One day after depositors of Lake Shore Savings Bank agreed to waive the bank’s dividend to the company’s mutual holding company that they control, the board of the Dunkirk-based company announced a quarterly cash dividend to public shareholders of 7 cents per share.
Lake Shore Bancorp said Thursday it will pay the dividend on its common stock March 29 to shareholders of record on March 11. If the Federal Reserve agrees, the dividend will not be paid to Lake Shore MHC, the mutual holding company that owns 61.4 percent of the company’s total outstanding stock.
The mutual holding company, which in turn is owned by the depositors at Lake Shore, is designed to ensure the local community maintains control over the publicly traded company’s future. Historically, the mutual holding company has always waived its right to receive the same dividend as other shareholders. Otherwise, that would impose a significant cost on the bank and would be a deterrent to dividend payments.
But the Federal Reserve recently adopted “interim” final rules that impose restrictions on such waivers and require mutual holding companies to obtain approval from their members first. The bank even slashed its dividend 43 percent in October to 4 cents per share because it didn’t have time to seek members’ approval for a waiver.
On Wednesday, the savings bank’s depositors voted to waive their payment on dividends that the company declares through Feb. 26, 2014.