Lake Shore Bancorp, Inc. (the “Company”) (NASDAQ: LSBK), the
holding company for Lake Shore Savings Bank (the “Bank”), reported
unaudited net income of $1.7 million, or $0.29 per diluted share,
for the 2022 second quarter compared to net income of $1.0 million,
or $0.17 per diluted share, for the 2021 second quarter. For the
first six months of 2022, the Company reported unaudited net income
of $2.75 million, or $0.47 per diluted share, as compared to $2.68
million, or $0.45 per diluted share, for the first six months of
2021.
2022 Second Quarter and Year to Date
Financial Highlights:
- 2022 second quarter net income
increased $0.7 million, or 69.6%, when compared to 2021 second
quarter net income primarily due to increases in net interest
income and non-interest income and a decrease in provision for loan
losses, which was partially offset by increases in non-interest
expense and income tax expense;
- Net income for the six month period
ended June 30, 2022 increased $64,000, or 2.4%, when compared to
the same period in 2021. The increase was primarily due to an
increase in net interest income and a decrease in provision for
loan losses, which was partially offset by increases in
non-interest expense and income tax expense and a decrease in
non-interest income when compared to the same period in 2021;
- Net interest margin and interest
rate spread was 3.54% and 3.46%, respectively, for the six months
ended June 30, 2022 as compared to 3.28% and 3.14%, respectively,
for the six months ended June 30, 2021;
- Loans receivable, net grew by 5.8%,
to $547.2 million at June 30, 2022 when compared to December 31,
2021, primarily due to $27.6 million of net growth in commercial
and residential real estate loans during the six months ended June
30, 2022;
- Non-performing loans as a percent
of total net loans decreased to 0.48% at June 30, 2022 from 1.86%
at December 31, 2021, primarily due to a decrease in non-accrual
commercial estate loans; and
- Cash dividend payments increased
$77,000, or 14.1%, to $625,000 for the six months ended June 30,
2022 as compared to the same period in 2021.
“During the first six months of 2022, we
produced meaningful growth in our net interest margin, while also
significantly enhancing our asset quality. These results have not
only improved our net income when compared to 2021, they have also
further strengthened our historically robust capital position,”
stated Daniel P. Reininga, President and Chief Executive Officer.
“Our strong financial and capital position will allow us to react
appropriately to the challenges of the current interest rate and
economic environment.”
Net Interest Income
2022 second quarter net interest income
increased $547,000, or 10.1%, to $6.0 million as compared to $5.4
million for the 2021 second quarter. Net interest income for the
first six months of 2022 increased $745,000, or 7.0%, to $11.4
million as compared to $10.7 million for the first six months of
2021.
Interest income for the 2022 second quarter was
$6.4 million, an increase of $262,000, or 4.2%, compared to $6.2
million for the 2021 second quarter. The increase was primarily due
to a 27 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 $6.4 million, or 8.4%, increase in the
average balance of securities available for sale as a result of an
increase in securities purchased since June 30, 2021.
Interest income for the six months ended June
30, 2022 was $12.4 million, an increase of $139,000, or 1.1%,
compared to $12.2 million for the six months ended June 30, 2021.
The increase was primarily due to an 8 basis points increase in the
average yield on interest-earning assets due to an increase in
interest rates. The increase was also due to an $8.4 million, or
10.8%, increase in the average balance of securities available for
sale as a result of an increase in securities purchased since June
30, 2021.
2022 second quarter interest expense was
$453,000, a decrease of $285,000, or 38.6%, from $738,000 for 2021
second quarter primarily due to a decrease in interest paid on
deposit accounts. During the second quarter of 2022, there was a 21
basis points decrease in the average interest rate paid on deposit
accounts. During the 2022 second quarter, interest expense on
long-term debt decreased by $30,000, or 21.6%, compared to the 2021
second quarter, primarily due to a $5.8 million decrease in the
average balance of long-term borrowings.
Interest expense for the six months ended June
30, 2022 was $919,000, a decrease of $606,000, or 39.7%, as
compared to $1.5 million for the six months ended June 30, 2021
primarily due to a decrease in interest paid on deposit accounts.
During the first six months of 2022, there was a 23 basis points
decrease in the average interest rate paid on deposit accounts. The
decrease was partially offset by a $5.9 million, or 1.2%, increase
in average interest-bearing deposits during the six months ended
June 30, 2022 as compared to the six months ended June 30, 2021.
The increase in the average balance of interest-bearing deposits
was due to an increase in core deposit accounts. During the six
months ended June 30, 2022, interest expense on long-term debt
decreased by $69,000, or 24.5%, compared to the six months ended
June 30, 2021, primarily due to a $6.4 million decrease in the
average balance of long-term borrowings.
Non-Interest Income
Non-interest income was $720,000 for the 2022
second quarter, an increase of $37,000, or 5.4%, as compared to the
same quarter in the prior year. The increase was primarily due to a
$60,000 increase in unrealized gains on interest rate swaps
primarily due to an increase in interest rates. The increase was
also due to a $45,000 increase in service charges and fees. The
increases were partially offset by a $58,000 net change in the
realized (loss)/gain on the sale of residential loans primarily due
to an increase in interest rates.
Non-interest income was $1.5 million for the six
months ended June 30, 2022, a decrease of $51,000, or 3.4%, as
compared to the six months ended June 30, 2021. The decrease was
primarily due to a $227,000 net decrease in the realized
(loss)/gain on the sale of residential loans, primarily due to an
increase in interest rates. Non-interest income was also impacted
by a $22,000 decrease in recoveries on previously impaired
investment securities and a $13,000 decrease in earnings on bank
owned life insurance. The decreases were nearly offset by a
$157,000 increase in unrealized gains on interest rate swaps and a
$57,000 increase in service charges and fees.
Non-Interest Expense
Non-interest expense was $4.6 million for the
second quarter of 2022, an increase of $182,000, or 4.1%, as
compared to $4.4 million for the second quarter of 2021. Salary and
employee benefits expense increased $217,000, or 9.7%, primarily
due to a $118,000 decrease in deferred salaries associated with a
decrease in the number of loans originated during the second
quarter of 2022 when compared to the second quarter of 2021. The
increase was also due to annual salary increases and increases in
employee benefits. Occupancy and equipment increased $120,000, or
18.2%, primarily due to an increase in maintenance contracts and
equipment expenses related to the core processing system conversion
completed in the third quarter of 2021 and the conversion to a
cloud based computing system completed in the second quarter of
2022. Other expenses increased $58,000, or 17.1%, primarily due to
an increase in foreclosure related expenses. The increase in total
non-interest expenses was partially offset by a $57,000, or 31.7%,
decrease in advertising costs during the three months ended June
30, 2022 when compared to the same period in 2021.
Non-interest expense was $9.1 million for the
six months ended June 30, 2022, an increase of $761,000, or 9.1%,
as compared to $8.3 million for the six months ended June 30, 2021.
Salary and employee benefits expense increased $523,000, or 12.0%,
primarily due to a $403,000 decrease in deferred salaries
associated with a decrease in the number of loans originated during
the six months ended June 30, 2022 when compared to the six months
ended June 30, 2021. The increase was also due to annual salary
increases and increases in employee benefits. Other expenses
increased $275,000, or 42.8%, primarily due to an increase in
telephone, loan and foreclosure related expenses. Occupancy and
equipment increased $195,000, or 14.6%, primarily due to an
increase in maintenance contracts and equipment expenses related to
the core processing system conversion completed in the third
quarter of 2021 and the conversion to a cloud based computing
system in the second quarter of 2022. The increase in total
non-interest expenses was partially offset by lower expenses for
professional service, data processing, advertising, postage and
supplies during the six months ended June 30, 2022 when compared to
the same period in 2021.
Asset Quality
The provision for loan losses was $100,000 for
the three months ended June 30, 2022, a $400,000, or 80.0%,
decrease as compared to $500,000 for the three months ended June
30, 2021. The decrease in provision for loan losses was primarily
due to a specific reserve related to the downgrade and impairment
of one commercial real estate loan during the three months ended
June 30, 2021.
The provision for loan losses was $500,000 for
the six months ended June 30, 2022, a $150,000, or 23.1%, decrease
as compared to $650,000 for the six months ended June 30, 2021. The
decrease in provision for loan losses was primarily due to a
specific reserve related to the downgrade and impairment of one
commercial real estate loan during the six months ended June 30,
2021, which was partially offset by an increase in commercial
construction and commercial real estate loan balances during the
six months ended June 30, 2022 when compared to the same period in
2021.
Non-performing loans as a percent of total net
loans decreased to 0.48% at June 30, 2022 as compared to 1.86% at
December 31, 2021. The decrease was primarily due to a $6.9
million, or 72.5%, decrease in non-accrual loans during the first
six months of 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 June
30, 2022 and December 31, 2021, respectively.
Balance Sheet Summary
Total assets at June 30, 2022 were $694.5
million, a $19.2 million decrease, or 2.7%, as compared to $713.7
million at December 31, 2021. Cash and cash equivalents decreased
by $40.4 million, or 59.8%, from $67.6 million at December 31, 2021
to $27.2 million at June 30, 2022. The decrease was primarily due
to the use of cash to fund loan originations. Securities available
for sale decreased $11.3 million, or 12.7%, to $77.5 million at
June 30, 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 first six months of 2022. Loans receivable, net were
$547.2 million, an increase of $30.0 million, or 5.8%, 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 first six
months of 2022. Total deposits at June 30, 2022 were $578.3
million, a decrease of $14.9 million, or 2.5%, compared to $593.2
million at December 31, 2021 primarily due to a decrease in
commercial deposits as a result of increased business costs and
recovery from the COVID-19 pandemic.
Stockholders’ equity at June 30, 2022 was $80.6
million, a $7.4 million decrease, or 8.4%, as compared to $88.0
million at December 31, 2021. The decrease in stockholders’ equity
was primarily attributed to a $9.6 million decrease in accumulated
other comprehensive income and the payment of dividends, partially
offset by net income during the first six months of 2022. During
the first six months of 2022, the Company repurchased 5,701 shares
of common stock at an average cost of $14.91 per share as compared
to 79,928 shares of common stock repurchased at an average cost of
$15.00 per share during the first six months of 2021.
Dividends Declared
On July 20, 2022, the Company’s Board of
Directors approved a quarterly cash dividend of $0.18 per share of
common stock. The dividend is payable on August 19, 2022, to
shareholders of record as of August 2, 2022. Lake Shore, MHC (the
“MHC”), which holds 3,636,875 shares, or 63.7%, of the Company’s
total outstanding stock as of July 19, 2022, has elected to waive
receipt of the dividend on its shares. The closing stock price of
Lake Shore Bancorp, Inc. shares was $13.80 on July 19, 2022, which
implied a dividend yield for the Company’s common stock of
5.2%.
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 and Bank 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, 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 |
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
2022 |
|
2021 |
|
(Unaudited) |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
Total assets |
$ |
694,495 |
|
|
$ |
713,739 |
|
Cash and cash equivalents |
|
27,156 |
|
|
|
67,585 |
|
Securities available for
sale |
|
77,540 |
|
|
|
88,816 |
|
Loans receivable, net |
|
547,200 |
|
|
|
517,206 |
|
Deposits |
|
578,268 |
|
|
|
593,184 |
|
Long-term debt |
|
24,950 |
|
|
|
21,950 |
|
Stockholders’ equity |
|
80,614 |
|
|
|
87,976 |
|
Statements of Income |
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(Unaudited) |
|
(Dollars in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
$ |
6,431 |
|
|
$ |
6,169 |
|
|
$ |
12,365 |
|
|
$ |
12,226 |
|
Interest expense |
|
453 |
|
|
|
738 |
|
|
|
919 |
|
|
|
1,525 |
|
Net interest income |
|
5,978 |
|
|
|
5,431 |
|
|
|
11,446 |
|
|
|
10,701 |
|
Provision for loan losses |
|
100 |
|
|
|
500 |
|
|
|
500 |
|
|
|
650 |
|
Net interest income after
provision for loan losses |
|
5,878 |
|
|
|
4,931 |
|
|
|
10,946 |
|
|
|
10,051 |
|
Total non-interest income |
|
720 |
|
|
|
683 |
|
|
|
1,452 |
|
|
|
1,503 |
|
Total non-interest
expense |
|
4,577 |
|
|
|
4,395 |
|
|
|
9,109 |
|
|
|
8,348 |
|
Income before income
taxes |
|
2,021 |
|
|
|
1,219 |
|
|
|
3,289 |
|
|
|
3,206 |
|
Income tax expense |
|
337 |
|
|
|
226 |
|
|
|
544 |
|
|
|
525 |
|
Net income |
$ |
1,684 |
|
|
$ |
993 |
|
|
$ |
2,745 |
|
|
$ |
2,681 |
|
Basic and diluted earnings per
share |
$ |
0.29 |
|
|
$ |
0.17 |
|
|
$ |
0.47 |
|
|
$ |
0.45 |
|
Dividends declared per
share |
$ |
0.16 |
|
|
$ |
0.13 |
|
|
$ |
0.32 |
|
|
$ |
0.26 |
|
Lake Shore Bancorp,
Inc.Selected Financial Information
Selected Financial
Ratios |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
|
2021 |
|
(Unaudited) |
|
|
|
|
Return on average assets |
0.97 |
% |
|
0.56 |
% |
|
0.79 |
% |
|
0.77 |
% |
Return on average equity |
8.21 |
% |
|
4.56 |
% |
|
6.49 |
% |
|
6.17 |
% |
Average interest-earning
assets to average interest-bearing liabilities |
129.58 |
% |
|
131.66 |
% |
|
129.38 |
% |
|
130.44 |
% |
Interest rate spread |
3.63 |
% |
|
3.13 |
% |
|
3.46 |
% |
|
3.14 |
% |
Net interest margin |
3.71 |
% |
|
3.28 |
% |
|
3.54 |
% |
|
3.28 |
% |
|
June 30, |
|
December 31, |
|
2022 |
|
2021 |
|
(Unaudited) |
|
|
|
|
|
Asset Quality
Ratios: |
|
|
|
|
Non-performing loans as a percent of total net loans |
0.48 |
% |
|
1.86 |
% |
Non-performing assets as a
percent of total assets |
0.42 |
% |
|
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 |
258.01 |
% |
|
63.50 |
% |
|
June 30, |
|
December 31, |
|
2022 |
|
2021 |
|
(Unaudited) |
|
|
|
|
|
|
|
|
Share
Information: |
|
|
|
|
|
|
|
Common stock, number of shares
outstanding |
|
5,710,779 |
|
|
|
5,692,410 |
|
Treasury stock, number of
shares held |
|
1,125,735 |
|
|
|
1,144,104 |
|
Book value per share |
$ |
14.12 |
|
|
$ |
15.45 |
|
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