Lake Shore Bancorp(US:LSBK)2025-03-14 20:59Stock Information - Lake Shore Bancorp's common stock is traded on the Nasdaq Global Market under the symbol "LSBK" with 63.4% of shares held by Lake Shore, MHC as of December 31, 2024[14]. Market Share - The company holds a 15.2% deposit market share in Chautauqua County as of June 30, 2024, while its largest competitors hold 25.8% and 20.5% respectively[34]. - In Erie County, Lake Shore Bancorp's deposit market share increased to 0.5% as of June 30, 2024, up from 0.4% in 2023[34]. Loan Portfolio - The loan portfolio totals $546.49 million, with $161.33 million in residential one- to four-family loans and $320.98 million in commercial loans[41]. - Total loans outstanding at December 31, 2024, were $558.5 million, a decrease of 3.1% from $576.7 million in 2023[43]. - Commercial real estate loans totaled $321.0 million, representing 58.7% of the total gross loan portfolio as of December 31, 2024[43]. - Home equity loans and lines of credit amounted to $47.5 million, accounting for 8.7% of the total gross loan portfolio[65]. - The average loan balance in the commercial real estate loan portfolio was $875,000, with the largest individual loan being $10.6 million[47]. - Residential, one- to four-family loans totaled $161.3 million, representing 29.5% of the total gross loan portfolio[53]. - Commercial real estate loans secured by residential properties and multi-family complexes made up 40.0% of the commercial real estate portfolio, totaling $128.3 million[44]. - Commercial business loans totaled $15.7 million, representing 2.9% of the total gross loan portfolio as of December 31, 2024[68]. - Consumer loans totaled $1.0 million, or 0.2% of the total gross loan portfolio, as of December 31, 2024[71]. Lending Strategy - The company has no loan sales recorded for the years 2024 or 2023, indicating a strategy of retaining originated loans[42]. - The primary lending activities include fixed and adjustable-rate mortgage loans, with a focus on commercial and residential real estate[38]. Economic Outlook - The company anticipates continued growth opportunities driven by local economic expansion and demographic trends[31]. - Competition remains intense, with significant pressure from larger financial institutions and online service providers[33]. - The company aims to compete through personalized service and local market knowledge, despite the challenges posed by technological advances in the financial services industry[36]. Asset Quality - The company maintains a high level of asset quality, with a focus on commercial real estate and one- to four-family residential mortgage loans[79]. - The classification of loans includes "Substandard," "Doubtful," and "Loss," with management closely monitoring the quality of the loan portfolio[87]. - The allowance for credit losses is reviewed quarterly and is based on expected credit losses in the loan portfolio[90]. - As of December 31, 2024, the total allowance for credit losses was $5,133,000, a decrease from $6,463,000 in 2023[95]. - The commercial real estate loans accounted for 81.3% of the total allowance in 2024, compared to 81.0% in 2023[95]. Deposits and Funding - The company had $10.5 million in depositor funds placed in the IntraFi Network Deposits program as of December 31, 2024, down from $12.9 million in 2023[113]. - Uninsured deposits in excess of the FDIC insurance limit were $77.5 million, or 13.5% of total deposits, as of December 31, 2024[117]. - Long-term debt from the FHLBNY decreased to $10.3 million in 2024 from $35.3 million in 2023[117]. Employee Information - As of December 31, 2024, Lake Shore Savings Bank employed 93 full-time employees and 7 part-time employees[123]. - The bank provides a comprehensive benefit package that includes health, dental, life, and disability insurance, as well as a generous paid time off policy[125]. - The bank's employees participate in an Employee Stock Ownership Plan, aligning employee and stockholder interests[125]. Regulatory Compliance - Lake Shore Savings Bank is primarily supervised by the OCC and is required to file reports and pay assessments to fund the agency's operations[130]. - The bank's capital distributions are governed by federal regulations, which include cash dividends and stock repurchases[141]. - Lake Shore Savings Bank received an "outstanding" rating under the Community Reinvestment Act in its most recent federal examination[153]. - As of December 31, 2024, Lake Shore Savings is in compliance with Regulation O regarding credit extensions to insiders[157]. Risk Factors - Deteriorating credit quality could adversely affect earnings, with potential significant loan losses impacting operating results[203]. - Increased credit risk is associated with non-residential, non-owner-occupied real estate loans, which depend on tenants' ability to pay rent[201]. - The investment portfolio may experience credit deterioration, impacting operating results and necessitating adjustments to the allowance for credit losses[204]. - Off-balance sheet arrangements expose the company to credit and interest rate risk, which could affect liquidity and capital resources[207]. - Low demand for real estate loans may lower profitability, particularly if economic conditions weaken or interest rates rise[209]. - The company relies on key personnel for business strategy implementation, with potential adverse effects from the loss of executive officers[210]. Future Plans - The proposed transaction for Lake Shore, MHC to convert to a stock holding company is expected to be completed in the third quarter of 2025, pending regulatory approval[185]. - The proposed stock offering will be based on the aggregate pro forma market value of the common stock of the New Bank Holding Company, determined by an independent appraisal[184].