Lake Shore Bancorp, Inc. Annual Report 2015

← All annual reports

FY2015 Annual Report · Lake Shore Bancorp, Inc.

Loading PDF…

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%

11%

29%

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

58%

43%

11%

15%

12/31/15
TOTAL DEPOS ITS = $3 69. 2M

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.

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.

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%

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.

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

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.

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.

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

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)

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

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

0.28

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

0.25

20,765

5,636

15,129

415

14,714

1,666

11,307

5,073

1,393

3,680

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

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

109

108

109

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.

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

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

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