STATEN ISLAND, NY--(Marketwired - Jul 13, 2016) - VSB Bancorp, Inc. (
The $263,983 increase in net income was due to an increase in net interest income of $179,798, a decrease in non-interest expenses of $124,180 and an decrease in the provision for income taxes of $85,979, due to a lower effective tax rate (the 2015 period had a $155,266 valuation allowance recorded against the New York City portion of our existing net deferred tax asset due to a change in New York City tax laws in April 2015), partially offset by an increase in pre-tax income. The increase was partially offset by an increase in the provision for loan loss of $115,000 due to loan growth and loan charge-offs and a decrease in non-interest income of $10,974.
The $179,798 increase in net interest income for the second quarter of 2016 occurred primarily because our interest income increased by $230,484, while our cost of funds increased by $50,686. The rise in interest income resulted from an $183,520 increase in income from loans ($116,681 included in the 2015 period was due to a recovery of interest income on a previously non-performing loan), due to a $20.2 million increase in average loan balance between the periods, partially offset by a 7 basis point decrease in yield between the periods, as we booked new loans at lower rates due to a more competitive environment. The average balance of loans increased by 21.2% as we implemented our strategy to increase our loan portfolio, which helped improve our average asset yields. Income from investment securities increased slightly by $18,193, as the 9 basis point increase in the yield was partially offset by the $3.4 million decrease in the average balance, as we looked to deploy lower yielding assets into loans.
Interest income from other interest earning assets (principally overnight investments) increased by $28,771 due to a $16.9 million increase in the average balance and a 25 basis point increase in the average yield. Overall, average interest-earning assets increased by $33.7 million from the second quarter of 2015 to the second quarter of 2016.
The increase in interest expense was principally due to a $41,900 increase in the cost of money market accounts, due to a 20 basis point increase in average cost and a $8.8 million increase in the average balance. There was also a $12,161 increase in interest on time accounts, as the average cost increased by 9 basis points while the average balance between periods decreased by $1.4 million. We also experienced a $8,862 increase in interest on NOW accounts. These increases were partially offset by $12,237 drop in the cost of savings accounts, as the average balance between periods decreased by $2.4 million and the average cost decreased by 18 basis points. Our overall average cost of interest-bearing liabilities increased by 8 basis points as the Federal Reserve increased the benchmark federal funds rate by 25 basis points in December 2015, resulting in upward pressure on deposit rates generally.
Average demand deposits, an interest free source of funds for us to invest, increased $18.3 million from the second quarter of 2015 and represented approximately 40% of average total deposits for the second quarter of 2016. Average interest-bearing deposits increased by $12.7 million, resulting in an overall $31.0 million increase in average total deposits from the second quarter of 2015 to the second quarter of 2016.
The average yield on earning assets rose by 8 basis points while the average cost of funds rose by 8 basis points. The increase in the yield on assets was principally due to the change in asset mix as we redeployed lower yielding investments into loans. Our interest rate margin increased by 4 basis points from 3.05% to 3.09% when comparing the second quarter of 2016 to the same quarter in 2015, while our interest rate spread remained flat at 2.86%. The margin increased because of a combination of multiple factors. Loans increased as a percentage of interest-earning assets from 33.6% in the second quarter of 2015 to 36.4% in the second quarter of 2016. In addition, the yield we were able to obtain on the average balance of our investment securities increased as the increase in the federal funds rate drove an increase in market yields available on such securities. The resulting 8 basis point increase in average yield on earning assets had a positive effect margin due to an increase in earnings from assets funded by non-interest bearing demand deposits and capital. However, the effect of the increase in yield on reported spread was restrained by the corresponding rise in the cost of deposits as market expectations, although lessened, of additional increases in the federal funds rate this year increased competition for deposits at current rates before rates increase.
Non-interest income decreased slightly to $754,525 in the second quarter of 2016, compared to $765,499 in the same quarter in 2015. The decrease was a result of a $73,611 decrease in other income as we had $68,718 in non-interest income recorded upon the settlement of pending litigation in the 2015 period, a $46,379 reduction in service charges on deposits, which consist mainly of fees on items being presented for payment against insufficient funds, which are inherently volatile and a $12,788 decrease in rental income as we collected all rents past due in the 2nd quarter of 2015. This was partially offset by a $120,751 gain on the sale of REO property in the 2016 period.
Comparing the second quarter of 2016 with the same quarter in 2015, non-interest expense decreased by $124,180, totaling $2.2 million for the second quarter of 2016. Non-interest expense decreased for various business reasons including: (i) an $185,094 decrease in other expenses (due to $167,372 more in collection expenses in the 2015 period related principally to the sale of the two non-performing loans in the second quarter of 2015); and (ii) a $30,883 decrease in occupancy expenses due to a lower level of repairs and the retirement of certain fixed assets; and (iii) a $19,000 decrease in FDIC assessments due to a reduction in the rate charged. The decreases were partially offset by an $112,085 increase in salary and benefit costs due to a higher level of staff.
Total assets increased to $327.3 million at June 30, 2016, an increase of $20.9 million, or 6.8%, from December 31, 2015. The significant component of this increase was a $14.8 million increase in loans and a $14.4 million increase in cash and other liquid assets, which was partially offset by a $7.5 million decrease in investment securities. Our non-performing loans decreased from $1.9 million at December 31, 2015 to $1.2 million at June 30, 2016, due primarily to the payoff of $730,548 of non-performing loans, and the charge-off of $140,741 in non-accrual loans in 2016. Total OREO stood at $54,000 at June 30, 2016. Total deposits, including escrow deposits, increased to $295.9 million, an increase of $19.6 million, or 7.1% during 2016. The increase was primarily attributable to increases of $17.4 million in demand and checking deposits, $7.7 million in NOW accounts, and $1.1 million in saving accounts, partially offset by a $3.9 million decrease in money market accounts and a $2.8 million decrease in time deposits.
Our total stockholders' equity increased by $1.1 million, principally due to $863,443 in retained earnings, $298,104 in other comprehensive income, a net decrease in treasury stock of $271,630 (due to the issuance of 50,000 common shares to the RRP shares from Treasury Shares and the repurchase of 18,200 shares of common stock during 2016) and $50,062 of amortization of our ESOP loan. These increases were partially offset by a $344,804 decrease in additional paid in capital, due to the net change in treasury shares. We are currently in our fourth stock repurchase program. VSB Bancorp's Tier 1 capital ratio was 9.15% at June 30, 2016. Book value per common share increased from $16.00 at year end 2015 to $16.37 at June 30, 2016.
For the first six months of 2016, pre-tax income increased to $1.7 million from $1.1 million for the first six months of 2015, an improvement of $590,127, or 52.9%. Net income for the six months ended June 30, 2016 was $1.1 million, or basic net income of $0.64 per common share, as compared to net income of $546,630, or basic net income of $0.31 per common share, for the six months ended June 30, 2015. The increase in net income for the six months ended June 30, 2016 compared to the same period in 2015 was attributable principally to a $547,285 increase in net interest income and a $44,288 decrease in non-interest expenses partially offset by a $28,093 increase in the provision for income taxes. The tax effect of the increase in pre-tax income was partially offset because our effective tax rate was lower in 2016 than in 2015, due to the $155,266 valuation allowance we recorded against of our deferred tax asset in the 2015 period, as discussed above.
The decrease in non-interest expense of $44,288 was due primarily to a $123,307 decrease in other expenses (due to $153,256 more collection expenses in the 2015 period principally related to the sale of the two non-performing loans), a $46,461 decrease in legal fees due to lower collection costs, a $43,000 decrease in FDIC assessments due to a reduction in the rate charged and a $38,023 decrease in occupancy expenses due to a lower level of repairs and the retirement of certain fixed assets. These decreases were partially offset by a $211,214 increase in salary and benefit costs due to a higher level of staff. The net interest margin increased by 8 basis points to 3.10% for the six months ended June 30, 2016 from 3.02% in the same period in 2015, as the average balance of our loans grew by 30%, the average balance on our investment securities dropped by 14%. Average interest earning assets for the six months ended June 30, 2016 increased by $33.3 million, or 11.9%, from the same period in 2015.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "The increases in our loan portfolio have helped us to generate a higher net interest margin. Our deposit mix remains strong, as demand deposits continue to be a major portion of our base." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "Our return on assets and return on equity have steadily increased over the past year. Our book value per share rose to $16.37. Our philosophy of delivering the best in customer service has been responsible for our long term success."
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 $29.9 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, 2016 | ||||||||||||
| (unaudited) | ||||||||||||
| June 30, | December 31, | |||||||||||
| 2016 | 2015 | |||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 29,213,498 | $ | 14,845,096 | ||||||||
| Investment securities, available for sale | 53,764,431 | 58,096,583 | ||||||||||
| Investment securities, held to maturity | 117,417,396 | 120,585,784 | ||||||||||
| Loans receivable | 119,093,573 | 104,341,670 | ||||||||||
| Allowance for loan loss | (1,368,396 | ) | (1,290,563 | ) | ||||||||
| Loans receivable, net | 117,725,177 | 103,051,107 | ||||||||||
| Bank premises and equipment, net | 1,390,341 | 1,528,914 | ||||||||||
| Accrued interest receivable | 731,598 | 743,375 | ||||||||||
| Bank owned life insurance | 5,255,624 | 5,194,945 | ||||||||||
| Other assets | 1,762,744 | 2,361,325 | ||||||||||
| Total assets | $ | 327,260,809 | $ | 306,407,129 | ||||||||
| Liabilities and stockholders' equity: | ||||||||||||
| Liabilities: | ||||||||||||
| Deposits: | ||||||||||||
| Demand and checking | $ | 119,044,958 | $ | 101,659,731 | ||||||||
| NOW | 39,114,065 | 31,428,768 | ||||||||||
| Money market | 56,970,063 | 60,912,775 | ||||||||||
| Savings | 22,245,678 | 21,136,015 | ||||||||||
| Time | 58,284,696 | 61,110,374 | ||||||||||
| Total Deposits | 295,659,460 | 276,247,663 | ||||||||||
| Escrow deposits | 224,013 | 56,600 | ||||||||||
| Accounts payable and accrued expenses | 1,439,609 | 1,303,575 | ||||||||||
| Total liabilities | 297,323,082 | 277,607,838 | ||||||||||
| Stockholders' equity: | ||||||||||||
| Common stock, ($.0001 par value, 10,000,000 shares authorized 2,086,509 issued, 1,829,198 outstanding at June 30, 2016 and 2,078,509 issued, 1,799,398 outstanding at December 31, 2015) | 209 | 208 | ||||||||||
| Additional paid in capital | 10,167,237 | 10,512,041 | ||||||||||
| Retained earnings | 22,884,450 | 22,021,007 | ||||||||||
| Treasury stock, at cost (257,311 shares at June 30, 2016 and 279,111 at December 31, 2015) | (2,704,545 | ) | (2,976,175 | ) | ||||||||
| Unearned ESOP shares | (784,313 | ) | (834,375 | ) | ||||||||
| Accumulated other comprehensive gain, net of taxes of $201,756 and $41,238, respectively | 374,689 | 76,585 | ||||||||||
| Total stockholders' equity | 29,937,727 | 28,799,291 | ||||||||||
| Total liabilities and stockholders' equity | $ | 327,260,809 | $ | 306,407,129 | ||||||||
| VSB Bancorp, Inc. | ||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||
| June 30, 2016 | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Three months | Three months | Six months | Six months | |||||||||||||||
| ended | ended | ended | ended | |||||||||||||||
| June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||||
| Interest and dividend income: | ||||||||||||||||||
| Loans receivable | $ | 1,751,010 | $ | 1,567,490 | $ | 3,448,605 | $ | 2,847,372 | ||||||||||
| Investment securities | 884,336 | 866,143 | 1,783,522 | 1,772,263 | ||||||||||||||
| Other interest earning assets | 36,151 | 7,380 | 65,512 | 14,753 | ||||||||||||||
| Total interest income | 2,671,497 | 2,441,013 | 5,297,639 | 4,634,388 | ||||||||||||||
| Interest expense: | ||||||||||||||||||
| NOW | 20,107 | 11,245 | 34,162 | 21,721 | ||||||||||||||
| Money market | 115,136 | 73,236 | 239,809 | 144,508 | ||||||||||||||
| Savings | 11,972 | 24,209 | 23,513 | 47,922 | ||||||||||||||
| Time | 86,450 | 74,289 | 172,838 | 140,205 | ||||||||||||||
| Total interest expense | 233,665 | 182,979 | 470,322 | 354,356 | ||||||||||||||
| Net interest income | 2,437,832 | 2,258,034 | 4,827,317 | 4,280,032 | ||||||||||||||
| Provision for loan loss | 145,000 | 30,000 | 195,000 | 190,000 | ||||||||||||||
| Net interest income after provision for loan loss | 2,292,832 | 2,228,034 | 4,632,317 | 4,090,032 | ||||||||||||||
| Non-interest income: | ||||||||||||||||||
| Loan fees | 11,724 | 10,671 | 24,590 | 21,337 | ||||||||||||||
| Service charges on deposits | 510,961 | 557,340 | 1,027,917 | 1,085,861 | ||||||||||||||
| Net rental income | 24,475 | 37,263 | 38,029 | 41,102 | ||||||||||||||
| Other income | 207,365 | 160,225 | 305,615 | 244,297 | ||||||||||||||
| Total non-interest income | 754,525 | 765,499 | 1,396,151 | 1,392,597 | ||||||||||||||
| Non-interest expenses: | ||||||||||||||||||
| Salaries and benefits | 1,133,048 | 1,020,963 | 2,256,679 | 2,045,465 | ||||||||||||||
| Occupancy expenses | 312,342 | 343,225 | 648,158 | 686,181 | ||||||||||||||
| Legal expense | 43,988 | 50,977 | 86,275 | 132,736 | ||||||||||||||
| Professional fees | 92,325 | 87,300 | 180,656 | 181,628 | ||||||||||||||
| Computer expense | 98,223 | 95,822 | 193,675 | 190,664 | ||||||||||||||
| Director fees | 61,275 | 63,000 | 118,725 | 125,475 | ||||||||||||||
| FDIC and NYSBD assessments | 47,000 | 66,000 | 89,000 | 132,000 | ||||||||||||||
| Other expenses | 398,700 | 583,794 | 749,582 | 872,889 | ||||||||||||||
| Total non-interest expenses | 2,186,901 | 2,311,081 | 4,322,750 | 4,367,038 | ||||||||||||||
| Income before income taxes | 860,456 | 682,452 | 1,705,718 | 1,115,591 | ||||||||||||||
| Provision (benefit) for income taxes: | ||||||||||||||||||
| Current | 337,266 | 64,484 | 679,752 | 314,070 | ||||||||||||||
| Deferred | (36,078 | ) | 322,683 | (82,698 | ) | 254,891 | ||||||||||||
| Total provision for income taxes | 301,188 | 387,167 | 597,054 | 568,961 | ||||||||||||||
| Net income | $ | 559,268 | $ | 295,285 | $ | 1,108,664 | $ | 546,630 | ||||||||||
| Basic net income per common share | $ | 0.32 | $ | 0.17 | $ | 0.64 | $ | 0.31 | ||||||||||
| Diluted net income per share | $ | 0.32 | $ | 0.17 | $ | 0.64 | $ | 0.31 | ||||||||||
| Book value per common share | $ | 16.37 | $ | 15.68 | $ | 16.37 | $ | 15.68 | ||||||||||
Contact Information:
Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100