SOURCE: VSB Bancorp

October 10, 2007 14:52 ET

VSB Bancorp, Inc. Third Quarter 2007 Results of Operations

STATEN ISLAND, NY--(Marketwire - October 10, 2007) - VSB Bancorp, Inc. (NASDAQ: VSBN) reported net income of $496,279 for the third quarter of 2007, a 23.0% decrease from net income of $644,129 in the third quarter of 2006. The following unaudited figures were released today. Pre-tax income was $928,968 in the third quarter of 2007, as compared to $1,205,971 for the third quarter of 2006, a decrease of $277,003, or 23.0%. Basic net income per common share was $0.27, as compared to basic net income per common share of $0.35 for the quarter ended September 30, 2006. Two non-recurring items represented $89,294 of the difference in pre-tax net income. The September 2006 quarter pre-tax income was benefited by $56,044 of interest income recognized on a former non-accrual loan that was paid in full, and by the fact that the reversal of SAR compensation expense was $33,250 more in the 2006 quarter than in the 2007 quarter.

The $147,850 decrease in net income was attributable to a decrease in interest income of $295,096 and an increase in interest expense of $19,586, which combined to cause a $314,682 decrease in net interest income, a decrease in the credit to the allowance for loan losses of $10,000 and an increase in non-interest expense of $45,035. The decrease in net interest income was partially offset by an increase in non-interest income of $92,714, and a decrease in income tax expense of $129,153.

The increase in interest expense was primarily caused by a $52,495 increase in the cost of money market deposit accounts partially offset by a decrease in the cost of time deposits of $42,794. The average rate that we paid on money market deposits increased by 41 basis points and average money market deposits increased by $5.8 million since the third quarter of 2006. The average balance of time deposits decreased $9.1 million over the same period while the average rate paid on time deposits increased by 22 basis points. The decrease in interest income was due to a decrease of $294,756 in interest on loans as the average balance of loans decreased by $9.9 million from the third quarter of 2006, which was partially offset by an increase in interest income from money market investments as yields and average balances increased over the same period. The $45,035 increase in non-interest expense was directly attributable to an increase in occupancy expenses of $76,973, due to the operation of our new main office at 4142 Hylan Boulevard in Great Kills and the operation of the Rosebank branch; and an increase in salary and benefits of $27,595, which were partially offset by a decrease in legal expenses of $64,874.

Total assets decreased to $208.0 million at September 30, 2007, a decrease of $3.9 million, or 1.8%, from December 31, 2006. Total deposits, including escrow deposits, decreased to $181.1 million, a decrease of $5.6 million, or 3.0%, during the nine months of 2007. Other assets decreased $2.0 million as we opened our new main office in Great Kills, which resulted in the transfer of construction in progress, previously combined with other assets, to bank premises and equipment. The Bancorp's Tier 1 capital ratio of 12.20% includes the effect, as Tier 1 capital, of $5.0 million (25% of its Tier 1 capital) from the proceeds of a $5 million trust preferred securities issuance in August 2003.

Average interest-earning assets and average loans decreased by $13.5 million and $9.9 million, respectively, from the third quarter of 2006 to the third quarter of 2007. Average demand deposits, an interest free source of funds for the Bancorp to invest, were approximately 33% of average total deposits for the third quarter of 2007, compared to 35% for the third quarter of 2006. Average deposits decreased by $15.9 million from the third quarter of 2006 to the third quarter of 2007. The Company's interest rate spread and interest rate margin were 3.46% and 4.45%, respectively, for the quarter ending September 30, 2007 as compared to 3.87% and 4.79%, respectively, for the quarter ended September 30, 2006. Non-interest income increased $92,714 to $539,637 in the third quarter of 2007. Non-interest expense totaled $1.8 million in the third quarter of 2007.

Pre-tax income decreased to $2,872,068 for the first nine months of 2007, as compared to $3,411,034 for 2006, a decrease of $538,966, or 15.8%. Net income for the nine months ended September 30, 2007 was $1,534,071, or basic net income of $0.84 per common share, as compared to a net income of $1,821,810, or $1.00 per common share, for the nine months ended September 30, 2006. The $287,739 reduction in net income for the nine months ended September 30, 2007 was attributable to an increase in interest expense of $300,897, due to a 57 basis point increase in the cost of time deposits, and a 26 basis point increase in money market deposits. The decrease in net income was also due to the reduction of interest income of $461,382 due to the decrease in average loan balance of $10.2 million, partially offset by the increase of $4.6 million in other interest earning assets, coupled with an increase of 33 basis points in the yield on other interest earning assets. The decrease in net income was partially offset by a decrease in the provision for loan loss of $45,000, and an increase in non-interest income of $207,249, due primarily to the increase in deposit service charges. Income tax expense also decreased $251,813 between the periods as pre-tax income decreased.

Merton Corn, VSB Bancorp, Inc.'s President and CEO, stated, "The general downturn in the real estate market has limited our loan production. While we have kept non-interest expenses in check, we have still have seen our net interest income decrease." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "The current economic climate has dampened our earnings but we still increased our book value per share to $10.52 at September 30, 2007, up $1.64 from the book value per share one year earlier. Our strategy of delivering the highest customer service and our reputation as the Island's premier business bank, have helped us to mitigate some of the pressure on our earnings."

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 $19.9 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). In February 2007, we opened our new main office 4142 Hylan Boulevard in the Great Kills section of Staten Island. We simultaneously closed our former main office in the Oakwood Heights Shopping Center as the lease expired at that location.

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, 2007
                               (unaudited)


                                              September 30,  December 31,
                                                  2007           2006
                                              -------------  -------------
Assets:

Cash and cash equivalents                     $  32,251,699  $  25,363,069
Investment securities, available for sale       109,947,323    113,770,611
Loans receivable                                 59,473,650     66,410,677
   Allowance for loan loss                         (965,641)    (1,128,824)
                                              -------------  -------------
      Loans receivable, net                      58,508,009     65,281,853
Bank premises and equipment, net                  4,020,292      1,554,363
Accrued interest receivable                         805,338        805,681
Deferred taxes                                    1,431,393      2,030,647
Other assets                                      1,032,845      3,078,535
                                              -------------  -------------
      Total assets                            $ 207,996,899  $ 211,884,759
                                              =============  =============

Liabilities and stockholders' equity:

Liabilities:
Deposits:
   Demand and checking                        $  62,409,088  $  67,371,582
   NOW                                           19,960,831     19,935,769

   Money market                                  23,585,125     18,359,007
   Savings                                       11,109,695     12,526,485
   Time                                          63,607,910     68,229,244
                                              -------------  -------------
      Total Deposits                            180,672,649    186,422,087
Escrow deposits                                     399,145        261,063
Subordinated debt                                 5,155,000      5,155,000
Accounts payable and accrued expenses             1,860,339      2,306,312
                                              -------------  -------------
      Total liabilities                         188,087,133    194,144,462
                                              -------------  -------------

Employee Stock Ownership Plan Repurchase
 Obligation                                               -        399,026
Stockholders' equity:
Common stock, ($.0001 par value, 3,000,000
 shares authorized, 1,891,759 issued and
 outstanding at September 30, 2007 and
 December 31, 2006)                                     189            189
Additional paid in capital                        9,042,545      8,667,665
Retained earnings                                12,827,271     11,293,200
Unallocated ESOP shares                          (1,113,097)    (1,239,905)
Accumulated other comprehensive loss, net
 of taxes of $738,969 and $1,203,679,
 respectively                                      (847,142)    (1,379,878)
                                              -------------  -------------
      Total stockholders' equity                 19,909,766     17,341,271
                                              -------------  -------------
      Total liabilities and stockholders'
        equity                                $ 207,996,899  $ 211,884,759
                                              =============  =============


                            VSB Bancorp, Inc.
                  Consolidated Statements of Operations
                            September 30, 2007
                                (unaudited)


                              Three       Three
                              months      months   Nine months  Nine months
                              ended       ended       ended        ended
                             September   September  September    September
                             30, 2007    30, 2006   30, 2007     30, 2006
                           ----------- ----------- ----------- ------------
Interest and dividend income:
  Loans receivable         $ 1,500,123 $ 1,794,879 $ 4,573,820 $  5,301,788
  Investment securities      1,320,528   1,336,087   3,914,686    3,862,518
  Other interest earning
   assets                      297,268     282,049     809,094      594,676
                           ----------- ----------- ----------- ------------
    Total interest income    3,117,919   3,413,015   9,297,600    9,758,982

Interest expense:
  NOW                           37,940      27,867      96,689       77,512
  Money market                 137,741      85,246     321,150      264,909
  Savings                       24,531      23,607      74,314       62,985
  Subordinated debt             89,040      89,040     267,119      267,119
  Other interest expense             -       1,112           -        1,112
  Time                         619,975     662,769   1,862,985    1,647,723
                           ----------- ----------- ----------- ------------
    Total interest expense     909,227     889,641   2,622,257    2,321,360

Net interest income          2,208,692   2,523,374   6,675,343    7,437,622
Provision (benefit) for
 loan loss                     (15,000)    (25,000)    (45,000)           -
                           ----------- ----------- ----------- ------------
    Net interest income
     after provision for
     loan loss               2,223,692   2,548,374   6,720,343    7,437,622

Non-interest income:
  Loan fees                     15,658      16,973      63,658       57,273
  Service charges on
   deposits                    457,023     366,716   1,319,422    1,143,444
  Net rental income /
   (loss)                       (2,568)      1,083        (876)       7,832
  Other income                  69,524      62,151     233,989      200,395
                           ----------- ----------- ----------- ------------
    Total non-interest
     income                    539,637     446,923   1,616,193    1,408,944

Non-interest expenses:
  Salaries and benefits        936,903     909,308   2,892,221    2,911,028
  Occupancy expenses           352,297     275,324   1,032,022      814,374
  Legal expense                 52,384     117,258      50,750      279,579
  Professional fees             56,700      46,000     153,000      136,000
  Computer expense              64,604      69,611     201,975      192,236
  Director fees                 52,600      53,950     160,450      167,400
  Other expenses               318,873     317,875     974,050      934,915
                           ----------- ----------- ----------- ------------
    Total non-interest
     expenses                1,834,361   1,789,326   5,464,468    5,435,532

      Income before income
       taxes                   928,968   1,205,971   2,872,068    3,411,034
                           ----------- ----------- ----------- ------------

Provision (benefit) for
 income taxes:
  Current                      381,296     515,262   1,229,835    1,544,749
  Deferred                      51,393      46,580     108,162       44,475
                           ----------- ----------- ----------- ------------
    Total provision for
     income taxes              432,689     561,842   1,337,997    1,589,224

      Net income           $   496,279 $   644,129 $ 1,534,071 $  1,821,810
                           =========== =========== =========== ============

Basic income per common
 share                     $      0.27 $      0.35 $      0.84 $       1.00
                           =========== =========== =========== ============

Diluted net income per
 share                     $      0.26 $      0.34 $      0.82 $       0.98
                           =========== =========== =========== ============

Book value per common
 share                     $     10.52 $      8.88 $     10.52 $       8.88
                           =========== =========== =========== ============

Contact Information

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