DUNKIRK – Lake Shore Savings Bank’s parent company plans to maintain its slow-but-steady method of adding branches, after opening one in Snyder in April, and is determined to grow its commercial loan portfolio.
“It’s been well-received, it’s a great service point for that community,” said Daniel P. Reininga, president and chief executive officer of Dunkirk-based Lake Shore Bancorp, referring to the Snyder branch. “Having a branch on every corner is not today’s banking model. You want to be an effective service point for the community, and that’s what we believe it is.”
The Snyder location, at 4950 Main St., is Lake Shore’s 11th branch in Erie and Chautauqua counties. The new branch had deposits of $4.7 million as of last Friday; Lake Shore acquired the property after First Niagara Financial Group vacated it.
Reininga said Lake Shore’s plan is to add one branch to its network every 18 to 24 months. “The strategy is, generally speaking, if you have a branch profitable at the end of two to three years, you’ve done pretty well with it,” he said after Wednesday’s annual meeting.
Reininga said Lake Shore aims to make greater inroads in Erie County, where it now has six branches. As of June 2012, its market share of deposits in the county was just 0.58 percent, ranking 11th among institutions, according to FDIC data. In Chautauqua County, its market share was 15 percent, ranking fourth.
“We’ve saturated pretty much Chautauqua County, but we have a customer base and a following that’s very appropriate,” he said. “We’re not abandoning Chautauqua County in any way whatsoever. It’s still a very good place for us to be, but the growth opportunity for our service model is Erie County, or other parts of Western New York.”
Across its territory, Lake Shore sees “bright signs” in the small-business community, Reininga said. “The borrowers are fit, as evidenced by the strength of our portfolio. We don’t have a lot of delinquencies in our commercial loan portfolio. We’re seeing folks that are able to sustain their business model.”
Lake Shore recorded commercial loan originations of $22.2 million last year, exceeding its goal of $20 million, he said.
“Commercial loans provide diversification in our portfolio and help us mitigate interest rate risk,” said Rachel Foley, Lake Shore’s chief financial officer.
“Our strategy is to continue to be focused on increasing the commercial loan portfolio, which we will do by taking advantage of the opportunities in our market areas, focused on the needs of small businesses,” she said. “However, we will continue to maintain a large portfolio of residential loans.”
Reininga said commercial loans are the “right kind of interest, in the sense that the commercial loan generally reprices variably.”
“If for some reason rates go up substantially, then those loans reset to a higher rate, which helps preserve the income for the bank,” he said.
Lake Shore in the first quarter of this year recorded net income of $906,000, down from $1 million the year before. It had total deposits of $384.3 million as of March 31.