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VSB Bancorp, Inc.
Fourth Quarter 2008 and Full Year 2008 Results of Operations
Ralph M. Branca
President & CEO
Staten Island, N. Y. January 13, 2009. VSB Bancorp, Inc. (NASDAQ GM: VSBN), the holding company for Victory State Bank, reported net income of $600,820 for the fourth quarter of 2008, a 17.1% increase from the fourth quarter of 2007. Net income for all of 2008 was $1,931,744 as compared to net income of $2,047,226 for 2007, a decline of 5.6%. The following unaudited figures were released today. Pre-tax income was $972,481 in the fourth quarter of 2008, as compared to $848,669 for the fourth quarter of 2007, an increase of $123,812, or 14.6%. Net income for the quarter was $600,820, or basic income of $0.32 per common share, as compared to a net income of $513,155, or $0.27 basic income per common share, for the quarter ended December 31, 2007.
The $87,665 increase in net income for the fourth quarter of 2008 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 on time deposits of $223,850, a $40,067 decrease in interest expense on money market deposits, and an $89,040 decrease in interest on subordinated debt due to repayment of the subordinated debt on August 8, 2008, for a total $361,883 decline in interest expense. This compares to a decrease in interest income on loans of $21,433 and a decrease in interest income from other interest earning assets of $172,909, which were the principal causes of the $174,072 decline in interest income. We also had a $49,615 increase in non-interest income, an increase in income tax expense of $36,147 and an increase in the provision for loan losses of $120,000. The increase in the provision for loan loss was due to the higher level of charge-offs and the further deterioration of the real estate market and local economy.
The reduction in interest income on loans is attributable to a rapid decline of the prime rate, which negatively affected the yield on our loans, partially offset by the increase in average loan balance of $6,029,760, for the fourth quarter of 2008. After remaining steady for approximately 15 months, the prime rate declined 3.25% from 8.25% at September 1, 2007 to 5.00% at September 1, 2008 and continued to decline during the fourth quarter of 2008 to reach 3.25% at December 16, 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 and were a significant contributor to moderating the decline in interest income. Non-interest expense was stable but the components had some volatility. Salary and benefits expense declined $39,150 due, in part, to the retirement of the former president and reduced incentive and ESOP compensation expense. This reduction was offset by a $55,395 increase in occupancy expense, mostly due to utility increases, a $15,900 increase in professional fees, and a $12,032 increase in computer expenses. Positively affecting non-interest expense was a $50,177 decrease in legal fees due to the recovery of legal fees on non-accrual loans that were paid in full, and a $7,400 reduction in director fees.
Total assets increased to $212.7 million at December 31, 2008, an increase of $8.9 million, or 4.3%, from December 31, 2007. This increase occurred despite our repayment of $5.2 million in subordinated debt during 2008. Total deposits, including escrow deposits, increased to $188.1 million, an increase of $11.8 million, or 6.7%. The Bancorps Tier 1 capital ratio was 10.70% at December 31, 2008. We redeemed our trust preferred securities and repaid the subordinate debt on August 8, 2008, the first available redemption date.
The following information was filed by Vsb Bancorp Inc (VSBN) on Thursday, January 15, 2009 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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