Source: Borer Financial Communications

VSB Bancorp, Inc. First Quarter 2015 Results of Operations

STATEN ISLAND, NY--(Marketwired - Apr 15, 2015) - VSB Bancorp, Inc. (OTCQX: VSBN) reported net income of $251,345 for the first quarter of 2015, a slight increase of $6,620, or 2.7%, from the first quarter of 2014. The following unaudited figures were released today. Pre-tax income was $433,139 in the first quarter of 2015, compared to $451,096 for the first quarter of 2014. Net income for the quarter was $251,345, or basic income of $0.14 per common share, compared to a net income of $244,725, or $0.14 basic income per common share, for the quarter ended March 31, 2014. Return on average assets increased from 0.31% in the first quarter of 2014 to 0.37% in the first quarter of 2015, while return on average equity increased from 3.23% to 3.64%.

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).


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,  
    2015     2014  
  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  
  Loans receivable     94,462,704       67,432,775  
    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  
  Other assets     2,010,876       2,169,514  
        Total assets   $ 288,847,455     $ 281,038,921  
Liabilities and stockholders' equity:                
    Demand and checking   $ 91,485,200     $ 96,170,194  
    NOW     33,353,084       27,240,106  
    Money market     49,195,023       45,245,094  
    Savings     24,257,881       24,604,737  
    Time     60,088,947       57,908,195  
      Total Deposits     258,380,135       251,168,326  
  Escrow deposits     416,090       208,803  
  Accounts payable and accrued expenses     1,252,105       1,147,302  
        Total liabilities     260,048,330       252,524,431  
Stockholders' equity:                
  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  
  Retained earnings     20,951,492       20,806,715  
  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  
    ended     ended  
    March 31, 2015     March 31, 2014  
Interest and dividend income:                
  Loans receivable   $ 1,279,882     $ 1,262,840  
  Investment securities     906,120       850,952  
  Other interest earning assets     7,373       30,443  
      Total interest income     2,193,375       2,144,235  
Interest expense:                
  NOW     10,476       13,768  
  Money market     71,272       56,397  
  Savings     23,713       26,076  
  Time     65,916       91,872  
      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  
Non-interest income:                
  Loan fees     10,666       17,374  
  Service charges on deposits     528,521       552,906  
  Net rental income     3,839       10,442  
  Other income     84,072       47,430  
      Total non-interest income     627,098       628,152  
Non-interest expenses:                
  Salaries and benefits     1,024,502       936,065  
  Occupancy expenses     342,956       360,313  
  Professional fees     81,759       101,217  
  Legal expenses     94,328       95,064  
  Computer expense     94,842       78,156  
  Director fees     62,475       65,300  
  FDIC and NYSBD assessments     66,000       64,500  
  Other expenses     289,095       292,563  
      Total non-interest expenses     2,055,957       1,993,178  
        Income before income taxes     433,139       451,096  
Provision (benefit) for income taxes:                
  Current     249,586       244,929  
  Deferred     (67,792 )     (38,558 )
      Total provision for income taxes     181,794       206,371  
        Net income   $ 251,345     $ 244,725  
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  

Contact Information:

Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100