Lake Shore Bancorp, Inc. Announces 2024 First Quarter Financial Results DUNKIRK, N.Y. — April 22, 2024 — Lake Shore Bancorp, Inc. (the "Company") (NASDAQ: LSBK), the holding company for Lake Shore Savings Bank (the "Bank"), reported unaudited net income of $1.0 million, or $0.17 per diluted share, for the 2024 first quarter compared to net income of $1.7 million, or $0.29 per diluted share, for the 2023 first quarter. Net income decreased $670,000, or 39.8%, when compared to the 2023 first quarter and was n ...

Stock Information - Lake Shore Bancorp's common stock is traded on the Nasdaq Global Market under the symbol "LSBK" with 63.96% of shares held by Lake Shore, MHC as of December 31, 2023[18]. Loan Portfolio - The loan portfolio totals $558.536 million, with $172.005 million in residential one- to four-family loans and $316.986 million in commercial loans[44]. - The company retains the majority of loans originated, with a focus on fixed-rate and adjustable-rate mortgage loans[41]. - The loan maturity table indicates that a significant portion of loans is due beyond 15 years, totaling $152.976 million[44]. - Total loans outstanding at the end of 2023 were $558.5 million, a decrease of 3.1% from $576.7 million in 2022[46]. - Total loan originations for 2023 were $56.3 million, down 64.1% from $157.2 million in 2022[46]. - Commercial real estate loans totaled $300.5 million, representing 53.8% of the total loan portfolio as of December 31, 2023[46]. - One- to four-family residential loans amounted to $172.0 million, accounting for 30.8% of the total loan portfolio[54]. - Home equity loans and lines of credit reached $51.9 million, making up 9.3% of the total loan portfolio[65]. - Construction loans totaled $16.4 million, representing 2.9% of the total loan portfolio[52]. - Jumbo loans totaled $5.7 million, or 3.3% of the one- to four-family residential mortgage portfolio[58]. - As of December 31, 2023, commercial business loans totaled $16.5 million, representing 3.0% of the total loan portfolio[67]. - Consumer loans amounted to $1.1 million, accounting for 0.2% of the total loan portfolio, with a decline in volume due to borrowers opting for home equity lines of credit[69]. Economic Environment - The primary market area includes Erie and Chautauqua Counties, with a combined population of approximately 1.1 million as of July 1, 2022[30]. - The company anticipates continued lending opportunities driven by economic growth in the region, despite the impact of the COVID-19 pandemic[33]. - Competition for loans and deposits is intense, with significant pressure from both traditional banks and online service providers[37]. - The local economies served are diversified, with principal employment sectors including service-related industries, wholesale and retail trade, and durable-goods manufacturing[34]. - Local economic conditions in Western New York, particularly in Erie and Chautauqua counties, are critical for future growth, with risks associated with population and income levels[206]. - As of December 31, 2023, the year-over-year consumer price index (CPI) increase was 3.4%, leading to a 100 basis points interest rate hike by the Federal Reserve in 2023[207]. - High inflation and rising interest rates may adversely affect loan demand and borrowers' repayment ability, impacting overall business performance[207]. Asset Quality and Credit Losses - The company maintains a high level of asset quality, with a focus on commercial real estate and one- to four-family residential mortgage loans[77]. - The allowance for credit losses on loans and unfunded commitments is a valuation allowance for expected credit losses, reviewed quarterly[87]. - The company adopted ASU 2016-13 (Topic 326) on January 1, 2023, replacing the incurred loss methodology with CECL for financial instruments[87]. - Loans classified as "Substandard" indicate potential loss if deficiencies are not corrected, while "Doubtful" loans have a high likelihood of non-collection[85]. - Non-performing loans are evaluated individually, and losses are recorded against the allowance for credit losses when collection is deemed unlikely[80]. - As of December 31, 2023, the total allocated allowance for credit losses was $6,463,000, a decrease from $6,930,000 in 2022, representing a 6.7% decline[92]. - The commercial real estate loans accounted for 81.0% of the total allowance in 2023, slightly down from 81.3% in 2022[92]. - The total unallocated allowance for credit losses was $0 as of December 31, 2023, compared to $135,000 (1.9% of total allowance) in 2022[92]. Deposits and Funding - The total deposits in the IntraFi Network Deposits program rose to $12.9 million in 2023 from $8.1 million in 2022, reflecting a 59.3% increase[109]. - Brokered time deposits increased significantly to $16.0 million in 2023 from $1.7 million in 2022, indicating a substantial growth of 841.2%[109]. - The total time deposit accounts amounted to $150,502,000 as of December 31, 2023, compared to $152,958,000 in 2022, showing a slight decrease of 1.6%[112]. - Uninsured deposits in excess of the FDIC insurance limit of $250,000 were $75.7 million, or 12.8% of total deposits, compared to $82.5 million, or 16.6% in 2022[113]. Regulatory Compliance and Governance - The Bank has been designated as being in "Troubled Condition" and must notify the OCC prior to changes in senior executive officers or board members[128]. - A Consent Order was entered into with the OCC on February 9, 2023, requiring the Bank to create a compliance committee and develop a corporate governance program[126]. - The Bank is required to maintain a Tier 1 Leverage capital ratio of 10% and a Total Risk-Based capital ratio of 13% as per the Individual Minimum Capital Requirement[129]. - The Bank's non-interest expenses are expected to remain elevated due to the Agreement with the Federal Reserve Bank of Philadelphia and the Consent Order[132]. - The Bank's management is committed to addressing compliance issues outlined in the Order and the Agreement with the Federal Reserve Bank[194]. - The Bank's BSA/AML compliance programs have been cited for deficiencies, which could lead to additional sanctions and operational restrictions[195]. - Lake Shore Savings is in compliance with Regulation O regarding extensions of credit to insiders, ensuring adherence to federal regulations[161]. - The bank is required to notify its primary federal regulator within 36 hours of a significant computer-security incident, as per the final rule effective April 1, 2022[163]. Capital and Dividends - Lake Shore, MHC is soliciting members to vote on a proposal to waive dividends aggregating up to $0.72 per share, with a special meeting scheduled for April 2, 2024[183]. - The Federal Reserve Board may restrict the ability of Lake Shore, MHC to pay dividends if a subsidiary bank becomes undercapitalized[182]. - The company announced the suspension of quarterly dividend payments on February 15, 2023, pending approval from the Federal Reserve Board to resume payments[183]. - Lake Shore Bancorp's ability to pay dividends is significantly influenced by Lake Shore Savings' capacity to make capital distributions[198]. - The Bank's ability to distribute capital is limited to net income for the current and prior two calendar years under OCC regulations[199]. - The ability to pay dividends to stockholders may be significantly impaired if the Federal Reserve Board does not grant the dividend waiver request[203]. Cybersecurity and Data Security - The company experienced a data security incident in November 2021, which led to increased operating costs and the implementation of additional security measures[210]. - Ongoing expenses related to cybersecurity enhancements and hiring key personnel have been incurred as a result of the 2021 incident[213]. - The company relies heavily on information systems, making it vulnerable to potential breaches that could harm reputation and financial condition[214]. - Future incidents could have a material adverse effect on business operations and financial results, leading to increased regulatory scrutiny and potential liabilities[214].

United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 000-51821 LAKE SHORE BANCORP, INC. (Exact name of registrant as specified in its charter) United States 20-4729288 (State or other jurisdiction of incorporation or organ ...

United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 000-51821 (716) 366-4070 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Exchange Act: | | Trading | | | --- | --- ...

Financial Performance - Total interest income for the three months ended March 31, 2023, was $7,951,000, an increase of 34% compared to $5,934,000 in the same period of 2022[12]. - Net income for the first quarter of 2023 was $1,684,000, representing a 59% increase from $1,061,000 in the first quarter of 2022[12]. - Basic and diluted earnings per common share for Q1 2023 were $0.29, up from $0.18 in Q1 2022[12]. - Total comprehensive income for Q1 2023 was $2,937,000, compared to a loss of $5,073,000 in Q1 2022[13]. - Net income for the three months ended March 31, 2023, was $1,684,000, compared to $1,061,000 for the same period in 2022, representing a 58.6% increase[94]. - Basic and diluted earnings per share for Q1 2023 were both $0.29, up from $0.18 in Q1 2022, reflecting a 61.1% increase[94]. Income and Expenses - Net interest income after provision for credit losses was $6,916,000 for Q1 2023, up from $5,068,000 in Q1 2022, marking a 36% increase[12]. - Total non-interest income decreased to $554,000 in Q1 2023 from $732,000 in Q1 2022, a decline of 24%[12]. - Total non-interest expense increased to $5,517,000 in Q1 2023, compared to $4,532,000 in Q1 2022, reflecting a rise of 22%[12]. Credit Losses and Provisions - The company reported a provision for credit losses of $(625,000) in Q1 2023, compared to a provision of $400,000 in Q1 2022, indicating a reversal of credit losses[12]. - The allowance for credit losses increased from $7,065 thousand on January 1, 2023, to $6,708 thousand by March 31, 2023, reflecting a provision of $(625) thousand during the quarter[56]. - The company expects credit losses to be reviewed by bank regulators, which may require additional expected credit losses to be established[30]. - The allowance for credit losses on unfunded loan commitments was recorded at $633,000 following the adoption of CECL[65]. Loans and Deposits - The net increase in deposits for Q1 2023 was $25,088,000, compared to a decrease of $364,000 in Q1 2022[16]. - Total gross loans amounted to $577.2 million as of March 31, 2023, with real estate loans totaling $556.9 million[49]. - The total gross loans receivable as of March 31, 2023, was $577,238,000, reflecting a slight increase from the previous quarter[71]. - The total past due loans as of March 31, 2023, were $2,872,000, with $1,927,000 being 90 days or more past due[71]. Securities and Investments - The total amortized cost of debt securities available for sale as of March 31, 2023, is $85,235,000, with unrealized losses of $11,618,000, resulting in a fair value of $73,742,000[37]. - The total fair value of securities, including equity and debt, was $73,751,000 at March 31, 2023, compared to $73,047,000 at December 31, 2022, representing an increase of approximately 1%[111]. - The fair value of municipal bonds was $43,412,000 at March 31, 2023, compared to $42,414,000 at December 31, 2022, reflecting an increase of approximately 2%[109]. Regulatory and Accounting Changes - The Company adopted ASU 2022-02 on January 1, 2023, which did not have a material impact on its consolidated financial statements but required enhanced vintage disclosures[35]. - The company adopted the current expected credit loss (CECL) model for estimating the allowance for credit losses effective January 1, 2023[51]. - The transition to ASC 326 reflects a shift from the incurred loss methodology to a more forward-looking approach for estimating credit losses[58]. Shareholder Equity and Compensation - The company did not repurchase any shares during the three months ended March 31, 2023, with 30,626 shares remaining under the stock repurchase program[126]. - Compensation expense related to unvested restricted stock awards under the 2012 Equity Incentive Plan amounted to $(49,000) for Q1 2023, compared to $42,000 for Q1 2022[102]. - As of March 31, 2023, there were 25,029 unvested shares outstanding under the 2012 Equity Incentive Plan, down from 56,627 shares at the same time in 2022[102].

Loan Performance and Composition - Lake Shore Bancorp's total loans outstanding increased to $576.7 million at the end of 2022, up from $519.8 million at the end of 2021, representing an increase of approximately 10.9%[45] - Total loan originations for 2022 were $157.2 million, a decrease of 6.7% compared to $168.6 million in 2021[45] - The company reported principal repayments totaling $98.7 million in 2022, down from $161.5 million in 2021, indicating a significant reduction of approximately 38.8%[45] - The loan portfolio composition includes $175.9 million in residential loans, $53.1 million in home equity loans, and $304.0 million in commercial loans as of December 31, 2022[42] - As of December 31, 2022, commercial real estate loans totaled $304.0 million, representing 52.7% of the total loan portfolio[47] - Multi-family apartment complexes accounted for 47.4% of the commercial real estate loan portfolio, totaling $156.2 million[47] - Construction loans amounted to $22.9 million, or 4.0% of the total loan portfolio as of December 31, 2022[52] - One- to four-family residential loans totaled $175.9 million, representing 30.5% of the total loan portfolio[55] - Home equity loans and lines of credit reached $53.1 million, accounting for 9.2% of the total loan portfolio[67] - Commercial business loans totaled $19.6 million, or 3.4% of the total loan portfolio as of December 31, 2022[71] - Jumbo loans amounted to $8.0 million, representing 4.6% of the one- to four-family residential mortgage portfolio[59] - The company sold $1.3 million of fixed-rate, conforming long-term residential mortgage loans during 2022 to manage interest rate risk[58] - The company has begun selling long-term, lower-yielding fixed-rate residential mortgages at origination in the secondary market[55] - At December 31, 2022, home equity loans where the company does not hold the first mortgage represented 31.3% of the outstanding principal within the home equity loan portfolio[68] - As of December 31, 2022, consumer loans totaled $1.2 million, representing less than 1% of the total loan portfolio[73] - Sold participations in commercial real estate loans amounted to $20.7 million, while commercial business loans totaled $258,000 as of December 31, 2022[75] Regulatory and Compliance Issues - The company is subject to regulatory oversight by the Federal Reserve Board and the Office of the Comptroller of the Currency, which impacts its operational strategies[22] - The company has been designated as being in "Troubled Condition" by the OCC, requiring prior notification for board member changes and certain severance payments[136] - A Consent Order was entered into with the OCC on February 9, 2023, mandating the establishment of a compliance committee and a written strategic plan for the Bank[134] - The company is subject to periodic examination by the OCC to ensure compliance with capital adequacy, asset quality, and other regulatory standards[140] - The bank's capital distribution is governed by federal regulations, requiring applications to be filed with the OCC prior to any dividend payments[152] - The Board of Directors has suspended quarterly dividend payments to focus capital resources on operational and compliance issues[154] - The Bank is under a Consent Order with the OCC due to deficiencies in information technology, security, and compliance, which may increase non-interest expenses and adversely affect financial performance[199] - The Bank's ability to pay dividends has been suspended by the Board of Directors to focus on addressing operational and compliance deficiencies[208] - The Bank must create a compliance committee to oversee adherence to the Consent Order and submit monthly reports to the Board and the OCC[202] - The Bank is expected to face increased costs due to remediation actions required by the Consent Order, which may burden management and internal resources[203] - Changes in laws and regulations may adversely affect the Bank's operations and increase compliance costs[207] Asset Quality and Loan Loss Allowance - The allowance for loan losses is maintained through provisions charged to income, reflecting the evaluation of inherent losses in the loan portfolio[92] - The company has a high level of asset quality, with a significant proportion of loans collateralized by stable property values in Western New York[81] - Loans classified as "Substandard" indicate defined weaknesses, while "Doubtful" loans have characteristics making full collection highly questionable[89] - The company may require additional loss allowances based on regulatory reviews of the allowance for loan losses[94] - Troubled debt restructurings (TDRs) occur when concessions are granted to borrowers facing financial difficulties, impacting the allowance for loan losses[87] - The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors[95] - Non-performing loans are reviewed periodically, with management determining impairment based on the borrower's financial condition[84] - As of December 31, 2022, the total allocated allowance for loan losses was $6.93 million, representing 98.1% of the total allowance, compared to $5.89 million (96.3%) in 2021[98] - The commercial real estate loans allowance increased to $5.40 million (76.4% of total allowance) in 2022 from $4.38 million (71.5%) in 2021, indicating a rise in risk assessment[98] - The total unallocated allowance for loan losses decreased to $135,000 in 2022 from $224,000 in 2021, reflecting improved credit quality[98] Capital and Funding Strategy - The company's Tier 1 Leverage capital ratio was 12.40% and Total Risk-Based capital ratio was 18.09% as of December 31, 2022, indicating compliance with the Individual Minimum Capital Requirement[137] - The company is required to maintain a Tier 1 Leverage capital ratio of 10% and a Total Risk-Based capital ratio of 13% as per the Individual Minimum Capital Requirement[137] - The bank's deposits at December 31, 2022, included $8.1 million in the IntraFi Network Deposits program, down from $13.4 million in 2021, indicating a shift in funding strategy[116] - Time deposits with remaining terms to maturity of less than one year amounted to $78.5 million in 2022, an increase from $72.6 million in 2021[119] - As of December 31, 2022, the company had $82.5 million in uninsured deposits exceeding the FDIC insurance limit of $250,000, down from $106.8 million in 2021[120] - The company reported $28.3 million in time deposits with balances of $250,000 or more, with $17.9 million maturing over twelve months[120] - At December 31, 2022, the company had $12.6 million in short-term borrowings and $25.0 million in long-term debt from the FHLBNY, compared to $22.0 million in long-term debt in 2021[120] Employee and Operational Strategies - The company employs 113 full-time and 7 part-time employees, with a focus on employee development and retention through educational opportunities and a comprehensive benefits package[127][129] - The bank's investment policy is reviewed and approved annually by the Board of Directors, ensuring compliance with risk management guidelines[100] - The bank's classification of investments includes two private-label asset-backed securities with a fair value of $96,000 as of December 31, 2022, reflecting ongoing credit risk assessments[109] Community and Market Position - The company anticipates continued lending opportunities driven by economic growth in the Western New York region, despite challenges posed by the COVID-19 pandemic[31] - Lake Shore Bancorp's market area includes approximately 1.0 million residents in Erie and Chautauqua Counties, with a diverse economic base and significant investment in healthcare and education sectors[28] - The company faces intense competition from various financial institutions, including commercial banks and online service providers, which may impact its growth and profitability[36] - Lake Shore Savings Bank received an "outstanding" rating in its most recent Community Reinvestment Act examination[162]

United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q United States 20-4729288 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 000-51821 LAKE SHORE BANCORP, INC. (E ...

Financial Performance - Total interest income for the three months ended June 30, 2022, was $6,431,000, an increase of 4.25% compared to $6,169,000 in the same period of 2021[12]. - Net income for the three months ended June 30, 2022, was $1,684,000, representing a 69.5% increase from $993,000 in the same period of 2021[12]. - Basic and diluted earnings per common share for the three months ended June 30, 2022, were $0.29, compared to $0.17 for the same period in 2021[12]. - Net income for the six months ended June 30, 2022, was $2,745,000, a slight increase from $2,681,000 in the same period of 2021, representing a growth of 2.4%[19]. - For the three months ended June 30, 2022, net income was $1,684,000, compared to $993,000 for the same period in 2021, representing a 69.6% increase[75]. Income and Expenses - Non-interest income for the six months ended June 30, 2022, was $1,452,000, slightly down from $1,503,000 in the same period of 2021[12]. - Total non-interest expense for the three months ended June 30, 2022, was $4,577,000, an increase of 4.13% compared to $4,395,000 in the same period of 2021[12]. - The provision for loan losses decreased to $100,000 for the three months ended June 30, 2022, down from $500,000 in the same period of 2021[12]. - The provision for loan losses was $500,000 for the six months ended June 30, 2022, down from $650,000 in 2021, indicating a decrease of 23.1%[19]. - The provision for income tax expense for the six months ended June 30, 2022, was $2,000, down from $7,000 in 2021[118]. Cash Flow and Investments - Net cash provided by operating activities increased to $4,103,000 for the six months ended June 30, 2022, compared to $3,556,000 in 2021, reflecting a rise of 15.4%[19]. - Net cash used in investing activities was $32,028,000 for the six months ended June 30, 2022, compared to $22,511,000 in 2021, indicating an increase of 42.3%[19]. - Net cash used in financing activities was $12,504,000 for the six months ended June 30, 2022, a decrease from $21,781,000 in 2021, showing a reduction of 42.5%[19]. Securities and Investments - The total amortized cost of debt securities available for sale was $88,407,000, with a fair value of $77,530,000 as of June 30, 2022, reflecting unrealized losses of $11,032,000[33]. - The total debt securities available for sale amounted to $88,797,000, with gross unrealized losses of $1,757,000[34]. - The fair value of securities was $77,540,000 as of June 30, 2022, with a carrying amount of $77,540,000[111]. - The estimated fair value of debt securities available for sale was $77,530,000 as of June 30, 2022, down from $88,797,000 as of December 31, 2021[97][100]. Loan Portfolio and Allowance for Loan Losses - Gross loans receivable totaled $550,218,000 as of June 30, 2022, compared to $519,779,000 at the end of 2021, indicating a growth in the loan portfolio[52]. - The allowance for loan losses increased to $6,747,000 as of June 30, 2022, up from $6,118,000 at the beginning of the year, reflecting a provision of $100,000 for the second quarter[52]. - The ending balance for collectively evaluated loans for impairment was $6,747,000 as of June 30, 2022[52]. - The company reported a total of $4,921,000 in recorded investment for commercial real estate loans with no related allowance as of June 30, 2022[57]. - The total amount of loans classified as substandard as of June 30, 2022, was $6,876,000, compared to $13,653,000 as of December 31, 2021, showing a decrease in risk[64]. Dividends and Stockholder Equity - Cash dividends declared per share increased to $0.16 for the three months ended June 30, 2022, from $0.13 in the same period of 2021[12]. - The Company declared a quarterly cash dividend of $0.18 per share, payable on August 19, 2022, to shareholders of record as of August 2, 2022[119]. - Lake Shore, MHC waived dividends totaling $582,000 and $1.2 million for the three and six months ended June 30, 2022, respectively, cumulatively waiving approximately $17.3 million as of June 30, 2022[119]. Asset Quality and Risk Management - The company maintains conservative underwriting standards for its one- to four-family residential mortgage loans, which are primarily held in the Western New York region[46]. - The company reviews all investment securities on an ongoing basis for the presence of other-than-temporary-impairment (OTTI) with formal reviews performed quarterly[39]. - The total amount of non-accruing loans as of June 30, 2022, was $22,000, with 7 loans in the residential one- to four-family category[70]. - The company's asset classification committee is responsible for monitoring risk ratings and making changes as deemed appropriate, with a focus on individual loan classifications[62]. Miscellaneous - The company expects an increase in the allowance for loan losses due to the adoption of the CECL model, which will require covering the full remaining expected life of the portfolio[26]. - As of June 30, 2022, all Paycheck Protection Program loans originated by the company have been forgiven by the SBA, indicating successful support for small businesses during the pandemic[30]. - The company had $578,268,000 in deposits with an estimated fair value of $579,437,000 as of June 30, 2022[111].

United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 000-51821 LAKE SHORE BANCORP, INC. (Exact name of registrant as specified in its charter) | | | | United | States | | | | | 20-4729288 | | | --- | --- | --- | --- | --- ...

Loan Performance - Lake Shore Bancorp's total loans outstanding at the end of 2021 were $519.779 million, a decrease from $526.632 million at the end of 2020, reflecting a reduction of approximately 1.6%[45] - The company originated a total of $168.609 million in loans during 2021, compared to $188.473 million in 2020, indicating a decline of about 10.5% year-over-year[45] - Principal repayments for total loans in 2021 amounted to $161.462 million, up from $114.156 million in 2020, representing an increase of approximately 41.5%[45] - The loan portfolio composition includes $158.826 million in residential one-to four-family loans and $266.525 million in commercial loans as of December 31, 2021[42] - The company originated $50.081 million in residential one- to four-family loans in 2021, an increase from $43.802 million in 2020, reflecting a growth of approximately 5.8%[45] - The company reported a significant increase in commercial loan originations, with $47.333 million in 2021 compared to $58.403 million in 2020, a decrease of about 19%[45] - As of December 31, 2021, commercial real estate loans totaled $266.5 million, representing 51.3% of the total loan portfolio[47] - Multi-family apartment complexes collateralized loans made up 44.7% of the commercial real estate loan portfolio, totaling $119.0 million[47] - Construction loans amounted to $21.8 million, or 4.2% of the total loan portfolio, as of December 31, 2021[52] - One- to four-family residential loans totaled $158.8 million, representing 30.6% of the total loan portfolio[55] - Home equity loans and lines of credit totaled $48.0 million, accounting for 9.2% of the total loan portfolio[67] - Commercial business loans reached $23.2 million, or 4.5% of the total loan portfolio, as of December 31, 2021[71] - Jumbo loans totaled $10.0 million, representing 6.3% of the one- to four-family residential mortgage portfolio[59] Risk Management - The company sold $13.0 million of long-term fixed-rate residential mortgage loans in 2021 to mitigate long-term interest rate risk[46] - The company retains the majority of loans originated, but sells residential mortgage loans into the secondary market to manage interest rate risk[38] - The allowance for loan losses reflects the evaluation of losses inherent in the loan portfolio, with provisions charged to income[96] - The allowance for loan losses at the end of 2021 was $6,118,000, an increase from $5,857,000 at the end of 2020[102] - The allocated component of the allowance for loan losses was $5,894,000, representing 96.3% of the total allowance, while the unallocated component was $224,000, or 3.7%[102] - The commercial real estate loans accounted for 71.5% of the total allowance for loan losses in 2021, up from 69.2% in 2020[102] Economic Environment - The local economy's growth, particularly in Erie and Chautauqua counties, is crucial for the company's future growth possibilities, as it significantly depends on population, income levels, deposits, and housing starts[200] - The COVID-19 pandemic has had a significant economic impact on the communities where the company operates, affecting borrowers and depositors, with ongoing volatility expected[201][202] - High inflation levels are currently affecting the national economy, with the consumer price index increasing to 7.0% in 2021, which could adversely impact the company's business and results of operations[203] - Changes in the Federal Reserve Board's monetary or fiscal policies could negatively affect the company's results of operations and financial condition, as these policies influence bank loans, investments, and deposits[204] Compliance and Regulations - The company must comply with the Truth in Lending Act and other federal laws governing credit transactions and consumer protection[183] - Lake Shore Savings is classified as "well-capitalized" with at least 5% leverage capital and 6.5% common equity Tier 1 risk-based capital[155] - Lake Shore Savings Bank is in compliance with the loans-to-one borrower limitations, which restrict loans to a single borrower to 15% of unimpaired capital and surplus[158] - The bank maintained a liquidity ratio of liquid assets not subject to pledge as a percentage of deposits and borrowings of 15% or greater[165] - The company has exercised a one-time opt-out regarding the inclusion of unrealized gains and losses on certain "available-for-sale" securities for regulatory capital calculations[145] - The minimum capital standards require a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets, with a well-capitalized status requiring a CET1 ratio of 6.5%[144] Employee and Operational Policies - The company employed 104 full-time and 3 part-time employees, with 21.1% having been employed for 15 years or longer[131] - The company has implemented safety protocols to ensure employee safety during the COVID-19 pandemic, prioritizing health and wellness[133] - The company provides a comprehensive benefits package, including health, dental, life, and disability insurance, along with a generous paid time off policy[134] Cybersecurity and Data Security - A data security incident in November 2021 led to unauthorized access to certain data, prompting the company to enhance its security measures and notify affected customers[207][209] - The company maintains insurance coverage, including cybersecurity insurance, but the coverage may not fully cover all losses incurred from incidents like the November 2021 breach[208] - The company relies heavily on communications and information systems, making it vulnerable to hardware and cybersecurity issues, which could lead to operational impairments and financial losses[210]