Home Global News News Alert: Lake Shore Bancorp, Inc. (NASDAQ:LSBK)

News Alert: Lake Shore Bancorp, Inc. (NASDAQ:LSBK)

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Lake Shore Bancorp, Inc. (NASDAQ: LSBK), the holding company for Lake Shore Savings Bank, proclaimed unaudited results for the 3-months and year finished December 31, 2K17.

2K17 4th-Quarter and Full Year Highlights:

  • Total assets at December 31, 2K17 inclined $29.80M, or 6.10 percent, to $519.00M when compared to December 31, 2K16 and exceeded $500.00M for the 1st-time in Company history throughout 2K17;
  • Loans receivable, net inclined 11.90 percent to $365.10M at December 31, 2K17 from $326.40M at December 31, 2K16 primarily due to net organic commercial loan growth of $41.80M, or 30.00 percent, throughout 2K17;
  • Total deposits grew by $19.30M, or 5.00 percent, to $405.20M at December 31, 2K17 when compared to December 31, 2K16, which included net core (non-time) deposit growth of $18.00M;
  • Net interest income inclined $1.60M, or 10.20 percent, for the year finished December 31, 2K17 when compared to the prior year primarily due to commercial loan growth;
  • 4th-Quarter 2K17 net interest margin was 3.510 percent, an incline of six basis points from 4th-quarter 2K16 primarily due to commercial loan growth;
  • Net interest margin was 3.610 percent for the year finished December 31, 2K17, up 17.0 basis points when compared to the year finished December 31, 2K16 primarily due to an inclined volume of commercial loans and a 75.00 basis point incline in the Prime rate throughout 2K17;
  • Income tax expense throughout the 4th-quarter of 2K17 included a $262,000.00 income tax charge due to the revaluation of net deferred tax assets required by the Tax Cuts and Jobs Act (“Tax Act”);  and
  • Non-performing loans as a percent of total loans declined from 1.8 percent as of December 31, 2K16 to 1.050 percent as of December 31, 2K17 primarily due to the payoff of non-performing commercial loans throughout 2K17.

“We are pleased to report steady growth in our 2K17 balance sheet, especially in commercial loans and core deposits, resulting in a 10.20 percent incline in net interest income and total assets in excess of the $500.00M threshold in 2K17,” stated Daniel P. Reininga, President, and CEO.  “Our financial results carry on to reflect our commitment to understanding the individual needs of our clients through an array of innovative solutions designed to help them to achieve their financial goals.”

Net income for 4th-quarter 2K17 was $580,000.00, or $0.090 per diluted share, compared to net income of $140,000.00, or $0.020 per diluted share, for 4th-quarter 2K16.

The $440,000.00 incline in 4th-quarter 2K17 net income reflected a $755,000.00 decline in provision for loan losses and a $350,000.00 incline in net interest income which was partially offset by a $565,000.00 incline in income tax expense and a $102,000.00 incline in non-interest expense when compared to the 4th-quarter of 2K16.

The incline in income tax expense throughout 4th-quarter 2K17 was primarily due to a $262,000.00 net deferred tax asset write-down as a result of the revaluation of net deferred tax assets due to the reduction in the U.S. corporate tax rate as of December 31, 2K17.

The Tax Act lowered the corporate tax rate from 34.00 percent to 21.00 percent, which will lower the Company’s provision for Federal income taxes in future years.  The Tax Act was signed into law throughout the 4th-quarter of 2K17 and generally accepted accounting principles require that the impact of the provisions of the Tax Act be accounted for in the period of enactment. As such, the Company was required to write down the value of its net deferred tax assets as of December 31, 2K17, to reflect the reduction in the corporate tax rate. The 4th-quarter 2K17 incline in income tax expense was also due to higher pre-tax income throughout the 2K17 4th-quarter.

Net income for the year finished December 31, 2K17 was $3.40M, or $0.550 per diluted share, compared to net income of $3.50M, or $0.58 per diluted share, for the year finished December 31, 2K16.

Net income for the year finished December 31, 2K17 was impacted by a $1.40M decline in non-interest income when compared to the year finished December 31, 2K16. Throughout the year finished December 31, 2K16, the Company recorded a $1.60M pre-tax realized gain on the sale of securities as compared to a $244,000.00 pre-tax realized gain on the sale of securities throughout the year finished December 31, 2K17.

Additionally, net income for the year finished December 31, 2K17 reflected a $1.60M incline in net interest income and a $615,000.00 decline in the provision for loan losses, which was partially offset by a $481,000.00 incline in non-interest expense and a $410,000.00 incline in income tax expense, when compared to the year finished December 31, 2K16. The incline in income tax expense was primarily due to the $262,000.00 net deferred tax asset write-down throughout the 4th-quarter of 2K17 as a result of the Tax Act, as well as higher pre-tax income throughout the year finished December 31, 2K17.

Net Interest Income

4th-quarter 2K17 net interest income inclined $350,000.00, or 9.10 percent, to $4.20M as compared to the 2K16 4th-quarter.  Net interest income inclined $1.60M, or 10.20 percent, to $16.80M for the year finished December 31, 2K17 as compared to 2K16.

Interest income for the 4th-quarter of 2K17 was $4.90M, an incline of $519,000.00, or 11.80 percent, compared to the 4th-quarter of 2K16.

The incline was attributable to a $39.90M, or 12.30 percent, incline in the average balance of loans, partially offset by a $13.30M decline in the average balance of the Bank’s securities portfolio from the 4th-quarter of 2K16.

Interest income for the year finished December 31, 2K17 was $19.40M, an incline of $1.90M, or 10.80 percent, compared to 2K16.

The incline was primarily attributable to a $40.00M, or 12.80 percent, incline in the average balance of loans, partially offset by an $18.10M decline in the average balance of the Bank’s securities portfolio from the year finished December 31, 2K16.

The incline in the average loan balance was primarily due to growth in the commercial real estate, home equity and commercial business loan portfolios, partially offset by a decline in residential, one- to four-family loans since December 31, 2K16. The decline in the average balance of the securities portfolio was primarily due to the Company’s strategy to reinvest paydowns and sales proceeds received on the securities portfolio into adjustable rate commercial loan originations in order to be in a better position to take advantage of future inclines in market interest rates. The incline in interest income throughout the year finished December 31, 2K17 was also due to the receipt of $202,000.00 in past due interest related to the pay-off of one non-performing commercial real estate loan.

Interest expense for the 2K17 4th-quarter was $741,000.00, an incline of 29.50 percent, from $572,000.00 for the 2K16 4th-quarter.

The incline was primarily due to a 19.0 and 16.0 basis points incline in the average interest rates being paid on money market and time deposit accounts, respectively, as well as a $25.30M, or 7.90 percent, incline in average deposits since the 2K16 4th-quarter.

The incline was also due to a $47,000.00 incline in interest paid on borrowings in the 4th-quarter 2K17 as compared to the 4th-quarter 2K16. The average balance for borrowings inclined $8.00M and the average rate paid on borrowings inclined to 2.070 percent in the 4th-quarter 2K17 from 1.960 percent since the 2K16 4th-quarter.

Interest expense for the year finished December 31, 2K17 was $2.60M, an incline of $336,000.00, or 14.60 percent, from the year, finished December 31, 2K16.

Average core deposits inclined by $19.30M since the year finished December 31, 2K16, partially offset by a $3.10M decline in higher cost average time deposits.

Average interest rates paid on money market and time deposit accounts inclined by eight basis points throughout the year finished December 31, 2K17 when compared to the prior year. The incline was also due to a $95,000.00 incline in interest paid on borrowings in 2K17 as compared to 2K16.

The average balance for borrowings inclined $3.80M and the average rate paid on borrowings inclined to 2.030 percent for the year finished December 31, 2K17, as compared to 1.940 percent for the year, finished December 31, 2K16.

Non-Interest Income

Non-interest income was $601,000.00 in the 4th-quarter of 2K17 as compared to $599,000.00 for the 4th-quarter of 2K16. Non-interest income was primarily impacted by a $16,000.00, or 21.60 percent, incline in earnings on bank owned life insurance, a $4,000.00 incline in gains on impaired securities and a $3,000 incline in other income throughout the 4th-quarter of 2K17.

The incline in bank-owned life insurance earnings was due to the purchase of an additional $2.50M in bank-owned life insurance throughout December 2K16. These inclines were partially offset by a $21,000.00 decline in various service charges and fees on deposit and loan accounts throughout the 2K17 4th-quarter.

Non-interest income declined by $1.40M, or 34.80 percent, to $2.70M for the year finished December 31, 2K17, as compared to $4.10M for the year, finished December 31, 2K16. The decline was primarily due to a $1.60M pre-tax realized gain on the sale of securities throughout the year finished December 31, 2K16 as compared to a $244,000.00 pre-tax realized gain on the sale of securities throughout the year finished December 31, 2K17.

The decline was also due to a $107,000.00, or 88.40 percent, decline in gains on the sale of loans throughout the year finished December 31, 2K17 as compared to the prior year. These declines were partially offset by a $77,000.00, or 27.40 percent incline in earnings on bank owned life insurance throughout the year finished December 31, 2K17.

Non-Interest Expense

Non-interest expense was $3.70M for the 4th-quarter of 2K17, an incline of $102,000.00, or 2.90 percent, compared to the same quarter in the prior year. The current year 4th-quarter had higher expenses for salary and benefits, FDIC insurance and data processing, partially offset by lower expenses for professional services, occupancy and equipment and postage and supplies.

Non-interest expense was $14.40M for the year finished December 31, 2K17, an incline of $481,000.00, or 3.50 percent, compared to the prior year. Salary and benefits expense inclined by $380,000.00, or 5.20 percent, due to annual salary inclines and grants of stock awards.

Data processing expenses inclined $138,000.00, or 12.30 percent, due to an implementation of new technology associated with enhanced product features and growth in deposit and loan accounts. Inclines in advertising expenses and other expenses in the year finished December 31, 2K17 were partially offset by declines in professional service fees, FDIC insurance expense and occupancy and equipment expenses.

Asset Quality

The 4th-quarter 2K17 provision for loan losses was $60,000.00, a decline of $755,000.00, or 92.60 percent, as compared to the same quarter in the prior year.

The decline in the provision was primarily due to a $390,000.00 specific reserve set aside for the impairment of one commercial real estate loan and higher commercial loan growth throughout the 4th-quarter of 2K16.

The provision for loan losses for the year finished December 31, 2K17 was $510,000.00, a decline of $615,000.00, or 54.70 percent, as compared to the prior year. The decline in provision expense was primarily due to a decline in provision set aside for impaired loans as a result of non-performing commercial loan payoffs throughout 2K17, as well as an improvement in non-performing loan ratios throughout the year finished December 31, 2K17.

Non-performing loans as a percent of total loans at December 31, 2K17 were 1.050 percent, a 75.00 basis points decline from 1.80 percent at December 31, 2K16, primarily due to payoffs received on a non-performing commercial real estate and commercial business loans throughout 2K17.

The Company’s allowance for loan losses as a percent of total loans was 0.9 percent at December 31, 2K17 and 0.880 percent at December 31, 2K16.

Balance Sheet Summary

Total assets at December 31, 2K17 were $519.00M. Loans receivable, net at December 31, 2K17 were $365.10M, a $38.70M, or 11.90 percent, incline as compared to $326.40M at December 31, 2K16.

The incline in total loans was primarily due to an incline in commercial real estate, construction, commercial business and home equity loans, partially offset by a decline in residential, one- to four-family loans.

Total deposits at December 31, 2K17 were $405.20M, an incline of $19.30M, or 5.00 percent, compared with $385.90M at December 31, 2K16. The incline in deposits was primarily due to an incline in net core deposits. Core deposits at December 31, 2K17 were $256.70M, an incline of $18.00M, or 7.50 percent, from December 31, 2K16.

Long-term debt at December 31, 2K17 was $27.00M, an incline of $8.00M, or 42.20 percent, as compared to $19.00M at December 31, 2K16.

The additional borrowings taken down throughout 2K17 allowed the Bank to take advantage of low fixed-rates in order to fund loan growth. Stockholders’ equity at December 31, 2K17 was $78.40M, an incline of $2.30M, or 3.10 percent, compared with $76.00M at December 31, 2K16.

The incline in stockholders’ equity was primarily attributed to net income in 2K17 which was partially offset by dividend payments and a decline in accumulated other comprehensive income.