Business & Finance
Business and Finance
Business and Finance
Thu, July 15, 2010
Wed, July 14, 2010 VSB Bancorp, Inc. Second Quarter 2010 Results of Operations
STATEN ISLAND, NY--(Marketwire - July 14, 2010) - VSB Bancorp, Inc. (
The modest $3,079 increase in net income for the second quarter of 2010 was due to a decrease in the provision for loan loss of $80,000, an increase in net interest income of $13,887, an increase in non-interest income of $6,428, and a decrease in income tax expense of $3,771. These were partially offset by an increase in non-interest expense of $101,007. Although the provision for loan loss declined, our allowance for loan losses represented 1.57% of total loans at June 30, 2010, compared to 1.35% at December 31, 2009 and 1.34% at June 30, 2009.
The $13,887 increase in net interest income for the second quarter of 2010 occurred primarily because our cost of funds decreased by $68,530, while our interest income decreased by $54,643. The decline in interest income resulted from a $190,635 decrease in income from investment securities, due to a 40 basis point decrease in yield, coupled with a $6.8 million decrease in average balance between the periods. The decrease in interest income from investment securities was partially offset by a $128,002 increase in interest income from loans. The increase in interest income on loans was due to an $8.2 million increase in the average balance of loans and a 4 basis point increase in yield from the second quarter of 2009 to the second quarter of 2010. Our non-performing loans increased by $4.4 million from year end 2009, hampering the increase in our loan yield. We have entered into modified repayment arrangements with two borrowers whose loans comprise 76% of our non-performing loan balance and those borrowers are paying in accordance with the modified arrangements.
Interest income from other interest earning assets (principally overnight investments) increased by $7,990 due to a $14.8 million increase in average balance and a 4 basis point increase in yield. Overall, average interest-earning assets increased by $16.2 million from the second quarter of 2009 to the second quarter of 2010.
The most significant component of the decrease in interest expense was a $72,872 decrease in interest on time deposits as the average cost declined by 51 basis points due to a continuation of low market interest rates, which have allowed us to renew or replace maturing time deposits at lower costs. Average demand deposits, an interest free source of funds for us to invest, increased by $4.5 million from the second quarter of 2009, representing approximately 32% of average total deposits for the second quarter of 2010. Average interest-bearing deposits increased by $14.0 million, resulting in an overall $18.4 million increase in average total deposits from the second quarter of 2009 to the second quarter of 2010.
The average yield on our interest-earning assets declined by 38 basis points, and our average cost of funds declined by 28 basis points. The reduction in the yield on assets was principally due to the 40 basis point drop in the yield on investment securities, as new securities were purchased at market rates significantly below the rates on securities repaid or matured. The decline in the cost of funds was driven principally by the 51 basis point drop in the cost of time deposits. Our interest rate margin decreased by 22 basis points from 4.21% to 3.99% when comparing the second quarter of 2010 to the same quarter in 2009, while our interest rate spread decreased by 10 basis points from 3.82% to 3.72%. These declines resulted when we were required to reinvest the proceeds from payments on investment securities at lower rates because of the dramatic decline in market interest rates. In addition, our lowest yielding assets, overnight investments, were a larger percentage of the earning asset mix in 2010. The margin decreased more than the spread because it reflects the effect of non-interest bearing funding sources such as checking accounts and capital, which are less valuable in lower interest rate environments because they fund interest-earning assets with lower average yields. The interest rate floors on our loans have helped to stabilize interest income from the loan portfolio, but these floors also have the effect of limiting increases in our income as market rates increase until the prime rate rises above 6%. Non-interest income increased by $6,428 to $621,511 in the second quarter of 2010 compared to the same quarter in 2009.
Comparing the second quarter of 2010 with the same quarter in 2009, non-interest expense increased by $101,007, totaling $2.1 million for the second quarter of 2010. Non-interest expense increased for various business reasons including new hires, higher employee benefit costs and increased salary due to normal raises, a $23,082 increase in other non-interest expenses due to expenses related to a loan that was in the process of foreclosure and a $27,413 increase in legal expenses because of increased collection costs in the second quarter of 2010.
For the first six months of 2010, pre-tax income increased to $1,649,057 compared to $1,545,865 for the first six months of 2009, an increase of $103,192, or 6.7%. Net income for the six months ended June 30, 2010 was $894,598, or basic net income of $0.51 per common share, as compared to a net income of $832,348, or basic net income of $0.46 per common share, for the six months ended June 30, 2009. The $62,250 growth in net income for the six months ended June 30, 2010 was attributable principally to a $265,000 reduction in the provision for loan losses, partially offset by $151,920 increase in non-interest expenses. The increase in non-interest expense of $151,920, was due primarily to an $130,530 increase in salaries and benefits as a result of new hires, higher employee benefit costs and increased salary due to normal raises, a $42,285 increase in legal expenses due to higher collection costs and a $22,000 increase in FDIC and NYSBD assessments. Income tax expense increased $40,942 due to the $103,192 increase in pre-tax income. The net interest margin decreased by 28 basis points from the six months ended June 30, 2010 to 4.04% from 4.32%, in the same period in 2009. Average interest earning assets, for the six months ending June 30, 2010, increased by $17,506,394, or 8.2%, from the same period in 2009.
Total assets increased to $254.0 million at June 30, 2010, an increase of $17.0 million, or 7.2%, from December 31, 2009. The significant components of this increase were a $21.8 million increase in cash and other liquid assets, partially offset by a $1.5 million decrease in loans, net and a $2.6 million decline in investment securities. Total deposits, including escrow deposits, increased to $226.1 million, an increase of $15.1 million, or 7.2%. We had increases of $10.7 million in NOW accounts, $1.8 million increase in demand and checking deposits, $1.2 million in time and jumbo time deposits, $1.0 million in savings deposits, and a $413,890 increase in money market deposits from year end 2009. The Bancorp's Tier 1 capital ratio was 9.88% at June 30, 2010.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "The second quarter of 2010 has benefited from the improvement in our asset quality as we were able to reduce the provision for loan loss by $80,000 as compared to the second quarter of 2009. We also increased our deposit base by $13.4 million from the end of the first quarter of 2010. The economy has shown recent signs of retraction, which will continue to put pressure on our earnings. Interest rates remain near historic lows, but when they begin to rise, we expect to face additional net interest income pressure as our prime based loan portfolio will behave as a fixed rate portfolio until the prime rate exceeds 6%." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "We continue to focus on working more effectively so we can restrain the growth of our expenses. We have generated stable earnings and increased our capital base, allowing us to pay our eleventh consecutive dividend to our stockholders. Our ROA of 0.76% and our ROE of 7.19% for the second quarter of 2010 compares favorably to our peers. Our continued focus on delivering the highest quality personal service to the professionals and business owners on Staten Island is a prominent factor in our ability to grow."
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 $25.9 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, 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 June 30, 2010 (unaudited) June 30, December 31, 2010 2009 ------------- ------------- Assets: Cash and cash equivalents $ 61,468,856 $ 39,716,919 Investment securities, available for sale 111,340,569 113,912,404 Loans receivable 77,320,496 78,834,156 Allowance for loan loss (1,214,187) (1,063,454) ------------- ------------- Loans receivable, net 76,106,309 77,770,702 Bank premises and equipment, net 2,950,568 3,204,063 Accrued interest receivable 619,331 722,228 Other assets 1,477,037 1,673,556 ------------- ------------- Total assets $ 253,962,670 $ 236,999,872 ============= ============= Liabilities and stockholders' equity: Liabilities: Deposits: Demand and checking $ 72,206,755 $ 70,372,448 NOW 43,177,680 32,501,930 Money market 28,538,205 28,124,315 Savings 16,021,836 15,001,936 Time 65,874,672 64,669,128 ------------- ------------- Total Deposits 225,819,148 210,669,757 Escrow deposits 261,369 316,329 Accounts payable and accrued expenses 1,960,286 1,529,837 ------------- ------------- Total liabilities 228,040,803 212,515,923 ------------- ------------- Stockholders' equity: Common stock, ($.0001 par value, 3,000,000 shares authorized, 1,989,509 issued, 1,840,700 outstanding at June 30, 2010 and 1,945,134 issued, 1,762,191 outstanding at December 31, 2009) 199 195 Additional paid in capital 9,204,682 9,317,719 Retained earnings 16,794,676 16,112,741 Treasury stock, at cost (148,809 shares at June 30, 2010 and 182,943 at December 31, 2009) (1,461,009) (1,840,249) Unearned ESOP shares (648,133) (732,672) Accumulated other comprehensive gain, net of taxes of $1,713,160 and $1,371,416, respectively 2,031,452 1,626,215 ------------- ------------- Total stockholders' equity 25,921,867 24,483,949 ------------- ------------- Total liabilities and stockholders' equity $ 253,962,670 $ 236,999,872 ============= ============= VSB Bancorp, Inc. Consolidated Statements of Operations June 30, 2010 (unaudited) Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 ------------ ----------- ----------- ----------- Interest and dividend income: Loans receivable $ 1,451,191 $ 1,323,189 $ 2,841,487 $ 2,653,895 Investment securities 1,124,032 1,314,667 2,286,254 2,697,286 Other interest earning assets 13,683 5,693 22,890 10,434 ------------ ----------- ----------- ----------- Total interest income 2,588,906 2,643,549 5,150,631 5,361,615 Interest expense: NOW 41,348 35,990 80,600 62,773 Money market 63,018 62,944 125,504 123,455 Savings 12,129 13,219 23,589 26,321 Time 147,893 220,765 308,010 531,317 ------------ ----------- ----------- ----------- Total interest expense 264,388 332,918 537,703 743,866 Net interest income 2,324,518 2,310,631 4,612,928 4,617,749 Provision for loan loss 20,000 100,000 110,000 375,000 ------------ ----------- ----------- ----------- Net interest income after provision for loan loss 2,304,518 2,210,631 4,502,928 4,242,749 Non-interest income: Loan fees 16,551 24,773 18,855 50,524 Service charges on deposits 551,019 538,187 1,091,720 1,084,049 Net rental income 14,266 12,567 26,249 24,084 Other income 39,675 39,556 86,361 69,595 ------------ ----------- ----------- ----------- Total non-interest income 621,511 615,083 1,223,185 1,228,252 Non-interest expenses: Salaries and benefits 990,642 911,745 1,954,258 1,823,728 Occupancy expenses 361,606 373,242 725,396 752,323 Legal expense 87,260 59,847 176,781 134,496 Professional fees 60,650 75,500 126,850 152,500 Computer expense 65,597 70,896 132,552 137,696 Director fees 60,575 60,675 119,525 111,775 FDIC and NYSBD assessments 105,000 101,500 199,000 177,000 Other expenses 342,350 319,268 642,694 635,618 ------------ ----------- ----------- ----------- Total non-interest expenses 2,073,680 1,972,673 4,077,056 3,925,136 Income before income taxes 852,349 853,041 1,649,057 1,545,865 ------------ ----------- ----------- ----------- Provision (benefit) for income taxes: Current 344,800 450,353 787,110 876,203 Deferred 45,173 (56,609) (32,651) (162,686) ------------ ----------- ----------- ----------- Total provision for income taxes 389,973 393,744 754,459 713,517 Net income $ 462,376 $ 459,297 $ 894,598 $ 832,348 ============ =========== =========== =========== Basic income per common share $ 0.26 $ 0.26 $ 0.51 $ 0.46 ============ =========== =========== =========== Diluted net income per share $ 0.26 $ 0.25 $ 0.51 $ 0.46 ============ =========== =========== =========== Book value per common share $ 14.08 $ 13.20 $ 14.08 $ 13.20 ============ =========== =========== ===========
