STATEN ISLAND, NY--(Marketwired - Apr 15, 2015) - VSB Bancorp, Inc. (
VSB Bancorp, Inc. is implementing a strategy to increase interest income while not taking excessive interest rate risk in the event that market interest rates increase. This strategy comprises a number of components. We have redeployed a portion of our overnight and short term investments into higher yielding securities investments. We are also aggressively seeking to increase our loan portfolio through a combination of outreach efforts in our community, hiring new loan business development officers to produce more loans outside of the Staten Island market, seeking prudent loans through high quality mortgage brokers, and contacting other banks to seek to acquire participating interests in loans that the other banks originate.
The $6,620 increase in net income was due to an increase in net interest income of $65,876 and a decrease in the provision for income taxes of $24,577, partially offset by an increase in non-interest expenses of $62,779, and an increase in the provision for loan loss of $20,000.
The $65,876 increase in net interest income for the first quarter of 2015 occurred primarily because our interest income increased by $49,140, while our cost of funds decreased by $16,736. The rise in interest income resulted from a $55,168 increase in income from investment securities, due to a $28.8 million increase in average balance between the periods, partially offset by a 23 basis point decrease in yield between the periods, as new securities were purchased at market rates at or below the rates on securities repaid or matured. The rise in interest income was also a result of a $17,042 increase in interest income from loans principally due to a $4.9 million increase in the average balance of loans, partially offset by a 45 basis point decrease in average yield from the first quarter of 2014 to the first quarter of 2015, as we have booked new loans at lower rates due to the more competitive environment.
Interest income from other interest earning assets (principally overnight investments) decreased by $23,070 due to a $41.9 million decrease in the average balance. Overall, average interest-earning assets decreased by $8.2 million from the first quarter of 2014 to the first quarter of 2015.
The decrease in interest expense was principally due to a $26,726 decrease in interest on time accounts, as the average balance between periods decreased by $11.4 million, partially offset by the average cost decrease of 8 basis points. This decrease was partially offset by a $14,875 increase in the cost of money market accounts, due to a 3 basis point increase in average cost and an $8.6 million increase in the average balance. We also experienced a $3,292 decrease in interest on NOW account accounts, as the average balance between periods decreased by $2.0 million, partially offset by the 3 basis point drop in the average cost. Average demand deposits, an interest free source of funds for us to invest, increased $181,317 from the first quarter of 2014, representing approximately 37% of average total deposits for the first quarter of 2015. Average interest-bearing deposits decreased by $4.4 million, resulting in an overall $4.3 million decrease in average total deposits from the first quarter of 2014 to the first quarter of 2015.
The average yield on earning assets rose by 14 basis points while the average cost of funds declined by 3 basis points. The increase in the yield on assets was principally due to the change in asset mix from other interest earning assets to loans and investment securities. The decline in the cost of funds was driven principally by the 8 basis point drop in the cost of time deposits, and the 3 basis point drop in the cost of NOW deposits, partially offset by the 3 basis point increase in the cost of money market deposits. Our interest rate margin increased by 15 basis point from 2.75% to 2.90% when comparing the first quarter of 2015 to the same quarter in 2014, while our interest rate spread increased by 17 basis points from 2.56% to 2.73%. The spread and margin both increased because of the combined effect of the rise in earnings we were able to obtain on the average balance of our loans and investment securities and the decreased average balance of low yielding other interest-earning assets, partially offset by the adverse effect of the non-receipt of interest received on non-performing loans. These increases were complemented by corresponding declines in the cost of deposits because the rates we paid on deposits were low due to low markets rates.
Non-interest income was relatively stable at $627,098 the first quarter of 2015, compared to $628,152 in the same quarter in 2014. The stability was achieved through the $36,642 increase in other income due to the purchase of $5 million in Bank Owned Life Insurance (BOLI) in July 2014. This was partially offset by a $6,708 reduction in loan fees as we reversed late fees on a loan that went non-accrual and a $24,385 drop in service charges on deposits, which consist mainly of fees on items being presented for payment against insufficient funds, which are inherently volatile.
Comparing the first quarter of 2015 with the same quarter in 2014, non-interest expense increased by $62,779, totaling $2.1 million for the first quarter of 2015. Non-interest expense increased for various business reasons including an $88,437 increase in salary and benefit costs due to a higher level of staff and a $16,686 increase in computer expense due to the addition of new software. These increases were partially offset by (i) a $17,357 decrease in occupancy expenses due to reduced equipment repair and maintenance and depreciation expense on FF&E; (ii) a $13,305 decrease in legal fees due to the deregistration of our common stock from the SEC in March 2014; and (iii) a $6,889 decrease in professional fees also due to the deregistration of our common stock in 2014.
Total assets increased to $288.8 million at March 31, 2015, an increase of $7.8 million, or 2.8%, from December 31, 2014. The largest component of this increase was a $27.0 million increase in loans, partially offset by a $7.5 million decrease in investment securities and an $11.3 million decrease in cash and other liquid assets. Our non-performing loans increased from $4.6 million at December 31, 2014 to $4.8 million at March 31, 2015, due primarily to two past maturity loans (but for which the borrowers have continued to pay interest at the note rate) that are expected to be renewed or paid off in the second quarter of 2015. We also sold a $499,000 non-performing loan in January 2015 on which we recovered the book balance, disbursements and some interest. Total deposits, including escrow deposits, increased to $258.8 million, an increase of $7.4 million, or 2.9%. The increase was primarily attributable to increases from year end 2014 of $6.1 million in NOW accounts, $3.9 million in money market accounts and $2.2 million in time deposits. These increases were partially offset by decreases in demand and checking deposits of $4.7 million. Our total stockholders' equity increased by $284,635 as the growth of retained earnings, the unrealized appreciation of our available for sale portfolio and the amortization of our ESOP loan were partially offset by an increase in treasury shares due to the repurchase of 3,400 shares of common stock in our announced third stock repurchase program. VSB Bancorp's Tier 1 capital ratio was 9.88% at March 31, 2015.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "Our loan portfolio showed significant growth in the first quarter of 2015 and now stands at the highest level in our history. While this increase necessitated a corresponding increase in our loan allowance, we have been able to control non-interest expenses even with the addition of new staff." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "We laid the foundation for our loan growth in 2014 and we are now seeing those benefits. We paid our thirtieth consecutive dividend to our stockholders and our book value per share rose to $15.54. We continue to implement our philosophy of providing the best in customer service."
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 $28.8 million primarily through the retention of earnings. The Bank operates five full service locations in Staten Island: the main office in Great Kills, and branches on Forest Avenue (West Brighton), Hyatt Street (St. George), Hylan Boulevard (Dongan Hills) and on Bay Street (Rosebank).
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to adverse changes in local, regional or national economic conditions, fluctuations in market interest rates, changes in laws or government regulations, weaknesses of other financial institutions, changes in customer preferences, and changes in competition within our market area. When used in this release or in any other written or oral statements by the Company or its directors, officers or employees, words or phrases such as "will result in," "management expects that," "will continue," "is anticipated," "estimate," "projected," or similar expressions, and other terms used to describe future events, are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date of the statement. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of protecting the Company under the PSLRA's safe harbor provisions.
|VSB Bancorp, Inc.|
|Consolidated Statements of Financial Condition|
|March 31, 2015|
|March 31,||December 31,|
|Cash and cash equivalents||$||6,786,867||$||18,129,166|
|Investment securities, available for sale||60,767,362||64,759,836|
|Investment securities, held to maturity||118,401,294||121,929,954|
|Allowance for loan loss||(1,127,363||)||(958,966||)|
|Loans receivable, net||93,335,341||66,473,809|
|Bank premises and equipment, net||1,768,373||1,839,292|
|Accrued interest receivable||676,307||668,631|
|Bank owned life insurance||5,101,035||5,068,719|
|Liabilities and stockholders' equity:|
|Demand and checking||$||91,485,200||$||96,170,194|
|Accounts payable and accrued expenses||1,252,105||1,147,302|
|Common stock, ($.0001 par value, 10,000,000 shares authorized 2,078,509 issued, 1,853,445 outstanding at March 31, 2015 and 1,856,845 at December 31, 2014)||
|Additional paid in capital||10,514,659||10,487,210|
|Treasury stock, at cost (225,064 shares at March 31, 2015 and 221,664 at December 31, 2014)||
|Unearned ESOP shares||(909,469||)||(934,500||)|
|Accumulated other comprehensive gain, net of taxes of $413,635 and $353,216, respectively||
|Total stockholders' equity||28,799,125||28,514,490|
|Total liabilities and stockholders'equity||$||
|VSB Bancorp, Inc.|
|Consolidated Statements of Operations|
|March 31, 2015|
|Three months||Three months|
|March 31, 2015||March 31, 2014|
|Interest and dividend income:|
|Other interest earning assets||7,373||30,443|
|Total interest income||2,193,375||2,144,235|
|Total interest expense||171,377||188,113|
|Net interest income||2,021,998||1,956,122|
|Provision for loan loss||160,000||140,000|
|Net interest income after provision for loan loss||1,861,998||1,816,122|
|Service charges on deposits||528,521||552,906|
|Net rental income||3,839||10,442|
|Total non-interest income||627,098||628,152|
|Salaries and benefits||1,024,502||936,065|
|FDIC and NYSBD assessments||66,000||64,500|
|Total non-interest expenses||2,055,957||1,993,178|
|Income before income taxes||433,139||451,096|
|Provision (benefit) for income taxes:|
|Total provision for income taxes||181,794||206,371|
|Basic income per common share||$||0.14||$||0.14|
|Diluted net income per share||$||0.14||$||0.14|
|Book value per common share||$||15.54||$||15.59|
Ralph M. Branca
President & CEO