SOURCE: VSB Bancorp

January 13, 2010 17:31 ET

VSB Bancorp, Inc. Fourth Quarter 2009 and Full Year 2009 Results of Operations

STATEN ISLAND, NY--(Marketwire - January 13, 2010) - VSB Bancorp, Inc. (NASDAQ: VSBN) reported net income of $515,460 for the fourth quarter of 2009, a 14.2% decrease from the fourth quarter of 2008. The following unaudited figures were released today. Pre-tax income was $884,953 in the fourth quarter of 2009, compared to $972,481 for the fourth quarter of 2008, a decrease of $87,528, or 9.0%. Net income for the quarter was $515,460, or basic income of $0.29 per common share, compared to a net income of $600,820, or $0.32 basic income per common share, for the quarter ended December 31, 2008.

The $85,360 decrease in net income was due to an increase in non-interest expense of $151,309 and a decrease in non-interest income of $13,293. These expense increases were partially offset by an increase in net interest income of $27,074 and a decrease in provision for loan loss of $50,000.

The $27,074 increase in net interest income for the fourth quarter of 2009 occurred primarily because our cost of funds decreased by $171,123 while our interest income decreased by $144,049. The most significant component of the decrease in interest expense was a $157,451 decrease in interest on time deposits. The decline in interest income resulted from a $209,199 decrease in income from investment securities, due to a 61 basis point decrease in yield, coupled with a $3.1 million decrease in average balance between the periods. The decrease in interest income from investment securities was partially offset by a $66,064 increase in interest income from loans. Interest income from other interest earning assets (principally overnight investments) was relatively stable as an 11 basis point reduction in yield was offset by a $15.9 million increase in average balance.

The increase in interest income on loans was due to a $10.1 million increase in the average balance of loans, partially offset by a 25 basis point decrease in yield from the fourth quarter of 2008 to the fourth quarter of 2009. Reductions in the prime rate during 2008 caused our prime based loans to reach their interest rate floors. These floors helped to stabilize interest income from the loan portfolio and were a significant contributor to moderating the decline in interest income. In contrast, the average yield on our investment securities portfolio declined 61 basis points, as new securities were purchased at market rates significantly below the rates on securities repaid or matured. Non-interest income decreased by $13,293 to $593,521 in the fourth quarter of 2009 compared to the same quarter in 2008.

Comparing the fourth quarter of 2009 with the same quarter in 2008, non-interest expense increased by $151,309, totaling $2.0 million for the fourth quarter of 2009. One of the principal increases was an increase in FDIC and NYSBD assessments due to an increase in FDIC regular assessment rates effective April 1, 2009. The FDIC increased its insurance premium rates to banks in 2009 due to losses to the FDIC insurance fund as a result of bank failures during 2008 and 2009, coupled with additional losses that the FDIC projected for the future due to anticipated additional bank failures. The other categories of non-interest expenses increased for various business reasons including increased salary and benefits due to additional staff and higher related benefit costs, and higher reported legal expenses because in the fourth quarter of 2008 we recovered legal fees previously expensed in collecting non-accrual loans.

Total assets increased to $237.0 million at December 31, 2009, an increase of $24.3 million, or 11.4%, from December 31, 2008. The significant components of this increase were a $12.5 million increase in loans, net and an $18.5 million increase in cash and other liquid assets, partially offset by a $6.4 million decline in investment securities. Other assets increased by $748,549 primarily due to the required prospective three-year prepayment of our FDIC assessments. Total deposits, including escrow deposits, increased to $211.0 million, an increase of $22.9 million, or 12.2%. The mix of our deposits also changed as we had increases of $14.9 million in NOW accounts, $11.8 million in demand and checking accounts and $5.3 million increase in money market deposits. The increase in total deposits was partially offset by a decrease in time deposits of $11.7 million from year end 2008. The Bancorp's Tier 1 capital ratio was 9.67% at December 31, 2009.

Average interest-earning assets and average loans increased by $22.9 million and $10.1 million, respectively, from the fourth quarter of 2008 to the fourth quarter of 2009. Average demand deposits, an interest free source of funds for us to invest, increased by $6.9 million from the fourth quarter of 2008, representing approximately 34% of average total deposits for the fourth quarter of 2009. Average interest-bearing deposits increased by $14.5 million, resulting in an overall $21.4 million increase in average total deposits from the fourth quarter of 2008 to the fourth quarter of 2009. Our interest rate margin decreased by 25 basis points from 4.34% to 4.09% when comparing the fourth quarter of 2009 to the same quarter in 2008, while our interest rate spread increased slightly by 2 basis points from 3.73% to 3.75%. The interest rate margin decreased because the proceeds from payments on investment securities were reinvested at lower rates and overnight investment yields declined, both because of the dramatic decline in market interest rates. The spread improved while the margin declined because the margin includes the effect of earnings on assets funded by non-interest-bearing demand deposits, and such earnings were less in 2009 than 2008 due to lower market interest rates.

Pre-tax income decreased to $3,312,040 for the year ended of 2009, compared to $3,447,997 for 2008, a decrease of $135,957, or 3.9%. Net income for the year ended December 31, 2009 was $1,822,277, or basic net income of $1.02 per common share, compared to net income of $1,931,744, or basic net income of $1.04 per common share, for the year ended December 31, 2008. The $109,467 decline in net income for the year ended December 31, 2009 was due principally to an increase in non-interest expense of $490,202 and an increase in the provision for loan loss of $275,000 caused by weakness in the economy. The increase in non-interest expense was due primarily to a $195,000 increase in FDIC and NYSBD assessments, a $160,251 increase in salaries and benefits due to additional staff and higher related benefit costs, and a $51,600 increase in professional fees due to higher costs.

These expense increases were partially offset by a $611,303 increase in net interest income as interest income decreased by $367,106 while interest expense decreased by $978,409. The average yield on earning assets declined by 64 basis points while the average cost of funds declined by 89 basis points. The decline in the cost of funds was driven principally by a 92 basis point drop in the cost of time deposits and a $214,685 reduction in interest on subordinated debt, which was our highest cost funding source and which we repaid in August 2008. The decline in market rates had a lesser effect on interest income than on our cost of funds, due principally to the floors on our prime-based loans. The average yield on our loans declined 28 basis points from 2008 to 2009, which compares favorably to a 148 basis point decline in the yield on other interest earning assets (principally overnight investments) as the target federal funds rate declined 400 basis points during 2008 and then remained steady in 2009. Average interest earning assets also increased by $18.5 million from 2008 to 2009, resulting in additional increases in interest income. We also had a $17,942 increase in non-interest income and a decrease in income tax expense of $26,490 from 2008 to 2009.

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "2009 was a year marked by significant economic stress both on a local and national level and increased costs due to higher charge-offs and increased FDIC insurance assessments. Despite these stresses that have negatively affected the Company, we have been able to grow our assets by $24 million and our loan portfolio by almost $13 million and we were able to generate $1.8 million in net income." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "Our ability to generate earnings and capital in this harsh environment allowed us to continue to pay our dividends and enabled us to repurchase 141,520 shares of our common stock. We had a ROA of 0.87% and a ROE of 8.18% for the fourth quarter of 2009, which compares favorably to our peers. Even with the capital management strategies that we have employed, we continue to increase our book value per share, which now stands at $13.89, an increase of $1.56 per share from 2008. We have held steadfast to our philosophy of delivering the highest quality personal service to the professionals and business owners 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 $24.5 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
                            December 31, 2009
                               (unaudited)


                                             December 31,    December 31,
                                                 2009            2008
                                             -------------   -------------
Assets:

  Cash and cash equivalents                  $  39,716,919   $  21,240,223
  Investment securities, available for sale    113,912,404     120,288,588
  Loans receivable                              78,834,156      66,246,652
    Allowance for loan loss                     (1,063,454)       (987,876)
                                             -------------   -------------
      Loans receivable, net                     77,770,702      65,258,776
  Bank premises and equipment, net               3,204,063       3,695,822
  Accrued interest receivable                      722,228         723,473
  Deferred taxes                                         -         525,839
  Other assets                                   1,673,556         925,007
                                             -------------   -------------
        Total assets                         $ 236,999,872   $ 212,657,728
                                             =============   =============

Liabilities and stockholders' equity:

Liabilities:
  Deposits:
      Demand and checking                    $  70,372,448   $  58,598,579
      NOW                                       32,501,930      17,636,154
      Money market                              28,124,315      22,829,789
      Savings                                   15,001,936      12,412,561
      Time                                      64,669,128      76,323,494
                                             -------------   -------------
        Total Deposits                         210,669,757     187,800,577
  Escrow deposits                                  316,329         308,872
  Accounts payable and accrued expenses          1,529,837       1,344,512
                                             -------------   -------------
        Total liabilities                      212,515,923     189,453,961
                                             -------------   -------------

Stockholders' equity:
  Common stock, ($.0001 par value, 3,000,000
   shares authorized, 1,945,134 issued,
   1,762,191 outstanding at December 31,
   2009 and 1,923,884 issued, 1,882,461
   outstanding December 31, 2008)                      195             192
  Additional paid in capital                     9,317,719       9,200,010
  Retained earnings                             16,112,741      14,714,143
  Treasury stock, at cost (182,943 shares at
   December 31, 2009 and 41,423 shares
   at December 31, 2008)                        (1,840,249)       (395,891)
  Unearned ESOP shares                            (732,672)       (901,750)
  Accumulated other comprehensive gain, net
   of taxes of $1,371,416 and $488,735,
   respectively                                  1,626,215         587,063
                                             -------------   -------------
        Total stockholders' equity              24,483,949      23,203,767
                                             -------------   -------------
        Total liabilities and stockholders'
         equity                              $ 236,999,872   $ 212,657,728
                                             =============   =============




                            VSB Bancorp, Inc.
                  Consolidated Statements of Operations
                            December 31, 2009
                               (unaudited)

                                                     Twelve       Twelve
                        Three months Three months    months       months
                           ended        ended        ended        ended
                          Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
                            2009         2008         2009         2008
                        ------------ ------------ ------------ -----------
Interest and dividend
 income:
  Loans receivable      $  1,450,944 $  1,384,880 $  5,465,368 $ 5,078,576
  Investment securities    1,200,271    1,409,470    5,149,770   5,699,228
  Other interest earning
   assets                     11,417       12,331       33,050     237,490
                        ------------ ------------ ------------ -----------
    Total interest
     income                2,662,632    2,806,681   10,648,188  11,015,294

Interest expense:
  NOW                         41,947       30,521      142,405     127,066
  Money market                60,367       78,019      246,866     310,714
  Savings                     11,638       19,084       50,145      76,011
  Subordinated debt                -            -            -     214,685
  Time                       192,402      349,853      925,793   1,615,142
                        ------------ ------------ ------------ -----------
    Total interest
     expense                 306,354      477,477    1,365,209   2,343,618
Net interest income        2,356,278    2,329,204    9,282,979   8,671,676
Provision for loan loss      110,000      160,000      560,000     285,000
                        ------------ ------------ ------------ -----------
  Net interest income
   after provision
   for loan loss           2,246,278    2,169,204    8,722,979   8,386,676
Non-interest income:
  Loan fees                   24,196       10,973       94,079      66,259
  Service charges on
   deposits                  525,424      550,566    2,137,676   2,120,769
  Net rental income           12,061       13,774       50,110      37,662
  Other income                31,840       31,501      136,992     176,225
                        ------------ ------------ ------------ -----------
    Total non-interest
     income                  593,521      606,814    2,418,857   2,400,915
Non-interest expenses:
  Salaries and benefits      930,943      869,583    3,675,149   3,514,898
  Occupancy expenses         357,012      377,009    1,482,300   1,469,898
  Legal expense               43,512        1,393      225,172     189,118
  Professional fees           77,600       70,100      308,100     256,500
  Computer expense            71,410       68,938      279,152     245,014
  Director fees               50,950       48,300      218,225     217,450
  FDIC and NYSBD
   assessments               113,000       59,500      392,000     197,000
  Other expenses             310,419      308,714    1,249,698   1,249,716
                        ------------ ------------ ------------ -----------
    Total non-interest
     expenses              1,954,846    1,803,537    7,829,796   7,339,594

      Income before
       income taxes          884,953      972,481    3,312,040   3,447,997
                        ------------ ------------ ------------ -----------
Provision (benefit) for
 income taxes:
  Current                     89,386      358,708    1,373,021   1,870,198
  Deferred                   280,107       12,953      116,742    (353,945)
                        ------------ ------------ ------------ -----------
   Total provision
    for income taxes         369,493      371,661    1,489,763   1,516,253
       Net income       $    515,460 $    600,820 $  1,822,277 $ 1,931,744
                        ============ ============ ============ ===========

Basic income per common
 share                  $       0.29 $       0.32 $       1.02 $      1.04
                        ============ ============ ============ ===========

Diluted net income per
 share                  $       0.29 $       0.32 $       1.01 $      1.03
                        ============ ============ ============ ===========
Book value per common
 share                  $      13.89 $      12.33 $      13.89 $     12.33
                        ============ ============ ============ ===========

Contact Information

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