April 09, 2014 16:15 ET

VSB Bancorp, Inc. First Quarter 2014 Results of Operations

STATEN ISLAND, NY--(Marketwired - Apr 9, 2014) - VSB Bancorp, Inc. (OTCQB: VSBN) reported net income of $244,725 for the first quarter of 2014, an increase of $34,854, or 16.6%, from the first quarter of 2013. The following unaudited figures were released today. Pre-tax income was $451,096 in the first quarter of 2014, compared to $386,873 for the first quarter of 2013. Net income for the quarter was $244,725, or basic income of $0.14 per common share, compared to a net income of $209,871, or $0.12 basic income per common share, for the quarter ended March 31, 2013. Return on average assets increased from 0.29% in the first quarter of 2013 to 0.31% in the first quarter of 2014, while return on average equity increased from 2.84% to 3.23%.

The $34,854 increase in net income was due to an increase in net interest income of $99,559, and an increase in non-interest income of $17,551, partially offset by an increase in non-interest expense of $32,887, an increase in the provision for income taxes of $29,369, and an increase in the provision for loan loss of $20,000.

The $99,559 increase in net interest income for the first quarter of 2014 occurred primarily because our interest income increased by $74,658, while our cost of funds decreased by $24,901. The rise in interest income resulted from a $221,041 increase in income from investment securities, due to a $38.0 million increase in average balance between the periods and a 5 basis point increase in yield, as new securities were purchased at market rates at or above the rates on securities repaid or matured, between the periods. The increase in interest income was partially offset by a $136,301 decrease in interest income from loans principally due to a $8.7 million decrease in the average balance of loans and a 3 basis point decrease in yield from the first quarter of 2013 to the first quarter of 2014.

Interest income from other interest earning assets (principally overnight investments) decreased by $10,082 due to an $18.2 million decrease in average balance. Overall, average interest-earning assets increased by $11.0 million from the first quarter of 2013 to the first quarter of 2014.

The decrease in interest expense was principally due to a $36,719 decrease in interest on time accounts, as the average cost declined by 15 basis points and the average balance between periods decreased by $7.3 million. This decrease was partially offset by a $7,572 increase in the cost of savings account deposits, due to a 8 basis point increase in the cost and a $3.1 million increase in the average balance and a $5,801 increase in interest on money market accounts, as the average balance between periods increased by $8.4 million, but was partially offset by the 8 basis point drop in the average cost. Average demand deposits, an interest free source of funds for us to invest, increased $7.9 million, or 9.2%, from the first quarter of 2013, representing approximately 36% of average total deposits for the first quarter of 2014. Average interest-bearing deposits increased by $4.2 million, resulting in an overall $11.9 million increase in average total deposits from the first quarter of 2013 to the first quarter of 2014.

The average yield on earning assets declined by 4 basis points while the average cost of funds declined by 7 basis points. The reduction in the yield on assets was principally due to the 3 basis point drop in the yield on loans, partially offset by a 5 basis point increase in the yield on investment securities. The decline in the cost of funds was driven principally by the 15 basis point drop in the cost of time account deposits, and the 8 basis point drop in the cost of money market deposits partially offset by the 8 basis point increase in the cost of saving account deposits. Our interest rate margin increased by 1 basis point from 2.74% to 2.75% when comparing the first quarter of 2014 to the same quarter in 2013, while our interest rate spread increased by 3 basis points from 2.53% to 2.56%. The spread and margin both increased because of the combined effect of the rise in earnings we were able to obtain on our investments securities, 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 complimented 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 increased by $17,551 to $628,152 in the first quarter of 2014, from $610,601 in the same quarter in 2013. The most significant component of the increase was a $44,155 rise in service charges on deposits, which consist mainly of insufficient fund fees that are inherently volatile, and are based upon the number of items being presented for payment against insufficient funds. This increase was partially offset by $24,977 decrease in other income, due primarily to a $17,571 gain on the sale of other fixed assets recognized in the first quarter of 2013.

Comparing the first quarter of 2014 with the same quarter in 2013, non-interest expense increased by $32,887, totaling $2.0 million for the first quarter of 2014. Non-interest expense increased for various business reasons including (i) a $33,202 increase in legal fees due to due to costs of removing our common stock from SEC registration in 2014 and a higher level of collection costs; (ii) a $32,570 increase in occupancy expenses due to an insurance payout in the first quarter of 2013 on monies expensed in the remediation of our Dongan Hills branch; (iii) a $12,445 increase in professional fees due to due to higher costs and the hiring of a consultant; (iv) a $8,950 increase in director fees due to a greater number of meetings; and (v) a $7,500 increase in FDIC and NYSBD assessments due to a larger assessment base (generally average assets minus tangible capital) in 2014. These increases were partially offset by a $13,298 decrease in salary and benefit costs due to reduced staff, and a $52,863 decrease in other non-interest expenses due to reduced OREO costs, and decreased costs of regulatory filings, as we completed the deregistering of our Company on March 31, 2014.

Total assets decreased to $287.6 million at March 31, 2014, a decrease of $9.5 million, or 3.2%, from December 31, 2013. The significant component of this decrease was a $18.2 million decrease in cash and other liquid assets, partially offset by a $9.3 million increase in investment securities. Our non-performing loans increased from $4.2 million at December 31, 2013 to $4.5 million at March 31, 2014, due primarily to a past maturity loan that is expected to be renewed in the second quarter of 2014. Total deposits, including escrow deposits, decreased to $258.1 million, a decrease of $10.5 million, or 3.9%. The decrease was primarily attributable to two large withdrawals from two customers that re-deployed the deposits into non-bank investments. We had increases in demand and checking deposits of $1.5 million, and a $1.7 million increase in savings deposits, partially offset by a decrease of $9.3 million in in time deposits, $3.0 million in NOW accounts, and a $1.6 million in money market accounts and from year end 2013. Our total stockholders' equity increased by $162,746 as the growth of retained earnings and the amortization of our ESOP loan were partially offset by the increase in treasury shares due to the repurchase of 3,400 shares of common stock in our announced third stock repurchase program. The Bancorp's Tier 1 capital ratio was 9.44% at March 31, 2014. 

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "We have generated more net interest income, more non-interest income and we have controlled our non-interest expenses in 2014. While our total deposits decreased in the first quarter of 2014, those decreases were primarily concentrated in our highest costing liabilities, which we funded with our excess cash." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "We posted a 17% increase in net income from the 2013 period. As we look to different opportunities to generate income, we are confident that we will be able generate a higher return than last year. We paid our twenty-sixth consecutive dividend to our stockholders and our book value per share rose to $15.59. Our commitment to providing the utmost in customer service has driven our growth and has led to increased stockholder value."

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 $27.7 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, 2014
    March 31,     December 31,  
    2014     2013  
  Cash and cash equivalents   $ 47,315,331     $ 65,562,635  
  Investment securities, available for sale     63,278,866       57,517,211  
  Investment securities, held to maturity     100,726,292       97,146,039  
  Loans receivable     72,709,735       73,081,310  
    Allowance for loan loss     (1,016,364 )     (1,093,788 )
    Loans receivable, net     71,693,371       71,987,522  
  Bank premises and equipment, net     1,988,737       1,992,527  
  Accrued interest receivable     555,790       539,092  
  Other assets     2,060,319       2,391,082  
    Total assets   $ 287,618,706     $ 297,136,108  
Liabilities and stockholders' equity:                
    Demand and checking   $ 98,122,213     $ 96,640,569  
    NOW     30,034,380       32,989,791  
    Money market     40,473,675       42,075,301  
    Savings     25,745,971       24,075,184  
    Time     63,246,820       72,538,100  
      Total Deposits     257,623,059       268,318,945  
  Escrow deposits     438,702       235,633  
  Accounts payable and accrued expenses     1,861,451       1,048,782  
    Total liabilities     259,923,212       269,603,360  
Stockholders' equity:                
  Common stock, ($.0001 par value, 10,000,000 shares authorized 1,989,509 issued, 1,776,709 outstanding at March 31, 2014 and 1,780,109 at December 31, 2013)     199       199  
  Additional paid in capital     9,375,784       9,364,950  
  Retained earnings     20,098,910       19,960,933  
  Treasury stock, at cost (212,800 shares at March 31, 2014 and 209,400 at December 31, 2013)     (2,160,275 )     (2,123,546 )
  Unearned ESOP shares     (14,090 )     (56,360 )
  Accumulated other comprehensive gain, net of taxes of $330,082 and $326,003, respectively     394,966       386,572  
    Total stockholders' equity     27,695,494       27,532,748  
    Total liabilities and stockholders' equity   $ 287,618,706     $ 297,136,108  
VSB Bancorp, Inc.
Consolidated Statements of Operations
March 31, 2014
    Three months     Three months
    ended     ended
    March 31, 2014     March 31, 2013
Interest and dividend income:              
  Loans receivable   $ 1,262,840     $ 1,399,141
  Investment securities     850,952       629,911
  Other interest earning assets     30,443       40,525
    Total interest income     2,144,235       2,069,577
Interest expense:              
  NOW     13,768       15,323
  Money market     56,397       50,596
  Savings     26,076       18,504
  Time     91,872       128,591
    Total interest expense     188,113       213,014
Net interest income     1,956,122       1,856,563
Provision for loan loss     140,000       120,000
  Net interest income after provision for loan loss     1,816,122       1,736,563
Non-interest income:              
  Loan fees     17,374       12,457
  Service charges on deposits     552,906       508,751
  Net rental income     10,442       16,986
  Other income     47,430       72,407
    Total non-interest income     628,152       610,601
Non-interest expenses:              
  Salaries and benefits     936,065       949,363
  Occupancy expenses     360,313       327,743
  Professional fees     101,217       88,772
  Legal expenses     95,064       61,862
  Computer expense     78,156       73,775
  Director fees     65,300       56,350
  FDIC and NYSBD assessments     64,500       57,000
  Other expenses     292,563       345,426
    Total non-interest expenses     1,993,178       1,960,291
    Income before income taxes     451,096       386,873
Provision (benefit) for income taxes:              
  Current     244,929       2,293
  Deferred     (38,558 )     174,709
    Total provision for income taxes     206,371       177,002
      Net income   $ 244,725     $ 209,871
Basic income per common share   $ 0.14     $ 0.12
Diluted net income per share   $ 0.14     $ 0.12
Book value per common share   $ 15.59     $ 15.53

Contact Information

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