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Lake Shore Bank executive's 10-year incentive to stay: $1.4 million

Where will you be working on March 29, 2028?

If Jeffrey M. Werdein is still with Lake Shore Savings Bank on that date, he'll get a lump-sum payment of $1.4 million.

The idea is go give Werdein, the executive vice president of Lake Shore's commercial division, an incentive to keep working at the Dunkirk-based bank.

It's an unusually long deal, particularly for a smaller bank like Lake Shore. The bank has 11 branches in Erie and Chautauqua counties and had profits of $3.4 million last year.

By the time the retention deal expires, two more presidential elections and four more Olympic Games will have taken place. Tom Brady might even be retired.

But Lake Shore has emphasized growing its commercial lending business, which Werdein oversees.

"That was the intent of the hire and it's definitely materialized, and we're recognizing the fact that it's a critical part of our bank and very important to have great leadership in that area," said Daniel P. Reininga, Lake Shore's president and CEO.

Lake Shore's commercial loans were up 30 percent last year, and they made up half of all the bank's loans. The retention agreement says Werdein "has contributed significantly to the success of the bank and (his) continued services are vital to the bank's continued growth and success."

The objective of a retention agreement like Werdein's is "preservation of shareholder value," Reininga said.

"It's not earned instantly," he said. "It's developed value over time, and that creates value for the bank over time."

Jeffrey Werdein (Lake Shore Bank photo)

If the retention agreement works out as planned, it will bring stability to Lake Shore's commercial lending leadership. It's not uncommon to see bankers jump from one bank to another, especially amid the market disruption caused by KeyBank's deal for First Niagara and the arrival of new competitors who are eager to hire experienced, local people.

Werdein joined Lake Shore in 2014, after 15 years at Evans Bank. Prior to that, had positions with Citibank and Chase Manhattan Bank.

Werdein has to stay with Lake Shore for the next 10 years in order to collect the full $1.4 million, although exceptions are built into the agreement.

If the bank terminates Werdein's employment without cause, or if he leaves the bank for what the agreement defines as "good reason," he would collect what he had accrued on a year-by-year basis.

Under the agreement, Werdein becomes vested each year on Dec. 31; if he is still employed with the bank on that date, the account balance increases by the amount designated for that year. If a separation occurs prior to a vesting date, he would collect what he had accrued as of the previous Dec. 31.

If Werdein collects the full $1.4 million, the bank will pay it to him in three installments of nearly $467,000 each in 2028, 2029 and 2030.

Werdein's base salary in 2017 was $215,000, making him the bank's second-highest paid executive, behind Reininga. The president and CEO's base salary was $313,000, a 5 percent increase from the year before.

Reininga said Werdein has done an "outstanding job" at Lake Shore. "I've known Jeff, for a long long time, and Jeff is a high-performing commercial department executive," he said.







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