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VSB Bancorp: VSB Bancorp, Inc. First Quarter 2009 Results of Operations

^{Published on 2009-04-14 10:21:26, Last Modified on 2009-04-14 10:24:30 - Market Wire}
 

STATEN ISLAND, NY--(Marketwire - April 14, 2009) - VSB Bancorp, Inc. (NASDAQ: [ VSBN ]), the holding company for Victory State Bank, reported net income of $373,051 for the first quarter of 2009, a 3.1% increase from the first quarter of 2008. The following unaudited figures were released today. Pre-tax income was $692,824 in the first quarter of 2009, as compared to $673,041 for the first quarter of 2008, an increase of $19,783, or 2.9%. Net income for the 2009 quarter was $373,051, or basic income of $0.21 per common share, as compared to a net income of $361,945, or $0.20 basic income per common share, for the quarter ended March 31, 2008.

The $11,106 increase in net income for the first quarter of 2009 was attributable primarily to a more rapid decline in our cost of funds than the decline in our asset yields as market interest rates declined. We experienced a decrease in interest expense of $344,844, the most significant components of which were a $208,895 decrease in interest on time deposits and an $89,040 decrease in interest on subordinated debt because we repaid the subordinated debt on August 8, 2008. In contrast, interest income declined by only $13,015 as a $97,552 decline in interest income from other interest earning assets (principally overnight investments) was partially offset by $88,805 of interest income representing interest owed for a prior period that was paid during the first quarter of 2009 on a non-accrual loan that was reinstated to accrual status. We also had an increase in the provision for loan losses of $245,000 due to a higher level of charge-offs -- $350,023 for the 2009 quarter as compared to $93,730 in the same period in 2008 -- and a further deterioration of the real estate market and local economy. We are aggressively collecting these charged-off loans in an effort to recover these amounts.

Without the benefit of the interest received in connection with the non-accrual loan reinstatement, interest income on loans remained stable. The average yield declined 33 basis points due to the decline of the prime rate, but that was partially offset by a $4.9 million increase in average loan balances. The prime rate declined from 7.25% to 5.25% during the first quarter of 2008 and continued to decline throughout the rest of 2008 so that the prime rate was at 3.25% at year end 2008 and stayed at that level throughout the first quarter of 2009. 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 and were a significant contributor to moderating the decline in interest income. Our investment securities portfolio had similar income stability as our loans, as the 14 basis point reduction in average yield was offset by the $4.4 million increase in average balance in the 2009 quarter.

Comparing the first quarter of 2009 with the same quarter in 2008, non-interest expense increased by $114,313, totaling $2.0 million for the 2009 quarter. The principal increase was a $29,000 increase in FDIC insurance premiums due to an increase in FDIC assessment rates. The FDIC increased its insurance premium rates to banks in 2009 due to losses to the FDIC insurance fund as a result of bank failures during 2008, coupled with additional losses that the FDIC projected in 2009 due to additional bank failures. Recently, the FDIC proposed a 20 basis point special assessment, based on June 30, 2009 deposits, payable on September 30, 2009. If fully implemented, our special assessment would be almost $400,000. The other categories of non-interest expenses increased for various business reasons including increased utility costs, increased costs of collection, and the implementation of an advertising campaign.

Non-interest income increased $47,267 to $613,169 in the first quarter of 2009 due in part to the increase in the per item charge for insufficient fund transactions that went into effect in March 2008.

Total assets increased to $222.7 million at March 31, 2009, an increase of $10.0 million, or 4.7%, from December 31, 2008. Total deposits, including escrow deposits, increased to $197.0 million, an increase of $8.9 million, or 4.7%. The mix of our deposits also changed as NOW increased by $16.8 million and time deposits decreased by $11.8 million from year end 2008. The Bancorp's Tier 1 capital ratio was 10.51% at March 31, 2009.

Average interest-earning assets and average loans increased by $14.0 million and $4.9 million, respectively, from the first quarter of 2008 to the first quarter of 2009. Average demand deposits, an interest free source of funds for the Bancorp to invest, decreased by $3.8 million from the first quarter of 2008 to approximately 31% of average total deposits for the first quarter of 2009. Average interest-bearing deposits increased by $13.8 million, resulting in an overall $10.0 million increase in total deposits from the first quarter of 2008 to the first quarter of 2009. Average interest-bearing liabilities increased by $8.6 million, which included the decrease in liabilities caused by repaying $5.2 million in subordinated debt in August 2008. The Company's interest rate spread and interest rate margin were 3.89% and 4.37%, respectively, for the quarter ended March 31, 2009 as compared to 3.13% and 4.07%, respectively, for the quarter ended March 31, 2008. Although a significant part of this improvement was due to the reinstatement of the loan to accruing status as discussed above, our spread and margin were also helped by the effect of interest rate floors on our loans that helped maintain yields when our cost of funds was declining due to lower market interest rates.

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "We remain in a weak economic environment which has contributed to the increase in our charged-off loans. Despite the increased provision in the first quarter of 2009, we were able to increase our earnings from the comparable period in 2008. We were also able to increase our deposits by almost $9 million and our loan portfolio by $2 million." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated "In this market where capital is a premium, we have been able to repurchase 94,643 of our shares under our stock buyback program and we were able to pay our sixth quarterly dividend of $0.06 per common share for stockholders of record on March 20, 2009. This is a result of our capital strength. Additionally, we have not needed or even applied for any money under the government's bailout programs. Our strategy and philosophy 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 $23.9 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 March 31, 2009 (unaudited) March 31, December 31, 2009 2008 ------------- ------------- Assets: Cash and cash equivalents $ 29,489,943 $ 21,240,223 Investment securities, available for sale 120,401,021 120,288,588 Loans receivable 68,718,740 66,246,652 Allowance for loan loss (926,583) (987,876) ------------- ------------- Loans receivable, net 67,792,157 65,258,776 Bank premises and equipment, net 3,584,229 3,695,822 Accrued interest receivable 720,190 723,473 Deferred taxes - 525,839 Other assets 684,857 925,007 ------------- ------------- Total assets $ 222,672,397 $ 212,657,728 ============= ============= Liabilities and stockholders' equity: Liabilities: Deposits: Demand and checking $ 60,174,572 $ 58,598,579 NOW 34,464,218 17,636,154 Money market 23,805,412 22,829,789 Savings 13,646,234 12,412,561 Time 64,502,605 76,323,494 ------------- ------------- Total Deposits 196,593,041 187,800,577 Escrow deposits 439,511 308,872 Accounts payable and accrued expenses 1,710,951 1,344,512 ------------- ------------- Total liabilities 198,743,503 189,453,961 ------------- ------------- Stockholders' equity: Common stock, ($.0001 par value, 3,000,000 shares authorized, 1,923,884 issued, 1,829,241 outstanding at March 31, 2009 and 1,923,884 issued, 1,882,461 outstanding December 31, 2008) 192 192 Additional paid in capital 9,177,764 9,200,010 Retained earnings 14,980,327 14,714,143 Treasury shares, at cost (94,643 at March 31, 2009, 41,423 shares at December 31, 2008) (858,863) (395,891) Unearned ESOP shares (859,480) (901,750) Accumulated other comprehensive gain, net of taxes of $1,255,662 and $488,735, respectively 1,488,954 587,063 ------------- ------------- Total stockholders' equity 23,928,894 23,203,767 ------------- ------------- Total liabilities and stockholders' equity $ 222,672,397 $ 212,657,728 ============= ============= VSB Bancorp, Inc. Consolidated Statements of Operations March 31, 2009 (unaudited) Three months Three months ended ended Mar. 31, 2009 Mar. 31, 2008 ------------- ------------- Interest and dividend income: Loans receivable $ 1,330,706 $ 1,244,491 Investment securities 1,382,619 1,384,297 Other interest earning assets 4,741 102,293 ------------- ------------- Total interest income 2,718,066 2,731,081 Interest expense: NOW 26,783 32,231 Money market 60,511 96,092 Savings 13,102 18,982 Subordinated debt - 89,040 Time 310,552 519,447 ------------- ------------- Total interest expense 410,948 755,792 Net interest income 2,307,118 1,975,289 Provision for loan loss 275,000 30,000 ------------- ------------- Net interest income after provision for loan loss 2,032,118 1,945,289 Non-interest income: Loan fees 25,751 22,223 Service charges on deposits 545,862 479,615 Net rental income (loss) 11,517 (1,011) Other income 30,039 65,075 ------------- ------------- Total non-interest income 613,169 565,902 Non-interest expenses: Salaries and benefits 911,983 910,408 Occupancy expenses 379,081 357,724 Legal expense 74,649 54,086 Professional fees 77,000 61,400 Computer expense 66,800 55,106 Director fees 51,100 57,250 FDIC and NYSBD assessments 75,500 46,500 Other expenses 316,350 295,676 ------------- ------------- Total non-interest expenses 1,952,463 1,838,150 Income before income taxes 692,824 673,041 ------------- ------------- Provision (benefit) for income taxes: Current 425,850 332,900 Deferred (106,077) (21,804) ------------- ------------- Total provision for income taxes 319,773 311,096 Net income $ 373,051 $ 361,945 ============= ============= Basic income per common share $ 0.21 $ 0.20 ============= ============= Diluted net income per share $ 0.20 $ 0.19 ============= ============= Book value per common share $ 13.08 $ 11.68 ============= =============