Lake Shore Bancorp, Inc. operates as a mid-tier, federally chartered savings
and loan holding company of Lake Shore Savings Bank (“Lake Shore Savings”
or the “Bank”). A majority of Lake Shore Bancorp’s issued
and outstanding common stock (60.6% as of December 31, 2015) is held by Lake
Shore, MHC (the “MHC”), a federally chartered mutual holding company,
which serves as the parent company to Lake Shore Bancorp. The MHC does not engage
in any substantial business activity other than its investment in a majority
of the common stock of Lake Shore Bancorp. The Board of Governors of the Federal
Reserve System (the “Federal Reserve Board”) is the regulator for
the MHC. Federal law and regulations require that as long as the MHC is in existence,
it must own at least a majority of Lake Shore Bancorp’s common stock.
The remaining common shares of Lake Shore Bancorp are owned by public stockholders
and the Lake Shore Savings Bank Employee Stock Ownership Plan (“ESOP”).
Our common stock is traded on the Nasdaq Global Market under the symbol “LSBK”.
Unless the context otherwise requires, all references herein to Lake Shore Bancorp
or Lake Shore Savings include Lake Shore Bancorp and Lake Shore Savings on a
consolidated basis.
Lake Shore Bancorp, Inc. was organized in 2006 for the purpose of acting as
the savings and loan holding company of Lake Shore Savings Bank in connection
with the Company’s initial public stock offering. The Company, a federal
corporation, is regulated by the Federal Reserve Board.
Lake Shore Savings Bank was chartered as a New York savings and loan association
in 1891. In 2006, the Bank converted from a New York-chartered mutual savings
and loan association to a federal savings bank charter. The Bank is subject
to the supervision and regulation of the Office of the Comptroller of the Currency
(“OCC”).
For over 124 years, the Bank has served the local community of Dunkirk, New
York. In 1987, we opened our second office in Fredonia, New York. Since 1993,
we have expanded to eleven branch offices. In addition, we have added three
administrative office buildings which comprise our corporate headquarters in
Dunkirk, New York. Our principal business consists of (1) attracting retail
deposits from the general public in the areas surrounding our corporate headquarters
and main branch office in Dunkirk, New York and ten other branch offices in
Chautauqua and Erie Counties, New York and (2) investing those deposits, together
with funds generated from operations, primarily in one- to four-family residential
mortgage loans, commercial real estate loans, home equity lines of credit and,
to a lesser extent, commercial business loans, consumer loans, and investment
securities.
Historically, as a thrift institution, we have primarily originated residential
mortgage loans, including home equity loans. In recent years, we have become
more focused on originating commercial real estate and commercial business loans,
also known as C&I Lending, to add adjustable rate loans to our portfolio
and diversify the risk on our balance sheet, limit interest rate risk and to
position ourselves for a rising interest rate environment. We plan to continue
this practice in the near future. We have also purchased a limited number of
equipment loans from a third party broker, which are secured by first liens
on the new equipment purchases by small businesses located throughout the Northeastern
United States.
Our Board of Directors reviews and approves our investment policy on an annual
basis. This policy dictates that investment decisions be made based on the safety
of the investment, liquidity requirements, potential returns, cash flow targets,
and consistency with our interest rate risk management strategy. The Board of
Directors has delegated primary responsibility for ensuring that the guidelines
in the investment policy are followed to the President and Chief Executive Officer
and the Chief Financial Officer. Our President and Chief Executive Officer or
our Chief Financial Officer are responsible for making securities portfolio
decisions in accordance with established policies and have the authority to
purchase and sell securities within the specific guidelines established by the
investment policy. In addition, all transactions are reviewed by the Asset/Liability
Committee of the Board of Directors which meets at least quarterly.
All of our securities carry market risk, as increases in market rates of interest
may cause a decrease in the fair value of the securities. Our investment policy
is designed primarily to manage the interest rate sensitivity of our assets
and liabilities, to generate a favorable return without incurring undue interest
rate or credit risk, to complement our lending activities and to provide and
maintain liquidity within established guidelines. Our investment policy outlines
the pre-purchase analysis, credit, and interest rate risk assessment guidelines
and due diligence documentation required for all permissible investments. In
addition, our policy requires management to routinely monitor the investment
portfolio as well as the markets for changes which may have a material, negative
impact on the credit quality of our holdings.
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