VSB Bancorp, Inc.
Fourth Quarter 2010 Results of Operations
Ralph M. Branca
President & CEO
Staten Island, N. Y. —January 12, 2011. VSB Bancorp, Inc. (NASDAQ GM: VSBN) reported net income of $479,170 for the fourth quarter of 2010, a decrease of $36,290, or 7.0%, from the fourth quarter of 2009. The following unaudited figures were released today. Pre-tax income was $883,317 in the fourth quarter of 2010, compared to $884,953, a decrease of $1,636, or 0.2%, from the fourth quarter of 2009. Net income for the quarter was $479,170, or basic income of $0.27 per common share, compared to net income of $515,460, or $0.29 basic income per common share, for the quarter ended December 31, 2009.
The $36,290 decrease in net income for the fourth quarter of 2010 was due to a decrease in net interest income of $75,447, an increase in non-interest expense of $54,531 and an increase in income tax expense of $34,654, partially offset by a decrease in the provision for loan loss of $95,000, and an increase in non-interest income of $33,342. Although the provision for loan loss declined, our allowance for loan losses represented 1.56% of total loans at December 31, 2010, compared to 1.35% at December 31, 2009.
The $75,447 decrease in net interest income for the fourth quarter of 2010 occurred primarily because our interest income decreased by $147,917, while our cost of funds decreased by $72,470. The decline in interest income resulted from a $174,079 decrease in income from investment securities, due to a 54 basis point decrease in yield, coupled with a $1.9 million decrease in average balance between the periods. The decrease in interest income from investment securities was partially offset by a $16,054 increase in interest income from loans. The increase in interest income on loans was due to a $1.1 million increase in the average balance of loans, partially offset by a 6 basis point decrease in average yield from the fourth quarter of 2009 to the fourth quarter of 2010. Our non-performing loans increased by $4.7 million from year end 2009 to year end 2010, contributing to the decrease in our average loan yield. We have entered into modified repayment arrangements with two borrowers whose loans comprise 72% of our non-performing loan balance and those borrowers have been paying in accordance with the modified arrangements for more than six consecutive months. We recognize interest income on those loans only when interest is actually paid.
Interest income from other interest earning assets (principally overnight investments) increased by $10,108 due to a $6.3 million increase in average balance and a 7 basis point increase in average yield. Overall, average interest-earning assets increased by $5.5 million from the fourth quarter of 2009 to the fourth quarter of 2010.
The most significant component of the decrease in interest expense was a $64,453 decrease in interest on time deposits as the average cost of time deposits declined by 42 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 $228,916 from the fourth quarter of 2009, and they represented approximately 33% of average total deposits for the fourth quarter of 2010. Average interest-bearing deposits increased by $3.3 million, resulting in an overall $3.5 million increase in average total deposits from the fourth quarter of 2009 to the fourth quarter of 2010.
The average yield on our interest-earning assets declined by 37 basis points, and our average cost of funds declined by 22 basis points. The reduction in the yield on assets was principally due to the 54 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 42 basis point drop in the cost of time deposits.
The following information was filed by Vsb Bancorp Inc (VSBN) on Thursday, January 13, 2011 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.