Formerly ‘troubled’ bank reaches truce with activist investor

• Key Insight: The Stilwell Group, an activist investor, has agreed to a number of conditions in exchange for a seat on the board of directors of Lake Shore Bank, a community bank with a checkered past.
• Supporting Data: Of the 78 companies where it’s taken an activist position, the Stilwell Group has seated a director on 18 boards.
• Expert Quote: “In each instance, our purpose has been to profit from the appreciation in the market price of the shares we held by asserting shareholder rights,” the Stilwell Group has written.

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In the battle between a New York community bank and an activist investor, the two sides have reached a temporary ceasefire.

Lake Shore Bancorp, owner of Lake Shore Bank in Western New York, has entered into a “standstill agreement” with the Stilwell Group, an investment group led by its principal owner, Joseph Stilwell. 

Under the agreement, which Lake Shore outlined in an SEC filing, the Stilwell Group is forbidden to buy any more Lake Shore stock, sue or participate in lawsuits against the bank, force it to sell itself or merge with another business, or otherwise seek a “change in control” of the company.

In return, Lake Shore has promised to elect Dennis Pollack to its board of directors. Lake Shore’s filing did not explain Pollack’s connection to Stilwell, but he has previously served on the boards of numerous businesses where Stilwell owned a stake, including Provident Bancorp in Massachusetts and Wheeler Real Estate Investment Trust in Virginia.

The Stilwell standstill was reached on March 17, and is set to last until Lake Shore’s stockholders meeting in 2029.

Lake Shore Bank has 11 branches, all of them in Western New York, and $727.3 million in assets as of December 2025. It is headquartered in Dunkirk, New York, which is located about 40 miles southwest of Buffalo, along Lake Erie.

The Stilwell Group, according to a history it recently filed with the SEC, has taken an activist role at 78 publicly traded companies since 2000, using its significant stakes to lobby for strategic or operational changes. Subsequent to the firm’s actions, 42 of those companies underwent a merger or acquisition.

“In each instance, our purpose has been to profit from the appreciation in the market price of the shares we held by asserting shareholder rights,” the Stilwell Group wrote.

In Lake Shore’s case, it was not immediately clear what the Stilwell Group’s demands were, or why it sought to plant a new director on the company’s board. But this action is not uncommon for the activist investor — by its own count, it has seated directors at 18 other companies.

In its SEC filing, which preceded the standstill agreement, the Stilwell Group indicated that other efforts to secure its demands from Lake Shore had gone nowhere.

“Following an unproductive meeting with management, we intend to seek board representation” at Lake Shore’s 2026 annual meeting, the Stilwell Group wrote in its filing.

In recent years, Lake Shore has faced significant regulatory and cybersecurity setbacks. In 2022, the bank revealed that it had fallen victim to a cyberattack, through which hackers gained access to customers’ personal information. 

Following the attack, the Office of the Comptroller of the Currency reported that it found unsafe or unsound practices at the bank, including information technology security weaknesses. In a written agreement, the OCC ordered the bank to create a special compliance committee and submit quarterly reports.

Then, in 2023, the OCC found that Lake Shore was out of compliance with that agreement, and replaced it with a consent order labeling the company as being in “troubled condition.” The bank’s longtime CEO, Daniel Reininga, subsequently resigned just two months before his planned retirement.

In 2024, the OCC released Lake Shore from its consent order and removed the “troubled” label.

Neither the Stilwell Group nor Lake Shore responded to American Banker’s request for comment.