Lake Shore Bancorp, Inc. (the “Company”) (NASDAQ: LSBK), the
holding company for Lake Shore Savings Bank (the “Bank”), reported
unaudited net income of $749,000, or $0.13 per diluted share, for
the fourth quarter of 2023 compared to net income of $1.2 million,
or $0.20 per diluted share, for the fourth quarter of 2022. For the
year ended December 31, 2023, the Company reported unaudited net
income of $4.8 million, or $0.82 per diluted share, as compared to
$5.7 million, or $0.97 per diluted share, for the year ended
December 31, 2022. The Company's 2023 financial performance was
negatively impacted by the Office of the Comptroller of the
Currency's (the "OCC") regulatory action of February 2023 resulting
in increased non-interest expense.
“Lake Shore's financial performance throughout
2023 and the fourth quarter was commendable given the financial
pressures experienced from a challenging interest rate environment
and costly, ongoing regulatory matters we continue to address,”
stated Kim Liddell, President, CEO, and Director. "We believe our
efforts to remediate and strengthen those regulatory operational
areas will be successful as we continuously strive to enhance and
deliver shareholder value."
2023 Full Year and Fourth Quarter
Financial Highlights:
- Net income decreased to $749,000 during the 2023 fourth
quarter, a decrease of $443,000, or 37.2%, when compared to the
2022 fourth quarter. Net income during the fourth quarter of 2023
was negatively impacted by a decrease to net interest income after
(credit) provision for credit losses, partially offset by an
increase in non-interest income from a bank-owned life insurance
restructure which took place during Q4 2023;
- Net income decreased to $4.8 million during the year ended
December 31, 2023, a decrease of $0.9 million, or 15.5%, when
compared to the year ended December 31, 2022. Net income during the
year ended December 31, 2023 was negatively impacted by an increase
in non-interest expenses associated with remediation activities
related to regulatory matters, and an increase in salaries and
benefits, partially offset by an increase in net interest income
after (credit) provision for credit losses;
- Net interest margin and interest rate spread was 3.34% and
2.83%, respectively, for the 2023 fourth quarter as compared to
4.07% and 3.90%, respectively, for the 2022 fourth quarter;
- Net interest margin and interest rate spread was 3.62% and
3.23%, respectively for the year ended December 31, 2023 as
compared to 3.77% and 3.65%, respectively, for the year ended
December 31, 2022;
- Total deposits increased by $20.8 million, or 3.6% since
December 31, 2022. At December 31, 2023 and December 31, 2022,
the Company’s percentage of uninsured deposits to total deposits
was 12.8% and 16.6%, respectively;
- Book value per share increased 6.6% to $15.17 per share at
December 31, 2023 as compared to $14.23 per share at December 31,
2022; and
- The Bank's capital position remains "well capitalized" with a
Tier 1 Leverage ratio of 12.68% and a Total Risk-Based capital
ratio of 17.77% at December 31, 2023.
Net Interest Income
2023 fourth quarter net interest income
decreased $990,000, or 15.1%, to $5.6 million from the 2022 fourth
quarter. Net interest income for the year ended December 31, 2023
increased to $24.4 million, an increase of $19,000, or 0.1%, from
the year ended December 31, 2022.
Interest income for the 2023 fourth quarter was
$8.6 million, an increase of $1.1 million, or 15.3%, compared to
$7.5 million for the 2022 fourth quarter. The increase was
primarily due to a 56 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 $18.4 million, or 2.8%,
increase in the average balance of interest earning assets when
compared to the same period of 2022. During the fourth quarter of
2023 as compared to the same period in 2022, there was a $676,000
increase in interest earned on loans due to a 54 basis points
increase in the average yield earned on loans, partially offset by
a decrease in the average loans balance of $6.5 million, or
1.2%.
Interest income for the year ended December 31,
2023 was $33.8 million, an increase of $7.0 million, or 26.2%,
compared to $26.8 million for the year ended December 31,
2022. The increase was primarily due to a 88 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
$26.2 million, or 4.1%, increase in the average balance of interest
earning assets since December 31, 2022. During the year ended
December 31, 2023 as compared to 2022, there was a $5.5 million
increase in interest earned on loans due to a 79 basis points
increase in the average yield earned on loans along with an
increase in the average loans balance of $22.4 million, or
4.1%.
2023 fourth quarter interest expense was $3.1
million, an increase of $2.1 million, or 231.0%, from $923,000 for
the 2022 fourth quarter. The increase in interest expense was
primarily due to a 161 basis points increase in average interest
paid on interest-bearing liabilities and a $22.6 million increase
in average interest-bearing liabilities. During the fourth
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 219 basis points increase in the average interest rate paid on
time deposits along with an increase in average time deposit
balances of $63.8 million, or 42.4%. The increase in the average
rate paid on deposit accounts was primarily due to the increase in
market interest rates and deposit competition. Average deposit
balances were $483.3 million, a 3.4% increase during the 2023
fourth quarter, resulting from an increase in time deposits and
brokered deposits when compared to the same period of 2022.
During the 2023 fourth quarter, interest expense on borrowed funds
and other interest-bearing liabilities increased by $116,000, or
57.1%, compared to the 2022 fourth quarter, primarily due to a $6.7
million increase in average borrowed funds and other
interest-bearing liabilities outstanding.
Interest expense for the year ended December 31,
2023 was $9.4 million, an increase of $7.0 million, or 289.1%, from
$2.4 million for the year ended December 31, 2022. The increase in
interest expense was primarily due to a 130 basis points increase
in average interest paid on interest-bearing liabilities and a
$27.3 million increase in average interest-bearing liabilities.
During the year ended December 31, 2023 as compared to 2022, there
was a $4.8 million increase in interest paid on time deposit
accounts due to a 206 basis points increase in the average interest
rate paid on time deposits along with an increase in average time
deposit balances of $67.5 million, or 48.6%. The increase in the
average rate paid on deposit accounts was primarily due to the
increase in market interest rates and deposit competition since
December 31, 2022. Average deposit balances were $486.1 million, a
2.9% increase during the year ended December 31, 2023, resulting
from an increase in time deposits and brokered deposits since
December 31, 2022. During the year ended December 31, 2023,
interest expense on borrowed funds and other interest-bearing
liabilities increased by $728,000, or 121.3%, compared to the year
ended December 31, 2022, primarily due to a $13.5 million increase
in average borrowed funds and other interest-bearing liabilities
outstanding.
Non-Interest Income and Income Tax
Expense
Non-interest income was $923,000 for the 2023
fourth quarter, an increase of $339,000, or 58.0%, as compared to
the 2022 fourth quarter. The increase was primarily due to a
$354,000 increase in earnings on bank-owned life insurance in
connection with the restructuring of bank-owned life insurance
during the fourth quarter of 2023. Additionally, the aforementioned
restructuring of bank-owned life insurance was the primary driver
of the increase in income tax expense of $315,000, or 128.0% when
compared to the same period of 2022.
Non-interest income was $2.6 million for the
year ended December 31, 2023, a decrease of $69,000, or 2.6%, as
compared to the year ended December 31, 2022. The decrease was
primarily due to a $391,000 net decrease in unrealized gains on
interest rate swap products as a result of market interest rate
movements, a $59,000 loss on the sale of securities in the current
year to reposition the Bank’s balance sheet, and a $59,000 decrease
in service charges and fees. These decreases were partially offset
by a $420,000 increase in earnings on bank-owned life insurance in
connection with the restructuring of bank-owned life insurance
during the fourth quarter of 2023, and a $18,000 decrease in loss
on sale of loans when compared to the year ended December 31,
2022. Additionally, the aforementioned restructuring of
bank-owned life insurance was the primary driver of the increase in
income tax expense of $237,000, or 20.4% when compared to the year
ended December 31, 2022.
Non-Interest Expense
Non-interest expense was $5.2 million for the
2023 fourth quarter, a decrease of $266,000, or 4.9%, as compared
to $5.5 million for the 2022 fourth quarter. The decrease relates
to a net decline in professional services expense and salary and
employee benefits expense of $102,000, or 3.0%. Additionally,
advertising costs decreased by $194,000, or 75.2%, due to a
decrease in marketing spending. These decreases were partially
offset by an increase in FDIC insurance expense of $153,000, or
114.2%, when compared to the prior year period due to an increase
in premium assessments related to regulatory matters and an
increase in data processing costs of $133,000, or 40.5%, primarily
due to an increase in costs related to core system maintenance and
enhancements to existing IT security protocols.
Non-interest expense was $21.8 million for the
year ended December 31, 2023, an increase of $2.4 million, or
12.2%, as compared to $19.4 million for the year ended December 31,
2022 primarily due to an increase in professional services expense
and salary and employee benefits expense of $1.8 million, or 14.9%,
as a result of performing remediation activities related to
regulatory matters. Additionally, FDIC insurance expense increased
by $841,000, or 309.2%, during the year ended December 31, 2023 due
to an increase in premium assessments related to regulatory
matters. Data processing costs increased by $323,000, or 22.7%,
during the year ended December 31, 2023 primarily due to an
increase in costs related to core system maintenance and
enhancements to existing IT security protocols.
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
during Q1 2023. The Company's allowance for credit losses on loans
was $6.5 million at December 31, 2023 as compared to $7.1 million
at December 31, 2022. The Company's allowance for credit losses on
unfunded commitments was $485,000 at December 31, 2023 as compared
to $0 at December 31, 2022.
Non-performing assets as a percent of total
assets increased to 0.47% at December 31, 2023 as compared to 0.43%
at December 31, 2022. The Company’s allowance for credit losses on
loans as a percent of net loans was 1.16% at December 31, 2023 and
1.23% at December 31, 2022.
Balance Sheet Summary
Total assets at December 31, 2023 were $725.1
million, a $25.2 million increase, or 3.6%, as compared to $699.9
million at December 31, 2022. Cash and cash equivalents increased
by $44.1 million, or 457.8%, from $9.6 million at December 31, 2022
to $53.7 million at December 31, 2023. The increase was primarily
due to an increase in total deposits and decreases in loans
receivable and securities available-for-sale, partially offset by a
decrease in total borrowings. Securities available for sale were
$60.4 million at December 31, 2023 as compared to $73.0 million at
December 31, 2022 primarily as the result of the sale of $9.8
million of securities during the year ended December 31,
2023. Loans receivable, net at December 31, 2023 and December
31, 2022 were $555.8 million and $573.5 million,
respectively. Total deposits at December 31, 2023 were $590.9
million, an increase of $20.8 million, or 3.6%, compared to $570.1
million at December 31, 2022. Total borrowings decreased to $35.3
million at December 31, 2023, a decrease of $2.3 million, or 6.1%
as compared to $37.5 million as of December 31, 2022.
Stockholders’ equity at December 31, 2023 was
$86.3 million, a $5.1 million increase, or 6.3%, as compared to
$81.2 million at December 31, 2022. The increase in stockholders’
equity was primarily attributed to $4.8 million in net income
earned during 2023 and a $947,000 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 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 |
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
|
(Unaudited) |
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
Total assets |
$ |
725,118 |
|
$ |
699,914 |
|
Cash and cash equivalents |
|
53,730 |
|
|
9,633 |
|
Securities available for
sale |
|
60,442 |
|
|
73,047 |
|
Loans receivable, net |
|
555,828 |
|
|
573,537 |
|
Deposits |
|
590,924 |
|
|
570,119 |
|
Short-term borrowings |
|
— |
|
|
12,596 |
|
Long-term debt |
|
35,250 |
|
|
24,950 |
|
Stockholders’ equity |
|
86,273 |
|
|
81,184 |
|
Statements of
Income |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Years Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
(Unaudited) |
|
|
(Dollars in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
$ |
8,613 |
|
|
$ |
7,471 |
|
|
$ |
33,755 |
|
|
$ |
26,754 |
|
Interest expense |
|
3,055 |
|
|
|
923 |
|
|
|
9,397 |
|
|
|
2,415 |
|
Net interest income |
|
5,558 |
|
|
|
6,548 |
|
|
|
24,358 |
|
|
|
24,339 |
|
(Credit) provision for credit
losses |
|
(32 |
) |
|
|
225 |
|
|
|
(1,043 |
) |
|
|
725 |
|
Net interest income after
(credit) provision for credit losses |
|
5,590 |
|
|
|
6,323 |
|
|
|
25,401 |
|
|
|
23,614 |
|
Total non-interest income |
|
923 |
|
|
|
584 |
|
|
|
2,635 |
|
|
|
2,704 |
|
Total non-interest expense |
|
5,203 |
|
|
|
5,469 |
|
|
|
21,817 |
|
|
|
19,448 |
|
Income before income taxes |
|
1,310 |
|
|
|
1,438 |
|
|
|
6,219 |
|
|
|
6,870 |
|
Income tax expense |
|
561 |
|
|
|
246 |
|
|
|
1,399 |
|
|
|
1,162 |
|
Net income |
$ |
749 |
|
|
$ |
1,192 |
|
|
$ |
4,820 |
|
|
$ |
5,708 |
|
Basic and diluted earnings per
share |
$ |
0.13 |
|
|
$ |
0.20 |
|
|
$ |
0.82 |
|
|
$ |
0.97 |
|
Dividends declared per share |
$ |
— |
|
|
$ |
0.18 |
|
|
$ |
— |
|
|
$ |
0.68 |
|
Lake Shore Bancorp, Inc. |
Selected Financial Information |
|
|
|
|
|
|
|
|
|
|
Selected Financial
Ratios |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Years Ended |
|
|
December 31, |
|
|
December 31, |
|
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
|
|
|
|
|
Return on average assets |
|
0.42 |
% |
|
0.69 |
% |
|
|
0.67 |
% |
|
0.82 |
% |
Return on average equity |
|
3.60 |
% |
|
5.98 |
% |
|
|
5.78 |
% |
|
6.90 |
% |
Average interest-earning assets
to average interest-bearing liabilities |
|
127.96 |
% |
|
129.39 |
% |
|
|
128.06 |
% |
|
129.81 |
% |
Interest rate spread |
|
2.83 |
% |
|
3.90 |
% |
|
|
3.23 |
% |
|
3.65 |
% |
Net interest margin |
|
3.34 |
% |
|
4.07 |
% |
|
|
3.62 |
% |
|
3.77 |
% |
|
December 31, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
|
|
|
|
Asset Quality
Ratios: |
|
|
|
|
Non-performing loans as a percent
of total net loans |
0.60 |
% |
0.51 |
% |
Non-performing assets as a
percent of total assets |
0.47 |
% |
0.43 |
% |
Allowance for credit losses as a
percent of net loans |
1.16 |
% |
1.23 |
% |
Allowance for credit losses as a
percent of non-performing loans |
193.09 |
% |
240.96 |
% |
|
December 31, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
Share
Information: |
|
|
|
|
|
|
Common stock, number of shares
outstanding |
|
5,686,288 |
|
|
5,705,225 |
|
Treasury stock, number of shares
held |
|
1,150,226 |
|
|
1,131,289 |
|
Book value per share |
$ |
15.17 |
|
$ |
14.23 |
|
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