STATEN ISLAND, NY--(Marketwire - Oct 12, 2011) - VSB Bancorp, Inc. (
The $84,573 decrease in net income was due to an increase in the provision for loan losses of $75,000, a decrease in net interest income of $64,836, and a $33,370 decrease in non-interest income, partially offset by a decrease in the provision for income taxes of $71,284 and a decrease in non-interest expense of $17,349.
The $64,836 decrease in net interest income for the third quarter of 2011 occurred primarily because our interest income decreased by $103,930, while our cost of funds decreased by $39,094. The decline in interest income resulted from a $149,851 decrease in income from investment securities, due to a 57 basis point decrease in average yield, partially offset by a $2.0 million increase in average balance between the periods. Interest income from loans increased by $45,392 due to the collection of interest of $103,881 on a non-accrual loan, partially offset by a reversal of $40,438 of accrued but uncollected interest income on loans that we categorized as non-accrual in the third quarter and a 38 basis point decrease in average yield from the third quarter of 2010 to the third quarter of 2011. The decrease in the yield on loans was partially offset by a $3.0 million increase in the average balance of loans. The average balance of non-accrual loans increased by $1.3 million from the third quarter of 2010 to the third quarter of 2011, the balance of non-accrual loans for which we received interest and recognized it on a cash basis decreased by $2.4 million in that period. This shift in non-accrual loans was the principal cause to the 38 basis point drop in our average loan yield. Substantially all of the new non-accrual loans are secured by mortgages on real estate located on Staten Island.
Interest income from other interest earning assets (principally overnight investments) was relatively flat due to a $3.4 million decrease in average balance, partially offset by a 2 basis point increase in yield. Overall, average interest-earning assets increased by $1.6 million from the third quarter of 2010 to the third quarter of 2011.
The most significant component of the decrease in interest expense was a $23,950 decrease in interest on NOW accounts as the average cost declined by 19 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 $69.7 million, or 32.4% of total deposits in the third quarter of 2010, to $77.1 million, or 36.0% of total deposits in the third quarter of 2011. Average interest-bearing deposits decreased by $8.1 million and average non-interest bearing deposits increased by $7.4 million, resulting in an overall $756,232 decrease in average total deposits from the third quarter of 2010 to the third quarter of 2011.
The average yield on earning assets declined by 32 basis points while the average cost of funds declined by 7 basis points from the third quarter of 2010 to the third quarter of 2011. The reduction in the yield on assets was principally due to the 57 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 38 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 third 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 19 basis point drop in the cost of NOW account deposits. Our interest rate margin decreased by 25 basis points from 3.95% to 3.70% when comparing the third quarter of 2011 to the same quarter in 2010, and our interest rate spread also decreased by 25 basis points from 3.69% to 3.44%. 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 38 basis point decrease in the average yield on loans, our highest earning asset. 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 when market rates increase until the prime rate rises above 6%. Non-interest income decreased by $33,370 to $602,505, in the third quarter of 2011 compared to the same quarter in 2010, due primarily to a $26,472 reduction in service charges on deposits. Service charges on deposits consist mainly of insufficient fund fees, which are inherently volatile, and are based upon the number of items being presented for payment against insufficient funds.
Comparing the third quarter of 2011 with the same quarter in 2010, non-interest expense decreased by $17,349, and totaled $2.0 million for the third quarter of 2011. Non-interest expense decreased for various business reasons including a $50,500 decrease in FDIC and NYSBD assessments due to the reduction in the FDIC assessment rate, a $30,245 reduction in salaries and benefits, due to a slight reduction in staff, partially offset by a $44,932 increase in occupancy expenses due to remediation costs at a branch that flooded during Hurricane Irene and a $15,019 in other expenses due to increased costs.
For the first nine months of 2011, pre-tax income decreased to $2,362,843 from $2,583,447 for the first nine months of 2010, a decline of $220,604, or 8.5%. Net income for the nine months ended September 30, 2011 was $1,281,783, or basic net income of $0.71 per common share, as compared to a net income of $1,401,459, or basic net income of $0.79 per common share, for the nine months ended September 30, 2010. The $119,676 reduction in net income for the nine months ended September 30, 2011 was attributable principally to a $265,382 decrease in net interest income, a $25,559 decrease in non-interest income and a $20,000 increase in the provision for loan losses, partially offset by a $90,337 decrease in non-interest expenses. The decrease in non-interest expense of $90,337 was due primarily to a $110,000 decrease in FDIC and NYSBD assessments and a $73,229 decrease in legal expenses due to a lower level of collections and a recovery of legal fees previously expensed on a settled lawsuit, partially offset by a $57,764 increase in occupancy expenses due primarily to remediation costs at a branch that flooded during Hurricane Irene and a $23,551 increase in professional fees due to higher costs. Income tax expense decreased $100,928 due to the $220,604 decrease in pre-tax income. The net interest margin decreased by 20 basis points from the nine months ended September 30, 2011 to 3.81% from 4.01%, in the same period in 2010. Correspondingly, the spread decreased by 18 points from 3.74% to 3.56% between the periods. Average interest earning assets, for the nine months ending September 30, 2011, increased by $1.9 million, or 0.8%, from the same period in 2010.
Total assets increased to $245.4 million at September 30, 2011, an increase of $10.1 million, or 4.3%, from December 31, 2010. The significant components of this increase were an $18.4 million increase in cash and other liquid assets and a $543,300 increase in loans, net, partially offset by an $8.3 million decline in investment securities. Total deposits, including escrow deposits, increased to $215.9 million, an increase of $8.5 million, or 4.1%. We had increases in demand and checking deposits of $11.8 million, $2.1 million in savings deposits, a $1.1 million increase in time deposits and $446,903 million in money market accounts, partially offset by a decrease in NOW accounts of $7.2 million from year end 2010. The Bancorp's Tier 1 capital ratio was 10.56% at September 30, 2011.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "We reported lower net income in the third quarter of 2011 due to the weak economic environment and an increase in our non-performing loans of $1.6 million in this quarter. The increase in non-performing and delinquent loans and the low interest rate environment have had a negative effect on earnings. We are aggressively collecting these loans and we continue to work toward a positive outcome on our past due loans." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "Despite the weak real estate market and the economy in general, we paid our sixteenth consecutive dividend to our stockholders and announced our third stock repurchase plan. Our ROA of 0.62% and our ROE of 5.50% for the third quarter of 2011 compare favorably to our peers. Our book value per share stands at $15.15. Victory State Bank continues to be the premier choice for businesses and professionals on Staten Island. Our personal service and our philosophy of not 'nickeling and diming our customers for fees' creates an unsurpassed business model."
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 $27.6 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 | ||||||||||||
| September 30, 2011 | ||||||||||||
| (unaudited) | ||||||||||||
| September 30, | December 31, | |||||||||||
| 2011 | 2010 | |||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 47,214,664 | $ | 28,764,987 | ||||||||
| Investment securities, available for sale | 113,007,622 | 121,307,907 | ||||||||||
| Loans receivable | 82,116,879 | 81,538,224 | ||||||||||
| Allowance for loan loss | (1,312,575 | ) | (1,277,220 | ) | ||||||||
| Loans receivable, net | 80,804,304 | 80,261,004 | ||||||||||
| Bank premises and equipment, net | 2,395,254 | 2,732,229 | ||||||||||
| Accrued interest receivable | 594,314 | 673,967 | ||||||||||
| Other assets | 1,359,936 | 1,513,605 | ||||||||||
| Total assets | $ | 245,376,094 | $ | 235,253,699 | ||||||||
| Liabilities and stockholders' equity: | ||||||||||||
| Liabilities: | ||||||||||||
| Deposits: | ||||||||||||
| Demand and checking | $ | 78,222,827 | $ | 66,407,225 | ||||||||
| NOW | 27,965,016 | 35,138,867 | ||||||||||
| Money market | 27,504,535 | 27,057,632 | ||||||||||
| Savings | 17,063,848 | 14,938,440 | ||||||||||
| Time | 64,779,169 | 63,644,963 | ||||||||||
| Total Deposits | 215,535,395 | 207,187,127 | ||||||||||
| Escrow deposits | 327,141 | 219,530 | ||||||||||
| Accounts payable and accrued expenses | 1,871,918 | 1,802,186 | ||||||||||
| Total liabilities | 217,734,454 | 209,208,843 | ||||||||||
| Stockholders' equity: | ||||||||||||
| Common stock, ($.0001 par value, 10,000,000 shares authorized 1,989,509 issued, 1,824,909 outstanding at September 30, 2011 and 1,825,009 outstanding at December 31, 2010) | 199 | 199 | ||||||||||
| Additional paid in capital | 9,270,285 | 9,249,600 | ||||||||||
| Retained earnings | 18,519,067 | 17,563,435 | ||||||||||
| Treasury stock, at cost (164,600 shares at September 30, 2011 and 164,500 at December 31, 2010) | (1,644,942 | ) | (1,643,797 | ) | ||||||||
| Unearned ESOP shares | (436,785 | ) | (563,594 | ) | ||||||||
| Accumulated other comprehensive gain, net of taxes of $1,630,822 and $1,213,545, respectively | 1,933,816 | 1,439,013 | ||||||||||
| Total stockholders' equity | 27,641,640 | 26,044,856 | ||||||||||
| Total liabilities and stockholders' equity | $ | 245,376,094 | $ | 235,253,699 | ||||||||
| VSB Bancorp, Inc. | ||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||
| September 30, 2011 | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Three months | Three months | Nine months | Nine months | |||||||||||||||||
| ended | ended | ended | ended | |||||||||||||||||
| Sept. 30, 2011 | Sept. 30, 2010 | Sept. 30, 2011 | Sept. 30, 2010 | |||||||||||||||||
| Interest and dividend income: | ||||||||||||||||||||
| Loans receivable | $ | 1,537,598 | $ | 1,492,206 | $ | 4,357,917 | $ | 4,333,693 | ||||||||||||
| Investment securities | 939,250 | 1,089,101 | 2,949,689 | 3,375,355 | ||||||||||||||||
| Other interest earning assets | 17,238 | 16,709 | 41,979 | 39,599 | ||||||||||||||||
| Total interest income | 2,494,086 | 2,598,016 | 7,349,585 | 7,748,647 | ||||||||||||||||
| Interest expense: | ||||||||||||||||||||
| NOW | 18,965 | 42,915 | 75,237 | 123,515 | ||||||||||||||||
| Money market | 59,240 | 58,250 | 179,720 | 183,754 | ||||||||||||||||
| Savings | 11,508 | 11,978 | 37,482 | 35,567 | ||||||||||||||||
| Time | 120,669 | 136,333 | 361,060 | 444,343 | ||||||||||||||||
| Total interest expense | 210,382 | 249,476 | 653,499 | 787,179 | ||||||||||||||||
| Net interest income | 2,283,704 | 2,348,540 | 6,696,086 | 6,961,468 | ||||||||||||||||
| Provision for loan loss | 90,000 | 15,000 | 145,000 | 125,000 | ||||||||||||||||
| Net interest income after provision for loan loss | 2,193,704 | 2,333,540 | 6,551,086 | 6,836,468 | ||||||||||||||||
| Non-interest income: | ||||||||||||||||||||
| Loan fees | 9,057 | 18,383 | 49,663 | 37,238 | ||||||||||||||||
| Service charges on deposits | 533,256 | 559,728 | 1,591,641 | 1,651,448 | ||||||||||||||||
| Net rental income | 10,795 | 14,950 | 32,513 | 41,199 | ||||||||||||||||
| Other income | 49,397 | 42,814 | 159,684 | 129,175 | ||||||||||||||||
| Total non-interest income | 602,505 | 635,875 | 1,833,501 | 1,859,060 | ||||||||||||||||
| Non-interest expenses: | ||||||||||||||||||||
| Salaries and benefits | 988,260 | 1,018,505 | 2,957,098 | 2,972,763 | ||||||||||||||||
| Occupancy expenses | 403,650 | 358,718 | 1,141,878 | 1,084,114 | ||||||||||||||||
| Legal expense | 57,035 | 53,443 | 156,995 | 230,224 | ||||||||||||||||
| Professional fees | 65,900 | 68,000 | 218,401 | 194,850 | ||||||||||||||||
| Computer expense | 64,298 | 66,020 | 202,867 | 198,572 | ||||||||||||||||
| Director fees | 63,150 | 59,475 | 188,525 | 179,000 | ||||||||||||||||
| FDIC and NYSBD assessments | 54,500 | 105,000 | 194,000 | 304,000 | ||||||||||||||||
| Other expenses | 320,883 | 305,864 | 961,980 | 948,558 | ||||||||||||||||
| Total non-interest expenses | 2,017,676 | 2,035,025 | 6,021,744 | 6,112,081 | ||||||||||||||||
| Income before income taxes | 778,533 | 934,390 | 2,362,843 | 2,583,447 | ||||||||||||||||
| Provision (benefit) for income taxes: | ||||||||||||||||||||
| Current | 421,989 | 453,982 | 1,402,370 | 1,241,092 | ||||||||||||||||
| Deferred | (65,744 | ) | (26,453 | ) | (321,310 | ) | (59,104 | ) | ||||||||||||
| Total provision for income taxes | 356,245 | 427,529 | 1,081,060 | 1,181,988 | ||||||||||||||||
| Net income | $ | 422,288 | $ | 506,861 | $ | 1,281,783 | $ | 1,401,459 | ||||||||||||
| Basic income per common share | $ | 0.23 | $ | 0.28 | $ | 0.71 | $ | 0.79 | ||||||||||||
| Diluted net income per share | $ | 0.23 | $ | 0.28 | $ | 0.71 | $ | 0.79 | ||||||||||||
| Book value per common share | $ | 15.15 | $ | 14.38 | $ | 15.15 | $ | 14.38 | ||||||||||||
Contact Information:
Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100