Lake Shore Bancorp, Inc.
Annual Report 2015

Plain-text annual report

SOLID. SUSTAINABLE. LAKE SHORE BANCORP, INC. 2015 ANNUAL REPORT L O A N P O R T F O L I O C O M P O S I T I O N 12/31/11 TOTAL LOA NS = $ 27 3.7M 1% 16% 5% 11% 29% 6% 12/31/15 TOTA L LOANS = $29 6.1 M 1% 67% 53% 11% One-to-four family Home equity Commercial loans Commercial real estate Consumer loans D E P O S I T C O M P O S I T I O N 12/31/11 TOTAL DEPOS ITS = $379.8M 7% 58% 43% 11% 9% 15% 12/31/15 TOTAL DEPOS ITS = $3 69. 2M 12% 12% 21% 12% Time deposits Savings Money market Interest bearing Non-interest bearing B O O K V A L U E P E R S H A R E I N D OLL ARS AT 1 2 /31 C O R E D E P O S I T G R O W T H IN MILLION S AT 12/3 1 $12.0 $9.0 $6.0 $3.0 $400 $300 $200 $100 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 CO RE TIME TOTA L LETTER TO SHAREHOLDERS . 1 OPERATIONS REVIEW . 4 SENIOR MANAGEMENT . 8 BOARD OF DIRECTORS . 9 SELECTED FINANCIAL INFORMATION . I0 BANK LOCATIONS . I2 SHAREHOLDER INFORMATION . I3 CONTENTS L E T T E R T O S H A R E H O L D E R S SOLID. SUSTAINABLE. Investment Rationale Prudent and conservative approach to growth and risk management | Experienced management with deep knowledge of service area | Commitment to an efficient operating profile | Operational focus on managing interest rate risk | Solid community banking core business | Retail growth efforts focused on increased market share in Buffalo Metro area | Ongoing commitment to maintain strong market position in Chautauqua County | Continued investment in enhanced digital capabilities to meet customer’s technology needs | Solid and stable asset quality metrics compared to industry and peer averages | Capital ratios in excess of regulatory definition for well capitalized 125 years and counting Not far from our main downtown branch and corporate offices, the historic Dunkirk Lighthouse stands watch over the ever-changing waters of Lake Erie. Built in 1875, the 61-foot stone tower remains strong and sturdy, weathering decades of fierce storms. We chose to feature this landmark on our cover because it serves as a beacon of local pride. Yet beyond that, the lighthouse also seemed a fitting choice as we reflected on our past achievements as well as our clear vision for the future. Much like that lighthouse, Lake Shore Savings remains a strong and sustainable cornerstone of our community. As we approach our 125th anniversary, we have compiled an enduring track record of effectively meeting the needs of our customers and expectations of our shareholders through the full spectrum of market cycles – including the most recent recession. On every occasion, we have emerged stronger, more resilient, and better prepared for the future. 2015 proved to be no exception, as we furthered our long-range strategic efforts to manage and diversify our loan portfolio in ways that position the Bank to more effectively manage interest rate risk, while also enhancing our ability to adapt to evolving market conditions and consumer expectations. This strategic focus — teamed with ongoing improvements to our core systems and mobile banking platforms and driven by significant commercial loan growth — delivered strong performance in 2015 and promises continued momentum in 2016 and beyond. Local sensibilities, high-tech capabilities Lake Shore has been able to achieve growth and consistent performance in a banking environment that in 2015 continued to present challenges for the industry as a whole. Yet while the Fed’s reluctance to move on interest rates tested our patience, it has never diminished our resolve. Our continued success and focused execution through this difficult cycle repeatedly affirmed our business model, which relies on the underlying strengths and attributes that differentiate Lake Shore from many of our competitors. We offer customers a value proposition that is difficult to duplicate. In short, Lake Shore is a bank that builds individualized relationships with our customers backed by high-tech capabilities. Take, for instance, our emphasis on local decision-making. Our commercial loan applications are not sent off to another faraway city, state, or even country, for evaluation and approval. Rather, our seasoned bankers and underwriters draw on their experience, knowledge and judgment to assess loans right here in Western New York. That allows us to focus on the needs of our borrowers, while also assuring our shareholders that we are diligently evaluating risk to assure profitability. And the actual execution of a loan is just one small aspect of our relationship with our customers. We remain a phone call or a branch visit away to provide assistance and advice, while offering the convenience of conducting business through our online and mobile platforms, which feature time-saving capabilities such as remote deposit capture and enhanced cash management applications. 1 While we aggressively expanded our commercial loan portfolio we did not do so at the expense of quality. The combination of a personal touch and high-tech ease holds true for our retail customers as well. Walk into one of our branches and you will be greeted by a friendly familiar face who understands your banking needs. Of course, for everyday banking transactions you have the option of using fast and convenient mobile and online technology 24 hours, seven days a week. This mix of personalized service with ever-improving mobile and online capabilities has helped us maintain strong customer retention while also attracting the next generation of banking customers. In particular, Millennials — aged 19 to 37 — represent an important segment to Lake Shore, and we are focused on making sure we provide the online and mobile offerings they value, while maintaining the many beneficial aspects of traditional banking. Ultimately, what Lake Shore customers get is an engaged, interactive and authentic banking experience. It is an experience that emanates from our team members living and working within our communities, developing lasting personal, business, and civic relationships, and re-affirming our commitment to customer and community at every opportunity. Ultimately, we are helping our customers succeed, reach their goals, and achieve their dreams. That, in turn, has fueled our continued success while delivering long-term value for our shareholders. Solid financial performance Our 2015 financial results affirm the rationale of our strategy, and our commitment to serve our customers. We ended the year strong, with commercial loan growth increasing $22.6 million, or 27.6% from December 31, 2014. Meanwhile repositioning of our balance sheet, with increased focus on core deposits and reduced dependence on more costly time deposits and borrowings, helped improve our net interest margin, up 13 basis points from 2014. Declining interest expense — down 17.7% compared to 2014 — further boosted profitability as 2015 net interest income of $14.8 million improved $299,000, compared to 2014. Full year 2015 net income was $3.3 million, or $0.56 per diluted share, compared to net income of $3.2 million, or $0.55 per diluted share for 2014. We also increased our focus on securing core deposits, which — consistent with our strategy — provide a highly stable source of appropriately priced funds. Core deposits grew $5.8 million or 2.8% from December 31, 2014. Meanwhile, total deposits at year-end were $369.2 million, a slight decline from $386.9 million on December 31, 2014. This was the anticipated result of the Bank’s decision to allow the gradual run-off of more costly time deposits. While we aggressively expanded our commercial loan portfolio we did not do so at the expense of quality. As of December 31, 2015 and 2014, total non-performing loans remained constant, at $4.7 million. Moving forward, we remain committed to maintaining the important balance of increasing our commercial portfolio while also maintaining an appropriate risk profile. Commercial lending strength A key driver of the 2015 results has been the strategic growth of our commercial loan portfolio. Aware of how important shorter-term better-return business loans are to the broader long-term health of Lake Shore, we have committed considerable talent and resources to ramping up our commercial lending efforts. 2 From left to right: Daniel P. Reininga, President and Chief Executive Officer and Gary W. Winger, Chairman of the Board We are seeing a solid return on that investment with double-digit commercial loan growth in 2015. And we continue to see accelerating momentum. The Erie County and the Buffalo Metropolitan area continue to offer an intriguing opportunity for a growth-focused community bank. The commercial real estate market has rebounded significantly, and businesses large and small are showing increased confidence in growing operations and making capital investments. Lake Shore’s increasing presence in Erie County has been bolstered by our customer-centric focus on commercial banking, as demonstrated by the dedication of our commercial team in developing customer relationships, thereby increasing commercial loan growth. Clear vision for the future Unlike many on the Great Lakes, the Dunkirk Lighthouse is not merely a historic icon. It remains an active lighthouse, serving to guide freighters and boats through dense fog and battering storms. We like to think we play a similar role for our customers, helping them navigate the sometimes confusing world of banking and finance. We offer clarity, direction, and security as they journey toward their dreams and aspirations. We enter 2016 with optimism and focus. We have managed our Bank over the last several years with the clear aim of being well positioned to benefit from a more balanced and diversified loan portfolio. With progress occurring on both of those fronts, we anticipate that 2016 will be marked by continued loan and core deposit growth. We also see increasing in-market opportunity related to an uptick in consolidation activity involving some of the larger regional banks in our markets. Lake Shore offers a compelling value proposition and the promise of continuity and superior service to potential customers impacted by ongoing mergers. Our strategic plan for the next five years focuses on increasing shareholder value through organic growth of the balance sheet, building on the momentum we have already achieved. As we celebrate our 125th anniversary during 2016, we will be leveraging the opportunities available to grow core deposits. Growing our commercial lending business is a key initiative as small businesses and mid- to- large- size companies seeking financing are in need of a bank that values relationships. Our commercial lending team is focused on building relationships to expand economic growth for our customers and our region. Of course, much like the volatile waters of Lake Erie, hallmarks of the economy and markets are uncertainty and change. We are proud to say that we have built an organization capable of successfully adapting to that change when it occurs. As we look to the future, we believe we have the right experience, strategy and vision to assure continued success and steady growth. We take seriously the trust you, our shareholders place in us, and remain committed to taking the actions necessary to deliver value that stands the test of time. Daniel P. Reininga President and Chief Executive Officer Gary W. Winger Chairman of the Board S O L I D A S S E T Q U A L I T Y LSBK and ASIN¹ at or for December 31, 2015 LSBK ASIN 1 ASIN 1 ASIN 1 $300M to $500M to $1B $500M 1.57% 1.76% 1.28% 1.13% 0.67% 1.37% 1.07% 1.01% 42.52% 78.02% 83.50% 89.69% 0.11% 0.59% 0.09% 0.11% 9.93 5.53 13.25 12.86 Non-performing loans / total net loans Allowance for loan losses / total net loans Allowance for loan losses / non-performing loans Net charge-offs / average loans and leases outstanding Earnings coverage of net charge-offs (x) 1 ASIN = All Savings Institutions - National N E T I N T E R E S T M A R G I N 2015 4.0% 3.5% 3.0% 2.5% Q1 Q2 Q3 Q4 3 A PERSONAL FEEL Mark Andol went shopping for a bank. He ended up at Lake Shore Savings Bank. Andol is the founder and owner of the Made in America Store, a Western New York retail outlet nationally known as the only brick-and-mortar general merchandise store exclusively selling American made products. As the business has grown, so have Andol’s banking needs. And a while back, he got tired of the “many layers” he encountered when trying to do business with his large regional bank, headquartered out of state. So Andol took the same approach he employs when making a major purchase — he comparison shopped by visiting six nearby community banks. “I wanted to meet with the bankers face-to-face and get a sense of how willing they were to really talk to me,” he says. “I went to Lake Shore and I immediately liked the feeling. They listened and made it clear they wanted to know me and my business. It had a personal feel.” Today, Andol enjoys banking with Lake Shore. Daily, he utilizes online, mobile, and remote capabilities for routine transactions. For more complex banking needs, he knows he has access to everyone at the bank. “The way I see it, this is a win-win,” Andol says. “They can meet the needs of a growing local business and I benefit from their personalized service and expertise in banking. I couldn’t be happier with Lake Shore as my bank.” Made In America store owner finds the right fit with Lake Shore. 4 Lake Shore’s commercial lending portfolios grew by a combined 27.6% during 2015. ELEVATING OUR COMMERCIAL BANKING BUSINESS Lake Shore is strategically focused on growing our portfolio of commercial real estate loans and our small business commercial loans, including business installment loans, lines of credit and other commercial loans. Commercial loans are generally made at higher interest rates and for shorter durations which lowers the Bank’s interest rate risk. At December 31, 2015 our commercial loans totaled $104.3 million, or 35.2% of total loans, up from $81.7 million, or 28.8% of total loans at 2014 year end. We expected to attract lower cost core deposits as part of these commercial borrower relationships and we have realized this benefit. The Bank’s volume of higher-rate time deposits has declined reflecting our concentration on building lower-cost core deposits related to our expanded commercial relationships. Importantly, this has helped reduce and control our cost of funds which has a positive effect on the Bank’s interest rate margin. Our commercial lending group’s efforts in 2015 were instrumental in driving strong growth of 29.8% for the commercial real estate portfolio and 16.9% growth for other commercial loans. We’re encouraged by the growing interest in our commercial loan products within our Western New York service area and optimistic about opportunities for 2016 and beyond. We believe that growing commercial banking business is reflective of the Bank’s understanding of and responsiveness to the financial needs of our customers. These needs are satisfied by both short-term and longer-term financing options, as well as with commercial checking and deposit accounts with the flexibility to meet the varied needs of almost every business around. In addition we have an expanded offering of business banking services designed to meet the day-to-day needs of our targeted commercial customer base which include; direct deposit and withdrawal processing for payroll and accounts receivable, remote deposit capture, merchant card services, business debit cards, night deposit box, safe deposit box, overdraft protection, business online banking and bill pay, E-statements, Visa credit card and landlord sub accounts. C O M M E R C I A L L E N D I N G G R O W T H IN MILLIONS $100 $75 $50 $25 2013 2014 2015 5 Erie County and the Buffalo Metropolitan area offer an intriguing opportunity for a growth-focused community bank. The Buffalo Metropolitan area offers an intriguing opportunity reflecting recent economic expansion led by investment in the health care and education sectors, as well as the resurgence in the central business district. 6 OUR EVOLVING COMPETITIVE POSTURE For nearly 125 years we have been one of the most respected and recognized community banks in Western New York. Our customers consistently associate the Lake Shore name with high quality service and solid and consistent financial strength. Founded in Dunkirk, New York, we have developed and grown a significant five-branch presence in Chautauqua County where we hold approximately 15 percent of the deposit market share. With the saturation of this market, our expansion plan evolved to target the more populous Erie County market where our smaller market share provides significant opportunity for growth. We have been opportunistic in our pursuit of growth around the Buffalo metropolitan area and our focus on this market represents a critical component of our future profitability and growth. The Erie County and the Buffalo metropolitan area continue to offer an intriguing opportunity for a growth-focused community bank, reflecting recent economic expansion led by investment in the health care and education sectors, as well as a resurgence in the central business district. This economic activity is having a positive effect on the small business and middle-market customers that we target, and we believe that Lake Shore is solidly positioned to service this market and capitalize on additional expected growth. In addition, we believe that recently announced bank consolidation within our market area presents a favorable environment for attracting new deposit customers and lending relationships. EFFICIENTLY MEETING CUSTOMERS PREFERENCES We continue to provide cost efficient enhancements to improve our mobile banking services. There is no doubt the convenience of mobile banking is increasingly important, but for certain transactions customers prefer working with a professional banker instead of a virtual one. We didn’t need to survey customers to arrive at this conclusion. We understand that today’s bank customer has a variety of needs which range from digital convenience to hands-on customer service, and it’s not one size fits all. Lake Shore’s success has always been related to extraordinary customer service. Our customer facing associates are a competitive strength, and attracting and keeping quality bankers will always be a high priority. But we also realize the importance of continuously evaluating and improving the technology, which enhances the customer experience, increases efficiency and enables our associates to more effectively handle our customers’ needs. This is reflected in the Bank’s five year plan for implementation of cost effective and efficient digital services which meet our customer’s technology needs, help to attract new customers, and that continuously improve our operational efficiencies. During 2015 we implemented additional mobile banking capability, allowing for mobile deposit of checks with a smart phone or mobile device, as well as enhanced technology and related software to make back office processing more efficient and convenient. Although we remain committed to expanding our retail branch footprint whenever it makes strategic sense, we intend to concentrate our near-term efforts on elevating our digital capabilities. Business Profile Lake Shore Bancorp, Inc. (“the Company”) is the mid-tier holding company of Lake Shore Savings Bank, a mission-driven community institution dedicated to serving the financial needs of consumers and businesses within the Bank’s Western New York market area. The Company’s common stock is traded on the NASDAQ Global Market as “LSBK” and its 6.0 million shares, including 3.6 million mutual holding company (MHC) shares, had a “market cap” of approximately $80.4 million on December 31, 2015. The Company had total consolidated assets of $473.4 million and total deposits of $369.2 million at the end of 2015. Lake Shore Savings Bank is dedicated to serving the financial needs of consumers and businesses in Western New York, which it has been doing for more than 124 years. Lake Shore is focused on providing high-quality, personal customer service through its 11 full-service branches and 18 ATMs that are located throughout Chautauqua and Erie counties. Headquartered in Dunkirk, New York, Lake Shore has retail locations in Dunkirk, Fredonia, Jamestown, Lakewood, Westfield, Depew, East Amherst, Hamburg, Kenmore, Orchard Park and Snyder, where it offers a broad range of retail and commercial lending and deposit services. The Company is committed to maintaining an efficient expense profile, driving commercial loan portfolio growth, identifying and managing institutional risk, and achieving prudent growth which builds long- term sustainable value for investors. Additional information about the Company and the Bank is available at www.lakeshoresavings.com. 7 S E N I O R M A N A G E M E N T T E A M Administration Group From left to right: Eric Hohenstein, Internal Auditor; Nicole May, Compliance Officer; Sonia Ortolano, VP Management Information Systems Officer; Janinne Fiegl Dugan, VP Human Resource Officer Finance and Operations Group From left to right: Cindy Guenther, Consumer/Residential Real Estate Lending Manager; Steve Schiavone, Controller; Rachel Foley, Chief Financial Officer and Treasurer; Beverly Sutton, VP of Banking Operations and Enterprise Risk Management; Dan Reininga, President and CEO Commercial Lending Group From left to right: Nancy LaTulip, VP Commercial and Small Business Lending, Erie County; Lou DiPalma, VP Commercial and Small Business Lending, Chautauqua County; Jeff Werdein, EVP, Commercial Division; Charlie Brooks, AVP Commercial Loan Officer 8 B O A R D O F D I R E C T O R S Gary W. Winger Chairman of the Board, Principal, Compass Consulting, Inc. DIRECTOR SINCE 1997 BOARD CO MM I TTE E S Asset/Liability, Loan Susan C. Ballard Branch Consultant for Hunt Real Estate ERA DIRECTOR SINCE 2012 BOARD CO MM I TTE E S Nominating and Governance, Compensation Sharon E. Brautigam Partner, Brautigam & Brautigam, LLP DIRECTOR SINCE 2004 BOARD CO MM I TTE E S Nominating and Governance, Compensation (Chairs Nominating and Governance Committee) David C. Mancuso Former President and Chief Executive Officer of Lake Shore Bancorp, Inc. DIRECTOR SINCE 1998 BOARD CO MM I TTE E S Asset/Liability, Loan (Chairs Asset/Liability Committee) Kevin M. Sanvidge Chief Executive Officer and Administrative Director of the Chautauqua County Industrial Development Agency DIRECTOR SINCE 2012 BOARD CO MM I TTE E S Nominating and Governance, Compensation (Chairs Compensation Committee) Nancy L. Yocum Vice Chairperson of the Board, retired CPA and former Partner of Brumfield & Associates DIRECTOR SINCE 1995 BOARD COMMITTEES Audit/Risk (Chairs Audit/Risk Committee) Tracy S. Bennett CPA and Former Vice President of Administration, SUNY Fredonia DIRECTOR SINCE 2010 BOARD COMMITTEES Audit/Risk, Asset/Liability Reginald S. Corsi Former Executive Vice President and Chief Operations Officer of Lake Shore Bancorp, Inc. DIRECTOR SINCE 2008 BOARD COMMITTEES Audit/Risk, Loan Daniel P. Reininga President & Chief Executive Officer DIRECTOR SINCE 1994 BOARD COMMITTEES Asset/Liability, Loan (Chairs Loan Committee) 9 Our selected consolidated financial and other data is set forth below, which is derived in part from, and should be read in conjunction with our audited consolidated financial statements and notes thereto, beginning on page F-1 of our 2015 Annual Report on Form 10-K. S E L E C T E D F I N A N C I A L D AT A A S O F D E C E M B E R 3 1 , 2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 11 Selected Financial Condition Data (Dollars in thousands) Total assets Loans, net Securities available for sale Federal Home Loan Bank stock Total cash and cash equivalents Total deposits Short-term borrowings Long-term debt Total stockholders’ equity Allowance for loan losses Non-performing loans Non-performing assets $ 473,385 $ 487,471 $ 482,167 $ 482,387 $ 297,101 113,213 1,454 34,227 369,155 -0- 21,150 73,876 1,985 4,668 5,380 284,853 138,202 1,375 35,811 277,345 157,964 1,560 17,202 386,939 388,235 -0- 18,950 71,630 1,921 4,729 5,130 11,650 7,850 65,271 1,813 4,606 5,187 272,933 159,368 1,852 19,765 378,543 11,200 14,400 66,985 1,806 2,420 3,000 488,597 275,068 164,165 2,219 23,704 379,798 6,910 27,230 63,947 1,366 2,798 3,113 F O R T H E Y E A R E N D E D D E C E M B E R 3 1 , 2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 11 Selected Operating Data (Dollars in thousands, except per share data) Interest income Interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Total non-interest income Total non-interest expense Income before income taxes Income taxes Net income Basic earnings per common share Diluted earnings per common share Dividends declared per share 10 $ 17,587 $ 17,879 $ 18,614 $ 19,650 $ 2,757 14,830 400 14,430 2,707 13,083 4.054 716 3,338 0.57 0.56 0.28 $ $ $ $ 3,348 14,531 222 14,309 2,235 12,819 3,725 567 3,158 0.55 0.55 0.28 $ $ $ $ 3,556 15,058 105 14,953 2,092 12,334 4,711 968 3,743 0.66 0.65 0.28 $ $ $ $ 4,603 15,047 656 14,391 2,030 11,811 4,610 984 3,626 0.64 0.64 0.25 $ $ $ $ $ $ $ $ 20,765 5,636 15,129 415 14,714 1,666 11,307 5,073 1,393 3,680 0.65 0.65 0.28 S E L E C T E D F I N A N C I A L R AT I O S A N D O T H E R D AT A AT O R F O R T H E Y E A R E N D E D D E C E M B E R 3 1 , 2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1 Performance Ratios Return on average assets Return on average equity Dividend payout ratio 1 Interest rate spread 2 Net interest margin 3 Efficiency ratio4 Non-interest expense to average total assets Average interest-earning assets to average interest-bearing liabilities Book value per share 5 Capital Ratios Common Equity 0.70% 4.57% 50.00% 3.18% 3.34% 74.60% 0.65% 4.58% 50.91% 3.06% 3.21% 76.46% 0.77% 5.64% 43.08% 3.19% 3.34% 71.92% 0.74% 5.47% 39.06% 3.07% 3.26% 69.16% 0.76% 6.15% 43.08% 3.14% 3.34% 67.32% 2.73% 2.63% 2.55% 2.40% 2.34% 125.03% $12.31 120.93% $11.96 119.39% $11.03 119.69% $11.32 116.58% $10.77 Tier 1 risk-based capital to risk weighted assets 6,7 24.21% n/a n/a n/a Total risk-based capital to risk weighted assets 6 Tier 1 risk-based capital to risk weighted assets 6 Tangible capital to tangible assets 6 Tier 1 leverage (core) capital to adjustable tangible assets 6 Equity to total assets Asset Quality Ratios Non-performing loans as a percent of total net loans Non-performing assets as a percent of total assets Allowance for loan losses as a percent of total net loans Allowance for loan losses 24.93% 25.71% 25.08% 23.77% 24.21% 14.31% 14.31% 15.61% 1.57% 1.14% 0.67% 24.95% 13.16% 13.16% 14.69% 1.66% 1.05% 0.67% 24.36% 12.75% 12.75% 13.54% 1.66% 1.08% 0.65% 23.04% 12.14% 12.14% 13.89% 0.89% 0.62% 0.66% n/a 21.81% 21.27% 11.18% 11.18% 13.09% 1.02% 0.64% 0.50% as a percent of non-performing loans 42.52% 40.62% 39.36% 74.63% 48.82% Other Data Number of full service offices Number of full-time equivalent employees 11 109 11 108 11 109 10 109 10 108 1 Represents dividends declared per share as a percent of diluted earnings per share. 2 Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the year. 3 Represents the net interest income as a percent of average interest-earning assets for the year. 4 Represents non-interest expense divided by the sum of net interest income and non-interest income. 5 Represents shareholders equity divided by outstanding shares. 6 Represents the capital ratios of Lake Shore Savings Bank since Lake Shore Bancorp, Inc., as a savings and loan holding company with less than $1.0 billion in consolidated assets, is not currently subject to formula-based capital requirements at the holding company level. 7 Effective January 1, 2015 Lake Shore Saving Bank become subject to a new capital requirement adopted by the OCC. The new requirement resulted in the creation of a new required ratio for common equity Tier 1 (“CET 1”) capital. Cautionary Statement The statements contained herein that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “estimate,” “anticipate,” “believe,” “target,” “plan,” “project” or “continue” or the negatives thereof or other variations thereon or similar terminology, and are made on the basis of management’s current plans and analyses of our business and the industry in which we operate as a whole. These factors in some cases have affected, and in the future could affect, our financial performance and could cause actual results to differ materially from those expressed in or implied by such forward-looking statements. Information on factors that could affect the Company’s business and results are discussed in the Company’s periodic reports filed with the Securities and Exchange Commission including the Company’s annual report on Form 10-K for 2015. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. 11 B R A N C H L O C AT I O N S BU FFA LO ★ DUNKIR K CHAUTAUQUA COUNTY ERIE COUNTY 128 East Fourth Street Dunkirk, New York 14048 PH 716-366-4070 FX 716-366-2965 30 East Main Street Fredonia, New York 14063 PH 716-673-9555 FX 716-679-0696 115 East Fourth Street Jamestown, New York 14701 PH 716-664-1103 FX 716-664-1183 1 Green Avenue, WE Jamestown, New York 14701 PH 716-483-3400 FX 716-483-3468 106 East Main Street Westfield, New York 14787 PH 716-326-4414 FX 716-326-4422 12 Corporate Headquarters Branch Location 570 Dick Road Depew, New York 14043 PH 716-898-2022 FX 716-684-5069 5751 Transit Road East Amherst, New York 14051 PH 716-688-6114 FX 716-688-5941 59 Main Street Hamburg, New York 14075 PH 716-646-9480 FX 716-646-9481 3438 Delaware Avenue Kenmore, New York 14217 PH 716-898-2010 FX 716-874-2057 3111 Union Road Orchard Park, New York 14127 PH 716-674-2066 FX 716-674-4347 4950 Main Street Snyder, New York 14226 PH 716-898-2101 FX 716-839-1404 S H A R E H O L D E R I N F O R M AT I O N S H A R E H O L D E R P R O F I L E ANNUAL SHAREHOLDERS MEETING May 18, 2016 8:30 a.m. Clarion Hotel The Bayside Room 30 Lake Shore Drive East Dunkirk, NY 14048 NATIONAL STOCK LISTING The NASDAQ Global Market under the symbol LSBK SPECIAL COUNSEL Luse Gorman, PC 5335 Wisconsin Avenue, NW Suite 780 Washington, DC 20015 INDEPENDENT AUDITORS Baker Tilly Virchow Krause, LLP 20 Stanwix Street Suite 800 Pittsburgh, PA 15222 TRANSFER AGENT AND REGISTRAR Computershare Shareholder Services P.O. Box 30170 College Station, TX 77842-3170 (800) 368-5948 www.computershare.com/investor INVESTOR RELATIONS CONTACT Rachel A Foley Chief Financial Officer/Treasurer (716) 366-4070 option 4 ext 1220 rachel.foley@lakeshoresavings.com 60.6% AT 1 2/31/15 4.5% 22.0% 12.9% Lake Shore MHC Institutions Individuals Officers & Directors L A K E S H O R E S AV I N G S B A N K O F F I C E R S Daniel P. Reininga President and Chief Executive Officer Jeffrey M. Werdein Executive Vice President, Commercial Division Rachel A. Foley Chief Financial Officer and Treasurer Janinne Fiegl Dugan Vice President, Human Resource Officer Wendy J. Harrington Corporate Secretary Eric Hohenstein Internal Auditor Nicole May Compliance Officer Sonia N. Ortolano Vice President, MIS Officer Steven Schiavone Controller Beverly J. Sutton Vice President of Banking Operations and Enterprise Risk Management Louis P. DiPalma Vice President, Commercial and Small Business Lending Nancy L. LaTulip Vice President, Commercial and Small Business Lending John P. Huber Vice President Beverley J. Mulkin Vice President Charles D. Brooks Assistant Vice President Theresa M. Campanella Assistant Vice President Adam J. Dimitri Assistant Vice President Magdalena Dye Assistant Vice President Barbara M. Fancher Assistant Vice President Gabriele J. Maddalena Assistant Vice President Nancy L. March Assistant Vice President Sally A. Pyne Assistant Vice President Hiroko Walters Assistant Vice President Victoria Weixlmann Assistant Vice President 13 3 1 E A S T F O U R T H S T R E E T D U N K I R K , N Y 1 4 0 4 8 7 1 6 . 3 6 6 . 4 0 7 0 L A K E S H O R E S A V I N G S . C O M N A S D A Q : L S B K 

Continue reading text version or see original annual report in PDF format above