Lake Shore Bancorp, Inc. (the “Company”) (NASDAQ: LSBK), the
holding company for Lake Shore Savings Bank (the “Bank”), reported
unaudited net income of $1.6 million, or $0.27 per diluted share,
for the 2023 third quarter compared to net income of $1.8 million,
or $0.30 per diluted share, for the 2022 third quarter. For the
first nine months of 2023, the Company reported unaudited net
income of $4.1 million, or $0.69 per diluted share, as compared to
$4.5 million, or $0.77 per diluted share, for the first nine months
of 2022.
“Lake Shore delivered solid results for the
third quarter despite significant expenses related to our efforts
to remediate previously disclosed regulatory matters,” stated Kim
Liddell, President, CEO, and Director. “We continue to look for
opportunities to effectively manage expense and improve results for
our shareholders. Deposit competition remains fierce and continues
to be at the forefront of our focus.”
2023 Third Quarter and Year-to-Date
Financial Highlights:
- Net income decreased to $1.6 million during the 2023 third
quarter, a decrease of $200,000, or 11.3%, when compared to the
2022 third quarter. Net income during the three months ended
September 30, 2023 was negatively impacted by an increase in
non-interest expenses from an increase in salaries and benefits and
FDIC insurance, partially offset by an increase in net interest
income after (credit) provision for credit losses;
- Net income decreased to $4.1 million during the first nine
months of 2023, a decrease of $0.4 million, or 9.9%, when compared
to the first nine months of 2022. Net income during the nine months
ended September 30, 2023 was negatively impacted by an increase in
non-interest expenses associated with remediation activities
related to regulatory matters, an increase in salaries and
benefits, and a decrease in non-interest income, partially offset
by an increase in net interest income after (credit) provision for
credit losses;
- Net interest income decreased $50,000, or 0.8%, to $6.3 million
during the 2023 third quarter as compared to the 2022 third
quarter, primarily due to an increase in the average interest rate
paid on interest-bearing liabilities when compared to the prior
year period, partially offset by an increase in the average yield
earned on interest-earning assets;
- Net interest income increased $1.0 million, or 5.7%, to $18.8
million during the first nine months of 2023 as compared to $17.8
million during the first nine 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
September 30, 2022, partially offset by an increase in the average
rate paid on interest-bearing liabilities;
- Average loan yield increased 88 basis points for the three
months ended September 30, 2023 when compared to the three months
ended September 30, 2022, due to an increase in market rates;
- Total deposits increased by $14.0 million, or 2.5% since
December 31, 2022. At September 30, 2023 and December 31,
2022, the Company’s percentage of uninsured deposits to total
deposits was 12.4% and 16.6%, respectively;
- Net interest margin and interest rate spread was 3.74% and
3.32%, respectively, for the 2023 third quarter as compared to
3.92% and 3.81%, respectively, for the 2022 third quarter; and
- Net interest margin and interest rate spread was 3.72% and
3.36%, respectively for the first nine months of 2023 as compared
to 3.67% and 3.58%, respectively, for the first nine months of
2022.
Net Interest Income
2023 third quarter net interest income decreased
$50,000, or 0.8%, to $6.3 million from the 2022 third quarter. Net
interest income for the first nine months of 2023 increased $1.0
million, or 5.7%, to $18.8 million as compared to $17.8 million for
the first nine months of 2022.
Interest income for the 2023 third quarter was
$8.7 million, an increase of $1.8 million, or 26.1%, compared to
$6.9 million for the 2022 third quarter. The increase was primarily
due to a 91 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 $25.3 million, or 3.9%,
increase in the average balance of interest earning assets since
September 30, 2022. During the third quarter of 2023 as compared to
the same period in 2022, there was a $1.4 million increase in
interest earned on loans due to an 88 basis points increase in the
average yield earned on loans along with an increase in the average
loans balance of $12.7 million, or 2.3%.
Interest income for the first nine months of
2023 was $25.1 million, an increase of $5.9 million, or 30.4%,
compared to $19.3 million for the first nine months of 2022. The
increase was primarily due to a 100 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 $27.7
million, or 4.3%, increase in the average balance of interest
earning assets since September 30, 2022. During the first nine
months of 2023 as compared to the same period in 2022, there was a
$4.8 million increase in interest earned on loans due to an 88
basis points increase in the average yield earned on loans along
with an increase in the average loans balance of $32.2 million, or
6.0%.
2023 third quarter interest expense was $2.4
million, an increase of $1.9 million, or 323.4%, from $573,000 for
the 2022 third quarter. The increase in interest expense was
primarily due to a 140 basis points increase in average interest
paid on interest-bearing liabilities and a $26.4 million increase
in average interest-bearing liabilities. During the third quarter
of 2023 as compared to the same period in 2022, there was a $1.4
million increase in interest paid on time deposit accounts due to a
230 basis points increase in the average interest rate paid on time
deposits along with an increase in average time deposit balances of
$75.8 million, or 54.8%. The increase in the average rate paid on
deposit accounts was primarily due to the increase in market
interest rates since September 30, 2022. Average deposit balances
were $483.8 million, a 3.2% increase during the 2023 third quarter,
resulting from an increase in time deposits and brokered deposits
since September 30, 2022. During the 2023 third quarter, interest
expense on borrowed funds and other interest-bearing liabilities
increased by $168,000, or 109.1%, compared to the 2022 third
quarter, primarily due to a $11.4 million increase in average
borrowings outstanding.
Interest expense for the first nine months of
2023 was $6.3 million, an increase of $4.9 million, or 325.1%, from
$1.5 million for the first nine months of 2022. The increase in
interest expense was primarily due to a 121 basis points increase
in average interest paid on interest-bearing liabilities and a
$28.8 million increase in average interest-bearing liabilities.
During the first nine months of 2023, there was a $3.4 million
increase in interest paid on time deposit accounts due to a 201
basis points increase in the average interest rate paid on time
deposits along with an increase in average time deposit balances of
$68.7 million, or 51.0%. The increase in the average rate paid on
deposit accounts was primarily due to the increase in market
interest rates since September 30, 2022. Average deposit balances
were $487.1 million, a 2.7% increase during the first nine months
of 2023, resulting from an increase in time deposits and brokered
deposits since September 30, 2022. During the first nine months of
2023, interest expense on borrowed funds and other interest-bearing
liabilities increased by $613,000, or 154.4%, compared to the first
nine months of 2022, primarily due to a $15.8 million increase in
average borrowings outstanding.
Non-Interest Income
Non-interest income was $605,000 for the 2023
third quarter, a decrease of $63,000, or 9.4%, as compared to the
2022 third quarter. The decrease was primarily due to a $91,000
decrease in unrealized gains on interest rate swap products as a
result of their unwind in the second quarter of 2023, and a $21,000
decrease in service charges and fees, partially offset by a $48,000
increase in earnings on bank-owned life insurance.
Non-interest income was $1.7 million for the
first nine months of 2023, a decrease of $408,000, or 19.2%, as
compared to the first nine months of 2022. The decrease was
primarily due to a $402,000 net decrease in unrealized gains on
interest rate swap products as a result of market interest rate
movements, a $52,000 loss on the sale of securities in the current
period to reposition the Bank’s balance sheet, and a $42,000
decrease in service charges and fees. These decreases were
partially offset by a $66,000 increase in earnings on bank owned
life insurance and a $18,000 decrease in loss on sale of loans when
compared to the first nine months of 2022.
Non-Interest Expense
Non-interest expense was $5.2 million for the
2023 third quarter, an increase of $326,000, or 6.7%, as compared
to $4.9 million for the 2022 third quarter. Salary and employee
benefits expense increased $269,000, or 10.7%, during the third
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 $249,000, or
541.3%, when compared to the prior year due to an increase in
premium assessments. Data processing costs increased $29,000, or
7.2%, primarily due to an increase in costs related to core system
maintenance and enhancements to existing IT security protocols.
Professional services expense decreased by $173,000, or 30.8%,
primarily due to a decrease in consulting costs during the 2023
third quarter associated with remediation activities related to
regulatory matters as compared to the third quarter of 2022.
Non-interest expense was $16.6 million for the
first nine months of 2023, an increase of $2.6 million, or 18.8%,
as compared to $14.0 million for the first nine months of 2022.
Salary and employee benefits expense increased $992,000, or 13.5%,
during the first nine 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. Professional services expense
increased by $891,000, or 74.5%, primarily due to an increase in
legal, auditing services, regulatory assessments, and consulting
costs during the first nine months of 2023 associated with
remediation activities related to regulatory matters. FDIC
insurance expense increased by $688,000, or 498.6%, during the
first nine months of 2023 due to an increase in premium
assessments. Data processing costs increased $190,000, or 17.4%,
during the first nine 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
$58,000, or 12.7%, primarily due to an increase in marketing costs
during the first nine months of 2023. The increases were partially
offset by a decrease in other costs of $144,000, or 11.2%,
primarily due to a one-time, insurance-related expense being
recorded in the first nine 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 and unfunded commitments. During the
three months ended September 30, 2023, the Company recorded a
$199,000 credit to the provision for credit losses on loans and
unfunded commitments primarily due to a decrease in the balance of
the loan portfolio and a decrease in loan commitments during the
three months ended September 30, 2023. During the nine months ended
September 30, 2023, the Company recorded a $1.0 million 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 the loan portfolio and unfunded
commitments.
The provision for loan losses was $0 for the
three months ended September 30, 2022 and $500,000 for the nine
months ended September 30, 2022.
Non-performing assets as a percent of total
assets increased to 0.51% at September 30, 2023 as compared to
0.43% at December 31, 2022, primarily due to one commercial
relationship comprised of two loans which were moved to non-accrual
status during the quarter. The Company’s allowance for credit
losses as a percent of total loans was 1.18%, at September 30, 2023
and 1.23% at December 31, 2022.
Balance Sheet Summary
Total assets at September 30, 2023 were $713.6
million, a $13.6 million increase, or 2.0%, as compared to $699.9
million at December 31, 2022. Cash and cash equivalents increased
by $36.4 million, or 377.5%, from $9.6 million at December 31, 2022
to $46.0 million at September 30, 2023. The increase was primarily
due to an increase in total deposits, a decrease in securities
available-for-sale and loans receivable, and an increase in
long-term borrowings. Securities available for sale were $58.0
million at September 30, 2023 as compared to $73.0 million at
December 31, 2022 primarily as the result of the sale of $8.5
million of securities during the nine months ended September 30,
2023. Loans receivable, net at September 30, 2023 and December 31,
2022 were $564.8 million and $573.5 million, respectively. Total
deposits at September 30, 2023 were $584.2 million, an increase of
$14.0 million, or 2.5%, compared to $570.1 million at December 31,
2022. Total borrowings decreased to $36.5 million at September 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 September 30, 2023 was
$81.9 million, a $673,000 increase, or 0.8%, as compared to $81.2
million at December 31, 2022. The increase in stockholders’ equity
was primarily attributed to $4.1 million in net income earned
during the first nine months of 2023 partially offset by a $2.7
million unrealized mark-to-market loss 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 ContactTaylor M.
GildenChief Financial Officer and TreasurerLake Shore Bancorp,
Inc.31 East Fourth StreetDunkirk, New York 14048(716) 366-4070 ext.
1065
Lake Shore Bancorp,
Inc.Selected Financial Information
Selected Financial Condition Data |
|
|
|
|
|
|
September
30, |
|
December
31, |
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
(Dollars in
thousands) |
|
|
|
|
|
|
Total assets |
$ |
713,563 |
|
$ |
699,914 |
Cash and cash equivalents |
|
45,999 |
|
|
9,633 |
Securities available for sale |
|
57,952 |
|
|
73,047 |
Loans receivable, net |
|
564,848 |
|
|
573,537 |
Deposits |
|
584,158 |
|
|
570,119 |
Short-term borrowings |
|
— |
|
|
12,596 |
Long-term debt |
|
36,450 |
|
|
24,950 |
Stockholders’ equity |
|
81,857 |
|
|
81,184 |
Statements of Income |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
September
30, |
|
September
30, |
|
2023 |
|
|
2022 |
|
2023 |
|
|
2022 |
|
(Unaudited) |
|
(Dollars in
thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
$ |
8,721 |
|
|
$ |
6,918 |
|
$ |
25,142 |
|
|
$ |
19,283 |
Interest expense |
|
2,426 |
|
|
|
573 |
|
|
6,342 |
|
|
|
1,492 |
Net interest income |
|
6,295 |
|
|
|
6,345 |
|
|
18,800 |
|
|
|
17,791 |
(Credit) provision for credit losses |
|
(199 |
) |
|
|
- |
|
|
(1,011 |
) |
|
|
500 |
Net interest income after (credit) provision for credit
losses |
|
6,494 |
|
|
|
6,345 |
|
|
19,811 |
|
|
|
17,291 |
Total non-interest income |
|
605 |
|
|
|
668 |
|
|
1,712 |
|
|
|
2,120 |
Total non-interest expense |
|
5,196 |
|
|
|
4,870 |
|
|
16,614 |
|
|
|
13,979 |
Income before income taxes |
|
1,903 |
|
|
|
2,143 |
|
|
4,909 |
|
|
|
5,432 |
Income tax expense |
|
332 |
|
|
|
372 |
|
|
838 |
|
|
|
916 |
Net income |
$ |
1,571 |
|
|
$ |
1,771 |
|
$ |
4,071 |
|
|
$ |
4,516 |
Basic and diluted earnings per share |
$ |
0.27 |
|
|
$ |
0.30 |
|
$ |
0.69 |
|
|
$ |
0.77 |
Dividends declared per share |
$ |
- |
|
|
$ |
0.18 |
|
$ |
- |
|
|
$ |
0.50 |
Lake Shore Bancorp,
Inc.Selected Financial Information
Selected Financial Ratios |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
Nine Months
Ended |
|
|
September
30, |
|
|
September
30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
(Unaudited) |
|
|
|
|
|
|
|
Return on average assets |
0.87 |
% |
|
1.02 |
% |
|
0.75 |
% |
|
0.86 |
% |
Return on average equity |
7.48 |
% |
|
8.62 |
% |
|
6.50 |
% |
|
7.19 |
% |
Average interest-earning assets to average interest-bearing
liabilities |
129.32 |
% |
|
131.10 |
% |
|
128.10 |
% |
|
129.95 |
% |
Interest rate spread |
3.32 |
% |
|
3.81 |
% |
|
3.36 |
% |
|
3.58 |
% |
Net interest margin |
3.74 |
% |
|
3.92 |
% |
|
3.72 |
% |
|
3.67 |
% |
|
September 30, |
|
December
31, |
|
|
2023 |
|
|
2022 |
|
|
(Unaudited) |
|
|
|
|
|
|
Asset Quality Ratios: |
|
|
|
|
Non-performing loans as a percent of total net loans |
0.62 |
% |
|
0.51 |
% |
Non-performing assets as a percent of total assets |
0.51 |
% |
|
0.43 |
% |
Allowance for credit losses as a percent of net loans |
1.18 |
% |
|
1.23 |
% |
Allowance for credit losses as a percent of non-performing
loans |
188.32 |
% |
|
240.96 |
% |
|
September
30, |
|
December
31, |
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
|
|
|
|
Share Information: |
|
|
|
|
|
Common stock, number of shares outstanding |
|
5,690,776 |
|
|
5,705,225 |
Treasury stock, number of shares held |
|
1,145,738 |
|
|
1,131,289 |
Book value per share |
$ |
14.38 |
|
$ |
14.23 |
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