Lake Shore Bancorp, Inc., the holding company for Lake Shore Savings Bank, announced first quarter 2013 net income of $906,000, or $0.16 per diluted share, compared to net income of $1.0 million, or $0.18 per diluted share, for the first quarter of 2012. The lower net income, as compared to first quarter 2012, was primarily due to a modest decrease in net interest income during 2013, as well as an $80,000 increase in the provision for loan losses in the first quarter of 2013 as compared to the first quarter of 2012.
"We continue to deliver solid and stable earnings in a challenging low-growth economic environment by remaining focused on strong asset quality, carefully managing non-interest expense and prudently investing in opportunities to expand our customer service footprint," said Daniel P. Reininga, President and Chief Execu-tive Officer. "We remain committed to building scale in our commercial lending portfolio to realize higher yields and shorter loan terms than are available on our traditional lending focus, residential mortgages. We continue to invest in expanding our branch network, particularly in Erie County, and are pleased to have opened our eleventh branch office in Snyder, New York, on April 11, 2013, an area with compelling demographics. We look forward to bringing a superior level of personal service to the families and businesses in yet another Western New York community."
First quarter 2013 net interest income was $3.7 million, a reduction of 1.7 percent, compared to $3.8 million for the first quarter of 2012. Interest income for the first quarter was down $419,000 primarily due to lower average interest rates on the bank's investment portfolio and lower average interest-earning assets in comparison to the first quarter of 2012. Interest expense for the first quarter of 2013 was $912,000, a decrease of $353,000, or 27.9 percent, compared to first quarter 2012 and reflective of a 7 basis point reduction in average deposit rates and lower average balances for deposits and borrowings in the 2013 quarter.
First quarter net interest margin was 3.36 percent, up 4 basis points compared to 3.32 percent for first quarter 2012, and up 8 basis points compared to 3.28 percent for the quarter ended Dec. 31.
The first quarter net interest margin reflected a 33 basis point decline in the cost of interest bearing liabilities that was partially offset by a 24 basis point decline in the interest rate on interest earning assets and a $13.9 million decrease in total interest-earning assets, compared to the first quarter of 2012.
Average interest-earning assets to average interest-bearing liabilities for first quarter increased 84 basis points to 119.4 percent, compared to first quarter 2012. Average interest-earning assets declined by $13.9 million primarily reflecting a reduction in investment securities, and average interest-bearing liabilities were down $14.4 million due to an $8.4 million reduction in average borrowings and a $6.0 million reduction in average deposits, as compared to the first quarter 2012.
2013 First Quarter highlights
Net interest margin: Improved by 8 basis points in comparison to the fourth quarter 2012.
Deposits: Grew at an annualized rate of 6.1 percent from Dec. 31.
Total assets: increased $5.8 million from Dec. 31.
Asset quality metrics: Remained steady and reflect the solid credit quality of the loan portfolio.
Non-interest income for the first quarter 2013 and 2012 was $515,000 and $521,000, respectively, with the 2013 quarter reflecting a decrease in service charges and fees partially offset by increased earnings on bank owned life insurance.
Non-interest expense for first quarter was $3.1 million, an increase of only 1.2 percent compared with the 2012 first quarter. The modest increase to non-interest expense was due to higher occupancy and equipment cost, higher professional services expense and increased salary and benefits expense, which was partially offset by lower advertising expenditures in the first quarter.
The bank's first quarter provision for loan losses was $45,000, compared to a credit of $35,000 in the 2012 first quarter, and reflective of additional growth in the bank's commercial real estate loan portfolio along with an increase in classified residential mortgage loans.
The bank's asset quality metrics remained steady, with non-performing loans as a percentage of total net loans equal to 0.93 percent, up slightly from 0.89 percent at Dec. 31. The Bank's allowance for loan losses as a percentage of non-performing loans was 72.52 percent on March 31, as compared to 74.63 percent at Dec. 31.
Total assets at March 31 were $488.2 million, an annualized increase of 4.8 percent in comparison to Dec. 31. Total deposits at March 31, 2013 were $384.3 million, an increase of $5.7 million from December 31. Stockhold-ers' equity at March 31 and Dec. 31 was $66.9 million, reflecting $906,000 of net income in the first quarter partially offset by a $776,000 decrease in unrealized gains on available for sale investment securities and a $159,000 cash dividend payment.
On April 24, the Com-pany's Board of Directors approved a $0.07 per share cash dividend on its common stock, payable on May 21, to shareholders of record as of May 7. Based on the company's closing stock price of $11.68 on April 23, the implied dividend yield for the company's common stock is 2.40 percent.
Lake Shore, MHC, which holds 3,636,875 shares, or 61.4 percent, of the company's total outstanding stock, has elected to waive receipt of the dividend on its shares.
The MHC obtained the approval of its members (depositors of Lake Shore Savings Bank) to waive the MHC's receipt of this dividend, as well as any future quarterly dividends de-clared by the company on its common stock up to $0.28 per share during the 12-month period ending Feb. 26, 2014. The MHC received the non-objection of the Federal Reserve Bank of Philadelphia to waive its right to receive dividends paid by the company on March 25.