April 13, 2016 16:15 ET

VSB Bancorp, Inc. First Quarter 2016 Results of Operations

STATEN ISLAND, NY--(Marketwired - Apr 13, 2016) - VSB Bancorp, Inc. (OTCQX: VSBN) reported net income of $549,396 for the first quarter of 2016, an increase of $298,051, or 118.6%, from the first quarter of 2015. The following unaudited figures were released today. Pre-tax income was $845,262 in the first quarter of 2016, compared to $433,139 for the first quarter of 2015. Net income for the quarter was $549,396, or basic income of $0.32 per common share, compared to a net income of $251,345, or $0.14 basic income per common share, for the quarter ended March 31, 2015. Return on average assets increased from 0.37% in the first quarter of 2015 to 0.67% in the first quarter of 2016, while return on average equity increased from 3.64% to 7.25%.

The $298,051 increase in net income was due to an increase in net interest income of $367,487, a decrease in the provision for loan loss of $110,000 and an increase in non-interest income of $14,528, partially offset by an increase in non-interest expenses of $79,892, and an increase in the provision for income taxes of $114,072, due to an increase in pre-tax income.

The $367,487 increase in net interest income for the first quarter of 2016 occurred primarily because our interest income increased by $432,767, while our cost of funds increased by $65,280. The rise in interest income resulted from a $417,713 increase in income from loans, due to a $31.5 million increase in average balance between the periods, partially offset by a 21 basis point decrease in yield between the periods, as we booked new loans at lower rates due to a more competitive environment. The average balance of loans increased by 40.7% as we implemented our strategy to increase our loan portfolio to improve average asset yields. Income from investment securities decreased slightly by $6,934, as the $10.4 million decrease in the average balance was substantially offset by 10 basis point increase in the yield, as we looked to deploy lower yielding assets into loans.

Interest income from other interest earning assets (principally overnight investments) increased by $21,988 due to a $11.7 million increase in the average balance and a 25 basis point increase in the yield. Overall, average interest-earning assets increased by $32.9 million from the first quarter of 2015 to the first quarter of 2016.

The increase in interest expense was principally due to a $53,401 increase in the cost of money market accounts, due to a 24 basis point increase in average cost and a $11.5 million increase in the average balance, and a $21,242 increase in interest on time accounts, as the average balance between periods increased by $4.3 million and the average cost increased by 10 basis points. We also experienced a $3,579 increase in interest on NOW account accounts. These increases were partially offset by $12,172 drop in the cost of savings accounts, as the average balance between periods decreased by $3.0 million and the average cost decreased by 17 basis points. Our overall average cost of interest-bearing liabilities increased by 11 basis points as the Federal Reserve increased the benchmark federal funds rate by 25 basis points in December 2015, resulting in upward movement in other interest rate indicators, such as the prime rate, which also increased by 25 basis points at that time.

Average demand deposits, an interest free source of funds for us to invest, increased $16.7 million from the first quarter of 2015, representing approximately 38% of average total deposits for the first quarter of 2016. Average interest-bearing deposits increased by $15.8 million, resulting in an overall $32.7 million increase in average total deposits from the first quarter of 2015 to the first quarter of 2016.

The average yield on earning assets rose by 24 basis points while the average cost of funds rose by 11 basis points. The increase in the yield on assets was principally due to the change in asset mix as we redeployed lower yielding investments into loans. Our interest rate margin increased by 19 basis points from 2.90% to 3.09% when comparing the first quarter of 2016 to the same quarter in 2015, while our interest rate spread increased by 13 basis points from 2.73% to 2.86%. The spread and margin both increased because of a combination of two factors. Loans increased as a percentage of interest-earning assets from 28.3% in the first quarter of 2015 to 35.6% in the first quarter of 2016. In addition, the yield we were able to obtain on the average balance of our investment securities increased as the increase in the federal funds rate drove an increase in market yields available on such securities. These increases were restrained by corresponding rise in the cost of deposits as market expectations of additional increases in the federal funds rate this year increased competition for deposits at current rates before rates increase.

Non-interest income increased slightly to $641,626 in the first quarter of 2016, compared to $627,098 in the same quarter in 2015. The increase was achieved through the $14,178 increase in other income as we had additional ATM surcharges and other miscellaneous income. We also had a $9,715 increase in rental income as we collected all rents due in 2016. This was partially offset by an $11,565 reduction 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 2016 with the same quarter in 2015, non-interest expense increased by $79,892, totaling $2.1 million for the first quarter of 2016. Non-interest expense increased for various business reasons including: (i) a $99,129 increase in salary and benefit costs due to a higher level of staff (ii) a $37,663 increase in other expenses due to an increase in collection expenses (real estate taxes and insurance on non-performing loans) and loan servicing fees paid on participation loans; and (iii) a $8,250 increase in New York State and New York City franchise tax due to recent tax law changes. The increases were partially offset by a reduction of legal expenses of $39,472 due to lower legal fees on collection matters.

Total assets increased to $327.4 million at March 31, 2016, an increase of $21.0 million, or 6.8%, from December 31, 2015. The significant component of this increase was a $9.7 million increase in loans and a $17.1 million increase in cash and other liquid assets, which was partially offset by a $5.6 million decrease in investment securities. Our non-performing loans decreased from $1.9 million at December 31, 2015 to $1.2 million at March 31, 2016, due primarily to the payoff of $662,384 of non-performing loans, in the first quarter of 2016. Total OREO stood at $570,000 at March 31, 2016. Total deposits, including escrow deposits, increased to $296.4 million, an increase of $20.1 million, or 7.3% during 2016. The increase was primarily attributable to increases of $17.3 million in demand and checking deposits, and $1.2 million in saving accounts, $1.2 million in NOW accounts, a $787,463 in money market accounts, partially offset by a $737,856 decrease in time deposits. 

Our total stockholders' equity increased by $676,894, principally due to $428,021 in retained earnings, $164,453 in other comprehensive income, $102,788 in additional paid in capital (due to option exercises) and $25,031 of amortization of our ESOP loan. These increases were partially offset as we repurchased 3,500 shares of common stock during 2016, resulting in an increase in treasury stock of $43,410. We are currently in our fourth stock repurchase program. VSB Bancorp's Tier 1 capital ratio was 9.18% at March 31, 2016. Book value per common share increased from $16.00 at year end 2015 to $16.34 at March 31, 2016. 

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "During the past year, our strategy of increasing our loan portfolio has produced our strong quarter over quarter growth. By prudently expanding our geographic footprint, we have taken advantage of new loan opportunities." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "The shifting of our asset mix toward loans has generated more net income and allowed us to increase our cash dividend. Our book value per share rose to $16.34, an all-time high. The cornerstone of our success is 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 $29.5 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).


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, 2016
    March 31,     December 31,  
    2016     2015  
  Cash and cash equivalents   $ 31,939,868     $ 14,845,096  
  Investment securities, available for sale     55,944,952       58,096,583  
  Investment securities, held to maturity     117,171,029       120,585,784  
  Loans receivable     114,058,404       104,341,670  
    Allowance for loan loss     (1,328,071 )     (1,290,563 )
      Loans receivable, net     112,730,333       103,051,107  
  Bank premises and equipment, net     1,462,418       1,528,914  
  Accrued interest receivable     744,622       743,375  
  Bank owned life insurance     5,225,026       5,194,945  
  Other assets     2,143,972       2,361,325  
        Total assets   $ 327,362,220     $ 306,407,129  
Liabilities and stockholders' equity:                
    Demand and checking   $ 118,951,223     $ 101,659,731  
    NOW     32,615,357       31,428,768  
    Money market     61,700,238       60,912,775  
    Savings     22,310,598       21,136,015  
    Time     60,372,518       61,110,374  
      Total Deposits     295,949,934       276,247,663  
  Escrow deposits     434,311       56,600  
  Accounts payable and accrued expenses     1,501,790       1,303,575  
      Total liabilities     297,886,035       277,607,838  
Stockholders' equity:                
  Common stock, ($.0001 par value, 10,000,000 shares authorized 2,086,509 issued, 1,803,898 outstanding at March 31, 2016 and 2,078,509 issued, 1,799,398 outstanding at December 31, 2015)     209       208  
  Additional paid in capital     10,614,839       10,512,041  
  Retained earnings     22,449,028       22,021,007  
  Treasury stock, at cost (282,611 shares at March 31, 2016 and 279,111 at December 31, 2015)     (3,019,585 )     (2,976,175 )
  Unearned ESOP shares     (809,344 )     (834,375 )
  Accumulated other comprehensive gain, net of taxes of $129,790 and $41,238, respectively     241,038       76,585  
      Total stockholders' equity     29,476,185       28,799,291  
      Total liabilities and stockholders' equity   $ 327,362,220     $ 306,407,129  
VSB Bancorp, Inc.
Consolidated Statements of Operations
March 31, 2016
    Three months     Three months  
    ended     ended  
    March 31, 2016     March 31, 2015  
Interest and dividend income:            
  Loans receivable   $ 1,697,595     $ 1,279,882  
  Investment securities     899,186       906,120  
  Other interest earning assets     29,361       7,373  
    Total interest income     2,626,142       2,193,375  
Interest expense:                
  NOW     14,055       10,476  
  Money market     124,673       71,272  
  Savings     11,541       23,713  
  Time     86,388       65,916  
    Total interest expense     236,657       171,377  
Net interest income     2,389,485       2,021,998  
Provision for loan loss     50,000       160,000  
    Net interest income after provision for loan loss     2,339,485       1,861,998  
Non-interest income:                
  Loan fees     12,866       10,666  
  Service charges on deposits     516,956       528,521  
  Net rental income     13,554       3,839  
  Other income     98,250       84,072  
    Total non-interest income     641,626       627,098  
Non-interest expenses:                
  Salaries and benefits     1,123,631       1,024,502  
  Occupancy expenses     335,816       342,956  
  Professional fees     42,287       81,759  
  Legal expenses     88,331       94,328  
  Computer expense     95,452       94,842  
  Director fees     57,450       62,475  
  FDIC and NYSBD assessments     42,000       66,000  
  Other expenses     350,882       289,095  
    Total non-interest expenses     2,135,849       2,055,957  
      Income before income taxes     845,262       433,139  
Provision (benefit) for income taxes:                
  Current     342,486       249,586  
  Deferred     (46,620 )     (67,792 )
    Total provision for income taxes     295,866       181,794  
        Net income   $ 549,396     $ 251,345  
Basic income per common share   $ 0.32     $ 0.14  
Diluted net income per share   $ 0.32     $ 0.14  
Book value per common share   $ 16.34     $ 15.54  

Contact Information

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