EXHIBIT 99.1
VSB Bancorp, Inc.
Second Quarter 2008 Results of Operations
Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100
Staten Island, N. Y. --July 8, 2008. VSB Bancorp, Inc. (NASDAQ CM: VSBN)
reported net income of $426,275 for the second quarter of 2008, a 16.1% decrease
from the second quarter of 2007. The following unaudited figures were released
today. Pre-tax income was $793,067 in the second quarter of 2008, as compared to
$951,258 for the second quarter of 2007, a decrease of $158,191, or 16.6%. Net
income for the quarter was $426,275, or basic income of $0.23 per common share,
as compared to a net income of $508,021, or $0.28 basic income per common share,
for the quarter ended June 30, 2007.
The $81,746 decrease in net income was attributable to a decrease in net
interest income of $104,006, due primarily to a decrease in interest income from
loans of $328,427, a decrease in interest income from other interest earning
assets of $190,209 and an increase in the provision for loan losses of $55,000.
The decrease in net income was partially offset by an increase in investment
income of $137,664, an increase in non-interest income of $89,041, a decrease in
income tax expense of $76,445 and the decrease of interest expense of time
deposits of $247,494.
The reduction in interest income is attributable to a rapid decline of the fed
funds and the prime rates, which negatively affected the yield on our loans, and
other interest earning assets income. After remaining steady for approximately
15 months, the prime rate declined 3.25% from September 2007 to June 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. The $88,226 increase in non-interest expense is
directly attributable to an increase in legal fees of $81,860, due in part to
the reimbursement in 2007 from our insurance company of legal fees previously
expensed, an increase in occupancy expenses of $16,716, and an increase in other
expenses of $52,932, due primarily to a recovery in 2007 of a reserve previously
expensed. The increase in non-interest expense was partially offset by a
decrease in salary and benefits of $69,725, which was due, in part to the
retirement of the former president, and reduced incentive and ESOP compensation
expense.
Total assets increased to $217.2 million at June 30, 2008, an increase of $13.4
million, or 6.6%, from December 31, 2007. Total deposits increased to $189.1
million, an increase of $12.7 million, or 7.2%, during the second quarter of
2008. The Bancorp's Tier 1 capital ratio of 12.76% includes the effect, as Tier
1 capital, of $5.0 million (25% of its Tier 1 capital) from the proceeds of a $5
million trust preferred securities issuance in August 2003. We have given notice
that we will be redeeming the trust preferred securities on August 8, 2008, the
first available redemption date.
Average interest-earning assets and average loans increased by $5.9 million and
$1.8 million, respectively, from the second quarter of 2007 to the second
quarter of 2008. Average demand deposits, an interest free source of funds for
the Bancorp to invest, were approximately 34% of average total deposits for the
second quarter of 2008, approximately the same level as in the second quarter of
2007. Average deposits increased by $1.9 million from the second quarter of 2007
to the second quarter of 2008. The Company's interest rate spread and interest
rate margin were 3.50% and 4.20%, respectively, for the quarter ending June 30,
2008 as compared to 3.49% and 4.51%, respectively, for the quarter ended June
30, 2007. Non-interest income increased $89,041 to $624,234 in the second
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 $1.9 million in the second quarter of 2008.
Pre-tax income decreased to $1,466,108 for the first six months of 2008, as
compared to $1,943,100 for 2007, a decrease of $476,992, or 24.6%. Net income
for the six months ended June 30, 2008 was $788,220, or basic net income of
$0.43 per common share, as compared to a net income of $1,037,792, or basic net
income of $0.57 per common share, for the six months ended June 30, 2007. The
$249,572 reduction in net income for the six months ended June 30, 2008 was
attributable to an increase in the provision for loan loss of $115,000, and a
decrease in interest income of $769,769 as the yield on average interest earning
assets dropped 88 basis points, with the yield on loans dropping 224 basis
points. The drop in yields was due to 325 basis point reduction in the prime and
fed funds rate from June 2007. The decrease was partially offset by a decrease
in interest expense of $364,417 due to a 105 basis point drop in the cost of
time deposits, an increase in interest income from investments securities of
$221,501 due to the increase in average investment security balance of $8.2
million and an increase in non-interest income of $113,580. Income tax expense
also decreased $227,420 between the periods as pre-tax income decreased.
Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "Our
interest margin and spread have leveled off after the recent drops in short term
rates, including the Prime Rate. Our quarterly net income increased $64,330 from
the first quarter of 2008. This is because our investment portfolio grew in the
second quarter of 2008, at rates comparable to the overall yield on our
investment portfolio due to the increased spreads and yields on investments that
we purchased during 2008." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman,
stated "Our interest rate margin was 4.15% for the first half of 2008, which has
helped soften the impact of the current economic climate. We paid our third
quarterly dividend of $0.06 per common share for stockholders of record on June
20, 2008. We have been delivering on our motto of `making the Bank fit your
business,' to the Island's professional and business communities."
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 $21.6 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.
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VSB Bancorp, Inc.
Consolidated Statements of Financial Condition
June 30, 2008
(unaudited)
June 30, December 31,
2008 2007
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Assets:
Cash and cash equivalents $ 23,007,861 $ 17,696,879
Investment securities, available for sale 125,126,744 117,814,117
Loans receivable 63,111,018 62,373,078
Allowance for loan loss (859,459) (927,161)
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Loans receivable, net 62,251,559 61,445,917
Bank premises and equipment, net 3,794,967 3,931,679
Accrued interest receivable 732,044 799,249
Deferred taxes 1,193,766 991,297
Other assets 1,075,832 1,114,431
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Total assets $ 217,182,773 $ 203,793,569
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Liabilities and stockholders' equity:
Liabilities:
Deposits:
Demand and checking $ 66,517,191 $ 62,525,053
NOW 19,129,591 16,931,113
Money market 20,414,574 20,534,721
Savings 12,483,717 11,349,111
Time 70,323,445 64,738,564
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Total Deposits 188,868,518 176,078,562
Escrow deposits 192,017 255,881
Subordinated debt 5,155,000 5,155,000
Accounts payable and accrued expenses 1,389,553 1,420,321
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Total liabilities 195,605,088 182,909,764
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Stockholders' equity:
Common stock, ($.0001 par value, 3,000,000
shares authorized, 1,908,634 issued and
outstanding at June 30, 2008 and 1,900,509 issued and
outstanding December 31, 2007) 191 190
Additional paid in capital 9,124,796 9,107,119
Retained earnings 13,786,066 13,226,395
Unallocated ESOP shares (986,289) (1,070,827)
Accumulated other comprehensive loss, net
of taxes of $302,760 and $330,668, respectively (347,079) (379,072)
------------- -------------
Total stockholders' equity 21,577,685 20,883,805
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Total liabilities and stockholders'
equity $ 217,182,773 $ 203,793,569
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VSB Bancorp, Inc.
Consolidated Statements of Operations
June 30, 2008
(unaudited)
Three months Three months Six months Six months
ended ended ended ended
June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
------------- ------------- ------------- -------------
Interest and dividend income:
Loans receivable $ 1,172,917 $ 1,501,344 $ 2,417,408 $ 3,073,697
Investment securities 1,431,362 1,293,698 2,815,659 2,594,158
Other interest earning assets 74,552 264,761 176,845 511,826
------------- ------------- ------------- -------------
Total interest income 2,678,831 3,059,803 5,409,912 6,179,681
Interest expense:
NOW 32,702 29,960 64,933 58,749
Money market 72,509 97,559 168,601 183,409
Savings 18,191 25,355 37,173 49,783
Subordinated debt 89,039 89,039 178,079 178,079
Time 380,380 627,874 899,827 1,243,010
------------- ------------- ------------- -------------
Total interest expense 592,821 869,787 1,348,613 1,713,030
Net interest income 2,086,010 2,190,016 4,061,299 4,466,651
Provision (benefit) for loan loss 55,000 -- 85,000 (30,000)
------------- ------------- ------------- -------------
Net interest income
after provision for loan loss 2,031,010 2,190,016 3,976,299 4,496,651
Non-interest income:
Loan fees 21,285 20,532 43,508 48,000
Service charges on deposits 545,902 445,491 1,025,517 862,399
Net rental income / (loss) 11,103 (13,121) 10,092 1,692
Other income 45,944 82,291 111,019 164,465
------------- ------------- ------------- -------------
Total non-interest income 624,234 535,193 1,190,136 1,076,556
Non-interest expenses:
Salaries and benefits 868,263 937,988 1,778,671 1,955,318
Occupancy expenses 358,466 341,750 716,190 679,725
Legal expense / (recovery) 65,700 (16,160) 119,786 (1,634)
Professional fees 62,100 44,700 123,500 96,300
Computer expense 57,198 70,155 112,304 137,371
Director fees 57,700 55,700 114,950 107,850
Other expenses 392,750 339,818 734,926 655,177
------------- ------------- ------------- -------------
Total non-interest expenses 1,862,177 1,773,951 3,700,327 3,630,107
Income before income taxes 793,067 951,258 1,466,108 1,943,100
------------- ------------- ------------- -------------
Provision (benefit) for income taxes:
Current 400,690 405,809 733,590 848,539
Deferred (33,898) 37,428 (55,702) 56,769
------------- ------------- ------------- -------------
Total provision for income taxes 366,792 443,237 677,888 905,308
Net income $ 426,275 $ 508,021 $ 788,220 $ 1,037,792
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Basic income per common share $ 0.23 $ 0.28 $ 0.43 $ 0.57
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Diluted net income per share $ 0.23 $ 0.27 $ 0.42 $ 0.55
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Book value per common share $ 11.31 $ 9.84 $ 11.31 $ 9.84
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