Lake Shore Bancorp said it won't seek a federal government investment after all, despite caution about the economy, as it reported a 29 percent gain in fourth-quarter profits amid record loan and deposit growth last year.
The Dunkirk-based savings bank said it earned $871,000, or 15 cents per share, in the fourth quarter of 2008, up from $675,000, or 10 cents per share, in the same period a year earlier. The bank's total revenues grew, despite a $202,000 one-time "other-than-temporary" charge to cut the value of an investment security that was not issued by a government-sponsored entity like Fannie Mae or Freddie Mac.
However, the bank sounded a note of warning about the next year, noting that if mortgage rates keep dropping, that will pressure the bank's lending profits and overall earnings. So Lake Shore will try to boost loan growth this year, both in mortgages and small business lending.
"We are very pleased with earnings in the fourth quarter, but we are cautious about the future," President and CEO David C. Mancuso said in a press release. "As we look to 2009, we continue to be concerned about the current economic conditions."
The company said its board of directors voted to withdraw the bank's application to the U.S. Treasury Department for an investment under the Capital Purchase Program, which is part of the broader Troubled Asset Relief Program, or TARP.
Lake Shore had initially applied for the program by the November 2008 deadline just to get in line and not miss out, expecting to further review the program's details for mutual holding companies, and awaiting any regulatory changes before making a final decision.
However, the government has yet to issue its terms and conditions for mutuals, which are savings banks that are owned by their depositors. Lake Shore Bancorp is publicly traded, but more than half of the company is owned by a separate mutual holding company that its depositors own.