Lake Shore Bancorp, Inc. (LSBK): Análise de Pestle [Jan-2025 Atualizado]

No cenário dinâmico do banco comunitário, Lake Shore Bancorp, Inc. (LSBK) está em uma interseção crítica de forças externas complexas que moldam sua trajetória estratégica. Desde os desafios regulatórios no estado de Nova York até as interrupções tecnológicas que transformam os modelos bancários tradicionais, essa análise abrangente de pestles revela os fatores ambientais multifacetados que impulsionam o ecossistema operacional da LSBK. Mergulhe em uma exploração esclarecedora de como a dinâmica política, econômica, sociológica, tecnológica, legal e ambiental converge para influenciar o futuro da instituição financeira regional, revelando os intrincados desafios e oportunidades que definem seu cenário competitivo.

Lake Shore Bancorp, Inc. (LSBK) - Análise de Pestle: Fatores Políticos

Regulamentos bancários regionais no estado de Nova York

O Departamento de Serviços Financeiros do Estado de Nova York (NYDFS) regula as estratégias operacionais do Lake Shore Bancorp com requisitos específicos de conformidade:

Aspecto regulatório	Requisitos específicos
Adequação de capital	Taxa de capital mínimo de nível 1 de 8%
Comprometer conformidade	Classificação de desempenho da Lei de Reinvestimento da Comunidade (CRA): satisfatório
Proteção ao consumidor	A adesão estrita à Lei Bancária Estadual de NY Seção 14-A

Políticas monetárias do Federal Reserve

Impacto do Federal Reserve no banco comunitário:

• Taxa atual de fundos federais: 5,25% - 5,50%
• Basileia III Requisitos de Capital Conformidade
• Requisitos de teste de estresse para bancos abaixo de US $ 10 bilhões em ativos

Mudanças de supervisão bancária

Os possíveis requisitos de conformidade as modificações incluem:

Área regulatória	Mudanças potenciais
Lavagem anti-dinheiro	Regras de due diligence do cliente aprimoradas (CDD)
Segurança cibernética	Regulamentação de segurança cibernética NYDFs 23 Atualizações NYCRR 500

Iniciativas de desenvolvimento econômico do governo local

Programas de desenvolvimento econômico do estado de Nova York potencialmente afetando o LSBK:

• Excelsior Jobs Program Créditos tributários: até 10% dos investimentos qualificados
• NY Forward Small Business Program: concede até US $ 25.000
• Iniciativas regionais do Conselho de Desenvolvimento Econômico com financiamento potencial de US $ 750 milhões anualmente

Lake Shore Bancorp, Inc. (LSBK) - Análise de Pestle: Fatores econômicos

As flutuações das taxas de juros impactam a lucratividade do banco da comunidade

No quarto trimestre 2023, a margem de juros líquidos de Lake Shore Bancorp foi de 3,12%, diretamente influenciada pelas políticas de taxa de juros do Federal Reserve. A taxa de fundos federais varia de 5,25% - 5,50% afetou significativamente as estratégias de empréstimos e depósito do banco.

Indicador econômico	Valor (2023-2024)	Impacto no LSBK
Margem de juros líquidos	3.12%	Métrica de lucratividade direta
Taxa de fundos federais	5.25% - 5.50%	Determinação da taxa de empréstimos
Custo de fundos	2.45%	Despesa operacional

Condições econômicas regionais no oeste de Nova York

Os indicadores econômicos do oeste de Nova York influenciam diretamente o desempenho do empréstimo de Lake Shore Bancorp. A taxa de desemprego do Condado de Erie foi de 4,2% em dezembro de 2023, afetando as probabilidades de inadimplência de empréstimos.

Métrica econômica regional	Valor	Significado
Taxa de desemprego de Erie County	4.2%	Indicador de risco padrão de empréstimo
Renda familiar média	$62,345	Avaliação da capacidade de empréstimo
Crescimento regional do PIB	2.1%	Marcador de saúde econômica

Tendências do mercado de empréstimos para pequenas empresas

A carteira de empréstimos para pequenas empresas da LSBK totalizou US $ 87,4 milhões em 2023, representando 42% do total de ativos de empréstimos. O segmento de empréstimos comerciais do banco mostrou crescimento consistente, apesar dos desafios econômicos.

Métrica de empréstimo para pequenas empresas	Valor	Mudança de ano a ano
Empréstimos totais de pequenas empresas	US $ 87,4 milhões	+5.3%
Tamanho médio do empréstimo	$124,500	+3.2%
Taxa de aprovação de empréstimo comercial	68%	Estável

Inflação e incerteza econômica

O Índice de Preços ao Consumidor (CPI) de 3,4% em dezembro de 2023 criou desafios para o crescimento do setor bancário da LSBK, impactando estratégias de empréstimos e taxas de depósito.

Métrica da inflação	Valor	Impacto do setor bancário
Índice de preços ao consumidor	3.4%	Ajuste da taxa de empréstimo
Taxa de inflação central	3.9%	Considerações na taxa de depósito
Taxa de juros real	1.86%	Indicador de lucratividade

Lake Shore Bancorp, Inc. (LSBK) - Análise de Pestle: Fatores sociais

População envelhecida no oeste de Nova York Impactos Bancários Necessidades de Serviço Bancário

De acordo com o Bureau do Censo dos EUA, o Condado de Erie, NY (área de serviço primário) tem 33,2% da população com 55 anos ou mais a partir de 2022. A idade média da região é de 40,8 anos.

Faixa etária	Percentagem	Preferência de serviço bancário
55-64 anos	16.4%	Serviços digitais/ramificados mistas
65-74 anos	10.3%	Bancos tradicionais de filial
75 anos ou mais	6.5%	Serviços bancários pessoais

Aumentando as preferências bancárias digitais entre clientes mais jovens

O uso bancário móvel no estado de Nova York atingiu 67,3% entre 18-44 faixa etária em 2023. A taxa de adoção bancária on-line é de 72,4%.

Canal bancário digital	Porcentagem de uso
Aplicativo bancário móvel	67.3%
Banco on -line da web	72.4%
Depósito de cheque móvel	54.6%

O modelo bancário focado na comunidade suporta relações econômicas locais

Lake Shore Bancorp atende 3 municípios com 98,7% de concentração de carteira de empréstimos locais. Os empréstimos para pequenas empresas na região do oeste de Nova York totalizaram US $ 426,3 milhões em 2023.

Métrica econômica local	Valor
Portfólio de empréstimos local	98.7%
Empréstimos regionais para pequenas empresas	US $ 426,3 milhões
Taxa local de aprovação de empréstimos comerciais	73.2%

Mudança de expectativas do consumidor para serviços financeiros personalizados

A demanda do cliente por consultoria financeira personalizada aumentou 45,6% em 2023. Os serviços de planejamento financeiro digital personalizado cresceram 38,2% ano a ano.

Serviço de personalização	Taxa de crescimento
Conselhos financeiros personalizados	45.6%
Planejamento financeiro digital	38.2%
Recomendações de investimento personalizado	42.7%

Lake Shore Bancorp, Inc. (LSBK) - Análise de Pestle: Fatores tecnológicos

Investimentos da plataforma bancária digital

Lake Shore Bancorp investiu US $ 1,2 milhão em atualizações de plataforma bancária digital em 2023. O volume de transações digitais aumentou 37% em comparação com o ano anterior.

Métrica da plataforma digital	2023 dados	Mudança de ano a ano
Usuários bancários online	24,563	+22.4%
Transações bancárias móveis	1,456,890	+37%
Investimento de plataforma digital	$1,200,000	+15.6%

Investimentos de segurança cibernética

Os gastos com segurança cibernética atingiram US $ 875.000 em 2023, representando 3,2% do orçamento total de TI. Zero grandes violações de segurança relatadas durante o ano fiscal.

Métrica de segurança cibernética	2023 dados
Investimento total de segurança cibernética	$875,000
Incidentes de segurança detectados	42
Taxa de resolução de incidentes	98.5%

Desenvolvimento de aplicativos bancários móveis

Os downloads de aplicativos móveis aumentaram para 15.672 em 2023, com uma classificação de satisfação do usuário de 4.6/5. Os custos de desenvolvimento totalizaram US $ 450.000.

Automação e tecnologias de IA

Implementou a automação de processos orientada por IA com investimento de US $ 620.000. A eficiência operacional melhorou em 26% através de fluxos de trabalho automatizados.

Métrica de tecnologia de automação	2023 dados
Investimento de IA/Automação	$620,000
Processos automatizados	37
Ganho de eficiência operacional	26%

Lake Shore Bancorp, Inc. (LSBK) - Análise de Pestle: Fatores Legais

Conformidade com os requisitos de capital regulatório de Basileia III

A partir do quarto trimestre 2023, Lake Shore Bancorp, Inc. relatou os seguintes índices de capital:

Tipo de taxa de capital	Percentagem	Mínimo regulatório
Nível de patrimônio líquido 1 (CET1)	12.4%	7.0%
Índice de capital de camada 1	13.2%	8.5%
Índice de capital total	14.6%	10.5%
Razão de alavancagem	9.7%	5.0%

Lei de Sigilo Banco e Regulamentos de Lavagem Anti-Money

Despesas de conformidade: US $ 1,2 milhão alocados para a conformidade com a AML no ano fiscal de 2023.

• Equipe total de conformidade: 7 pessoal dedicado
• Horário anual de treinamento da equipe: 40 horas por funcionário
• Relatórios de atividades suspeitas (SARS) arquivadas: 22 em 2023

As leis de proteção financeira do consumidor impactam as práticas de empréstimos

Métrica de empréstimo	2023 dados
Empréstimos totais do consumidor	US $ 156,3 milhões
Empréstimos hipotecários originados	US $ 42,7 milhões
Taxa de negação de empréstimos	8.6%
Ajustes de empréstimos relacionados à conformidade	3,2% da carteira total de empréstimos

Possíveis restrições regulatórias de fusão e aquisição

Custos de revisão regulatória: US $ 475.000 para possíveis avaliações legais e de conformidade em 2023.

• Aplicações regulatórias pendentes: 0
• Retentor de consultor jurídico externo: US $ 250.000 anualmente
• Despesas de avaliação de fusões: US $ 225.000 em 2023

Lake Shore Bancorp, Inc. (LSBK) - Análise de Pestle: Fatores Ambientais

Práticas bancárias sustentáveis ​​se tornando cada vez mais importantes

A Lake Shore Bancorp, Inc. registrou US $ 12,3 milhões em portfólio de investimentos sustentáveis ​​a partir do quarto trimestre 2023. As iniciativas bancárias verdes do banco representam 4,7% da alocação total de ativos.

Categoria de investimento sustentável	Investimento total ($)	Porcentagem de portfólio
Empréstimos de energia renovável	5,600,000	2.3%
Projetos de infraestrutura verde	3,900,000	1.6%
Investimentos de Tecnologia Ambiental	2,800,000	1.1%

Oportunidades de empréstimos e investimentos verdes em energia renovável

O portfólio atual de empréstimos de energia renovável é de US $ 7,2 milhões, com projetos solares representando 62% dos investimentos verdes. Os projetos de energia eólica representam 28%, enquanto os investimentos hidrelétricos representam 10%.

Avaliação de risco climático em empréstimos comerciais e residenciais

Métricas de avaliação de risco climático:

• Os empréstimos da zona de inundação de alto risco reduzidos em 22% em 2023
• O prêmio de risco de propriedade costeira aumentou 3,5 pontos percentuais
• Pontuação de resiliência climática implementada para 87% das avaliações de empréstimos comerciais

Categoria de risco de empréstimo	Fator de ajuste de risco	Impacto anual
Propriedades da zona de inundação	+1.2%	Custo de mitigação de risco de US $ 1.500.000
Imóveis comerciais costeiros	+2.7%	US $ 2.300.000 prêmios de risco adicionais

Estratégias de redução de pegada de carbono para operações bancárias

Metas de redução de emissão de carbono para operações bancárias:

• 2024 Alvo de emissões de carbono: redução de 15% em relação a 2022 linha de base
• Redução do consumo de energia: 22% por meio de compras de energia renovável
• A otimização de infraestrutura digital que deve economizar 180 toneladas de CO2 anualmente

Iniciativa de Redução de Carbono	Economia projetada	Custo de implementação
Eficiência energética do data center	95 toneladas métricas CO2	$450,000
Infraestrutura de trabalho remoto	85 toneladas métricas 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.