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Lyons Bancorp Aggressively Adds to its Loan Reserve As a Result of Record Revenues

With the uncertainty surrounding the depth of the ultimate financial hardships caused by the COVID-19 pandemic, Lyons Bancorp Inc., the parent financial holding company for The Lyons National Bank aggressively funded its Allowance for Loan Losses in 2020. Record revenues earned by the Company afforded it the ability to follow this conservative strategy. In 2020, the Company’s total revenues were $56 million, $6 million more than the $50 million it generated in 2019. The increased revenues allowed the Company to add $6.3 million to its Allowance for Loan Losses in 2020 as compared to the $2.3 million it added in 2019. It is important to note, the Company’s actual loan losses in 2020 fell to $431 thousand, approximately 50% of the $821 thousand it realized in 2019. “Until the battle against the coronavirus is won and the overall financial picture improves, we will continue to err on the side of caution,” said Robert A. Schick, Lyons Bancorp Chairman and President. “Nationwide, many small businesses and families are still struggling financially.”
Taking this conservative financial approach did end the Company’s run of 23 consecutive years of ever-increasing annual net income after tax. For 2020, Lyons Bancorp earned $10.3 million down from $11 million earned in the previous year. On a per share basis, the Company earned $3.12 per common share versus $3.33 per common share in 2019. Both numbers are calculated on a fully diluted basis. “Watching our earnings streak end is a small price to pay for the added cushion in our loan allowance and ultimately the financial strength of the Bank,” said Schick.
As a result of the federal government’s largest ever financial assistance/stimulus package and the Federal Reserve’s aggressive approach to lower interest rates, assets at the Company’s main subsidiary, The Lyons National Bank, ballooned by 22% to $1.42 billion at the end of 2020 as compared to $1.16 billion at the end of 2019. Loans at the Bank, led by the SBA PPP loan program and residential mortgages, grew $157 million, a gain of 18%. “Quickly realizing the severity of the developing economic crisis, we marshalled forces throughout the Bank to process PPP loan applications and get much needed money into the hands of our customers and non-customers alike,” said Thomas Kime, President and CEO of The Lyons National Bank. “Our folks worked around the clock for many months processing approximately 1,200 applications totaling more than $116 million of PPP loans. We also worked diligently with these folks to have their loans forgiven. Historically low interest rates resulted in a record number of residential mortgage applications processed by the Bank. To say our employees earned their paychecks in 2020, would be a gross understatement.”
Bank deposits grew by 20% to $1.3 billion in 2020. The Bank’s strong branch system (as evidenced by market share gains in all of the markets it serves) enhanced by the opening of our newest branch in Farmington, NY, was instrumental in capturing the record increase in local deposits.
Retained earnings increased shareholder equity by $8.6 million, a 10% increase over 2019.
Rapid balance sheet growth, coupled with a decline in our net interest margin, reduced the Company’s Return on Average Assets (ROAA) to 0.78% from 0.98%. Lower net interest margin also had a negative effect on our Return on Average Equity (ROAE) as it slipped from 12.99% to 10.47%.