Lake Shore Bancorp, Inc.
Annual Report 2020

Plain-text annual report

Navigating to calmer waters LAKE SHORE BANCORP, INC. 2020 ANNUAL REPORT TABLE OF CONTENTS 1 Letter to Shareholders 6 Generations in the Community 10 Community Involvement 11 Dave Mancuso Departure 12 Board of Directors Senior Management and Bank Officers Inside back cover Summary of Financial Information Shareholder Information Shareholder Letter DEAR SHAREHOLDERS, CUSTOMERS, PARTNERS AND FRIENDS, In banking and in life, the importance of Putting People First™ cannot be stressed enough. At Lake Shore Savings, we have been demonstrating this for years, but the events of the last year have proven it without a doubt. While 2020 may have tested our community, we have been there for our customers with the services and products they need to overcome challenges in the present and plan for opportunities in the future. A future we believe will be brighter with Lake Shore Savings’ truly individualized approach to banking. GENERATIONS AT THE HELM OF COMMUNITY BANKING Lake Shore Savings has been meeting the banking needs of the Western New York community for 130 years. Our team has been by our community’s side to guide them to their financial goals, whether they are growing their business or starting a family. In the wake of the pandemic and the ever-changing financial landscape, many in Western New York have been forced to shift their financial plans and priorities to adapt. However, with Lake Shore Savings in their corner, innovative products and support have accompanied every decision—and secured every step. WEATHERING THE STORM TO PERFORM EXCEPTIONALLY The Bank’s management team quickly responded and adapted to the rapidly changing environment brought about by the onset of the COVID-19 pandemic. From initially allowing lobby visits by appointment and enhanced drive-thru service to implementing strict COVID-19 safety protocols, we have kept the health and well-being of our customers, employees, and community our top priority. Our focus throughout the past year has been to help minimize the financial impact of the pandemic on our customers. Our commercial loan officers and branch team members helped customers navigate through the CARES Act and waived fees when necessary. We have also worked tirelessly to originate Paycheck Protection Program (“PPP”) loans and Federal Home Loan Bank of New York (FHLBNY) grants for our small business clients. OPERATING PERFORMANCE We are pleased to report that with the closing of a year rife with challenges, we achieved consistent growth and improved financial performance for our customers and shareholders. In 2020, we grew loans and deposits, reported record earnings and maintained solid asset quality metrics. The company exceeded the $686 million asset mark during the year, growing total assets by 12.3% from the 2019 year end. Asset growth was primarily driven by a $53.3 million increase in loans receivable, net. We experienced remarkable growth in loan originations during 2020 with $104 million in commercial loan originations (including PPP loans) and $65 million in residential and consumer loan originations. continued on page 3 — LAKE SHORE BANCORP, INC. | 2020 ANNUAL REPORT 1 2020 Highlights 12.3% TOTAL ASSETS at December 31, 2020 of $686.2 million, an increase of $75.3 million or 12.3%, compared to prior year-end 13.2% BASIC EARNINGS PER SHARE increased 13.2% to $0.77 compared to $0.68 in prior year 11.3% YEAR-END LOANS RECEIVABLE, NET, increased 11.3% to $524.1 million, primarily due to growth in commercial real estate and commercial business loans $26.9 M OF PPP LOANS were originated by the Bank in 2020, assisting 252 of our small business customers, of which 68.5% was funded directly by the Bank, and remaining 31.5% funded indirectly via our relationship with Pursuit, an SBA lender that operates in the Northeast 219 customers were assisted by the Bank’s LOAN DEFERRAL PROGRAM that helped lessen the financial impact of the COVID-19 pandemic NET INTEREST MARGIN NET INCOME 2016 | 3.44% 2017 | 3.61% 2018 | 3.61% 2019 | 3.58% 2020 | 3.23% 2016 | $3.5 M 2017 | $3.4 M 2018 | $4.0 M 2019 | $4.1 M 2020 | $4.6 M LOANS, NET TOTAL ASSETS 2016 | $326.4 M 2017 | $365.1 M 2018 | $392.5 M 2019 | $470.8 M 2020 | $524.1 M 2016 | $489.2 M 2017 | $519.0 M 2018 | $545.7 M 2019 | $610.9 M 2020 | $686.2 M CORE DEPOSIT GROWTH BASIC EARNINGS PER SHARE 2016 | $238.8 M 2017 | $256.7 M 2018 | $277.5 M 2019 | $313.0 M 2020 | $400.9 M 2016 | $0.58 2017 | $0.55 2018 | $0.66 2019 | $0.68 2020 | $0.77 2 NET INCOME NON-INTEREST INCOME We reported net income of $4.6 million for the year, compared to $4.1 million in 2019. On a per share basis, we earned $0.77 for the year, an increase of $0.09, or 13.2%, compared to 2019. Operating revenue, the sum of net interest income and non-interest income, grew 6.3% during the year to $22.9 million. NET INTEREST INCOME Net interest income for the year ended December 31, 2020 was $19.9 million, an increase of $862,000, or 4.5%, compared to the year ended December 31, 2019. Interest income was $24.3 million for the years ended December 31, 2020 and 2019, respectively. 2020 interest income was positively impacted by an $84.6 million, or 15.9%, increase in the average balance of interest-earning assets, partially offset by a 61 basis points decrease in the average yield earned on assets due to the decrease in market interest rates during the year. Interest expense for the year ended December 31, 2020 was $4.4 million, a decrease of 15.3% compared to the prior year. The average interest rate paid on deposit accounts decreased by 32 basis points in 2020, which was partially offset by a $56.4 million, or 14.2%, increase in average interest-bearing deposits. Net interest margin for the year ended December 31, 2020 was 3.23%, a 35 basis points decrease from prior years, primarily resulting from the Federal Reserve’s implementation of a 150 basis points decrease in short term market rates to combat the impact of the pandemic on the economy. Non-interest income was $3.0 million for the year ended December 31, 2020, an increase of $500,000, or 20.1%, as compared to the year ended December 31, 2019. The increase was primarily driven by a $777,000 increase in gains on the sale of loans. We sold a portion of low-rate, long term residential mortgage loans originated in 2020 to the secondary market to manage interest rate risk. The increase was partially offset by a $247,000 decrease in service charges and fees due to waivers of certain fees for our customers during the initial phase of the COVID-19 pandemic. ASSET QUALITY As of December 31, 2020, non-performing loans as a percent of total net loans improved to 0.59% as compared to 0.75% at December 31, 2019. Allowance for loan losses as a percent of total net loans was 1.12% at December 31, 2020 as compared to 0.91% at December 31, 2019. We have worked closely with those customers that have experienced financial difficulties due to the onset of the COVID-19 pandemic by granting loan payment deferrals and halting foreclosures, in accordance with regulatory guidelines. As of December 31, 2020, approximately 14 loans had payment deferrals, representing loan balances of $23.8 million, or 4.5%, of the total loan portfolio. When compared to 2019, our provision for loan losses during 2020 increased by $725,000, or 80.6% as we set aside additional reserves to adjust for the impact of the pandemic and related economic conditions on borrowers’ ability to repay loans. SETTING OUR SAILS FOR FUTURE SUCCESS With Lake Shore Savings, our customers and shareholders have a trusted partner and a reliable financial adviser. Though 2020 had its difficulties, we have continued to deliver community banking by Putting People First™ and it shows. Our community banking model allows our customers to rely on the bank for assistance in times of adversity. The investment our shareholders have made in the Bank has been secure. Our shareholders have benefited from our success in serving the needs of our customers and communities via improved shareholder value. Our community has enjoyed the many benefits of a local bank focused on providing the very best. Going into the new year, Lake Shore Savings has set its sights on navigating post-pandemic challenges with reliable, effective performance. LAKE SHORE BANCORP, INC. | 2020 ANNUAL REPORT 3 LOAN COMPOSITION as of December 31, 2020 28.6% ONE TO FOUR FAMILY 0.3% CONSUMER 54.4% COMMERCIAL REAL ESTATE (INCLUDING CRE CONSTRUCTION LOANS) DEPOSIT COMPOSITION as of December 31, 2020 15.1% INTEREST-BEARING DEMAND 16.4% NON-INTEREST BEARING DEMAND 9.0% HOME EQUITY 7.7% COMMERCIAL LOANS (INCLUDING PPP LOANS) 28.3% MONEY MARKET 28.5% TIME DEPOSIT 11.7% SAVINGS TANGIBLE BOOK VALUE PER SHARE ANNUAL DIVIDENDS PAID PER SHARE 2016 | $12.49 2017 | $12.85 2018 | $13.29 2019 | $13.98 2020 | $14.75 2016 | $0.28 2017 | $0.32 2018 | $0.40 2019 | $0.48 2020 | $0.49 4 CHANGES TO OUR BOARD Our board of directors remains focused on providing consistent and quality oversight and governance of our organization. In May 2020, Kevin M. Sanvidge stepped into the role of Chairman of our board, as a result of the former Chairman’s retirement. Mr. Sanvidge has significant experience as a former executive for a local IDA and for a private food manufacturing company, and his appointment ensures continuity of strong leadership at the helm of our organization. In August 2020, Susan C. Ballard stepped down as director to accept the position of Executive Vice President of Retail, Sales and Marketing with the Company, providing increased leadership and focus on the Bank’s customer experience. During January 2021, former New York State Senator Catharine M. Young joined our board, bringing unique skills in leadership with a focus on strategic planning, legislation and economic development. Lastly, our long-time director and former President and CEO, David C. Mancuso, will retire from the board in May 2021 due to his attainment of the retirement age. We extend to Mr. Mancuso our sincere gratitude and appreciation for his more than 55 years of service, guidance and leadership to the Company and the Bank. DRAWING STRENGTH FROM OUR DIFFERENCES We believe a large part of our success is tied to the values we view as essential to fostering a positive, healthy and successful workplace; specifically, our focus on diversity, inclusion and mutual respect. We are proud that at Lake Shore Savings, our organization is more than 80% female. We consistently work with community groups to ensure we understand the needs of all those we serve. As we continue to grow, our focus on people continues to pay dividends for our employees, customers and shareholders. From our board of directors to each of our local branches, we are always working to be more inclusive, so we can all move forward together. Our strong capital levels, enterprise risk management and customer focus will propel us forward as we navigate continued challenges presented by the pandemic and current economic environment. FUTURE FOCUS As we celebrate our 130th anniversary in 2021, we find that we are well-positioned to meet the challenges ahead. Our strong capital levels, enterprise risk management and customer focus will propel us forward as we navigate continued challenges presented by the pandemic and current economic environment. In 2021, we plan to convert to a new core processing system to enhance both in-person and digital services for our customer base, as well as improve operational efficiencies. Our partnership with COCC, a state-of-the-art core processing platform provider for the banking industry, will allow us to continue to offer even greater innovative services that exceed those offered by our competitors. We will continue to serve the Western New York region for years to come, with services that will be delivered by our team of experts who share our common vision and desire to help our customers achieve their financial goals. Banking with your best interest at heart—it is how we are Putting People First™. KEVIN M. SANVIDGE | Chairman of the Board DANIEL P. REININGA | President and Chief Executive Officer LAKE SHORE BANCORP, INC. | 2020 ANNUAL REPORT 5 GENERATIONS IN THE COMMUNITY Gold Wynn Where larger banks layer on unnecessary complexity, Lake Shore Savings offers simplicity. If you ask Ben Friedland, VP of Operations at Gold Wynn, Lake Shore Savings’ streamlined, personal approach has made all the difference. As a family-owned real estate company that prides itself on investing in properties and people, Gold Wynn has made monumental contributions to the Western New York community with a trusted financial partner at their side. 6 “ When they say they will deliver, they deliver.” “They find solutions as things come up.” Gold Wynn began working with Lake Shore Savings three years ago when they chose to invest in 69 Delaware, known famously throughout Buffalo as The Athletic Club building. In true Gold Wynn fashion, the company completely transformed the property into a masterpiece of architectural styles. Visitors can eat, exercise and get a classic haircut, or if they prefer, stroll around and delight in the natural splendor and stunning architecture of the restored space. “I really like the back-to-basics banking. Strong relationships. Direct contact with decision-makers. Getting stuff done.” More recently, Gold Wynn worked with Lake Shore Savings to purchase 49 Johnson Park, contributing to the neighborhood’s continued revitalization. Sporting a painted mural of Gold Wynn’s signature art deco stamp, the property joins the park and the property values in the area’s economic upswing. The building and the surrounding community have a bright future ahead. Although the pandemic has placed new challenges on industries, Gold Wynn has held their own, achieving 25% growth for the year. With the rapid-fire changes around the world last year, Mr. Friedland greatly appreciated that Lake Shore Savings stayed consistent and did not complicate their services in response to the pandemic. “Everything is simpler. That’s what you’re looking for.” Mr. Friedland feels that going into 2021, Gold Wynn is well-positioned to continue transforming properties throughout Western New York and beyond, with what he says is an extremely strong and dynamic team. Lake Shore Savings is positioned well, too—right at their side. “More nimble, thoughtful, helpful with lending and everything else— even through COVID times.” LAKE SHORE BANCORP, INC. | 2020 ANNUAL REPORT 7 GENERATIONS IN THE COMMUNITY Cortese Construction Services It was more than 11 years ago that Cortese Construction Services—one of the largest home remodeling companies in Buffalo and the surrounding Western New York area— first started banking with Lake Shore Savings. 8 “ Our relationship is extremely strong and vital. We not only bank there, but we also send all our clients to Lake Shore for financing their renovation projects.” “ It feels good to do business with people who are like-minded.” At the time, Lake Shore Savings had been a sponsor of Mr. Cortese’s home improvement radio show—Hammertime RadioTM—for several years. Before making the switch, Domenic Cortese says his company primarily did business with a large multinational bank in the area. Around 2010, Cortese Construction Services was looking to expand a new product line, so Mr. Cortese called his branch manager at the bank to see if he could expand his business line of credit. After multiple calls with no response, Mr. Cortese finally went down to the bank in person, where he felt completely invisible. After learning his prior contact had been replaced, Mr. Cortese met with the new branch manager and discussed his plans. Days later, the new branch manager reached out to inform him that not only would they be unable to expand his line of credit—they would be canceling his line of credit altogether. “ They put me right against the wall. I needed to make a change, and that’s when the lightbulb went off.” Mr. Cortese was astonished. Not only was the complete lack of communication and personal service appalling, the bank had put his business in a very difficult position. It didn’t matter that, at the time, Cortese Construction Services had been doing business with the bank for over 40 years. They were closing branches, restructuring services, and not thinking about people. It was time for a change. “The connection was already there.” Cortese Construction Services switched to Lake Shore Savings, and the two have worked remarkably together ever since. “Hands down, it’s the personalized, concierge, one-on-one attention that’s paid to not only our clients, but ourselves as a customer.” Throughout 2020, Lake Shore Savings has helped Cortese Construction Services and their clients weather what Mr. Cortese says has been a perfect storm for the industry. Despite being closed for three months, a first in its 70- year history, Cortese Construction Services has managed to achieve a record year. Most recently, they have been working with Lake Shore Savings on the financing of their new corporate headquarters. “We actually managed, in spite of the pandemic, to have a record year.” Today, Mr. Cortese still endorses Lake Shore Savings on his WBEN radio show, and his HammertimeTVTM show, in- between providing his listeners with tips, tricks and insights for transforming their homes. Cortese Construction Services continues to offer its customers exceptional home remodeling. Lake Shore Savings continues to be there for Mr. Cortese, his business and his clients. LAKE SHORE BANCORP, INC. | 2020 ANNUAL REPORT 9 COMMUNITY INVOLVEMENT Brooks-TLC Hospital System For more than 20 years, the hospital has relied on Lake Shore Savings for all of their banking needs. As their trusted financial partner, Lake Shore also assists with the financing of critical equipment that the hospital uses to provide exceptional care to its community. To Mary LaRowe, President and CEO of Brooks-TLC, the value of a community bank to a community hospital is clear. “There’s nothing better than walking into your local bank and knowing the folks there. They know your story. You’re not starting over.” Brooks-TLC, like most other hospitals, relies on patient revenue to maintain operations and to obtain crucial upgrades and equipment. When the COVID-19 pandemic hit, and in-patient revenue went down, the hospital needed to look into the Paycheck Protection Program to ensure they could pay their employees and maintain their high standard of care. 10 “We reached out to Lake Shore Savings, who walked us through the whole process, supported us through it, answered all of our questions, and were able to turn around our application in a very reasonable amount of time.” Lake Shore Savings was successful in obtaining a PPP loan for the hospital, which offered them the stability to continue caring for their community through the year’s hardships. “Even though many other hospitals were trying to do the same thing at the same time, we were successful in obtaining the payroll protection loan.” Ms. LaRowe is very optimistic for the future of the hospital and the community it serves. In her mind, the pandemic has shown the true strength and resilience of her colleagues. “The pandemic has truly demonstrated that we have leaders throughout the organization. Not that people aren’t tired, but we have a lot of strength internally.” Like the rest of us, Ms. LaRowe can’t wait for the pandemic to be under control, or better yet—over. She and her staff continue to fight every day for their community’s health and safety despite the quickly changing healthcare landscape and the ever-evolving needs of patients. And Lake Shore Savings continues to provide exceptional local banking to an exceptional local hospital. “The bank really listens to what your needs are and tries to find solutions. That listening piece is so critical.” Over half a century of service. DAVID C. MANCUSO Dave Mancuso started at Lake Shore Savings as a teller in 1965. At the time, the bank’s total assets were less than $8 million and there was but a single branch. After succeeding in a variety of roles at the bank, he became President and CEO in 1993, when assets were in excess of $115 million and the bank had expanded to two branches. As President and CEO, Dave opened eight additional branches, entered the Erie County marketplace, and led the company through its transition from a mutual savings bank charter to the mutual holding company structure and a federal savings bank charter. This resulted in an initial public offering of our stock in 2006 and our listing on the NASDAQ stock exchange. When Dave retired as President and CEO in 2011, the bank had assets in excess of $475 million. After retiring, Dave remained a member of the Board of Directors. During his time on the board, he has helped guide the bank through continued growth to our current level of total assets at $686 million and an additional branch purchase. We are sincerely grateful for Dave’s service, guidance and dedication to the Bank and the Company over the last 55 years. LAKE SHORE BANCORP, INC. | 2020 ANNUAL REPORT 11 COMMERCIAL LENDING AND OTHER OFFICERS BARBARA M. FANCHER, Vice President, Commercial Credit Administration Manager WENDY HARRINGTON, Corporate Secretary MICHAEL R. NOVILLE, Vice President, Commercial Loan Officer DYLAN P. RUBADEAUX, Vice President, Commercial Loan Officer JARED M. SEDOR, Assistant Vice President, Commercial Loan Officer BRANCH MANAGEMENT OFFICERS ADAM J. DIMITRI, Vice President, Regional Sales Officer AMY HARDING, Vice President, Regional Sales Officer GABRIELE J. MADDALENA, Vice President, Regional Sales Officer SAMANTHA GOLOMBEK, Assistant Vice President, Regional Branch Sales Manager RICHARD E. GRECO JR., Assistant Vice President, Regional Branch Sales Manager SCOTT T. SWAN, Assistant Vice President, Regional Branch Sales Manager HIROKO WALTERS, Assistant Vice President, Branch Sales Manager BOARD OF DIRECTORS Left to right TRACY S. BENNETT JOHN P. MCGRATH JACK L. MEHLTRETTER RONALD J. PASSAFARO DANIEL P. REININGA, President and Chief Executive Officer SHARON E. BRAUTIGAM, Vice Chairperson of the Board KEVIN M. SANVIDGE, Chairman of the Board DAVID C. MANCUSO* NANCY L. YOCUM CATHARINE M. YOUNG* *Not photographed SENIOR MANAGEMENT Left to right STEVEN SCHIAVONE, Controller and Principal Accounting Officer SUSAN C. BALLARD, Executive Vice President for Retail, Sales, and Marketing SONIA N. ORTOLANO, Vice President, Information Technology DANIEL P. REININGA, President and Chief Executive Officer JANINNE FIEGL DUGAN, Vice President, Human Resource Officer JEFFREY M. WERDEIN, Executive Vice President, Commercial Division RACHEL A. FOLEY, Chief Financial Officer and Treasurer NICOLE MAY, Compliance and CRA Officer BEVERLY J. SUTTON, Vice President of Retail Banking Operations MARK J. PETERS, Internal Auditor and Enterprise Risk Manager* *Not photographed 12 social distancing. Photos were then arranged on the page during the development of this report. All photos were taken individually while following strict COVID-19 safety precautions, including SELECTED FINANCIAL DATA Our selected consolidated financial and other data is set forth below and is derived from, and should be read in conjunction with our audited consolidated financial statements and notes thereto, beginning on page F-1 of our 2020 Annual Report on Form 10-K. INVESTMENT RATIONALE - Prudent and conservative approach to growth and risk management - Experienced management with thorough knowledge of service area SELECTED FINANCIAL CONDITION DATA As of December 31, (Dollars in thousands) 2020 2019 $ 686,200 $ 610,869 TOTAL ASSETS LOANS, NET - Commitment to an efficient operating profile - Operational focus on managing interest rate risk - Solid community banking core business 524,143 470,816 - Online banking enhancements support SECURITIES AVAILABLE FOR SALE FEDERAL HOME LOAN BANK STOCK 79,285 1,905 71,201 2,055 TOTAL CASH AND CASH EQUIVALENTS 42,975 30,289 560,259 483,476 retail and commercial deposits - Continued investments in enhanced digital capabilities to meet customers’ technology needs TOTAL DEPOSITS LONG-TERM DEBT 29,750 34,650 - Commercial lending growth efforts focused on gaining TOTAL STOCKHOLDERS’ EQUITY 85,924 82,840 market share in the Buffalo metropolitan area ALLOWANCE FOR LOAN LOSSES NON-PERFORMING LOANS NON-PERFORMING ASSETS 5,857 3,103 3,161 4,267 3,547 4,326 SELECTED OPERATING DATA For the year ended December 31, SHAREHOLDER INFORMATION NATIONAL STOCK LISTING The NASDAQ Global Market under the symbol LSBK (Dollars in thousands, except per share data) 2020 2019 SPECIAL COUNSEL INTEREST INCOME INTEREST EXPENSE NET INTEREST INCOME $ 24,336 $ 24,267 4,404 5,197 19,932 19,070 LUSE GORMAN, PC 5335 Wisconsin Avenue, NW Suite 780 Washington, DC 20015 PROVISION FOR LOAN LOSSES 1,625 900 INDEPENDENT AUDITORS 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 AND DILUTED EARNINGS PER COMMON SHARE DIVIDENDS DECLARED PER SHARE 18,307 2,992 15,917 5,382 824 18,170 2,492 15,920 4,742 655 $ 4,558 $ 4,087 $ $ 0.77 0.49 $ $ 0.68 0.48 BAKER TILLY US, LLP 20 Stanwix Street Suite 800 Pittsburgh, PA 15222 TRANSFER AGENT & REGISTRAR Computershare Investor Services By Regular Mail PO Box 505005 Louisville, KY 40233-5005 By Overnight Delivery 462 South 4th Street Suite 1600 Louisville, KY 40202 (800) 368-5948 Computershare.com/investor INVESTOR RELATIONS CONTACT RACHEL A. FOLEY, Chief Financial Officer and Treasurer (716) 366-4070 ext 1020 Rachel.foley@lakeshoresavings.com 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 is committed to maintaining an efficient expense profile, driving commercial loan portfolio growth, maintaining its history of being a strong residential mortgage lender in its market areas, identifying and managing enterprise risk, and achieving prudent growth which builds long-term sustainable value for investors. The Company’s common stock is traded on the NASDAQ Global Market as “LSBK” and its 5.8 million shares, including 3.6 million mutual holding company (MHC) shares, had a “market cap” of approximately $75.7 million on December 31, 2020. The Company had total consolidated assets of $686.2 million and total deposits of $560.3 million at the end of 2020. 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 130 years. Our focus is on providing high- quality, personal customer service through our 11 full-service branches and 19 ATMs that are located throughout Chautauqua and Erie counties. Locally headquartered in Western New York, Lake Shore Savings Bank has retail locations in Depew, East Amherst, Hamburg, Kenmore, Orchard Park, Snyder, Dunkirk, Fredonia, Jamestown, Lakewood and Westfield, where it offers a broad range of retail and commercial lending and deposit services. Additional information about the Company and the Bank is available at lakeshoresavings.com. 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 2020. 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. HEADQUARTERS 31 East Fourth Street | Dunkirk, NY 14048 716.366.4070 Lakeshoresavings.com NASDAQ: LSBK 

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