Lake Shore Bancorp, Inc. announces 2018 and fourth quarter financial results

Lake Shore Bancorp, Inc., the holding company for Lake Shore Savings Bank, announced unaudited results for the three months and year ended December 31, 2018.

2018 Fourth Quarter and Full Year Highlights:

Earnings per share, basic and diluted, increased $0.11, or 20.0%, for the year ended December 31, 2018 when compared to the year ended December 31, 2017. Basic and diluted earnings per share for the three months ended December 31, 2018 was $0.17, an increase of $0.08, or 88.9%, when compared to the three months ended December 31, 2017;

Net interest income increased $1.2 million, or 6.9%, for the year ended December 31, 2018 when compared to the year ended December 31, 2017 primarily due to a $26.7 million, or 16.1%, increase in average commercial loans during the year ended December 31, 2018 as compared to the year ended December 31, 2017;

Net interest income increased $472,000, or 11.3%, for the fourth quarter 2018 when compared to the fourth quarter 2017 primarily due to a $19.7 million, or 11.1%, increase in average commercial loans during the three months ended December 31, 2018 as compared to the three months ended December 31, 2017;

The effective tax rate was 12.8% for the year ended December 31, 2018, which was a 50.8% decrease in comparison to the year ended December 31, 2017, primarily due to the Tax Cuts and Jobs Act (“Tax Act”) which lowered the federal corporate tax rate from 34% to 21% as of January 1, 2018. Net income for the year ended December 31, 2017 was negatively impacted by a one-time $262,000 income tax charge recorded during the fourth quarter 2017 due to the revaluation of net deferred tax assets required by the Tax Act. There were no similar one-time charges recorded during the year ended December 31, 2018;

The effective tax rate was 11.3% for the fourth quarter 2018, which was a 75.1% decrease in comparison to the fourth quarter 2017, primarily due to the Tax Act. A one-time $262,000 income tax charge was recorded during the fourth quarter 2017 due to the revaluation of net deferred tax assets required by the Tax Act which had a negative impact on 2017 net income. There were no similar one-time charges recorded during fourth quarter 2018;

Total assets at December 31, 2018 increased $26.7 million, or 5.2%, to $545.7 million when compared to December 31, 2017;

Loans receivable, net increased $27.4 million, or 7.5%, to $392.5 million at December 31, 2018 from $365.1 million at December 31, 2017 primarily due to organic growth in commercial loans of $13.4 million, or 7.4%, and one- to four-family residential real estate loans of $10.4 million, or 7.2%, during 2018;

Non-performing loans as a percent of total loans decreased from 1.05% as of December 31, 2017 to 0.82% as of December 31, 2018 primarily due to a decrease in non-performing commercial real estate loans during 2018; and

Total deposits grew by $27.3 million, or 6.7%, to $432.5 million at December 31, 2018 when compared to December 31, 2017.

Net income for fourth quarter 2018 was $1.0 million, or $0.17 per diluted share, as compared to fourth quarter 2017 net income of $580,000, or $0.09 per diluted share. Fourth quarter 2018 net income reflected a $472,000 increase in net interest income and a $354,000 decrease in income tax expense which was partially offset by a $388,000 increase in non-interest expense, a $15,000 increase in provision for loan losses and a $3,000 decrease in non-interest income when compared to the fourth quarter of 2017.

Net income for the year ended December 31, 2018 was $4.0 million, or $0.66 per diluted share, compared to net income of $3.4 million, or $0.55 per diluted share, for the year ended December 31, 2017. Net income for the year ended December 31, 2018 reflected a $1.2 million increase in net interest income, a $600,000 decrease in income tax expense and a $120,000 decrease in provision for loan losses which was partially offset by a $1.1 million increase in non-interest expense and a $181,000 decrease in non-interest income when compared to the year ended December 31, 2017.

“We are extremely pleased to report significant growth in both total assets and net income during 2018,” stated Daniel P. Reininga, President and Chief Executive Officer. “Our financial results continue to be positively impacted by our strategic focus on growing loans and deposits organically through the establishment and strengthening of customer relationships while also improving upon our already strong credit quality. We will remain focused on delivering exceptional individualized service while providing our customers with innovative banking products and services.”

Net Interest Income

Fourth quarter 2018 net interest income increased $472,000, or 11.3%, to $4.7 million compared to fourth quarter 2017. Net interest income for the year ended December 31, 2018 increased $1.2 million, or 6.9%, to $17.9 million when compared to the year ended December 31, 2017.

Interest income for the fourth quarter of 2018 was $5.7 million, an increase of $742,000, or 15.1%, compared to fourth quarter 2017. The increase was attributable to a $24.1 million, or 5.1%, increase in the average balance of interest-earning assets and a 40 basis points increase in the average yield of interest-earning assets to 4.53% in comparison to 4.13% for the fourth quarter of 2017. The increase in the average balance and yield of interest-earning assets was primarily due to growth in commercial loans.

Interest income for the year ended December 31, 2018 was $21.5 million, an increase of $2.1 million, or 11.0%, compared to the year ended December 31, 2017. The increase was attributable to a $31.7 million, or 6.8%, increase in the average balance of interest-earning assets in comparison to the year ended December 31, 2017, primarily due to growth in commercial loans. The average yield on interest-earning assets increased by 16 basis points to 4.34% for the year ended December 31, 2018 in comparison to 4.18% for the year ended December 31, 2017, primarily due to growth in higher rate commercial loans.

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