STATEN ISLAND, NY--(Marketwire - October 15, 2008) - VSB Bancorp, Inc. (
The $46,425 increase in net income was attributable to an increase in investment interest income of $153,571, an increase in non-interest income of $64,328, and a decrease in interest expense on time deposits of $254,513. These factors were partially offset by a decrease in interest income on loans of $223,835, a decrease in interest income from other interest earning assets of $248,954, an increase in income tax expense of $34,015 and an increase in the provision for loan losses of $55,000.
The reduction in interest income on loans is attributable to a rapid decline of the prime rate, which negatively affected the yield on our loans. After remaining steady for approximately 15 months, the prime rate declined 3.25% from September 2007 to September 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. Non-interest expense was stable but the components had some volatility. The reduction in salary and benefits of $70,259 was due, in part to the retirement of the former president and reduced incentive and ESOP compensation expense. This reduction was primarily offset by a $24,402 increase in occupancy expense, mostly due to utility increases, a $24,703 increase in other expenses due to higher advertising expenses, and a $15,555 increase in legal fees due to more collection costs.
Total assets increased to $206.9 million at September 30, 2008, an increase of $3.1 million, or 1.5%, from December 31, 2007. This increase occurred despite our repayment of $5.2 million in subordinated debt during 2008. Total deposits, including escrow deposits, increased to $183.3 million, an increase of $6.9 million, or 3.9%, during the third quarter of 2008. The Bancorp's Tier 1 capital ratio was 10.66% at September 30, 2008. We redeemed our trust preferred securities and repaid the subordinate debt on August 8, 2008, the first available redemption date.
Average interest-earning assets and average loans increased by $3.5 million and $4.7 million, respectively, from the third quarter of 2007 to the third quarter of 2008. Average demand deposits, an interest free source of funds for the Bancorp to invest, increased $4.5 million from the third quarter of 2007 to approximately 35% of average total deposits for the third quarter of 2008. Average interest-bearing deposits decreased by $1.0 million, resulting in an overall $3.5 million increase in total deposits from the third quarter of 2007 to the third quarter of 2008. The Company's interest rate spread and interest rate margin were 3.84% and 4.48%, respectively, for the quarter ended September 30, 2008 as compared to 3.46% and 4.45%, respectively, for the quarter ended September 30, 2007. Non-interest income increased $64,328 to $603,965 in the third 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 $1.8 million in the third quarter of 2008.
Pre-tax income decreased to $2,475,516 for the first nine months of 2008, as compared to $2,872,068 for 2007, a decrease of $396,552, or 13.8%. Net income for the nine months ended September 30, 2008 was $1,330,924, or basic net income of $0.72 per common share, as compared to a net income of $1,534,071, or basic net income of $0.84 per common share, for the nine months ended September 30, 2007. The $203,147 reduction in net income for the nine months ended September 30, 2008 was attributable to an increase in the provision for loan loss of $170,000, and a decrease in interest income of $1,088,987. The yield on average loans dropped 221 basis points, which caused an 84 basis point drop in our overall average yield on interest-earning assets. The drop in loan yield was due to the 3.25% reduction in the prime rate from September 2007. The decrease in loan income, which totaled $880,000 when comparing the two periods, was combined with a $584,000 decrease in income on short term investments. These two declines were partially offset by a decrease in interest expense of $756,116 due to a 126 basis point drop in the average cost of time deposits, an increase in interest income from investments securities of $375,072 due to the increase in average investment security balance of $12.4 million and an increase in non-interest income of $177,908. The $71,589 increase in non-interest expense is directly attributable to (i) an increase in legal fees of $136,975 because in 2007 we received reimbursement from our insurance company of legal fees previously expensed, (ii) an increase of $104,452 in other expenses, due to introduction of our online ATMs and debit cards, and (iii) a $60,867 increase in occupancy expenses due to higher utility bills and real estate taxes. These increases were partially offset by a decrease in salary and benefit expense of $246,906, due to reduced salary, incentive and ESOP compensation expense. Income tax expense also decreased $193,405 between the periods as pre-tax income decreased.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "The recent turmoil in the financial markets has further damaged the economy and will make our future earning prospects more challenging. Despite the current economic environment, we were able to increase our interest margin and spread from the second to the third quarter of 2008. By redeeming our trust preferred securities, we reduced our overall interest expense. Both of these factors were instrumental in our quarter vs. quarter increase in net income." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated "We recently announced our first stock buyback program where we have authorized the repurchase of up to 100,000 shares of our common stock. We paid our fourth quarterly dividend of $0.06 per common share for stockholders of record on September 19, 2008. We are able to institute these capital strategies because of the financial strength of our Company. Our motto of 'making the Bank fit your business,' and our capacity to lend in this tough environment demonstrate the philosophy that has made Victory the premier business bank on the 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 $22.1 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
September 30, 2008
(unaudited)
September 30, December 31,
2008 2007
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Assets:
Cash and cash equivalents $ 15,609,220 $ 17,696,879
Investment securities, available for sale 120,743,189 117,814,117
Loans receivable 64,925,020 62,373,078
Allowance for loan loss (942,550) (927,161)
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Loans receivable, net 63,982,470 61,445,917
Bank premises and equipment, net 3,787,631 3,931,679
Accrued interest receivable 765,340 799,249
Deferred taxes 1,296,799 991,297
Other assets 722,401 1,114,431
------------- -------------
Total assets $ 206,907,050 $ 203,793,569
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Liabilities and stockholders' equity:
Liabilities:
Deposits:
Demand and checking $ 60,884,999 $ 62,525,053
NOW 17,961,859 16,931,113
Money market 19,987,754 20,534,721
Savings 13,128,463 11,349,111
Time 70,910,856 64,738,564
------------- -------------
Total Deposits 182,873,931 176,078,562
Escrow deposits 399,486 255,881
Subordinated debt - 5,155,000
Accounts payable and accrued expenses 1,457,802 1,420,321
------------- -------------
Total liabilities 184,731,219 182,909,764
------------- -------------
Stockholders' equity:
Common stock, ($.0001 par value, 3,000,000
shares authorized, 1,923,884 issued and
outstanding at September 30, 2008 and
1,900,509 issued and outstanding
December 31, 2007) 192 190
Additional paid in capital 9,219,384 9,107,119
Retained earnings 14,213,337 13,226,395
Unallocated ESOP shares (944,019) (1,070,827)
Accumulated other comprehensive loss, net
of taxes of $269,271 and $330,668,
respectively (313,063) (379,072)
------------- -------------
Total stockholders' equity 22,175,831 20,883,805
------------- -------------
Total liabilities and stockholders'
equity $ 206,907,050 $ 203,793,569
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VSB Bancorp, Inc.
Consolidated Statements of Operations
September 30, 2008
(unaudited)
Three months Three months Nine months Nine months
ended ended ended ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
------------- ------------- ------------- -------------
Interest and
dividend
income:
Loans
receivable $ 1,276,288 $ 1,500,123 $ 3,693,696 $ 4,573,820
Investment
securities 1,474,099 1,320,528 4,289,758 3,914,686
Other
interest
earning
assets 48,314 297,268 225,159 809,094
------------- ------------- ------------- -------------
Total
interest
income 2,798,701 3,117,919 8,208,613 9,297,600
Interest
expense:
NOW 31,612 37,940 96,545 96,689
Money market 64,094 137,741 232,695 321,150
Savings 19,754 24,531 56,927 74,314
Subordinated
debt 36,606 89,040 214,685 267,119
Time 365,462 619,975 1,265,289 1,862,985
------------- ------------- ------------- -------------
Total
interest
expense 517,528 909,227 1,866,141 2,622,257
Net interest
income 2,281,173 2,208,692 6,342,472 6,675,343
Provision
(benefit) for
loan loss 40,000 (15,000) 125,000 (45,000)
------------- ------------- ------------- -------------
Net
interest
income
after
provision
for loan
loss 2,241,173 2,223,692 6,217,472 6,720,343
Non-interest
income:
Loan fees 11,778 15,658 55,286 63,658
Service
charges on
deposits 544,686 457,023 1,570,203 1,319,422
Net rental
income 13,796 (2,568) 23,888 (876)
Other income 33,705 69,524 144,724 233,989
------------- ------------- ------------- -------------
Total
non-
interest
income 603,965 539,637 1,794,101 1,616,193
Non-interest
expenses:
Salaries and
benefits 866,644 936,903 2,645,315 2,892,221
Occupancy
expenses 376,699 352,297 1,092,889 1,032,022
Legal expense 67,939 52,384 187,725 50,750
Professional
fees 62,900 56,700 186,400 153,000
Computer
expense 63,772 64,604 176,076 201,975
Director fees 54,200 52,600 169,150 160,450
Other
expenses 343,576 318,873 1,078,502 974,050
------------- ------------- ------------- -------------
Total
non-
interest
expenses 1,835,730 1,834,361 5,536,057 5,464,468
Income
before
income
taxes 1,009,408 928,968 2,475,516 2,872,068
------------- ------------- ------------- -------------
Provision
(benefit) for
income taxes:
Current 777,900 381,296 1,511,490 1,229,835
Deferred (311,196) 51,393 (366,898) 108,162
------------- ------------- ------------- -------------
Total
provision
for income
taxes 466,704 432,689 1,144,592 1,337,997
Net
income $ 542,704 $ 496,279 $ 1,330,924 $ 1,534,071
============= ============= ============= =============
Basic income
per common
share $ 0.29 $ 0.27 $ 0.72 $ 0.84
============= ============= ============= =============
Diluted net
income per
share $ 0.29 $ 0.26 $ 0.71 $ 0.82
============= ============= ============= =============
Book value per
common share $ 11.53 $ 10.52 $ 11.53 $ 10.52
============= ============= ============= =============
Contact Information: Contact Name: Ralph M. Branca President & CEO (718) 979-1100