An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time an offering circular which is not designated as a Preliminary Offering Circular is delivered and the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

Preliminary Offering Circular

35 William Street, Lyons, New York 14489

(315) 781-5007

bankwithlnb.com

Best Efforts Offering of Common Stock

Offering Price:  $[35] to $[40] per share

Offering: [252,121] shares for $[_______]

We are distributing to our shareholders, free of charge, non-transferable subscription rights to purchase up to [252,121] shares of our common stock, par value $0.50 per share, at an offering price of $[35] to $[40] per share. You will receive one right for each thirteen shares of common stock, and for each thirteen shares of common stock underlying our Series A convertible preferred stock, that you hold of record as of 5:00 p.m., Lyons, New York time, on ______ __, 2021. If you exercise your subscription rights for all of the shares that you hold of record, then you may also subscribe to purchase additional shares, subject to the conditions and limitations described later in this offering circular, at the same price of $[35] to $[40] per share. The shares in this rights offering will be sold on a best efforts basis.

We also plan to offer any unsold shares in the rights offering to beneficial owners and other investors in a supplemental offering. Neither the rights offering nor the supplemental offering is contingent upon the occurrence of any event or the sale of a minimum number of shares. We have not made arrangements to place funds we receive from subscribers in trust or similar account.

Your subscription rights may be exercised at any time during the period starting on XXX, 2021 and ending at 5:00 p.m., Lyons, New York time, on XXX, 2021, unless we extend the rights offering period, in our sole discretion. At the expiration of the rights offering, and after taking into consideration all over-subscription requests, we may sell shares to the public at $[35] to $[40] per share in the supplemental offering. Under no circumstances will we issue more than [252,121] shares in the combined rights and supplemental offerings. The supplemental offering will end on XXX, 2021, subject to extension in our sole discretion. We may cancel the rights offering or the supplemental offering, or both, at any time and for any reason.

Our stock is quoted on the OTCQX under the symbol “LYBC.” The two most recent sales occurred on July 6, 2021, at a price of $42.55 per share, and on June 28, 2021, at a price of $ 43.00 per share. See “Description of Securities”.

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

This Offering Circular is following the offering circular format described in Part II of Form 1-A.

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other selling literature. These securities are offered pursuant to an exemption from registration with the Commission; however, the commission has not made an independent determination that the securities offered hereunder are exempt from registration.

(1)     We will not pay any commission or other compensation to our officers based on their selling efforts in the offering.

(2)      Before deducting $125,000 in estimated offering expenses payable by us, including, among others, printing, mailing and marketing expenses as well as legal and accounting fees.

This investment involves risk. See “Risk Factors” beginning on page 18.

The date of this Preliminary Offering Circular is July 9, 2021.

NEITHER THE SUBSCRIPTION RIGHTS NOR THE SHARES OF COMMON STOCK ARE A DEPOSIT OR AN ACCOUNT OF OUR BANK SUBSIDIARY AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

THIS OFFERING CIRCULAR CONTAINS ALL OF THE REPRESENTATIONS BY US CONCERNING THIS OFFERING, AND NO PERSON SHALL MAKE DIFFERENT OR BROADER STATEMENTS THAN THOSE CONTAINED HEREIN. INVESTORS ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS OFFERING CIRCULAR.

TABLE OF CONTENTS

Page

Questions and Answers Relating to the Rights Offering

As used through this offering circular, the terms “we,” “us,” “our,” “the Company” and “Lyons Bancorp, Inc.” refers to Lyons Bancorp, Inc. and its subsidiaries. “Bank” refers to our wholly-owned subsidiary, The Lyons National Bank.

The following are examples of what we anticipate will be common questions about the rights offering. The answers are based on selected information included elsewhere in this offering circular. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the rights offering. This offering circular contains a more detailed description of the terms and conditions of the rights offering and provides additional information about us and our business, including potential risks related to the rights offering, the common stock of the Bank, and our business. See the section entitled “The Rights Offering” beginning on page [35] below.

What is being offered?

We are distributing, at no cost or charge to our shareholders subscription rights to purchase up to [252,121] shares of our common stock. The purchase price is $[35] to $[40] per share. These rights may be exercised only by the shareholders to whom they are distributed, and may not be sold, transferred or assigned to anyone else. The rights will be issued to holders of our common stock and holders of our Series A Non-Cumulative Convertible Preferred Stock, and which we refer to as our Series A preferred stock. Holders of our common stock and our Series A preferred stock will receive one subscription right for each thirteen shares of common stock, and for each thirteen shares of common stock underlying our Series A preferred stock, held of record as of 5:00 p.m., Lyons, New York time on XXXX, 2021, the record date of the rights offering. The subscription rights will be evidenced by Subscription Election Forms. Each subscription right will entitle you to purchase one share of common stock, at a subscription price equal to $[35] to $[40] per share. Any unsold shares from the basic subscription privilege will be available for purchase under the over-subscription opportunity, described below, and in the supplemental offering. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights.

Fractional shares resulting from the exercise of the basic subscription privilege or the over-subscription opportunity, each as described below, will be eliminated by rounding down to the nearest whole share, with the total subscription payment being adjusted accordingly. As a result, we may not issue the full number of shares authorized for issuance in connection with the rights offering. Any excess subscription payments received by us will be returned, without interest or penalty, as soon as practicable.

Why are we conducting the rights offering?

We are conducting the rights offering as a way of raising equity capital in a cost-effective manner that gives all of our shareholders an opportunity to participate. We cannot predict the number of shares that will be sold. We intend to add the proceeds from the sales to our general funds to be used for general corporate purposes. See section entitled “Use of Proceeds” beginning on page [34] below.

How will the shares be offered?

The shares will be offered in the rights offering to our current shareholders. These shareholders have a right to buy shares pursuant to their basic subscription privilege, and the ability to subscribe for additional shares through an over-subscription opportunity in our discretion. The shares will also be offered for subscription in our discretion to our shareholders, including beneficial owners, and to others in the supplemental offering. Our marketing for this offering will be accomplished through a combination of telephone calls, mail and personal visits and meetings.

What is the basic subscription privilege?

For each right that you own, you will have a basic subscription privilege to buy from us one share of common stock at the subscription price. You may exercise your basic subscription privilege for some or all of your subscription rights, or you may choose not to exercise any subscription rights. Holders of our common stock and Series A preferred stock will receive one subscription right for each 13 shares of common stock, and for each 13 shares of common stock underlying our Series A preferred stock.

For example, if you owned 1,000 shares of our common stock, or Series A preferred stock convertible into 1,000 shares of our common stock as of 5:00 p.m., Lyons, New York time on the record date, you would receive 76 subscription rights and would have the right to purchase 76 shares of common stock for $[35] to $[40] per share with your basic subscription privilege.

What is the over-subscription opportunity?

If you exercise your basic subscription privilege in full, you, together with other shareholders that exercise their basic subscription privilege in full, will be entitled to subscribe to purchase additional shares subject to certain conditions and limitations. The subscription price per share that applies to the over-subscription opportunity is the same subscription price per share that applies to the basic subscription privilege.

What are the limitations on the over-subscription opportunity?

We reserve the right to reject in whole or in part any over-subscription request, regardless of the availability of shares to satisfy these requests. Subject to this right, we will honor over-subscription requests in full to the extent sufficient shares are available following the exercise of rights under the basic subscription privilege, taking into account our right to facilitate sales of shares in the supplemental offering that we are undertaking concurrently with the rights offering. If over-subscription requests exceed the shares that are available to satisfy the requests, then, subject to our right to reject in whole or in part any over-subscription request, we will allocate the available shares, first, by satisfying the first 250 shares requested in each over-subscription, and then second, pro rata based on the number of shares each over-subscribing shareholder purchased under the basic subscription privilege. Any excess subscription payments will be returned, without interest or penalty.

What will happen if less than all of the subscription rights are exercised?

In the event shares remain available for sale after taking into account the exercise of basic subscription rights and such over-subscription requests as we choose to satisfy, we will offer those remaining shares to others at the $[35] to $[40] per share subscription price in the supplemental offering.

Am I required to exercise the rights I receive in the rights offering?

No. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. However, if you choose not to fully exercise your basic subscription privilege and other shareholders fully exercise their basic subscription privilege, the percentage of our common stock owned by these other shareholders will increase relative to your ownership percentage, and your voting rights, if any, and other rights will likewise be diluted. In addition, if you do not exercise your basic subscription privilege in full, you will not be entitled to subscribe to purchase additional shares pursuant to the over-subscription opportunity and your ownership percentage in our common stock and any related voting and other rights may be further diluted.

How soon must I act to exercise my subscription rights?

The subscription rights may be exercised at any time during the 30- day subscription period, which commences on XXX 2021, through the expiration date for the rights offering, which is 5:00 p.m., Lyons, New York time, on XXX, 2021. If you elect to exercise any subscription rights, the Bank must actually receive all required documents and payments from you at or prior to the expiration date. Although we have the option of extending the subscription period at our sole discretion, we do not currently intend to do so.

May I transfer my subscription rights?

No. You may not sell, transfer or assign your subscription rights to anyone else.

Are we requiring a minimum subscription to complete the rights offering?

No.

Are there any limitations on the number of subscription rights I may exercise in the rights offering?

You may only purchase the number of shares purchasable upon exercise of the number of basic subscription rights distributed to you in the rights offering, plus up to the number of shares that may be made available pursuant to the over-subscription opportunity. Accordingly, the number of shares you may purchase in the rights offering is limited by the number of shares of our common stock or shares of our Series A preferred stock you held on the record date and by the extent to which other shareholders exercise their subscription rights, including any over-subscription requests, as well as by our determination as to the number of shares, if any, that we will offer to sell to beneficial owners in the supplemental offering.

However, no sale may be made to you in this offering if the aggregate purchase price you would pay exceeds 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

In addition, under applicable federal banking laws, any purchase of shares may also require the prior clearance or approval of, or prior notice to, federal bank regulatory authorities if the purchase will result in any person or entity or group of persons or entities acting in concert owning or controlling shares in excess of 10.0% of our outstanding shares of common stock following the completion of the rights offering.

Can the rights offering be cancelled?

Yes. We may cancel the rights offering at any time prior to the expiration date for any reason.

How do I exercise my subscription rights?

If you wish to participate in the rights offering, you must properly complete the enclosed Subscription Election Form and deliver it, along with the full subscription price (including any amounts in respect of your over-subscription request), to the Bank before 5:00 p.m., Lyons, New York time, on XXX, 2021. If you use the mail, we recommend that you use insured, registered mail, return receipt requested.

If you send a payment that is insufficient to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the payment received will be applied to exercise your basic subscription right and, if applicable, any over-subscription request that we have accepted to the fullest extent possible based on the amount of the payment received, subject to the elimination of fractional shares. If the payment exceeds the subscription price for the full exercise of your basic subscription right and any applicable over-subscription request that we have accepted, or if you subscribe for more shares than you are eligible to purchase pursuant to the over-subscription opportunity, then the excess will be returned to you as soon as practicable. You will not receive interest on any payments refunded to you under the rights offering.

If the rights offering or supplemental offering is not completed, will my subscription payment be refunded to me?

Yes. We will hold all funds received in a segregated account until completion of the rights offering. If the rights offering or supplemental offering is not completed, we will promptly return, without interest or penalty, all subscription payments.

What form of payment must I use to pay the subscription price?

You must timely pay the full subscription price for the full number of shares you wish to acquire under the basic subscription privilege and any over-subscription request by delivering to the Bank a certified or cashier’s check, a bank draft drawn on a U.S. bank, a U.S. postal or express money order, a personal check that clears before the expiration date of the rights offering, or an authorization to deduct payment from your checking or savings account with the Bank. If you wish to use any other form of payment, then you must make arrangements in advance with the Bank for the delivery of such payment.

What should I do if I want to participate in the rights offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominee?

If you hold your shares in the name of a broker, dealer, bank or other nominee and you wish to participate in the Rights Offering or Supplemental Offering and purchase our Common Shares, you should complete and return to your Subscription Form along with payment in full for the number of shares you are subscribing. DO NOT SEND THE RIGHTS SUBSCRIPTION AGREEMENT AND PAYMENT TO YOUR BROKER, DEALER, BANK OR OTHER NOMINEE UNLESS YOU ARE SIMPLY INSTRUCTING THEM TO FORWARD THEM TO US. You should receive the form from your broker, dealer, bank or other nominee with the other offering materials. We assume no responsibility in respect of the timely administration of your broker, dealer, bank or other nominee to perform its obligations on your behalf.

After I exercise my subscription rights, can I change my mind?

No. All exercises of subscription rights are irrevocable by the shareholders, even if you later learn information about us that you consider unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase. However, we may cancel, extend or otherwise amend the rights offering at any time prior to the expiration date.

Does exercising my subscription rights involve risk?

Yes. The exercise of your subscription rights involves risks. Exercising your subscription rights involves the purchase of additional shares of our common stock and should be considered as carefully as you would consider other equity investments. Among other things, you should carefully consider the risks described under the heading “Risk Factors” beginning on page 18 of this offering circular.

Has our Board of Directors made a recommendation to our shareholders regarding the rights offering?

No. Our Board of Directors is making no recommendations regarding your exercise of subscription rights. You could risk investment loss on new money invested. We cannot assure you that the trading price for our common stock will be above the subscription price at the time of exercise or at the expiration of the rights offering period or that anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher price. You are urged to decide whether or not to exercise your subscription rights based on your own assessment of our business and the rights offering. See the section entitled “Risk Factors” beginning on page [19] of this offering circular.

What fees or charges apply if I exercise my subscription rights?

We are not charging any fees or sales commissions to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If you exercise your subscription rights through a broker or other record holder of your shares, you are responsible for paying any fees that person may charge.

When will I receive my new shares of common stock?

As soon as practicable after the expiration of the rights offering period, we will direct our transfer agent, Broadridge Corporate Issuer Solutions, Inc., to issue the Common Stock in book-entry form. Shortly thereafter, shareholders whose subscriptions are accepted will receive a statement of ownership from our transfer agent reflecting the Common Stock purchased in the offering. Shares purchased pursuant to the over-subscription opportunity and in the supplemental offering will be issued in the same manner as soon as practicable after the expiration date of the rights offering and following the completion of any pro-rations as may be necessary in the event the over-subscription requests exceed the number of shares available to satisfy such requests. Thereafter, the shares should be available for delivery to you or your broker as soon as reasonably possible.

Will the subscription rights be listed on a stock exchange or trading market?

The subscription rights may not be sold, transferred or assigned to anyone else and will not be listed on any other stock exchange or trading market or on the OTC Markets. Our common stock is quoted on the OTC Markets OTCQX tier under the symbol “LYBC”.

What are the U.S. federal income tax consequences of exercising my subscription rights?

The receipt and exercise of your subscription rights will generally not be taxable under U.S. federal income tax laws. You should, however, seek specific tax advice from your personal tax advisor in light of your personal tax situation and as to the applicability of any other tax laws. See the section below entitled “United States Federal Income Taxation”.

Is the supplemental offering subject to any minimum or maximum subscription amount?

We are offering shares in the supplemental offering to beneficial owners of our shares as of the record date. There is no minimum or maximum amount of shares you can subscribe for as long as we have shares remaining available for sale after our rights offering is completed. You may not revoke or change your subscription after you have submitted your subscription agreement. We may choose to reject your subscription entirely or accept it for only a portion of the shares for which you subscribe.

In addition, under applicable federal and state banking laws, any purchase of shares may also require the prior clearance or approval of, or prior notice to, federal and state bank regulatory authorities if the purchase will result in any person or entity or group of persons or entities acting in concert owning or controlling shares in excess of 10.0% of our outstanding shares of common stock following the completion of the supplemental.

How can I get further information about the rights offering?

This offering circular describes the rights offering in detail. If you would like further information, please call Robert A. Schick, Chairman of the Board and President at (315) 946-8260, or Carol Snook, Corporate Secretary (315) 781-5007 to set up an appointment or pick up additional materials. Neither the subscription rights nor the shares being offered are a deposit or an account of the Bank, are not insured by the Federal Deposit Insurance Corporation or any other government agency, and are not offered through normal banking channels.

Summary

As used through this offering circular, the terms “we,” “us,” “our,” “the Company” and “Lyons Bancorp, Inc.” refers to Lyons Bancorp, Inc. and its subsidiaries. “Bank” refers to our wholly-owned subsidiary, The Lyons National Bank.

This summary highlights selected information from this offering circular and may not contain all the information that you should consider before investing in the securities we are offering. To understand the offered securities properly, you should read the entire document carefully, including the risk factors and our consolidated financial statements and the related notes.

Lyons Bancorp, Inc. and its Subsidiaries

Lyons Bancorp, Inc. is a bank holding company under the Federal Bank Holding Company Act of 1956. We were incorporated in 1987 under the laws of New York.

We own and operate The Lyons National Bank, which is our principal subsidiary. We also own all of the common beneficial interest of Lyons Capital Statutory Trust II, which is a Delaware statutory trust, which we formed in August 2004 in connection with the issuance of $5,000,000 of trust preferred capital securities.

The Lyons National Bank is a full service, nationally chartered, commercial bank serving Wayne County and portions of Cayuga, Monroe, Onondaga, Ontario, Seneca and Yates Counties in New York through sixteen full-service banking offices located in Lyons (two offices), Wolcott, Newark, Macedon, Ontario, Jordan, Clyde, Geneva, Penn Yan, Waterloo, Canandaigua, Perinton, Auburn (two offices) and Farmington, New York, an ATM network and Internet and telephone banking services. The Bank owns all of the common stock of Lyons Realty Associates Corp., a real estate investment trust which holds a portfolio of real estate mortgages. The Bank also provides brokerage investment and insurance products and services to its customers through an arrangement with LPL Financial.

We are a community oriented bank, emphasizing personal service and customer convenience in serving the financial needs of the individuals, families and businesses residing in our markets. We attract deposits from the general public in the markets we serve and use those funds, together with funds generated from operations and borrowings, to originate commercial real estate loans, residential mortgage loans, commercial and agricultural loans and consumer loans. We also invest in mortgage-backed securities and other permissible investments.

Over the past several years, we have experienced significant growth in our assets, deposit base, loan portfolio and net worth. As of December 31, 2020, we had $1,423 million in total assets, $1,020 million in total loans, $1,286 million in total deposits and $95 million in stockholders’ equity.

Our main office is located at 35 William Street, Lyons, New York 14489. Our telephone number is (315) 946-4871, and our web site is www.bankwithlnb.com. Information on our web site is not a part of this offering circular.

The Offering

The following summary describes the principal terms of the rights offering, but is not intended to be complete. See the section of this offering circular below entitled “The Rights Offering” for a more detailed description of the terms and conditions of the rights offering.

Securities Offered

We are distributing, at no cost or charge to our shareholders of record subscription rights to purchase up to [252,121] shares of common stock. Holders of our common stock and our Series A preferred stock will receive one subscription right for each thirteen shares of common stock, and for each thirteen shares of common stock underlying our Series A preferred stock, held of record as of 5:00 p.m., Lyons, New York time on_XXXX, 2021, the record date of the rights offering. These rights may be exercised only by you, and cannot be sold, transferred or assigned to anyone else.

Basic Subscription Privilege

For each right that you own, you will have a basic subscription privilege to buy from us one share of common stock at the subscription price. You may exercise your basic subscription privilege for some or all of your subscription rights, or you may choose not to exercise your subscription rights.

Over-subscription opportunity

If you exercise your basic subscription privilege in full, you will also have an opportunity to subscribe to purchase any shares that our other subscription rights holders do not purchase under their basic subscription privilege. The subscription price for shares purchased pursuant to the over-subscription opportunity will be the same as the subscription price for the basic subscription privilege. We reserve the right to reject in whole or in part any or all over-subscription requests, and we may choose to issue some or all of the shares that we may issue beyond the number necessary to satisfy properly exercised basic subscription rights to beneficial owners in the supplemental offering.

Subscription Price

The subscription price per share shall be equal to $[35] to $[40] per share. To be effective, any payment related to the exercise of a subscription right, or over-subscription, must clear prior to the expiration of the rights offering period.

Record Date

The record date will be XXXX, 2021.

Expiration Date

The subscription rights will expire at 5:00 p.m., Lyons, New York time, on XXX, 2021 unless the expiration date is extended. We reserve the right to extend the subscription rights period at our sole discretion.

Supplemental Offering

If shares remain available for sale after the closing of the rights offering, we will offer and sell those remaining shares in a supplemental offering to beneficial owners of our shares as of the record date at the $[35] to $[40] per share subscription price. Initially, we anticipate that any shares offered in the supplemental offering will be offered with a preference given to beneficial owners of our common stock.

We have the right to accept or reject, in our sole discretion, any orders received in the supplemental offering.

Procedure for Exercising Subscription Rights

The subscription rights may be exercised at any time during the subscription period, which commences on XXX, 2021. To exercise your subscription rights, you must properly complete the enclosed Subscription Election Form and deliver it, along with the full subscription price (including any amounts in respect of an over-subscription request), to the Bank before 5:00 p.m., Lyons, New York time, on XXX, 2021, unless the expiration date is extended.

If you use the mail, we recommend that you use insured, registered mail, return receipt requested.

Net Proceeds of Offering

The net proceeds to us will depend on the number of subscription rights that are exercised, including over-subscription requests, and the number of shares, if any, that are sold in the supplemental offering. If we issue all shares available for the exercise of basic subscription rights in the rights offering, the net proceeds to us, after deducting estimated offering expenses, will be approximately $9.88 million. We estimate that the expenses of the combined rights and supplemental offerings will be approximately $125,000. We intend to use the net proceeds to fund future asset growth and for general corporate purposes. See the section below entitled “Use of Proceeds”.

Non-Transferability of Subscription Rights

The subscription rights may not be sold, transferred or assigned to anyone else and will not be listed for trading on any other stock exchange or trading market or on the OTCQX.

No Revocation of Exercise by Shareholders

All exercises of subscription rights are irrevocable, even if you later learn information about us that you consider unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase the shares of common stock offered pursuant to the rights offering.

Conditions to the Rights Offering

The completion of the rights offering is subject to the conditions described in the section below entitled “The Rights Offering—Conditions and Cancellation”.

Amendment; Cancellation

We may amend the terms of the rights offering or extend the rights offering period. We also reserve the right to cancel the rights offering at any time prior to the expiration date for any reason.

No Board Recommendation

Our Board of Directors is making no recommendations regarding your exercise of the subscription rights. You are urged to make your own decision whether or not to exercise your subscription rights based on your own assessment of our business and the rights offering. See the section below entitled “Risk Factors”.

Issuance of Common Stock

If you purchase shares through the rights offering, we will issue those shares of common stock to you as soon as practicable after the completion of the rights offering.

Trading of Common Stock

Our common stock is quoted on the OTC Markets OTCQX tier under the symbol “LYBC.”

Certain Material U.S. Federal Income Tax Considerations

The receipt and exercise of your subscription rights will generally not be taxable under U.S. federal income tax laws. However, you should seek specific tax advice from your personal tax advisor in light of your personal tax situation and as to the applicability and effect of any other tax laws. See the section entitled “United States Federal Income Taxation” on page [110] below.

Subscription Agent

Our subscription agent is The Lyons National Bank.

Shares of Common Stock Outstanding Before the Rights Offering

As of December 31, 2020, there were 3,156,444 shares of our common stock outstanding. In addition, holders of our Series A preferred stock may elect to convert their holdings into 120,000 shares of common stock, which would increase the diluted total of shares outstanding to 3,276,444.

Shares of Common Stock Outstanding After Completion of the Rights Offering

We will issue up to [252,121] shares of common stock in the rights offering, depending on the number of subscription rights that are exercised. Assuming no Series A preferred stock are converted prior to the expiration of the rights offering period, and based on the number of shares of common stock outstanding as of XXXX, 2021, if we issue all [252,121] shares of common stock available for the exercise of basic subscription rights in the rights offering and any supplemental offering, we would have [3,409,696] shares of common stock outstanding following the completion of the rights offering and any supplemental offering.

How We Determined the Subscription Price  

Our Board of Directors determined the terms of the rights offering, including the subscription price, in its sole discretion. In determining the subscription price, our Board of Directors considered a number of factors, including:

The subscription price is not necessarily related to our book value, results of operations, cash flows, financial condition or net worth or any other established criteria of value and may or may not be considered the fair value of our common stock at the time the rights offering was approved by our Board or during the rights offering period. We cannot assure you that the trading price of our common stock will not decline during or after the rights offering. We also cannot assure you that you will be able to sell shares purchased in this offering at a price equal to or greater than the subscription price. We do not intend to change the subscription price in response to changes in the trading price of our common stock prior to the closing of the rights offering.

Selected Financial and Other Data

The following table sets forth our selected consolidated historical financial and other data for the years and at the dates indicated. The information at December 31, 2020 and 2019, and for the years then ended is derived in part from and should be read together with our consolidated financial statements and notes thereto beginning at page F-1 of this offering circular. The information at December 31, 2018 and for the fiscal year then ended is derived in part from our audited consolidated financial statements not contained in this offering circular. The selected consolidated financial data below should be read in conjunction with our consolidated financial statements and the accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations.” The historical results are not necessarily indicative of results that may be expected for any future period.

Risk Factors

An investment in the securities offered hereby involves certain risks. You should carefully read the following risk factors about our business and this offering, together with the other information in this offering circular, before making a decision to purchase any shares.

If any of the following risks actually occurs, our business, assets, liquidity, operating results, prospects and financial condition could be seriously harmed. This could cause the trading price of our securities to decline, resulting in a loss of all or part of your investment.

Risks Relating to the Company and the Offered Stock

You may have difficulty in selling your securities or selling them at a fair price because there is little trading activity.

Our common stock is quoted on the OTC Market's OTCQX tier under the symbol “LYBC.” We have no plans to list any of our securities on any exchange. As a result, you may not be able to sell your shares without delay, or be able to sell your shares at a fair price. We cannot predict when, if ever, a fully developed active and liquid public trading market for our securities will occur. If a developed public trading market for our securities does develop at a future time, such developed public trading market may not be sustained for any period of time.

The future trading price of our common stock may be less than the purchase price in this offering.

While the trading price for our common stock has been relatively stable, we cannot assure you that the market price will not decline if and after you acquire our common shares. The trading price of our stock could fluctuate substantially based on a variety of factors, including, but not limited to, the following:

In addition, the trading volume of our stock has been limited, which may increase the volatility of the trading price of our stock. Further, the economic impact of the COVID-19 pandemic has caused and may continue to cause the price of our stock to fluctuate.

Fluctuating interest rates may reduce our profitability.

Fluctuations in interest rates will ultimately affect both the level of income and expense we record on a large portion of the Bank’s assets and liabilities, and the market value of all interest-earning assets, other than interest-earning assets that mature in the short term. The Bank’s interest rate management strategy is designed to stabilize net interest income and preserve capital over a broad range of interest rate movements by matching the interest rate sensitivity of assets and liabilities. Although we believe that our current mix of loans, securities and deposits is reasonable, significant fluctuations in interest rates may have a negative effect on our profitability.

Persistently low interest rates could erode our core profitability.

We derive a significant portion of our net revenues (net interest income plus noninterest income) from the difference between what we earn on our interest-bearing assets such as loans and investment securities and what we pay for our interest-bearing liabilities. Of the $[56.0] million of net revenues for the fiscal year ended December 31, 2020, 70.6% was attributable to this difference.

Part of the core profitability of a community bank such as ours is the lower cost inherent in the deposits it gathers at its branch offices compared to those that could be obtained in the wholesale money markets. This benefit has been eroding as market lending rates remain at low levels. In such an environment, our ability to save on funding costs is reduced and few additional savings will accrue to us for a longer period of time. In addition, as many of our interest-bearing assets prepay or mature, we will be forced to replace them with assets at lower current market yields. This asymmetrical impact could reduce our net interest income and adversely affect our operating results.

We may experience difficulties in managing our organic growth.

The success of our organic growth strategy will depend primarily on our ability to generate an increasing level of loans and deposits at acceptable risk levels and terms without significant increases in noninterest expenses relative to revenues generated. Our growth strategy involves a variety of risks, including our ability to:

If we fail to effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.

Our risk management framework seeks to mitigate risk and appropriately balance risk and return. We have established processes and procedures intended to identify, measure, monitor and report the types of risk to which we are subject, including credit, liquidity, interest rate sensitivity, compliance, reputation, and operations. We seek to monitor and control our risk exposure through a framework of policies, procedures and reporting requirements. Management of our risks in some cases depends upon the use of analytical and/or forecasting models. If the models that we use to mitigate these risks are inadequate, we may incur increased losses. In addition, there may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated. If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.

We may experience difficulties in assimilating future acquisitions into our business model.

As part of our general growth strategy, we may acquire banks and businesses that we believe provide a strategic fit with our business. We do not have a history of growth by acquisitions. To the extent that we grow by acquisition, we cannot assure you that we will be able to manage our growth adequately and profitably. Acquiring other banks and businesses will involve risks commonly associated with acquisitions, including:

Failure to successfully address the issues of growth either internally or by acquisition could adversely affect our results of operations and financial condition.

Because we primarily serve Wayne County and several counties in a close proximity, a decline in the economy of this local region could lower our profitability and adversely affect our growth.

We serve Wayne County and portions of Cayuga, Monroe, Onondaga, Ontario, Seneca and Yates counties with 16 banking offices, 27 ATMs and our Internet and telephone banking services. Our profits depend on providing products and services to customers in this local region. An increase in unemployment, a decrease in real estate values, inclement weather, natural disasters and adverse trends or events affecting various industry groups such as agriculture are among the factors that could weaken the local economy. With a weaker local economy:

Making mortgage loans, consumer loans, commercial loans and agricultural loans is a significant source of our profits. If customers in the local area do not want these loans, our profits may decrease. Although we could make other investments, we may earn less revenue on these investments than on loans. Also, our losses on loans may increase if borrowers are unable to make payments on their loans. Increases in delinquent and non-accrual loans may result in an additional provision for loan losses which will negatively affect earnings. All of these factors could lower our profitability and adversely affect our growth.

We operate in a highly competitive industry and market area.

Competition for commercial banking and other financial services is strong in our market area. In one or more aspects of business, the Company’s subsidiaries compete with other commercial banks, savings and loan associations, credit unions, finance companies, Internet-based financial services companies, mutual funds, insurance companies, brokerage and investment banking companies, and other financial intermediaries. Some of these competitors have substantially greater resources and lending capabilities and may offer services we do not currently provide. In addition, many of our non-banking competitors are not subject to the same extensive Federal regulations that govern bank holding company and federally insured banks. We focus on providing unparalleled customer service, which includes offering a strong suite of products and services. Based upon our ability to grow our customer base in recent years, management believes this business model allows us to compete effectively in the markets we serve, but there can be no assurance that this business model will be successful.

We may suffer more severely than other lenders if the local agricultural economy experiences a downturn in its economic performance as a business segment.

Our agricultural lending activities are an important part of the growth and profitability of the Company, with approximately 11.43% of our loan portfolio as of December 31, 2020, in either agriculture-related real estate or business loans. Based on Federal Reserve data for bank holding companies as of December 31, 2020, our peers held approximately 1.1% of their loan portfolios in agriculture-related loans. To the extent that the fortunes of the farm economy are adversely affected by general economic conditions, we may suffer more than our peers.

The COVID-19 outbreak has adversely affected, and is likely to continue to adversely affect, our business and results of operations.

The ongoing COVID-19 pandemic and measures intended to prevent its spread have had, and likely will continue to have, a material adverse effect on our business, financial condition, liquidity, and results of operations. The nature and extent of these effects will depend on future developments, which are highly uncertain and are difficult to predict.

In December 2019, a novel coronavirus was reported in China, and, in March 2020, the World Health Organization declared COVID-19 a pandemic. In March 2020, the United States declared the COVID-19 outbreak a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments, including New York, ordered non-essential businesses to close and residents to restrict their activities. This resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. In response to the COVID-19 outbreak, the Federal Reserve has reduced the benchmark federal funds rate to a target range of 0% to 0.25% and the yields on 10 and 30-year treasury notes have declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). Federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. Certain industries have been particularly impacted, including the travel and hospitality industry, the restaurant industry, and the retail industry. In response to COVID-19, we have modified our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We also have had employees working remotely and may be required to take further actions required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of this impact will depend on future developments, which are highly uncertain, including the extent to which the outbreak can be controlled or abated, and the recovery of the economy generally. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we may be subject to the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

Moreover, our future success and profitability substantially depends on our executive officers and key employees, many of whom have held positions with us for many years. The unanticipated loss or unavailability of executive officers or key employees due to the outbreak could harm our ability to execute our business strategy, and we might not be successful in finding and integrating suitable successors in the event of executive officer or key employee loss or unavailability. Any of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

We are subject to regulatory, litigation, reputation and other risks related to our participation in the Paycheck Protection Program.

In response to the COVID-19 outbreak and related economic hardships, the CARES Act provided for the Paycheck Protection Program (“PPP”) as a loan program administered through the Small Business Administration (“SBA”). Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other lenders, subject to detailed qualifications and eligibility criteria. Beginning in 2020, we have participated in the PPP, adding new commercial customers and $166 million in PPP loans.

Because of the short timeframe between the passing of the CARES Act and implementation of the PPP, some of the rules and guidance relating to PPP were issued after lenders began processing PPP applications. There continues to be uncertainty in the laws, rules and guidance relating to the PPP. Since the opening of the PPP, several banks have been subject to litigation regarding the procedures used in processing PPP applications and the payment of fees to agents that assisted borrowers in obtaining PPP loans. In addition, some banks and borrowers have received negative media attention associated with PPP loans. Although we believe that we have administered the PPP in accordance with all applicable laws, regulations and guidance, we may be exposed to litigation risk and negative media attention related to our participation in the PPP. Any such litigation may result in significant financial liability to us or adversely affect our reputation.

Federal and state regulators can also impose or request that we consent to substantial sanctions, restrictions and requirements if they determine there are violations of laws, rules or regulations or weaknesses or failures with respect to general standards of safety and soundness, including with respect to our PPP lending, which could adversely affect our business, reputation, results of operation and financial condition.

Further, there is a risk that PPP borrowers may not qualify for the loan forgiveness feature of the program due to the conduct of the borrower after the loan is originated. We also have credit risk with respect to PPP loans given that the SBA may determine that there is a deficiency in the manner in which we originated, funded or serviced loans, including any issue with the eligibility of a borrower to receive a PPP loan. These factors may result in us having to hold a significant amount of these low-yield loans on our books for a significant period of time. Moreover, in the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which we originated, funded or serviced a PPP loan, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency from us.

A significant portion of our loans are commercial real estate and commercial loans, which carry greater credit risk than loans secured by owner-occupied one-to-four family real estate.

At December 31, 2020, commercial real estate loans totaled $252.3 million or approximately 24% of our loan portfolio, and commercial loans, including term loans and revolving lines of credit, totaled $180.4 million, or approximately 18% of our total loan portfolio. Given their larger balances and the complexity of the underlying collateral, commercial real estate and commercial loans generally expose a lender to greater credit risk than loans secured by owner-occupied one- to four-family real estate. Commercial real estate and commercial loans also have greater credit risk than residential real estate loans because repayment is dependent on income being generated in amounts sufficient to cover operating expenses, property maintenance and debt service, and because repayment is generally dependent upon the successful operation of the borrower’s business.

If loans that are collateralized by real estate of other business assets become troubled and the value of the collateral has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan. This could cause us to increase our provision for loan losses and adversely affect our operation results and financial condition.

Our business may be adversely affected by credit risk associated with residential property.

At December 31, 2020, $440.9 million, or approximately 42% of our total loan portfolio, was secured by one-to-four family residential real estate mortgage and home equity loans that may be generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan repayment obligations, making loss levels difficult to predict. The national residential market experienced such conditions during the recession of 2008.

Although the Upstate New York State markets we serve have not historically experienced the "boom/bust" market conditions that other parts of the country have experienced, we cannot assure that will continue to be the case. A decline in residential real estate values as a result of the weakness of the housing market in the areas we serve would reduce the value of the real estate collateral securing residential real estate mortgage and increase the risk that we would incur losses if borrowers default on their loans. A decline in home values in our market areas would result in our residential loans being secured by first mortgages on properties in which the borrowers have little or no equity. Residential loans with combined higher loan-to-value ratios would be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, they may be unable to repay their loans in full from the sale proceeds. Further, a significant amount of our home equity loans, and lines of credit consist of second mortgage loans. For home equity loans and lines of credit secured by a second mortgage, it is unlikely that we would be successful in recovering all or a portion of our loan proceeds in the event of default. For these reasons, declining property values in our market areas would adversely affect our results of operations and financial condition.

Our profitability and ability to grow would be adversely affected if a change in the law occurs that precludes our municipal customers from maintaining deposits with us or if those customers withdraw their deposits from us for other reasons.

Public deposits historically have been very important to us. As of December 31, 2020, 15.9% of our deposits were provided by municipal customers, which we believe to be significantly greater than our peers. If legislation to liberalize the options for municipal deposits were passed, or if our relationships with local municipalities were to deteriorate, this important source of funding could erode and/or become more expensive. This could affect our profitability and our ability to fund our growth strategies.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings would decrease.

Lending money is an essential part of the banking business. However, borrowers do not always repay their loans. The risk of non-payment is affected by:

If our borrowers do not repay their loans, we may suffer loan losses. Loan losses are inherent in the lending business and could have a materially adverse effect on our operating results. We make various assumptions and judgments about the collectability of our loan portfolio and provide an allowance for loan losses for loan defaults and non-performance. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, beyond our control. Such losses may exceed current estimates. If our assumptions are wrong, our allowance for loan losses may not be sufficient to cover our future losses, thereby having an adverse effect on our earnings. In addition, this may cause us to increase the allowance for loan losses in the future, thereby decreasing our future earnings. In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs required by these regulatory authorities would decrease our earnings.

We may lose customers or be unable to grow our customer base if our competitors develop and invest in technological improvements that consumer’s desire, but which are beyond our financial ability to adopt and implement.

The financial services industry continues to undergo rapid technological change with frequent introductions of new technology-driven products and services. In addition, the effective uses of technology to better serve customers increases efficiency and enables financial institutions to reduce costs. Our future success and ability to implement our growth strategy will depend in part upon our ability to use technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements.

Our ability to compete successfully in the future will depend on whether we can anticipate and respond to technological changes. To develop these and other new technologies we will likely have to make additional capital investments. Although we continually invest in new technology, we cannot assure you that we will have sufficient resources or access to the necessary proprietary technology to remain competitive in the future. We may not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers. This could result in a loss of customers or an inability to grow our customer base, either of which would adversely affect our profitability and ability to grow.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

Our subsidiary bank is a community bank, and its reputation is one of the most valuable aspects of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by taking advantage of new business opportunities with existing and prospective customers in our current market areas. As a result, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and addressing the needs of our customers and employees. If our reputation is negatively affected, by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and operating results may be adversely affected.

Our Business requires the Collection and Retention of Large Volumes of Sensitive Data, which is subject to Extensive Regulation and Oversight and Exposes our Business to Additional Risks.

In our ordinary course of business, we collect and retain large volumes of customer data, including personally identifiable information in various information systems that we maintain and in systems maintained by third parties with whom we contract to provide data services. We also maintain important internal Company data such as personally identifiable information about our employees and information relating to our operations. Our customers and employees have been, and will continue to be, targeted by cybersecurity threats attempting to misappropriate passwords, bank account information or other personal information. Our attempts to mitigate these threats may not be successful as cybercrimes are complex and continue to evolve. Publicized information concerning security and cyber-related problems could cause us to incur reputational harm and discourage our customers from using our electronic or web-based applications or solutions, which could harm their utility as a means of conducting commercial transactions.

Even well-protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in breach attempts or other disruptions are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures. A security breach or other significant disruption of our information systems or those related to our customers and our third party vendors, including as a result of cyberattacks, could:

The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

A Breach of Information or Other Technological Security, including as a result of Cyberattacks, could have a Material Adverse Effect on our Business, Financial Condition and Results of Operations.

We cannot be certain that all of our systems, or third-party systems upon which we rely, are free from vulnerability to cyberattack or other technological difficulties or failures. Information security breaches and cybersecurity-related incidents may include attempts to access information, including customer and company information, malicious code, computer viruses, phishing, denial of service attacks and other means of intrusion that could result in unauthorized access, misuse, loss or destruction of data (including confidential customer or employee information), account takeovers, unavailability of service or other events. These types of threats may derive from human error, fraud or malice on the part of external or internal parties, or may result from accidental technological failure. Further, to access our products and services our customers may use computers and mobile devices that are beyond our security control systems. If information security is breached or difficulties or failures occur, despite the controls we and our third party vendors have instituted, information may be lost or misappropriated, resulting in financial loss or costs, reputational harm or damages and litigation, regulatory investigation costs or remediation costs to us or others. While we maintain specific “cyber” insurance coverage, which would apply in the event of many breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage. Any of these consequences could have a material adverse effect on our financial condition and results of operations.

The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, has significantly increased, in part due to the expansion of new technologies, the increased use of the Internet and mobile services and the increased intensity and sophistication of attempted attacks and intrusions from around the world. The threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. Our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future. Our technologies, systems, networks and software, and those of other financial institutions have been, and are likely to continue to be, the target of cybersecurity threats and attacks, which may range from uncoordinated individual attempts to sophisticated and targeted measures directed at us. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats as well as the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

We are also subject to data security standards and privacy and data breach notice requirements established by federal and state regulators. Banking agencies have adopted guidelines to encourage financial institutions to address cybersecurity risks and identify, assess and mitigate these risks, both internally and at critical third party service providers. For example, federal banking regulators have highlighted that financial institutions should establish several lines of defense and design their risk management processes to address the risk posed by compromised customer credentials. In addition, financial institutions are expected to maintain sufficient business continuity planning processes designed to facilitate a recovery, resumption and maintenance of the institution’s operations after a cyberattack.

As cyber threats continue to evolve, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate any information security vulnerabilities.

We cannot guarantee the future payment of dividends on our Common Stock.

Holders of our common stock are only entitled to receive such dividends as our Board of Directors may declare out of funds legally available for such payments. The payment of future dividends will depend upon our financial resources, the earnings and the financial condition of the Bank and its subsidiaries, restrictions under applicable law and regulations and other factors relevant at the time the Board of Directors considers any declaration of dividends. In addition, if a default occurs in the payment due on the trust preferred securities issued by Lyons Capital Statutory Trust II in which we own all of the common beneficial interest or in the payment of dividends on our Series A preferred stock, we would be prohibited from paying dividends on our common stock. Accordingly, dividends, if any, may not be paid at historical levels or may be increased, or such an increase may not occur.

Monetary policies and economic factors could adversely affect our financial performance.

The success of the Company will depend in significant part upon its ability to attract deposits and extend loans and to maintain a sufficient interest margin between the rates of interest it receives on loans and other investments and the rates it pays out on deposits and other liabilities. This is affected by the monetary policies of federal regulatory authorities, particularly the Federal Reserve, and by economic conditions in our service area and the United States generally, including the following:

We cannot predict the nature and timing of any changes in such policies and conditions or their impact on us or our bank subsidiary. Any such changes may have a material adverse impact on our financial performance.

We may be Adversely Impacted by the Transition from LIBOR as a Reference Rate.

In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021, it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”). In November 2020, the administrator of LIBOR announced it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two month LIBOR offered rates will cease after December 31, 2021, but the publication of the remaining LIBOR offered rates will continue until June 30, 2023. In light of consumer protection, litigation, and reputation risks, the bank regulatory agencies have indicated that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and that they will examine bank practices accordingly. Therefore, those agencies encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.

It is not possible to predict what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments. In particular, regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments. At this time, it is not possible to predict whether these specific recommendations and proposals will be broadly accepted, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments.

We have issued debt with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR could create costs and additional risk. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely affect LIBOR rates and the value of LIBOR-based loans, and securities in our portfolio. If LIBOR rates are no longer available, and we are required to implement substitute indices for the calculation of interest rates under our loan agreements with our borrowers, we may experience significant expenses in effecting the transition, and may be subject to disputes or litigation with customers and creditors over the appropriateness or comparability to LIBOR of the substitute indices, which could have an adverse effect on our results of operations. Further, since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have an adverse effect on our business, financial condition and results of operations.

Our growth and return to investors may be limited by the laws and government agencies that regulate us and changes in these laws that may adversely affect our results of operation and financial condition.

We are a bank holding company, and our principal subsidiary is a national bank. Both entities operate in a highly regulated environment and are subject to examination, supervision and comprehensive regulation by federal regulatory agencies. Under regulatory capital adequacy guidelines and other regulatory requirements, our company and our subsidiary bank must meet guidelines subject to qualitative judgments by regulators about components, risk weightings and other factors. From time to time, the regulators implement changes to these regulatory capital adequacy guidelines. Banking regulations, designed primarily for the safety of depositors and not shareholders of Lyons Bancorp, Inc., may limit our growth and the return to investors by restricting activities such as the payment of dividends; mergers with, or acquisitions by, other institutions; investments; loans and interest rates; interest rates paid on deposits and the creation of branch banking offices. Furthermore, if we fail to meet these minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected.

Future governmental regulation and legislation could limit our future growth.

We are subject to extensive state and federal regulation, supervision, and legislation which govern almost all aspects of our operations. These laws may change from time to time and are primarily intended for the protection of customers, depositors, and the deposit insurance funds. The impact of any changes to these laws may negatively impact our ability to expand our services and to increase the value of our business. The Dodd-Frank Act, enacted in July 2010, represents a comprehensive overhaul of the financial services industry in the United States and requires federal agencies to implement many new rules. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to our shareholders. See “Supervision and Regulation” for more information about applicable banking regulations.

A loss of our senior officers could impair our relationship with our customers and adversely affect our revenue.

We rely upon our senior officers to develop business and maintain customer relationships. If any of these individuals were to leave for any reason or something were to happen to one of them, and we were unable to hire highly qualified and experienced personnel to replace them, we could lose valuable customer relationships and associated revenue, especially if they were to work with a competitor.

Our management will have broad discretion in allocating the net proceeds from the offering and may not allocate the proceeds in the most profitable manner.

Neither we nor the Bank have specifically allocated the use of the net proceeds from this offering. Until utilized, we anticipate that net offering proceeds will be invested in short-term and intermediate-term securities or deposits in our Bank subsidiary. Therefore, management will have broad discretion as to the timing and specific application of the net proceeds and investors will not have the opportunity to evaluate the economic, financial and other relevant information that we will use in applying the net proceeds. Although we intend to use the net proceeds to serve Lyons Bancorp, Inc.’s best interests, our application may not ultimately reflect the most profitable application of the net proceeds and you may not agree with such application. As a result, it is possible that our return on equity will decrease following the offering.

A decline in the market value of our investments could negatively impact shareholders' equity.

Approximately 95.34% of our securities investment portfolio as of December 31, 2020 has been designated as available-for-sale. Unrealized gains and losses in the estimated value of the available-for-sale portfolio are reflected as a separate item in stockholders’ equity, net of tax. If the market value of our investment portfolio declines, this would cause a decline in stockholders’ equity which could be material.

Given current economic and market conditions, declines in the value of individual securities within our investment portfolio that are considered “other-than-temporarily-impaired” could have a negative impact on stockholders’ equity.

At December 31, 2020, approximately 28% of our securities investment portfolio is invested in New York State and local government obligations. These issuers are affected by political, economic and regulatory factors. The concerns facing the State of New York and its municipalities may lead nationally recognized rating agencies to downgrade its debt obligations. We periodically, but not less than quarterly, evaluate these investments for impairment indicators. Under U.S. generally accepted accounting principles, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings to the extent the impairment is related to credit losses. If impairment is deemed other-than-temporary, the resulting charge to earnings relating to credit quality may be significant.

If we issue additional stock in the future, your percentage of ownership of Lyons Bancorp, Inc. could be reduced.

As a shareholder of Lyons Bancorp, Inc., you will not have preemptive rights with respect to the issuance of additional shares of common stock or the issuance of any other class of stock. This means that if we decide to issue additional shares of stock in an offering other than a rights offering, you will not automatically be entitled to purchase additional shares to maintain your percentage of ownership of our outstanding common stock. In addition, if we sell additional shares in the future, it is possible that those shares may be issued on terms more favorable, including a lower share price, than the terms hereunder.

Substantial regulatory limitations on changes of control and anti-takeover provisions in our Certificate of Incorporation and Bylaws may make it more difficult for you to receive a change in control premium.

With certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company or financial holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Federal Reserve. Also our Certificate of Incorporation and Bylaws contain certain provisions that can slow down or limit a hostile takeover. The provisions are intended to discourage costly takeover battles and lessen our vulnerability to a hostile change in control, thereby enhancing the possibility that our Board of Directors can maximize shareholder value in connection with an offer to acquire us. However, anti-takeover provisions can discourage activities such as unsolicited merger proposals, acquisitions, or tender offers by which shareholders might otherwise receive a change of control premium for their shares above the market price.

Our directors and executive officers control a significant percentage of outstanding shares and may influence shareholder actions in a manner that may be adverse to your personal investment objectives.

As of June 30, 2021, our directors and executive officers beneficially control 15.1% of our outstanding shares of common stock before this offering. Our directors and executive officers have indicated that they intend to participate under this offering. Combined with the anti-takeover provisions in our Certificate of Incorporation and Bylaws, these holdings can effectively block any attempted takeover of us. In addition, if our directors and executive officers vote together as a single group, they will significantly influence the outcome of our shareholder votes, such as election of directors, amendments to our Certificate of Incorporation, mergers and asset sales. The interests of our directors and executive officers may differ from the interests of other shareholders with respect to control issues such as these.

Risks Related to the Rights Offering

If you do not fully exercise your basic subscription privilege, your interest in us will be diluted. In addition, if you do not exercise your basic subscription privilege in full and the subscription price is less than the fair value of our common stock, then you would experience an immediate dilution of the aggregate fair value of your shares.

Up to [252,121] shares are issuable in the rights offering, with any remaining shares available to satisfy over-subscription requests and/or to facilitate sales of shares to beneficial owners in the supplemental offering that we are undertaking concurrently with the rights offering. This includes up to [252,121] shares of common stock issuable immediately on the closing. If you do not choose to fully exercise your basic subscription privilege, your percentage ownership interest in us will decrease. In addition, if you do not exercise your over-subscription opportunity and other shareholders exercise their over-subscription opportunity, or we otherwise issue additional shares to beneficial owners in the supplemental offering, the percentage of our common stock owned by all other shareholders will increase.

The subscription price determined for the rights offering is not necessarily an indication of the fair value of our common stock.

Our Board of Directors determined the terms of the rights offering, including the subscription price, in its sole discretion. In determining the subscription price, our Board of Directors considered a number of factors, including:

The subscription price is not necessarily related to our book value, results of operations, cash flows, financial condition or net worth or any other established criteria of value and may or may not be considered the fair value of our common stock at the time the rights offering was approved by our Board or during the rights offering period. On July 6, 2021, the closing sale price for a trade of 100 shares of our common stock on the OTCQX was $42.55 per share. Prior to July 6, 2021, the most recent closing sale price for our common stock was $43.00 per share, which was for a trade of 200 shares. We cannot assure you that the trading price of our common stock will not decline during or after the rights offering. We also cannot assure you that you will be able to sell shares purchased in the rights offering at a price equal to or greater than the subscription price. We do not intend to change the subscription price in response to changes in the trading price of our common stock prior to the closing of the rights offering.

Because we do not have any formal commitments from any of our shareholders to participate in the rights offering, the net proceeds we receive from the rights offering may be lower than currently anticipated.

We do not have any formal commitments from any of our shareholders to participate in the rights offering, and we cannot assure you that our other shareholders will exercise all or any part of their basic subscription privilege or their over-subscription opportunity. If our shareholders subscribe for fewer shares of our common stock than anticipated, the net proceeds we receive from the rights offering could be significantly reduced and we could incur damage to our reputation.

Because there is no minimum offering amount, purchasers in the rights offering may be one of a few to purchase and management’s plans for offering proceeds may not be met.

There is no minimum amount of subscriptions required to complete the rights offering. Therefore, purchasers in the rights offering could be one of a relatively small number of investors in the rights offering. Further, if there are only a small number of investors in the rights offering, the offering proceeds may not be sufficient to complete management’s planned use for the proceeds.

The rights offering may cause the price of our common stock to decline.

Depending upon the trading price of our common stock at the time of our announcement of the rights offering, the announcement of the rights offering and its terms, including the subscription price, together with the number of shares we could issue if the offering is completed, may result in an immediate decrease in the trading price of our common stock. This decrease may continue after the completion of the rights offering. If that occurs, your purchase of shares in the rights offering may be at a price greater than the prevailing trading price of our common stock. Further, if a substantial number of subscription rights are exercised and the holders of the shares received upon exercise of those subscription rights choose to sell some or all of those shares, the resulting sales could also depress the trading price of our common stock.

We may cancel the rights offering at any time prior to the expiration of the rights offering period, and we will have no obligation to you except to return your subscription payment.

We may at our sole discretion cancel the rights offering at any time prior to the expiration of the rights offering period. If we elect to cancel the rights offering, we will have no obligation with respect to the subscription rights except to return to you, without interest or penalty, as soon as practicable any subscription payments. In addition, we may suffer reputational harm if the rights offering is cancelled prior to the expiration date.

Because you may not revoke or change your exercise of the subscription rights, you could be committed to buying shares above the prevailing trading price of our common stock at the time the rights offering is completed.

Once you exercise your subscription rights, you may not revoke or change the exercise. The trading price of our common stock may decline before the subscription rights expire. If you exercise your subscription rights, and, afterwards, the trading price of our common stock decreases below the $[35] to $[40] per share subscription price, you will have committed to buying shares at a price above the prevailing trading price and could have an immediate unrealized loss. Our common stock is traded on the OTCQX under the symbol, “LYBC.” On July 6, 2021, the closing sale price for a trade of 100 shares of our common stock on the OTCQX was $42.55 per share. Prior to July 6, 2021, the most recent closing sale price for our common stock was $43.00 per share, which was for a trade of 200 shares. The trading price of our common stock may not be equal to or exceed the subscription price at the time of exercise or at the expiration of the subscription rights offering period.

There is no legal obligation for our directors or senior management to subscribe for any shares in the rights offering.

None of our directors or members of senior management is legally obligated to subscribe for any shares of common stock in the rights offering. Because our directors and senior management are not required to subscribe for any shares of common stock in the rights offering, they may choose to subscribe for less than the number of shares of common stock that they are entitled to purchase in the rights offering. Any failure on the part of our directors and senior management to participate significantly in the rights offering may jeopardize the likelihood of success for the rights offering and could result in damage to our reputation.

If you do not act promptly and follow the subscription instructions, your exercise of subscription rights will be rejected.

Shareholders that desire to purchase shares in the rights offering must act promptly to ensure that all required forms and payments are actually received by the Bank prior to the expiration date of the rights offering. If you fail to complete and sign the required subscription forms, send an incorrect payment amount or otherwise fail to follow the subscription procedures that apply to your exercise in the rights offering prior to the expiration of the rights offering period, the Bank may, depending on the circumstances, reject your subscription or accept it only to the extent of the payment received. Neither we nor the Bank undertakes to contact you concerning, or attempt to correct, an incomplete or incorrect subscription form. We have no obligation to contact you or any broker, dealer, bank or other nominee that holds your Common Shares on your behalf regarding any deficiencies or delays. We have the sole discretion to determine whether the exercise of your subscription rights properly and timely follows the subscription procedures.

Because the subscription rights are non-transferable, there is no market for the subscription rights.

You may not sell, transfer or assign your subscription rights to anyone else, and we do not intend to seek to have the subscription rights quoted on the OTCQX or any other stock exchange or trading market. Because the subscription rights are non-transferable, there is no market or other means for you to directly realize any value associated with the subscription rights. You must exercise the subscription rights and acquire additional shares of our common stock to realize any value that may be embedded in the subscription rights.

If you make payment of the subscription price by uncertified personal check, your check may not clear in sufficient time to enable you to purchase shares in the rights offering.

Any uncertified personal check used to pay the subscription price in the rights offering must clear prior to the expiration date of the rights offering, and the clearing process may require five or more business days. As a result, if you choose to use an uncertified personal check to pay the subscription price, it may not clear prior to the expiration date, in which event you would not be eligible to exercise your subscription rights. You may eliminate this risk by paying the subscription price by certified or cashier’s check or bank draft drawn on a U.S. bank or by a U.S. postal or express money order, wire transfer or authorized withdrawal from a depository account at the Bank.

We will continue to incur certain costs as a result of conducting a Tier 2 offering under Regulation A and in the administration of our organizational structure.

After the offering, we may incur legal, accounting, insurance and other expenses at higher levels than we are currently experiencing. We also have incurred and will continue to incur costs associated with conducting the Tier 2 offering under Regulation A, and related rules implemented by the SEC. We will also incur the costs of the ongoing reporting requirements relating to the Tier 2 offering under Regulation A, and we will continue to incur ongoing periodic expenses in connection with the administration of our organizational structure. Accordingly, we expect our legal and financial compliance costs will increase, and some activities will be more time consuming and costly. However, we are unable to estimate these costs with certainty. Compliance requirements, laws, and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These compliance requirements, laws, and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as our executive officers. Furthermore, if we are unable to satisfy our compliance obligations relating to the ongoing reporting requirements relating to the Tier 2 offering under Regulation A, we could be subject to delisting, fines, sanctions and other regulatory action, and potentially civil litigation.

Note Regarding Forward-Looking Statements

In this offering circular we make forward-looking statements concerning trends and future conditions, including the future of the banking industry, our business strategy (including the possibility of future openings of banking offices and acquisitions), continued acceptance and growth of our assets, loans and deposits, development and addition of products and dependence on significant customers such as agricultural and municipal customers. These statements can be identified by the use of forward-looking terminology such as “may,” “expect,” “plan,” “intend,” “seek,” “anticipate,” “estimate,” “continue” or other similar words. These statements and similar expressions discuss expectations of the future and are intended to identify forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements contained in this offering circular. We caution readers not to place undue reliance on any of these forward-looking statements, which reflect our views on the date of this offering circular. The “Risk Factors” and other factors identified throughout this offering circular could cause our actual results to differ significantly from those contained in any forward-looking statement.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this offering circular. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of these statements in light of new information or future events.

Use of Proceeds

The estimated net proceeds from the rights offering depend upon the total number of shares we sell. Although we do not plan on using a broker or underwriter to assist in the sale of shares, and have therefore not included any sales commissions in our offering expenses, we reserve the right to retain a broker or underwriter if we believe it would be in the Company’s best interests, given market conditions. If we retain a broker of underwriter, our offering expenses will be significantly higher and our net proceeds will be lower than disclosed in this offering circular.

The following table sets forth the calculation of our net proceeds from the rights offering at an offering price of $[35] to $[40] per share and the use of these proceeds. Because this is a best efforts offering and there is no minimum number of shares to be sold, we are presenting this information assuming that we sell 10%, 50% and 100% of the shares that we are offering.

1. Assuming the distribution of 80% of the net proceeds from the Offering to the Bank, subject to the sole discretion of our management and its evaluation of the economic, financial and other relevant information it will use to determine the final application of the net proceeds as described above in the section entitled “Risk Factors” beginning on page [19].

We are raising equity capital at this time to increase the Company’s regulatory capital levels. See "Management's Discussion and Analysis of Financial Condition and Results of Operations – Capital”; and “Supervision and Regulation – Capital Requirements”. We intend to add the proceeds from the sale to our general funds to be used for general corporate purposes, including without limitation, paying interest due on subordinated debt; investing in short-term and intermediate-term interest bearing securities or in deposits in our Bank subsidiary, or for injecting additional capital into the Bank. We expect our investment in the Bank to qualify as Tier I regulatory capital for the Bank under regulatory capital guidelines. The Bank plans to use the portion of the net proceeds it receives to invest in new loans and investment securities. The Bank may also consider other growth strategies, such as future acquisition opportunities or de novo branching. We have otherwise not specifically allocated the net proceeds from this offering. Until we apply the net proceeds, we intend to invest such proceeds in short-term and intermediate-term interest-bearing securities or in deposits in our Bank.

The Rights Offering

The following describes the rights offering in general and assumes, unless specifically provided otherwise, that you are a record holder of our common stock on the record date.

Before deciding whether to exercise your subscription rights, you should carefully read this offering circular, including the information set forth under the heading “Risk Factors” in this offering circular.

The Subscription Rights

We are distributing, at no cost or charge to our shareholders subscription rights to purchase up to [252,121] shares. The purchase price is $[35] to $[40] per share in this offering. You will receive one subscription right for each thirteen shares of common stock, and for each thirteen shares of common stock underlying Series A preferred stock, you owned as of 5:00 p.m., Lyons, New York time, on the record date of XXXX, 2021. The subscription rights will be evidenced by a Subscription Election Form to be provided to each record holder of our common stock. Subscription rights may be exercised at any time during the subscription period, which commences on XXX, 2021, through the expiration date for the rights offering, which is 5:00 p.m., Lyons, New York time, on XXX, 2021. You are not required to exercise any of your subscription rights.

Basic Subscription Privilege

Each subscription right will entitle you to purchase one share, with each share consisting of one share of common stock for each thirteen shares of common stock, and for each thirteen shares of common stock underlying Series A preferred stock, you currently hold at a subscription price of $[35] to $[40] per whole share. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights.

Over-subscription Opportunity

If you exercise your basic subscription privilege in full, you will also have an opportunity to subscribe to purchase any shares that our other subscription rights holders do not purchase pursuant to their basic subscription privilege. We may elect to issue additional shares to satisfy over-subscription requests and/or to facilitate sales of shares to beneficial owners in the supplemental offering. The subscription price for shares purchased pursuant to the over-subscription opportunity will be the same as the subscription price for the basic subscription privilege.

You may exercise your over-subscription opportunity only if you exercise your basic subscription privilege in full. To determine if you have fully exercised your basic subscription privilege, we will consider only the basic subscription privilege held by you in the same capacity. For example, if you are granted subscription rights for shares of our common stock that you own individually and shares of our common stock that you own jointly with your spouse, you may exercise your over-subscription opportunity with respect to the subscription rights you own individually, as long as you fully exercise your basic subscription privilege with respect to your individually owned subscription rights. You will not, however, be able to exercise the over-subscription opportunity you have collectively with your spouse unless the basic subscription privilege collectively held by you and your spouse is fully exercised. You do not have to subscribe for any shares under the basic subscription privilege owned jointly with your spouse to exercise your individual over-subscription opportunity.

When you complete the portion of your Subscription Election Form to exercise your over-subscription opportunity, you will be representing and certifying that you have fully exercised your basic subscription privilege as to shares of our common stock that you hold in that capacity. You must exercise your over-subscription opportunity at the same time you exercise your basic subscription privilege in full.

We reserve the right to reject in whole or in part any or all over-subscription requests regardless of the availability of shares. We also reserve the right to issue some or all of the shares that we may issue beyond the number necessary to satisfy properly exercised basic subscription rights solely to beneficial owners in the supplemental offering.

If holders exercise their over-subscription opportunity for more shares than are available to be purchased pursuant to the over-subscription opportunity, we will allocate the shares of our common stock to be issued pursuant to the exercise of the over-subscription opportunity, first, by satisfying the first 250 shares requested in each over-subscription, and then second, pro rata among those over-subscribing rights holders, subject to our right to reject in whole or in part any over-subscription request. “Pro rata” means in proportion to the number of shares that you and the other subscription rights holders have agreed to purchase by exercising the basic subscription privilege. If there is a pro rata allocation of the remaining shares and you would otherwise receive an allocation of a greater number of shares than you subscribed for under your over-subscription opportunity, then, subject to our accepting your over-subscription request, we will allocate to you only the number of shares for which you over-subscribed. We will allocate the remaining shares among all other holders exercising their over-subscription opportunity, again subject to our right to reject in whole or in part any over-subscription request. If you are not allocated the full amount of shares for which you over-subscribe, you will receive a refund of the subscription price, without interest or penalty, which you delivered for those shares that are not allocated to you. The Bank will mail such refunds as soon as practicable after the completion of the offering.

Subscription Price

The subscription price per share shall be $[35] to $[40].

Expiration Time and Date; Amendments

The subscription rights will expire at 5:00 p.m., Lyons, New York time, on XXX, 2021, unless we extend it. We reserve the right to extend the subscription period at our sole discretion. In no event, however, will the offering be extended beyond 5:00 p.m., Lyons, New York time, on XXX, 2021. We will notify you of any extension of the expiration date by issuing a press release. You must properly complete the enclosed Subscription Election Form and deliver it, along with the full subscription price (including any amounts in respect of an over-subscription request), to the Bank prior to 5:00 p.m., Lyons, New York time, on XXX, 2021, unless the expiration date is extended. After the expiration of the rights offering period, all unexercised subscription rights will be null and void. We will not be obligated to honor any purported exercise of subscription rights which the Bank receives after the expiration of the offering, regardless of when you sent the documents regarding that exercise. Any subscription payments for shares not allocated or validly purchased will be returned to you, without interest or penalty, as soon as practicable following the expiration date of the rights offering. We reserve the right, at our sole discretion, to amend or modify the terms of the rights offering.

Reasons for the Rights Offering

We are conducting the rights offering as a way of raising equity capital in a cost-effective manner that gives our shareholders the first opportunity to participate. This equity capital will be used to support future asset growth and will otherwise be used for various corporate purposes. We believe that the current economic environment, in which many larger regional and national banking institutions have tightened their lending standards and concentrated on addressing their deteriorated asset quality and reduced capital levels, has created significant opportunities for well-positioned community banks, such as the Company and its wholly-owned subsidiary, The Lyons National Bank, to expand geographically and to increase market share.

Anticipated Proceeds From the Rights Offering

The net proceeds to us from the rights offering will depend on the number of subscription rights exercised in the rights offering, including oversubscription requests, and whether any remaining shares are sold in the supplemental offering. If we issue all [252,121] shares available for the exercise of basic subscription rights in the rights offering, the net proceeds to us, after deducting estimated offering expenses, will be approximately [$ ]. We estimate that the expenses of the combined rights and supplemental offerings will be approximately $125,000. See the section of this offering circular above entitled “Use of Proceeds”.

Method of Exercising Subscription Rights

The exercise of subscription rights is irrevocable and may not be cancelled or modified. You may exercise your subscription rights as follows:

Subscription by Registered Holders

To exercise your basic subscription privilege and your over-subscription opportunity, you must properly complete and execute the Subscription Election Form, together with any required signature guarantees, and forward it, together with payment in full of the subscription price for each share you are subscribing for, including any shares you subscribe for pursuant to the over-subscription opportunity, to the Bank at the address set forth below under the heading entitled “—Submission of Subscriptions”, on or prior to the expiration date.

Payment Method

Your payment of the subscription price must be made in U.S. dollars for the full number of shares you wish to acquire under the basic subscription privilege and the over-subscription opportunity. Your payment must be delivered in one of the following ways:

If you wish to use any other form of payment, then you must obtain the prior approval of the Bank and make arrangements in advance with the Bank for the delivery of such payment.

Receipt of Payment

Your payment will be considered received by the Bank only upon:

Payment received after the expiration of the rights offering period will not be honored, and, in that case, your payment will be returned to you, without interest or penalty, as soon as practicable.

Clearance of Uncertified Personal Checks

If you are paying by uncertified personal check, please note that payment will not be deemed to have been received by the Bank until the check has cleared, which could take at least five or more business days to clear. If you wish to pay the subscription price by uncertified personal check, we urge you to make payment sufficiently in advance of the time the rights offering expires to ensure that your payment is received by us and clears by the rights offering expiration date. We urge you to consider using a certified or cashier’s check or bank draft drawn on a U.S. bank or U.S. postal or express money order.

Instructions for Completing Your Subscription Election Form

You should read the instruction letter accompanying the Subscription Election Form carefully and strictly follow it. We will not consider your subscription received until the Bank has received delivery of a properly completed and duly executed Subscription Election Form and payment of the full subscription amount. The risk of delivery of all documents and payments is borne by you or your nominee, not us.

The method of delivery of Subscription Election Forms and payment of the subscription amount to the Bank will be at the risk of the holders of subscription rights. If sent by mail, we recommend that you send those Subscription Election Forms and payments by overnight courier or by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the Bank and clearance of payment before the expiration of the subscription period for the rights offering. Because uncertified personal checks may take at least five or more business days to clear, we strongly urge you to pay or arrange for payment by means of certified or cashier’s check or bank draft or U.S. postal or express money order to avoid missing the opportunity to exercise your subscription rights should you decide to exercise your subscription rights.

Missing or Incomplete Subscription Information

If you do not indicate the number of subscription rights being exercised, or do not forward full payment of the total subscription price payment for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised your subscription rights with respect to the maximum number of subscription rights that may be exercised with the aggregate subscription price payment you delivered to the Bank. If your aggregate subscription price payment is greater than the amount you would owe for exercise of your basic subscription privilege in full, you will be deemed to have exercised your over-subscription opportunity to purchase the maximum number of shares that could be purchased with your over-payment. If we do not apply your full subscription price payment to your purchase of shares, the subscription agent will return the excess amount to you by mail, without interest or penalty, as soon as practicable after the expiration date of the rights offering.

Conditions and Cancellation

We reserve the right to cancel the rights offering on or prior to the expiration date of the rights offering for any reason. We may cancel, extend or otherwise amend the rights offering, in whole or in part, if at any time before completion of the rights offering there is any judgment, order, decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to the rights offering that in the sole judgment of our Board of Directors would or might make the rights offering or its completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion of the rights offering. We may waive any of these conditions and choose to proceed with the rights offering even if one or more of these events occur. If we cancel the rights offering, in whole or in part, all affected subscription rights will expire without value, and all subscription payments received by us will be returned, without interest or penalty, as soon as practicable.

Cancellation Rights

Our Board of Directors may cancel, extend or otherwise amend the rights offering at its sole discretion at any time prior to the time the rights offering expires for any reason. If we cancel the rights offering, we will issue a press release notifying shareholders of the cancellation, and any funds you paid to us will be returned, without interest or penalty, as soon as practicable.

Submission of Subscriptions

All Subscription Election Forms and payments of the subscription price must be delivered to The Lyons National Bank as follows:

By First Class Mail: The Lyons National Bank, Attention: Robert Schick, 399 Exchange Street, Geneva, New York 14456

By Express Mail or Overnight Delivery: The Lyons National Bank, Attention: Robert Schick, 399 Exchange Street, Geneva, New York 14456

You should direct any questions or requests for assistance concerning the method of subscribing for the shares or for additional copies of this offering circular to Robert Schick or Carol Snook at (315) 946-8260, or (315) 781-5007, respectively.

If you deliver subscription documents, including the Subscription Election Forms, in a manner different than that described in this offering circular, we may not honor the exercise of your subscription rights.

Fees and Expenses

We will pay all fees in connection with preparing and sending the rights offering materials to holders of our common stock. You are responsible for paying all costs associated with returning subscriptions to us, including any other commissions, fees, taxes or other expenses incurred in connection with the exercise of the subscription rights. We will not pay such expenses.

No Fractional Shares

We will not issue fractional shares. Fractional shares resulting from the exercise of the basic subscription privilege or the over-subscription opportunity will be eliminated by rounding down to the nearest whole share. Any excess subscription payments received by us will be returned, without interest or penalty, as soon as practicable.

Shares Held by Brokers and Nominees

If you hold your shares in the name of a broker, dealer, bank or other nominee and you wish to participate in the Rights Offering or Supplemental Offering and purchase our Common Shares, you should complete and return to your Subscription Form along with payment in full for the number of shares you are subscribing. DO NOT SEND THE RIGHTS SUBSCRIPTION AGREEMENT AND PAYMENT TO YOUR BROKER, RATHER RETURN BOTH DIRECTLY TO THE COMPANY. You should receive the form from your broker, dealer, bank or other nominee with the other offering materials. We assume no responsibility in respect of the timely administration of your broker, dealer, bank or other nominee to perform its obligations on your behalf.

Questions about Exercising Subscription Rights

If you have any questions or require assistance regarding the method of exercising your subscription rights or requests for additional copies of any documents, you should contact us at (315) 781-5007 or stop by our office located at 399 Exchange Street, Geneva, New York 14456.

Transferability of Subscription Rights

The subscription rights granted to you may be exercised only by you, and, therefore, you may not sell, transfer or assign your subscription rights to anyone else.

Validity of Subscriptions

We will resolve all questions regarding the validity and form of the exercise of your subscription privileges, including time of receipt and eligibility to participate in the rights offering. Our determination will be final and binding. Once made, subscriptions and directions are irrevocable, and we will not accept any alternative, conditional or contingent subscriptions or directions. We reserve the absolute right to reject any subscriptions or directions not properly submitted or the acceptance of which would be unlawful. You must resolve any irregularities in connection with your subscriptions before the subscription period expires, unless waived by us at our sole discretion. We shall not be under any duty to notify you or your representative of defects in your subscriptions. A subscription will be considered accepted, subject to our right to cancel the rights offering, only when a properly completed and duly executed Subscription Election Form and any other required documents and payment of the full subscription amount have been received by the Bank. Our interpretations of the terms and conditions of the rights offering will be final and binding.

Cancellation of Rights Offering; Return of Funds

The Bank will hold funds received in payment for the shares pending completion of the rights offering. The Bank will hold this money until the rights offering is completed or is cancelled. If the rights offering is cancelled for any reason, the Bank will return this money to subscribers, without interest or penalty, as soon as practicable.

Delivery of Shares of Common Stock

As soon as practicable after the expiration of the rights offering period, we will direct our transfer agent, Broadridge Corporate Issuer Solutions, Inc., to issue the Common Stock in book-entry form. Shortly thereafter, shareholders whose subscriptions are accepted will receive a statement of ownership from our transfer agent reflecting the Common Stock that you have purchased in the offering. Shares purchased pursuant to the over-subscription opportunity and in the supplemental offering will be issued in the same manner as soon as practicable after the expiration date of the rights offering and following the completion of any pro-rations as may be necessary in the event the over-subscription requests exceed the number of shares available to satisfy such requests. Thereafter, the shares should be available for delivery to you or your broker as soon as reasonably possible.

Rights of Subscribers

You will have no rights as a shareholder of our common stock until you are issued certificates for shares of our common stock purchased in the rights offering. You will have no right to revoke your subscriptions after you deliver your completed Subscription Election Form, payment and any other required documents to the Bank.

No Revocation or Change

Once you submit the form of Subscription Election Form to exercise any subscription rights, you are not allowed to revoke or change the exercise or request a refund of monies paid. All exercises of subscription rights are irrevocable, even if you learn information about us that you consider to be unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase the shares of common stock offered pursuant to the rights offering.

Regulatory Limitation

We will not be required to accept your subscription for shares pursuant to the rights offering if, in our opinion, you are required to obtain prior clearance or approval from, or submit a prior notice to, any state or federal regulatory authorities to acquire, own or control the shares and if, at the time the rights offering expires, we determine that you have not properly obtained such clearance or approval or submitted such notice.

U.S. Federal Income Tax Treatment of Subscription Rights Distribution

Based upon discussions with our advisors, we believe that our distribution or any shareholder’s exercise of these subscription rights to purchase shares should generally not be taxable to our shareholders. See the section entitled “United States Federal Income Taxation” on page [103] below.

You are urged to consult with your own tax advisor with respect to the particular Federal, State and local tax consequences of the receipt of subscription rights in this offering and the ownership, exercise and disposition of the subscription rights applicable to your own particular tax situation.

No Recommendation to Subscription Rights Holders

Our Board of Directors is making no recommendations regarding your exercise of the subscription rights. You are urged to make your own decision whether or not to exercise your subscription rights based on your own assessment of our business and the rights offering. See the section entitled “Risk Factors” in this offering circular.

Listing

The subscription rights may not be sold, transferred or assigned to anyone else and will not be listed on any other stock exchange or trading market or on the OTCQX. The shares of common stock issuable upon exercise of the subscription rights will be quoted on the OTC Markets OTCQX tier under the symbol “LYBC”.

Shares of Common Stock Outstanding After the Rights Offering

Based on the 3,157,575 shares of our common stock outstanding as of June 30, 2021, if we issue all [252,121] shares of common stock comprising the shares available for the exercise of basic subscription rights in the rights offering, we would have [3,409,696] shares of common stock outstanding following the completion of the rights offering, which would represent an increase in the number of outstanding shares of our common stock of approximately [8.0%].

Other Matters

We are not making the rights offering in any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting any offers to purchase any shares from subscription rights holders who are residents of those states or other jurisdictions or who are otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights. We may delay the commencement of the rights offering in those states or other jurisdictions, or change the terms of the rights offering, in whole or in part, in order to comply with the securities laws or other legal requirements of those states or other jurisdictions. Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution of any shares you may elect to purchase by exercise of your subscription rights in order to comply with state securities laws. We may decline to make modifications to the terms of the rights offering requested by those states or other jurisdictions, in which case, if you are a resident in those states or jurisdictions or if you are otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights you will not be eligible to participate in the rights offering.

The Supplemental Offering

Acceptance of Subscriptions During Pendency of Rights Offering

We are also offering shares to the beneficial owners of our shares as of the record date in the supplemental offering. During the rights offering they may submit subscriptions to purchase shares at a purchase price of $[35] to $[40] per share as and to the extent that any shares remain available for purchase following the expiration date of the rights offering, subject to the purchase priority rights of the holders of subscription rights.

Prospective purchasers should complete, date and sign the subscription agreement that accompanies this offering circular and return it, together with a check, bank draft or money order payable to “The Lyons National Bank” for the full amount of the total subscription price for the shares that you subscribe for under the subscription agreement, to The Lyons National Bank, at the appropriate address set forth above in this offering circular in the subsection entitled “The Rights Offering”—Submission of Subscriptions”.

Supplemental offering subscriptions are binding on subscribers.

If you send an uncertified personal check, payment will not be deemed to have been received by us until the check has cleared. If you send a certified or cashier’s check or bank draft, drawn on a U.S. bank, or a U.S. postal or express money order, payment will be deemed to have been received immediately upon receipt of such instruments.

Any uncertified personal check used to pay for shares must clear the appropriate financial institutions prior to 5:00 p.m., Lyons, New York time, on XXX, 2021, which is the expiration date of the supplemental offering. The clearance of an uncertified personal check may require five or more business days. Accordingly, persons who wish to acknowledge their subscription by means of an uncertified personal check are urged to make payment sufficiently in advance of the expiration of the supplemental offering to ensure such payment is received and clears by such date.

If you wish to use any other form of payment in subscribing for shares in the supplemental offering, then you must obtain the prior approval of the Bank and make arrangements in advance with the Bank for the delivery of such payment.

Expiration Date and Cancellation Rights

The supplemental offering will expire ten (10) days following the expiration of the rights offering, or at 5:00 p.m., Lyons, New York time, on XXX, 2021, unless we extend the supplemental offering in our sole discretion. In no event, however, will the offering be extended beyond 5:00 p.m., Lyons, New York time, on September 30, 2021.

We may cancel the supplemental offering at any time for any reason, including following the rights offering expiration date. If we cancel the supplemental offering, we will return all subscription payments, without interest or deduction, as soon as practicable.

Discretion to Accept Subscriptions

We reserve the right, in our sole discretion, to accept or reject in whole or in part any subscription that may be properly delivered to the Bank pursuant to the supplemental offering. As a result, you may not receive any or all of the shares for which you subscribe. We will notify subscribers as soon as practicable following the expiration date of the supplemental offering as to whether and to what extent their subscriptions have been accepted. If we do not accept all or a portion of a subscription, we will return to the subscriber the unaccepted portion of the subscription funds, without interest or deduction, as soon as practicable.

Escrow Arrangements; Return of Funds

The Bank will hold funds received with a subscription in connection with the supplemental offering. The Bank will hold these funds in escrow until such time as we accept or reject the subscription in whole or in part or until the supplemental offering is cancelled. If the supplemental offering is cancelled, the Bank will return the subscription payments, without interest or deduction, as soon as practicable.

No Revocation or Change

Once you submit your subscription and payment in connection with the supplemental offering, you will not be allowed to revoke your subscription or request a refund of monies paid. All subscriptions delivered pursuant to the supplemental offering are irrevocable, even if you learn information about us that you consider to be unfavorable. You should not submit a subscription to purchase shares in the supplemental offering unless you are certain that you wish to purchase shares at the subscription price.

Market for Our Common Stock and Related Shareholder Matters

Our stock is quoted in the over-the-counter market on the OTC Markets OTCQX tier under the symbol “LYBC.”

We do not currently have outstanding options, or warrants to purchase, common stock. We do have shares of Series A preferred stock that are convertible into common stock. We have not agreed to register any common stock under the Securities Act of 1933, as amended, or Securities Act, for sale by our security holders, although we reserve the right to do so in the future.

The following table describes for the quarters indicated the high and low sales for our stock as quoted on the OTCQX and dividends paid with respect to our stock since January 1, 2018.

The above over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. The quotation of our common stock on the OTCQX does not assure that a meaningful, consistent and liquid market for such securities currently exists.

As of June 30, 2021, there were 610 holders of record of our common stock.

Our Policy Regarding Common Stock Dividends

Since our formation in 1987, we, as the holding company of the Bank, have continued the payment of cash dividends to common shareholders in keeping with the historical payment of cash dividends to common shareholders to the Bank. We (or the Bank prior to our formation) have paid consecutive annual cash dividends for more than 50 years to common shareholders. Our Board of Directors currently intends to continue the policy of paying dividends. Dividend payments at historical levels following the offering may not be sustained or may be increased, or such increase may not occur. Future payment of dividends must necessarily depend upon our financial resources, the earnings and financial condition of the Bank, restrictions under applicable law and regulations, and other factors relevant at the time the Board of Directors considers any declaration of dividends. To the extent we have insufficient cash available for the payment of dividends; we must receive dividends from the Bank. Therefore, the restrictions on the Bank’s dividend payments are directly applicable to us. For a description of limitations on the ability of the Bank to pay any dividends to us, see “Supervision and Regulation.”

We will be restricted in our ability to pay common stock dividends if we default on certain of our obligations related to the Lyons Capital Statutory Trust II in which we own all of the common beneficial interest. We formed the trust in August 2004 for the sole purpose of issuing trust preferred securities that are fully and unconditionally guaranteed by us. In connection with each formation, we also sold subordinated debentures to Trust II in the principal amount of $5,155,000. If we default on our obligations under the guarantees of the subordinated debentures, we would be prohibited from paying dividends under the indentures governing the trust preferred securities.

In addition, so long as any shares of Series A preferred stock are outstanding, no dividends or distributions shall be declared or paid with respect to our common stock, and we may not purchase, redeem, or acquire for any consideration, any shares of our common stock, unless (i) we are not in default of any of our obligations to redeem shares of Series A preferred stock, and (ii) dividends on the Series A preferred stock for the then current dividend period have been paid or declared and funds set aside therefor.

Determination of Offering Price and Dilution

If you purchase shares in this offering, you may pay a higher effective price per share than the prices paid to us by certain of our officers and directors during the past year.

The most recent trade of our common stock occurred on July 6, 2021 at a price of $42.55 per share, for a trade of 100 shares of our common stock. Prior to July 6, 2021, the most recent closing sale price for our common stock was $43.00 per share, which was for a trade of 200 shares. The following table summarizes the total consideration paid to us and the average price paid by our executive officers from January 1, 2020 through June 30, 2021 for shares in the Company. These are shares of common stock underlying stock units awarded to our executive officers under our 2019 Deferred Compensation Plan, and the prices represent the price of the common stock underlying the stock unit as determined under the plan:

(1) Represents shares underlying stock units awarded to the following executives under our 2019 Deferred Compensation Plan in the following amounts at the prices as determined under such plan:

- During 2020: Schick – 3,374; Britt – 1,262; Kime – 2,095; DeRaddo – 1,116; Proper – 408; Juffs – 408; Mittiga – 601 (no longer with the Company); at an average price per share of $36.63; and

- During 2021 through June 30, 2021: Schick – 1,644; Britt – 615; Kime s– 1,020; DeRaddo – 544; Proper – 214; Juffs – 214; Mittiga – 16 (no longer with the Company); at an average price of $38.60.

Capitalization

The following table sets forth as of December 31, 2020:

You should read the information in this table together with the “Selected Financial and Other Data,” our consolidated financial statements and notes thereto and the other information in this offering circular.

1. Includes 16,894 shares of common stock underlying stock units awarded under the Company’s 2019 Deferred Compensation Plan.

Plan of Distribution

Rights Offering

On or about the date hereof, we will distribute the subscription rights, Subscription Election Forms and copies of this offering circular to individuals who owned shares of common stock of record as of 5:00 p.m., Lyons, New York time, on XXXX, 2021, the record date for the rights offering. If you wish to exercise your subscription rights and purchase shares, you should complete the Subscription Election Form and return it with payment for the shares, to the Bank. See the subsection above entitled “The Rights Offering—Method of Exercising Subscription Rights”. If you have any questions, you should contact Robert Schick or Carol Snook, at (315) 946-8260 or (315) 781-5007, respectively. The subscription rights will not be listed on any stock exchange or trading market or on the OTC Market. The shares of common stock issuable upon exercise of the subscription rights will be quoted on the OTC Markets OTCQX tier under the symbol “LYBC.”

Except as described in this section, we are not paying any other commissions, placement agent fees or discounts in connection with the rights offering. Some of our employees may solicit responses from you as a holder of subscription rights, but we will not pay our employees any commissions or compensation for these services other than their normal employment compensation. We estimate that our total expenses in connection with the combined rights and supplemental offerings will be approximately $125,000.

Robert A. Schick, Chairman of the Board and President, Chad J. Proper, Senior Vice President and Treasurer, both executive officers of the Company, along with Thomas L. Kime, Bank President and CEO and Clair J. Britt, Jr., Executive Vice President and Senior Commercial Loan Officer of the Bank, will likely participate in the selling efforts for Lyons Bancorp.

Supplemental Offering

We are also offering shares to the beneficial owners of our shares as of the record date in the supplemental offering. During the rights offering they may submit subscriptions to purchase shares at a purchase price of $[35] to $[40] per share as and to the extent that any shares remain available for purchase following the expiration date of the rights offering, subject to the purchase priority rights of the holders of subscription rights.

Neither the rights offering nor the supplemental offering is contingent upon the occurrence of any event or the sale of a minimum number of shares. Funds received in the offering will be deposited with and held in a non-interest bearing account until the closing of the both the rights offering and supplemental offering. Closing of both offerings is expected to occur no later than XXX, 2021.

Investment Limitations

Generally, no sale may be made to you in this offering if the aggregate purchase price you would pay exceeds more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d) (2) (i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

As a Tier 2, Regulation A offering, investors must comply with the 10% limitation to investment in the offering. The only investor in this offering exempt from this limitation is an accredited investor, an “Accredited Investor,” as defined under Rule 501 of Regulation D. If you meet one of the following tests you should qualify as an Accredited Investor:

(1) You are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in the current year;

(2) You are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase shares in this offering (please see below on how to calculate your net worth);

(3) You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or the Code, a corporation, a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the shares in this offering, with total assets in excess of $5,000,000;

(4) You are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor;

(5) You are a trust with total assets in excess of $5,000,000, your purchase of shares in this offering is directed by a person who either alone or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were not formed for the specific purpose of investing in the shares in this offering;

(6) You are a natural person who holds, in good standing, one of the following professional licenses: the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), or the Investment Adviser Representative license (Series 65);

(7) You are a family office, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, that (i) has assets under management in excess of $5 million; (ii) is not formed for the specific purpose of acquiring the Securities and (iii) has a person directing the prospective investment who has such knowledge and experience in financial and business matters so that the family office is capable of evaluating the merits and risks of the prospective investment; or

(8) You are a family client, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, of a family office meeting the requirements of clause (p) above and whose prospective investment in the Issuer is directed by that family office pursuant to clause (p)(iii) above.

Under Rule 251 of Regulation A, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). A non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please see below on how to calculate your net worth).

Net Worth Calculation

Your net worth is defined as the difference between your total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the shares in the offering.

In order to purchase shares in this offering and prior to the acceptance of any funds from an investor, an investor will be required to represent, to the company’s satisfaction, that he or she is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this offering.

Our Company 

General

Lyons Bancorp, Inc., which is a bank holding company under the Federal Bank Holding Company Act of 1956, owns all of the outstanding capital stock of The Lyons National Bank and all of the common beneficial interest of the Lyons Capital Statutory Trust II. Lyons Bancorp, Inc. was incorporated under the laws of the State of New York on April 15, 1987.

The Lyons National Bank is a community oriented bank, emphasizing personal service and customer convenience in serving the financial needs of the individuals, families and businesses residing in our markets. We attract deposits from the general public in the areas surrounding our banking offices and use those funds, together with funds generated from operations and borrowings, to originate commercial real estate loans, residential mortgage loans, commercial and agricultural loans and consumer loans. We also invest in mortgage-backed securities and other permissible investments.

Over the past several years, we have experienced significant growth in our assets, deposit base, loan portfolio and net worth. As of December 30, 2020, we had $1,423 million in total assets, $1,020 million in total loans, $1,286 million in total deposits and $95 million in stockholders’ equity.

Lyons Bancorp’s primary asset is The Lyons National Bank. Lyons Bancorp, Inc. is staffed by three part-time employees; Robert A. Schick, Chairman of the Board and President, Chad J. Proper, Treasurer and Carol Snook, Secretary. Mr. Schick has a consulting contract with the Company. Mr. Proper and Ms. Snook do not receive compensation from Lyons Bancorp, Inc. Mr. Proper is Senior Vice President and Chief Financial Officer; and Ms. Snook is Corporate Executive Secretary of the Lyons National Bank and full-time employees of the Bank.

Our main office is located at 35 William Street, Lyons, New York 14489.

Our telephone number is (315) 781-5007 and our web-site is www.bankwithlnb.com. Information at our web site is not part of this offering circular. 

Lyons National Bank

The Lyons National Bank commenced business operations in 1852 as the Palmyra Bank of Lyons and later changed its name to The Lyons National Bank. In 1933, the Bank merged with Gavitt National Bank to create The Lyons National Bank. The Bank opened its first branch banking office in Lyons in 1986 and added a second in Wolcott, New York in 1990. Our pace of expansion accelerated as we entered the Newark, New York market in 1996 and upgraded to a new facility there in 2000. Our first supermarket location commenced operations in Macedon, New York in 1997 and in 2007, was moved to a full-service banking office. We opened full service banking offices in Ontario, New York in 1999, in Jordan, New York in 2001, in Clyde, New York in 2002, in Geneva, New York in 2003, in Penn Yan, New York in 2004, and Waterloo, New York in 2010. We constructed new facilities for our Geneva and Penn Yan offices in 2005. We opened offices in Canandaigua and Perinton, in 2013 and 2015, respectively. Because of the diversity and size of the City of Auburn in Cayuga County, we opened two branches there in 2018. We opened our latest office in the Town of Farmington in Ontario County in the summer of 2020.

The Bank is a full service community oriented commercial bank, without trust powers. We believe the Bank presents an alternative to large national or regional financial institutions by offering local ownership, local decision-making and other personalized service characteristics of community banks.

The Bank has one subsidiary, Lyons Realty Associates Corp. (Lyons Realty). The Bank owns all of the common stock and 93.5% of the non-voting preferred stock of Lyons Realty. A group of investors owns approximately 6.5% of Lyons Realty’s non-voting preferred stock. 

Other Subsidiaries

Lyons Realty Associates Corp. is a New York corporation formed by the Bank in June 2001 to operate as a real estate investment trust under the Internal Revenue Code of 1986, as amended. Lyons Realty primarily acquires, owns and holds a portfolio of real estate mortgages and related assets. To date, our Bank has originated all of the mortgages held by Lyons Realty. As of December 31, 2020, Lyons Realty held $147.0 million in real estate mortgages. Lyons Realty does not provide any services or products to third parties.

Lyons Capital Statutory Trust II, or Trust II, is a Delaware statutory business trust we formed in August 2004. This trust is not authorized and does not conduct any trade or business and was formed for the sole purpose of the issuance, sale and administration of the trust preferred capital securities. The trusts’ principal assets are subordinated debentures issued by Lyons Bancorp, Inc. In August 2004, concurrently with Trust II's acquisition of these subordinated debentures, Trust II issued $5.0 million of trust preferred capital securities to investors.

The capital securities issued by these trusts are classified as long-term debt for financial statements purposes, but Tier 1 capital for regulatory purposes. For a further description of the details of these transactions see “Banking Operations – Sources of Funds – Borrowings;” and “Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital.”

Products and Services

The Company, through our banking subsidiary, provides a wide range of traditional commercial and retail banking products and services for individuals and small to medium sized businesses primarily in our market area. The Bank’s services include accepting time, demand and savings deposits, and making secured and unsecured loans. See “-- Sources of Funds – Deposits.” Deposits in the Bank are insured to applicable limits by the Federal Deposit Insurance Corporation. The Bank offers enhanced delivery system options such as telephone and online banking options and helps business customers manage their cash flow with Automatic Clearing House origination and cash management services. Other services the Bank offers include safe deposit boxes, money orders, wire transfers, drive-through facilities, 24-hour depositories, and ATMs. The Bank’s lending products include residential and commercial real estate loans, agricultural, commercial, and consumer loans. See “Banking Operations - Lending Activities.”

The Bank, through an arrangement with LPL Financial (LPL), a non-affiliated entity, makes non-insured financial services and products available to its customers and potential customers. These products range from stocks, bonds and mutual funds to life insurance and annuities. LPL also offers advisory services to the Bank under this arrangement. LPL sells the product or service to the customer and the Bank receives a referral commission from LPL for the sale. The commissions we receive from these transactions are intended to help offset some of the risk associated with our net interest margin because it can provide a recurring source of revenue. During the first quarter of 2021, the amount of revenue we generated from these products was $439,000.

Business Strategy

Our mission is to increase shareholder value by offering financial services to a constantly changing market. Our strategy includes:

Franchise Growth

All of the growth in the Company’s modern history has been organic. We are not averse to purchasing other banks or strategically located branches our competitors may sell from time-to-time, or other related financial services companies that we believe are compatible with us. We do however, have a profitability model we adhere to when entertaining such purchases.

Since the end of 2015, we have grown our customer base by almost 40%; from approximately 27,600 customers to approximately 38,200. According to Federal Deposit Insurance Corporation (FDIC) data since that time, we have increased our market share in all of the seven counties we serve or have maintained our number one market share status.

Our main consumer loan product is residential mortgages. We both hold mortgages on our balance sheet as well as sell, but service, a portion of what we originate. In the past five years, the mortgages we have retained on our balance sheet have increased from approximately $183 million as of December 31, 2015 to approximately $329 million as of December 31, 2020. Our sold, but serviced mortgages total $424 million as of December 31, 2020. The latest available FDIC data and as of December 31, 2020 depict us to be the number one residential mortgage originator in three of the seven counties we serve, second in another county and third in another.

As bank net interest margins continue to narrow, obtaining critical mass is essential to cover ever-increasing operational expenses. At the end of 2020, the average size of our deposits per branch office was $96 million as compared to $39 million at the end of 2010. Four of our branches exceeded $100 million in deposits and one exceeded $200 million.

Deepen Commercial and Agricultural Relationships

On December 31, 2020, we had $1,020 million of total loans. The most significant concentration of our loans is commercial and agricultural loans, which as of December 31, 2020 totaled $548.4 million and constituted 53.8% of our total loans.

We have increased our loan portfolio by 69% from December 31, 2015 to December 31, 2020. We have a professional staff consisting of eleven commercial/agricultural lending officers and nine residential mortgage and consumer loan officers. These loan officers are supported by a credit administration department consisting of a chief credit administrator, a credit administrator manager, four analysts and an administrative assistant. Further, our loan operations department consists of two supervisors, and eighteen clerical employees.

Cement Retail Loyalty

In order to attract consumers, we offer products that address consumers’ needs to manage their funds on a day-to-day basis and finance homes. We offer checking and savings products, which are accessible by either visiting our local offices or by electronic means. We have a large network of ATMs and offer full access for our customers in all of the major domestic ATM networks. Internet and telephone banking provide customers additional alternatives to access their accounts.

The decision to purchase or refinance a home is a significant financial transaction for most of our customers. If the loan is a plain-vanilla mortgage that meets all of the standards of the secondary marketplace, we can originate, sell, and service the loan. This allows customers to take advantage of national funding options while retaining a local contact should any problems develop. The Bank benefits because it can generate fees for these services. Another advantage of this approach is that the loan will not impose regulatory capital requirements on us, allowing us to originate additional loans. For those properties that do not fit into the one-size-fits-all box of the secondary market, we can originate and hold the loan, and do so at a premium rate.

We intend to continue emphasizing the core consumer deposit and mortgage products in our market and to continue to build our serviced mortgage portfolio.

Expand Sales of Non-Bank Financial Services

Making noninterest income a larger part of our total revenue stream and broadening our base of customers and increasing customer retention through sales of these products and services is an integral part of our strategy. The Bank, through an arrangement with Linsco/Private Ledger, makes non-insured financial services and products available to its customers and potential customers. These products range from stocks, bonds and mutual funds to life insurance and annuities.

Purchase Branches or Banks

We have contacted various larger financial institutions to determine if any are interested in selling certain branches that are within our geographic footprint. We periodically review opportunities for full bank acquisitions as well. Currently, we do not have any agreements, arrangements or understandings for acquisitions of any kind.

Business Support Strategies

To support our business growth we believe that we need to execute the following five key business support strategies.

Marketing and Sales Approach

To generate increased revenues in the fast-changing financial services marketplace, we believe that we must balance our community banking culture with an effective marketing and sales approach. As we compete for customers, we strive to project a consistent image to the consumer. We also train our staff to identify the needs of our customers so that we can offer them the products and services that will generate our future profits.

Expanded Product Lines

In addition to our current arrangement with Linsco/Private Ledger, we plan to support better marketing and training by developing and offering additional products and services to our customers. We expect to develop products in-house and offer them through our own systems and customer representatives. In addition, we will consider utilizing out-sourcing options that offer a good trade-off between time to market and revenues generated. New product lines we are considering include: insurance, brokerage, financial planning, investment management, and trust services.

Infrastructure

We have increased the assets of the Company from $868.1 million on December 31, 2015 to $1,423.1 million on December 31, 2020, an increase of 64.0%. During this time the staff has increased to 226 full-time equivalent employees or 22.1%. In order for us to continue our success we plan to deepen the organizational structure of the Company by adding expertise in certain specialized areas, such as additional information technology support and by adding to staff positions throughout the Company.

In August of 2007, we updated our core operating system with software from a company called Open Solutions, Inc. Open Solutions, Inc. is a leading provider of banking software and data center solutions and currently provides us with a robust suite of products and services designed to help us meet our customer needs. With Open Solutions, Inc. providing our data center services, the responsibility for the technical aspects of technology lies with experts while keeping the responsibility for strategy within the Company. A key portion of our future success will rest on our ability to utilize the capabilities of our systems to provide timely information upon which to make decisions. Open Solutions, Inc. was purchased by Fiserv in 2013.

Manage Risk

The key risks we face include credit, liquidity, interest rate sensitivity, compliance, reputation, and operations. We manage each of these areas in a structured fashion. Although each of our risks is managed by individuals and systems unique to the particular risk in question, we maintain a global risk management process as well. This approach allows us to monitor the various risks we face in an integrated fashion. We feel it is important to review risk trends in all areas at the same time to make sure that we are not subject to a correlated increase in risk that could feed on itself. Our internal Enterprise Risk Management Committee is charged with the responsibility to gather information from each risk area, collate it, and review the implications in an enterprise-wide fashion. We self-rate the Company in the different areas and take care to compare these ratings to those provided by outside parties (auditors, examiners, etc.) for consistency.

The potential risk to our reputation from rumor or unauthorized activities could cause severe harm to our business. We take any comments made about the Company seriously and counter any inaccuracies we find as quickly as we can. All of our employees and directors are subject to our internal Code of Conduct Policy that provides strict guidelines for actions and formal penalties for violations. Our corporate governance policies have been enhanced, meeting many of the guidelines in place for much larger institutions.

Operating risk, including cyber risk, has become a much more important consideration in the past few years as new threats have been presented. We have established strict privacy requirements in all of our customer dealings. We have taken steps to secure our data processing areas from attack both physical and through electronic means. We believe our disaster recovery procedures are adequate.

Capital Management

Capital raising activities generally take place at Lyons Bancorp, Inc. while capital use other than dividend and interest payments is primarily related to the Bank’s business and regulatory needs. We work to closely integrate the capital needs of Lyons Bancorp, Inc. and the Bank so that capital movement between the two entities is both timely and appropriately sized. See “Management's Discussion and Analysis of Financial Condition and Results of Operations– Capital”

Banking Operations

Market Area

The Finger Lakes region offers many opportunities which fit within our business model. During June 2003, we opened our first location in Ontario County, New York by adding a banking office on Seneca Street in Geneva, New York. We relocated that office to our new facility at 399 Exchange Street in June of 2005. Geneva proper is one of the largest markets in our service area with a population of over 16,500 and bankable deposits of approximately $624 million. When we opened our branch, we became but the fourth bank to establish a presence in the city.

While opening our first banking office in Ontario County is important in its own right, being in Geneva has afforded us the opportunity to springboard into other markets in Ontario County. The Canandaigua market is strategically important to us, with a population of over 20,000 and bankable deposits of approximately $1.007 billion, it provides us with a gateway into the Rochester area. We opened a temporary office in Canandaigua in 2013 and built our permanent location in 2014.

In May of 2004 we opened our branch in Penn Yan, in Yates County, in a temporary storefront and moved into our permanent facility in January of 2005. In May 2010, we opened an office in Waterloo, Seneca County, in a temporary location, and moved into our permanent facility in December 2010.

In September of 2015, we opened our Perinton office, our first banking office in Monroe County.

In the Fall of 2017, we opened our first Auburn office in downtown. The following February, we opened the second office on the main retail strip on the east side of the City.

In August 2020, we opened our newest branch office in the Town of Farmington, in northern Ontario County. With the opening of the Farmington location, the Bank now operates sixteen banking offices within its primary market area, which is centered around Lyons, New York. The Bank’s primary market area now encompasses Wayne County and portions of Cayuga, Monroe, Onondaga, Ontario, Seneca and Yates Counties in New York State.

The following maps show the Bank’s primary market area:

Lending Activities

The principal lending activity of the Bank has been the origination for its own portfolio of adjustable and fixed-rate loans secured by various forms of collateral. The Bank also originates fixed rate residential mortgages, some of which it sells to third parties and retains the servicing rights. The value of the servicing rights associated with these sold mortgages was $2,700,000, and $2,600,000 as of December 31, 2020 and 2019, respectively.

The following tables set forth the composition of our loan portfolio, by type of loan at the dates indicated, the maturities of loans and fixed rate vs. variable rate:

Summary of Loan Portfolio

By Type

(In thousands)

Remaining Maturity of Selected Loans

At December 31, 2020    

Sensitivity of Loans to Changes in Interest Rates

(Dollars in thousands)

Asset Quality

The Bank maintains written loan policies that require certain underwriting, documentation, and credit standards to be met for the approval and funding of loans. Management has safeguards and procedures in place that track adherence to policies. In addition, independent third parties the Bank retains for loan review periodically sample the loan portfolio and report to Bank management and our Board of Directors any identified discrepancies. Generally, exceptions to policy, when made, are documented, justified, and approved by management. Lending authorities are recommended by management and approved by our Board of Directors. Management reports measures of both loan quality and loan portfolio growth on a regular basis to our Board.

Our allowance for loan losses represents management’s estimate of an amount adequate to provide for potential losses inherent in our loan portfolio. In its continuing evaluation of the allowance and its adequacy, management considers the Bank’s loan loss experience, the amount of past-due and nonperforming loans, current and anticipated economic conditions, underlying collateral values securing loans and other factors which affect the allowance for potential credit losses. Bank management monitors the adequacy of the allowance through the use of a model designed to comply with the requirements of the Office of the Comptroller of the Currency.

While it is the Bank’s policy to charge-off loans in the period in which a loss is considered probable, there are additional factors impacting potential future losses which cannot be quantified precisely or attributed to particular loans or classes of loans. These factors include such items as the general state of the economy and value of collateral. Management’s judgment as to the adequacy of the allowance is, therefore, necessarily approximate. The allowance is also subject to regulatory examinations as to adequacy, which may include reviews of the methodology used to arrive at the allowance and comparison of the allowance to peer institutions.

The commercial loan policy provides that the accrual of interest on commercial and real estate loans ceases when there is significant, undermining deterioration of the borrower’s financial position, or payment in full of principal or interest is not expected; this may result in the placement of a contractually performing loan into nonaccrual status. In addition, a loan with principal or interest that has been in default for a period of ninety (90) days or more may be placed in nonaccrual status, unless the asset is both well secured and in the process of immediate collection. An asset is “well secured” if it is secured by collateral in the form of liens on or pledges of real or personal property, or marketable securities, having a realizable value sufficient to discharge the debt (including accrued interest) in full, or, by the guarantee of a financially responsible party. An asset is “in the process of collection” if collection of the asset is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

Our consumer loan policy provides that accrual of interest on residential mortgages generally ceases whenever payment of principal or interest becomes 90 days delinquent. It also provides that consumer loans, whether secured or unsecured, are considered for charge-off to the allowance for loan loss when they reach 90 days delinquent.

The following tables present a summary of the “Allocation of Allowance for Loan Losses by Loan Type” and an “Analysis of Changes in Allowance for Loan Losses”:

Allocation of Allowance for Loan Losses

By Loan Type

(In thousands)

The allowance has been increasing over the past five years, with the majority of the growth in the allowance allocated to commercial loans. The general increase during 2020 reflects the unstable financial situation due to the Coronavirus Pandemic. The World Health Organization declared the outbreak as a global pandemic on March 11, 2020. The financial situation of the United States has since stabilized and is beginning to recover.

Analysis of Changes in Allowance for Loan Losses

(Dollars In thousands)

The provision for loan losses represents management’s estimate of the expense necessary to maintain the allowance for loan losses at an adequate level. The provision for loan and lease losses was $6.3 million for 2020 and $2.3 million for 2019. In 2020, the provision was higher than historical levels due to the financial uncertainties related to the Coronavirus Pandemic.

The level of future charge-offs is dependent upon a variety of factors such as national and local economic conditions, trends in various industries, underwriting characteristics, and conditions unique to each borrower. Given uncertainties surrounding these factors, it is difficult to estimate future losses.

The following tables summarize the Bank’s nonperforming loans by class over the periods indicated:

Nonperforming Loans

(Dollars in Thousands)

The difference between the interest income that would have been recorded if these loans had been paid in accordance with their original terms and the interest income that was recorded for the years ended December 31, 2020 and 2019, was $122,000 and $73,000 respectively.

Management reviews the loan portfolio continuously for evidence of potential problem loans. Potential problem loans are loans that are currently performing in accordance with contractual terms, but where known information about possible credit problems of the related borrowers causes management to have doubt as to the ability of such borrowers to comply with the present loan payment terms and may result in such loans becoming nonperforming at some time in the future. Management considers loans classified as Substandard, which continue to accrue interest, to be potential problem loans. Through our internal loan review function, we have identified 59 commercial relationships totaling approximately $13.5 million at December 31, 2020 that are classified as Substandard, and continued to accrue interest. We continue to monitor these relationships; however, we cannot predict the extent to which continued weak economic conditions or other factors may further impact borrowers. These loans remain in a performing status due to a variety of factors, including payment history, the value of collateral supporting the credits, and personal or government guarantees. These factors, when considered in the aggregate, give management reason to believe that the current risk exposure on these loans does not warrant accounting for these loans as nonperforming. However, these loans do exhibit certain risk factors, which have the potential to cause them to become nonperforming. Accordingly, management’s attention is focused on these credits, which are reviewed on at least a quarterly basis.

Past Due and Restructured Loans

(In Thousands)

Nonperforming loans (loans in nonaccrual status and loans past due 90 days or more and still accruing interest) were $3.3 million at December 31, 2020, and $5.1 million at December 31, 2019. A breakdown of nonperforming loans by portfolio segment is shown above.

Loans are considered modified in a troubled debt restructuring (TDR) when, due to a borrower’s financial difficulties, we make a concession(s) to the borrower that we would not otherwise consider. When modifications are provided for reasons other than as a result of the financial distress of the borrower, these loans are not classified as TDR’s or impaired. These modifications may include, among others, an extension of the term of the loan, and granting a period when interest-only payments can be made, with the principal payments made over the remaining term of the loan or at maturity.  TDRs of $2.1 million and $500,000 as of December 31, 2020 and 2019, respectively are included in the above table within nonaccrual loans. The TDR amounts at December 31, 2020 consist of three commercial relationships and a total of six loans. The TDR amount as of December 31, 2019 consists of one commercial relationship and one loan.

In general, we place a loan on nonaccrual status if principal or interest payments become 90 days or more past due and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Although in nonaccrual status, we may continue to receive payments on these loans. These payments are generally recorded as a reduction to principal and interest income is recorded only after principal recovery is reasonably assured. As of December 31, 2020, we were regularly receiving payments on approximately 31% of the loans categorized as nonaccrual.

The recorded investment in loans and leases that are considered impaired totaled $2.2 million at December 31, 2020 and $3.6 million at December 31, 2019. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Specific allowance on individually identified impaired loans that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs.

The average recorded investment in impaired loans was $2.8 million in 2020 and $3.9 million in 2019. At December 31, 2020, $3.3 million of impaired loans had specific allocations of $675,000 and $2.0 million had no specific allocation. At December 31, 2019, $5.1 million of impaired loans had specific allocations of $775,000 and $2.5 million had no specific allocations. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured.

Investment Activities

Our securities portfolio is comprised of interest-bearing notes, bonds and pass-through securities issued by the United States government and its direct and sponsored agencies, as well as state and local municipal obligations. Our available-for-sale portfolio provides a source of liquidity, collateral for repurchase agreements and public funds as well as being a means of diversifying our interest earning asset portfolio. While we generally intend to hold our investment portfolio assets until maturity, a significant portion of the portfolio is classified as available-for-sale. Securities so classified are accounted for at fair value with the unrealized appreciation and depreciation reported as a separate component of stockholders’ equity, net of income tax effects. Securities not classified as available-for-sale are recorded in the held to maturity category and accounted for at amortized cost. We invest in securities for the yield they produce and not to profit from trading the securities.

The securities portfolio also includes non-marketable equity securities that are carried at cost because they are not readily marketable or have no quoted market value.

The following tables summarize the fair values of the investment portfolio as of the dates indicated:

Investment Securities 

(In thousands)

All of our mortgage-backed securities are residential direct pass through securities or collateralized mortgage obligations issued or backed by government sponsored enterprises.

The fair value (Available–for-Sale), amortized cost (Held-to-Maturity), and weighted average yield of the combined investment portfolios of the Company and the Bank as of December 31, 2020, by final contractual maturity or repricing date, are as follows:

Investment Portfolio

(Dollars in thousands)

(1)    Average yields are stated on a tax equivalent basis.

(2)    Total does not include equity securities.

At December 31, 2020, there were no holdings of any one issuer, other than the U.S. Government sponsored entities, in an amount greater than 10% of the Company’s stockholders’ equity.

Sources of Funds

General. The major sources of our funds for lending and other investment purposes are deposits, scheduled principal repayments, prepayment of loans and mortgage-backed securities, maturities and calls of investment securities, equity capital investment, borrowings, and cash flows from operations. Scheduled loan principal repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and market conditions.

Deposits. We attract customer deposits principally from within our primary market area by offering a broad selection of deposit instruments, including demand deposit accounts, checking accounts, savings, money market deposit, term certificate accounts and individual retirement accounts. Deposit account terms vary according to the minimum balance required, the time period the funds must remain on deposit and the interest rate. All deposit accounts are insured by the Federal Deposit Insurance Corporation up to the maximum amount permitted by law.

The following table is a summary of our deposits for our last three fiscal years:

Deposits - Average Balances and Rates

(Dollars in thousands)

The maturity distribution of time deposits of $250,000 or more was:

Borrowings. To help fund our loan growth from time to time we obtain advances from the Federal Home Loan Bank of New York. The following table summarizes these borrowings as of December 31 for the years indicated:

Borrowings

(Dollars in thousands)

As of December 31, 2020, the Bank had $162.9 million and $42.3 million of availability from Federal Home Loan Bank of New York and the Federal Reserve Bank, respectively, subject to collateral availability. In addition, at December 31, 2020, the Bank had available unsecured lines of credit agreements with correspondent banks, permitting borrowings to a maximum of $40.0 million. There were no outstanding advances against those lines at December 31, 2020. The Bank may access funds through general markets such as national repurchase agreements. At December 31, 2020, the Bank had no national repurchase agreements.

The following tables present additional information concerning borrowings for the indicated years ended December 31:

We currently own one statutory trust company which we formed for the sole purpose of issuing trust preferred securities that are fully and unconditionally guaranteed by us. In each case, we issued junior subordinated debentures to the trusts, which, in turn, issued trust preferred securities to the respective trust investors in the same amount. The junior subordinated debentures are the principal asset of the trusts. The trust preferred securities are classified as long-term debt for the financial statements, but are included as Tier 1 capital for regulatory purposes. See “Management Discussion and Analysis of Financial Condition and Results of Operations -- Capital.”

In August 2004, we formed Lyons Capital Statutory Trust II, a Delaware statutory business trust, or Trust II. We issued $5.2 million of subordinated debentures to Trust II who issued $5.0 million in trust preferred securities to investors. The interest rate on this security, 3.03% at December 31, 2015, is variable, adjusting quarterly at three-month LIBOR plus 2.65%. The interest is payable quarterly. The trust preferred securities mature in August 2034, or may be redeemed at any time in the event that the deduction of related interest for federal income tax purposes is prohibited, treatment as Tier 1 capital is no longer permitted, or certain other contingencies arise.

Our subordinated debentures issued to Trust II also mature on August 23, 2034 and bear interest at the three-month LIBOR plus 2.65% (3.03% at December 31, 2015), payable quarterly. We have the option to defer interest payments from time to time for up to 20 consecutive quarterly periods without defaulting on the debentures. We also have the option to redeem the debentures in whole or in part, on a quarterly basis beginning on August 23, 2009, and the option to redeem the debentures in whole or in part, throughout the entire term of the debentures, within 90 days of one or more of the following events relating to the debentures: (a) the deduction of related interest for federal income tax purposes is prohibited, (b) treatment as Tier I capital is no longer permitted, or (c) certain other events occur. The redemption price, expressed as a percentage of the principal amount of the debentures being redeemed, is 100%.

If we elect to defer interest payments as described above on Trust II trust preferred securities, or if the debentures are in default, we are, among other things, prohibited from declaring or paying dividends.

On October 28, 2020, the Company completed the sale of approximately $16 million of subordinated promissory notes to accredited investors. The notes mature on December 31, 2027. The interest rate is fixed at 4.25% for the first five years, increases to 4.75% in the sixth year and increases again to 5.25% in the seventh year. The Company retains the right to redeem the notes, in whole or in part, any time on or after December 31, 2025. We have been using the proceeds for general corporate purposes to support organic growth of the Bank and intend to continue to do so, and also to fund possible acquisitions. The net proceeds of the sale, after deducting estimated offering expenses, were $15.7 million.

The sale of the notes was made in a private placement to accredited investors in reliance on the exemption from registration provided by Rule 506 of Regulation D under the Securities Act of 1933, as amended ("Securities Act").

For regulatory purposes, the subordinated promissory notes capital securities qualify as Tier I capital of the Company subject to a 25% of capital limitation under risk-based capital guidelines. The portion that exceeds the 25% of capital limitation qualifies as Tier II capital. At December 31, 2020, $14.7 million in subordinated promissory notes capital securities qualified as Tier I capital.

Legal Proceedings

Currently, we are not subject to any pending lawsuits in which claims for material monetary damages are asserted.

Competition

We face intense and increasing competition in making loans, attracting deposits and providing other financial products and services. The Bank competes with other financial institutions and service providers such as commercial banks, savings banks, savings and loan associations, credit unions, mortgage banking companies, finance companies, brokerage firms and mutual fund companies. Interest rates, both on loans and deposits, and prices of services are significant competitive factors among financial institutions generally. Important competitive factors, such as office location, types and quality of services and products, office hours, customer service, a local presence, community reputation and continuity of personnel, among others, are and continue to be a focus of the Bank.

Some of the largest banks in the Country have offices in our markets. These institutions have greater financial resources and lending limits, better name recognition, more locations, more advanced technology and more financial products to offer than we do and may offer various services we do not offer. In addition, these institutions may be able to better afford and make broader use of media advertising, support services and electronic technology that we may. To offset these competitive disadvantages, the Bank depends on its reputation as an independent and locally-owned community bank, its personal service, its greater community involvement and its ability to make credit and other business decisions quickly and locally.

Employees

As of June 30, 2021, we employed 228 persons, of which 215 were full time. The Bank provides a variety of employment benefits and considers its relationship with its employees to be good. We have no collective bargaining agreements with any employees.

Properties

The location of the sixteen banking offices and an operations center operated by the Bank and certain other information related to these offices is set forth below:

We consider all of these banking offices to be well located and suitably equipped to serve as banking facilities. In the opinion of management the properties are adequately covered by insurance.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist readers in understanding and evaluating the results of operations and financial condition of Lyons Bancorp, Inc., The Lyons National Bank and Lyons Realty Associates Corp. on a consolidated basis as of and for the period ended December 31, 2020. This discussion and analysis should be read in conjunction with our consolidated financial statements and the notes relating thereto appearing elsewhere in this offering circular.

Overview

Lyons Bancorp, Inc. is the holding company for The Lyons National Bank and its subsidiary, Lyons Realty Associates Corp. Lyons Bancorp, Inc.’s business is conducted through The Lyons National Bank, a federally chartered and regulated bank with sixteen full-service banking offices in Monroe, Onondaga, Ontario, Seneca, Wayne and Yates Counties in New York, an ATM network and Internet and telephone banking services. In addition, the Bank services customers in Cayuga County. The Bank's main office is located in Lyons, New York.

Our principal sources of revenue consist of income from commercial and residential real estate loans, including mortgage servicing fees, consumer loans made by the Bank and its subsidiary, investment securities held by us and the Bank and from a variety of deposit services offered by the Bank to its customers. We fund our operations through cash flows from operations, the Bank's deposits, maturing and called investment securities, the sale of investment securities, borrowings and capital raising transactions.

Results of Operations

Results of Operations For Years Ended December 31, 2020 and 2019

Summary of Performance

Net income was $10.3 million for 2020 compared to net income of $11.0 million for 2019, a decrease of $737,000, or 6.9% over the prior fiscal year. Diluted earnings per share were $3.12 for 2020, compared to $3.33 in 2019. The decline in earnings year over year was primarily due to the negative impact of the pandemic, prompting the Bank to increases the provision for loan loss.

Return on average assets was 0.78% in 2020, compared to 0.98% in 2019. Return on average equity was 10.47% in 2020, compared to 12.99% in 2019. Our dividend payout ratio was 39.2% in 2020, compared to 36.1% in 2019, while our average equity as a percentage of average assets was 7.43% in 2020, compared to 7.52% in 2019.

Average Balances and Interest Rates

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets, the resultant yields, and the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Average balances are derived from average daily balances. The yield on securities available-for-sale is included in investment securities and is calculated based on the historical amortized cost. All interest has been adjusted to a fully taxable equivalent amount using the federal statutory rate of 21%. The yields and rates are established by dividing income or expense dollars by the average balance of the asset or liability.

AVERAGE BALANCES AND INTEREST RATES

(Dollars in thousands)

YTD Ended December 31,