Lake Shore Bancorp, Inc. (the “Company”) (NASDAQ: LSBK), the
holding company for Lake Shore Savings Bank (the “Bank”), reported
unaudited net income of $1.2 million, or $0.20 per diluted share,
for the fourth quarter of 2022 compared to net income of $1.8
million, or $0.31 per diluted share, for the fourth quarter of
2021. For the year ended December 31, 2022, the Company reported
unaudited net income of $5.7 million, or $0.97 per diluted share,
as compared to $6.2 million, or $1.05 per diluted share, for the
year ended December 31, 2021.
“We experienced impressive growth in our net
interest margin and loan balances during 2022 as a result of the
collective determination of our team of talented banking
specialists,” stated Daniel P. Reininga, President and Chief
Executive Officer. “Our robust capital position and strong asset
quality will allow us to react appropriately to the challenges of
an uncertain economic environment and increased competition in our
marketplace. The increase in non-interest expenses during fourth
quarter 2022 and the full year 2022 were primarily due to
remediation activities associated with the previously disclosed
entry of Lake Shore Savings Bank into a formal written agreement
with the Office of the Comptroller of the Currency, the Bank’s
primary regulator. We expect these higher costs to continue over
the near term while we address our regulatory requirements.
Additionally, we expect that our employee expenses will increase as
we continue to invest in staffing resources to support both our
future growth as well as our commitment to address all outstanding
regulatory matters. We are very pleased with the additions of our
new Chief Operating Officer, Jennifer Zatkos, and Chief Technology
Officer, Robert Cortellucci to our senior management team.”
2022 Full Year and Fourth Quarter
Financial Highlights:
- Net interest margin and interest
rate spread was 3.77% and 3.65%, respectively, for the year ended
December 31, 2022 as compared to 3.35% and 3.22%, respectively, for
the year ended December 31, 2021;
- Loans receivable, net grew by
10.9%, to $573.5 million at December 31, 2022 when compared to
December 31, 2021, primarily due to $54.6 million of net growth in
commercial and residential real estate loans during the year ended
December 31, 2022;
- Non-performing loans as a percent
of total net loans decreased to 0.51% at December 31, 2022 from
1.86% at December 31, 2021, primarily due to the payoff of a
non-accrual commercial real estate loan during the year ended
December 31, 2022;
- Fourth quarter 2022 net income of
$1.2 million decreased by $623,000, or 34.4%, when compared to the
fourth quarter of 2021. Fourth quarter 2022 net income was impacted
by a $1.2 million increase in non-interest expense primarily due to
remediation costs related to requirements from the formal agreement
with the Office of the Comptroller of the Currency (the “Formal
Agreement”). A decrease in non-interest income and an increase in
provision for loan losses also reduced fourth quarter 2022 net
income, which was partially offset by an increase in net interest
income and a decrease in income tax expense; and
- Net income of $5.7 million for the
year ended December 31, 2022 decreased by $479,000, or 7.7%, when
compared to the year ended December 31, 2021. Net income during the
year ended December 31, 2022 was negatively impacted by an increase
in non-interest expense, a decrease in non-interest income and an
increase in provision for loan losses, which was partially offset
by an increase in net interest income and a decrease in income tax
expense.
Net Interest Income
2022 fourth quarter net interest income
increased $1.1 million, or 20.0%, to $6.5 million as compared to
$5.5 million for the 2021 fourth quarter. Net interest income for
the year ended December 31, 2022 increased $2.3 million, or 10.7%,
to $24.3 million as compared to $22.0 million for the year ended
December 31, 2021.
Interest income for the 2022 fourth quarter was
$7.5 million, an increase of $1.5 million, or 25.2%, compared to
$6.0 million for the 2021 fourth quarter. The increase was
primarily due to a 98 basis points increase in the average yield on
interest-earning assets due to an increase in interest rates. The
increase was also due to a $42.9 million, or 8.2%, increase in the
average balance of loans receivable, net since December 31,
2021.
Interest income for the year ended December 31,
2022 was $26.8 million, an increase of $2.1 million, or 8.5%,
compared to $24.7 million for the year ended December 31, 2021. The
increase was primarily due to a 39 basis points increase in the
average yield on interest-earning assets due to an increase in
interest rates. The increase was also due to a $12.2 million, or
2.3%, increase in the average balance of loans receivable, net
since December 31, 2021.
2022 fourth quarter interest expense was
$923,000, an increase of $411,000, or 80.3%, from $512,000 for the
2021 fourth quarter primarily due to an increase in interest paid
on deposit accounts. During the fourth quarter of 2022, there was a
29 basis points increase in the average interest rate paid on
deposit accounts, partially offset by a $5.8 million, or 1.2%,
decrease in average interest-bearing deposits. The increase in the
average rate paid on deposit accounts was primarily due to the
increase in interest rates during 2022. During the 2022 fourth
quarter, interest expense on short-term and long-term debt
increased by $82,000, or 76.6%, compared to the 2021 fourth
quarter, primarily due to a 56 basis points increase in the average
rate paid on debt and a $7.2 million increase in average debt
outstanding.
Interest expense for the year ended December 31,
2022 was $2.4 million, a decrease of $250,000, or 9.4%, as compared
to $2.7 million for the year ended December 31, 2021 primarily due
to a decrease in interest paid on deposit accounts as a result of
an $11.5 million decrease in the average balance of time deposits.
The overall decrease in interest paid on deposit accounts was
partially offset by a 9 basis points increase in the average rate
paid on money market accounts due to a rise in market interest
rates. During the year ended December 31, 2022, interest expense on
short-term and long-term debt increased by $35,000, or 6.9%,
compared to the year ended December 31, 2021, primarily due to a 22
basis points increase in the average rate paid on average debt
outstanding.
Non-Interest Income
Non-interest income was $584,000 for the 2022
fourth quarter, a decrease of $394,000, or 40.3%, as compared to
the same quarter in the prior year. The decrease was primarily due
to a $269,000 net change in the realized (loss)/gain on the sale of
residential real estate loans due to a decrease in the volume of
loan sales as a result of an increase in interest rates. The
decrease was also due to a $90,000 increase in unrealized losses on
interest rate swaps and a $24,000 decrease in earnings on bank
owned life insurance.
Non-interest income was $2.7 million for the
year ended December 31, 2022, a decrease of $484,000, or 15.2%, as
compared to the year ended December 31, 2021. The decrease was
primarily due to a $565,000 net change in the realized (loss)/gain
on the sale of residential real estate loans, as a result of
decreased sales due to an increase in interest rates. Non-interest
income was also impacted by a $75,000 decrease in earnings on bank
owned life insurance and a $44,000 decrease in recoveries on
previously impaired investment securities. The decreases were
partially offset by a $133,000 increase in net unrealized gains on
interest rate swaps and a $55,000 increase in service charges and
fees.
Non-Interest Expense
Non-interest expense was $5.5 million for the
fourth quarter of 2022, an increase of $1.3 million, or 29.8%, as
compared to $4.2 million for the fourth quarter of 2021.
Professional services costs increased by $555,000, or 155.5%,
primarily due to an increase in auditing services and consulting
costs during the fourth quarter of 2022 associated with remediation
requirements from the Formal Agreement. Salary and employee
benefits expense increased $203,000, or 8.9%, primarily due to an
increase in the cost to attract and retain employees in our market
area and increases in employee benefits. Advertising expense
increased $158,000, or 158.0%, primarily due to an increase in
marketing costs during the fourth quarter of 2022. Data processing
costs increased $134,000, or 69.1%, primarily due to an increase in
core system related costs related to the conversion to a
cloud-based computing system in the second quarter of 2022, core
system maintenance and enhancements to existing IT security
protocols. Other expenses increased $125,000, or 35.7%, primarily
due to an increase in training expenses, which has increased
year-over-year as pandemic restrictions have decreased. FDIC
insurance increased $86,000, or 179.2%, primarily due to an
increase in regulatory assessment fees.
Non-interest expense was $19.4 million for the
year ended December 31, 2022, an increase of $2.4 million, or
14.0%, as compared to $17.1 million for the year ended December 31,
2021. Salary and employee benefits expense increased $855,000, or
9.5%, primarily due to a $430,000 decrease in deferred salaries
associated with a decrease in the number of loans originated during
the year ended December 31, 2022 when compared to the year ended
December 31, 2021. The increase was also due to annual salary
increases, increases in the cost to attract and retain employees in
our market area and increases in employee benefits. Professional
services increased $548,000, or 35.1%, primarily due to an increase
in auditing services and consulting costs during 2022 associated
with remediation costs relating to requirements from the Formal
Agreement. Other expenses increased $538,000, or 44.1%, primarily
due to an increase in capital-based taxes, training, loan and
foreclosure related expenses. Occupancy and equipment increased
$217,000, or 7.7%, primarily due to an increase in maintenance
contracts and equipment expenses related to the core processing
system conversion completed in the fourth quarter of 2021 and the
conversion to a cloud-based computing system in the second quarter
of 2022. Adverting expense increased $112,000, or 18.6%, primarily
due to an increase in marketing costs. FDIC insurance increased
$89,000, or 48.6%, primarily due to an increase in regulatory
assessment fees.
Asset Quality
There was a $225,000 provision for loan losses
recorded during fourth quarter 2022 as compared to no provision
being recorded during the fourth quarter 2021, primarily due to the
downgrade of a $6.0 million commercial loan relationship during the
period. There was no provision for loan losses during fourth
quarter 2021 due to a net decrease in commercial real estate loan
balances.
The provision for loan losses was $725,000 for
the year ended December 31, 2022, a $75,000, or 11.5%, increase as
compared to $650,000 for the year ended December 31, 2021. The
increase in provision for loan losses was primarily due to an
increase in classified commercial real estate loans and an increase
in commercial construction and commercial real estate loan balances
during the year ended December 31, 2022 when compared to the year
ended December 31, 2021. The increase in the provision for loans
losses was partially offset by the payoff of one non-accrual
commercial real estate loan during the year ended December 31,
2022.
Non-performing loans as a percent of total net
loans decreased to 0.51% at December 31, 2022 as compared to 1.86%
at December 31, 2021. The decrease was primarily due to a $6.6
million, or 69.2%, decrease in non-accrual loans during the year
ended December 31, 2022 due to a payoff received on an impaired
commercial real estate loan. The Company’s allowance for loan
losses as a percent of total net loans was 1.23% and 1.18% at
December 31, 2022 and December 31, 2021, respectively.
Balance Sheet Summary
Total assets at December 31, 2022 were $699.9
million, a $13.8 million decrease, or 1.9%, as compared to $713.7
million at December 31, 2021. Cash and cash equivalents decreased
by $58.0 million, or 85.7%, from $67.6 million at December 31, 2021
to $9.6 million at December 31, 2022. The decrease was primarily
due to the use of cash to fund loan originations. Securities
available for sale decreased $15.8 million, or 17.8%, to $73.0
million at December 31, 2022 from $88.8 million at December 31,
2021. The decrease was primarily due to unrealized mark to market
losses on securities available for sale due to an increase in
market interest rates during the year ended December 31, 2022.
Loans receivable, net at December 31, 2022 were $573.5 million, an
increase of $56.3 million, or 10.9%, compared to $517.2 million at
December 31, 2021. The increase in loans receivable, net was
primarily due to increased commercial and residential real estate
loan originations during the year ended December 31, 2022. Total
deposits at December 31, 2022 were $570.1 million, a decrease of
$23.1 million, or 3.9%, compared to $593.2 million at December 31,
2021 primarily due to a decrease in commercial deposits.
Stockholders’ equity at December 31, 2022 was
$81.2 million, a $6.8 million decrease, or 7.7%, as compared to
$88.0 million at December 31, 2021. The decrease in stockholders’
equity was primarily attributed to a $11.3 million increase in
accumulated other comprehensive loss relating to unrealized mark to
market losses on the securities portfolio. The decrease in
stockholders’ equity was also attributed to the payment of
dividends, partially offset by net income earned during the year
ended December 31, 2022. The Company repurchased 5,701 shares of
common stock at an average cost of $14.91 per share during the year
ended December 31, 2022 as compared to 150,542 shares of common
stock repurchased at an average cost of $14.98 per share during the
prior year.
About Lake Shore
Lake Shore Bancorp, Inc. (NASDAQ Global Market:
LSBK) is the mid-tier holding company of Lake Shore Savings Bank, a
federally chartered, community-oriented financial institution
headquartered in Dunkirk, New York. The Bank has eleven
full-service branch locations in Western New York, including five
in Chautauqua County and six in Erie County. The Bank offers a
broad range of retail and commercial lending and deposit services.
The Company’s common stock is traded on the NASDAQ Global Market as
“LSBK”. Additional information about the Company is available at
www.lakeshoresavings.com.
Safe-Harbor
This release contains certain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, that are based on current expectations,
estimates and projections about the Company’s and the Bank’s
industry, and management’s beliefs and assumptions. Words such as
anticipates, expects, intends, plans, believes, estimates and
variations of such words and expressions are intended to identify
forward-looking statements. Such statements reflect management's
current views of future events and operations. These
forward-looking statements are based on information currently
available to the Company as of the date of this release. It is
important to note that these forward-looking statements are not
guarantees of future performance and involve and are subject to
significant risks, contingencies, and uncertainties, many of which
are difficult to predict and are generally beyond our control
including, but not limited to, risks from data loss or other
security breaches, risks from the COVID-19 pandemic, increased
regulatory risks, and associated costs, due in part to compliance
with the Bank’s Formal Agreement with the Office of the Comptroller
of the Currency, the strength of the United States economy in
general and of the local economies in which we conduct operations,
the effect of changes in monetary and fiscal policy, including
changes in interest rate policies of the Board of Governors of the
Federal Reserve System, inflation, climate change, increased
unemployment, deterioration in credit quality of our loan portfolio
and/or the value of the collateral securing the repayment of those
loans, reduction in the value of our investment securities, the
cost and ability to attract and retain key employees, a breach of
our operational or security systems, policies or procedures
including cyber-attacks on us or third party vendors or service
providers, regulatory or legal developments, tax policy changes,
and our ability to implement and execute our business plan and
strategy and expand our operations. Therefore, actual results may
differ materially from those expressed or forecast in such
forward-looking statements. The Company and Bank undertake no
obligation to update publicly any forward-looking statements,
whether as a result of new information or otherwise.
Source: Lake Shore Bancorp, Inc.Category: Financial
Investor Relations/Media ContactRachel A.
FoleyChief Financial Officer and TreasurerLake Shore Bancorp,
Inc.31 East Fourth StreetDunkirk, New York 14048(716) 366-4070 ext.
1020
Lake Shore Bancorp,
Inc.Selected Financial Information
|
|
|
|
|
|
Selected Financial
Condition Data |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
2022 |
|
|
2021 |
|
|
(Unaudited) |
|
|
(Dollars in thousands) |
|
|
|
|
|
|
Total assets |
$ |
699,914 |
|
$ |
713,739 |
Cash and cash equivalents |
|
9,633 |
|
|
67,585 |
Securities available for
sale |
|
73,047 |
|
|
88,816 |
Loans receivable, net |
|
573,537 |
|
|
517,206 |
Deposits |
|
570,119 |
|
|
593,184 |
Short-term borrowings |
|
12,596 |
|
|
- |
Long-term debt |
|
24,950 |
|
|
21,950 |
Stockholders’ equity |
|
81,184 |
|
|
87,976 |
|
|
|
|
|
|
|
|
|
|
|
|
Statements of
Income |
|
|
|
|
|
|
|
|
Three Months Ended |
|
Years Ended |
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
(Unaudited) |
|
(Dollars in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
$ |
7,471 |
|
$ |
5,968 |
|
$ |
26,754 |
|
$ |
24,659 |
Interest expense |
|
923 |
|
|
512 |
|
|
2,415 |
|
|
2,665 |
Net interest income |
|
6,548 |
|
|
5,456 |
|
|
24,339 |
|
|
21,994 |
Provision for loan losses |
|
225 |
|
|
- |
|
|
725 |
|
|
650 |
Net interest income after
provision for loan losses |
|
6,323 |
|
|
5,456 |
|
|
23,614 |
|
|
21,344 |
Total non-interest income |
|
584 |
|
|
978 |
|
|
2,704 |
|
|
3,188 |
Total non-interest expense |
|
5,469 |
|
|
4,215 |
|
|
19,448 |
|
|
17,057 |
Income before income taxes |
|
1,438 |
|
|
2,219 |
|
|
6,870 |
|
|
7,475 |
Income tax expense |
|
246 |
|
|
404 |
|
|
1,162 |
|
|
1,288 |
Net income |
$ |
1,192 |
|
$ |
1,815 |
|
$ |
5,708 |
|
$ |
6,187 |
Basic and diluted earnings per
share |
$ |
0.20 |
|
$ |
0.31 |
|
$ |
0.97 |
|
$ |
1.05 |
Dividends declared per share |
$ |
0.18 |
|
$ |
0.14 |
|
$ |
0.68 |
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
Lake Shore Bancorp,
Inc.Selected Financial Information
|
|
|
|
|
|
Selected Financial
Ratios |
|
|
|
|
|
|
Three Months Ended |
|
Years Ended |
|
December 31, |
|
December 31, |
|
2022 |
2021 |
|
2022 |
2021 |
|
(Unaudited) |
|
|
|
|
Return on average assets |
0.69 |
% |
1.03 |
% |
|
0.82 |
% |
0.88 |
% |
Return on average equity |
5.98 |
% |
8.32 |
% |
|
6.90 |
% |
7.10 |
% |
Average interest-earning assets
to average interest-bearing liabilities |
129.39 |
% |
131.51 |
% |
|
129.81 |
% |
131.45 |
% |
Interest rate spread |
3.90 |
% |
3.25 |
% |
|
3.65 |
% |
3.22 |
% |
Net interest margin |
4.07 |
% |
3.35 |
% |
|
3.77 |
% |
3.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
2022 |
|
2021 |
|
(Unaudited) |
|
|
|
Asset Quality
Ratios: |
|
|
Non-performing loans as a percent of total net loans |
0.51 |
% |
|
1.86 |
% |
Non-performing assets as a
percent of total assets |
0.43 |
% |
|
1.37 |
% |
Allowance for loan losses as a
percent of total net loans |
1.23 |
% |
|
1.18 |
% |
Allowance for loan losses as a
percent of non-performing loans |
240.96 |
% |
|
63.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
(Unaudited) |
|
|
|
|
|
|
Share
Information: |
|
|
|
|
|
Common stock, number of shares
outstanding |
|
5,705,225 |
|
|
5,692,410 |
Treasury stock, number of shares
held |
|
1,131,289 |
|
|
1,144,104 |
Book value per share |
$ |
14.23 |
|
$ |
15.45 |
Lake Shore Bancorp (NASDAQ:LSBK)
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