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LS

LAKE SHORE BANCORP, INC. (LSBK)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 net income was $1.01M ($0.17 diluted EPS), down 39.8% YoY on higher funding costs; sequentially improved from Q4 2023 ($0.13) as NII stabilized and operating expense declined .
  • Net interest margin compressed to 3.10% vs 3.76% in Q1 2023 and 3.34% in Q4 2023 as deposit competition and higher time-deposit rates lifted interest expense; spread fell to 2.55% .
  • Management highlighted regulatory remediation progress and an approved MHC dividend waiver enabling potential dividends up to $0.72 per share over the next 12 months (subject to FRB non‑objection), a potential stock catalyst .
  • Balance sheet resilience: deposits +$3.8M QoQ, uninsured deposits 12.6%, long-term debt reduced by $10M, and Tier 1 leverage 13.05% with total risk-based capital 18.13% .

What Went Well and What Went Wrong

What Went Well

  • Reduced wholesale funding reliance: repaid $11.0M brokered CDs and $10.0M FHLBNY borrowings; long-term debt down to $25.25M at 3/31/24 .
  • Operating discipline: non-interest expense fell 9.5% YoY (-$522k), driven by professional services (-61.5%), advertising (-71.3%), and occupancy/equipment (-11.8%) .
  • Strategic flexibility: members approved MHC dividend waiver for potential dividends up to $0.72 per share over the twelve months ending April 2, 2025, pending FRB non‑objection; CEO emphasized shift “from regulatory matters to more customer driven performance” .

What Went Wrong

  • Margin pressure: NIM 3.10% and spread 2.55% vs 3.76% and 3.48% in Q1 2023, reflecting a 138 bps increase in average rate paid on interest‑bearing liabilities; time deposit rates +192 bps YoY .
  • Higher FDIC insurance and data processing costs (+193.7% and +19.8% YoY) partially offset opex savings, linked to regulatory assessments and IT security enhancements .
  • Credit metrics ticked up: non‑performing assets to total assets rose to 0.55% (from 0.47% at 12/31/23); ACL/loans dipped to 1.12% vs 1.16% at year‑end, driven by quantitative loss factor changes in the vintage model .

Financial Results

Quarterly P&L and Margins (oldest → newest)

MetricQ3 2023Q4 2023Q1 2024
Interest Income ($USD Millions)$8.721 $8.613 $8.609
Interest Expense ($USD Millions)$2.426 $3.055 $3.476
Net Interest Income ($USD Millions)$6.295 $5.558 $5.133
(Credit) Provision for Credit Losses ($USD Millions)($0.199) ($0.032) ($0.352)
Non‑Interest Income ($USD Millions)$0.605 $0.923 $0.707
Non‑Interest Expense ($USD Millions)$5.196 $5.203 $4.995
Pre‑Tax Income ($USD Millions)$1.903 $1.310 $1.197
Net Income ($USD Millions)$1.571 $0.749 $1.014
Diluted EPS ($)$0.27 $0.13 $0.17
Net Interest Margin (%)3.74% 3.34% 3.10%
Interest Rate Spread (%)3.32% 2.83% 2.55%
ROAA (%)0.87% 0.42% 0.57%
ROAE (%)7.48% 3.60% 4.69%

Note: For banks, “revenue” is typically viewed as net interest income plus non‑interest income; components are shown above .

YoY Comparison (Q1 2024 vs Q1 2023)

MetricQ1 2023Q1 2024
Interest Income ($USD Millions)$7.951 $8.609
Interest Expense ($USD Millions)$1.660 $3.476
Net Interest Income ($USD Millions)$6.291 $5.133
(Credit) Provision for Credit Losses ($USD Millions)($0.625) ($0.352)
Non‑Interest Income ($USD Millions)$0.554 $0.707
Non‑Interest Expense ($USD Millions)$5.517 $4.995
Net Income ($USD Millions)$1.684 $1.014
Diluted EPS ($)$0.29 $0.17
Net Interest Margin (%)3.76% 3.10%
Interest Rate Spread (%)3.48% 2.55%

Balance Sheet KPIs (oldest → newest)

KPIQ3 2023Q4 2023Q1 2024
Total Assets ($USD Millions)$713.563 $725.118 $717.582
Loans, Net ($USD Millions)$564.848 $555.828 $555.455
Securities AFS ($USD Millions)$57.952 $60.442 $58.682
Cash & Equivalents ($USD Millions)$45.999 $53.730 $54.953
Deposits ($USD Millions)$584.158 $590.924 $594.704
Long‑Term Debt ($USD Millions)$36.450 $35.250 $25.250
Uninsured Deposits (% of Total)12.4% 12.8% 12.6%
Book Value/Share ($)$14.38 $15.17 $15.22
Tier 1 Leverage Ratio (%)—12.68% 13.05%
Total Risk‑Based Capital Ratio (%)—17.77% 18.13%
Non‑Performing Assets / Total Assets (%)0.51% 0.47% 0.55%
ACL / Loans (%)1.18% 1.16% 1.12%

Segment Breakdown

  • Not applicable; LSBK reports consolidated community bank operations without segment disclosures in the press releases/8‑K .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend capacity (policy)12 months ending Apr 2, 2025No formal guidance; dividends ceased in 2023 (Q4 2023 dividends per share: $0.00) MHC members approved waiver enabling potential dividends up to $0.72/share, subject to FRB non‑objection Policy update; potential resumption
Revenue, Margins, OpEx, OI&E, Tax Rate—None disclosed None disclosed Maintained (no guidance)
CapitalCurrent“Well capitalized” status reaffirmedTier 1 leverage 13.05%, Total RBC 18.13% at 3/31/24 Status maintained

Earnings Call Themes & Trends

  • No Q1 2024 earnings call transcript was located in the document catalog; themes are derived from company press releases and 8‑Ks [Search attempted; none found].
TopicPrevious Mentions (Q3 2023)Previous Mentions (Q4 2023)Current Period (Q1 2024)Trend
Regulatory remediation & opexElevated FDIC, consulting, staffing for remediation; deposit competition “fierce” Ongoing regulatory matters caused higher opex in 2023; progress emphasized Transition “from regulatory matters to more customer driven performance”; opex down YoY Improving
Deposit competition & funding costsHigher time deposit rates; interest expense +323% YoY; NIM down Interest expense +231% YoY; NIM down; brokered deposits up Interest expense +109% YoY; NIM 3.10%; reduced brokered CDs and FHLB borrowings Stabilizing (costs high but funding mix improved)
Capital & dividends—Well capitalized; BVPS +6.6% YoY Tier 1 leverage 13.05%, TRBC 18.13%; MHC dividend waiver up to $0.72 Strengthening optionality
CreditNPA/Assets 0.51%; CECL credits from portfolio shifts NPA/Assets 0.47%; ACL/Loans 1.16% NPA/Assets 0.55%; ACL/Loans 1.12%; provision credit ($0.352M) Mixed (slight NPA uptick)
BOLI & swap effectsSwaps unwind reduced unrealized gains BOLI restructure boosted non‑interest income; tax expense up BOLI restructure continued to support non‑interest income; swap variance favorable Positive carry‑over

Management Commentary

  • “I am pleased with our first quarter 2024 earnings as we continue to transition from regulatory matters to more customer driven performance.” — Kim Liddell, President & CEO .
  • “Our members approved the dividend waiver for Lake Shore, MHC, creating the potential to resume paying a dividend of up to $0.72 per share over the next year.” — Kim Liddell .
  • Q4 2023 context: “Commendable given… challenging interest rate environment and costly, ongoing regulatory matters we continue to address.” — Kim Liddell .

Q&A Highlights

  • No Q1 2024 earnings call transcript or Q&A was available in the catalog; no Q&A themes to report [Search attempted; none found].

Estimates Context

  • Street (S&P Global) consensus for Q1 2024 EPS and revenue was unavailable at time of query due to data access limits; therefore, we cannot benchmark results vs consensus. Values retrieved from S&P Global were not available due to a daily request limit issue.
  • Given limited micro‑cap coverage, estimates may be sparse; near‑term revisions likely focus on NIM trajectory, funding mix, and opex normalization ].

Key Takeaways for Investors

  • Funding mix improvement and wholesale paydowns are constructive; watch for continued brokered CD runoff and FHLB reductions to support margin stabilization .
  • Margin pressure persists, but opex control is tangible; sustained declines in professional services and advertising expenses could drive operating leverage if funding costs plateau .
  • Dividend optionality is a potential catalyst: MHC waiver allows up to $0.72/share over the next year, contingent on FRB non‑objection; monitor regulatory correspondence/timing .
  • Credit quality remains solid at low NPA levels despite a modest uptick; ACL levels and provision credits reflect vintage model inputs—track any macro or sector‑specific stress .
  • Near term trading lens: headlines around dividend resumption, capital ratios, and deposit growth likely drive sentiment; lack of Street estimates reduces “beat/miss” volatility.
  • Medium‑term thesis: disciplined cost management, capital strength, and customer‑driven growth post‑remediation can re‑rate valuation if NIM stabilizes and deposit competition eases .

Additional Cross-References and Notes

  • Non‑GAAP: Company press releases do not present non‑GAAP EPS or adjusted items; notable influences include BOLI restructure (boosting non‑interest income) and swap unwind effects .
  • Discrepancies: None identified between 8‑K narrative and selected financial tables; absence of an earnings call limits cross‑validation of qualitative points .