SCHEDULE: Stilwell Group to Seek Lake Shore Bancorp Board Seats

Activist investor Stilwell Group, holding a 9.9% stake in Lake Shore Bancorp, Inc., plans to seek board representation at the 2026 annual meeting following unproductive discussions with management.

Summary

• Stilwell Activist Fund, L.P., Stilwell Activist Investments, L.P., Stilwell Partners, L.P., Stilwell Value LLC, and Joseph Stilwell (collectively, the 'Group') beneficially own 773,675 shares of Lake Shore Bancorp, Inc. common stock.
• This ownership represents approximately 9.9% of the 7,825,501 shares outstanding as of August 8, 2025.
• The Group's purpose is to profit from the appreciation in the market price of the shares by asserting shareholder rights, believing the Issuer's asset value is not adequately reflected in the current market price.
• Following an unproductive meeting with management, the Group intends to seek board representation at Lake Shore Bancorp's 2026 annual meeting of shareholders.
• Recent purchases include 5,600 shares by Stilwell Activist Fund for $73,085.60 and 29,400 shares by Stilwell Activist Investments for $383,699.40, both on October 1, 2025, at a price of $13.0510 per share.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly positive for shareholders, as activist involvement often signals potential for value creation, but it also introduces uncertainty and potential for conflict with existing management. For the company's current management, the sentiment is negative due to the activist's stated dissatisfaction and intent to seek board seats.

Positives

• The involvement of an activist investor like Stilwell Group often serves as a catalyst for strategic review and potential value maximization for shareholders.
• Stilwell Group has a long track record of successfully driving corporate changes, including sales, mergers, and improved capital allocation, across 77 publicly-traded companies since 2000.
• The Group's stated goal is to profit from share price appreciation, aligning with the interests of other shareholders.

Negatives

• The Group reported an 'unproductive meeting with management,' indicating potential friction and resistance to their proposals.
• The intent to seek board representation suggests a potential proxy contest, which can be costly and distracting for the company.
• The belief that the Issuer's asset value is not adequately reflected in the current market price implies dissatisfaction with current management or strategy.

Risks

• The Group's share purchases may be funded in part by margin account loans, which could lead to forced sales if collateral requirements are not met.
• A proxy contest for board seats could lead to significant legal and administrative expenses for Lake Shore Bancorp.
• Stilwell Value LLC previously consented to an SEC cease and desist order and paid a $75,000 penalty for failing to timely file beneficial ownership reports, indicating a past regulatory compliance issue.

Future Outlook

The Stilwell Group intends to seek board representation at Lake Shore Bancorp's 2026 annual meeting of shareholders. They may also seek to make additional purchases or sales of common stock in the future.

Management Comments

• The filing notes an 'unproductive meeting with management,' indicating a lack of agreement or progress in discussions between the Stilwell Group and Lake Shore Bancorp's leadership.

Industry Context

Activist investing is a common strategy in the financial services sector, particularly among smaller regional banks, where investors often target companies perceived as undervalued, poorly managed, or having inefficient capital allocation. Stilwell Group specializes in this niche, frequently advocating for mergers, sales, share repurchases, or board changes to unlock shareholder value. This action aligns with a broader trend of increased shareholder activism in community banking.

Comparison to Industry Standards

• Stilwell Group's strategy of acquiring a significant stake (9.9%) and then seeking board representation after unproductive talks is a standard activist playbook, consistent with their history in companies like Oregon Trail Financial Corp. (OTFC) and HCB Bancshares, Inc. (HCBB), where they successfully seated directors who then facilitated mergers or value-maximizing actions.
• Their belief that the Issuer's assets are not adequately reflected in the market price mirrors their rationale in 77 other activist positions since 2000, where they aimed to profit from appreciation by asserting shareholder rights.
• The Group's past engagements, such as with Jefferson Bancshares, Inc. (JFBI) and FedFirst Financial Corporation (FFCO), demonstrate a pattern of pushing for sales or significant share repurchases, often after initial proposals were met with resistance or perceived inaction by management.
• In cases like Provident Bancorp, Inc. (PVBC) and IF Bancorp, Inc. (IROQ), Stilwell Group successfully negotiated for board appointments, which subsequently led to strategic changes or sales, indicating a proven model for influencing corporate direction.

Corporate Governance

Legal Proceedings

• Stilwell Value LLC consented to an SEC administrative cease and desist order on September 25, 2024, for failing to timely file certain beneficial ownership reports (Sections 13(d)(1) and 13(d)(2) of the Securities Exchange Act of 1934 and rules 13d-1 and 13d-2).
• The order required Stilwell Value LLC to cease and desist from future violations and imposed a $75,000 civil monetary penalty, which has been satisfied.

Stakeholder Impact

• Shareholders: Potential for increased shareholder value if the activist's efforts lead to strategic changes, such as a sale or improved capital allocation. However, a proxy fight could introduce short-term volatility.
• Management and Board: Increased pressure to perform and potentially defend their positions against the activist's nominees. Could lead to changes in leadership or strategy.
• Employees: Potential for uncertainty regarding future employment or company direction if significant strategic changes, like a merger or sale, are pursued.

Next Steps

• The Stilwell Group intends to seek board representation at Lake Shore Bancorp, Inc.'s 2026 annual meeting of shareholders.
• Members of the Group may seek to make additional purchases or sales of shares of Common Stock.

Key Dates

Recommendation

A 'buy' recommendation is warranted for investors seeking an activist catalyst. The Stilwell Group's significant 9.9% stake and stated intent to seek board representation, following an 'unproductive meeting' with management, signals a strong push for value creation. Stilwell has a proven track record of successfully driving strategic changes, including sales, mergers, and improved capital allocation, across numerous companies. This activism could unlock perceived undervalued assets, making Lake Shore Bancorp an attractive target for appreciation, despite potential short-term volatility from a proxy contest.

Keywords

Activist Investor, Shareholder Rights, Board Representation, Lake Shore Bancorp, LSIB, Stilwell Group, Corporate Governance, Proxy Contest, Value Maximization, Regional Bank