Attached files
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| 8-K - FORM 8-K - VSB BANCORP INC | vsb_8k.htm |
Exhibit 99.1
VSB Bancorp, Inc.
Second Quarter 2011 Results of Operations
Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100
Staten Island, N. Y. —July 13, 2011. VSB Bancorp, Inc. (NASDAQ GM: VSBN) reported net income of $427,704 for the second quarter of 2011, a decrease of $34,672, or 7.50%, from the second quarter of 2010. The following unaudited figures were released today. Pre-tax income was $788,345 in the second quarter of 2011, compared to $852,349 for the second quarter of 2010. Net income for the quarter was $427,704, or basic income of $0.24 per common share, compared to a net income of $462,376, or $0.26 basic income per common share, for the quarter ended June 30, 2010.
The $34,672 decrease in net income was due to a decrease in net interest income of $163,448, partially offset by a decrease in non-interest expense of $102,662 and a decrease in the provision for income taxes of $29,332.
The $163,448 decrease in net interest income for the second quarter of 2011 occurred primarily because our interest income decreased by $211,389, while our cost of funds decreased by $47,941. The decline in interest income resulted from a $126,145 decrease in income from investment securities, due to a 63 basis point decrease in average yield, partially offset by a $6.1 million increase in average balance between the periods. Interest income from loans also decreased by $85,164 due to a 66 basis point decrease in average yield from the second quarter of 2010 to the second quarter of 2011. The decrease in the yield on loans was partially offset by a $2.7 million increase in the average balance of loans. Although the average balance of non-accrual loans decreased by $372,956 from the second quarter of 2010 to the second quarter of 2011, the balance of non-accrual loans for which we received interest and recognized it on a cash basis decreased by $2.8 million in that period, while the balance of non-accrual loans for which we did not receive interest increased by $2.5 million in the second quarter of 2011. This shift in non-accrual loans was a major contributor to the 66 basis point drop in our average loan yield. Substantially all of the new non-accrual loans are secured by mortgages on real estate located in Staten Island.
Interest income from other interest earning assets (principally overnight investments) was relatively flat due to a $6.9 million decrease in average balance, partially offset by a 3 basis point increase in yield. Overall, average interest-earning assets increased by $1.9 million from the second quarter of 2010 to the second quarter of 2011.
The most significant component of the decrease in interest expense was a $29,008 decrease in interest on time deposits as the average cost declined by 15 basis points due to a continuation of low market interest rates. Average demand deposits, an interest free source of funds for us to invest, increased from 31.6% of total deposits in the second quarter of 2010, to 35.3% of total deposits in the second quarter of 2011. Average interest-bearing deposits decreased by $8.4 million and average non-interest bearing deposits increased by $7.6 million, resulting in an overall $868,844 decrease in average total deposits from the second quarter of 2010 to the second quarter of 2011.
The average yield on earning assets declined by 39 basis points while the average cost of funds declined by 10 basis points from the second quarter of 2010 to the second quarter of 2011. The reduction in the yield on assets was principally due to the 63 basis point drop in the yield on investment securities, as new securities were purchased at market rates significantly below the rates we had been earning on securities repaid or matured, and a 66 basis point drop in the yield on loans. The increase in non-accrual loans that were not paying interest on a cash basis during the second quarter of 2011 reduced interest income and reduced our reported average loan yield.
The decline in the cost of funds was driven principally by the 15 basis point drop in the cost of time deposits. Our interest rate margin decreased by 30 basis points from 3.99% to 3.69% when comparing the second quarter of 2011 to the same quarter in 2010, while our interest rate spread decreased by 29 basis points from 3.72% to 3.43%. These declines resulted when we were required to reinvest the proceeds from payments on investment securities at lower rates because of the continuation of low market interest rates. The declines also resulted from the 66 basis point decrease in the average yield on loans, our highest earning asset. 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. 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 $1,782 to $623,293 in the second quarter of 2011 compared to the same quarter in 2010.
Comparing the second quarter of 2011 with the same quarter in 2010, non-interest expense decreased by $102,662, totaling $2.0 million for the second quarter of 2011. Non-interest expense decreased for various business reasons including a $52,286 reduction in legal fees, due to a lower level of collections and a recovery of legal fees previously expensed on a settled lawsuit, a $59,500 decrease in FDIC and NYSBD assessments due to the reduction in the FDIC assessment rate, partially offset by the $7,650 increase in computer expenses due to a one-time conversion charge.
For the first six months of 2011, pre-tax income decreased to $1,584,310 from $1,649,057 for the first six months of 2010, a decline of $64,747, or 3.9%. Net income for the six months ended June 30, 2011 was $859,495, or basic net income of $0.48 per common share, as compared to a net income of $894,598, or basic net income of $0.51 per common share, for the six months ended June 30, 2010. The $35,103 reduction in net income for the six months ended June 30, 2011 was attributable principally to a $200,546 decrease in net interest income, partially offset by a $55,000 reduction in the provision for loan losses and a $72,988 decrease in non-interest expenses. The decrease in non-interest expense of $72,988 was due primarily to a $76,821 decrease in legal expenses due to a lower level of collections and a recovery of legal fees previously expensed on a settled lawsuit, and a $59,500 decrease in FDIC and NYSBD assessments partially offset by a $25,651 increase in professional fees due to higher costs. Income tax expense decreased $29,644 due to the $64,747 decrease in pre-tax income. The net interest margin decreased by 22 basis points from the six months ended June 30, 2011 to 3.82% from 4.04%, in the same period in 2010. Average interest earning assets, for the six months ending June 30, 2011, increased by $2.1 million, or 0.9%, from the same period in 2010.
Total assets increased to $244.9 million at June 30, 2011, an increase of $9.7 million, or 4.1%, from December 31, 2010. The significant components of this increase were a $9.9 million increase in cash and other liquid assets and a $1.3 million increase in loans, net, partially offset by a $1.0 million decline in investment securities. Total deposits, including escrow deposits, increased to $216.1 million, an increase of $8.6 million, or 4.2%. We had increases in demand and checking deposits of $8.8 million, $2.5 million in savings deposits and $1.9 million in money market accounts, partially offset by a decrease in NOW accounts of $4.0 million and a $559,653 decrease in time deposits from year end 2010. The Bancorp’s Tier 1 capital ratio was 10.48% at June 30, 2011.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.’s President and CEO, stated, “The second quarter of 2011 demonstrated that the general economic recovery appears to be slowing due to increased oil prices and high unemployment. Our non-performing loans increased by $2.5 million in this quarter, but we are working toward a positive resolution with two of the largest borrowers. Our interest rate margin declined, mostly due to the increase in non-performing loans.” Joseph J. LiBassi, VSB Bancorp, Inc.’s Chairman, stated, “We have encountered some obstacles in this quarter but we have a plan to overcome these issues. We paid our fifteenth consecutive dividend to our stockholders. Our ROA of 0.71% and our ROE of 6.42% for the second quarter of 2011 compare favorably to our peers. Our book value per share stands at $14.81. Our philosophy of providing the highest quality personal service without subjecting our customers to excess service charges has made Victory the premier choice for businesses and professionals on Staten 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 $27.0 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, 2011
(unaudited)
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June 30,
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December 31,
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2011
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2010
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Assets:
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Cash and cash equivalents
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$ | 38,622,272 | $ | 28,764,987 | ||||
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Investment securities, available for sale
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120,282,630 | 121,307,907 | ||||||
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Loans receivable
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82,727,855 | 81,538,224 | ||||||
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Allowance for loan loss
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(1,192,630 | ) | (1,277,220 | ) | ||||
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Loans receivable, net
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81,535,225 | 80,261,004 | ||||||
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Bank premises and equipment, net
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2,518,610 | 2,732,229 | ||||||
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Accrued interest receivable
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627,905 | 673,967 | ||||||
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Other assets
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1,319,457 | 1,513,605 | ||||||
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Total assets
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$ | 244,906,099 | $ | 235,253,699 | ||||
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Liabilities and stockholders’ equity:
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Liabilities:
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Deposits:
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Demand and checking
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$ | 75,204,955 | $ | 66,407,225 | ||||
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NOW
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31,092,654 | 35,138,867 | ||||||
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Money market
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28,978,292 | 27,057,632 | ||||||
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Savings
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17,482,082 | 14,938,440 | ||||||
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Time
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63,085,310 | 63,644,963 | ||||||
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Total Deposits
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215,843,293 | 207,187,127 | ||||||
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Escrow deposits
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207,219 | 219,530 | ||||||
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Accounts payable and accrued expenses
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1,824,726 | 1,802,186 | ||||||
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Total liabilities
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217,875,238 | 209,208,843 | ||||||
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Stockholders’ equity:
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Common stock, ($.0001 par value, 10,000,000 shares authorized 1,989,509 issued, 1,825,009 outstanding at June 30, 2011 and December 31, 2010)
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199 | 199 | ||||||
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Additional paid in capital
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9,265,716 | 9,249,600 | ||||||
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Retained earnings
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18,205,496 | 17,563,435 | ||||||
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Treasury stock, at cost (164,500 shares at June 30, 2011 and December 31, 2010)
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(1,643,797 | ) | (1,643,797 | ) | ||||
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Unearned ESOP shares
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(479,055 | ) | (563,594 | ) | ||||
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Accumulated other comprehensive gain, net of taxes of $1,418,716 and $1,213,545, respectively
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1,682,302 | 1,439,013 | ||||||
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Total stockholders’ equity
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27,030,861 | 26,044,856 | ||||||
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Total liabilities and stockholders’ equity
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$ | 244,906,099 | $ | 235,253,699 | ||||
VSB Bancorp, Inc.
Consolidated Statements of Operations
June 30, 2011
(unaudited)
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Three months
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Three months
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Six months
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Six months
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ended
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ended
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ended
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ended
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June 30, 2011
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June 30, 2010
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June 30, 2011
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June 30, 2010
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Interest and dividend income:
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Loans receivable
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$ | 1,366,027 | $ | 1,451,191 | $ | 2,820,319 | $ | 2,841,487 | ||||||||
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Investment securities
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997,887 | 1,124,032 | 2,010,439 | 2,286,254 | ||||||||||||
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Other interest earning assets
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13,603 | 13,683 | 24,741 | 22,890 | ||||||||||||
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Total interest income
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2,377,517 | 2,588,906 | 4,855,499 | 5,150,631 | ||||||||||||
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Interest expense:
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NOW
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23,183 | 41,348 | 56,272 | 80,600 | ||||||||||||
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Money market
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61,101 | 63,018 | 120,480 | 125,504 | ||||||||||||
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Savings
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13,278 | 12,129 | 25,974 | 23,589 | ||||||||||||
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Time
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118,885 | 147,893 | 240,391 | 308,010 | ||||||||||||
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Total interest expense
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216,447 | 264,388 | 443,117 | 537,703 | ||||||||||||
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Net interest income
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2,161,070 | 2,324,518 | 4,412,382 | 4,612,928 | ||||||||||||
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Provision for loan loss
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25,000 | 20,000 | 55,000 | 110,000 | ||||||||||||
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Net interest income after provision for loan loss
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2,136,070 | 2,304,518 | 4,357,382 | 4,502,928 | ||||||||||||
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Non-interest income:
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Loan fees
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13,036 | 16,551 | 40,606 | 18,855 | ||||||||||||
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Service charges on deposits
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536,148 | 551,019 | 1,058,385 | 1,091,720 | ||||||||||||
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Net rental income
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10,105 | 14,266 | 21,718 | 26,249 | ||||||||||||
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Other income
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64,004 | 39,675 | 110,287 | 86,361 | ||||||||||||
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Total non-interest income
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623,293 | 621,511 | 1,230,996 | 1,223,185 | ||||||||||||
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Non-interest expenses:
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Salaries and benefits
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988,835 | 990,642 | 1,968,838 | 1,954,258 | ||||||||||||
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Occupancy expenses
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361,665 | 361,606 | 738,228 | 725,396 | ||||||||||||
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Legal expense
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34,974 | 87,260 | 99,960 | 176,781 | ||||||||||||
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Professional fees
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72,050 | 60,650 | 152,501 | 126,850 | ||||||||||||
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Computer expense
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73,247 | 65,597 | 138,569 | 132,552 | ||||||||||||
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Director fees
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62,925 | 60,575 | 125,375 | 119,525 | ||||||||||||
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FDIC and NYSBD assessments
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45,500 | 105,000 | 139,500 | 199,000 | ||||||||||||
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Other expenses
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331,822 | 342,350 | 641,097 | 642,694 | ||||||||||||
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Total non-interest expenses
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1,971,018 | 2,073,680 | 4,004,068 | 4,077,056 | ||||||||||||
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Income before income taxes
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788,345 | 852,349 | 1,584,310 | 1,649,057 | ||||||||||||
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Provision (benefit) for income taxes:
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Current
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565,691 | 344,800 | 980,381 | 787,110 | ||||||||||||
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Deferred
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(205,050 | ) | 45,173 | (255,566 | ) | (32,651 | ) | |||||||||
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Total provision for income taxes
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360,641 | 389,973 | 724,815 | 754,459 | ||||||||||||
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Net income
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$ | 427,704 | $ | 462,376 | $ | 859,495 | $ | 894,598 | ||||||||
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Basic income per common share
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$ | 0.24 | $ | 0.26 | $ | 0.48 | $ | 0.51 | ||||||||
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Diluted net income per share
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$ | 0.24 | $ | 0.26 | $ | 0.48 | $ | 0.51 | ||||||||
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Book value per common share
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$ | 14.81 | $ | 14.08 | $ | 14.81 | $ | 14.08 | ||||||||