Lake Shore Bancorp, Inc. (the “Company”) (NASDAQ: LSBK), the
holding company for Lake Shore Savings Bank (the “Bank”), reported
unaudited net income of $0.8 million, or $0.14 per diluted share,
for the 2023 second quarter compared to net income of $1.7 million,
or $0.29 per diluted share, for the 2022 second quarter. For the
first six months of 2023, the Company reported unaudited net income
of $2.5 million, or $0.43 per diluted share, as compared to $2.7
million, or $0.47 per diluted share, for the first six months of
2022.
“Lake Shore’s 2023 second quarter performance
was solid despite significant expenses connected to our efforts to
remediate previously disclosed regulatory matters,” stated Kim
Liddell, President and CEO. “The loan portfolio continues to
perform well with little to no credit deterioration. Deposit
competition remains fierce demanding close personal service to
retain and grow the deposit base. We expect more of the same
economic headwinds and remain committed to enhancing the Company’s
results.”
2023 Second Quarter and Year-to-Date
Financial Highlights:
- Net income decreased to $0.8 million during the 2023 second
quarter, a decrease of $868,000, or 51.5%, when compared to the
2022 second quarter. Net income during the three months ended June
30, 2023 was negatively impacted by an increase in non-interest
expenses associated with remediation activities related to
regulatory matters, partially offset by an increase in net interest
income;
- Net income decreased to $2.5 million during the first half of
2023, a decrease of $0.2 million, or 8.9%, when compared to the
first half of 2022. Net income during the six months ended June 30,
2023 was negatively impacted by an increase in non-interest
expenses associated with remediation activities related to
regulatory matters, partially offset by an increase in net interest
margin;
- Net interest income increased $236,000, or 3.9%, to $6.2
million during the 2023 second quarter as compared to the 2022
second quarter, primarily due to an increase in the average yield
earned on interest-earning assets and an increase in the average
balance of interest-earning assets since June 30, 2022;
- Net interest income increased $1.1 million, or 9.3%, to $12.5
million during the first six months of 2023 as compared to $11.4
million during the first six months of 2022, primarily due to an
increase in the average yield earned on interest-earning assets and
an increase in the average balance of interest-earning assets since
June 30, 2022;
- Average loan yield increased 90 basis points for the three
months ended June 30, 2023 when compared to the three months ended
June 30, 2022, primarily due to loan portfolio growth along with an
increase in market interest rates;
- Total deposits increased by $11.8 million, or 2.1% since
December 31, 2022. Uninsured deposits at June 30, 2023 amounted to
$60.6 million, or 10.4% of our total deposits, down from $82.5
million, or 16.6% of our total deposits, at December 31, 2022;
- Net interest margin and interest rate spread was 3.65% and
3.29%, respectively, for the 2023 second quarter as compared to
3.71% and 3.63%, respectively, for the 2022 second quarter;
and
- Non-performing loans as a percent of total net loans was 0.49%
and 0.51% at June 30, 2023 and December 31, 2022,
respectively.
Net Interest Income
2023 second quarter net interest income
increased $236,000, or 3.9%, to $6.2 million as compared to $6.0
million for the 2022 second quarter. Net interest income for the
first six months of 2023 increased $1.1 million, or 9.3%, to $12.5
million as compared to $11.4 million for the first six months of
2022.
Interest income for the 2023 second quarter was
$8.4 million, an increase of $2.0 million, or 31.7%, compared to
$6.4 million for the 2022 second quarter. The increase was
primarily due to a 99 basis points increase in the average yield on
interest-earning assets due to an increase in market interest
rates. The increase was also due to a $35.8 million, or 5.6%,
increase in the average balance of interest earning assets since
June 30, 2022. During the second quarter of 2023 as compared to the
same period in 2022, there was a $1.6 million increase in interest
earned on loans due to a 90 basis points increase in the average
yield earned along with an increase in the average loans balance of
$30.1 million, or 5.6%.
Interest income for the first six months of 2023
was $16.4 million, an increase of $4.1 million, or 32.8%, compared
to $12.4 million for the first six months of 2022. The
increase was primarily due to a 104 basis points increase in the
average yield on interest-earning assets due to an increase in
market interest rates. The increase was also due to a $28.9
million, or 4.5%, increase in the average balance of interest
earning assets since June 30, 2022. During the first half of 2023
as compared to the same period in 2022, there was a $3.4 million
increase in interest earned on loans due to a 89 basis points
increase in the average yield earned along with an increase in the
average loans balance of $42.0 million, or 7.9%.
2023 second quarter interest expense was $2.3
million, an increase of $1.8 million, or 398.0%, from $453,000 for
the 2022 second quarter. The increase in interest expense was
primarily due to a 133 basis points increase in average interest
paid on interest-bearing liabilities and a $37.0 million increase
in average interest-bearing liabilities. During the second
quarter of 2023 as compared to the same period in 2022, there was a
$1.3 million increase in interest paid on time deposit accounts due
to a 221 basis points increase in the average interest rate paid
along with an increase in average time deposit balances of $81.9
million, or 62.4%. The increase in the average rate paid on deposit
accounts was primarily due to the increase in market interest rates
since June 30, 2022. Average deposit balances were $494.8 million,
a 4.2% increase during the 2023 second quarter, resulting from an
increase in certificate of deposits and brokered deposits since
June 30, 2022. During the 2023 second quarter, interest
expense on short-term and long-term debt increased by $217,000, or
175.0%, compared to the 2022 second quarter, primarily due to a
$16.9 million increase in average borrowings outstanding.
Interest expense for the first six months of
2023 was $3.9 million, an increase of $3.0 million, or 326.1%, from
$919,000 for the first six months of 2022. The increase in interest
expense was primarily due to a 111 basis points increase in average
interest paid on interest-bearing liabilities and a $30.1 million
increase in average interest-bearing liabilities. During the first
six months of 2023, there was a $2.1 million increase in interest
paid on time deposit accounts due to a 186 basis points increase in
the average interest rate paid along with an increase in average
time deposit balances of $65.1 million, or 49.0%. The increase in
the average rate paid on deposit accounts was primarily due to the
increase in market interest rates since June 30, 2022. Average
deposit balances were $488.8 million, a 2.5% increase during the
first six months of 2023, resulting from an increase in certificate
of deposits and brokered deposits since June 30, 2022. During
the first six months of 2023, interest expense on short-term and
long-term debt increased by $446,000, or 183.5%, compared to the
first six months of 2022, primarily due to a $18.0 million increase
in average borrowings outstanding.
Non-Interest Income
Non-interest income was $553,000 for the 2023
second quarter, a decrease of $167,000, or 23.2%, as compared to
the 2022 second quarter. The decrease was primarily due to a
$79,000 net increase in unrealized losses on interest rate swap
products as a result of market interest rate movements, a $52,000
decrease in service charges and fees, and a $49,000 loss on the
sale of $6.0 million of available-for-sale securities in the
current period to reposition the Bank’s balance sheet.
Non-interest income was $1.1 million for the
first six months of 2023, a decrease of $345,000, or 23.8%, as
compared to the first six months of 2022. The decrease was
primarily due to a $311,000 net increase in unrealized losses on
interest rate swap products as a result of market interest rate
movements and a $49,000 loss on the sale of securities in the
current period to reposition the Bank’s balance sheet. The decrease
was partially offset by a $18,000 increase in earnings on bank
owned life insurance and a $18,000 decrease in loss on sale of
loans when compared to the first six months of 2022.
Non-Interest Expense
Non-interest expense was $5.9 million for the
2023 second quarter, an increase of $1.3 million, or 28.9%, as
compared to $4.6 million for the 2022 second quarter. Professional
services expense increased by $513,000, or 153.1%, primarily due to
an increase in legal, auditing services, regulatory assessments,
and consulting costs during the 2023 second quarter associated with
remediation activities related to regulatory matters. Salary and
employee benefits expense increased $351,000, or 14.3%, during the
second quarter of 2023 primarily due to the addition of staffing
resources, annual salary increases, an increase in the cost to
attract and retain employees in our market area, and an increase in
employee benefits. FDIC Insurance expense increased by $389,000, or
827.7%, during the current quarter due to an increase in premium
assessments. Data processing costs increased $98,000, or 26.1%,
primarily due to an increase in costs related to core system
maintenance and enhancements to existing IT security protocols.
Advertising expense increased $56,000, or 45.5%, during the second
quarter of 2023 primarily due to an increase in marketing costs
during the second quarter of 2023. The increases were partially
offset by a decrease in occupancy and equipment costs and other
costs of $85,000, or 9.8%.
Non-interest expense was $11.4 million for the
first six months of 2023, an increase of $2.3 million, or 25.3%, as
compared to $9.1 million for the first six months of 2022.
Professional services expense increased by $1.1 million, or 167.8%,
primarily due to an increase in legal, auditing services,
regulatory assessments, and consulting costs during the first six
months of 2023 associated with remediation activities related to
regulatory matters. Salary and employee benefits expense increased
$723,000, or 14.9%, during the first six months of 2023 primarily
due to the addition of staffing resources, annual salary increases,
an increase in the cost to attract and retain employees in our
market area, and an increase in employee benefits. FDIC Insurance
expense increased by $439,000, or 477.2%, during the first six
months of 2023 due to an increase in premium assessments. Data
processing costs increased $161,000, or 23.3%, during the first six
months of 2023 primarily due to an increase in costs related to
core system maintenance and enhancements to existing IT security
protocols. Advertising expense increased $98,000, or 37.8%,
primarily due to an increase in marketing costs during the first
six months of 2023. The increases were partially offset by a
decrease in occupancy and equipment costs and other costs of
$192,000, or 7.8%, primarily due to a one-time, insurance-related
expense being recorded in the first six months of 2022.
Credit Quality
The Company adopted the Current Expected Credit
Losses (“CECL”) methodology to record expected credit losses on our
loan portfolio effective January 1, 2023. The adoption of
CECL under current accounting guidance resulted in a pre-tax
increase to the allowance for credit losses on loans of $282,000
and an increase to the allowance for credit losses on unfunded
commitments of $633,000, with an offset to the Company’s retained
earnings. The Company is utilizing the vintage model to
estimate its allowance for credit losses on loans. During the three
months ended June 30, 2023, the Company recorded a $187,000 credit
to the provision for credit losses on loans and unfunded
commitments primarily due to a decrease in loan commitments during
the three months ended June 30, 2023. During the six months ended
June 30, 2023, the Company recorded a $812,000 credit to the
provision for credit losses on loans and unfunded commitments
primarily due to a change in qualitative factors from January 1,
2023 and a decrease in unfunded commitments.
The provision for loan losses was $100,000 for
the three months ended June 30, 2022 and $500,000 for the six
months ended June 30, 2022.
Non-performing loans as a percent of total net
loans decreased to 0.49% at June 30, 2023 as compared to 0.51% at
December 31, 2022. The Company’s allowance for credit losses as a
percent of total loans was 1.19%, at June 30, 2023 and 1.23% at
December 31, 2022.
Balance Sheet Summary
Total assets at June 30, 2023 were $714.0
million, a $14.1 million increase, or 2.0%, as compared to $699.9
million at December 31, 2022. Cash and cash equivalents increased
by $25.9 million, or 269.4%, from $9.6 million at December 31, 2022
to $35.6 million at June 30, 2023. The increase was primarily due
to an increase in deposit accounts and long-term borrowings and a
decrease in securities available-for-sale. Securities available for
sale were $65.4 million at June 30, 2023 as compared to $73.0
million at December 31, 2022 primarily as the result of the sale of
$6.0 million of securities during the second quarter of 2023.
Loans receivable, net at June 30, 2023 and December 31, 2022 were
$569.5 million and $573.5 million, respectively. Total
deposits at June 30, 2023 were $582.0 million, an increase of $11.8
million, or 2.1%, compared to $570.1 million at December 31, 2022.
Total borrowings decreased to $36.5 million at June 30, 2023, a
decrease of $1.1 million, or 2.9% as compared to $37.5 million as
of December 31, 2022.
Stockholders’ equity at June 30, 2023 was $83.4
million, a $2.2 million increase, or 2.7%, as compared to $81.2
million at December 31, 2022. The increase in stockholders’ equity
was primarily attributed to $2.5 million in net income earned
during the first six months of 2023 and a $0.5 million unrealized
mark-to-market gain on the available-for-sale securities portfolio
recognized in other comprehensive income.
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, compliance with the Bank’s Consent
Order and an Individual Minimum Capital Requirement both issued by
the Office of the Comptroller of the Currency, compliance with the
Written Agreement with the Federal Reserve Bank of Philadelphia,
data loss or other security breaches, including a breach of our
operational or security systems, policies or procedures, including
cyber-attacks on us or on our third party vendors or service
providers, economic conditions, the effect of changes in monetary
and fiscal policy, inflation, unanticipated changes in our
liquidity position, climate change, increased unemployment,
deterioration in the credit quality of the loan portfolio and/or
the value of the collateral securing repayment of loans, reduction
in the value of investment securities, the cost and ability to
attract and retain key employees, regulatory or legal
developments, tax policy changes, and our ability to implement and
execute our business plan and strategy and expand our operations.
These factors should be considered in evaluating forward looking
statements and undue reliance should not be placed on such
statements, as our financial performance could differ materially
due to various risks or uncertainties. We do not undertake to
publicly update or revise our forward-looking statements if future
changes make it clear that any projected results expressed or
implied therein will not be realized.
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, |
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Total assets |
$ |
|
714,041 |
|
|
$ |
|
699,914 |
|
Cash and cash equivalents |
|
|
35,582 |
|
|
|
|
9,633 |
|
Securities available for
sale |
|
|
65,377 |
|
|
|
|
73,047 |
|
Loans receivable, net |
|
|
569,503 |
|
|
|
|
573,537 |
|
Deposits |
|
|
581,965 |
|
|
|
|
570,119 |
|
Short-term borrowings |
|
|
— |
|
|
|
|
12,596 |
|
Long-term debt |
|
|
36,450 |
|
|
|
|
24,950 |
|
Stockholders’ equity |
|
|
83,394 |
|
|
|
|
81,184 |
|
|
|
|
|
|
|
|
|
|
|
Statements
of Income |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
(Dollars in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
$ |
|
8,470 |
|
|
$ |
|
6,431 |
|
|
$ |
|
16,421 |
|
|
$ |
|
12,365 |
|
Interest expense |
|
|
2,256 |
|
|
|
|
453 |
|
|
|
|
3,916 |
|
|
|
|
919 |
|
Net interest income |
|
|
6,214 |
|
|
|
|
5,978 |
|
|
|
|
12,505 |
|
|
|
|
11,446 |
|
(Credit) provision for credit
losses |
|
|
(187 |
) |
|
|
|
100 |
|
|
|
|
(812 |
) |
|
|
|
500 |
|
Net interest income after
(credit) provision for credit losses |
|
|
6,401 |
|
|
|
|
5,878 |
|
|
|
|
13,317 |
|
|
|
|
10,946 |
|
Total non-interest income |
|
|
553 |
|
|
|
|
720 |
|
|
|
|
1,107 |
|
|
|
|
1,452 |
|
Total non-interest
expense |
|
|
5,901 |
|
|
|
|
4,577 |
|
|
|
|
11,418 |
|
|
|
|
9,109 |
|
Income before income
taxes |
|
|
1,053 |
|
|
|
|
2,021 |
|
|
|
|
3,006 |
|
|
|
|
3,289 |
|
Income tax expense |
|
|
237 |
|
|
|
|
337 |
|
|
|
|
506 |
|
|
|
|
544 |
|
Net income |
$ |
|
816 |
|
|
$ |
|
1,684 |
|
|
$ |
|
2,500 |
|
|
$ |
|
2,745 |
|
Basic and diluted earnings per
share |
$ |
|
0.14 |
|
|
$ |
|
0.29 |
|
|
$ |
|
0.43 |
|
|
$ |
|
0.47 |
|
Dividends declared per
share |
$ |
|
- |
|
|
$ |
|
0.16 |
|
|
$ |
|
- |
|
|
$ |
|
0.32 |
|
|
Lake Shore Bancorp, Inc.Selected Financial
Information |
|
Selected Financial
Ratios |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30, |
|
|
June 30, |
|
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
|
|
|
|
|
Return on average assets |
|
0.45 |
% |
|
0.97 |
% |
|
|
0.69 |
% |
|
0.79 |
% |
Return on average equity |
|
3.92 |
% |
|
8.21 |
% |
|
|
6.00 |
% |
|
6.49 |
% |
Average interest-earning
assets to average interest-bearing liabilities |
|
127.32 |
% |
|
129.58 |
% |
|
|
127.48 |
% |
|
129.38 |
% |
Interest rate spread |
|
3.29 |
% |
|
3.63 |
% |
|
|
3.39 |
% |
|
3.46 |
% |
Net interest margin |
|
3.65 |
% |
|
3.71 |
% |
|
|
3.71 |
% |
|
3.54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
|
|
|
|
Asset Quality
Ratios: |
|
|
|
|
Non-performing loans as a percent of total net loans |
|
0.49 |
% |
|
0.51 |
% |
Non-performing assets as a
percent of total assets |
|
0.41 |
% |
|
0.43 |
% |
Allowance for credit losses as
a percent of total loans |
|
1.19 |
% |
|
1.23 |
% |
Allowance for credit losses as
a percent of non-performing loans |
|
240.69 |
% |
|
240.96 |
% |
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