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LS

LAKE SHORE BANCORP, INC. (LSBK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $0.26, up 8% QoQ and up ~100% YoY, as a higher credit to the provision ($0.6mm) and stronger non-interest income offset slight net interest income pressure; net interest margin improved to 3.31% (+3 bps QoQ) .
  • Management highlighted 2024 achievements: early termination of the OCC Consent Order, reinstatement of quarterly dividends, and EPS growth; they expect a “challenging earnings environment in 2025” .
  • Balance sheet de-risking continued: brokered CDs non-renewals ($16mm) and FHLB repayments ($25mm) reduced wholesale funding reliance; uninsured deposits were 13.5% at year-end (vs. 12.8% in 2023) .
  • No explicit numeric guidance provided; dividends maintained at $0.18 per share (declared Oct-2024 and Jan-2025, with regulatory approval), a potential stock sentiment support alongside NIM stabilization and regulatory clean-up .

What Went Well and What Went Wrong

  • What Went Well

    • Net interest margin expanded for a second straight quarter to 3.31% (+3 bps QoQ; +17 bps vs. Q2), reflecting lower funding costs as FHLB borrowings were repaid and deposit betas eased .
    • Non-interest income rose to $1.07mm (+35% QoQ; +16% YoY) aided by annuity earnings, higher BOLI income (death benefit), and equity securities gains .
    • Regulatory overhang eased: OCC Consent Order terminated (Dec 3), and dividends reinstated/maintained at $0.18, with Fed approval obtained for payments .
    • Quote: “2024 was a momentous year… exit early the OCC’s Consent Order, reinstituted quarterly dividend payments to shareholders and grew earnings per share” – Kim C. Liddell, President & CEO .

  • What Went Wrong

    • Net interest income was flat-to-down ($5.34mm, -0.8% QoQ; -3.9% YoY) as average earning assets declined and asset yields softened slightly QoQ, despite lower interest expense .
    • Efficiency ratio worsened QoQ (82.30% vs. 77.96% in Q3), with Q4 non-interest expense ticking up vs. Q3; salaries and wages rose YoY (+14%) .
    • Asset quality ratios slightly deteriorated vs. 2023: NPLs to net loans rose to 0.80% (from 0.60% in Q4’23) and ACL coverage to net loans moved down to 0.93% (from 1.16% in Q4’23), reflecting model/qualitative factor updates and normalization .

Financial Results

  • Income statement and margin trend (oldest → newest)
Metric (USD)Q4 2023Q1 2024Q2 2024Q3 2024Q4 2024
Net interest income ($000s)5,558 5,133 5,206 5,383 5,341
Non-interest income ($000s)923 707 738 791 1,068
EPS (basic & diluted) ($)0.13 0.17 0.19 0.24 0.26
Net interest margin (%)3.34% 3.10% 3.14% 3.28% 3.31%
Interest rate spread (%)2.83% 2.55% 2.56% 2.67% 2.72%
Efficiency ratio (%)80.24% 85.53% 82.39% 77.96% 82.30%

  • Q4 2024 actual vs consensus (S&P Global)

    • Consensus was unavailable for EPS and revenue at the time of analysis; no comparison to Street possible (S&P Global consensus unavailable).

  • Balance sheet and credit KPIs (oldest → newest)

KPIQ4 2023Q1 2024Q2 2024Q3 2024Q4 2024
Total assets ($000s)725,118 717,582 711,042 697,596 685,504
Deposits ($000s)590,924 594,704 589,395 587,563 572,978
Long-term debt/borrowings ($000s)35,250 25,250 23,250 10,250 10,250
Net loans ($000s)555,828 555,455 544,337 539,005 544,620
Cash & equivalents ($000s)53,730 54,953 60,987 49,981 33,131
Uninsured deposits (% of total)12.8% (FY) —12.0% (Jun-30) 13.4% (Sep-30) 13.5% (FY)
NPLs / net loans (%)0.60% 0.71% 0.73% 0.74% 0.80%
NPAs / total assets (%)0.47% 0.55% 0.56% 0.57% 0.55%
ACL / net loans (%)1.16% 1.12% 1.08% 1.01% 0.93%
Tier 1 leverage ratio (%)12.68% 12.87% 13.02% 13.37% 13.83%
Total risk-based capital (%)17.77% 18.13% 18.64% 18.85% 18.79%

Drivers and context:

  • QoQ: NIM +3 bps, interest expense down (-6.3% QoQ) as average interest-bearing liabilities fell and rate paid declined; net interest income edged down (-0.8%) on lower average earning assets/asset yields .
  • Credit: Q4 provision was a $0.613mm credit, as quantitative/qualitative loss factors declined; ACL coverage moved down to 0.93% of loans .
  • Non-interest income: +35% QoQ on annuity earnings (+$161k), BOLI death benefit (+$65k), and equity gains (+$51k) .

Guidance Changes

The company did not issue quantitative financial guidance. Dividend actions and qualitative outlook are summarized below.

MetricPeriodPrevious GuidanceCurrent Guidance/ActionChange
Dividend per shareQ4 2024Reinstated earlier in 2024Declared $0.18 (paid Nov 8, 2024; FRB approval Sep 30, 2024) Maintained
Dividend per shareQ1 2025$0.18 (prior)Declared $0.18 (pay Feb 14, 2025; FRB approval Jan 9, 2025) Maintained
Outlook (qualitative)2025—“Anticipate a challenging earnings environment in 2025” New qualitative outlook
Regulatory statusQ4 2024OCC Consent Order outstanding earlierOCC Consent Order terminated Dec 3, 2024 Improved

Earnings Call Themes & Trends

Note: No Q4 2024 earnings call transcript was located; themes reflect management commentary across quarterly releases.

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Net interest marginQ2: 3.14%; Q3: 3.28%; sequential improvement 3.31%; continued improvement Improving
Funding/wholesale reductionQ2: repaid $12mm FHLB, $11mm brokered CDs Full-year: -$25mm FHLB, -$16mm brokered CDs Improving mix, lower funding costs
Deposits/uninsuredQ2: uninsured 12.0% (Jun-30) 13.5% at 12/31 (vs 13.4% at 9/30) Stable-to-slightly higher
Expenses/efficiencyQ2: YoY cuts in pro services, ads; efficiency 82.39% Full-year opex -8.4% YoY; Q4 efficiency 82.30% (worse vs Q3) Structural progress; Q4 seasonal uptick
Credit provisioningQ2/Q3: provision credits ($285k, $229k) Larger credit: $613k; ACL ratio 0.93% Favorable model/qual factors
RegulatoryQ2/Q3: under OCC order; building compliance OCC Consent Order terminated Dec 3, 2024 Resolved (positive)
BOLI/annuitiesQ2/Q3: BOLI restructure/death benefit lifted fees Added annuity earnings; more BOLI benefit Diversifying fee income

Management Commentary

  • “2024 was a momentous year for Lake Shore as we achieved our goal to exit early the OCC’s Consent Order, reinstituted quarterly dividend payments to shareholders and grew earnings per share… We anticipate a challenging earnings environment in 2025” – Kim C. Liddell, President, CEO, and Director .
  • Q3 tone: “Solid quarter… marked by quarterly earnings growth and an uptick in the net interest margin for the first time in well over a year” – Kim C. Liddell .
  • Q2 tone: “We continue to remain disciplined and focused on executing our strategic plan and it is beginning to bear results” – Kim C. Liddell .

Q&A Highlights

  • No Q4 2024 earnings call transcript was available in the company documents reviewed; therefore, no Q&A themes to report for the period. Analysis relies on the 8-K 2.02 and press releases .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 and FY 2024 EPS and revenue were unavailable at the time of analysis; no beat/miss assessment to Street can be made.
  • Implication: Absent consensus, investors should focus on sequential NIM improvement, expense trajectory, and credit factor-driven provision credits as the key near-term earnings drivers .

Key Takeaways for Investors

  • NIM stabilization with two consecutive quarterly increases (3.28% → 3.31%) supports earnings resilience if deposit costs continue to ease and wholesale funding remains low .
  • Provision credit tailwind (model/qualitative factor-driven) boosted Q4 EPS; durability into 2025 depends on macro and portfolio performance (ACL now 0.93% of loans) .
  • Operating discipline is evident (full-year opex -8.4% YoY), but Q4 efficiency ratio back above 82%; continued cost control is a lever against NII pressure .
  • Balance sheet risk reduced via $41mm wholesale funding reduction; funding mix improvement plus dividend continuity ($0.18) and OCC Consent Order termination collectively improve sentiment/cost of funds trajectory .
  • Asset quality is stable but slightly softer vs 2023 (NPLs/loans 0.80% vs 0.60%); monitor credit trends as ACL coverage has normalized lower with model updates .
  • 2025 “challenging” setup: management’s cautious tone suggests limited top-line growth near term; focus on deposit pricing discipline, earning asset mix, and fee diversification (BOLI/annuities) .
  • With no Street estimates, trading may anchor to sequential momentum (NIM/expense) and regulatory normalization; upcoming dividend cadence and capital ratios (T1 leverage 13.83%) provide downside support .

Additional Detail and Data Sources

  • Q4 2024 8-K Item 2.02 (press release attached) and full press release: net income $1.47mm; EPS $0.26; NIM 3.31%; provision credit $613k; non-interest income $1.07mm; efficiency 82.30% .
  • Prior quarter press releases for trend analysis: Q3 2024 (EPS $0.24; NIM 3.28%) and Q2 2024 (EPS $0.19; NIM 3.14%) .
  • Other relevant Q4 press releases: OCC Consent Order termination (Dec 3, 2024); dividend declarations ($0.18) in Oct 2024 and Jan 2025 .