST EXPENSE:
  Interest on deposits                                                        3,904                 3,122
  Interest on short-term borrowings                                             263                   156
  Interest on long-term borrowings                                            1,344                 1,374
                                                                   -----------------    ------------------
       Total interest expense                                                 5,511                 4,652
                                                                   -----------------    ------------------
          Net interest income                                                 6,253                 6,662
  Provision for loan losses                                                      23                   229
                                                                   -----------------    ------------------
          Net interest income after provision for loan losses                 6,230                 6,433
                                                                   -----------------    ------------------

OTHER INCOME:
  Service charges on deposit accounts                                         1,059                   949
  Loan servicing fees                                                           160                   146
  Earnings on bank owned life insurance                                         150                   133
  Net losses on sales of securities                                              (9)                 (192)
  Net (losses) gains on sales of loans/real estate                              (34)                   30
  Other charges, commissions & fees                                             417                   418
                                                                   -----------------    ------------------
          Total other income                                                  1,743                 1,484
                                                                   -----------------    ------------------

OTHER EXPENSES:
  Salaries and employee benefits                                              3,765                 3,807
  Building occupancy                                                            913                   880
  Data processing expenses                                                      958                   964
  Professional and other services                                               352                   572
  Amortization of intangible asset                                              166                   166
  Other expenses                                                                958                 1,034
                                                                   -----------------    ------------------
          Total other expenses                                                7,112                 7,423
                                                                   -----------------    ------------------
Income before income taxes                                                      861                   494
Provision for income tax expense (benefit)                                      148                    (5)
                                                                   -----------------    ------------------
NET INCOME                                                      $               713     $             499
                                                                ====================    ==================
     NET INCOME PER SHARE - BASIC                               $              0.29     $            0.20
                                                                ====================    ==================
     NET INCOME PER SHARE - DILUTED                             $              0.29     $            0.20
                                                                ====================    ==================
     DIVIDENDS PER SHARE                                        $            0.3075     $           0.3075
                                                                ====================    ==================
The accompanying notes are an integral part of the consolidated financial
statements.

                                        3
PATHFINDER BANCORP, INC.
                                 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2005
                                                         (unaudited)

                                                                                                  Accumulated
                                                                      Additional                    Other Com-     Unearned
                                                   Common Stock         Paid in      Retained       prehensive       ESOP
                                                  Shares     Amount     Capital      Earnings     Income (Loss)     Shares
                                               ------------  -------  -----------  -------------  --------------  ----------
(Dollars in thousands, except per share data)
BALANCE, DECEMBER 31, 2005                        2,950,419  $    29  $     7,721  $     20,965   $      (1,285)  $       -
Comprehensive income
Net income                                                                                  713
Other comprehensive income, net of tax
Unrealized net gains on securities                                                                          308

Total Comprehensive Income
Stock options exercised                               1,400        -           11
Dividends declared ($.3075 per share)                                                      (595)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2006                       2,951,819  $    29  $     7,732  $     21,083   $        (977)  $       -
=============================================================================================================================

BALANCE, DECEMBER 31, 2004                        2,937,419  $    29  $     7,453  $     21,186   $        (307)  $     (33)
Comprehensive income
Net income                                                                                  499
Other comprehensive income, net of tax
Unrealized net losses on securities                                                                        (328)

Total Comprehensive Income
ESOP shares earned                                                             55                                        33
Stock options exercised                              13,000        -           86
Dividends declared ($.3075 per share)                                                      (593)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2005                       2,950,419  $    29  $     7,594  $     21,092   $        (635)  $       -
=============================================================================================================================

                                                Treasury
                                                 Stock      Total
                                               ----------  --------
(Dollars in thousands, except per share data)
BALANCE, DECEMBER 31, 2005                     $  (6,502)  $20,928
Comprehensive income
Net income                                                     713
Other comprehensive income, net of tax
Unrealized net gains on securities                             308
                                                           --------
Total Comprehensive Income                                   1,021

Stock options exercised                                         11
Dividends declared ($.3075 per share)                         (595)
-------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2006                    $  (6,502)  $21,365
===================================================================

BALANCE, DECEMBER 31, 2004                     $  (6,502)  $21,826
Comprehensive income
Net income                                                     499
Other comprehensive income, net of tax
Unrealized net losses on securities                           (328)
                                                           --------
Total Comprehensive Income                                     171

ESOP shares earned                                              88
Stock options exercised                                         86
Dividends declared ($.3075 per share)                         (593)
-------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2005                    $  (6,502)  $21,578
===================================================================
The accompanying notes are an integral part of the consolidated financial
statements.

                                        4
PATHFINDER BANCORP, INC.
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (Unaudited)

                                                               For the nine     For the nine
                                                               months ended      months ends
                                                               September 30,    September 30,
                                                                   2006             2005
                                                              ---------------  ---------------
(Dollars in thousands)
OPERATING ACTIVITIES
Net income                                                    $          713   $          499
Adjustments to reconcile net income to net cash
  provided by operating activities:
Provision for loan losses                                                 23              229
ESOP shares earned                                                         -               88
Deferred income tax expense                                              277              133
Realized losses (gains) on sale of:
  Real estate through foreclosure                                         34                7
  Loans                                                                    -              (37)
  Available-for-sale investment securities                                 9              192
  Premises and equipment                                                 (13)               -
Depreciation                                                             561              518
Amortization of intangible asset                                         166              166
Amortization of deferred financing costs                                  23               23
Amortization of mortgage servicing rights                                 77               22
Earnings on bank owned life insurance                                   (150)            (133)
Net amortization of premiums on investment securities                    116              279
Decrease (increase) in interest receivable                                42             (139)
Net change in other assets and liabilities                              (214)            (259)
                                                              ---------------  ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                              1,664            1,588
                                                              ---------------  ---------------

INVESTING ACTIVITIES
Purchase of investment securities available-for-sale                 (10,985)         (19,642)
Net (purchase) redemption of FHLB stock                                   33              131
Proceeds from maturities and principal reductions of
  investment securities available-for-sale                            15,792            9,183
Proceeds from sale:
  Portfolio loans                                                          -            8,897
  Real estate acquired through foreclosure                               456              414
  Available-for-sale investment securities                               771                -
  Premises and equipment                                                 145                -
Net increase in loans                                                 (7,114)          (6,021)
Purchase of premises and equipment                                      (275)            (949)
                                                              ---------------  ---------------
NET CASH USED IN INVESTING ACTIVITIES                                 (1,177)          (7,987)
                                                              ---------------  ---------------

FINANCING ACTIVITIES
Net decrease in demand deposits, NOW accounts
  savings accounts, money market deposit accounts
  and escrow deposits                                                (10,226)          (4,641)
Net increase in time deposits                                         11,770            8,821
Increase in short-term borrowings                                      1,300            1,000
Payments on long-term borrowings                                      (2,000)          (4,000)
Proceeds from exercise of stock options                                   11               86
Cash dividends paid                                                     (433)            (429)
                                                              ---------------  ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                422              837
                                                              ---------------  ---------------

   INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                      909           (5,562)
 Cash and cash equivalents at beginning of period                      7,895           14,325
                                                              ---------------  ---------------
  CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $        8,804   $        8,763
                                                              ===============  ===============

NONCASH INVESTING ACTIVITY:
  Conversion of Parent Company advances to loans receivable   $        1,101   $            -
  Transfer of loans to foreclosed real estate                            249              558
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  consolidated  financial  statements  of Pathfinder
Bancorp,  Inc.  and  its  wholly  owned  subsidiaries  (the "Company") have been
prepared  in  accordance  with U.S. generally accepted accounting principles for
interim  financial information and the instructions for Form 10-Q and Article 10
of  Regulation S-X.  Accordingly, they do not include all of the information and
footnotes  necessary  for  a  complete  presentation  of  consolidated financial
position,  results  of  operations,  and  cash  flows  in  conformity  with U.S.
generally  accepted  accounting  principles.  Certain  amounts  in  the  2005
consolidated  financial  statements  have  been  reclassified  to conform to the
current  period  presentation.  These  reclassifications  had  no  effect on net
income  as  previously reported.  In the opinion of management, all adjustments,
consisting  of  normal  recurring  accruals,  considered  necessary  for  a fair
presentation  have  been  included.

The  following  material under the heading "Management's Discussion and Analysis
of  Financial  Condition  and  Results  of  Operations"  was  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, 2005 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 nine months ended September 30, 2006 are not
necessarily  indicative  of the results that may be expected for the year ending
December  31,  2006.

(2)  EARNINGS  PER  SHARE

Basic  earnings  per  share  have  been  computed  by dividing net income by the
weighted average number of common shares outstanding throughout the three months
and nine months ended September 30, 2006 and 2005, using 2,463,482 and 2,461,328
weighted  average  common  shares  outstanding  for  the three months ended, and
2,463,250  and  2,453,744  for  the  nine  months  ended,  respectively. Diluted
earnings per share for the three months and nine months ended September 30, 2006
and  2005  have been computed using 2,483,465 and 2,488,418 for the three months
ended  and  2,482,069  and  2,487,478  for  the nine 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.
                                        6
(3)  PENSION  BENEFITS

The  composition of net periodic benefit plan cost for the three months and nine
months  ended  September  30,  2006  and  2005  is  as  follows:
FOR THE THREE MONTHS     FOR THE NINE MONTHS
                                   ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                   2006          2005       2006          2005
---------------------------------------------------------------------------------
(In thousands)
Service cost                     $     48   $    38          $    144   $  114
Interest cost                          63        57               189      171
Expected return on plan assets        (92)      (71)             (276)    (213)
Amortization of net losses             28        24                84       72
---------------------------------------------------------------------------------
Net periodic benefit cost        $     47   $    48          $    141   $  144
=================================================================================
The  Company previously disclosed in its financial statements for the year ended
December  31,  2005, that it expected to contribute $192,000 to its pension plan
in 2006.  As of September 30, 2006, $135,000 had been contributed to the pension
plan.

(4)  COMPREHENSIVE  INCOME  (LOSS)

The  components of other comprehensive income (loss) and related tax effects for
the  three  and  nine  month  periods  ended  September 30, 2006 and 2005 are as
follows:
FOR THE THREE MONTHS     FOR THE NINE MONTHS
                                             ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                             2006          2005       2006          2005
------------------------------------------------------------------------------------------
(In thousands)
Gross change in unrealized gains (losses)
  on securities available for sale         $  1,430   $   (175)       $    513   $ (739)
Reclassification adjustment for (gains)
  losses included in net income                   -        192               9      192
------------------------------------------------------------------------------------------
                                              1,430         17             522     (547)
Tax effect                                     (572)        (7)           (214)     219
------------------------------------------------------------------------------------------
Net of tax amount                          $    858   $     10        $    308   $ (328)
==========================================================================================
(5) GUARANTEES

The  Company  does  not  issue  any  guarantees  that  would  require  liability
recognition  or  disclosure,  other  than its standby letters of credit. Standby
letters  of  credit written are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Generally, all letters
of  credit,  when  issued have expiration dates within one year. The credit risk
involved  in issuing letters of credit is essentially the same as those that are
involved  in  extending  loan  facilities  to customers. The Company, generally,
holds  collateral  and/or  personal guarantees supporting these commitments. The
Company  had  $216,000  of  standby  letters of credit as of September 30, 2006.
Management  believes  that  the  proceeds  obtained  through  a  liquidation  of
collateral  and  the  enforcement of guarantees would be sufficient to cover the
potential amount of future payments required under the corresponding guarantees.
The  current  amount  of  the  liability as of September 30, 2006 for guarantees
under  standby  letters  of  credit  issued  is  not  material.

                                        7
(6)  STOCK  BASED  COMPENSATION

Prior  to  2006,  the  Company  accounted for stock-based compensation issued to
directors  and  employees  using  the  intrinsic value method in accordance with
Accounting  Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to
Employees"  (APB  25).  This  method  required  that  compensation  expense  be
recognized  to  the extent that the fair value of the stock exceeds the exercise
price  of  the  stock  award  at  the  grant date. The Company generally did not
recognize  compensation expense related to stock option awards because the stock
options  generally  had  fixed  terms  and exercise prices that were equal to or
greater  than  the  fair  value of the Company's common stock at the grant date.

Effective  January  1,  2006, the Company adopted Financial Accounting Standards
Board  (FASB)  Statement  No. 123(R), Share-Based Payment, ("SFAS 123(R)"). SFAS
123(R)  requires  compensation costs related to share-based payment transactions
to  be  recognized  in  the income statement (with limited exceptions) using the
modified  prospective  method  based  on  the  grant-date  fair  value  of  the
stock-based  compensation  issued.  Compensation  costs  are recognized over the
period  that  an employee provides service in exchange for the award.  As of the
date  of  adoption  of SFAS 123(R), the Company's options were fully granted and
vested,  and  accordingly,  there  was  no  impact to the Company's consolidated
financial  position  or  results  of  operations.

In  conjunction  with  SFAS 123(R), the Company also adopted FASB Staff Position
("FSP") SFAS 123(R)-2, "Practical Accommodation to the Application of Grant Date
as  Defined  in  SFAS  123(R)"  effective January 1, 2006. FSP 123(R)-2 provides
guidance  on  the  application  of  grant  date  as  defined  in SFAS 123(R). In
accordance  with  this standard a grant date of an award exists if (a) the award
is  a  unilateral  grant,  and (b) the key terms and conditions of the award are
expected to be communicated to an individual recipient within a relatively short
time  period  from  the  date of approval. The adoption of this standard did not
impact  our consolidated financial position, results of operations or cash flows
for  the  three  or  nine-month  periods  ended  September  30,  2006.

In  November  2005, the FASB issued final FSP No. 123(R)-3, "Transition Election
Related  to  Accounting  for the Tax Effects of Share-Based Payment Awards." The
FSP  provides  an  alternative  method  of  calculating excess tax benefits (the
Additional  Paid-in  Capital  "APIC"pool) from the method defined in SFAS 123(R)
for  share-based payments. A one-time election to adopt the transition method in
this  FSP  is  available to those entities adopting SFAS 123(R) using either the
modified  retrospective  or modified prospective method. Up to one year from the
initial adoption of SFAS 123(R) or effective date of the FSP is provided to make
this  one-time  election.  However,  until an entity makes its election, it must
follow  the  guidance  in SFAS 123(R). We are currently evaluating the potential
impact  of  calculating  the APIC pool with this alternative method and have not
yet  determined  which  method  we  will  adopt,  or  the expected impact on our
consolidated  financial  position  or  results  of  operations.

In  February 2006, the FASB issued FSP No. 123(R)-4, "Classifications of Options
and  Similar  Instruments  Issued  as  Employee Compensation That Allow for Cash
Settlement  upon the Occurrence of a Contingent Event." The position amends SFAS
123(R)  to incorporate that a cash settlement feature that can be exercised only
upon the occurrence of a contingent event that is outside the employee's control
does  not  meet certain conditions in SFAS 123(R) until it becomes probable that
the  event  will occur. The guidance in this FSP was required to be applied upon
initial  adoption  of  SFAS  123(R). The Company does not have any option grants
that  allow  for  cash  settlement.

                                        8
(7)  NEW  ACCOUNTING  PRONOUNCEMENTS

In  February  2006,  the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial  Instruments  ("SFAS 155"). SFAS 155 amends FASB Statement No. 133 and
FASB  Statement  No. 140, and improves the financial reporting of certain hybrid
financial  instruments  by  requiring more consistent accounting that eliminates
exemptions  and  provides  a  means  to  simplify  the  accounting  for  these
instruments.  Specifically,  SFAS  155  allows  financial  instruments that have
embedded  derivatives  to  be  accounted for as a whole (eliminating the need to
bifurcate  the derivative from its host) if the holder elects to account for the
whole  instrument  on  a  fair value basis. The Company is required to adopt the
provisions  of  SFAS  155, as applicable, beginning in 2007. Management does not
believe  the  adoption  of SFAS 155 will have a material impact on the Company's
consolidated  financial  position  and  results  of  operations.

 In  March  2006,  the  FASB  issued  SFAS  No. 156, Accounting for Servicing of
Financial  Assets -An Amendment of FASB Statement No. 140 ("SFAS 156"). SFAS 156
requires  that  all  separately  recognized  servicing  assets  and  servicing
liabilities  be  initially measured at fair value, if practicable. The statement
permits,  but  does  not require, the subsequent measurement of servicing assets
and  servicing  liabilities at fair value. SFAS 156 is effective for the Company
beginning  in  2007.  The Company does not believe that the adoption of SFAS 156
will  have  a  significant  effect  on  its  consolidated  financial statements.

In  July  2006,  the  Financial  Accounting  Standards  Board (FASB) issued FASB
Interpretation  No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes-an
interpretation  of  FASB  Statement  No.  109"  (FIN  48),  which  clarifies the
accounting  for  uncertainty in tax positions. This Interpretation requires that
companies  recognize in their financial statements the impact of a tax position,
if  that  position is more likely than not of being sustained on audit, based on
the technical merits of the position. The provisions of FIN 48 are effective for
fiscal  years  beginning  after December 15, 2006, with the cumulative effect of
the change in accounting principle recorded as an adjustment to opening retained
earnings.  The Company is evaluating the impact of this new pronouncement on its
consolidated  financial  statements.

In  September  2006,  the  FASB  issued  FASB  Statement  No.  157,  Fair  Value
Measurements,  which  defines  fair value, establishes a framework for measuring
fair  value  under  GAAP, and expands disclosures about fair value measurements.
FASB  Statement  No. 157 applies to other accounting pronouncements that require
or  permit  fair value measurements. The new guidance is effective for financial
statements  issued  for  fiscal years beginning after November 15, 2007, and for
interim  periods  within  those  fiscal  years.  We are currently evaluating the
potential  impact,  if  any,  of  the  adoption of FASB Statement No. 157 on our
consolidated  financial  position,  results  of  operations  and  cash  flows.

On  September  29,  2006, the Financial Accounting Standards Board "FASB" issued
SFAS  No.  158,  Employers'  Accounting  for  Defined  Benefit Pension and Other
Postretirement  Plans ("SFAS 158"), which amends SFAS 87 and SFAS 106 to require
recognition  of  the  overfunded  or  underfunded  status  of  pension and other
postretirement  benefit  plans  on  the balance sheet. Under SFAS 158, gains and
losses,  prior  service  costs and credits, and any remaining transition amounts
under  SFAS  87  and  SFAS  106  that  have  not yet been recognized through net
periodic  benefit  cost  will  be  recognized in accumulated other comprehensive
income,  net  of  tax  effects,  until  they are amortized as a component of net
periodic  cost.  The measurement date - the date at which the benefit obligation
and  plan assets are measured - is required to be the company's fiscal year end.
SFAS  158 is effective for publicly-held companies for fiscal years ending after
December  15,  2006,  except  for  the  measurement  date  provisions, which are
effective  for  fiscal  years  ending  after  December  15, 2008. The Company is
currently  analyzing  the  effects  of  SFAS  158  but  does  not  expect  its
implementation  will  have  a  significant  impact  on  the  Company's financial
conditions  or  results  of  operations.

On September 13, 2006, the Securities and Exchange Commission "SEC" issued Staff
Accounting  Bulletin No. 108 ("SAB 108"). SAB 108 provides interpretive guidance
on  how  the  effects  of  the carryover or reversal of prior year misstatements

                                        9
should be considered in quantifying a potential current year misstatement. Prior
to  SAB  108,  companies  might  evaluate the materiality of financial statement
misstatements  using either the income statement or balance sheet approach, with
the  income  statement  approach  focusing  on  new  misstatements  added in the
current  year,  and the balance sheet approach focusing on the cumulative amount
of  misstatement  present in a company's balance sheet. Misstatements that would
be  material  under  one  approach  could  be viewed as immaterial under another
approach,  and  not  be  corrected.  SAB  108  now  requires that companies view
financial  statement misstatements as material if they are material according to
either  the income statement or balance sheet approach. The Company has analyzed
SAB 108 and determined that upon adoption it will have no impact on the reported
results  of  operations  or  financial  conditions.

                                       10
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,  Inc.  are  the wholly owned subsidiaries of
Pathfinder Bank.   At September 30, 2006, Pathfinder Bancorp, MHC, the Company's
mutual  holding  company  parent, whose activities are not included in the MD&A,
held  64.2%  of  the  Company's  common stock while the public held 35.8% of the
Company's  common  stock.

The  following discussion reviews the Company's financial condition at September
30,  2006  and  the  results  of  operations for the three and nine months ended
September  30,  2006  and  September  30,  2005.

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  other  income,  including  income  from  fees and service charges on
deposit  accounts,  net  gains  and  losses  on  sales  of securities, loans and
foreclosed  real  estate,  and  other  expenses  such  as  salaries and employee
benefits,  building  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.

APPLICATION  OF  CRITICAL  ACCOUNTING  POLICIES

The  Company's consolidated financial statements are prepared in accordance with
accounting  principles  generally  accepted  in the United States of America and
follow  practices  within the banking industry.  Application of these principles
requires management to make estimates, assumptions and judgments that affect the

                                       11
amounts  reported  in  the  consolidated  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 2005 Annual
Report  on Form 10-K ("the Consolidated Financial Statements").  These policies,
along  with the disclosures presented in the other financial statement notes and
in  this  discussion,  provide  information  on  how  significant  assets  and
liabilities  are  valued  in the consolidated financial statements and how those
values  are  determined.  Based  on  the  valuation  techniques  used  and  the
sensitivity  of  financial  statement  amounts  to  the methods, assumptions and
estimates  underlying those amounts, management has identified the 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 September 30, 2006, 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 consolidated 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.

EXECUTIVE  SUMMARY

Net  income was $170,000, or $0.07 per diluted share, for the three months ended
September  30, 2006 as compared to $116,000, or $0.05 per diluted share, for the
same  period in 2005.  For the nine months ended September 30, 2006, the Company
reported  net  income  of  $713,000,  or  $0.29 per diluted share as compared to
$499,000,  or $0.20 per diluted share, for the same period in 2005.  The Company
continued  its  efforts toward transforming its traditional thrift balance sheet
with  mostly  residential  loans  as  interest  earning  assets toward that of a
community  bank  with a more diverse mix of residential, consumer and commercial
loans.  On  an  average  balance  basis,  commercial loans comprise 26.2% of the
total  gross  loan  portfolio  for  the nine months ended September 30, 2006, as
compared  to 25.0% of the portfolio in 2005.  Asset quality continues to improve

                                       12
during 2006 as reflected by the improvement in the ratio of non-performing loans
to  period end loans to 0.69% at September 30, 2006, from 0.88% at September 30,
2005.

On  April  23,  2006,  Alliance  Bank N.A. announced it had reached a definitive
agreement  to  merge  with  the  parent  company  of Oswego County National Bank
(OCNB).  OCNB,  formerly,  Oswego  County Savings Bank has been domiciled in the
city  of  Oswego  since  its  founding  in  1870  and has been the primary local
competitor  for  Pathfinder  Bank.  In management's view, the absorption of OCNB
into  Alliance  Bank,  a  $900  million bank headquartered in Syracuse, NY, will
provide  both  challenges  and opportunities for Pathfinder Bank.  The challenge
will  be  the  ability  of a larger competitor to more actively and aggressively
market  within  the  primary  business  area  of Pathfinder Bank.  Opportunities
exist,  as management believes that it's unique competencies and differentiators
are  more  closely  matched  by a locally domiciled bank, than one headquartered
outside  our  primary market area.  Opportunities may exist to garner additional
business  relationships  with the traditional customer base of OCNB that is more
apt  to  conduct  its  business  with  a  local  bank.

RESULTS  OF  OPERATIONS

The  return  on average assets and return on shareholders' equity were 0.23% and
3.21%,  respectively,  for  the  three months ended September 30, 2006, compared
with  0.15%  and  2.16%,  respectively, for the three months ended September 30,
2005.  During  the  third quarter of 2006, when compared to the third quarter of
2005,  net interest income decreased $145,000, combined with a decrease in other
income,  exclusive of net gains on sales of securities and loans/real estate, by
$26,000,  or  4%,  offset by a $102,000, or 4%, reduction in other expenses.  No
provision  for  loan  losses  was  made  in  the  quarter.

The  return  on average assets and return on shareholders' equity were 0.32% and
4.53%, respectively, for the nine months ended September 30, 2006, compared with
0.22%  and  3.10%,  respectively,  for the nine months ended September 30, 2005.
For  the  nine  months  ended  September 30, 2006, net interest income decreased
$409,000,  or  6%,  when  compared  to the nine months ended September 30, 2005.
This decrease was offset by a reduction in other expenses of $311,000, or 4%, an
increase  in  other  income,  exclusive  of net gains on sales of securities and
loans/real  estate,  of  $140,000,  or  9%, and a 90%, or $206,000, reduction in
provision  for  loan  losses.

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 interest
earning  assets,  interest-bearing  liabilities,  related  yields and associated
funding  costs.

For  the  three  months  ended  September  30,  2006,  net interest income, on a
tax-equivalent basis, decreased to $2.1 million from $2.2 million, when compared
to  the  same  quarter of 2005.  The Company's net interest margin for the third
quarter  of 2006 decreased to 3.11% from 3.21% when compared to the same quarter
in  2005.  Management  expects  continued margin compression to adversely impact
earnings,  as we anticipate the yield curve will continue to be flat or inverted
over  the  near term. The decline in net interest income was attributable to the
higher  rates paid of 54 basis points on both deposits and borrowings, offset by
an  increase  of  40  basis  points  in  average  interest-earning asset yields.
Average  interest-earning  assets  decreased  3% to $270.3 million for the three
months  ended  September  30,  2006  as compared to $279.6 million for the three
months ended September 30, 2005. The decrease in average interest-earning assets
was primarily attributable to a $14.4 million decrease in investment securities,
offset  by a $5.0 million increase in loans receivable. Average interest-bearing
liabilities  decreased  $9.7  million,  and the cost of funds increased 54 basis

                                       13
points  to  3.03%  for  the quarter ended September 30, 2006, from 2.49% for the
same  period  in  2005. The decrease in the average balance of interest- bearing
liabilities  resulted  primarily from an $8.3 million decrease in borrowed funds
and  a  $1.4  million  decrease  in  average  deposits. The decrease in deposits
principally  occurred  in  the  municipal  money  management  accounts  due  to
fluctuating  deposit activities of the local municipal entities. The increase in
cost  of  funds  can be attributed to the 175 basis point increase in short-term
interest  rates  over  the  past  12  months,  combined  with  a  change  in the
composition  of  deposits  as  $8.2  million in deposits shifted from lower cost
savings  accounts  to  higher  cost  certificates  of  deposit.

For  the  nine  months  ended  September  30,  2006,  net  interest income, on a
tax-equivalent basis, decreased $417,000, to $6.4 million, from $6.8 million for
the  nine  months  ended  September  30, 2005.  Net interest margin decreased 12
basis  points,  to 3.12% for the nine months ended September 30, 2006 from 3.24%
for  the  nine  months ended September 30, 2005. Average interest-earning assets
decreased  3%  to $273.1 million for the nine months ended September 30, 2006 as
compared  to  $280.3 million for the nine months ended September 30, 2005, while
the  yield  on  interest-earning  assets increased 36 basis points to 5.81% from
5.45%  for  the  comparable  periods.   The decrease in average interest-earning
assets  was  primarily  attributable  to  an $8.3 million decrease in investment
securities  and  a $3.3 million decrease in interest-earning deposits, partially
offset by a $4.4 million increase in loans receivable.  Average interest-bearing
liabilities  decreased  $7.6  million while the cost of funds increased 52 basis
points  to  2.86%  for  the nine months ended September 30, 2006, from 2.34% for
the  same  period  in  2005.  The  decrease  in  the  average  balance  of
interest-bearing  liabilities  resulted  from a $5.2 million decrease in average
deposits  and  a  $2.4  million  decrease  in  borrowed  funds.

INTEREST  INCOME

Total  interest  income,  on  a  tax-equivalent  basis,  for  the  quarter ended
September  30, 2006 increased $137,000, or 4%, to $4.0 million from $3.9 million
for  the  quarter  ended  September  30,  2005.  The  average  balance  of loans
increased $5.0 million to $194.7 million, with yields increasing 29 basis points
to  6.64%  for  the third quarter of 2006.  Average commercial real estate loans
increased  $6.6  million,  and  the yield on those loans increased to 7.77% from
7.30%  in 2005. Average commercial loans increased $2.5 million, and experienced
an  increase  in  the  average yield of 19 basis points, to 8.59% from 8.40%, in
2005.  Average  consumer  loans  increased  $915,000,  or 5%, and experienced an
increase  in  yield of 88 basis points.  The increase in the yield on commercial
and  consumer  loans was primarily the result of new loan originations occurring
at market rates higher than the weighted average existing portfolio rate as well
as the adjustable rate portions of the portfolios repricing upward in connection
with  Federal  Reserve  increases  in  the  prime rate. Increases in the average
balance  of  consumer and commercial loan portfolios were offset by decreases in
the  average  balance  of  residential real estate loan portfolios and municipal
loans.  The  average  balance of the residential real estate portfolio decreased
$4.1  million,  or  3%,  combined  with a slight decrease in yield to 5.75% from
5.79%  for  the  same  period  in  2005.  The Company's municipal loan portfolio
decreased  $951,000, or 5%, when comparing the third quarter of 2006 to the same
period  in  2005.  The  average  tax  equivalent  yield  on  the  municipal loan
portfolio  increased  to  5.87%  in the third quarter of 2006 from 4.32% for the
same  period  in  2005.

Average  investment  securities  (taxable  and tax-exempt) for the quarter ended
September 30, 2006 decreased by $14.4 million when compared to the same period a
year  ago, with a decrease in tax-equivalent interest income from investments of
$79,000,  or  9%,  compared  to  the  third  quarter  of  2005.  The  average
tax-equivalent  yield  of the portfolio increased 31 basis points, to 4.13% from
3.82%.  The  decrease  in average investment securities was primarily due to the
December  2005  sale of agency and municipal securities which had been purchased
as collateral for the additional municipal deposit relationships acquired during
2004  and  2005.  Additional  securities  were  sold during the first and second
quarters  of  2006  following  the  decrease  in  municipal  deposits.

                                       14
Total  interest  income,  on  a  tax-equivalent basis, for the nine months ended
September  30,  2006 increased $442,000, or 4%, when compared to the nine months
ended  September  30,  2005.  Average loans increased $4.4 million, with average
yields  increasing  27 basis points to 6.54% from 6.27%.  The average balance of
commercial real estate increased $4.9 million, with average yields increasing to
7.72%  from 7.39%, average commercial loans increased $2.9 million, with average
yields  increasing  to  8.16%  from  7.31%  and average consumer loans increased
$764,000  with  average yields increasing to 8.06% from 7.24% for the nine moths
September  30,  2005.  These  increases  were offset by decreases in the average
balance  of  residential  real  estate  and  municipal loans of $3.5 million and
$712,000,  respectively.

For  the  nine  months  ended September 30, 2006, tax-equivalent interest income
from  investment  securities  decreased  $109,000,  or  4%, compared to the same
period in 2005.   The average tax-equivalent yield of the portfolio increased 22
basis  points,  to  4.06%  from 3.84%, offset by an $8.3 million decrease in the
average  balance  of  investment  securities.

INTEREST  EXPENSE

Total  interest  expense increased $283,000 for the three months ended September
30,  2006,  when  compared to the same quarter in 2005.  Deposit expense for the
comparable  periods  increased  $315,000,  or  30%,  as the average rate paid on
higher cost money management accounts increased 46 basis points to 2.52% in 2006
from 2.06% in 2005.  The cost of time deposits also increased 86 basis points as
existing  time  deposits  matured and rolled over into higher cost deposits.  In
addition,  the  Bank  introduced  new  higher cost promotional deposit products,
combined  with a 14% increase in the average balance of time deposit accounts to
$104.7  million  in  2006  from  $92.2  million  in  2005.  The  cost  of  other
interest-bearing  deposits  increased  slightly to 0.47% from 0.45%, offset by a
6%,  or  $4.8  million,  decrease  in  the  average  balance  of these deposits.
Interest  expense  on  borrowings  decreased  by  $32,000, or 6%, from the prior
period,  resulting  from  a decrease in the average balance of borrowed funds of
$8.3  million,  or  17%,  offset by an increase in the cost of borrowed funds to
5.42%  from  4.75%.  The  increase  in the cost of borrowings primarily resulted
from an increase in the cost of the $5.0 million LIBOR (London Interbank Offered
Rate) based junior subordinated debentures to 8.88% from 6.91%.  The cost of the
junior  subordinated  debenture  adjusts  quarterly.

For  the  nine  months  ended  September  30,  2006,  interest expense increased
$859,000, or 19%, to $5.5 million from $4.7 million for the same period in 2005.
The  average  deposit balance decreased $5.2 million, offset by a 53 basis point
increase in the cost of deposits to 2.41% from 1.88%. The cost of borrowed funds
increased 53 basis points to 5.24% from 4.71%, partially offset by a decrease in
the  average  balance  of  borrowed  funds  by  $2.4  million,  or  6%.

PROVISION  FOR  LOAN  LOSSES

No  provision  for loan losses was made for the quarter ended September 30, 2006
reflecting  the Bank's improved asset quality.  The Company's ratio of allowance
for loan losses to period end loans has decreased to 0.83% at September 30, 2006
from  0.97%  at  September  30,  2005.  Nonperforming  loans to period end loans
decreased  to  0.68%  at  September  30,  2006 from 0.89% at September 30, 2005.

For  the nine months ended September 30, 2006, the provision for loan losses was
$23,000  as compared to $229,000 for the same period in 2005 primarily resulting
from a decrease in the level of charge-offs to $86,000 for the nine months ended
September  30,  2006  compared  to $255,000 in 2005 and continued improvement in
overall  asset  quality.

                                       15
NONINTEREST  INCOME

The  Company's  noninterest  income  is  primarily  comprised of fees charged 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
periods  indicated:
Three Months Ended September 30,
                                           2006    2005   $Change   % Change
-----------------------------------------------------------------------------
(Dollars in thousands)
Service charges on deposit accounts     $   338   $ 356   $   (18)   -5.1%
Loan servicing fees                          55      61        (6)   -9.8%
Earnings on bank owned life insurance        50      44         6    13.6%
Other operating income                      130     138        (8)   -5.8%
-----------------------------------------------------------------------------
Core other income                           573     599       (26)   -4.3%
Net gains/(losses) on sale of loans/
  foreclosed real estate                    (29)     42       (71) -169.0%
Net losses on sales of securities             -    (192)      192  -100.0%
-----------------------------------------------------------------------------
Total other income                      $   544   $ 449   $    95    21.2%
=============================================================================

                                         Nine Months Ended September 30,
                                           2006    2005   $Change   % Change
-----------------------------------------------------------------------------
(Dollars in thousands)
Service charges on deposit accounts     $ 1,059   $ 949   $   110    11.6%
Loan servicing fees                         160     146        14     9.6%
Earnings on bank owned life insurance       150     133        17    12.8%
Other operating income                      417     418        (1)   -0.2%
-----------------------------------------------------------------------------
Core other income                         1,786   1,646       140     8.5%
Net gains/(losses) on sale of loans/
  foreclosed real estate                   (34)      30       (64) -213.3%
Net losses on sales of securities           (9)    (192)      183   -95.3%
-----------------------------------------------------------------------------
Total other income                      $1,743   $1,484   $   259    17.5%
=============================================================================
For  the  three  months  ended September 30, 2006, core other income reflected a
decrease  of $26,000, or 4%, when compared with the three months ended September
30,  2005.  Income  from service charges on deposit accounts decreased primarily
due  to  lower  net collected fees on checking account activity. The decrease in
other  operating  income  primarily  resulted from a decrease in fees associated
with foreign ATM usage, partially offset by an increase in Pathfinder Bank debit
card  usage.

For  the  nine  months  ended  September  30,  2006, core other income increased
$140,000  or  9%,  when  compared with the nine months ended September 30, 2005.
The  increase was primarily due to a fee enhancement program on deposit accounts
which  began  in  the  second  quarter  of  2005.

The  increase in the net losses on sales of loans/foreclosed real estate for the
three and nine month period was the result of the sale of four ORE properties in
the  third  quarter  of  2006.  Additionally,  a  gain  on the sale of loans was
recorded  in  the  third  quarter  of 2005.  There were no loan sales during the
first  nine  months  of  2006.

The  decrease  in the net losses on sales of investment securities for the three
and  nine  month  period  was  primarily  due to a $192,000 other than temporary
impairment charge recorded in the third quarter of 2005, with no similar charges
taken  in  2006.

NONINTEREST  EXPENSES

The  following  table  sets forth certain information on noninterest expense for
the  periods  indicated:
Three Months Ended September 30,
                                       2006    2005   $Change   % Change
--------------------------------------------------------------------------
(Dollars in thousands)
Salaries and employee benefits      $ 1,307  $1,290  $    17      1.3%
Building occupancy                      291     318      (27)    -8.5%
Data processing                         328     325        3      0.9%
Professional and other services         121     172      (51)   -29.7%
Amortization of intangible assets        55      55        -      0.0%
Other operating                         289     333      (44)   -13.2%
-------------------------------------------------------------------------
Total noninterest expense           $ 2,391  $2,493  $  (102)    -4.1%
-------------------------------------------------------------------------

                                       Nine Months Ended September 30,
                                       2006    2005   $Change   % Change
------------------------------------------------------------------------
(Dollars in thousands)
Salaries and employee benefits      $ 3,765  $3,807  $   (42)    -1.1%
Building occupancy                      913     880       33      3.8%
Data processing                         958     964       (6)    -0.6%
Professional and other services         352     572     (220)   -38.5%
Amortization of intangible assets       166     166        -      0.0%
Other operating                         958   1,034      (76)    -7.4%
-------------------------------------------------------------------------
Total noninterest expense           $ 7,112  $7,423  $  (311)    -4.2%
=========================================================================
16
Total  noninterest  expense  decreased  $102,000  for  the  three  months  ended
September  30,  2006, when compared to the same quarter of 2005. The decrease in
building  occupancy  expense  for the three months ended September 30, 2006, was
primarily  the  result  of  a  reduction  of  machine  maintenance  expenses and
nonrecurring  expenses associated with branch facility improvements in 2005. The
decrease  in  professional  and other expenses for the three-month period ending
September  30,  2006,  was primarily due to costs associated with a company wide
leadership training program and process improvement initiatives that occurred in
2005.  The  decrease  in  other operating expenses was primarily attributable to
lower  expenses  associated  with  foreclosed real estate, a reduction in office
supplies and a reduction in costs associated with home equity loan originations.

Total noninterest expense decreased $311,000 for the nine months ended September
30, 2006 when compared to the same period of 2005. The reduction in salaries and
employee  benefits was primarily due to a personnel realignment in December 2005
and  a  reduction  of  expenses recognized on the employee stock ownership plan.
These reductions were offset by an increase in staffing costs for the new branch
that opened in June of 2005. The decrease in professional and other services was
primarily  due  to  the  2005  expenses  associated with the leadership training
program  and  process  improvement initiatives. The reduction in other operating
expenses  was  primarily  due  to  a  reduction in office supply expenses, lower
expenses  associated  with  home  equity  loan  origination  costs  and mortgage
recording  tax  expenses,  a  reduction  in  expenses on ORE property due to the
number  of  foreclosed  properties held and the recording of gains recognized on
the  sale  of  fixed assets. Building occupancy costs increased primarily due to
the  full nine months of operation of the new Central Square branch which opened
in  June  2005,  combined  with  increased  depreciation  expenses.

INCOME TAX EXPENSE

Income  taxes  increased  $89,000  and  $153,000  for the quarter ended and nine
months ended September 30, 2006, respectively, as compared to the same period in
2005.  These increases were attributable to an increase in the Company's pre-tax
income  and  a  decrease in tax-exempt interest income.   The effective tax rate
was 19.0% for the three months and 17.2% for the nine months ended September 30,
2006.  The Company continues to strive to reduce its tax rate from the statutory
rate of 34% primarily through the ownership of tax-exempt investment securities,
bank  owned  life  insurance and other tax savings strategies.  The enactment of
proposed  state tax legislation, which would limit the benefit derived from Real
Estate  Investment Trusts, would result in a higher effective state tax rate for
the  Company,  if  passed.

CHANGES  IN  FINANCIAL  CONDITION

ASSETS

Total  assets  increased  to  $298.0  million  at September 30, 2006 from $296.9
million  at  December  31, 2005. Loans receivable increased $7.9 million, or 4%,
offset by a decrease in investment securities of $5.2 million and a $1.9 million
reduction  in  other assets.  The increase in loans receivable was primarily the
result  of  a  $5.0  million  increase in commercial real estate, a $1.9 million
increase in commercial loans and a $1.3 million increase in consumer loans.  The
decrease  in  investment securities was primarily the result of amortization and
prepayments  within  the  mortgage-backed securities and government and agencies
portfolio.

At  September 30, 2006, the securities balance included a net unrealized loss on
available  for  sale securities of $1.6 million, as compared to a net unrealized
loss  of  $2.2  million  at  December  31,  2005. These unrealized losses relate
principally  to  changes  in  interest  rates  subsequent  to the acquisition of
specific  securities.  None of the securities in this category had an unrealized
loss  that  exceeded  8%  of the book value of the Company.  The Company has the
intent and ability to hold the individual securities to maturity or market price
recovery.

                                       17
The  decrease  in  other  assets  is  primarily  due  to  the  elimination  of
inter-company  balances  between the Bank and the Company which were paid off by
the  origination  of  two  commercial  loans  in  May  of  2006.

LIABILITIES

Total  liabilities  increased  slightly  to $276.6 million at September 30, 2006
from  $276.0 million at December 31, 2005.    The slight increase in liabilities
was  due  to a $1.5 million increase in non-interest bearing deposits and a $1.3
million  increase in short-term borrowings, offset by a $2.0 million decrease in
long-term  borrowings.  Short-term  borrowings were increased to replace deposit
outflows from municipal customers. The increase in non-interest bearing deposits
was primarily attributable to new business account relationships and the opening
of  the  new  Central  Square  branch  in  June  of  2005.

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
---------------------------------------------------------------------------------------------------
(Dollars in thousands)                               September 30,    December 31,    September 30,
                                                         2006             2005            2005
---------------------------------------------------------------------------------------------------
Nonaccrual loans:
Commercial                                          $          468   $         757   $        336
Consumer                                                       130              89            126
Real estate -  Construction                                      0               0              0
               Mortgage                                        749             834          1,179
----------------------------------------------------------------------------------------------------
Total nonaccrual loans                                       1,347           1,680          1,641
Loans past due 90 days or more and still accruing                0               0              0
----------------------------------------------------------------------------------------------------
Total non-performing loans                                   1,347           1,680          1,641
Foreclosed real estate                                         497             743            935
----------------------------------------------------------------------------------------------------
Total non-performing assets                         $        1,844   $       2,423   $      2,576
====================================================================================================
Non-performing loans to total loans                           0.68%           0.89%          0.88%
Non-performing assets to total assets                         0.62%           0.82%          0.85%
====================================================================================================
Total  nonperforming  loans  and  foreclosed  real  estate at September 30, 2006
decreased  19.8%  when  compared  to  December  31, 2005.  The sharp decrease in
commercial  nonaccrual  loans  is a result of the workout of one commercial loan
relationship  and the foreclosure on the real estate of another relationship. No
loss  of  principle  or  interest  was  recognized  from  either  situation.
Nonperforming  loans  continued  to  be  addressed  primarily  through increased
collection  efforts and foreclosure proceedings. The decrease in foreclosed real
estate  is  a  result  of  a conscious effort on the bank's part to aggressively
market  foreclosed  properties and reduce the amount of time that they are being
carried.  Management  believes that adequate reserves exist for potential losses
that  may  occur.

The  allowance  for loan losses at September 30, 2006 was $1.6 million, or 0.83%
of  period end loans, compared to $1.7 million, or 0.89% of period end loans, at
December  31,  2005.

CAPITAL

Shareholders'  equity  increased  $437,000, or 2%, to $21.4 million at September
30,  2006.  The  increase  in  shareholders'  equity  primarily  resulted from a
$308,000  reduction  in  accumulated  other  comprehensive  loss and $118,000 in
retained  earnings.  The Company added $713,000 to retained earnings through net
income  and returned $595,000 to its shareholders in the form of cash dividends.
The  Company's  mutual  holding company parent, Pathfinder Bancorp, MHC accepted
the  dividend  for  the  quarter  ended  September  30,  2006.

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

                                       18
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 September 30, 2006, Pathfinder
Bank  exceeded  all  regulatory  required  minimum  capital  ratios  and met the
regulatory  definition  of  a  "well-capitalized"  institution,  i.e. a leverage
capital ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 6% and a
total  risk-based  capital  ratio  exceeding  10%.

LIQUIDITY

Liquidity  management  involves  the  Company's  ability  to  generate  cash  or
otherwise  obtain  funds  at reasonable rates to support asset growth 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 mortgage backed securities 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, and utilizes
short-term  borrowings  as  a  source  of  liquidity  when  necessary.

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  Committees of the Company are responsible for
implementing  the  policies and guidelines for the maintenance of prudent levels
of  liquidity.  As  of  September  30, 2006, management reported to the Board of
Directors  that  the  Company  is  in  compliance  with  its  liquidity  policy
guidelines.

                                       19
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 Asset-
Liability  Management Committees which are 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  these  committees.

From  2001  until June 2004, the Federal Reserve lowered interest rates thirteen
times  by  a  total  of  550  basis points.  These interest rate reductions have
caused  significant  repricing  of Pathfinder 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.

Since  June  of 2004, the Federal Reserve has raised its key short-term interest
rate 425 basis points. Net interest margin compression has resulted as the yield
curve  flattened  from  sharp  increases  in  short-term  interest  rates  while
longer-term  rates  have remained relatively stable. Management will continue to
seek  to  minimize  any  reduction  in net interest income in a period of rising
short-term  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  September  30,  2006, the total interest-bearing liabilities
maturing  or  repricing  within  one year exceeded total interest-earning assets
maturing  or  repricing  in  the  same  period  by $31.4 million, representing a
cumulative  one-year  gap  ratio  of  a  negative  10.56%.

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).

                                       20
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.  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.
Percentage      Percentage
Change in    NPV       Change in      Change in
Interest   Capital   Net Interest   Net Portfolio
Rates       Ratio       Income          Value
--------------------------------------------------
300          7.23%        -17.64%         -33.70%
 200          8.23%        -11.60%         -22.82%
 100          9.21%         -5.72%         -11.48%
   0           ----           ----            ----
-100         10.66%          2.71%           7.40%
-200         10.58%          2.00%           8.44%
-300         10.14%         -0.65%           5.64%
21
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.

                                       22
PART  II  -  OTHER  INFORMATION

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

None

ITEM 1A - RISK FACTORS
----------------------

There have been no significant changes in the risk factors affecting Pathfinder
Bancorp, Inc. that were identified in Item 1A of Part 1 of the Company's Form
10-K for the year ended December 31, 2005.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
--------------------------------------------------------------------

None

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

None

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

None

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

None

ITEM 6 - EXHIBITS
-----------------

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

31.1               Rule 13a-14(a) / 15d-14(a) Certification of the Chief
                     Executive Officer
31.2               Rule 13a-14(a) / 15d-14(a) Certification of the Chief
                     Financial Officer
32.1               Section 1350 Certification of the Chief Executive
                     Officer and Chief Financial Officer

                                       23
SIGNATURES

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

     PATHFINDER BANCORP, INC.
     ------------------------
           (Registrant)

November 14, 2006        /s/ Thomas W. Schneider
-----------------        -----------------------
Date:                    Thomas W. Schneider
                         President, Chief Executive Officer

November 14, 2006        /s/ James A. Dowd
-----------------        ----------------
Date:                    James A. Dowd
                         Senior Vice President, Chief Financial Officer

                                       24
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 certify that:

1.     I have reviewed the September 30, 2006 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.

November 14, 2006         /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 certify that:

1.     I have reviewed the September 30, 2006 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.

November 14, 2006         /s/ James A. Dowd
-----------------         -----------------
Date                      James A. Dowd
                          Senior 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 September 30, 2006 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.

November 14, 2006             /s/ Thomas W. Schneider
-----------------             -----------------------
Date                          Thomas W. Schneider
                              President and Chief Executive Officer

November 14, 2006             /s/ James A. Dowd
-----------------             -----------------
Date                          James A. Dowd
                              Senior Vice President and Chief Financial
                              Officer