SOURCE: VSB Bancorp

January 09, 2013 16:15 ET

VSB Bancorp, Inc. Fourth Quarter 2012 Results of Operations

STATEN ISLAND, NY--(Marketwire - Jan 9, 2013) - VSB Bancorp, Inc. (NASDAQ: VSBN) reported net income of $177,255 for the fourth quarter of 2012, an increase of $14,587, or 9.0%, from the fourth quarter of 2011. The following unaudited figures were released today. Pre-tax income was $326,770 in the fourth quarter of 2012, compared to $265,668 for the fourth quarter of 2011. Net income for the quarter was $177,255, or basic income of $0.10 per common share, compared to a net income of $162,668, or $0.09 basic income per common share, for the quarter ended December 31, 2011.

The $14,587 increase in net income was due to a decrease in the provision for loan losses of $375,000, partially offset by an increase in non-interest expense of $187,396, a decrease in non-interest income of $66,388, a decrease in net interest income of $60,114, and an increase in the provision for income taxes of $46,515. The decrease in the provision for loan losses was due to a $481,998 reduction in charge-offs when comparing the fourth quarter of 2012 to the fourth quarter of 2011. Overall, our allowance for loan losses increased and reached 2.13% of total loans at December 31, 2012, compared to 1.64% at December 31, 2011.

The $60,114 decrease in net interest income for the fourth quarter of 2012 occurred primarily because our interest income decreased by $77,449, while our cost of funds decreased by $17,335. The decline in interest income resulted from a $177,548 decrease in income from investment securities, due primarily to a 65 basis point decrease in average yield between the periods. The $88,066 increase in interest income on loans was primarily due to a 40 basis point increase in yield caused by a reduction in average non-performing loans from the fourth quarter of 2011 to the fourth quarter of 2012. Our average non-performing loans decreased $4.2 million, from $10.4 million in the quarter ended December 31, 2011, to $6.2 million in the fourth quarter of 2012. The level of non-performing loans declined from $10.9 million at December 31, 2011 to $6.4 million at December 31, 2012.

Interest income from other interest earning assets (principally overnight investments) increased by $12,033 due principally to an $18.7 million increase in average balance from the fourth quarter of 2011 to the fourth quarter of 2012.

The most significant component of the decrease in interest expense was a $17,641 decrease in interest on time accounts as the average cost declined by 9 basis points due to a continuation of low market interest rates. Average demand deposits, an interest free source of funds for us to invest, increased from $75.9 million, or 35.3% of total deposits in the fourth quarter of 2011, to $84.0 million, or 35.8% of total deposits in the fourth quarter of 2012. Average interest-bearing deposits increased by $11.9 million and average non-interest bearing deposits increased by $8.1 million, resulting in an overall $20.0 million increase in average total deposits from the fourth quarter of 2011 to the fourth quarter of 2012.

The average yield on interest-earning assets declined by 39 basis points, while the average cost of funds declined by 9 basis points, from the fourth quarter of 2011 to the fourth quarter of 2012. The reduction in the yield on assets was principally due to the 65 basis point drop in the yield on investment securities, as new securities were purchased at market rates significantly below the rates we had been earning on securities repaid or matured. This effect was partially offset by the 40 basis point rise in the yield on loans. The decline in the cost of funds was driven principally by a 9 basis point drop both in the cost of time deposits and NOW account deposits, and a 18 basis point drop in the cost of money market deposits, partially offset by a 12 basis point increase in the cost of saving account deposits. Our interest rate margin decreased by 34 basis points from 3.32% to 2.98% when comparing the fourth quarter of 2012 to the same quarter in 2011, while our interest rate spread decreased by 30 basis points from 3.07% to 2.77%. The spread and margin both decreased because of the combined effect of the decline in earnings we were able to obtain on our investments securities, the increased average balance of low yielding other interest-earning assets and the adverse effect of the non-receipt of interest received on non-performing loans. These declines could not be offset by corresponding declines in the cost of deposits because the rates we paid on deposits were already low due to low markets rates so that we could not reduce them as much as the decline in the earnings on investment securities. In addition, we continued to incur interest expense on deposits that funded the non-performing loans that did not earn interest.

Non-interest income decreased by $66,388 to $572,189 in the fourth quarter of 2012, from $638,577 for the same quarter in 2011, principally due to the waiving of service charges on deposits and loan late fees in the aftermath of Hurricane Sandy.

Comparing the fourth quarter of 2012 with the same quarter in 2011, non-interest expense increased by $187,396, totaling $2.1 million for the fourth quarter of 2012. Non-interest expense increased for various business reasons primarily including a $92,858 increase in occupancy expenses due to the one-time remediation costs at a branch damaged in the fourth quarter of 2012 and the retirement of certain fixed assets; and a $59,344 increase in other non-interest expenses due to increased collection costs, ATM fees and other real estate owned costs. We received insurance proceeds of $37,846 in the fourth quarter of 2011, which reduced occupancy expenses in the 2011 quarter. We also had increases of $15,500 in FDIC assessments due mainly to the growth of the deposit base; $13,979 in salary and employee benefit costs due to normal staff raises; and a $12,200 in professional fees because of increased costs and the hiring of a consultant.

For the year ended 2012, pre-tax income decreased to $2,190,314 from $2,628,511 for the year ended 2011, a decline of $438,197, or 16.7%. Net income for the year ended December 31, 2012 was $1,188,200, or basic net income of $0.67 per common share, as compared to a net income of $1,444,451, or basic net income of $0.80 per common share, for the year ended December 31, 2011. The $256,251 reduction in net income for the year ended December 31, 2012 was attributable principally to a $477,705 decrease in net interest income, a $157,387 increase in non-interest expenses and a $43,105 decrease in non-interest income, partially offset by a $240,000 decrease in the provision for loan losses. The increase in non-interest expense of $157,387 was due primarily to a $47,679 increase in professional fees due to higher costs and the hiring of a consultant; a $46,709 increase in occupancy expenses due primarily to 2012 remediation costs at a branch that sustained damage during Hurricane Sandy; a $44,463 increase in legal expenses due to a higher level of collections and a recovery of legal fees in 2011 previously expensed on a settled lawsuit; a $100,838 increase in other non-interest expenses due to OREO costs and increased costs of regulatory filings, loan collection costs and checkbook printing charges; and a $13,250 increase in director fees due to an increase in the number of meetings. These increases were partially offset by an $81,274 decrease in employee salary and benefit costs due to reduced staff, and a $14,278 decrease in computer expenses due to reduced contract expenses. Income tax expense decreased $181,946 due to the $438,197 decrease in pre-tax income.

The net interest margin decreased by 40 basis points from the year ended December 31, 2012 to 3.30% from 3.70% in the same period in 2011. Correspondingly, the spread decreased by 37 basis points from 3.45% to 3.08% between the periods. Average interest earning assets for the year ended December 31, 2012, increased by $14.0 million, or 6.0%, from the same period in 2011. However, the increase in average interest earning assets did not result in a corresponding increase in interest income. We elected to maintain a higher level of lower-yielding short term and overnight investments because of the extreme low yields on interest-earning securities that were available to us for purchase.

Total assets increased to $269.7 million at December 31, 2012, an increase of $27.9 million, or 11.5%, from December 31, 2011. The significant component of this increase was a $29.6 million increase in cash and other liquid assets. Total deposits, including escrow deposits, increased to $240.7 million, an increase of $27.5 million, or 12.9%. We had increases in demand and checking deposits of $9.4 million, $6.1 million in money market accounts, $5.6 million in time deposits, $3.7 million in savings deposits, and $2.8 million in NOW accounts from year end 2011. The Bancorp's Tier 1 capital ratio was 9.97% at December 31, 2012.

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "We have been affected by Hurricane Sandy as many other companies and residences on Staten Island. We waived deposit service charges and loan late fees to our customers that sustained damage due to the super storm. We are in the midst of restoring our Dongan Hills branch which was damaged by Sandy and we should reopen in the next few weeks." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "We have just paid our twenty-first consecutive dividend to our stockholders in 2012 in anticipation of federal tax changes in 2013. We have increased our deposit base by $27.5 million in 2012 and our book value per share stands at $15.55. Hurricane Sandy has hampered our quarterly earnings and its effects will be felt in 2013 as well. We have reached out to our customer base as we look for ways to assist them in their recovery efforts. This is another example of the highest quality personal service that we provide 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 $27.8 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). We announced our sixth branch location in Charleston/Tottenville section of Staten Island, subject to regulatory approval.

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, 2012  
(unaudited)  
             
    December 31,     December 31,  
    2012     2011  
                 
Assets:                
                 
  Cash and cash equivalents   $ 77,728,426     $ 48,107,673  
  Investment securities, available for sale     106,825,570       108,500,489  
  Loans receivable     81,971,571       81,910,990  
    Allowance for loan loss     (1,753,521 )     (1,343,020 )
      Loans receivable, net     80,218,050       80,567,970  
  Bank premises and equipment, net     2,097,356       2,332,727  
  Accrued interest receivable     617,833       582,942  
  Other assets     2,217,136       1,754,654  
        Total assets   $ 269,704,371     $ 241,846,455  
                 
Liabilities and stockholders' equity:                
                 
Liabilities:                
  Deposits:                
    Demand and checking   $ 81,881,173     $ 72,507,555  
    NOW     33,394,785       30,553,003  
    Money market     33,023,373       26,909,220  
    Savings     20,871,593       17,178,525  
    Time     71,452,704       65,894,536  
      Total Deposits     240,623,628       213,042,839  
  Escrow deposits     77,578       180,066  
  Accounts payable and accrued expenses     1,249,194       1,521,290  
      Total liabilities     241,950,400       214,744,195  
                 
                 
Stockholders' equity:                
  Common stock, ($.0001 par value, 10,000,000 shares authorized 1,989,509 issued, 1,785,309 outstanding at December 31, 2012 and 1,797,809 outstanding at December 31, 2011)     199       199  
  Additional paid in capital     9,257,167       9,304,789  
  Retained earnings     19,336,280       18,574,651  
  Treasury stock, at cost (204,200 shares at December 31, 2012 and 191,700 at December 31, 2011)    
(2,068,898
)    
(1,935,596
)
  Unearned ESOP shares     (225,438 )     (394,516 )
  Accumulated other comprehensive gain, net of taxes of $1,226,742 and $1,309,447, respectively    
1,454,661
     
1,552,733
 
                 
    Total stockholders' equity     27,753,971       27,102,260  
                 
      Total liabilities and stockholders' equity   $  269,704,371     $  241,846,455  
                       
                       
   
VSB Bancorp, Inc.  
Consolidated Statements of Operations  
December 31, 2012  
(unaudited)  
                         
    Three months
ended
Dec. 31, 2012
    Three months
ended
Dec. 31, 2011
    Year
ended
Dec. 31, 2012
    Year
ended
Dec. 31, 2011
 
Interest and dividend income:                                
  Loans receivable   $ 1,413,548     $ 1,325,482     $ 5,902,637     $ 5,683,399  
  Investment securities     669,812       847,360       2,988,980       3,797,049  
  Other interest earning assets     36,767       24,734       115,098       66,713  
    Total interest income     2,120,127       2,197,576       9,006,715       9,547,161  
                                 
Interest expense:                                
  NOW     16,846       21,524       79,818       96,761  
  Money market     52,457       55,861       226,515       235,581  
  Savings     17,625       9,237       53,318       46,719  
  Time     101,004       118,645       436,374       479,705  
    Total interest expense     187,932       205,267       796,025       858,766  
                                 
Net interest income     1,932,195       1,992,309       8,210,690       8,688,395  
Provision for loan loss     75,000       450,000       355,000       595,000  
    Net interest income after provision for loan loss     1,857,195       1,542,309       7,855,690       8,093,395  
                                 
Non-interest income:                                
  Loan fees     10,469       8,481       42,532       58,144  
  Service charges on deposits     484,199       530,626       2,110,240       2,122,267  
  Net rental income     16,405       5,779       59,010       38,292  
  Other income     61,116       93,691       217,191       253,375  
    Total non-interest income     572,189       638,577       2,428,973       2,472,078  
                                 
Non-interest expenses:                                
  Salaries and benefits     959,215       945,236       3,821,060       3,902,334  
  Occupancy expenses     425,772       332,914       1,521,501       1,474,792  
  Legal expense     50,706       58,524       259,982       215,519  
  Professional fees     85,100       72,900       338,980       291,301  
  Computer expense     70,110       64,652       253,241       267,519  
  Director fees     62,050       66,175       267,950       254,700  
  FDIC and NYSBD assessments     57,000       41,500       235,500       235,500  
  Other expenses     392,661       333,317       1,396,135       1,295,297  
    Total non-interest expenses     2,102,614       1,915,218       8,094,349       7,936,962  
                                 
      Income before income taxes     326,770       265,668       2,190,314       2,628,511  
                                 
Provision (benefit) for income taxes:                                
  Current     379,980       207,781       1,438,309       1,610,151  
  Deferred     (230,465 )     (104,781 )     (436,195 )     (426,091 )
    Total provision for income taxes     149,515       103,000       1,002,114       1,184,060  
                                 
        Net income   $ 177,255     $ 162,668     $ 1,188,200     $ 1,444,451  
                                 
Basic income per common share   $ 0.10     $ 0.09     $ 0.67     $ 0.80  
                                 
Diluted net income per share   $ 0.10     $ 0.09     $ 0.67     $ 0.80  
                                 
Book value per common share   $ 15.55     $ 15.08     $ 15.55     $ 15.08  
                                 
                                 

Contact Information

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