10-Q

     United States

    

     Securities and Exchange Commission

    

     Washington, D.C. 20549

    

     FORM 10-Q

    

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.: 001-42754



LAKE SHORE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Maryland			39-3058424
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)
31 East Fourth Street, Dunkirk, New York			14048
(Address of principal executive offices)			(Zip code)
(716) 366-4070
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	LSBK	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer 	Accelerated filer 
Non-accelerated filer 	Smaller reporting company 
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

There were 7,862,790 shares of the registrant’s common stock, $0.01 par value per share, outstanding at May 7, 2026.

TABLE OF CONTENTS


ITEM		PART I	PAGE

1	FINANCIAL STATEMENTS
	-	Consolidated Statements of Financial Condition as of March 31, 2026 (Unaudited) and December 31, 2025	1
	-	Consolidated Statements of Income for the Three Months Ended March 31, 2026 and 2025 (Unaudited)	2
	-	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2026 and 2025 (Unaudited)	3
	-	Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2026 and 2025 (Unaudited)	4
	-	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (Unaudited)	5
	-	Notes to Unaudited Consolidated Financial Statements	6
2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		30
3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		41
4	CONTROLS AND PROCEDURES		42

		PART II

1A	RISK FACTORS		42
2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		42
5	OTHER INFORMATION
6	EXHIBITS		43
SIGNATURES			43

PART I Financial Information

Item 1. Financial Statements

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition (Unaudited)


	March 31,			December 31,
	2026			2025
	(Dollars in thousands, except per share data)
	(Unaudited)
Assets
Cash and due from banks	$	2,948		$	3,035
Interest-earning deposits		58,659			61,245
Cash and Cash Equivalents		61,607			64,280
Securities available for sale, at fair value		54,179			56,138
Federal Home Loan Bank stock, at cost		677			673
Loans receivable, net of allowance for credit losses of $4,799 in 2026 and $4,884 in 2025		553,879			555,441
Premises and equipment, net		6,915			7,050
Accrued interest receivable		3,005			3,007
Bank-owned life insurance		31,766			31,525
Other assets		9,983			9,209
Total Assets	$	722,011		$	727,323
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Interest-bearing	$	475,606		$	477,174
Non-interest-bearing		91,014			96,103
Total Deposits		566,620			573,277
Advances from borrowers for taxes and insurance		2,355			3,046
Other liabilities and accrued interest payable		10,658			9,361
Total Liabilities		579,633			585,684
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized at March 31, 2026; no shares issued or outstanding at March 31, 2026 or December 31, 2025		—			—
Common stock, $0.01 par value per share, 40,000,000 shares authorized at March 31, 2026 and December 31, 2025; 7,863,388 shares issued and outstanding at March 31, 2026, including 95,485 unvested shares, and 7,836,100 shares issued and outstanding at December 31, 2025, including 80,094 unvested shares		79			78
Additional paid-in capital		65,694			65,577
Unearned shares held by ESOP		(4,662	)		(4,711	)
Retained earnings		89,659			88,398
Accumulated other comprehensive loss		(8,392	)		(7,703	)
Total Stockholders' Equity		142,378			141,639
Total Liabilities and Stockholders' Equity	$	722,011		$	727,323

See notes to unaudited consolidated financial statements.

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Income (Unaudited)


	Three Months Ended March 31,
	2026				2025
	(Dollars in thousands, except per share data)
	(Unaudited)
Interest Income
Loans, including fees		$	8,232		$	7,752
Investment securities, taxable			156			164
Investment securities, tax-exempt			198			217
Interest-earning deposits			469			234
Total Interest Income			9,055			8,367
Interest Expense
Deposits			2,372			2,842
Long-term debt			—			50
Finance Lease and Other			23			10
Total Interest Expense			2,395			2,902
Net Interest Income			6,660			5,465
Provision for Credit Losses			(113	)		48
Net Interest Income After Provision for Credit Losses			6,773			5,417
Non-Interest Income
Service charges and fees			250			237
Debit card fees			181			187
Earnings on bank-owned life insurance			242			216
Gain on equity securities			—			46
Recovery on previously impaired investment securities			—			1
Earnings on annuity assets			16			22
Other			14			15
Total Non-Interest Income			703			724
Non-Interest Expense
Salaries and employee benefits			3,306			2,915
Occupancy and equipment			719			676
Data processing			361			459
Professional services			261			314
Telephone and communications			75			92
FDIC insurance			78			72
Postage and supplies			70			80
Advertising			8			11
Other			245			259
Total Non-Interest Expense			5,123			4,878
Income before Income Taxes			2,353			1,263
Income Tax Expense			430			206
Net Income		$	1,923		$	1,057
Basic and diluted earnings per common share		$	0.26		$	0.14
Dividends declared per share		$	0.09		$	0.13

Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio applied in the Conversion (1.3549) (see Note 1)

See notes to unaudited consolidated financial statements.

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Unaudited)



	Three Months Ended March 31,
	2026			2025
	(Unaudited)
	(Dollars in thousands)
Net Income	$	1,923		$	1,057
Other Comprehensive (Loss) income, net of tax benefit (expense):
Unrealized holding (losses) gains on securities available for sale, net of tax benefit (expense)		(689	)		14
Reclassification adjustments related to:
Recovery on previously impaired investment securities included in net income, net of tax expense		—			(1	)
Total Other Comprehensive (Loss) Income		(689	)		13
Total Comprehensive Income	$	1,234		$	1,070

See notes to unaudited consolidated financial statements.

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2026 and 2025 (Unaudited)


						Unearned						Accumulated
			Additional			Shares						Other
	Common		Paid-In			Held by			Retained			Comprehensive
	Stock		Capital			ESOP			Earnings			Loss			Total
	(Dollars in thousands, except per share data)
Balance - January 1, 2026	$	78	$	65,577		$	(4,711	)	$	88,398		$	(7,703	)	$	141,639
Net income		—		—			—			1,923			—			1,923
Other comprehensive loss, net of tax benefit of $184		—		—			—			—			(689	)		(689	)
ESOP shares earned (5,143 shares)		—		29			49			—			—			78
Compensation plan shares earned (8,833 shares)		1		120			—			—			—			121
Cash dividends declared ($0.09 per share)		—		—			—			(662	)		—			(662	)
Common stock repurchased to authorized and unissued on vesting for payroll taxes (2,102 shares)		—		(32	)		—			—			—			(32	)
Balance - March 31, 2026	$	79	$	65,694		$	(4,662	)	$	89,659		$	(8,392	)	$	142,378

See notes to unaudited consolidated financial statements.


									Unearned						Accumulated
			Additional						Shares						Other
	Common		Paid-In			Treasury			Held by			Retained			Comprehensive
	Stock		Capital			Stock			ESOP			Earnings			Loss			Total
	(Dollars in thousands, except per share data)
Balance - January 1, 2025	$	68	$	31,201		$	(13,304	)	$	(938	)	$	82,805		$	(9,964	)	$	89,868
Net income		—		—			—			—			1,057			—			1,057
Other comprehensive income, net of tax expense of $3		—		—			—			—			—			13			13
ESOP shares earned (2,688 shares)		—		10			—			21			—			—			31
Compensation plan shares granted (36,849 shares)		—		(256	)		256			—			—			—			—
Compensation plan shares earned (10,586 shares)		—		89			—			—			—			—			89
Cash dividends declared ($0.13 per share)		—		—			—			—			(361	)		—			(361	)
Common stock repurchased to treasury on vesting for payroll taxes (2,914 shares)		—		—			(35	)		—			—			—			(35	)
Balance - March 31, 2025	$	68	$	31,044		$	(13,083	)	$	(917	)	$	83,501		$	(9,951	)	$	90,662

See notes to unaudited consolidated financial statements.

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)


	Three Months Ended March 31,
	2026			2025
	(Unaudited)
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,923		$	1,057
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of investment securities		16			18
Net amortization of deferred loan costs		93			63
Provision for credit losses		(113	)		48
Recovery on previously impaired investment securities		—			(1	)
Unrealized gain on equity securities		—			(46	)
Depreciation and amortization of premises and equipment		143			156
Deferred income tax benefit		(54	)		(92	)
Increase in annuity asset		(16	)		(22	)
Increase in cash surrender value of bank-owned life insurance		(242	)		(216	)
ESOP shares committed to be released		78			31
Stock based compensation expense		121			89
Decrease (increase) in accrued interest receivable		2			(111	)
Increase in other assets		(520	)		(243	)
Increase (decrease) in other liabilities		1,359			(13	)
Net Cash Provided by Operating Activities		2,790			718
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in debt securities:
Maturities, prepayments, and calls		1,071			739
Redemptions of Federal Home Loan Bank of New York Stock		—			281
Purchases of Federal Home Loan Bank of New York Stock		(4	)		—
Loan principal collections and originations, net		1,546			(7,122	)
Proceeds from claim on and surrender of bank-owned life insurance		—			651
Additions to premises and equipment		(8	)		(150	)
Net Cash Provided by (Used In) Investing Activities		2,605			(5,601	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits		(6,657	)		9,752
Net decrease in advances from borrowers for taxes and insurance		(691	)		(902	)
Repayment of long-term debt		—			(6,250	)
Repayment of finance lease obligation		(26	)		(24	)
Shares of common stock repurchased on vesting for payroll taxes		(32	)		(35	)
Cash dividends paid		(662	)		(361	)
Net Cash (Used in) Provided by Financing Activities		(8,068	)		2,180
Net Decrease in Cash and Cash Equivalents		(2,673	)		(2,703	)
CASH AND CASH EQUIVALENTS - BEGINNING		64,280			33,131
CASH AND CASH EQUIVALENTS - ENDING	$	61,607		$	30,428
SUPPLEMENTARY CASH FLOWS INFORMATION
Interest paid	$	2,401		$	2,918
Income taxes paid (U.S. Federal)	$	—		$	—
Income taxes paid (NY State)	$	—		$	—
SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Unrealized (loss) gain on securities available for sale	$	(873	)	$	17
Accrued purchases of property and equipment	$	—		$	240

See notes to unaudited consolidated financial statements.

Lake Shore Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation and Significant Accounting Policies and Estimates

The interim unaudited consolidated financial statements include the accounts of Lake Shore Bancorp, Inc. (the “Company”, "Lake Shore Bancorp," “us”, “our”, or “we”), and Lake Shore Bank (the “Bank”), its wholly owned subsidiary. All intercompany accounts and transactions of the consolidated subsidiary have been eliminated in consolidation. On July 18, 2025, the Company underwent a Second Step Conversion, as more fully described below.

The interim unaudited consolidated financial statements included herein as of March 31, 2026 and for the three months ended March 31, 2026 and 2025 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), and therefore, do not include all information or footnotes necessary for a complete presentation of the consolidated statements of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated balance sheet at December 31, 2025 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information and to make the financial statements not misleading. These interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The consolidated statements of income for the three months ended March 31, 2026 are not necessarily indicative of the results for any subsequent period or the entire year ending December 31, 2026.

The Company's significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 2 of the audited consolidated financial statements and notes thereto for the year ended December 31, 2025 and are contained in the Company's 2025 Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025.

To prepare these unaudited consolidated financial statements in conformity with GAAP, management of the Company made a number of estimates and assumptions relating to the reporting of assets and liabilities and the reporting of revenue and expenses. Actual results could differ from those estimates. The allowance for credit losses is a material estimate that is particularly susceptible to significant change in the near term.

Organizational Structure

Lake Shore Bancorp, Inc. is the parent holding company for Lake Shore Bank. Lake Shore Bancorp, Inc., a federal corporation ("Lake Shore Federal Bancorp") and the former parent mutual holding company, Lake Shore, MHC (the “MHC”) were formed on April 3, 2006 to serve as the savings and loan holding companies for Lake Shore Savings Bank, upon Lake Shore Savings Bank’s initial conversion and reorganization from a New York State chartered mutual savings and loan association to the federal mutual holding company form of organization.

On July 18, 2025, Lake Shore Bancorp, Inc., a new corporation incorporated under the laws of the State of Maryland, became the bank holding company of Lake Shore Bank upon the completion of a "second-step" conversion (the "Conversion"). Pursuant to the Conversion, Lake Shore Savings Bank, a federally chartered savings bank, the wholly-owned subsidiary of Lake Shore Federal Bancorp, reorganized from the two-tier mutual holding company structure to the fully-public stock holding company structure. In addition, Lake Shore Savings Bank converted its charter from a federal savings bank to a New York commercial bank renamed Lake Shore Bank. The Conversion was consummated through the merger of Lake Shore, MHC with and into Lake Shore Federal Bancorp, followed by the merger of Lake Shore Federal Bancorp with and into Lake Shore Bancorp. In the subscription offering, Lake Shore Bancorp raised gross proceeds of $49.5 million by selling 4,950,460 shares of its common stock (approximately the midpoint of the offering range) at $10.00 per share to depositors of the Bank. The Company used $4.0 million of the proceeds to fund an addition to its Employee Stock Ownership Plan ("ESOP") loan for the acquisition of an additional 396,036 shares at $10.00 per share. Expenses incurred related to the

offering were $2.3 million and have been recorded against offering proceeds.

As part of the Conversion transaction, outstanding shares of Lake Shore Federal Bancorp common stock owned by the public stockholders of Lake Shore Federal Bancorp (stockholders other than Lake Shore, MHC) as of July 18, 2025 were converted into shares of Lake Shore Bancorp's common stock based on an exchange ratio of 1.3549 shares of Lake Shore Bancorp's common stock for each share of Lake Shore Federal Bancorp common stock so that Lake Shore Federal Bancorp's existing public stockholders would own approximately the same percentage of Lake Shore Bancorp's common stock as they owned of Lake Shore Federal Bancorp's common stock immediately prior to the Conversion. A total of 7,825,501 shares of common stock were outstanding immediately following the completion of the stock offering.

Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give retroactive recognition to the exchange ratio applied in the Conversion (1.3549).

Subsequent Events

The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of March 31, 2026 for items that should potentially be recognized or disclosed in the unaudited consolidated financial statements. The evaluation was conducted through the date these unaudited consolidated financial statements were issued.

As previously disclosed on a Current Report on Form 8-K, on April 22, 2026, the Board of Directors of the Company declared a cash dividend of $0.09 per share on its outstanding common stock. The dividend is expected to be paid on May 13, 2026 to stockholders of record as of May 4, 2026.

Note 2 – New Accounting Standards

Recent Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)." The amendments in this ASU require a public business entity to disclose additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods, including employee compensation, depreciation, intangible asset amortization, and other costs and expenses. Additionally, a public business entity must disclose a qualitative description of the amounts remaining in relevant expense captions which are not separately disaggregated quantitatively under the amendments included within this ASU. This ASU is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption of this ASU is permitted and may be applied prospectively to financial statements issued for reporting periods after the effective date of the ASU or retrospectively to any period presented in the financial statements. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.

In November 2025, the FASB issued ASU 2025-08, “Financial Instruments—Credit Losses (Topic 326): Purchased Loans.” The amendments in this ASU expand the application of the gross-up approach for recognizing credit losses to certain acquired loans, referred to as purchased seasoned loans, which are recorded at acquisition at their purchase price plus an allowance for expected credit losses. Under this approach, the initial allowance for credit losses does not result in a day-one provision for credit losses, and subsequent changes in the allowance are recognized through earnings. The amendments are intended to reduce complexity and improve comparability in the accounting for acquired loans by aligning the treatment of purchased seasoned loans with that of purchased credit-deteriorated assets. This ASU is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods, and is to be applied prospectively to loans acquired on or after the adoption date. Early adoption is permitted. The Company does not expect the adoption of ASU 2025-08 to have a material impact on its consolidated financial statements.

Note 3 – Investment Securities

The amortized cost and fair value of securities are as follows:


	March 31, 2026
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in thousands)
SECURITIES
Debt Securities Available for Sale
U.S. government agencies	$	2,004	$	—	$	(84	)		1,920
Municipal bonds		40,364		—		(7,699	)		32,665
Mortgage-backed securities:
Collateralized mortgage obligations-private label		7		—		—			7
Collateralized mortgage obligations-government sponsored entities		8,217		—		(908	)		7,309
Government National Mortgage Association		45		—		(1	)		44
Federal National Mortgage Association		9,536		1		(1,211	)		8,326
Federal Home Loan Mortgage Corporation		4,628		1		(722	)		3,907
Asset-backed securities-government sponsored entities		1		—		—			1
Total Debt Securities Available for Sale	$	64,802	$	2	$	(10,625	)	$	54,179


	December 31, 2025
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in thousands)
SECURITIES
Debt Securities Available for Sale
U.S. government agencies	$	2,004	$	—	$	(67	)	$	1,937
Municipal bonds		40,665		—		(6,825	)		33,840
Mortgage-backed securities:
Collateralized mortgage obligations-private label		8		—		—			8
Collateralized mortgage obligations-government sponsored entities		8,649		—		(885	)		7,764
Government National Mortgage Association		47		—		(2	)		45
Federal National Mortgage Association		9,772		1		(1,236	)		8,537
Federal Home Loan Mortgage Corporation		4,742		1		(737	)		4,006
Asset-backed securities-government sponsored entities		1		—		—			1
Total Debt Securities Available for Sale	$	65,888	$	2	$	(9,752	)	$	56,138

Debt Securities

All of the Company's collateralized mortgage obligations are backed by one- to four-family residential mortgages.

At March 31, 2026 and December 31, 2025, sixteen municipal bonds with an amortized cost of $4.7 million and fair value of $3.5 million and $3.6 million respectively, were pledged as collateral for customer deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. At March 31, 2026 and December 31, 2025, no securities were pledged as collateral to the Federal Reserve Bank ("FRB"), to the Federal Home Loan Bank of New York ("FHLBNY"), or for any other purposes.

The following table sets forth the Company’s investment in available for sale debt securities with gross unrealized losses of less than twelve months and gross unrealized losses of twelve months or more and associated fair values for which an allowance for credit losses has not been recorded for the periods indicated:


	Less than 12 months					12 months or more					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(Dollars in thousands)
March 31, 2026
U.S. government agencies	$	—	$	—		$	1,920	$	(84	)	$	1,920	$	(84	)
Municipal bonds		3,232		(78	)		29,433		(7,621	)		32,665		(7,699	)
Mortgage-backed securities		—		—			19,527		(2,842	)		19,527		(2,842	)
	$	3,232	$	(78	)	$	50,880	$	(10,547	)	$	54,112	$	(10,625	)


December 31, 2025
U.S. government agencies	$	—	$	—	$	1,937	$	(67	)	$	1,937	$	(67	)
Municipal bonds		—		—		32,794		(6,825	)		32,794		(6,825	)
Mortgage-backed securities		—		—		20,285		(2,860	)		20,285		(2,860	)
	$	—	$	—	$	55,016	$	(9,752	)	$	55,016	$	(9,752	)

As of March 31, 2026, the Company's investment portfolio included fifteen debt securities in the "unrealized losses less than twelve months" category and 154 debt securities in the "unrealized losses twelve months or more" category. As of December 31, 2025, the Company's investment portfolio included no debt securities in the "unrealized losses less than twelve months" category and 164 debt securities in the "unrealized losses twelve months or more" category.

As of March 31, 2026, the Company had 169 debt securities with a fair value of $54.1 million in an unrealized loss position. As of December 31, 2025, the Company had 164 debt securities with a fair value of $55.0 million in an unrealized loss position. The Company reviews securities in an unrealized loss position to evaluate credit risk. The Company considers payment history, risk ratings from external parties, financial statements for municipal and corporate securities, public statements from issuers and other available credible published sources in evaluating credit risk. In this review, the Company did not identify any credit risk, and therefore, no allowance for credit losses on securities available for sale was recorded as of March 31, 2026 or December 31, 2025. The unrealized losses are attributed to noncredit-related factors including changes in interest rates and other market conditions. The Company does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The contractual terms of the investments do not permit the issuers to settle the securities at a price less than the cost basis of the investments. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Accrued interest of $308,000 as of March 31, 2026 and $248,000 as of December 31, 2025 on available-for-sale debt securities is included in accrued interest receivable on the consolidated statements of financial condition and is excluded from the estimate of credit losses.

During the three months ended March 31, 2026 and 2025, the Company did not sell any debt securities.

Scheduled contractual maturities of debt securities are as follows:


	Amortized		Fair
	Cost		Value
	(Dollars in thousands)
March 31, 2026:
Less than one year	$	643	$	637
After one year through five years		3,272		3,151
After five years through ten years		12,518		11,105
After ten years		25,935		19,692
Mortgage-backed securities		22,433		19,593
Asset-backed securities		1		1
Total Debt Securities	$	64,802	$	54,179

The Company's mortgage-backed securities and asset-backed securities have stated maturities that may differ from actual maturities due to the borrowers' ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying assets and are generally influenced by interest rates. In the table above, mortgage-backed securities and asset-backed securities are shown in the aggregate.

Equity Securities

At January 1, 2025, the Company held 22,368 shares of Federal Home Loan Mortgage Corporation (“FHLMC”) common stock, included within securities, at fair value, on the consolidated statement of financial condition. During the year ended December 31, 2025, the Company sold these shares for proceeds of $223,000. Accordingly, the Company did not hold any equity securities at March 31, 2026. During the three months ended March 31, 2025, the Company recognized an unrealized gain of $46,000, on the equity securities, which was recorded in non-interest income in the consolidated statements of income. There were no purchases or sales of equity securities during the three months ended March 31, 2026 or 2025.

Note 4 - Loans and Allowance for Credit Losses

Loans consisted of the following segments as of March 31, 2026 and December 31, 2025:


		March 31,				December 31,
		2026				2025
		(Dollars in thousands)
Real Estate Loans:
Residential, one- to four-family (1)	$		147,275		$		150,095
Home Equity			46,362				46,970
Commercial (2)			328,978				327,352
Total real estate loans			522,615				524,417
Other Loans:
Commercial			17,773				17,430
Consumer (3)			15,358				15,466
Total gross loans			555,746				557,313
Net deferred loan costs			2,932				3,012
Allowance for credit losses on loans			(4,799	)			(4,884	)
Loans receivable, net	$		553,879		$		555,441

(1)

There were no one- to four-family construction loans at March 31, 2026 or December 31, 2025.

(2)

Includes commercial construction loans of $23.3 million and $18.8 million at March 31, 2026 and December 31, 2025, respectively.

(3)

Includes overdraft protection of $26,000 and $24,000 as of March 31, 2026 and December 31, 2025, respectively.

Real estate loans of approximately $125.1 million and $116.8 million in unpaid principal balance were pledged as collateral for FHLBNY advances as of March 31, 2026 and December 31, 2025, respectively.

Total loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income accrued based upon the outstanding principal balance and the terms of the loans. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Loans are reported by the portfolio segments identified above and are analyzed by management on this basis. All loan policies identified below apply to all segments of the loan portfolio.

Accrued interest on loans of $2.6 million and $2.7 million at March 31, 2026 and December 31, 2025, respectively, is included in accrued interest receivable on the consolidated statements of financial condition and is excluded from the estimate of credit losses.

Allowance for Credit Losses for Loans

The loan portfolio is segmented into the following loan types by risk level:

Real Estate Loans:



Residential, One- to Four-Family – are loans secured by first lien collateral on residential real estate primarily held in the Western New York region. These loans can be affected by economic conditions and the value of underlying properties. Western New York’s housing market has consistently demonstrated stability in home prices despite changing economic conditions. Furthermore, the Company has conservative underwriting standards and its residential lending policies and procedures verify that its one- to four-family residential mortgage loans generally conform to secondary market guidelines.



Home Equity - are loans or lines of credit secured by first or second liens on owner-occupied residential real estate primarily held in the Western New York region. These loans can also be affected by economic conditions and the values of underlying properties. Home equity loans may have increased risk of loss if the Company does not hold the first mortgage resulting in the Company being in a secondary position in the event of collateral liquidation. The Company does not originate interest only home equity loans.



Commercial Real Estate – are loans used to finance the purchase of real property, which generally consists of developed real estate that is held as first lien collateral for the loan. These loans are secured by real estate properties that are primarily held in the Western New York region. Commercial real estate lending involves additional risks compared with one- to four-family residential lending, because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, and/or the collateral value of the commercial real estate securing the loan, and repayment of such loans may be subject to adverse conditions in the real estate market or economic conditions to a greater extent than one- to four-family residential mortgage loans. Also, commercial real estate loans typically involve relatively large loan balances concentrated with single borrowers or groups of related borrowers.

Other Loans:



Commercial – includes business installment loans, lines of credit, and other commercial loans. Most of our commercial loans are for terms generally not in excess of five years. Whenever possible, we collateralize these loans with a lien on business assets and equipment and require the personal guarantees from principals of the borrower. Commercial loans generally involve a higher degree of credit risk, as commercial loans can involve relatively large loan balances to a single borrower or groups of related borrowers, with the repayment of such loans typically dependent on the successful operation of the commercial business and the income stream of the borrower. Such risks can be significantly affected by economic conditions. Although commercial loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default may be an insufficient source of repayment because the equipment or other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial loan depends primarily on the credit worthiness of the borrowers (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment.



Consumer – consist of loans secured by collateral such as an automobile or a deposit account, unsecured loans, and lines of credit. Consumer loans tend to have a higher credit risk due to the loans being either unsecured or secured by rapidly depreciable assets. Furthermore, consumer loan payments are dependent on the borrower’s continuing

financial stability and therefore are more likely to be adversely affected by job loss, divorce, illness, or personal bankruptcy.

Included in the Real Estate Loans for residential, one-to four-family and commercial real estate are loans to finance the construction of either one- to four-family owner occupied homes or commercial real estate. At the end of the construction period, the loan automatically converts to either a one- to four-family residential mortgage or a commercial real estate mortgage, as applicable. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion compared to the actual cost of construction. The Company limits its risk during construction as disbursements are not made until the required work for each advance has been completed and an updated lien search is performed. The completion of the construction progress is verified by a Company loan officer or inspections performed by an independent appraisal firm or other third party. Construction loans also expose us to the risk of construction delays which may impair the borrower’s ability to repay the loan.

The following tables detail the changes in the allowance for credit losses by loan segment as well as the distribution of the allowance for credit losses and gross loans receivable by loan segment and impairment method at or for the three months ended March 31, 2026 and 2025.


	Real Estate Loans								Other Loans
	One- to Four-Family (1)		Home Equity			Commercial Real Estate (2)			Commercial		Consumer			Total
	(Dollars in thousands)
March 31, 2026
Allowance for Credit Loss on Loans
Balance - January 1, 2026	$	721	$	100		$	3,916		$	140	$	7		$	4,884
Charge-offs		—		—			—			—		(9	)		(9	)
Recoveries		—		—			—			—		1			1
Provision for credit losses		66		(5	)		(173	)		27		8			(77	)
Balance – March 31, 2026	$	787	$	95		$	3,743		$	167	$	7		$	4,799
Ending balance: individually evaluated	$	15	$	—		$	—		$	—	$	—		$	15
Ending balance: collectively evaluated	$	772	$	95		$	3,743		$	167	$	7		$	4,784

Gross Loans Receivable (3):
Ending balance	$	147,275	$	46,362		$	328,978		$	17,773	$	15,358		$	555,746
Ending balance: individually evaluated	$	1,407	$	57		$	86		$	—	$	—		$	1,550
Ending balance: collectively evaluated	$	145,868	$	46,305		$	328,892		$	17,773	$	15,358		$	554,196

(1)

There were no one-to four-family construction loans at March 31, 2026.

(2)

Includes commercial construction loans of $23.3 million at March 31, 2026.

(3)

Gross Loans Receivable does not include allowance for credit losses of $(4,799) or net deferred loan costs of $2,932.


	Real Estate Loans							Other Loans
	One- to Four-Family (1)		Home Equity			Commercial Real Estate (2)		Commercial			Consumer			Total
	(Dollars in thousands)
March 31, 2025
Allowance for Credit Loss on Loans
Balance- January 1, 2025	$	390	$	137		$	4,171	$	421		$	14		$	5,133
Charge-offs		—		—			—		—			(7	)		(7	)
Recoveries		4		—			—		—			1			5
Provision for credit losses		320		(20	)		26		(290	)		3			39
Balance – March 31, 2025	$	714	$	117		$	4,197	$	131		$	11		$	5,170
Ending balance: individually evaluated	$	—	$	—		$	—	$	—		$	3		$	3
Ending balance: collectively evaluated	$	714	$	117		$	4,197	$	131		$	8		$	5,167
Gross Loans Receivable (3):
Ending balance	$	157,880	$	47,238		$	323,546	$	14,794		$	10,173		$	553,631
Ending balance: individually evaluated	$	1,451	$	651		$	1,337	$	—		$	3		$	3,442
Ending balance: collectively evaluated	$	156,429	$	46,587		$	322,209	$	14,794		$	10,170		$	550,189

(1)

There were no one-to four-family construction loans at March 31, 2025.

(2)

Includes commercial construction loans of $19.6 million at March 31, 2025.

(3)

Gross Loans Receivable does not include allowance for credit losses of $(5,170) or net deferred loan costs of $3,179.

The following table summarizes the distribution of the allowance for credit losses and loans receivable by loan segment and impairment method as of December 31, 2025:


	Real Estate Loans						Other Loans
	One- to Four-Family (1)		Home Equity		Commercial Real Estate (2)		Commercial		Consumer		Total
	(Dollars in thousands)

December 31, 2025
Allowance for Credit Losses on Loans
Balance – December 31, 2025	$	721	$	100	$	3,916	$	140	$	7	$	4,884
Ending balance: individually evaluated	$	6	$	—	$	—	$	—	$	—	$	6
Ending balance: collectively evaluated	$	715	$	100	$	3,916	$	140	$	7	$	4,878

Gross Loans Receivable (3):
Ending Balance	$	150,095	$	46,970	$	327,352	$	17,430	$	15,466	$	557,313
Ending balance: individually evaluated	$	1,493	$	62	$	89	$	—	$	—	$	1,644
Ending balance: collectively evaluated	$	148,602	$	46,908	$	327,263	$	17,430	$	15,466	$	555,669

(1)

There were no one- to four-family construction loans at December 31, 2025.

(2)

Includes commercial construction loans of $18.8 million at December 31, 2025.

(3)

Gross Loans Receivable does not include allowance for credit losses of $(4,884) or deferred loan costs of $3,012.

Allowance for Credit Losses on Unfunded Loan Commitments

The Company’s allowance for credit losses on unfunded loan commitments is recognized as a liability and included within other liabilities on the unaudited consolidated statements of financial condition, with adjustments to the reserve recognized in the provision for credit losses on the unaudited consolidated statements of income. The Company’s activity in the allowance for credit losses on unfunded loan commitments for the three months ended March 31, 2026 and the three months ended March 31, 2025 was as follows:


	For the three months ended March 31, 2026
	(Dollars in thousands)
Balance at December 31, 2025	$	361
Provision for credit losses		(36	)
Balance at March 31, 2026	$	325

	For the three months ended March 31, 2025
	(Dollars in thousands)
Balance at December 31, 2024	$	314
Provision for credit losses		9
Balance at March 31, 2025	$	323

Non-accrual Loans and Delinquency Status

The following table presents the amortized cost basis of loans on non-accrual status and loans on non-accrual status with no allowance for credit losses recorded. The Company did not have any loans past due 90 days or more and still accruing at March 31, 2026 and December 31, 2025.


	Total Non-accrual						Non-accrual with no Allowance for Credit Losses
		March 31,			December 31,			March 31,			December 31,
		2026			2025			2026			2025
	(Dollars in thousands)
Real Estate Loans:
Residential, one- to four-family (1)	$		1,437	$		1,525	$		1,236	$		1,388
Home Equity			62			66			62			66
Commercial Real Estate (2)			86			89			86			89
Other Loans:
Commercial			—			—			—			—
Consumer			—			—			—			—
Total loans	$		1,585	$		1,680	$		1,384	$		1,543

(1)

There were no non-accrual one- to four-family construction loans at March 31, 2026 or December 31, 2025.

(2)

There were no non-accrual commercial construction loans at March 31, 2026 or December 31, 2025.

There was no interest income recognized on non-accrual loans during the three months ended March 31, 2026 and the three months ended March 31, 2025. The accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. A loan does not have to be 90 days delinquent in order to be classified as non-accrual. When interest accrual is discontinued, all unpaid accrued interest is reversed. If ultimate collection of principal is in doubt, all cash receipts on non-accrual loans are applied to reduce the principal balance.

The following tables provide an analysis of past due loans as of the dates indicated:


	30-59 Days		60-89 Days		90 Days or More		Total Past			Current		Total Gross Loans
	Past Due		Past Due		Past Due		Due			Due		Receivable
	(Dollars in thousands)
March 31, 2026:
Real Estate Loans:
Residential, one- to four-family (1)	$	804	$	—	$	603	$	1,407	$		145,868	$	147,275
Home equity		—		173		—		173			46,189		46,362
Commercial (2)		—		—		86		86			328,892		328,978
Other Loans:
Commercial		—		—		—		—			17,773		17,773
Consumer		—		—		—		—			15,358		15,358
Total	$	804	$	173	$	689	$	1,666	$		554,080	$	555,746

	30-59 Days		60-89 Days		90 Days or More		Total Past			Current		Total Gross Loans
	Past Due		Past Due		Past Due		Due			Due		Receivable
	(Dollars in thousands)
December 31, 2025:
Real Estate Loans:
Residential, one- to four-family (1)	$	788	$	27	$	674	$	1,489	$		148,606	$	150,095
Home equity		447		137		—		584			46,386		46,970
Commercial (2)		—		—		89		89			327,263		327,352
Other Loans:
Commercial		—		—		—		—			17,430		17,430
Consumer		5		—		—		5			15,461		15,466
Total	$	1,240	$	164	$	763	$	2,167	$		555,146	$	557,313

(1)

There were no past due one- to four-family construction loans at March 31, 2026 or December 31, 2025.

(2)

There were no past due commercial construction loans at March 31, 2026 or December 31, 2025.

Collateral-Dependent Loans

Collateral-dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. For collateral-dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is measured on an individual loan basis based on the difference between the fair value of the loan’s collateral, which is adjusted for liquidation costs, and the amortized cost. If

the fair value of the collateral exceeds the amortized cost, no allowance for credit losses is required. Refer to Note 8 - Fair Value of Financial Instruments for additional information.

The following table presents an analysis of the amortized cost of collateral-dependent loans of the Company as of March 31, 2026 and December 31, 2025 by collateral type and loan segment:


		Residential			Business						Commercial						Total
		Real Estate			Assets			Land			Real Estate			Other			Loans
March 31, 2026:	(Dollars in thousands)
Real Estate Loans:
Residential, one- to four-family	$		1,437	$		—	$		—	$		—	$		—	$		1,437
Home Equity			62			—			—			—			—			62
Commercial			—			—			—			86			—			86
Total	$		1,499	$		—	$		—	$		86	$		—	$		1,585
December 31, 2025:
Real Estate Loans:
Residential, one- to four-family	$		1,525	$		—	$		—	$		—	$		—	$		1,525
Home Equity			66			—			—			—			—			66
Commercial			—			—			—			89			—			89
Total	$		1,591	$		—	$		—	$		89	$		—	$		1,680

There was an allowance for credit losses of $15,000 and $6,000 recorded on the above noted collateral-dependent loans secured by residential real estate as of March 31, 2026 and December 31, 2025, respectively.

Credit Quality Indicators

The Company’s policies provide for the classification of loans as follows:

•

Pass/Performing;

•

Special Mention – does not currently expose the Company to a sufficient degree of risk but does possess credit deficiencies or potential weaknesses deserving the Company’s close attention;

•

Substandard – has one or more well-defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. A substandard asset would be one inadequately protected by the current net worth and paying capacity of the obligor or pledged collateral, if applicable;

•

Doubtful – has all the weaknesses inherent in substandard loans with the additional characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss; and

•

Loss – loan is considered uncollectible and continuance without the establishment of a specific valuation reserve is not warranted.

Each commercial loan is individually assigned a loan classification. The Company’s consumer loans, including residential one- to four-family loans and home equity loans, are classified by using the delinquency status as the basis for classifying these loans. Generally, all consumer loans more than 90 days past due are classified and placed into non-accrual status. Such loans that are considered by management to be well-secured and in the process of collection will remain in accrual status.

Asset quality indicators for all loans and the Company’s risk rating process are reviewed on a monthly basis. Risk ratings are updated as circumstances that could affect the repayment of individual loans are brought to management’s attention through an established monitoring process. Written action plans are maintained and reviewed on a quarterly basis for all classified commercial loans. In addition to the Company’s internal process, an outsourced independent credit review

function is in place for commercial and certain consumer loans to further assess assigned risk classifications and monitor compliance with internal lending policies and procedures.

The following table presents gross loans by credit quality indicator by origination year at March 31, 2026 as well as gross charge-offs by year of origination for the three months ended March 31, 2026:


		2026			2025			2024			2023			2022			Prior			Revolving Loans			Total
March 31, 2026:		(Dollars in thousands)
Residential, one-to four-family (1):
Pass	$		315	$		4,414	$		4,989	$		10,107	$		29,615	$		95,764	$		—	$		145,204
Substandard			—			—			—			190			311			1,570			—			2,071
Doubtful			—			—			—			—			—			—			—			—
Total	$		315			4,414	$		4,989	$		10,297	$		29,926	$		97,334	$		—	$		147,275
Current period gross charge-offs	$		—			—	$		—	$		—	$		—	$		—	$		—	$		—

Home Equity (2):
Pass	$		159	$		614	$		27	$		1,902	$		1,640	$		377	$		41,300			46,019
Substandard			—			—			—			—			—			—			343			343
Doubtful			—			—			—			—			—			—			—			—
Total	$		159	$		614	$		27	$		1,902	$		1,640	$		377	$		41,643	$		46,362
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		—	$		—

Commercial Real Estate (3):
Pass	$		16,208	$		34,385	$		36,093	$		19,240	$		75,289	$		138,242	$		424	$		319,881
Special mention			—			—			—			399			—			857			—			1,256
Substandard			—			—			—			—			—			7,841			—			7,841
Doubtful			—			—			—			—			—			—			—			—
Total	$		16,208	$		34,385	$		36,093	$		19,639	$		75,289	$		146,940	$		424	$		328,978
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		—	$		—

Commercial Loans:
Pass	$		650	$		4,134	$		1,101	$		675	$		1,424	$		1,440	$		5,569	$		14,993
Special mention			—			—			—			—			—			37			—			37
Substandard			—			—			—			—			—			1,787			956			2,743
Doubtful			—			—			—			—			—			—			—			—
Total	$		650	$		4,134	$		1,101	$		675	$		1,424	$		3,264	$		6,525	$		17,773
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		—	$		—

Consumer Loans:
Pass	$		846	$		13,954	$		98	$		35	$		42	$		168	$		214	$		15,357
Substandard			—			—			—			—			—			—			1			1
Doubtful			—			—			—			—			—			—			—			—
Total	$		846	$		13,954	$		98	$		35	$		42	$		168	$		215	$		15,358
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		9	$		9

(1)

There were no one- to four-family construction loans at March 31, 2026.

(2)

Home equity loans presented with an origination year represent home equity lines-of-credit which have been converted to term loans.

(3)

Includes commercial construction loans at March 31, 2026.

The following table presents gross loans by credit quality indicator by origination year at December 31, 2025 as well as gross charge-offs by year of origination for the year ended December 31, 2025:


		2025			2024			2023			2022			2021			Prior			Revolving Loans			Total
December 31, 2025:		(Dollars in thousands)
Residential, one-to four-family (1):
Pass	$		4,434	$		5,068	$		10,308	$		30,091	$		24,701	$		73,327	$		—	$		147,929
Substandard			—			—			190			315			399			1,262			—			2,166
Doubtful			—			—			—			—			—			—			—			—
Total	$		4,434			5,068	$		10,498	$		30,406	$		25,100	$		74,589	$		—	$		150,095
Current period gross charge-offs	$		—			—	$		—	$		—	$		—	$		—	$		—	$		—

Home Equity (2):
Pass	$		627	$		28	$		2,007	$		1,721	$		58	$		352	$		41,698			46,491
Substandard			—			—			—			—			—			—			479			479
Doubtful			—			—			—			—			—			—			—			—
Total	$		627	$		28	$		2,007	$		1,721	$		58	$		352	$		42,177	$		46,970
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		—	$		—

Commercial Real Estate (3):
Pass	$		34,815	$		36,156	$		19,119	$		76,565	$		37,655	$		113,836	$		2	$		318,148
Special mention			—			—			402			—			—			865			—			1,267
Substandard			—			—			—			—			—			7,937			—			7,937
Doubtful			—			—			—			—			—			—			—			—
Total	$		34,815	$		36,156	$		19,521	$		76,565	$		37,655	$		122,638	$		2	$		327,352
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		—	$		—

Commercial Loans:
Pass	$		4,296	$		1,171	$		730	$		1,538	$		77	$		1,546	$		5,184	$		14,542
Special mention			—			—			—			—			63			—			—			63
Substandard			—			—			—			—			—			1,869			956			2,825
Doubtful			—			—			—			—			—			—			—			—
Total	$		4,296	$		1,171	$		730	$		1,538	$		140	$		3,415	$		6,140	$		17,430
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		—	$		—

Consumer Loans:
Pass	$		14,857	$		131	$		45	$		50	$		—	$		169	$		213	$		15,465
Substandard			—			—			—			—			—			—			1			1
Doubtful			—			—			—			—			—			—			—			—
Total	$		14,857	$		131	$		45	$		50	$		—	$		169	$		214	$		15,466
Current period gross charge-offs	$		—	$		—	$		—	$		—	$		—	$		—	$		30	$		30

(1)

There were no one- to four-family construction loans at December 31, 2025.

(2)

Home equity loans presented with an origination year represent home equity lines-of-credit which have been converted to term loans.

(3)

Includes commercial construction loans at December 31, 2025.

Modifications with Borrowers Experiencing Financial Difficulty:

Occasionally, the Company modifies loans to borrowers in financial distress by providing modifications to loans that it would not normally grant. Such modifications could include principal forgiveness, term extension, a significant payment delay, an interest rate reduction or the addition of a co-borrower or guarantor. When principal forgiveness is provided, the amount of the forgiveness is charged-off against the allowance for credit losses.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification may be granted, such as principal forgiveness.

There were no loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2026 or 2025.

There were no modified loans that were past due or on non-accrual as of March 31, 2026 or December 31, 2025.

There were no loans to borrowers experiencing financial difficulty during the three months ended March 31, 2026 and 2025 that had a payment default and were modified in the twelve months prior.

Foreclosed real estate consists of property acquired in settlement of loans which is carried at its fair value less estimated selling costs. Write-downs from amortized cost to fair value less estimated selling costs are recorded at the date of acquisition or repossession and are charged to the allowance for credit losses. There was no foreclosed real estate at March 31, 2026, and December 31, 2025. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction was $706,000 at March 31, 2026 and $491,000 at December 31, 2025.

Note 5 - Deposits

Deposits consist of the following at the dates indicated:



	March 31, 2026					December 31, 2025

			Weighted					Weighted
			Average					Average
	Amount		Rate			Amount		Rate
	(Dollars in thousands)
Demand deposits:
Non-interest bearing	$	91,014		—	%	$	96,103		—	%
Interest bearing		65,202		0.09	%		62,346		0.09	%
Money market accounts		151,895		1.92	%		159,212		1.91	%
Savings accounts		51,468		0.07	%		51,788		0.07	%
Time deposits		207,041		3.27	%		203,828		3.44	%
Total deposits	$	566,620		1.73	%	$	573,277		1.77	%

Note 6 – Earnings per Share

Earnings per share was calculated for the three months ended March 31, 2026 and 2025, in accordance with ASC 260 - Earnings Per Share, which provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Basic earnings per share is based upon the weighted average number of common shares outstanding, exclusive of unearned shares held by the ESOP. Unvested shares of restricted stock which have voting rights and are eligible to receive dividends are included in the calculation of the weighted average number of common shares outstanding. Diluted earnings per share is based upon the weighted average number of common shares outstanding and common share equivalents that would arise from the exercise of dilutive securities. Stock

options are regarded as potential common stock and are considered in the diluted earnings per share calculations to the extent they would be dilutive and computed using the treasury stock method.

The calculated basic and diluted earnings per share are as follows. Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio applied in the Conversion (1.3549).



	Three Months Ended March 31,
	2026		2025
Numerator – net income	$	1,923,000	$	1,057,000
Denominator:
Basic weighted average shares outstanding		7,349,045		7,650,171
Increase in weighted average shares outstanding due to:
Stock options(1)		16,163		5,757
Diluted weighted average shares outstanding(1)		7,365,208		7,655,927

Earnings per share:
Basic	$	0.26	$	0.14
Diluted	$	0.26	$	0.14

(1)

Weighted average stock options to purchase 43,175 shares under the Company's 2025 Equity Incentive Plan ("2025 EIP") at $14.85 were outstanding during the three months ended March 31, 2026 and were not included in the calculation of diluted earnings per share because to do so would have been anti-dilutive. All stock options outstanding during the three months ended March 31, 2025 were included in the calculation of diluted earnings per share as none had anti-dilutive effects.

Note 7 – Commitments to Extend Credit

The Company has commitments to extend credit with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. There was a $325,000 and $361,000 allowance for credit losses associated with these commitments at March 31, 2026 and December 31, 2025, respectively.

The following commitments to extend credit were outstanding as of the dates specified:


	Commitment Amount
	March 31,		December 31,
	2026		2025
	(Dollars in thousands)

Commitments to grant loans	$	16,535	$	17,644
Unfunded commitments to fund loans and lines of credit		98,083		92,748
Commercial and Standby letters of credit		181		720

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Note 8 – Stock-based Compensation

As of March 31, 2026, the Company had four active stock-based compensation plans, which are described below. The compensation cost related to these plans was $199,000 and $120,000 for the three months ended March 31, 2026 and 2025, respectively, and is included within salary and benefits expense in the non-interest expense section of the consolidated statements of income.

2006 Stock Option Plan

The Company’s 2006 Stock Option Plan (the “Stock Option Plan”), which was approved by the Company’s stockholders, permitted the grant of options to its employees and non-employee directors for up to 403,167 shares of common stock. The Stock Option Plan expired on October 24, 2016, and grants of options can no longer be awarded.

Both incentive stock options and non-qualified stock options have been granted under the Stock Option Plan. The exercise price of each stock option equals the market price of the Company’s common stock on the date of grant and an option’s maximum term is ten years. The stock options generally vest over a five-year period.

A summary of the status of the Stock Option Plan during the three months ended March 31, 2026 and 2025 is presented below:


	2026					2025
	Options		Weighted Average Exercise Price		Remaining Contractual Life	Options		Weighted Average Exercise Price		Remaining Contractual Life
Outstanding at beginning of year		37,696	$	10.61			37,696	$	10.61
Outstanding at end of period		37,696		10.61	0.6 years		37,696		10.61	1.6 years
Options exercisable at end of period		37,696	$	10.61	0.6 years		37,696	$	10.61	1.6 years

:At March 31, 2026, stock options granted under this plan had an intrinsic value of $172,000 and there were no remaining options available for grant under the Stock Option Plan. At March 31, 2026, all compensation cost and expense related to the Stock Option Plan had been recognized in prior periods.

2012 Equity Incentive Plan

The Company’s 2012 Equity Incentive Plan (the “2012 EIP”), which was approved by the Company’s stockholders on May 23, 2012, authorized the issuance of up to 243,882 shares of common stock pursuant to grants of restricted stock awards and up to 27,098 shares of common stock pursuant to grants of incentive stock options and non-qualified stock options, subject to permitted adjustments for certain corporate transactions. Employees and non-employee directors of the Company were eligible to receive awards under the 2012 EIP, except that non-employees may not be granted incentive stock options. The 2012 EIP expired on April 24, 2024, and grants of awards can no longer be made.

A summary of the status of unvested restricted stock awards under the 2012 EIP for the three months ended March 31, 2026 and 2025 is as follows:


	For the Three Months Ended March 31, 2026			Weighted Average Grant Price (per Share)		For the Three Months Ended March 31, 2025				Weighted Average Grant Price (per Share)
Unvested shares outstanding at beginning of year		32,538	$		7.91		77,231		$		8.19
Vested		—			—		(7,036	)			11.04
Unvested shares outstanding at end of period		32,538	$		7.91		70,195		$		7.90

As of March 31, 2026, there were 209,105 shares of restricted stock vested or distributed to eligible participants under the 2012 EIP and the plan expired on April 24, 2024. Accordingly, there were no remaining shares available for grant. Compensation expense related to restricted stock awards under the EIP amounted to $22,000 and $80,000 for the three months ended March 31, 2026 and 2025, respectively. At March 31, 2026, $178,000 of unrecognized compensation cost related to unvested restricted stock awards is expected to be recognized over a period of 25.1 months.

A summary of the status of stock options under the 2012 EIP for the three months ended March 31, 2026 and 2025 is presented below:


	2026							2025
	Options		Exercise Price		Intrinsic Value		Remaining Contractual Life	Options		Exercise Price		Intrinsic Value		Remaining Contractual Life
Outstanding at beginning of year		17,749	$	8.68	$	106,000			17,749	$	8.68	$	28,000
Outstanding at end of period		17,749	$	8.68	$	115,000	5.9 years		17,749	$	8.68	$	53,000	6.9 years

Options exercisable at end of period		7,661	$	9.71	$	42,000	3.0 years		5,140	$	10.61	$	5,000	1.6 years

Compensation expense related to unvested stock options under the 2012 EIP amounted to $1,000 for the three months ended March 31, 2026 and 2025. At March 31, 2026, $17,000 of unrecognized compensation cost related to unvested stock options is expected to be recognized over a period of 3.1 years. During April 2024, the Company granted all remaining options available under the 2012 EIP. The 2012 EIP expired on April 24, 2024 and no additional options were available for grant nor issued after this date.

2025 Equity Incentive Plan

On February 4, 2025, the stockholders of Lake Shore Bancorp, Inc. approved the Company's 2025 Equity Incentive Plan ("2025 EIP") which authorized the issuance of up to 406,470 shares of common stock pursuant to grants of restricted stock, restricted stock units, non-qualified stock options, and incentive stock options. Employees of the Company and Lake Shore Bank and non-employee members of the Company's Board of Directors are eligible to receive grants of stock-based awards under the 2025 EIP.

The Compensation Committee of the Board of Directors granted restricted stock awards under the 2025 EIP during the three months ended March 31, 2026 as follows:

         Grant Date

         Number of Restricted Stock Awards

         Vesting

         Fair Value per Share of Award on Grant Date

         Awardees

March 18, 2026

4,349

100% on March 18, 2027

14.57

Non-employee directors

March 18, 2026

25,041

25% per year for four years with first vesting on March 18, 2027

14.57

Employees

A summary of the status of unvested restricted stock awards under the 2025 EIP for the three months ended March 31, 2026 is as follows:


	At March 31, 2026			Weighted Average Grant Price (per Share)
Unvested shares outstanding at beginning of year		47,556		$	12.36
Granted		29,390			14.57
Vested		(13,999	)		11.64
Unvested shares outstanding at end of period		62,947		$	13.55

As of March 31, 2026, there were 13,999 shares of restricted stock vested or distributed to eligible participants under the 2025 EIP. Compensation expense related to unvested restricted stock awards under the 2025 EIP amounted to $91,000 for the three months ended March 31, 2026 and $8,000 for the three months ended March 31, 2025. At March 31, 2026, $794,000 of unrecognized compensation cost related to unvested restricted stock awards is expected to be recognized over a period of 34.5 months.

A summary of the status of stock options under the 2025 EIP for the three months ended March 31, 2026 is presented below:


	2026
	Options		Exercise Price		Intrinsic Value		Remaining Contractual Life
Outstanding at beginning of year		43,175	$	14.85
Outstanding at end of period		43,175	$	14.85	$	14,000	9.7 years
Options exercisable at end of period		—	$	—	$	—		—

Compensation expense related to unvested stock options under the 2025 EIP amounted to $7,000 for the three months ended March 31, 2026. At March 31, 2026 $105,000 of unrecognized cost related to unvested stock options is expected to be recognized over a period of 4.7 years. As of March 31, 2026 there were 286,349 shares available for grant under the 2025 EIP.

Employee Stock Ownership Plan

The Company established the ESOP for the benefit of eligible employees of the Company and Bank. All Company and Bank employees meeting certain age and service requirements are eligible to participate in the ESOP. Participants’ benefits become fully vested after five years of service once the employee is eligible to participate in the ESOP. The Company utilized $2.6 million of the proceeds of its 2006 stock offering to extend a loan to the ESOP and the ESOP used such proceeds to purchase 322,534 shares of stock on the open market at an average price of $7.90 per share, plus commission expenses. As a result of the purchase of shares by the ESOP, total stockholders’ equity of the Company was reduced by $2.6 million. As part of the Conversion, the remaining balance of $1.2 million of the original 2006 ESOP loan was paid off and refinanced with a new loan to the ESOP. The Company utilized $4.0 million of the proceeds from the 2025 stock offering to extend a loan to the ESOP and the ESOP purchased 396,036 shares of stock in the new Company at an average cost of $10.00. As a result of the purchase of shares by the ESOP, total stockholders' equity of the Company was reduced by $4.0 million. As of March 31, 2026, the balance of the loan to the ESOP was $5.0 million and the fair value of unallocated shares was $7.5 million. As of March 31, 2026, there were 108,845 allocated shares and 493,724 unallocated shares compared to 111,292 allocated shares and 493,724 unallocated shares at December 31, 2025. The ESOP compensation expense was $78,000 for the three months ended March 31, 2026 and $31,000 for the three months ended March 31, 2025 based on 5,143 shares and 2,688 shares earned in each of those quarters, respectively.

Note 9 - Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments. However, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of March 31, 2026 and December 31, 2025 and have not been re-evaluated or updated for purposes of these unaudited consolidated financial statements subsequent to those

respective dates. The estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported here.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities measurements (Level 1) and the lowest priority to unobservable input measurements (Level 3). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.

Level 3: Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the inputs and assumptions that market participants would use in pricing the assets or liabilities.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company’s consolidated statements of financial condition contain investment securities that are recorded at fair value on a recurring basis. For financial instruments measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2026 and December 31, 2025 were as follows:


	Fair Value Measurements at March 31, 2026
				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	Fair Value			(Level 1)		(Level 2)		(Level 3)
		(Dollars in thousands)
Measured at fair value on a recurring basis:
Securities:
Debt Securities Available for Sale
U.S. government agencies	$		1,920	$	—	$	1,920	$	—
Municipal bonds			32,665		—		32,665		—
Mortgage-backed securities:
Collateralized mortgage obligations-private label			7		—		7		—
Collateralized mortgage obligations-government sponsored entities			7,309		—		7,309		—
Government National Mortgage Association			44		—		44		—
Federal National Mortgage Association			8,326		—		8,326		—
Federal Home Loan Mortgage Corporation			3,907		—		3,907		—
Asset-backed securities- government sponsored entities:			1		—		1		—
Total Debt Securities Available for Sale	$		54,179	$	—	$	54,179	$	—


	Fair Value Measurements at December 31, 2025
				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	Fair Value			(Level 1)		(Level 2)		(Level 3)
		(Dollars in thousands)
Measured at fair value on a recurring basis:
Securities:
Debt Securities Available for Sale
U.S. government agencies	$		1,937	$	—	$	1,937	$	—
Municipal bonds			33,840		—		33,840		—
Mortgage-backed securities:
Collateralized mortgage obligations-private label			8		—		8		—
Collateralized mortgage obligations-government sponsored entities			7,764		—		7,764		—
Government National Mortgage Association			45		—		45		—
Federal National Mortgage Association			8,537		—		8,537		—
Federal Home Loan Mortgage Corporation			4,006		—		4,006		—
Asset-backed securities- government sponsored entities:			1		—		1		—
Total Debt Securities Available for Sale	$		56,138	$	—	$	56,138	$	—

Level 2 inputs for assets or liabilities measured at fair value on a recurring basis might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment projections, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. The following is a description of valuation methodologies used for financial assets recorded at fair value on a recurring basis:

•

Investment securities - the fair values are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1) or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution date, market consensus prepayment projections, credit information, and the security’ terms and conditions, among other observations. Level 2 securities which are fixed income instruments that are not quoted on an exchange, but are traded in active markets, are valued using prices obtained from our custodian, who use third party data service providers.

In addition to disclosure of the fair value of assets on a recurring basis, GAAP requires disclosures for assets and liabilities measured at fair value on a non-recurring basis. The following is a description of the valuation methods used for assets that may be measured at fair value on a non-recurring basis.

Collateral-Dependent Loans. Loans for which repayment is substantially expected to be provided through the operations or sale of collateral are considered collateral dependent. They are held at the lower of cost or fair value, and are considered to be measured at fair value when recorded below cost. Collateral-dependent loans are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, based on either a recent appraisal performed by a third-party independent appraiser or discounted cash flows based on current market conditions. Accordingly, collateral dependent loans are classified within Level 3 of the fair value hierarchy. The Company had two collateral-dependent loans with a recorded allowance for credit losses of $15,000 at March 31, 2026, and one collateral-dependent loan with a recorded allowance for credit losses of $6,000 as of December 31, 2025.

Foreclosed Real Estate and Repossessed Assets. Foreclosed real estate and repossessed assets are held at the lower of cost or fair value and are considered to be measured at fair value when recorded below cost. The fair value of foreclosed real estate is calculated using independent appraisals, less estimated selling costs. Certain repossessed assets may require

assumptions about factors that are not observable in an active market when determining fair value. Accordingly, foreclosed real estate and repossessed assets are classified within Level 3 of the fair value hierarchy. There was no foreclosed real estate at March 31, 2026 and December 31, 2025. The Company did not have repossessed assets at March 31, 2026 and December 31, 2025.

Mortgage Servicing Rights. Mortgage servicing rights do not trade in an active market with readily observable market data. As a result, the Company estimates the fair value of loan servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The key assumptions used in the model include the estimated life of loans sold with servicing retained and the estimated cost to service the loans. Loan servicing rights are classified as Level 3 measurements due to the use of unobservable inputs, as well as management judgment and estimation. Mortgage servicing rights amounted to $159,000 and $163,000 at March 31, 2026 and December 31, 2025, respectively, and were included as a component of other assets on the consolidated statements of financial condition.

For assets subject to measurement at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2026 and December 31, 2025 were as follows:


	Fair Value Measurements
				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	Fair Value			(Level 1)		(Level 2)		(Level 3)
		(Dollars in thousands)
Measured at fair value on a non-recurring basis:

At March 31, 2026
Mortgage servicing rights	$		159	$	—	$	—	$	159
Collateral-dependent loans			185		—		—		185

At December 31, 2025
Mortgage servicing rights	$		163	$	—	$	—	$	163
Collateral-dependent loan			131						131

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:


	Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands)	Fair Value Estimate		Valuation Technique	Unobservable Input	Range			Weighted Average
At March 31, 2026
Mortgage servicing rights	$	159	Discounted Cash Flow Model (1)	Servicing Fees	0.25%			0.25%
				Servicing Costs	0.10%			0.10%
				Estimated Life of Loans	3.79 - 7.30 years			5.54 years

Collateral-dependent loan		185	Appraisal of collateral (2)	Direct Disposal Costs (3)		8.00	%		8.00	%


At December 31, 2025
Mortgage servicing rights	$	163	Discounted Cash Flow Model (1)	Servicing Fees	0.25%			0.25%
				Servicing Costs	0.10%			0.10%
				Estimated Life of Loans	4.04 - 7.68 years			5.86 years

Collateral-dependent loan		131	Appraisal of collateral (2)	Direct Disposal Costs (3)		8.00	%		8.00	%

(1)

The fair value is based on a discounted cash flow model. The model's key assumptions are the estimated life of loans sold with servicing retained and the estimated cost to service the loans.

(2)

Fair value is generally determined through independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.

(3)

The fair value basis of collateral-dependent loans may be adjusted to reflect estimates of disposal costs including, but not necessarily limits to, real estate brokerage commissions, legal fees, and delinquent property taxes.

The carrying amount and estimated fair value, based on the exit price notion, of the Company’s financial instruments, whether carried at cost or fair value, are as follows:


	Fair Value Measurements at March 31, 2026
	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Financial assets:
Cash and cash equivalents	$	61,607	$	61,607	$	61,607	$	—	$	—
Securities		54,179		54,179		—		54,179		—
Federal Home Loan Bank stock		677		677		—		677		—
Loans receivable, net		553,879		548,302		—		—		548,302
Accrued interest receivable		3,005		3,005		—		3,005		—
Bank-owned life insurance		31,766		31,766		—		31,766		—
Mortgage servicing rights		159		159		—		—		159
Financial liabilities:
Deposits		566,620		565,832		—		565,832		—
Accrued interest payable		52		52		—		52		—


	Fair Value Measurements at December 31, 2025
	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Financial assets:
Cash and cash equivalents	$	64,280	$	64,280	$	64,280	$	—	$	—
Securities		56,138		56,138		—		56,138		—
Federal Home Loan Bank stock		673		673		—		673		—
Loans receivable, net		555,441		547,492		—		—		547,492
Accrued interest receivable		3,007		3,007		—		3,007		—
Bank-owned life insurance		31,525		31,525		—		31,525		—
Mortgage servicing rights		163		163		—		—		163
Financial liabilities:
Deposits		573,277		572,772		—		572,772		—
Accrued interest payable		58		58		—		58		—

Note 10 – Treasury Stock and Repurchases to Authorized and Unissued

Share and per share information disclosed herein which relate to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio (1.3549) applied in the Conversion.

The Company’s previous stock repurchase program adopted on August 13, 2021 was terminated effective July 18, 2025 in connection with the Conversion, and 1,459,691 shares of common stock held in treasury at a cost of $13.1 million were retired. During the three months ended March 31, 2026, the Company granted 29,390 shares of common stock under the 2025 Equity Incentive Plan, at an average cost of $14.57 per share, to fund awards that had been granted under the plan. During the three months ended March 31, 2026, the Company repurchased 2,102 shares upon vesting of shares under the 2025 Equity Incentive Plan for the purpose of remitting payroll taxes on behalf of awardees who were employees, at an average cost of $15.43 per share. Following the second step conversion, shares repurchased for the purpose of remitting payroll taxes are repurchased into common stock authorized and unissued in accordance with the Company's incorporation in the State of Maryland.

During the three months ended March 31, 2025, the Company did not repurchase any shares of common stock under the previous stock repurchase program. As of March 31, 2025, there were 41,495 shares remaining to be repurchased under the existing stock repurchase program. During the three months ended March 31, 2025, the Company transferred 36,849 shares of common stock out of treasury stock under the 2025 Equity Incentive Plan, at an average cost of $6.93 per share, to fund awards that had been granted under the plan. During the three months ended March 31, 2025, the Company repurchased 2,914 shares upon vesting of shares under the 2012 Equity Incentive Plan for the purpose of remitting payroll taxes on behalf of awardees who were employees, at an average cost of $11.93 per share.

On October 22, 2025, the Company adopted a plan to repurchase up to 5% of its outstanding shares of common stock. Share repurchases under the plan may occur following the one-year anniversary of the Conversion, or on July 20, 2026. All share repurchases made after the Conversion will be repurchased into common stock authorized and unissued.

Note 11 – Other Comprehensive (Loss) Income

In addition to presenting the consolidated statements of other comprehensive (loss) income herein, the following table shows the tax effects allocated to the Company’s single component of other comprehensive (loss) income for the periods presented:


	For the Three Months March 31, 2026								For the Three Months March 31, 2025
	Pre-Tax Amount			Tax Benefit		Net of Tax Amount			Pre-Tax Amount			Tax (Expense)			Net of Tax Amount
	(Dollars in thousands)
Net unrealized (losses) gains on securities available for sale:
Net unrealized (losses) gains arising during the period	$	(873	)	$	184	$	(689	)	$	17		$	(3	)	$	14
Less: reclassification adjustment related to:
Recovery on previously impaired investment securities included in net income		—			—		—			(1	)		—		$	(1	)
Total Other Comprehensive (Loss) Income	$	(873	)	$	184	$	(689	)	$	16		$	(3	)	$	13

The following table presents the amounts reclassified out of the single component of the Company’s accumulated other comprehensive loss for the indicated periods:


	Amounts Reclassified from Accumulated
Details about Accumulated Other	Other Comprehensive Income						Affected Line Item
Comprehensive Loss	For the Three Months Ended March 31,						on the Consolidated
Components	2026			2025			Statements of Income
	(Dollars in thousands)
Net unrealized losses on securities available for sale:
Recovery on previously impaired investment securities			—		(1	)	Recovery on previously impaired investment securities
Total reclassification for the period		$	—	$	(1	)	Increase to Net Income

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Safe-Harbor

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are based on current expectations, estimates and projections about the Company’s and the Bank’s industry, and management’s beliefs and assumptions. Words such as anticipates, expects, intends, plans, believes, estimates and variations of such words and expressions are intended to identify forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast. Therefore, actual results may differ materially from those expressed or forecast in such forward-looking statements.

Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to, those described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, Part II, Item 1A of this Quarterly Report on Form 10-Q and the following:

•

the strength of the United States economy in general and of the local economies in which we conduct operations;

•

the effect of change in monetary and fiscal policy, including changes in interest rate policies of the Board of Governors of the Federal Reserve System;

•

inflation, and market and monetary fluctuations;

•

climate change;

•

tariffs;

•

deterioration in the credit quality of our loan portfolio and/or the value of the collateral securing repayment of loans;

•

unanticipated changes in our liquidity position;

•

reduction in the value of our investment securities;

•

the cost and ability to attract and retain key employees;

•

regulatory or legal developments, tax policy changes;

•

our ability to implement and execute our business plan and strategy and expand our operations;

•

the ability of our customers to make loan payments;

•

the effect of competition on rates of deposit and loan growth and net interest margin;

•

our ability to continue to control costs and expenses;

•

any future FDIC insurance premium increases, or special assessment may adversely affect our earnings;

•

risks from data loss or other security breaches, including a breach of our operational or security systems, policies, or procedures, including cyber-attacks on us or on our third-party vendors or service providers;

•

the failure of financial institutions may adversely affect our business, and the market price of our common stock;

•

risks relating to pandemics and other public health issues;

•

risks relating to geopolitical conflicts;

•

changes in accounting principles, policies, or guidelines;

•

our success in managing the risks involved in our business; and

•

other economic, competitive, geopolitical, governmental, regulatory and technological factors affecting our operations, pricing, products and services.

Any and all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements we make may differ from actual outcomes. They can be affected by inaccurate assumptions we might make or known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Except as required by law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

Overview

The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition, results of operations and other relevant statistical data. It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on our consolidated financial condition as of March 31, 2026 compared to the consolidated financial condition as of December 31, 2025 and the consolidated results of operations for the three months ended March 31, 2026 and 2025.

Our results of operations depend primarily on our net interest income, which is the difference between the interest income we earn on loans and investments and the interest expense we pay on deposits, borrowings, and other interest-bearing liabilities. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates we earn or pay on these balances.

Our operations are also affected by non-interest income, such as service charges and fees, debit card fees, earnings on bank owned life insurance, and other non-interest income activities as well as non-interest expenses which include salaries and employee benefits, occupancy and equipment costs, data processing, professional services, advertising, FDIC insurance, and other general and administrative expenses.

Financial institutions like us, in general, are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing and commercial real estate, competition among lenders, interest rate conditions, and funds availability. Our operations and lending are principally concentrated in the Western New York area, and our operations and earnings are influenced by local economic conditions. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments, customer preferences, and levels of personal income and savings in our primary market area. Operations are also significantly impacted by government policies and actions of regulatory authorities. Future changes in applicable law, regulations, or government policies may materially impact the Company.

Completion of Second-Step Conversion

On January 27, 2025, Lake Shore, MHC, the former parent mutual holding company of Lake Shore Federal Bancorp, adopted a Plan of Conversion and Reorganization pursuant to which Lake Shore, MHC, would undertake a "second-step" conversion (the “Conversion”) and Lake Shore Savings Bank, a federally chartered savings bank, the wholly-owned subsidiary of Lake Shore Federal Bancorp, would reorganize from the two-tier mutual holding company structure to the fully-public stock holding company structure. In addition, Lake Shore Savings Bank would convert its charter from a federal savings bank to a New York commercial bank renamed Lake Shore Bank.

Effective July 18, 2025, Lake Shore Bancorp, a new corporation incorporated under the laws of the State of Maryland, became the bank holding company of Lake Shore Bank, a New York commercial bank and its only wholly-owned subsidiary in connection with the completion of Conversion. The Conversion was consummated through the merger of Lake Shore, MHC with and into Lake Shore Federal Bancorp, followed by the merger of Lake Shore Federal Bancorp with and into Lake Shore Bancorp, which occurred on July 18, 2025. In the subscription offering, Lake Shore Bancorp raised gross proceeds of $49.5 million by selling 4,950,460 shares of its common stock (approximately the midpoint of the offering range) at $10.00 per share to depositors of the Bank. The Company used $4.0 million of the proceeds to fund an addition to its Employee Stock Ownership Plan ("ESOP") loan for the acquisition of an additional 396,036 shares at $10.00 per share. Expenses incurred related to the offering were approximately $2.3 million and have been recorded against offering proceeds.

As part of the Conversion transaction, each outstanding share of Lake Shore Federal Bancorp common stock owned by the public stockholders of Lake Shore Federal Bancorp (stockholders other than Lake Shore, MHC) as of July 18, 2025 were converted into shares of Lake Shore Bancorp's common stock based on an exchange ratio of 1.3549 shares of Lake Shore Bancorp's common stock for each share of Lake Shore Federal Bancorp common stock so that Lake Shore Federal Bancorp's existing public stockholders would own approximately the same percentage of Lake Shore Bancorp's common

stock as they owned of Lake Shore Federal Bancorp's common stock immediately prior to the Conversion. A total of 7,825,501 shares of common stock were outstanding immediately following the completion of the stock offering.

Recent Events

Management Strategy

There have been no material changes in the Company’s management strategy from what was disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Critical Accounting Estimates

The Company's consolidated financial statements are prepared in accordance with GAAP. As a result, the Company is required to make certain estimates, judgments, and assumptions that it believes are reasonable based upon the information available at that time. Critical accounting estimates includes the areas where the Company has made what it considers to be particularly difficult, subjective, or complex judgments concerning estimates, and where these estimates can significantly affect the Company's financial results under different assumptions and conditions. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. Significant accounting policies followed by the Company are presented in Note 2 - Summary of Significant Accounting Policies, to the Audited Consolidated Financial Statements included within Part II. Item 8. of its Annual Report on Form 10-K for the year ended December 31, 2025, and in Note 1: Basis of Presentation and Significant Accounting Policies and Estimates in Part I. Item 1. of this Form 10-Q.

Allowance for Credit Losses

Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments can have on our results of operations. Determining the amount requires significant judgment on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.

The allowance is established through a provision for credit losses in the Consolidated Statements of Income, and evaluation of the adequacy of the allowance for credit losses is performed by management on a quarterly basis. While management uses available information to anticipate credit losses, future additions to the allowance may be necessary based on changes in economic conditions or the composition of its portfolios. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for credit losses. As of March 31, 2026 and December 31, 2025, the allowance for credit losses on loans totaled $4.8 million and $4.9 million, respectively. Due to the nature and composition of the Bank's lending activities, a significant portion of the allowance for credit losses on loans is allocated to the commercial real estate portfolio. As of March 31, 2026 and December 31, 2025, the allowance for credit losses on loans allocated to the total commercial real estate portfolio was $3.7 million, or 78.0%, and $3.9 million, or 80.2%, respectively.

The Company's methodology for maintaining its allowance for credit losses is based on historical loan-level performance experience and data, peer data, current economic information, and reasonable and supportable forecasts. Accordingly, the estimation of the allowance for credit losses is impacted by the economic forecasts utilized, which require the use of significant judgment. Deterioration of forecasted economic conditions may lead to further required increases to the allowance for credit losses. Conversely, improvements to forecasted economic conditions may warrant further reductions to the allowance for credit losses. In estimating the allowance for credit losses, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate.

The allowance for credit losses is sensitive to various forecasted macroeconomic drivers, including the Federal Open Market Committee's ("FOMC") median forecasted U.S. civilian unemployment rate and the year-over-year change in U.S. Gross Domestic Product ("GDP"). While it is difficult to estimate how potential changes to various factors may impact the allowance for credit losses because such changes to factors may not occur at the same rate or in the same direction, management compared the modeled allowance for credit losses on loans to a hypothetical model using a downside economic forecast. Using an immediate "shock" or increase of 20 basis points in the FOMC's projected rate of U.S. civilian unemployment, and a decrease of 100 basis points in the FOMC's projected rate of U.S. GDP growth, this would increase the model's total calculated allowance for credit losses on loans by $382,000, or 8.0%, representing a seven basis points increase in the coverage ratio of the allowance for credit losses as a percentage of loans at amortized cost, assuming all other quantitative and qualitative factors are kept at current levels, as of March 31, 2026. This example is only one of the numerous possible economic scenarios that could be utilized in assessing the sensitivity of the allowance for credit losses and does not represent management’s assumptions or judgment of factors as of March 31, 2026.

Unexpected changes in economic growth could adversely affect our results of operations, including causing increases in delinquencies and default rates on loans, which would adversely impact our charge-offs, allowance for credit losses, and provision for credit losses. Deterioration in real estate values, employment data and household incomes may also result in higher credit losses for us. Also, in the ordinary course of business, we may be subject to a concentration of credit risk to a particular industry, counterparty, borrower or issuer. A deterioration in the financial condition or prospects of a particular industry or a failure or downgrade of, or default by, any particular entity or group of entities could negatively impact our business, perhaps materially, and the systems by which we set limits and monitor the level of our credit exposure to individual entities and industries, may not function as we have anticipated.

Analysis of Net Interest Income

Net interest income represents the difference between the interest we earn on our interest-earning assets, such as commercial and residential mortgage loans and investment securities, and the expense we pay on interest-bearing liabilities, such as deposits and borrowings. Net interest income depends on both the volume of our interest-earning assets and interest-bearing liabilities and the interest rates we earn or pay on them.

Average Balances, Interest and Average Yields. The following table sets forth certain information relating to our average balance sheets for each principal category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for credit losses, but include non-accrual loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields. The net amortization of deferred loan fees and

costs were $93,000 and $63,000 for the three months ended March 31, 2026 and 2025, respectively. Interest income on securities does not include a tax equivalent adjustment for bank qualified municipal bonds.


	For the Three Months Ended							For the Three Months Ended
	March 31, 2026							March 31, 2025
	Average		Interest Income/		Yield/			Average		Interest Income/		Yield/
	Balance		Expense		Rate(2)			Balance		Expense		Rate(2)
	(Unaudited)
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits	$	54,061	$	469		3.47	%	$	23,562	$	234		3.97	%
Securities(1)		57,052		354		2.48	%		57,804		381		2.64	%
Loans, including fees		551,119		8,232		5.97	%		545,561		7,752		5.68	%
Total interest-earning assets		662,232	$	9,055		5.47	%		626,927	$	8,367		5.34	%
Other assets		53,328							51,656
Total assets	$	715,560						$	678,583

Interest-bearing liabilities:
Demand & NOW accounts	$	62,384	$	15		0.10	%	$	62,784	$	15		0.10	%
Money market accounts		156,226		735		1.88	%		152,680		867		2.27	%
Savings accounts		51,263		8		0.06	%		53,541		9		0.07	%
Time deposits		198,245		1,614		3.26	%		208,804		1,951		3.74	%
Total interest-bearing deposits		468,118		2,372		2.03	%		477,809		2,842		2.38	%
Borrowed funds & other interest-bearing liabilities		2,342		23		3.93	%		6,237		60		3.85	%
Total interest-bearing liabilities		470,460	$	2,395		2.04	%		484,046	$	2,902		2.40	%
Other non-interest bearing liabilities		102,013							103,593
Stockholders' equity		143,087							90,944
Total liabilities & stockholders' equity	$	715,560						$	678,583
Net interest income			$	6,660						$	5,465
Interest rate spread						3.43	%						2.94	%
Net interest margin						4.02	%						3.49	%

(1) The tax equivalent adjustment for bank qualified tax exempt municipal securities, using a federal statutory rate of 21%, results in rates of 2.85% and 3.04% for the three months ended March 31, 2026 and 2025, respectively. Yields above are not presented on a tax equivalent basis.

(2) Annualized.

Rate Volume Analysis. The following table analyzes the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. The table shows the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in interest rates. The effect of a change in volume is measured by applying the average rate during the later period to the volume change between

the two periods. The effect of changes in rate is measured by applying the change in rate between the two periods to the average volume during the first period.


	Three Months Ended March 31, 2026
	Compared to
	Three Months Ended March 31, 2025
	Rate				Volume			Net Change
		(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits	$		(30	)	$	265		$	235
Securities			(22	)		(5	)		(27	)
Loans, including fees			397			83			480
Total interest-earning assets			345			343			688
Interest-bearing liabilities:
Demand & NOW accounts			—			—			—
Money market accounts			(149	)		17			(132	)
Savings accounts			(1	)		—			(1	)
Time deposits			(251	)		(86	)		(337	)
Total deposits			(401	)		(69	)		(470	)
Other interest-bearing liabilities:
Borrowed funds & other interest-bearing liabilities			1			(38	)		(37	)
Total interest-bearing liabilities			(400	)		(107	)		(507	)
Total change in net interest income	$		745		$	450		$	1,195

As shown in the above tables, the increase in net interest income for the three months ended March 31, 2026 when compared to the three months ended March 31, 2025 was primarily impacted by a decrease in the average interest rate paid on interest-bearing liabilities, an increase in the average yield of interest-earning assets, an increase in the average balance of interest-earning assets, and a decrease in the average balance of interest bearing-liabilities. The average interest rate paid on interest-bearing liabilities decreased 36 basis points from 2.40% during the three months ended March 31, 2025 to 2.04% during the three months ended March 31, 2026. The decrease in the average interest rate paid on interest-bearing liabilities during the three months ended March 31, 2026 was primarily due to a 35 basis points decrease in the average interest rate paid on interest-bearing deposit accounts. The decrease in the average interest rate paid on deposit accounts was primarily due to the decrease in market interest rates and time deposit repricing. The average yield earned on interest-earning assets increased 13 basis points from 5.34% during the three months ended March 31, 2025 to 5.47% during the three months ended March 31, 2026. The increase in the average yield of interest-earning assets was primarily due to a 29 basis points increase in the average yield on the loan portfolio when compared to the prior year period. The average balance of interest-earning assets increased by $35.3 million to $662.2 million for the three months ended March 31, 2026 as compared to $626.9 million for the three months ended March 31, 2025. The increase in average balance of interest-earning assets was primarily related to an increase in the average balance of interest-earning deposits as a result of funds received from the second step conversion not yet deployed. The average balance of interest-bearing liabilities decreased $13.6 million, from $484.0 million during the three months ended March 31, 2025 to $470.5 million during the three months ended March 31, 2026 as a result of decreases in the average balance of deposits of $9.7 million and in the balance of borrowed funds and other interest-bearing liabilities of $3.9 million. Net interest margin increased to 4.02% for the three months ended March 31, 2026 as compared to 3.49% for the same period of the prior year.

Comparison of Financial Condition at March 31, 2026 and December 31, 2025

Total assets at March 31, 2026 were $722.0 million, a decrease of $5.3 million, or 0.7%, as compared to $727.3 million at December 31, 2025 primarily due to decreases in cash and cash equivalents and securities, at fair value.

Cash and cash equivalents decreased by $2.7 million, or 4.2%, from $64.3 million at December 31, 2025 to $61.6 million at March 31, 2026. The decrease in cash and cash equivalents was primarily due to a decrease in deposits of $6.7 million, or 1.2%, partially offset by a decrease in loans receivable of $1.6 million, or 0.3%.

Securities, at fair value, decreased by $2.0 million, or 3.5%, from $56.1 million at December 31, 2025 to $54.2 million at March 31, 2026, primarily due to securities paydowns of $1.1 million and an $872,000 decrease in the market value of the securities.

Net loans receivable decreased during the three months ended March 31, 2026, as shown in the table below:


	At March 31,			At December 31,			Change
	2026			2025			$			%
	(Dollars in thousands)
Real Estate Loans:
Residential, one- to four-family(1)	$	147,275		$	150,095		$	(2,820	)		(1.9	)	%
Home equity		46,362			46,970			(608	)		(1.3	)	%
Commercial(2)		328,978			327,352			1,626			0.5		%
Total real estate loans		522,615			524,417			(1,802	)		(0.3	)	%
Other Loans:
Commercial		17,773			17,430			343			2.0		%
Consumer		15,358			15,466			(108	)		(0.7	)	%
Total gross loans		555,746			557,313			(1,567	)		(0.3	)	%
Allowance for credit losses on loans		(4,799	)		(4,884	)		85			(1.7	)	%
Net deferred loan costs		2,932			3,012			(80	)		(2.7	)	%
Loans receivable, net	$	553,879		$	555,441		$	(1,562	)		(0.3	)	%

(1)

There were no one- to four- family construction loans as of March 31, 2026 or December 31, 2025.

(2)

Includes commercial construction loans.

Net loans receivable decreased $1.6 million, or 0.3%, from $555.4 million at December 31, 2025 to $553.9 million at March 31, 2026. The decrease was primarily due to decreases in residential, one- to four-family real estate loans, home equity loans, and consumer loans, partially offset by increases in commercial real estate loans and commercial loans. During the three months ended March 31, 2026, we remained strategically focused on originating shorter duration, adjustable-rate loans to diversify our asset mix and to manage interest rate risk while continuing to reduce our reliance on wholesale funding sources.

Asset Quality. The following tables set forth activity in our allowance for credit losses on loans and other ratios at or for the dates indicated:


	For the Three Months Ended March 31,
	2026				2025
	(Dollars in thousands)
Balance at beginning of year	$	4,884			$	5,133
Credit to provision for credit losses		(77	)			39
Charge-offs:
Other loans:
Consumer		(9	)			(7	)
Total charge-offs		(9	)			(7	)
Recoveries:
Real estate loans:
Residential, one- to four-family		—				4
Other loans:
Consumer		1				1
Total recoveries		1				5
Net (charge-offs) recoveries		(8	)			(2	)
Balance at end of period	$	4,799			$	5,170

	At March 31,				At March 31,
	2026				2025
Average loans outstanding, including fees	$	551,119			$	545,561
Allowance for credit losses as a percent of loans at amortized cost		0.86		%		0.93		%
Allowance for credit losses as a percent of non-performing loans at amortized cost		302.76		%		148.89		%

When compared to December 31, 2025, the current modeled allowance for credit losses related to the loan portfolio decreased by approximately $85,000, or 1.74%, which was comprised of a decrease of $92,000 due to a decrease in reserve rate for the blended portfolio, partially offset by an increase of $7,000 related to an increase in loan balance for the commercial real estate and commercial loan pools. Such allowance for credit losses was calculated utilizing a discounted cash flow model as further described in Part I Item 1 - Note 1 - Basis of Presentation and Significant Accounting Policies and Estimates.


	For the Three Months Ended March 31,
	2026				2025
Ratio of net charge-offs to average loans outstanding by loan type, annualized:
Real estate loans:
Residential, one- to four-family		—		%		—		%
Home equity		—		%		—		%
Commercial		—		%		—		%
Other loans:
Commercial		—		%		—		%
Consumer		(0.06	)	%		(0.13	)	%
Ratio of net charge-offs to average loans outstanding		—		%		—		%

For the three months ended March 31, 2026, consumer loan net charge-offs to average consumer loans outstanding, annualized, improved to (0.06)% from (0.13)% for the prior year period. This improvement was primarily driven by an increase in average consumer loans outstanding of $10.8 million for the three months ended March 31, 2026 when compared to the three months ended March 31, 2025.


	At March 31,				At December 31,
	2026				2025
		(Dollars in thousands)
Loans accounted for on a non-accrual basis:
Real estate loans:
Residential, one- to four-family(1)	$		1,437		$	1,525
Home equity			62			66
Commercial(2)			86			89
Other loans:
Commercial			—			—
Consumer			—			—
Total non-accrual loans			1,585			1,680
Total non-performing loans			1,585			1,680
Foreclosed real estate			—			—
Total non-performing assets	$		1,585		$	1,680
Ratios:
Non-performing loans as a percent of total loans at amortized cost			0.28	%		0.30	%
Non-performing assets as a percent of total assets			0.22	%		0.23	%

(1) There were no one- to four-family construction loans at March 31, 2026 or December 31, 2025.

(2) Includes commercial construction loans.

Total non-performing assets decreased by $95,000, or 5.7%, to $1.6 million at March 31, 2026 from $1.7 million at December 31, 2025, due to a decrease in non-accrual loans of $95,000. The Company had no loans past due 90 days or more but still accruing at March 31, 2026 or December 31, 2025.

Other assets increased $774,000, or 8.4%, to $10.0 million at March 31, 2026 from $9.2 million at December 31, 2025 as a result of normal operations.

The table below shows changes in deposit balances by type of deposit account between March 31, 2026 and December 31, 2025:


	At March 31,		At December 31,		Change
	2026		2025		$			%
	(Dollars in thousands)
Core deposits
Demand deposits and NOW accounts:
Non-interest bearing	$	91,014	$	96,103	$	(5,089	)		(5.3	)	%
Interest bearing		65,202		62,346		2,856			4.6		%
Time deposits less than or equal to $250,000		176,761		174,211		2,550			1.5		%
Money market		151,895		159,212		(7,317	)		(4.6	)	%
Savings		51,468		51,788		(320	)		(0.6	)	%
Total core deposits		536,340		543,660		(7,320	)		(1.3	)	%
Non-core deposits
Time deposits greater than $250,000		30,280		29,617		663			2.2		%
Total non-core deposits		30,280		29,617		663			2.2		%
Total deposits	$	566,620	$	573,277	$	(6,657	)		(1.2	)	%

The decrease in total deposits was primarily due to a 4.6% decrease in money market accounts, a 5.3% decrease in non-interest bearing deposit accounts, and a 0.6% decrease in savings accounts, as a result of changes to customer demand for these types of deposit products. These decreases were partially offset by a 4.6% increase in interest bearing transaction accounts, a 1.5% increase in time deposits less than or equal to $250,000, and a 2.2% increase in time deposits greater than $250,000. The increase in interest bearing core deposits, core time deposits and time deposits greater than $250,000 was

primarily due to an increase in customer demand for these types of deposit products as the result of the competitive interest rate environment. Our strategic focus remains centered on organic growth of deposits among our retail and commercial customers to reduce our reliance on wholesale funding and to strengthen customer relationships. At March 31, 2026 and December 31, 2025, our percentage of uninsured deposits to total deposits was 10.0% and 11.3%, respectively.

Total stockholders’ equity increased $739,000, or 0.5%, to $142.4 million at March 31, 2026 from $141.6 million at December 31, 2025. The increase in stockholders’ equity was primarily attributed to $1.9 million in net income earned during the three months ended March 31, 2026, partially offset by an increase in accumulated other comprehensive loss of $689,000 and dividends declared and paid of $662,000.

Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025

General. Net income increased to $1.9 million during the three months ended March 31, 2026, or $0.26 per diluted share, an increase of $866,000, or 81.9%, compared to net income of $1.1 million, or $0.14 per diluted share, for the three months ended March 31, 2025. Our financial performance for the three months ended March 31, 2026 was positively impacted primarily by a $1.2 million increase in net interest income.

Net Interest Income. Net interest income for the three months ended March 31, 2026 increased by $1.2 million, or 21.9%, to $6.7 million as compared to $5.5 million for the three months ended March 31, 2025. Net interest margin and interest rate spread were 4.02% and 3.43%, respectively, for the three months ended March 31, 2026 as compared to 3.49% and 2.94%, respectively, for the three months ended March 31, 2025.

Interest Income. Interest income for the three months ended March 31, 2026 was $9.1 million, an increase of $688,000, or 8.2%, compared to $8.4 million for the three months ended March 31, 2025. The increase in interest income from the prior year quarter was primarily due to a $35.3 million, or 5.6%, increase in the average balance of interest-earning assets and a 13 basis point increase in the average yield of interest-earning assets. During the first quarter of 2026 as compared to the same period in 2025, there was a $480,000 increase in interest income on loans due to a 29 basis point increase in the average yield earned on loans and $5.6 million, or 1.0%, increase in the average balance of loans. The increase in the average yield on loans and average balance of loans was primarily attributable to the origination of loans at higher interest rates since the first quarter of 2025. Further, interest income on interest-earning deposits increased by $235,000, or 100.4%, primarily due to a $30.5 million, or 129.4%, increase in the average balance of interest-earning deposits.

Interest Expense. Interest expense for the three months ended March 31, 2026 was $2.4 million, a decrease of $507,000, or 17.5%, from $2.9 million for the three months ended March 31, 2025. The decrease in interest expense when compared to the prior year quarter was primarily due to a 36 basis point decrease in average interest rate paid on interest-bearing liabilities and a $13.6 million, or 2.8%, decrease in the average balance of interest-bearing liabilities. During the three months ended March 31, 2026 as compared to the same period in 2025, interest expense on interest-bearing deposits decreased by $470,000, or 16.5%, due to a 35 basis point decrease in the average interest rate paid on interest-bearing deposit accounts, along with a $9.7 million, or 2.0% decrease in the average balance of interest-bearing deposits. The decrease in average interest-bearing deposits accounts was due to a decrease in the average balance of all deposit account types except money market accounts. During the three months ended March 31, 2026 as compared to the same period in 2025, there was a $337,000 decrease in interest paid on time deposit accounts due to a 48 basis point decrease in the average interest rate paid on time deposits. The decrease in the average interest rate paid on time deposit accounts was primarily due to the decrease in market interest rates and proactive management of deposit funding costs. During the first quarter of 2026, interest expense on borrowed funds and other interest-bearing liabilities decreased by $37,000, or 61.7%, compared to the first quarter of 2025, primarily due to a $3.9 million, or 62.4% decrease in average borrowed funds and other interest-bearing liabilities outstanding due to the repayment of our borrowings during 2025.

Provision (Credit) for Credit Losses. The Company recorded a credit to provision for credit losses of $113,000 for the three months ended March 31, 2026, as compared to a provision for credit losses of $48,000 for the three months ended March 31, 2025. The credit to the provision for credit losses of $113,000 for the three months ended March 31, 2026 was primarily attributable to a decrease in the quantitative and qualitative loss rates, inclusive of forecasted economic trends, primarily for the commercial real estate and home equity loan pools.

Non-Interest Income. Non-interest income was $703,000 for the three months ended March 31, 2026, a decrease of $21,000, or 2.9%, as compared to $724,000 for the three months ended March 31, 2025. The decrease was primarily due to a $46,000 gain on equity securities during the three months ended March 31, 2025, partially offset by a $26,000 increase in earnings on bank-owned life insurance for the current quarter when compared to the three months ended March 31, 2025.

Non-Interest Expense. Non-interest expense was $5.1 million for the three months ended March 31, 2026, an increase of $245,000, or 5.0%, as compared to $4.9 million for the three months ended March 31, 2025. The increase was primarily related to an increase in the cost of health insurance, taxes, and other non-salary benefits of $300,000, or 30.3%, and an increase in occupancy and equipment expenses of $43,000, or 6.4%. These increases were partially offset by a $98,000 decrease in data processing costs as we renegotiated our primary data processing contract, and a $53,000 decrease in professional services.

Income Tax Expense. Income tax expense was $430,000 for the three months ended March 31, 2026, an increase of $224,000, or 108.7%, as compared to $206,000 for the three months ended March 31, 2025. The increase in income tax expense from the prior year quarter was primarily related to the increase in taxable income earned during the current quarter.

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise during the ordinary course of business. Liquidity is primarily needed to fund loan commitments, to pay the deposit withdrawal requirements of our customers, as well as to fund current and planned expenditures. Our primary sources of funds consist of deposits, scheduled amortization and prepayments of loans and securities, maturities and sales of investments and loans, excess cash, interest earning deposits at other financial institutions, and funds provided from operations.

We have written agreements with the FHLBNY, which allow us to borrow the maximum lending values designated by the type of collateral pledged. As of March 31, 2026, the unpaid principal balance of the fixed-rate residential, one-to four-family loans pledged to FHLBNY as collateral, was $125.1 million and the total collateral market value assigned by FHLNBY was $94.2 million. In support of arrangements entered into by certain municipal and other public sector counterparties, we have issued a letter of credit (“MULOC”) through FHLBNY to secure municipal deposits. As of March 31, 2026 we had a $2.5 million outstanding letter of credit related to municipal deposits, and as of December 31, 2025, we had no outstanding letters of credit related to municipal deposits. Such MULOCs are applied as a reduction to our total borrowing capacity with FHLBNY. As of March 31, 2026 and December 31, 2025, respectively, we had available borrowing capacity of $91.7 million and $88.0 million under the agreement with FHLBNY. At March 31, 2026 and December 31, 2025, there were no outstanding advances under this agreement.

We have a written agreement with the Federal Reserve Bank discount window for overnight borrowings which is collateralized by a pledge of our securities, and allows us to borrow up to the value of the securities pledged. At March 31, 2026, and December 31, 2025, there were no securities pledged to the Federal Reserve Bank and we had no balances outstanding. Additionally, as of March 31, 2026, the Bank has un-collateralized intraday credit with the Federal Reserve Bank that allows for certain transactions to not be rejected for which there are insufficient funds in our Federal Reserve Master Account during normal hours of operation.

Lastly, we have also established an unsecured line of credit with a correspondent bank for $20.0 million. There were no borrowings on this line as of March 31, 2026 and December 31, 2025.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, calls of investment securities, and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions, and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds.

Our primary investing activities include the origination and purchase of loans and the purchase of investment securities. For the three months ended March 31, 2026, we originated loans of approximately $21.8 million as compared to approximately $18.1 million of loans originated during the three months ended March 31, 2025. Principal payments and other deductions

exceeded loan originations and purchases during the three months ended March 31, 2026 by $1.5 million. There were no purchases or sales of investment securities during the three months ended March 31, 2026 and 2025.

We have loan commitments to borrowers and borrowers have unused overdraft lines of protection, unused home equity lines of credit and unused commercial lines of credit that may require funding at a future date. We believe we have sufficient funds to fulfill these commitments, including sources of funds available through the use of FHLBNY advances or other liquidity sources. Total deposits were $566.6 million at March 31, 2026, as compared to $573.3 million at December 31, 2025. Approximately $185.3 million of time deposit accounts are scheduled to mature within one year as of March 31, 2026. Based on our deposit retention experience, current pricing strategy, and competitive pricing policies, we anticipate that a significant portion of these time deposits will remain with us following their maturity.

We are committed to maintaining a strong liquidity position; therefore, we monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. The marginal cost of new funding, however, whether from deposits or borrowings from the FHLBNY, will be carefully considered as we monitor our liquidity needs. Therefore, in order to maintain sufficient liquidity and manage our cost of funds, we may consider wholesale funding options, including additional borrowings from the FHLBNY, in the future.

We do not anticipate any material capital expenditures in 2026. We do not have any balloon or other payments due on any long-term obligations, other than the borrowing agreements noted above. At March 31, 2026, the Bank exceeded all of its regulatory capital requirements.

Regulatory Capital

The federal banking agencies have developed a “Community Bank Leverage Ratio” (“CBLR”) (bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A “qualifying community bank” may elect to utilize the Community Bank Leverage Ratio in lieu of the general applicable risk-based capital requirements under Basel III. If the community bank exceeds this ratio it will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Basel III. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set the minimum capital for the Community Bank Leverage Ratio at 9.0%. The Bank elected to be subject to this new definition when it became effective on January 1, 2020, and has continued to use the Community Bank Leverage Ratio since that time. Effective July 1, 2026, the federal banking agencies set the minimum capital for the Community Bank Leverage Ratio at 8.00%. As of March 31, 2026 and December 31, 2025, the Bank’s Community Bank Leverage Ratio was 17.54% and 16.65%, respectively.

In order to be considered “well-capitalized” by the FDIC, a non-CBLR commercial bank must maintain a Tier 1 Leverage capital ratio of 5% and a Total Risk-Based capital ratio of 10%. At March 31, 2026 and December 31, 2025, the Bank’s Tier 1 Leverage capital ratio was 17.54% and 16.65%, respectively, and its Total Risk-Based capital ratio was 23.81% and 23.51%, respectively. Accordingly, the Bank was considered to be well-capitalized under applicable regulatory capital requirements.

Off-Balance Sheet Arrangements

Other than loan commitments, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Refer to Note 7 in the Notes to our unaudited consolidated financial statements for a summary of loan commitments outstanding as of March 31, 2026.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Disclosure is not required as the Company is a smaller reporting company.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II

Item 1A. Risk Factors.

Refer to Part I, Item 1A, Risk Factors, of our Form 10-K for the year ended December 31, 2025 and Forward-Looking Statements from Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q for a discussion of certain risks affecting us. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations.

There have been no material changes to the risk factors since the filing of the Annual Report on Form 10-K for the year ended December 31, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table reports information regarding repurchases by Lake Shore Bancorp of its common stock in each month of the quarter ended March 31, 2026.

COMPANY PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2)

January 1 through January 31, 2026		—		—		—		—
February 1 through February 28, 2026		—		—		—		—
March 1 through March 31, 2026		2,102	$	15.43		—		—
Total		2,102	$	15.43		—		—

(1) Shares purchased represent shares that were elected to be withheld from the vesting of restricted stock awards to cover income tax withholdings for the individuals upon vesting. Shares were repurchased into authorized and unissued shares.

(2) On October 22, 2025, our Board of Directors adopted a plan to repurchase up to 5% of our outstanding shares of common stock. Repurchases under the plan are expected to commence following the one-year anniversary of the recently completed conversion of Lake Shore, MHC from mutual-to-stock form, or on July 20, 2026.

Item 5. Other Information

During the first quarter of 2026, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

Item 6. Exhibits




			31.1				Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
			31.2				Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002*
			32.1				Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
			32.2				Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
			101.INS				Inline XBRL Instance Document*
			101.SCH				Inline XBRL Taxonomy Extension Schema Document*
			101.CAL				Inline XBRL Taxonomy Calculation Linkbase Document*
			101.DEF				Inline XBRL Taxonomy Extension Definition Linkbase Document*
			101.LAB				Inline XBRL Taxonomy Label Linkbase Document*
			101.PRE				Inline XBRL Taxonomy Presentation Linkbase Document*
			104				Cover Page Interactive Date File (formatted as inline XBRL and contained in Exhibit 101)*

________________

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		LAKE SHORE BANCORP, INC.
		(Registrant)

May 12, 2026	By:	/s/ Kim C. Liddell
		Kim C. Liddell
		President and Chief Executive Officer
		(Principal Executive Officer)

May 12, 2026	By:	/s/ Taylor M. Gilden
		Taylor M. Gilden
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)