SOURCE: VSB Bancorp

October 11, 2006 17:27 ET

VSB Bancorp, Inc. Third Quarter 2006 Results of Operations

STATEN ISLAND, NY -- (MARKET WIRE) -- October 11, 2006 -- VSB Bancorp, Inc. (OTCBB: VSBN) reported net income of $644,129 for the third quarter of 2006, a 2.0% decrease from the third quarter of 2005. The following unaudited figures were released today. Pre-tax income was $1,205,971 in the third quarter of 2006, as compared to $1,231,356 for the third quarter of 2005, a decrease of $25,385, or 2.1%. Net income for the third quarter of 2006 was $644,129, or basic income of $0.35 per common share, as compared to a net income of $657,574, or $0.36 basic income per common share, for the quarter ended September 30, 2005. All per share data have been adjusted for the 5-for-4 stock split, in the form of a 25% stock dividend, paid on May 18, 2006, to stockholders of record on May 3, 2006.

The $13,445 decrease in net income was attributable to a decrease in non-interest income of $224,551, partially offset by a decrease in non-interest expense of $12,870, a decrease in the provision for loan loss of $10,000, an increase in net interest income of $176,296, and a decrease in income tax expense of $11,940. The decrease in non-interest income was a direct result of a lease buyout in 2005 of one of the Bank's subleases. The increase in net interest income was due partially to the receipt of interest income of $56,044 on a non-accrual loan that was repaid in full. Total assets increased to $221.9 million at September 30, 2006, an increase of $6.1 million, or 2.8%, from December 31, 2005. Total deposits increased to $197.4 million, an increase of $4.1 million, or 2.1%, during the 3rd quarter of 2006. The increase in deposits was due, in part, to a $10 million New York State jumbo CD deposit and a $10 million New York City jumbo CD deposit made in connection with the opening of our Rosebank branch under the state's and city's Bank Development District programs. The Bancorp's Tier 1 regulatory capital ratio was 10.48%, and includes as Tier 1 capital, the proceeds of a $5 million trust preferred securities issuance in August 2003.

Average interest-earning assets and average investment securities increased by $2.1 million and $5.6 million, respectively, from the third quarter of 2005 to the third quarter of 2006. Average demand deposits, an interest free source of funds for the Bancorp to invest, were approximately 35% of average total deposits for the third quarter of 2006, compared to 37% for the third quarter of 2005. Average time deposits grew by $13.5 million from the third quarter of 2005 to the third quarter of 2006. The Company's interest rate spread and interest rate margin were 3.87% and 4.79%, respectively, for the quarter ended September 30, 2006 as compared to 3.92% and 4.52%, respectively, for the quarter ended September 30, 2005. Non-interest income decreased $224,551 to $446,923 in the third quarter of 2006. Non-interest expense totaled $1.8 million, a decrease of $12,870 from the third quarter of 2005. The slight change in non-interest expense was attributable to a combination of a decrease in salaries and benefits expense, due to a reduction in compensation expense related to Stock Appreciation Rights, higher legal expenses, higher director fees and an increase in occupancy expenses primarily attributable to both the opening of our fifth branch and the preparation for the opening of our sixth branch.

Pre-tax income decreased to $3,411,034 for the first nine months of 2006, as compared to $3,598,543 for 2005, a decrease of $187,509, or 5.2%. Net income for the nine months ended September 30, 2006 was $1,821,810, or basic net income of $1.00 per common share, as compared to a net income of $1,921,827, or $1.07 per common share, for the nine months ended September 30, 2005. The $100,017 reduction in net income was attributable to an increase in non-interest expense of $416,946, an increase in the provision for loan loss of $90,000 and a decrease in non-interest income of $240,329, partially offset by an increase in net interest income of $559,766. Income tax expense also decreased $87,492 between the periods as pre-tax income decreased.

Merton Corn, President and CEO of VSB Bancorp, Inc., stated, "We are in the process of constructing our next bank building in Great Kills and we look forward to opening that branch in early 2007. The recent increases in the Prime Rate have helped to defray the increased costs of deposits. The Staten Island market has become more competitive and the Island's main industry, homebuilding, has been slowing recently, which has affected our deposit growth and loan originations." Mr. Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "Our earnings per share were $0.35 for the third quarter of 2006, our Return on Assets was 1.14% and our Return on Equity was 15.87% for this quarter. These are improvements from the June 2006 quarter. The highest quality personal service that we deliver sets us apart from our competitors and is the reason that we are the Island's premier business bank."

VSB Bancorp, Inc. is the one-bank holding company for Victory State Bank. Victory State Bank, a Staten Island based commercial bank, 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 $16.5 million since the Bank was formed. The Bank operates five full service locations in Staten Island: the main office in the Oakwood Heights Shopping Center, and branches on Forest Avenue, Hyatt Street, Hylan Boulevard and now on Bay Street. We have received regulatory approval for our sixth branch location in the Great Kills section of Staten Island.

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, 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, 2006
                                (unaudited)

                                              September 30,  December 31,
                                                  2006           2005
                                              -------------  -------------
Assets:
 Cash and cash equivalents                    $  36,054,385  $  31,324,147
 Investment securities, available for sale      113,888,922    106,023,293
 Loans receivable                                66,171,876     73,944,105
  Allowance for loan loss                        (1,193,024)    (1,153,298)
                                              -------------  -------------
    Loans receivable, net                        64,978,852     72,790,807
 Bank premises and equipment, net                 1,641,558      1,441,087
 Accrued interest receivable                        821,129        728,627
 Deferred taxes                                   2,268,664      2,298,195
 Other assets                                     2,219,179      1,169,556
                                              -------------  -------------
      Total assets                            $ 221,872,689  $ 215,775,712
                                              =============  =============

Liabilities and stockholders' equity:
Liabilities:
 Deposits:
    Demand and checking                       $  72,944,352  $  66,692,436
    NOW                                          20,433,030     23,574,056
    Money market                                 16,743,027     20,177,240
    Savings                                      13,208,697     14,809,010
    Time                                         73,690,729     67,731,273
                                              -------------  -------------
       Total Deposits                           197,019,835    192,984,015
 Escrow deposits                                    371,654        267,144
 Subordinated debt                                5,155,000      5,155,000
 Accounts payable and accrued expenses            2,533,909      2,553,208
                                              -------------  -------------
     Total liabilities                          205,080,398    200,959,367

Employee Stock Ownership Plan Repurchase
 Obligation                                         259,532        284,411

Stockholders' equity:
 Common stock, ($.0001 par value, 3,000,000
    shares authorized, 1,891,759 issued and
    outstanding at September 30, 2006 and
    1,509,822 issued and outstanding at
    December 31, 2005)                                  189            151
 Additional paid in capital                       8,812,500      8,743,200
 Retained earnings                               10,443,503      8,621,693
 Unallocated ESOP shares                         (1,282,175)    (1,408,983)
 Accumulated other comprehensive loss, net
   of taxes of $1,257,222 and $1,242,278,
   respectively                                  (1,441,258)    (1,424,127)
                                              -------------  -------------

    Total stockholders' equity                   16,532,759     14,531,934
                                              -------------  -------------
     Total liabilities and stockholders'
        equity                                $ 221,872,689  $ 215,775,712
                                              =============  =============



                            VSB Bancorp, Inc.
                  Consolidated Statements of Operations
                            September 30, 2006
                                (unaudited)



                        Three months Three months Nine months  Nine months
                           ended        ended        ended        ended
                         Sept. 30,    Sept. 30,    Sept. 30,    Sept. 30,
                            2006         2005         2006         2005
                        ------------ -----------  ------------ ------------
Interest and dividend
 income:
 Loans receivable       $  1,794,879 $ 1,540,973  $  5,301,788 $  4,193,942
 Investment securities     1,336,087   1,160,153     3,862,518    3,715,401
 Other interest earning
  assets                     282,049     171,029       594,676      316,289
                        ------------ -----------  ------------ ------------
     Total interest
      income               3,413,015   2,872,155     9,758,982    8,225,632
Interest expense:
 NOW                          27,867      28,455        77,512       78,351
 Money market                 85,246      55,768       264,909      161,768
 Savings                      23,607      20,897        62,985       59,235
 Subordinated debt            89,040      89,040       267,119      267,119
 Time                        662,769     330,917     1,647,723      781,303
 Other interest expense        1,112           -         1,112            -
                        ------------ -----------  ------------ ------------
     Total interest
      expense                889,641     525,077     2,321,360    1,347,776

Net interest income        2,523,374   2,347,078     7,437,622    6,877,856
Provision (benefit) for
 loan loss                   (25,000)    (15,000)            -
(90,000)
    Net interest income
       after provision
        for loan loss      2,548,374   2,362,078     7,437,622    6,967,856

Non-interest income:
 Loan fees                    16,973      22,914        57,273       80,008
 Service charges on
  deposits                   366,716     450,172     1,143,444    1,294,779
 Net rental income             1,083     149,129         7,832      170,734
 Other income                 62,151      49,259       200,395      103,752
                        ------------ -----------  ------------ ------------
     Total non-interest
      income                 446,923     671,474     1,408,944    1,649,273

Non-interest expenses:
 Salaries and benefits       909,308     958,331     2,911,028    2,832,081
 Occupancy expenses          275,324      238,295       814,374     725,037
 Legal expense               117,258      84,057       279,579      117,432
 Professional fees            46,000      51,000       136,000      177,000
 Computer expense             69,611      62,045       192,236      176,995
 Director fees                53,950      39,900       167,400      126,825
 Other expenses              317,875     368,568       934,915      863,216
                        ------------ -----------  ------------ ------------
     Total non-interest
      expenses             1,789,326   1,802,196     5,435,532    5,018,586

       Income before
        income taxes       1,205,971   1,231,356     3,411,034    3,598,543
                        ------------ -----------  ------------ ------------
Provision (benefit) for
 income taxes:
 Current                     515,262     580,100     1,544,749    1,664,840
 Deferred                     46,580      (6,318)       44,475       11,876
                        ------------ -----------  ------------ ------------
     Total provision
      for income taxes       561,842      573,782     1,589,224   1,676,716

           Net income   $    644,129 $   657,574  $  1,821,810 $  1,921,827
                        ============ ===========  ============ ============

Basic income per common
 share                  $       0.35 $      0.36  $       1.00 $       1.07
                        ============ ===========  ============ ============

Diluted net income per
 share                  $       0.34 $       0.35 $       0.98 $       1.03
                        ============ ============ ============ ============

Book value per common
 share                  $       8.88 $      7.63  $       8.88 $       7.63
                        ============ ===========  ============ ============

Contact Information

  • Contact Name:
    Ralph M. Branca
    Executive Vice President
    (718) 979-1100