STATEN ISLAND, NY--(Marketwired - Jan 14, 2016) - VSB Bancorp, Inc. (
VSB Bancorp, Inc. ("Bancorp") is implementing a strategy to increase interest income while not taking excessive interest rate risk in the event that market interest rates increase. This strategy comprises a number of components. We have redeployed a portion of our overnight and short term investments into higher yielding securities investments. We are also aggressively seeking to increase our loan portfolio through a combination of outreach efforts in our community, hiring new loan business development officers to produce more loans outside of the Staten Island market, seeking prudent loans through mortgage brokers, and contacting other banks to seek to acquire participating interests in loans that the other banks originate.
These strategies had a positive effect in 2015, as we experienced growth in our core earnings, our loan portfolio and a reduction in our non-performing loans.
The $396,734 increase in net income was principally due to an increase in net interest income of $344,132, a reduction of the provision for loan losses of $50,000, an increase of non-interest income of $48,663, and a decrease in the provision for income taxes of $38,994. The increase in net income was partially offset by the increase in non-interest expense of $85,055. The decrease in the provision for income taxes was a direct result of a $177,000 valuation allowance recorded against the New York State portion of the net deferred tax asset in the fourth quarter of 2014 partially offset by the increase in pre-tax income. The valuation allowance was established due to tax reform passed by New York State in 2014. The tax reform provides banks with certain exclusions on qualified loans that make it likely that we will not be subject to New York State income taxes in future periods. This valuation allowance is reflected as an increase in our provision for income taxes. As our asset mix has shifted to higher yielding loans, our interest income has increased.
Net interest income increased $344,132 for the fourth quarter of 2015 compared to the same period in 2014 because our interest income increased by $390,596, while our cost of funds increased by $46,464. The rise in interest income resulted from increase in interest income on loans of $520,912, or 46.6%, in the fourth quarter of 2015, which included the collection of $62,226 in interest income on non-accrual loans that were paid off in the 2015 quarter. The principal reason for the increase in interest income was a $34.2 million increase in average balance between the periods, was partially offset by a 32 basis point decrease in yield, as we have booked new loans at lower rates due to the more competitive environment. Interest income on investment securities decreased by $134,159 between the periods, as a $14.4 million decrease in average balance was partially offset by a 4 basis point increase in yield. Interest income from other earning assets (principally overnight investments) increased $3,843. Overall, average interest-earning assets increased by $17.9 million from the fourth quarter of 2014 to the fourth quarter of 2015.
Comparing the fourth quarter of 2015 with the same quarter in 2014, non-interest expense increased by $85,055, totaling $2.2 million for the fourth quarter of 2015. Non-interest expense increased for various business reasons principally including: (i) an $104,223 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 $16,500 increase in New York State and New York City franchise tax due recent tax law changes. The increases were partially offset by a reduction of legal expenses of $47,934 due to lower collection costs and the recovery of legal fees previously expensed on a charged-off loan.
Total assets increased to $306.4 million at December 31, 2015, an increase of $25.4 million, or 9.0%, from December 31, 2014. The significant component of this increase was a $36.9 million increase in loans, which was partially offset by a $8.0 million decrease in investment securities and a $3.3 million decrease in cash and other liquid assets. Our non-performing loans decreased from $4.6 million at December 31, 2014 to $1.9 million at December 31, 2015, due primarily to the sale of $1.2 million of non-performing loans, the payoff of $1.5 million of non-performing loans and the foreclosure of a $255,000 loan in the second quarter of 2015. Total OREO stood at $570,000 at December 31, 2015. Total deposits, including escrow deposits, increased to $276.3 million, an increase of $24.9 million, or 10.0% during 2015. The increase was primarily attributable to increases of $15.7 million in money market accounts, $5.5 million in demand and checking deposit, $4.2 million in NOW accounts, and $3.2 million in time deposits, partially offset by a $3.5 million decrease in saving accounts.
Our total stockholders' equity increased by $284,801 during the twelve months of 2015, principally due to $1.2 million in retained earnings and $100,125 of amortization of our ESOP loan. These increases were substantially offset as we repurchased 60,647 shares of common stock during 2015, resulting in an increase in treasury stock of $712,191. We are currently in our fourth stock repurchase program. The Bancorp's Tier 1 capital ratio was 8.99% at December 31, 2015. Book value per common share increased from $15.36 at year end 2014 to $16.00 at December 31, 2015.
For 2015, as a whole, pre-tax income increased to $2,783,614 from $2,515,145 for 2014, a rise of $268,469, or 10.7%. Net income for 2015 was $1,630,703, or basic net income of $0.93 per common share, as compared to a net income of $1,272,494, or basic net income of $0.72 per common share, for 2014. The $358,209 increase in net income for 2015 over 2014 was principally due to an increase in net interest income of $642,897, an increase in non-interest income of $148,604, a reduction in the provision for loan losses of $115,000, and a decrease in the provision for income taxes of $89,740. The increase in net income was partially offset by an increase in non-interest expense of $638,032.
Net interest income increased principally due to an increase in the average balance of interest-earning assets of $7.8 million and a shift in the mix of those assets towards higher yielding loans. The average balance of loans increased by $23.1 million from 2014 to 2015, amplified by a $7.8 million increase in the average balance of investment securities. Other interest earning assets, principally low-yielding overnight investments, decreased by an average of $23.1 million. This shift in mix resulted in a 16 basis point increase in our average yield on interest earning assets from 2014 to 2015.
The increase in non-interest expense of $638,032 was due primarily to: (i) a $347,668 increase in other expenses due to recording of $153,256 in expenses related to a non-performing loan sale in the second quarter of 2015, a $66,000 increase in New York State and New York City franchise tax due to the recent tax law changes, a $49,335 increase in loan servicing fees paid on participation loans, a $27,622 increase in ATM expenses due to increased customer base, and a $14,900 loss on a fraud; and (ii) a $317,391 increase in salary and benefits due to increased staff. These increases were partially offset by a $80,504 decrease in legal fees due to a recovery of a charged-off loan which the legal fees had been expensed and the settlement received on a litigation pertaining to a potential branch site. Income tax expense decreased $89,740 due to the reduction of our effective tax rate to 35% partially offset by an increase in the valuation allowance recorded against the New York City portion of the net deferred tax asset, both as a result of the recently enacted tax law changes. The effective tax rate has dropped to approximately 35% and we expect it to remain at that level in the future based upon our current income profile, assuming no further changes in tax laws. The net interest margin increased by 15 basis points to 3.06% for the year ended December 31, 2015 from 2.91% in the same period in 2014, as the average balance of our loans grew by 33%, and the level of overnight deposits was reduced by 55%. Average interest earning assets for the year ended December 31, 2015 increased by $7.8 million, or 2.7%, from the same period in 2014.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "Our net income grew in 2015 due to the shift in our asset mix to higher yielding loans. We have increased our geographic reach and we have two dedicated business development officers that are focusing on new loan opportunities. We continue to evaluate new loan participants as another avenue to increase our loan portfolio." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "Our strategy is bearing fruit as we have seen our fourth quarter ROA and ROE rise to 0.65% and 7.18%, respectively. We continue to hold our underwriting standards in this competitive market. We paid our thirty-third consecutive dividend to our stockholders and now our book value per share stands at $16.00. We are focused on stockholder value, which has benefited from the growth of our net income, the fourth buyback program and the payment of cash dividends."
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 $28.8 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).
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, 2015 | ||||||||||||
| (unaudited) | ||||||||||||
| December 31, | December 31, | |||||||||||
| 2015 | 2014 | |||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 14,845,096 | $ | 18,129,166 | ||||||||
| Investment securities, available for sale | 58,096,583 | 64,759,836 | ||||||||||
| Investment securities, held to maturity | 120,585,784 | 121,929,954 | ||||||||||
| Loans receivable | 104,341,670 | 67,432,775 | ||||||||||
| Allowance for loan loss | (1,290,563 | ) | (958,966 | ) | ||||||||
| Loans receivable, net | 103,051,107 | 66,473,809 | ||||||||||
| Bank premises and equipment, net | 1,528,914 | 1,839,292 | ||||||||||
| Accrued interest receivable | 743,375 | 668,631 | ||||||||||
| Bank owned life insurance | 5,194,945 | 5,068,719 | ||||||||||
| Other assets | 2,361,325 | 2,169,514 | ||||||||||
| Total assets | $ | 306,407,129 | $ | 281,038,921 | ||||||||
| Liabilities and stockholders' equity: | ||||||||||||
| Liabilities: | ||||||||||||
| Deposits: | ||||||||||||
| Demand and checking | $ | 101,659,731 | $ | 96,170,194 | ||||||||
| NOW | 31,428,768 | 27,240,106 | ||||||||||
| Money market | 60,912,775 | 45,245,094 | ||||||||||
| Savings | 21,136,015 | 24,604,737 | ||||||||||
| Time | 61,110,374 | 57,908,195 | ||||||||||
| Total Deposits | 276,247,663 | 251,168,326 | ||||||||||
| Escrow deposits | 56,600 | 208,803 | ||||||||||
| Accounts payable and accrued expenses | 1,303,575 | 1,147,302 | ||||||||||
| Total liabilities | 277,607,838 | 252,524,431 | ||||||||||
| Stockholders' equity: | ||||||||||||
| Common stock, ($.0001 par value, 10,000,000 shares authorized 2,078,509 issued, 1,799,398 outstanding at December 31, 2015 and 1,856,845 at December 31, 2014) | 208 | 208 | ||||||||||
| Additional paid in capital | 10,512,041 | 10,487,210 | ||||||||||
| Retained earnings | 22,021,007 | 20,806,715 | ||||||||||
| Treasury stock, at cost (279,811 shares at December 31, 2015 and 221,664 at December 31, 2014) | (2,976,175 | ) | (2,263,984 | ) | ||||||||
| Unearned ESOP shares | (834,375 | ) | (934,500 | ) | ||||||||
| Accumulated other comprehensive income, net of taxes of $41,238 and $353,216, respectively | 76,585 | 418,841 | ||||||||||
| Total stockholders' equity | 28,799,291 | 28,514,490 | ||||||||||
| Total liabilities and stockholders' equity | $ | 306,407,129 | $ | 281,038,921 | ||||||||
| VSB Bancorp, Inc. | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| December 31, 2015 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months | Three months | Year | Year | |||||||||||||
| ended | ended | ended | ended | |||||||||||||
| Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |||||||||||||
| Interest and dividend income: | ||||||||||||||||
| Loans receivable | $ | 1,638,375 | $ | 1,117,463 | $ | 6,050,577 | $ | 5,272,808 | ||||||||
| Investment securities | 896,980 | 1,031,139 | 3,563,017 | 3,602,109 | ||||||||||||
| Other interest earning assets | 18,624 | 14,781 | 49,715 | 94,533 | ||||||||||||
| Total interest income | 2,553,979 | 2,163,383 | 9,663,309 | 8,969,450 | ||||||||||||
| Interest expense: | ||||||||||||||||
| NOW | 14,575 | 11,182 | 50,574 | 49,733 | ||||||||||||
| Money market | 106,231 | 63,024 | 321,200 | 237,779 | ||||||||||||
| Savings | 18,399 | 26,747 | 90,172 | 108,714 | ||||||||||||
| Time | 79,119 | 70,907 | 295,250 | 310,008 | ||||||||||||
| Total interest expense | 218,324 | 171,860 | 757,196 | 706,234 | ||||||||||||
| Net interest income | 2,335,655 | 1,991,523 | 8,906,113 | 8,263,216 | ||||||||||||
| Provision for loan loss | - | 50,000 | 230,000 | 345,000 | ||||||||||||
| Net interest income after provision for loan loss | 2,335,655 | 1,941,523 | 8,676,113 | 7,918,216 | ||||||||||||
| Non-interest income: | ||||||||||||||||
| Loan fees | 8,489 | (6,384 | ) | 56,251 | 27,489 | |||||||||||
| Service charges on deposits | 560,796 | 568,225 | 2,224,935 | 2,319,738 | ||||||||||||
| Net rental income | 15,742 | 16,320 | 72,288 | 60,290 | ||||||||||||
| Other income | 129,814 | 88,017 | 474,475 | 271,828 | ||||||||||||
| Total non-interest income | 714,841 | 666,178 | 2,827,949 | 2,679,345 | ||||||||||||
| Non-interest expenses: | ||||||||||||||||
| Salaries and benefits | 1,100,880 | 996,657 | 4,210,949 | 3,893,558 | ||||||||||||
| Occupancy expenses | 337,494 | 327,583 | 1,383,643 | 1,370,506 | ||||||||||||
| Legal expense | 26,141 | 74,075 | 225,933 | 330,028 | ||||||||||||
| Professional fees | 89,408 | 116,311 | 403,486 | 389,622 | ||||||||||||
| Computer expense | 97,390 | 95,120 | 376,973 | 354,806 | ||||||||||||
| Director fees | 60,500 | 54,675 | 242,150 | 232,750 | ||||||||||||
| FDIC and NYSBD assessments | 66,000 | 66,000 | 264,000 | 245,500 | ||||||||||||
| Other expenses | 377,554 | 339,891 | 1,613,314 | 1,265,646 | ||||||||||||
| Total non-interest expenses | 2,155,367 | 2,070,312 | 8,720,448 | 8,082,416 | ||||||||||||
| Income before income taxes | 895,129 | 537,389 | 2,783,614 | 2,515,145 | ||||||||||||
| Provision (benefit) for income taxes: | ||||||||||||||||
| Current | 256,473 | (42,883 | ) | 863,000 | 810,044 | |||||||||||
| Deferred | 57,005 | 395,355 | 289,911 | 432,607 | ||||||||||||
| Total provision for income taxes | 313,478 | 352,472 | 1,152,911 | 1,242,651 | ||||||||||||
| Net income | $ | 581,651 | $ | 184,917 | $ | 1,630,703 | $ | 1,272,494 | ||||||||
| Basic net income per common share | $ | 0.34 | $ | 0.10 | $ | 0.93 | $ | 0.72 | ||||||||
| Diluted net income per share | $ | 0.34 | $ | 0.10 | $ | 0.93 | $ | 0.72 | ||||||||
| Book value per common share | $ | 16.00 | $ | 15.36 | $ | 16.00 | $ | 15.36 | ||||||||
Contact Information:
Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100