SOURCE: VSB Bancorp

July 08, 2008 18:51 ET

VSB Bancorp, Inc. Second Quarter 2008 Results of Operations

STATEN ISLAND, NY--(Marketwire - July 8, 2008) - VSB Bancorp, Inc. (NASDAQ: VSBN) reported net income of $426,275 for the second quarter of 2008, a 16.1% decrease from the second quarter of 2007. The following unaudited figures were released today. Pre-tax income was $793,067 in the second quarter of 2008, as compared to $951,258 for the second quarter of 2007, a decrease of $158,191, or 16.6%. Net income for the quarter was $426,275, or basic income of $0.23 per common share, as compared to a net income of $508,021, or $0.28 basic income per common share, for the quarter ended June 30, 2007.

The $81,746 decrease in net income was attributable to a decrease in net interest income of $104,006, due primarily to a decrease in interest income from loans of $328,427, a decrease in interest income from other interest earning assets of $190,209 and an increase in the provision for loan losses of $55,000. The decrease in net income was partially offset by an increase in investment income of $137,664, an increase in non-interest income of $89,041, a decrease in income tax expense of $76,445 and the decrease of interest expense of time deposits of $247,494.

The reduction in interest income is attributable to a rapid decline of the fed funds and the prime rates, which negatively affected the yield on our loans, and other interest earning assets income. After remaining steady for approximately 15 months, the prime rate declined 3.25% from September 2007 to June 2008. The reductions in the prime rate have caused our prime based loans to reach their interest rate floors. These floors have helped to stabilize the interest income from the loan portfolio. The $88,226 increase in non-interest expense is directly attributable to an increase in legal fees of $81,860, due in part to the reimbursement in 2007 from our insurance company of legal fees previously expensed, an increase in occupancy expenses of $16,716, and an increase in other expenses of $52,932, due primarily to a recovery in 2007 of a reserve previously expensed. The increase in non-interest expense was partially offset by a decrease in salary and benefits of $69,725, which was due, in part to the retirement of the former president, and reduced incentive and ESOP compensation expense.

Total assets increased to $217.2 million at June 30, 2008, an increase of $13.4 million, or 6.6%, from December 31, 2007. Total deposits increased to $189.1 million, an increase of $12.7 million, or 7.2%, during the second quarter of 2008. The Bancorp's Tier 1 capital ratio of 12.76% includes the effect, as Tier 1 capital, of $5.0 million (25% of its Tier 1 capital) from the proceeds of a $5 million trust preferred securities issuance in August 2003. We have given notice that we will be redeeming the trust preferred securities on August 8, 2008, the first available redemption date.

Average interest-earning assets and average loans increased by $5.9 million and $1.8 million, respectively, from the second quarter of 2007 to the second quarter of 2008. Average demand deposits, an interest free source of funds for the Bancorp to invest, were approximately 34% of average total deposits for the second quarter of 2008, approximately the same level as in the second quarter of 2007. Average deposits increased by $1.9 million from the second quarter of 2007 to the second quarter of 2008. The Company's interest rate spread and interest rate margin were 3.50% and 4.20%, respectively, for the quarter ending June 30, 2008 as compared to 3.49% and 4.51%, respectively, for the quarter ended June 30, 2007. Non-interest income increased $89,041 to $624,234 in the second quarter of 2008 due in part to the increase in the per item charge for insufficient fund transactions that went into effect in March 2008. Non-interest expense totaled $1.9 million in the second quarter of 2008.

Pre-tax income decreased to $1,466,108 for the first six months of 2008, as compared to $1,943,100 for 2007, a decrease of $476,992, or 24.6%. Net income for the six months ended June 30, 2008 was $788,220, or basic net income of $0.43 per common share, as compared to a net income of $1,037,792, or basic net income of $0.57 per common share, for the six months ended June 30, 2007. The $249,572 reduction in net income for the six months ended June 30, 2008 was attributable to an increase in the provision for loan loss of $115,000, and a decrease in interest income of $769,769 as the yield on average interest earning assets dropped 88 basis points, with the yield on loans dropping 224 basis points. The drop in yields was due to 325 basis point reduction in the prime and fed funds rate from June 2007. The decrease was partially offset by a decrease in interest expense of $364,417 due to a 105 basis point drop in the cost of time deposits, an increase in interest income from investments securities of $221,501 due to the increase in average investment security balance of $8.2 million and an increase in non-interest income of $113,580. Income tax expense also decreased $227,420 between the periods as pre-tax income decreased.

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "Our interest margin and spread have leveled off after the recent drops in short term rates, including the Prime Rate. Our quarterly net income increased $64,330 from the first quarter of 2008. This is because our investment portfolio grew in the second quarter of 2008, at rates comparable to the overall yield on our investment portfolio due to the increased spreads and yields on investments that we purchased during 2008." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated "Our interest rate margin was 4.15% for the first half of 2008, which has helped soften the impact of the current economic climate. We paid our third quarterly dividend of $0.06 per common share for stockholders of record on June 20, 2008. We have been delivering on our motto of 'making the Bank fit your business,' to the Island's professional and business communities."

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 $21.6 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, 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
                              June 30, 2008
                               (unaudited)


                                                 June 30,     December 31,
                                                   2008           2007
                                              -------------  -------------
Assets:

  Cash and cash equivalents                   $  23,007,861  $  17,696,879
  Investment securities, available for sale     125,126,744    117,814,117
  Loans receivable                               63,111,018     62,373,078
  Allowance for loan loss                          (859,459)      (927,161)
                                              -------------  -------------
    Loans receivable, net                        62,251,559     61,445,917
  Bank premises and equipment, net                3,794,967      3,931,679
  Accrued interest receivable                       732,044        799,249
  Deferred taxes                                  1,193,766        991,297
  Other assets                                    1,075,832      1,114,431
                                              -------------  -------------
      Total assets                            $ 217,182,773  $ 203,793,569
                                              =============  =============

Liabilities and stockholders' equity:

Liabilities:
  Deposits:
    Demand and checking                       $  66,517,191  $  62,525,053
    NOW                                          19,129,591     16,931,113
    Money market                                 20,414,574     20,534,721
    Savings                                      12,483,717     11,349,111
    Time                                         70,323,445     64,738,564
                                              -------------  -------------
      Total Deposits                            188,868,518    176,078,562
 Escrow deposits                                    192,017        255,881
 Subordinated debt                                5,155,000      5,155,000
 Accounts payable and accrued expenses            1,389,553      1,420,321
                                              -------------  -------------
      Total liabilities                         195,605,088    182,909,764
                                              -------------  -------------

Stockholders' equity:
  Common stock, ($.0001 par value, 3,000,000
   shares authorized, 1,908,634 issued and
   outstanding at June 30, 2008 and 1,900,509
   issued and outstanding December 31, 2007)            191            190
  Additional paid in capital                      9,124,796      9,107,119
  Retained earnings                              13,786,066     13,226,395
  Unallocated ESOP shares                          (986,289)    (1,070,827)
  Accumulated other comprehensive loss, net
   of taxes of $302,760 and $330,668,
   respectively                                    (347,079)      (379,072)
                                              -------------  -------------

    Total stockholders' equity                   21,577,685     20,883,805
                                              -------------  -------------

      Total liabilities and stockholders'
       equity                                 $ 217,182,773  $ 203,793,569
                                              =============  =============





                            VSB Bancorp, Inc.
                  Consolidated Statements of Operations
                              June 30, 2008
                               (unaudited)


                        Three months Three months  Six months   Six months
                           ended        ended        ended        ended
                          June 30,     June 30,     June 30,     June 30,
                            2008         2007         2008         2007
                        -----------  -----------  -----------  -----------
Interest and dividend
 income:
  Loans receivable      $ 1,172,917  $ 1,501,344  $ 2,417,408  $ 3,073,697
  Investment securities   1,431,362    1,293,698    2,815,659    2,594,158
  Other interest
   earning assets            74,552      264,761      176,845      511,826
                        -----------  -----------  -----------  -----------
    Total interest
     income               2,678,831    3,059,803    5,409,912    6,179,681

Interest expense:
  NOW                        32,702       29,960       64,933       58,749
  Money market               72,509       97,559      168,601      183,409
  Savings                    18,191       25,355       37,173       49,783
  Subordinated debt          89,039       89,039      178,079      178,079
  Time                      380,380      627,874      899,827    1,243,010
                        -----------  -----------  -----------  -----------
    Total interest
     expense                592,821      869,787    1,348,613    1,713,030

Net interest income       2,086,010    2,190,016    4,061,299    4,466,651
Provision (benefit) for
 loan loss                   55,000            -       85,000      (30,000)
                        -----------  -----------  -----------  -----------
    Net interest income
     after provision
     for loan loss        2,031,010    2,190,016    3,976,299    4,496,651

Non-interest income:
  Loan fees                  21,285       20,532       43,508       48,000
  Service charges on
   deposits                 545,902      445,491    1,025,517      862,399
  Net rental income /
   (loss)                    11,103      (13,121)      10,092        1,692
  Other income               45,944       82,291      111,019      164,465
                        -----------  -----------  -----------  -----------
    Total non-interest
     income                 624,234      535,193    1,190,136    1,076,556

Non-interest expenses:
  Salaries and benefits     868,263      937,988    1,778,671    1,955,318
  Occupancy expenses        358,466      341,750      716,190      679,725
  Legal expense /
   (recovery)                65,700      (16,160)     119,786       (1,634)
  Professional fees          62,100       44,700      123,500       96,300
  Computer expense           57,198       70,155      112,304      137,371
  Director fees              57,700       55,700      114,950      107,850
  Other expenses            392,750      339,818      734,926      655,177
                        -----------  -----------  -----------  -----------
    Total non-interest
     expenses             1,862,177    1,773,951    3,700,327    3,630,107

      Income before
       income taxes         793,067      951,258    1,466,108    1,943,100
                        -----------  -----------  -----------  -----------

Provision (benefit) for
 income taxes:
  Current                   400,690      405,809      733,590      848,539
  Deferred                  (33,898)      37,428      (55,702)      56,769
                        -----------  -----------  -----------  -----------
    Total provision
     for income taxes       366,792      443,237      677,888      905,308

        Net income      $   426,275  $   508,021  $   788,220  $ 1,037,792
                        ===========  ===========  ===========  ===========

Basic income per common
 share                  $      0.23  $      0.28  $      0.43  $      0.57
                        ===========  ===========  ===========  ===========

Diluted net income per
 share                  $      0.23  $      0.27  $      0.42  $      0.55
                        ===========  ===========  ===========  ===========

Book value per common
 share                  $     11.31  $      9.84  $     11.31  $      9.84
                        ===========  ===========  ===========  ===========

Contact Information

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