STATEN ISLAND, NY--(Marketwire - Jul 13, 2011) - VSB Bancorp, Inc. (
The $34,672 decrease in net income was due to a decrease in net interest income of $163,448, partially offset by a decrease in non-interest expense of $102,662 and a decrease in the provision for income taxes of $29,332.
The $163,448 decrease in net interest income for the second quarter of 2011 occurred primarily because our interest income decreased by $211,389, while our cost of funds decreased by $47,941. The decline in interest income resulted from a $126,145 decrease in income from investment securities, due to a 63 basis point decrease in average yield, partially offset by a $6.1 million increase in average balance between the periods. Interest income from loans also decreased by $85,164 due to a 66 basis point decrease in average yield from the second quarter of 2010 to the second quarter of 2011. The decrease in the yield on loans was partially offset by a $2.7 million increase in the average balance of loans. Although the average balance of non-accrual loans decreased by $372,956 from the second quarter of 2010 to the second quarter of 2011, the balance of non-accrual loans for which we received interest and recognized it on a cash basis decreased by $2.8 million in that period, while the balance of non-accrual loans for which we did not receive interest increased by $2.5 million in the second quarter of 2011. This shift in non-accrual loans was a major contributor to the 66 basis point drop in our average loan yield. Substantially all of the new non-accrual loans are secured by mortgages on real estate located in Staten Island.
Interest income from other interest earning assets (principally overnight investments) was relatively flat due to a $6.9 million decrease in average balance, partially offset by a 3 basis point increase in yield. Overall, average interest-earning assets increased by $1.9 million from the second quarter of 2010 to the second quarter of 2011.
The most significant component of the decrease in interest expense was a $29,008 decrease in interest on time deposits as the average cost declined by 15 basis points due to a continuation of low market interest rates. Average demand deposits, an interest free source of funds for us to invest, increased from 31.6% of total deposits in the second quarter of 2010, to 35.3% of total deposits in the second quarter of 2011. Average interest-bearing deposits decreased by $8.4 million and average non-interest bearing deposits increased by $7.6 million, resulting in an overall $868,844 decrease in average total deposits from the second quarter of 2010 to the second quarter of 2011.
The average yield on earning assets declined by 39 basis points while the average cost of funds declined by 10 basis points from the second quarter of 2010 to the second quarter of 2011. The reduction in the yield on assets was principally due to the 63 basis point drop in the yield on investment securities, as new securities were purchased at market rates significantly below the rates we had been earning on securities repaid or matured, and a 66 basis point drop in the yield on loans. The increase in non-accrual loans that were not paying interest on a cash basis during the second quarter of 2011 reduced interest income and reduced our reported average loan yield.
The decline in the cost of funds was driven principally by the 15 basis point drop in the cost of time deposits. Our interest rate margin decreased by 30 basis points from 3.99% to 3.69% when comparing the second quarter of 2011 to the same quarter in 2010, while our interest rate spread decreased by 29 basis points from 3.72% to 3.43%. These declines resulted when we were required to reinvest the proceeds from payments on investment securities at lower rates because of the continuation of low market interest rates. The declines also resulted from the 66 basis point decrease in the average yield on loans, our highest earning asset. The margin decreased more than the spread because it reflects the effect of non-interest bearing funding sources such as checking accounts and capital, which are less valuable in lower interest rate environments because they fund interest-earning assets with lower average yields. Interest rate floors on our loans have helped to stabilize interest income from the loan portfolio, but these floors also have the effect of limiting increases in our income as market rates increase until the prime rate rises above 6%. Non-interest income increased by $1,782 to $623,293 in the second quarter of 2011 compared to the same quarter in 2010.
Comparing the second quarter of 2011 with the same quarter in 2010, non-interest expense decreased by $102,662, totaling $2.0 million for the second quarter of 2011. Non-interest expense decreased for various business reasons including a $52,286 reduction in legal fees, due to a lower level of collections and a recovery of legal fees previously expensed on a settled lawsuit, a $59,500 decrease in FDIC and NYSBD assessments due to the reduction in the FDIC assessment rate, partially offset by the $7,650 increase in computer expenses due to a one-time conversion charge.
For the first six months of 2011, pre-tax income decreased to $1,584,310 from $1,649,057 for the first six months of 2010, a decline of $64,747, or 3.9%. Net income for the six months ended June 30, 2011 was $859,495, or basic net income of $0.48 per common share, as compared to a net income of $894,598, or basic net income of $0.51 per common share, for the six months ended June 30, 2010. The $35,103 reduction in net income for the six months ended June 30, 2011 was attributable principally to a $200,546 decrease in net interest income, partially offset by a $55,000 reduction in the provision for loan losses and a $72,988 decrease in non-interest expenses. The decrease in non-interest expense of $72,988 was due primarily to a $76,821 decrease in legal expenses due to a lower level of collections and a recovery of legal fees previously expensed on a settled lawsuit, and a $59,500 decrease in FDIC and NYSBD assessments partially offset by a $25,651 increase in professional fees due to higher costs. Income tax expense decreased $29,644 due to the $64,747 decrease in pre-tax income. The net interest margin decreased by 22 basis points from the six months ended June 30, 2011 to 3.82% from 4.04%, in the same period in 2010. Average interest earning assets, for the six months ending June 30, 2011, increased by $2.1 million, or 0.9%, from the same period in 2010.
Total assets increased to $244.9 million at June 30, 2011, an increase of $9.7 million, or 4.1%, from December 31, 2010. The significant components of this increase were a $9.9 million increase in cash and other liquid assets and a $1.3 million increase in loans, net, partially offset by a $1.0 million decline in investment securities. Total deposits, including escrow deposits, increased to $216.1 million, an increase of $8.6 million, or 4.2%. We had increases in demand and checking deposits of $8.8 million, $2.5 million in savings deposits and $1.9 million in money market accounts, partially offset by a decrease in NOW accounts of $4.0 million and a $559,653 decrease in time deposits from year end 2010. The Bancorp's Tier 1 capital ratio was 10.48% at June 30, 2011.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "The second quarter of 2011 demonstrated that the general economic recovery appears to be slowing due to increased oil prices and high unemployment. Our non-performing loans increased by $2.5 million in this quarter, but we are working toward a positive resolution with two of the largest borrowers. Our interest rate margin declined, mostly due to the increase in non-performing loans." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "We have encountered some obstacles in this quarter but we have a plan to overcome these issues. We paid our fifteenth consecutive dividend to our stockholders. Our ROA of 0.71% and our ROE of 6.42% for the second quarter of 2011 compare favorably to our peers. Our book value per share stands at $14.81. Our philosophy of providing the highest quality personal service without subjecting our customers to excess service charges has made Victory the premier choice for businesses and professionals on Staten Island."
VSB Bancorp, Inc. is the one-bank holding company for Victory State Bank. Victory State Bank, a Staten Island based commercial bank, which commenced operations on November 17, 1997. The Bank's initial capitalization of $7.0 million was primarily raised in the Staten Island community. The Bancorp's total equity has increased to $27.0 million primarily through the retention of earnings. The Bank operates five full service locations in Staten Island: the main office in Great Kills, and branches on Forest Avenue (West Brighton), Hyatt Street (St. George), Hylan Boulevard (Dongan Hills) and on Bay Street (Rosebank).
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to adverse changes in local, regional or national economic conditions, fluctuations in market interest rates, changes in laws or government regulations, weaknesses of other financial institutions, changes in customer preferences, and changes in competition within our market area. When used in this release or in any other written or oral statements by the Company or its directors, officers or employees, words or phrases such as "will result in," "management expects that," "will continue," "is anticipated," "estimate," "projected," or similar expressions, and other terms used to describe future events, are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date of the statement. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of protecting the Company under the PSLRA's safe harbor provisions.
VSB Bancorp, Inc.
Consolidated Statements of Financial Condition
June 30, 2011
(unaudited)
June 30, December 31,
2011 2010
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Assets:
Cash and cash equivalents $ 38,622,272 $ 28,764,987
Investment securities, available for sale 120,282,630 121,307,907
Loans receivable 82,727,855 81,538,224
Allowance for loan loss (1,192,630) (1,277,220)
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Loans receivable, net 81,535,225 80,261,004
Bank premises and equipment, net 2,518,610 2,732,229
Accrued interest receivable 627,905 673,967
Other assets 1,319,457 1,513,605
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Total assets $ 244,906,099 $ 235,253,699
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Liabilities and stockholders' equity:
Liabilities:
Deposits:
Demand and checking $ 75,204,955 $ 66,407,225
NOW 31,092,654 35,138,867
Money market 28,978,292 27,057,632
Savings 17,482,082 14,938,440
Time 63,085,310 63,644,963
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Total Deposits 215,843,293 207,187,127
Escrow deposits 207,219 219,530
Accounts payable and accrued expenses 1,824,726 1,802,186
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Total liabilities 217,875,238 209,208,843
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Stockholders' equity:
Common stock, ($.0001 par value, 10,000,000
shares authorized 1,989,509 issued,
1,825,009 outstanding at June 30, 2011
and December 31, 2010) 199 199
Additional paid in capital 9,265,716 9,249,600
Retained earnings 18,205,496 17,563,435
Treasury stock, at cost (164,500 shares at
June 30, 2011 and December 31, 2010) (1,643,797) (1,643,797)
Unearned ESOP shares (479,055) (563,594)
Accumulated other comprehensive gain, net
of taxes of $1,418,716 and $1,213,545,
respectively 1,682,302 1,439,013
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Total stockholders' equity 27,030,861 26,044,856
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Total liabilities and stockholders'
equity $ 244,906,099 $ 235,253,699
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VSB Bancorp, Inc.
Consolidated Statements of Operations
June 30, 2011
(unaudited)
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
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Interest and dividend
income:
Loans receivable $ 1,366,027 $ 1,451,191 $ 2,820,319 $ 2,841,487
Investment securities 997,887 1,124,032 2,010,439 2,286,254
Other interest earning
assets 13,603 13,683 24,741 22,890
----------- ------------ ----------- -----------
Total interest
income 2,377,517 2,588,906 4,855,499 5,150,631
Interest expense:
NOW 23,183 41,348 56,272 80,600
Money market 61,101 63,018 120,480 125,504
Savings 13,278 12,129 25,974 23,589
Time 118,885 147,893 240,391 308,010
----------- ------------ ----------- -----------
Total interest
expense 216,447 264,388 443,117 537,703
Net interest income 2,161,070 2,324,518 4,412,382 4,612,928
Provision for loan loss 25,000 20,000 55,000 110,000
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Net interest income
after provision
for loan loss 2,136,070 2,304,518 4,357,382 4,502,928
Non-interest income:
Loan fees 13,036 16,551 40,606 18,855
Service charges on
deposits 536,148 551,019 1,058,385 1,091,720
Net rental income 10,105 14,266 21,718 26,249
Other income 64,004 39,675 110,287 86,361
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Total non-interest
income 623,293 621,511 1,230,996 1,223,185
Non-interest expenses:
Salaries and benefits 988,835 990,642 1,968,838 1,954,258
Occupancy expenses 361,665 361,606 738,228 725,396
Legal expense 34,974 87,260 99,960 176,781
Professional fees 72,050 60,650 152,501 126,850
Computer expense 73,247 65,597 138,569 132,552
Director fees 62,925 60,575 125,375 119,525
FDIC and NYSBD
assessments 45,500 105,000 139,500 199,000
Other expenses 331,822 342,350 641,097 642,694
----------- ------------ ----------- -----------
Total non-interest
expenses 1,971,018 2,073,680 4,004,068 4,077,056
Income before
income taxes 788,345 852,349 1,584,310 1,649,057
----------- ------------ ----------- -----------
Provision (benefit) for
income taxes:
Current 565,691 344,800 980,381 787,110
Deferred (205,050) 45,173 (255,566) (32,651)
----------- ------------ ----------- -----------
Total provision
for income taxes 360,641 389,973 724,815 754,459
Net income $ 427,704 $ 462,376 $ 859,495 $ 894,598
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Basic income per common
share $ 0.24 $ 0.26 $ 0.48 $ 0.51
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Diluted net income per
share $ 0.24 $ 0.26 $ 0.48 $ 0.51
=========== ============ =========== ===========
Book value per common
share $ 14.81 $ 14.08 $ 14.81 $ 14.08
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Contact Information:
Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100