Lake Shore Bancorp, Inc. (LSBK): Analyse de Pestle [Jan-2025 Mise à jour]

Dans le paysage dynamique de la banque communautaire, Lake Shore Bancorp, Inc. (LSBK) se dresse à une intersection critique de forces externes complexes qui façonnent sa trajectoire stratégique. Des défis réglementaires dans l'État de New York aux perturbations technologiques transformant les modèles bancaires traditionnels, cette analyse complète du pilon dévoile les facteurs environnementaux à multiples facettes stimulant l'écosystème opérationnel de LSBK. Plongez dans une exploration éclairante de la façon dont les dynamiques politiques, économiques, sociologiques, technologiques, juridiques et environnementales convergent pour influencer l'avenir de l'institution financière régionale, révélant les défis et les opportunités complexes qui définissent son paysage concurrentiel.

Lake Shore Bancorp, Inc. (LSBK) - Analyse du pilon: facteurs politiques

Règlements sur les banques régionales dans l'État de New York

Le Département des services financiers de l'État de New York (NYDFS) réglemente les stratégies opérationnelles de Lake Shore Bancorp avec des exigences de conformité spécifiques:

Aspect réglementaire	Exigences spécifiques
Adéquation du capital	Ratio de capital minimum de niveau 1 de 8%
Conformité aux prêts	Évaluation des performances de la loi sur le réinvestissement communautaire (CRA): satisfaisant
Protection des consommateurs	Adhésion stricte à la loi sur la loi bancaire de l'État de New York 14-A

Politiques monétaires de la Réserve fédérale

Impact de la Réserve fédérale sur la banque communautaire:

• Taux de fonds fédéraux actuels: 5,25% - 5,50%
• Conformité aux exigences de capital Bâle III
• Exigences de test de stress pour les banques de moins de 10 milliards de dollars d'actifs

Modifications de la surveillance bancaire

Les modifications des exigences de conformité potentielles comprennent:

Zone de réglementation	Changements potentiels
Anti-blanchiment	Règles de diligence raisonnable des clients (CDD) améliorées
Cybersécurité	NYDFS Règlement sur la cybersécurité 23 Mises à jour NYCRR 500

Initiatives de développement économique locales

Les programmes de développement économique de l'État de New York affectent potentiellement le LSBK:

• Crédits d'impôt du programme d'emplois Excelsior: jusqu'à 10% des investissements qualifiés
• Programme de petites entreprises NY Forward: accorde jusqu'à 25 000 $
• Initiatives du Conseil régional du développement économique avec un financement potentiel de 750 millions de dollars par an

Lake Shore Bancorp, Inc. (LSBK) - Analyse du pilon: facteurs économiques

Les fluctuations des taux d'intérêt ont un impact sur la rentabilité des banques communautaires

Dès le quatrième trimestre 2023, la marge nette des intérêts de Lake Shore Bancorp était de 3,12%, directement influencée par les politiques de taux d'intérêt de la Réserve fédérale. La fourchette de taux des fonds fédéraux de 5,25% - 5,50% a affecté de manière significative les stratégies de prêt et de dépôt de la banque.

Indicateur économique	Valeur (2023-2024)	Impact sur LSBK
Marge d'intérêt net	3.12%	Métrique de rentabilité directe
Taux de fonds fédéraux	5.25% - 5.50%	Détermination du taux de prêt
Coût des fonds	2.45%	Dépenses opérationnelles

Conditions économiques régionales dans l'ouest de New York

Les indicateurs économiques de l'ouest de New York influencent directement les performances du prêt de Lake Shore Bancorp. Le taux de chômage du comté d'Erie était de 4,2% en décembre 2023, affectant les probabilités de défaut de prêt.

Métrique économique régionale	Valeur	Importance
Taux de chômage du comté d'Erie	4.2%	Indicateur de risque de défaut de prêt
Revenu médian des ménages	$62,345	Évaluation de la capacité de prêt
Croissance régionale du PIB	2.1%	Marqueur de santé économique

Tendances du marché des prêts aux petites entreprises

Le portefeuille de prêts aux petites entreprises de LSBK a totalisé 87,4 millions de dollars en 2023, ce qui représente 42% des actifs totaux de prêt. Le segment des prêts commerciaux de la banque a montré une croissance constante malgré les défis économiques.

Métrique de prêt de petites entreprises	Valeur	Changement d'une année à l'autre
Prêts totaux pour les petites entreprises	87,4 millions de dollars	+5.3%
Taille moyenne du prêt	$124,500	+3.2%
Taux d'approbation des prêts commerciaux	68%	Écurie

Inflation et incertitude économique

L'indice des prix à la consommation (IPC) de 3,4% en décembre 2023 a créé des défis pour la croissance du secteur bancaire de LSBK, un impact sur les stratégies de prêt et les taux de dépôt.

Métrique de l'inflation	Valeur	Impact du secteur bancaire
Indice des prix à la consommation	3.4%	Ajustement du taux de prêt
Taux d'inflation de base	3.9%	Considérations de taux de dépôt
Taux d'intérêt réel	1.86%	Indicateur de rentabilité

Lake Shore Bancorp, Inc. (LSBK) - Analyse du pilon: facteurs sociaux

La population vieillissante dans l'ouest de New York a un impact démographique sur le service bancaire

Selon le U.S. Census Bureau, Erie County, NY (zone de service primaire) détient 33,2% de la population âgée de 55 ans et plus en 2022. L'âge médian de la région est de 40,8 ans.

Groupe d'âge	Pourcentage	Préférence de service bancaire
55 à 64 ans	16.4%	Services numériques / succursales mixtes
65-74 ans	10.3%	Banque de succursale traditionnelle
Plus de 75 ans	6.5%	Services bancaires en personne

Augmentation des préférences bancaires numériques chez les jeunes clients

L'utilisation des banques mobiles dans l'État de New York a atteint 67,3% parmi les 18 à 44 ans en 2023. Le taux d'adoption des banques en ligne est de 72,4%.

Canal bancaire numérique	Pourcentage d'utilisation
Application bancaire mobile	67.3%
Banque Web en ligne	72.4%
Dépôt de chèques mobiles	54.6%

Le modèle bancaire axé sur la communauté soutient les relations économiques locales

Lake Shore Bancorp dessert 3 comtés avec une concentration de portefeuille de prêts locaux de 98,7%. Les prêts aux petites entreprises dans la région de l'ouest de New York ont ​​totalisé 426,3 millions de dollars en 2023.

Métrique économique locale	Valeur
Portefeuille de prêts locaux	98.7%
Prêts régionaux de petites entreprises	426,3 millions de dollars
Taux d'approbation des prêts commerciaux locaux	73.2%

Changement des attentes des consommateurs pour les services financiers personnalisés

La demande des clients de conseils financiers personnalisés a augmenté de 45,6% en 2023. Les services de planification financière numériques personnalisés ont augmenté de 38,2% en glissement annuel.

Service de personnalisation	Taux de croissance
Conseils financiers personnalisés	45.6%
Planification financière numérique	38.2%
Recommandations d'investissement personnalisées	42.7%

Lake Shore Bancorp, Inc. (LSBK) - Analyse du pilon: facteurs technologiques

Investissements de plate-forme bancaire numérique

Lake Shore Bancorp a investi 1,2 million de dollars dans les mises à niveau de la plate-forme bancaire numérique en 2023. Le volume des transactions numériques a augmenté de 37% par rapport à l'année précédente.

Métrique de la plate-forme numérique	2023 données	Changement d'une année à l'autre
Utilisateurs de la banque en ligne	24,563	+22.4%
Transactions bancaires mobiles	1,456,890	+37%
Investissement de plate-forme numérique	$1,200,000	+15.6%

Investissements en cybersécurité

Les dépenses de cybersécurité ont atteint 875 000 $ en 2023, ce qui représente 3,2% du budget informatique total. Zéro des violations de sécurité majeures signalées au cours de l'exercice.

Métrique de la cybersécurité	2023 données
Investissement total de cybersécurité	$875,000
Incidents de sécurité détectés	42
Taux de résolution des incidents	98.5%

Développement d'applications bancaires mobiles

Les téléchargements d'applications mobiles sont passés à 15 672 en 2023, avec une note de satisfaction de l'utilisateur de 4,6 / 5. Les coûts de développement ont totalisé 450 000 $.

Automatisation et technologies de l'IA

Implémenta l'automatisation des processus axée sur l'IA avec un investissement de 620 000 $. L'efficacité opérationnelle s'est améliorée de 26% grâce à des workflows automatisés.

Métrique de la technologie d'automatisation	2023 données
Investissement IA / Automation	$620,000
Processus automatisés	37
Gain d'efficacité opérationnelle	26%

Lake Shore Bancorp, Inc. (LSBK) - Analyse du pilon: facteurs juridiques

Conformité aux exigences de capital réglementaire de Bâle III

Au quatrième trimestre 2023, Lake Shore Bancorp, Inc. a rapporté les ratios de capital suivants:

Type de ratio de capital	Pourcentage	Minimum réglementaire
Niveau de capitaux propres commun (CET1)	12.4%	7.0%
Ratio de capital de niveau 1	13.2%	8.5%
Ratio de capital total	14.6%	10.5%
Rapport de levier	9.7%	5.0%

Règlement sur le secret de la banque et les réglementations anti-blanchiment

Dépenses de conformité: 1,2 million de dollars alloués à la conformité des LMA au cours de l'exercice 2023.

• Personnel de conformité total: 7 personnel dédié
• Heures de formation annuelle du personnel: 40 heures par employé
• Rapports d'activités suspectes (SRAS) déposées: 22 en 2023

Les lois sur la protection financière des consommateurs impact sur les pratiques de prêt

Métrique de prêt	2023 données
Prêts à la consommation totale	156,3 millions de dollars
Les prêts hypothécaires sont originaires	42,7 millions de dollars
Taux de refus de prêt	8.6%
Ajustements de prêts liés à la conformité	3,2% du portefeuille total des prêts

Contraintes de réglementation potentielle de fusion et d'acquisition

Coûts de révision réglementaire: 475 000 $ pour les évaluations potentielles de fusions et acquisitions et de conformité en 2023.

• Applications réglementaires en attente: 0
• Convocateur juridique externe: 250 000 $ par an
• Dépenses d'évaluation de la fusion: 225 000 $ en 2023

Lake Shore Bancorp, Inc. (LSBK) - Analyse du pilon: facteurs environnementaux

Les pratiques bancaires durables deviennent de plus en plus importantes

Lake Shore Bancorp, Inc. a déclaré 12,3 millions de dollars en portefeuille d'investissement durable au quatrième trimestre 2023. Les initiatives de banque verte de la banque représentent 4,7% de l'allocation totale des actifs.

Catégorie d'investissement durable	Investissement total ($)	Pourcentage de portefeuille
Prêts aux énergies renouvelables	5,600,000	2.3%
Projets d'infrastructure verte	3,900,000	1.6%
Investissements technologiques environnementaux	2,800,000	1.1%

Opportunités de prêt vert et d'investissement dans les énergies renouvelables

Le portefeuille de prêts aux énergies renouvelables actuel s'élève à 7,2 millions de dollars, les projets solaires représentant 62% des investissements verts. Les projets d'énergie éolienne représentent 28%, tandis que les investissements hydroélectriques représentent 10%.

Évaluation des risques climatiques dans les prêts commerciaux et résidentiels

Métriques d'évaluation des risques climatiques:

• Des prêts à haut risque de zone d'inondation ont été réduits de 22% en 2023
• La prime de risque de propriété côtière a augmenté de 3,5 points de pourcentage
• La notation de la résilience climatique mise en œuvre pour 87% des évaluations de prêts commerciaux

Catégorie de risque de prêt	Facteur d'ajustement des risques	Impact annuel
Propriétés de la zone d'inondation	+1.2%	1 500 000 $ Coût d'atténuation des risques
Immobilier commercial côtier	+2.7%	2 300 000 $ Prime de risque supplémentaire

Stratégies de réduction de l'empreinte carbone pour les opérations bancaires

Objectifs de réduction des émissions de carbone pour les opérations bancaires:

• 2024 Émissions de carbone cible: 15% de réduction par rapport à 2022
• Réduction de la consommation d'énergie: 22% grâce à l'approvisionnement en énergies renouvelables
• L'optimisation des infrastructures numériques devrait économiser 180 tonnes métriques de CO2 par an

Initiative de réduction du carbone	Économies projetées	Coût de la mise en œuvre
Efficacité énergétique du centre de données	95 tonnes métriques CO2	$450,000
Infrastructure de travail à distance	85 tonnes métriques CO2	$350,000

Lake Shore Bancorp, Inc. (LSBK) - PESTLE Analysis: Social factors

Strong community-oriented focus in Western New York (Chautauqua and Erie counties)

Lake Shore Bancorp, Inc. (LSBK) is defintely a classic community bank, and that local tie is a core social factor that drives its business model. The Bank operates as a mission-driven, community-oriented financial institution, and this is not just marketing-it's a geographic reality. Its entire physical footprint is concentrated in Western New York, specifically across ten full-service branch locations: four in Chautauqua County and six in Erie County.

This deep local presence means the Bank's reputation and customer loyalty are intrinsically linked to its community support. When the CEO states a commitment to providing ongoing support to the communities it serves, it's a strategic necessity, not a choice. The Bank's ability to attract and retain deposits relies heavily on this trust, especially as larger, national banks push digital-only services into the region.

Localized economic health directly impacts the bank's loan quality and deposit base

For a community bank like Lake Shore Bancorp, Inc., the health of its loan portfolio is a direct mirror of the local economy in Dunkirk and the surrounding counties. If local businesses struggle, the Bank feels it immediately. The good news is that as of the third quarter of 2025, the bank's asset quality remains strong, which suggests relative stability in its operating region despite broader economic volatility.

Here's the quick math on their asset health as of September 30, 2025:

• Non-performing assets as a percentage of total assets decreased to just 0.25%.
• That metric was 0.55% at the end of 2024, so they've cut the risk in half.

This strong loan quality is critical because it protects the deposit base. The Bank reported $590.3 million in Total Deposits and $552.6 million in Total Loans as of September 30, 2025. A healthy loan-to-deposit ratio means the bank is putting local money to work responsibly, but any local economic downturn-say, a major employer leaving Chautauqua County-would hit both sides of the balance sheet hard.

Growing consumer adoption of short-term installment loans (Buy Now, Pay Later)

You need to be aware that the Buy Now, Pay Later (BNPL) trend is a major social shift, and it's a direct competitor to traditional bank credit products, especially for younger customers. This short-term installment financing is booming. In 2025, an estimated 90 million Americans are expected to use BNPL services for purchases.

The psychology is simple: spreading payments makes a purchase feel less financially 'real' than using a credit card. This is a significant risk for a bank that relies on local consumer lending. The global Gross Merchandise Volume (GMV) for BNPL is projected to reach $560.1 billion in 2025, reflecting a 13.7% year-over-year increase. The real danger, and the opportunity for a community bank, lies in the rising delinquency rates.

BNPL Consumer Trend	2025 US Data	Implication for Lake Shore Bancorp, Inc.
Expected US Users	90 million	Threatens market share for small-dollar bank loans and credit cards.
Monthly Spending Growth (YOY)	Increased nearly 21% (June 2024 to June 2025)	Shows rapid normalization of BNPL as a primary payment method.
Users Reporting Late Payments	Approximately 34-41%	Creates an opening for the Bank to offer more responsible, transparent credit products as an alternative to high-risk BNPL.
Late Payment Rate for Gen Z Users	51%	Highlights financial strain among the younger demographic, a potential future credit risk pool.

Workforce shifts demanding higher skills in data analytics and technology

The social shift in the workforce is forcing every financial institution, even a regional one, to compete for talent in data and technology. The financial services sector is leading the charge in tech adoption, with 95% of firms investing in Artificial Intelligence (AI) solutions. This means the skills needed for a teller or a loan officer today are fundamentally different than five years ago.

The demand for specialized roles is skyrocketing. The financial services sector is expected to see a 228% demand increase in AI and machine learning specialists by 2030. For Lake Shore Bancorp, Inc., this means they must now compete with major financial hubs for data analysts. More than 40% of financial executives are prioritizing the recruitment of staff with advanced technology and data analytics skills in 2025. Your next hire in risk management needs to know data modeling, not just accounting. This is a massive reskilling challenge for a smaller organization.

Lake Shore Bancorp, Inc. (LSBK) - PESTLE Analysis: Technological factors

Banks prioritizing Artificial Intelligence (AI) for operational efficiency and leverage in 2025.

You're seeing the industry shift from simply automating tasks to injecting real intelligence into core operations, and Lake Shore Bancorp, Inc. (LSBK) is defintely not immune to this pressure. Globally, the banking sector is projected to spend over $73 billion on Artificial Intelligence (AI) technologies by the end of 2025, driving a 17% year-over-year increase in spending. This isn't just a big bank trend; it's a competitive necessity.

For a community institution like Lake Shore Bank, with total assets of $742.8 million as of September 30, 2025, AI is less about headcount reduction and more about leveraging limited resources. For example, AI-driven credit risk modeling has already improved loan approval accuracy by 34% in mid-size banks, which is a massive lever for commercial real estate and residential mortgage lending, LSBK's main lines of business. Honestly, integrating AI is the only way for smaller banks to match the speed and personalization offered by national competitors.

Here's the quick math on the industry's focus:

AI Use Case in Banking (2025)	Industry Impact/Metric
Global AI Spend in Banking	Projected to exceed $73 Billion
AI Adoption Rate (US Banks)	99% active AI implementation in at least one major operation
AI-Driven Value Creation	Expected to generate over $140 Billion annually in banking
AI-Based Fraud Reduction	Reduces false positives by up to 80%

Need for significant investment in cybersecurity to protect a growing digital asset base.

As Lake Shore Bank expands its digital footprint, the risk surface grows exponentially, and the cost to manage that risk is rising fast. Global spending on cybersecurity is projected to soar to $213 billion in 2025. Plus, 88% of bank executives are planning to increase their IT and tech spend by at least 10% this year to counter increasingly complex, AI-powered attacks.

The bank's total deposits hit $590.3 million by Q3 2025, and protecting that base is paramount. This means moving past simple firewalls to proactive, AI-driven threat detection. LSBK's non-interest expense for Q3 2025 showed an increase in data processing expense of $57,000, or 12.5%, compared to the prior quarter, which is a concrete sign that core technology costs are already climbing just to maintain the status quo. What this estimate hides is the true cost of a breach, which can be catastrophic for a community bank's reputation.

Expansion of online banking solutions to compete with larger national institutions.

The successful conversion to a fully public stock-based structure in July 2025, which generated gross proceeds of $49.5 million, gives Lake Shore Bank the war chest it needs to finally level up its digital offerings. A core stated purpose of this capital raise is to 'enhance digital banking infrastructure.' This is a direct response to consumer demand, where over 16% of clients worldwide are comfortable with a fully digital bank as their primary relationship.

The focus now must be on seamless, high-value digital experiences, not just basic transactions. This expansion includes:

• Streamlining digital account opening to reduce customer acquisition friction.
• Offering personalized financial fitness tools to help customers manage savings and investments.
• Ensuring 24/7 availability for all core services, which is a non-negotiable for modern customers.

Adoption of agentic workflows to drive the next level of operational efficiency.

The next frontier is agentic AI (autonomous systems that reason, plan, and act independently), which is set to be a defining differentiator in 2025. This technology moves beyond simple chatbots to handle complex, end-to-end processes without human handoffs. For Lake Shore Bank, this is where significant operational efficiency will be unlocked, especially in the back-office.

Instead of just using AI to flag a suspicious transaction, an agentic workflow can autonomously investigate, gather necessary compliance data, generate an audit trail, and even draft the regulatory submission, all in real-time. This is about operational resilience at scale. Agentic AI can revolutionize LSBK's core processes:

• Loan Processing: Automate credit scoring and document parsing for faster loan approvals.
• Compliance: Continuously monitor transactions and enforce regulatory policy in real-time.
• Back-Office: Orchestrate complex finance administration like payment matching and reconciliation.

Moving to these workflows will help turn the bank's strong nine-month 2025 net income of $5.3 million into even more sustainable, long-term profitability by cutting down on manual, high-cost steps.

Lake Shore Bancorp, Inc. (LSBK) - PESTLE Analysis: Legal factors

The legal landscape for Lake Shore Bancorp, Inc. (LSBK) in 2025 is defined by a major internal corporate restructuring-the mutual-to-stock conversion-and a favorable macro-trend of regulatory relief for smaller regional banks. This combination provides a clear legal tailwind, immediately strengthening the balance sheet and reducing future compliance overhead.

LSBK's July 2025 conversion raised $49.5 million in gross proceeds, strengthening capital.

The successful completion of the second-step mutual-to-stock conversion on July 18, 2025, was a critical legal and financial maneuver. This transaction, which required all necessary regulatory approvals, eliminated the mutual holding company structure, simplifying the corporate governance and enhancing transparency for investors. The core financial benefit was the stock offering, which sold 4,950,460 shares at $10.00 per share, generating gross proceeds of $49.5 million.

Here's the quick math: that cash infusion immediately boosted the company's capital ratios, providing a substantial buffer for future growth and regulatory compliance. The legal act of conversion was the mechanism for this capital raise, a defintely positive step.

Transition from a federal savings bank to a New York chartered commercial bank.

Simultaneously with the conversion, Lake Shore Savings Bank transitioned its charter from a federal savings bank to a New York chartered commercial bank. This shift is a strategic move that expands the bank's operational scope under New York state law.

The new commercial bank charter allows for a broader range of lending activities, particularly expanding capacity to bank with municipalities and public entities within the state, which was more restricted under the prior federal savings bank charter.

Regulatory Status Change (July 2025)	Former Status	New Status
Holding Company Structure	Mutual Holding Company (Lake Shore, MHC)	Fully Public Stock Holding Company (Lake Shore Bancorp, Inc.)
Bank Charter	Federal Savings Bank	New York Chartered Commercial Bank
Key Benefit	Maintained local control, limited capital access	Enhanced liquidity, expanded lending capacity, simplified structure

Regulatory easing expected to reduce compliance costs for regional banks.

The general regulatory environment in late 2025 is trending toward relief for smaller institutions like Lake Shore Bancorp, Inc., which had approximately $689.0 million in consolidated assets at March 31, 2025.

This easing is a direct offset to the high cost of compliance that has historically burdened regional banks. Recent actions by federal regulators include:

• OCC ending the Money Laundering Risk System data collection for community banks, effective immediately in November 2025.
• Tailored Bank Secrecy Act (BSA) examination procedures for community banks, effective February 1, 2026.
• A proposal to reduce the Community Bank Leverage Ratio (CBLR) requirement from 9% to 8%, extending the grace period for non-compliance.

These changes mean LSBK can reallocate resources from compliance paperwork to core business functions, potentially saving on technology and specialist recruitment costs.

Potential elimination of Long-Term Debt (LTD) mandates for regional banks.

While the broader discussion about Long-Term Debt (LTD) mandates for regional banks continues, Lake Shore Bancorp, Inc. is effectively exempt from the most stringent proposals. The LTD Proposal, which aims to enhance resolvability, applies to US banking organizations with $100 billion or more in total assets.

Since LSBK's asset base is significantly smaller, the company does not face the regulatory requirement to issue substantial amounts of new LTD, a mandate that is expected to increase the marginal cost of funding for larger peers. This non-applicability is a major competitive advantage in the legal/regulatory space, allowing the bank to maintain a simpler capital structure and lower funding costs compared to banks just above the $100 billion threshold.

Lake Shore Bancorp, Inc. (LSBK) - PESTLE Analysis: Environmental factors

You're looking at the Environmental factors for Lake Shore Bancorp, Inc. (LSBK), and the core takeaway is clear: the bank's high concentration in real estate collateral in New York State makes climate-related risk management a fiduciary imperative, not just a compliance checkbox. The regulatory pressure from the state is real, but it also creates a clear path to new, profitable green lending opportunities.

Growing investor and public focus on Environmental, Social, and Governance (ESG) reporting.

Investor scrutiny on Environmental, Social, and Governance (ESG) performance is no longer limited to the mega-banks; it's a baseline expectation for regional players like Lake Shore Bancorp. Investors now demand structured, transparent disclosures that quantify climate-related financial risks and opportunities. This shift means your ESG strategy needs to be integrated with your financial reporting, not just a separate marketing document. For LSBK, with total assets of $742.8 million as of September 30, 2025, a clear ESG framework is essential to maintain investor confidence and attract capital in a competitive market.

Honestly, without credible ESG data, businesses risk being excluded from key sustainable finance opportunities. The market rewards banks that can show a clear link between sustainability initiatives and business resilience.

Increased pressure for banks to assess and disclose climate-related financial risks.

The regulatory hammer in New York State (NY) is already in motion. The New York State Department of Financial Services (NYSDFS) issued guidance requiring state-regulated banking and mortgage institutions, which includes Lake Shore Bank, to actively identify, measure, and monitor material financial and operational risks from climate change. This isn't a suggestion; it's a new standard of risk management.

The guidance focuses on both physical risks (like extreme weather) and transition risks (like policy changes or carbon pricing). Your Enterprise Risk Management (ERM) framework must now explicitly incorporate climate-related scenario analysis and stress testing. The NYSDFS is expected to issue a Request for Information (RFI) to gather insights on how regulated institutions are integrating this risk into their governance and risk management, making preparedness for 2025 a defintely critical task.

Physical risks from climate change impacting real estate collateral in the New York market.

The most immediate and material risk to Lake Shore Bancorp is the potential devaluation of its loan collateral due to physical climate hazards. Your loan portfolio is heavily concentrated in real estate, representing almost 95% of your total loans, which stood at $552.6 million as of September 30, 2025. Commercial Real Estate (CRE) alone makes up 58.5% of the gross loan total.

Given your Western New York market area, you face risks from severe winter storms, extreme heat, and flooding along Lake Erie and its tributaries. These events can damage collateral, disrupt business operations for commercial borrowers, and increase insurance/maintenance costs, which directly impacts the credit quality of your portfolio. This is a direct credit risk you must model.

Risk Channel	LSBK's Material Exposure (2025)	Financial Impact Mechanism
Physical Risk (e.g., flooding, severe storms)	95% of the $552.6 million loan portfolio is real estate collateral.	Increased loan default rates, higher non-performing assets (NPA), and devaluation of collateral. NPA was already at 0.25% of total assets as of Q3 2025.
Transition Risk (e.g., new building efficiency mandates)	58.5% of gross loans is Commercial Real Estate.	Increased capital expenditure (CapEx) for borrowers to meet new New York State building decarbonization and energy efficiency codes, risking borrower financial strain and credit deterioration.

Opportunity to finance local green energy or sustainable community projects.

The transition risk for borrowers is a direct opportunity for the bank. You can use your capital to finance the required upgrades for your existing commercial clients and capture new market share in the growing New York green economy. This is a clear path to commercial loan portfolio growth.

Lake Shore Bank is already positioned for this, with a qualitative commitment to green finance:

• Financing customers in the local solar farm business.
• Funding several LEED (Leadership in Energy and Environmental Design) certified commercial real estate projects.
• Holding some funds in green bonds within the Bank's investment portfolio.

To be fair, while the exact dollar amount of your 2025 green lending portfolio isn't publicly disclosed, the opportunity is massive. The New York Green Bank, for context, expects to increase its overall leverage portfolio to 8:1 by 2025, indicating a huge appetite for private capital in the state's clean energy transition. This is where you need to be aggressive.

Next step: Risk Management must draft a formal Climate Risk Disclosure plan aligned with NYSDFS guidance by the end of Q1 2026.