SOURCE: VSB Bancorp

January 15, 2014 09:30 ET

VSB Bancorp, Inc. Fourth Quarter and Year End 2013 Results of Operations

STATEN ISLAND, NY--(Marketwired - Jan 15, 2014) -  VSB Bancorp, Inc. (OTCQB: VSBN) reported net income of $277,293 for the fourth quarter of 2013, an increase of $100,038, or 56.4%, from the fourth quarter of 2012. The following unaudited figures were released today. Pre-tax income was $511,099 in the fourth quarter of 2013, compared to $326,770 for the fourth quarter of 2012. Net income for the quarter was $277,293, or basic income of $0.16 per common share, compared to a net income of $177,255, or $0.10 basic income per common share, for the quarter ended December 31, 2012. 

The $100,038 increase in net income was due to a $74,822 increase in net interest income, an increase in non-interest income of $87,968, a decrease in non-interest expense of $51,539, partially offset by an increase in the provision for loan losses of $30,000, and an increase in the provision for income taxes of $84,291. The increase in the provision for loan losses was due to a writedown of $280,000 on a non-performing loan, when comparing the fourth quarter of 2013 to the fourth quarter of 2012. Overall, our allowance for loan losses declined to 1.50% of total loans at December 31, 2013, compared to 2.13% at December 31, 2012 as we resolved some of our outstanding problem loans.

The $74,822 increase in net interest income for the fourth quarter of 2013 occurred primarily because our interest income increased by $90,110, and our cost of funds increased by $15,288. The rise in interest income resulted from an increase of $188,832 in interest income from investment securities due to a $44.6 million increase in the average balance between the periods, which was partially offset by a 22 basis point decrease in average yield, as new securities were purchased at market rates significantly below the rates on securities repaid or matured. This decrease was partially offset by a $96,105 decrease in income on loans, due to a $7.2 million decrease in the average balance of loans, partially offset by an 11 basis point increase in yield from the fourth quarter of 2012 to the fourth quarter of 2013. Our average non-performing loans decreased $1.3 million, from $6.2 million in the quarter ended December 31, 2012, to $4.9 million in the fourth quarter of 2013. The level of non-performing loans declined $2.2 million from $6.4 million at December 31, 2012 to $4.2 million at December 31, 2013.

Interest income from other interest earning assets (principally overnight investments) decreased by $2,617 due principally to an $6.4 million decrease in average balance from the fourth quarter of 2012 to the fourth quarter of 2013.

The most significant components of the increase in interest expense was a $8,858 increase in interest on money market deposits due to the $9.2 million increase in the average balance between the periods, even as the average cost declined by 6 basis points, a $6,271 increase in interest on time deposits due to the $9.5 million increase in the average balance between the periods even as the average cost declined by 5 basis points, and a $1,657 increase in the cost of savings accounts due to the $2.0 million increase in the average balance between the periods. The increase in interest expense in these deposit categories was partially offset by a $1,498 decrease in the cost of NOW accounts, as the average cost declined by 2 basis points, while the average balance increase by $1.1 million. Average demand and escrow deposits increased $10.6 million, or 12.6%, from the fourth quarter of 2012. Average demand deposits represent approximately 36% of average total deposits for the fourth quarter of 2013. Average interest-bearing deposits increased by $21.7 million, resulting in an overall $32.4 million increase in average total deposits from the fourth quarter of 2012 to the fourth quarter of 2013. 

The average yield on interest-earning assets declined by 24 basis points, while the average cost of funds declined by 3 basis points, from the fourth quarter of 2012 to the fourth quarter of 2013. The reduction in the yield on assets was principally due to the 22 basis point drop in the yield on investment securities partially offset by an 11 basis point increase in the yield on loans. Also significantly contributing to the reduction in yield is the reduction of loans, our highest yield asset category, as a percentage of average interest earning assets from 31.9% in the fourth quarter of 2012 to 26.0% in the fourth quarter of 2013. 

The decline in the cost of funds was driven principally by a 6 basis point drop in the cost of money market account deposits, a 5 basis point drop in the cost of time deposits and a 2 basis point drop in the cost of NOW deposits. Our interest rate margin decreased by 23 basis points from 2.98% to 2.75% when comparing the fourth quarter of 2013 to the same quarter in 2012, while our interest rate spread decreased by 21 basis points from 2.77% to 2.56%. 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 and the decline in the average balance of loans as a percentage of total earning assets from 31.9% in the 2012 quarter to 26.0% in the 2013 quarter. 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 and loans. 

Non-interest income increased by $87,968 to $660,157 in the fourth quarter of 2013, compared to $572,189 for the same quarter in 2012 due primarily to a recent increase in the non-sufficient fund fee assessed against deposit accounts and the fact that we waived many service charges on deposits and loan late fees in late 2012 in the aftermath of Hurricane Sandy.

Comparing the fourth quarter of 2013 with the same quarter in 2012, non-interest expense decreased by $51,539, and was $2.1 million for the fourth quarter of 2013. Non-interest expense decreased for various business reasons including (i) an $86,837 decrease in occupancy expenses due to reduced fixed asset costs and to insurance payouts on monies expensed in the remediation of damage to our Dongan Hills branch caused by Superstorm Sandy in 2012; and (ii) a $28,734 decrease in salary and benefit costs due to reduced staff and benefit plan costs. These decreases were partially offset by a $46,996 increase in legal fees due to general corporate needs in 2013 and an increase in collection costs on our non-performing loans, a $15,153 increase in computer expenses due to a recent rise in software contract expenses and the replacement of computer hardware, and a $5,500 increase in FDIC and NYSBD assessments due to a larger assessment base (generally average assets minus tangible capital) in 2013.

For the year ended 2013, pre-tax income decreased to $1,938,235 from $2,190,314 for the year ended 2012, a decline of $252,079, or 11.5%. Net income for the year ended December 31, 2013 was $1,051,471, or basic net income of $0.59 per common share, as compared to a net income of $1,188,200, or basic net income of $0.67 per common share, for the year ended December 31, 2012. The $136,729 reduction in net income for the year ended December 31, 2013 was attributable principally to a $470,139 decrease in net interest income, and a $49,030 increase in non-interest expenses. These increases were partially offset by a $197,090 increase in non-interest income, and a $70,000 decrease in the provision for loan losses. The increase in non-interest expense of $49,030 was due primarily to a (i) $143,452 increase in other non-interest expenses due to OREO costs and increased costs of regulatory filings, loan collection costs and checkbook printing charges; (ii) a $55,569 increase in computer expenses due to a recent rise in software contract expenses and the replacement of computer hardware; (iii) a $36,357 increase in legal expenses due to a higher level of collection activity; and (iv) a $20,761 increase in professional fees due to higher costs and the hiring of a consultant. These increases were partially offset by a $188,218 decrease in occupancy expenses due to insurance payouts on monies expensed in the remediation of damage to our Dongan Hills branch from Superstorm Sandy and reduced fixed asset costs, and a $29,725 decrease in director fees due to reduced number of meetings. Income tax expense decreased $115,350 due to the $252,079 decrease in pre-tax income. 

The net interest margin decreased by 55 basis points from the year ended December 31, 2013 to 2.75% from 3.30% in the same period in 2012. Correspondingly, the spread decreased by 53 basis points from 3.08% to 2.55% between the periods. Average interest earning assets for the year ended December 31, 2013, increased by $33.0 million, or 13.3%, from the same period in 2012. However, the increase in average interest earning assets did not result in a corresponding increase in interest income. The average level of lower-yielding short term and overnight investments was higher in 2013 than in 2012. Although we deployed some excess cash into investment securities when the interest rate rose, most of this did not occur until the second half of 2013. We continue to evaluate loan opportunities, investment opportunities and loan participations that are available to us in 2014.

Total assets increased to $297.1 million at December 31, 2013, an increase of $27.4 million, or 10.2%, from December 31, 2012. The significant component of this increase was a $47.8 million increase in investment securities. Total deposits, including escrow deposits, increased to $268.6 million, an increase of $27.9 million, or 11.6%. We had increases in demand and checking deposits of $14.8 million, $9.1 million in money market accounts, $3.2 million in savings deposits, and $1.1 million in time deposits from year end 2012. The Bancorp's Tier 1 capital ratio was 9.17% at December 31, 2013. 

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "2013 presented unique challenges for us as our community started to recover from Superstorm Sandy. We have been able to reduce our non-performing loans, maintain our profitability, and contain our costs while we organically grew the Bank in 2013." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "Our delisting from NASDAQ and trading on the OTCQB has been seamless and transparent. We made this strategic decision in order to reduce our operating expenses and to provide more value to our stockholders. We just paid our twenty-fifth consecutive dividend to our stockholders and our book value per share stands at $15.47. We will continue to leverage off our biggest strength, our customer relationships, which have been forged by delivering to them the highest level of 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 $27.5 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). 

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, 2013  
(unaudited)  
             
    December 31,     December 31,  
    2013     2012  
             
Assets:            
             
  Cash and cash equivalents   $ 65,562,635     $ 77,728,426  
  Investment securities, available for sale     57,517,211       106,825,570  
  Investment securities, held to maturity     97,146,039       -  
  Loans receivable     73,081,310       81,971,571  
  Allowance for loan loss     (1,093,788 )     (1,753,521 )
    Loans receivable, net     71,987,522       80,218,050  
  Bank premises and equipment, net     1,992,527       2,097,356  
  Accrued interest receivable     539,092       617,833  
  Other assets     2,391,082       2,217,136  
      Total assets   $ 297,136,108     $ 269,704,371  
                 
Liabilities and stockholders' equity:                
                 
Liabilities:                
  Deposits:                
    Demand and checking   $ 96,640,569     $ 81,881,173  
    NOW     32,989,791       33,394,785  
    Money market     42,075,301       33,023,373  
    Savings     24,075,184       20,871,593  
    Time     72,538,100       71,452,704  
      Total Deposits     268,318,945       240,623,628  
  Escrow deposits     235,633       77,578  
  Accounts payable and accrued expenses     1,048,782       1,249,194  
      Total liabilities     269,603,360       241,950,400  
                 
                 
  Stockholders' equity:                
  Common stock, ($.0001 par value, 10,000,000 shares authorized 1,989,509 issued, 1,780,109 outstanding at December 31, 2013 and 1,785,309 outstanding at December 31, 2012)    

199
     

199
 
  Additional paid in capital     9,364,950       9,257,167  
  Retained earnings     19,960,933       19,336,280  
  Treasury stock, at cost (209,400 shares at December 31, 2013 and 204,200 at December 31, 2012)    
(2,123,546
)    
(2,068,898
)
  Unearned ESOP shares     (56,360 )     (225,438 )
  Accumulated other comprehensive gain, net of taxes of $326,003 and $1,226,742, respectively    
386,572
     
1,454,661
 
                 
      Total stockholders' equity     27,532,748       27,753,971  
                 
      Total liabilities and stockholders'equity     $ 297,136,108       $ 269,704,371  
                   
   
VSB Bancorp, Inc.  
Consolidated Statements of Operations  
December 31, 2013  
(unaudited)  
                     
    Three months   Three months     Year   Year  
    ended   ended     ended   ended  
    Dec. 31, 2013   Dec. 31, 2012     Dec. 31, 2013   Dec. 31, 2012  
Interest and dividend income:                            
  Loans receivable   $ 1,317,443   $ 1,413,548     $ 5,455,249   $ 5,902,637  
  Investment securities     858,644     669,812       2,952,346     2,988,980  
  Other interest earning assets     34,150     36,767       157,931     115,098  
    Total interest income     2,210,237     2,120,127       8,565,526     9,006,715  
                             
Interest expense:                            
  NOW     15,348     16,846       62,651     79,818  
  Money market     61,315     52,457       218,478     226,515  
  Savings     19,282     17,625       77,245     53,318  
  Time     107,275     101,004       466,601     436,374  
    Total interest expense     203,220     187,932       824,975     796,025  
                             
Net interest income     2,007,017     1,932,195       7,740,551     8,210,690  
Provision for loan loss     105,000     75,000       285,000     355,000  
  Net interest income after provision for loan loss     1,902,017     1,857,195       7,455,551     7,855,690  
                             
Non-interest income:                            
  Loan fees     11,602     10,469       48,734     42,532  
  Service charges on deposits     582,773     484,199       2,234,015     2,110,240  
  Net rental income     16,844     16,405       69,747     59,010  
  Other income     48,938     61,116       273,567     217,191  
    Total non-interest income     660,157     572,189       2,626,063     2,428,973  
                             
Non-interest expenses:                            
  Salaries and benefits     930,481     959,215       3,829,394     3,821,060  
  Occupancy expenses     338,935     425,772       1,333,283     1,521,501  
  Legal expense     97,702     50,706       296,339     259,982  
  Professional fees     82,794     85,100       359,741     338,980  
  Computer expense     85,263     70,110       308,810     253,241  
  Director fees     60,600     62,050       238,225     267,950  
  FDIC and NYSBD assessments     62,500     57,000       238,000     235,500  
  Other expenses     392,800     392,661       1,539,587     1,396,135  
    Total non-interest expenses     2,051,075     2,102,614       8,143,379     8,094,349  
                             
    Income before income taxes     511,099     326,770       1,938,235     2,190,314  
                             
Provision (benefit) for income taxes:                            
  Current     149,974     379,980       574,689     1,438,309  
  Deferred     83,832     (230,465 )     312,075     (436,195 )
    Total provision for income taxes     233,806     149,515       886,764     1,002,114  
                             
      Net income   $ 277,293   $ 177,255     $ 1,051,471   $ 1,188,200  
                             
Basic income per common share   $ 0.16   $ 0.10     $ 0.59   $ 0.67  
                             
Diluted net income per share   $ 0.16   $ 0.10     $ 0.59   $ 0.67  
                             
Book value per common share   $ 15.47   $ 15.55     $ 15.47   $ 15.55  
                             

Contact Information

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