Lake Shore Bancorp CEO Daniel Reininga is set to resign Friday — two months earlier than planned — after an Office of the Comptroller of Currency consent order found the lender in “troubled condition,” the Dunkirk, New York-based lender said Monday in a filing with the Securities and Exchange Commission.
Jeffrey Werdein will serve as the bank’s interim principal executive officer starting Friday. Werdein has served as executive vice president of the bank’s commercial division since 2014.
A July 2022 written agreement with the OCC found “unsafe or unsound” practices at the bank, including weakness in information technology security and risk governance. The OCC ordered the bank to create a compliance committee to monitor the bank’s progress and stipulated that it meet quarterly and submit reports to the board and the OCC along that interval.
However, a Feb. 9 consent order from the OCC overrode the July agreement. The OCC, in the February order, said Lake Shore is in “substantial noncompliance” with the written agreement. Further, the agency said the bank engaged in unsafe and unsound practices, including not adhering to the rules of the Bank Secrecy Act.
Lake Shore neither admitted nor denied the OCC’s findings, according to the consent order. But as part of the consent order, the bank must ensure it is led by efficient management, including the CEO. The lender also must receive the OCC’s approval before making any changes to its board or senior management team.
“I have been privileged to work with extraordinary bankers, as well as board and community members during the last 12 years,” Reininga said in a December press release announcing his intended May retirement. “I will treasure that work, but more so the relationships attached to it. And, above all, I know I am leaving the bank in capable hands as we continue to follow our mission of Putting People First.”
Lake Shore said in December it would conduct a national search for Reininga’s permanent replacement.
The bank serves western New York state with 11 branches in Chautauqua and Erie counties.
Reininga took Lake Shore’s helm in 2011 and grew its assets from $488 million to around $700 million, the bank said.
Lake Shore ceased its quarterly dividend and promised to use the capital to focus on “operational, compliance and governance deficiencies described in the order.”
The bank told the SEC of a cybersecurity breach that exposed customer personal information to hackers, in a filing in March 2022.
