/EINPresswire.com/ -- STATEN ISLAND, NY -- (Marketwired) -- 04/13/16 -- VSB Bancorp, Inc. (OTCQX: VSBN) reported net income of $549,396 for the first quarter of 2016, an increase of $298,051, or 118.6%, from the first quarter of 2015. The following unaudited figures were released today. Pre-tax income was $845,262 in the first quarter of 2016, compared to $433,139 for the first quarter of 2015. Net income for the quarter was $549,396, or basic income of $0.32 per common share, compared to a net income of $251,345, or $0.14 basic income per common share, for the quarter ended March 31, 2015. Return on average assets increased from 0.37% in the first quarter of 2015 to 0.67% in the first quarter of 2016, while return on average equity increased from 3.64% to 7.25%.

The $298,051 increase in net income was due to an increase in net interest income of $367,487, a decrease in the provision for loan loss of $110,000 and an increase in non-interest income of $14,528, partially offset by an increase in non-interest expenses of $79,892, and an increase in the provision for income taxes of $114,072, due to an increase in pre-tax income.

The $367,487 increase in net interest income for the first quarter of 2016 occurred primarily because our interest income increased by $432,767, while our cost of funds increased by $65,280. The rise in interest income resulted from a $417,713 increase in income from loans, due to a $31.5 million increase in average balance between the periods, partially offset by a 21 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 40.7% as we implemented our strategy to increase our loan portfolio to improve average asset yields. Income from investment securities decreased slightly by $6,934, as the $10.4 million decrease in the average balance was substantially offset by 10 basis point increase in the yield, as we looked to deploy lower yielding assets into loans.

Interest income from other interest earning assets (principally overnight investments) increased by $21,988 due to a $11.7 million increase in the average balance and a 25 basis point increase in the yield. Overall, average interest-earning assets increased by $32.9 million from the first quarter of 2015 to the first quarter of 2016.

The increase in interest expense was principally due to a $53,401 increase in the cost of money market accounts, due to a 24 basis point increase in average cost and a $11.5 million increase in the average balance, and a $21,242 increase in interest on time accounts, as the average balance between periods increased by $4.3 million and the average cost increased by 10 basis points. We also experienced a $3,579 increase in interest on NOW account accounts. These increases were partially offset by $12,172 drop in the cost of savings accounts, as the average balance between periods decreased by $3.0 million and the average cost decreased by 17 basis points. Our overall average cost of interest-bearing liabilities increased by 11 basis points as the Federal Reserve increased the benchmark federal funds rate by 25 basis points in December 2015, resulting in upward movement in other interest rate indicators, such as the prime rate, which also increased by 25 basis points at that time.

Average demand deposits, an interest free source of funds for us to invest, increased $16.7 million from the first quarter of 2015, representing approximately 38% of average total deposits for the first quarter of 2016. Average interest-bearing deposits increased by $15.8 million, resulting in an overall $32.7 million increase in average total deposits from the first quarter of 2015 to the first quarter of 2016.

The average yield on earning assets rose by 24 basis points while the average cost of funds rose by 11 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 19 basis points from 2.90% to 3.09% when comparing the first quarter of 2016 to the same quarter in 2015, while our interest rate spread increased by 13 basis points from 2.73% to 2.86%. The spread and margin both increased because of a combination of two factors. Loans increased as a percentage of interest-earning assets from 28.3% in the first quarter of 2015 to 35.6% in the first 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. These increases were restrained by corresponding rise in the cost of deposits as market expectations of additional increases in the federal funds rate this year increased competition for deposits at current rates before rates increase.

Non-interest income increased slightly to $641,626 in the first quarter of 2016, compared to $627,098 in the same quarter in 2015. The increase was achieved through the $14,178 increase in other income as we had additional ATM surcharges and other miscellaneous income. We also had a $9,715 increase in rental income as we collected all rents due in 2016. This was partially offset by an $11,565 reduction in service charges on deposits, which consist mainly of fees on items being presented for payment against insufficient funds, which are inherently volatile.

Comparing the first quarter of 2016 with the same quarter in 2015, non-interest expense increased by $79,892, totaling $2.1 million for the first quarter of 2016. Non-interest expense increased for various business reasons including: (i) a $99,129 increase in salary and benefit costs due to a higher level of staff (ii) a $37,663 increase in other expenses due to an increase in collection expenses (real estate taxes and insurance on non-performing loans) and loan servicing fees paid on participation loans; and (iii) a $8,250 increase in New York State and New York City franchise tax due to recent tax law changes. The increases were partially offset by a reduction of legal expenses of $39,472 due to lower legal fees on collection matters.

Total assets increased to $327.4 million at March 31, 2016, an increase of $21.0 million, or 6.8%, from December 31, 2015. The significant component of this increase was a $9.7 million increase in loans and a $17.1 million increase in cash and other liquid assets, which was partially offset by a $5.6 million decrease in investment securities. Our non-performing loans decreased from $1.9 million at December 31, 2015 to $1.2 million at March 31, 2016, due primarily to the payoff of $662,384 of non-performing loans, in the first quarter of 2016. Total OREO stood at $570,000 at March 31, 2016. Total deposits, including escrow deposits, increased to $296.4 million, an increase of $20.1 million, or 7.3% during 2016. The increase was primarily attributable to increases of $17.3 million in demand and checking deposits, and $1.2 million in saving accounts, $1.2 million in NOW accounts, a $787,463 in money market accounts, partially offset by a $737,856 decrease in time deposits.

Our total stockholders' equity increased by $676,894, principally due to $428,021 in retained earnings, $164,453 in other comprehensive income, $102,788 in additional paid in capital (due to option exercises) and $25,031 of amortization of our ESOP loan. These increases were partially offset as we repurchased 3,500 shares of common stock during 2016, resulting in an increase in treasury stock of $43,410. We are currently in our fourth stock repurchase program. VSB Bancorp's Tier 1 capital ratio was 9.18% at March 31, 2016. Book value per common share increased from $16.00 at year end 2015 to $16.34 at March 31, 2016.

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.'s President and CEO, stated, "During the past year, our strategy of increasing our loan portfolio has produced our strong quarter over quarter growth. By prudently expanding our geographic footprint, we have taken advantage of new loan opportunities." Joseph J. LiBassi, VSB Bancorp, Inc.'s Chairman, stated, "The shifting of our asset mix toward loans has generated more net income and allowed us to increase our cash dividend. Our book value per share rose to $16.34, an all-time high. The cornerstone of our success is providing the best in customer service."

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 $29.5 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
                               March 31, 2016
                                 (unaudited)

                                                   March 31,   December 31,
                                                     2016          2015
                                                 ------------  ------------

Assets:

  Cash and cash equivalents                      $ 31,939,868  $ 14,845,096
  Investment securities, available for sale        55,944,952    58,096,583
  Investment securities, held to maturity         117,171,029   120,585,784
  Loans receivable                                114,058,404   104,341,670
    Allowance for loan loss                        (1,328,071)   (1,290,563)
                                                 ------------  ------------
      Loans receivable, net                       112,730,333   103,051,107
  Bank premises and equipment, net                  1,462,418     1,528,914
  Accrued interest receivable                         744,622       743,375
  Bank owned life insurance                         5,225,026     5,194,945
  Other assets                                      2,143,972     2,361,325
                                                 ------------  ------------
        Total assets                             $327,362,220  $306,407,129
                                                 ============  ============

Liabilities and stockholders' equity:

Liabilities:
  Deposits:
    Demand and checking                          $118,951,223  $101,659,731
    NOW                                            32,615,357    31,428,768
    Money market                                   61,700,238    60,912,775
    Savings                                        22,310,598    21,136,015
    Time                                           60,372,518    61,110,374
                                                 ------------  ------------
      Total Deposits                              295,949,934   276,247,663
  Escrow deposits                                     434,311        56,600
  Accounts payable and accrued expenses             1,501,790     1,303,575
                                                 ------------  ------------
      Total liabilities                           297,886,035   277,607,838
                                                 ------------  ------------


Stockholders' equity:
  Common stock, ($.0001 par value, 10,000,000
   shares authorized 2,086,509 issued, 1,803,898
   outstanding at March 31, 2016 and 2,078,509
   issued, 1,799,398 outstanding at December 31,
   2015)                                                  209           208
  Additional paid in capital                       10,614,839    10,512,041
  Retained earnings                                22,449,028    22,021,007
  Treasury stock, at cost (282,611 shares at
   March 31, 2016 and 279,111 at December 31,
   2015)                                           (3,019,585)   (2,976,175)
  Unearned ESOP shares                               (809,344)     (834,375)
  Accumulated other comprehensive gain, net of
   taxes of $129,790 and $41,238, respectively        241,038        76,585
                                                 ------------  ------------

      Total stockholders' equity                   29,476,185    28,799,291
                                                 ------------  ------------

      Total liabilities and stockholders' equity $327,362,220  $306,407,129
                                                 ============  ============


                              VSB Bancorp, Inc.
                    Consolidated Statements of Operations
                               March 31, 2016
                                 (unaudited)

                                                 Three months  Three months
                                                     ended         ended
                                                   March 31,     March 31,
                                                     2016          2015
                                                 ------------  ------------
Interest and dividend income:
  Loans receivable                               $  1,697,595  $  1,279,882
  Investment securities                               899,186       906,120
  Other interest earning assets                        29,361         7,373
                                                 ------------  ------------
    Total interest income                           2,626,142     2,193,375

Interest expense:
  NOW                                                  14,055        10,476
  Money market                                        124,673        71,272
  Savings                                              11,541        23,713
  Time                                                 86,388        65,916
                                                 ------------  ------------
    Total interest expense                            236,657       171,377

Net interest income                                 2,389,485     2,021,998
Provision for loan loss                                50,000       160,000
                                                 ------------  ------------
    Net interest income after provision for loan
     loss                                           2,339,485     1,861,998

Non-interest income:
  Loan fees                                            12,866        10,666
  Service charges on deposits                         516,956       528,521
  Net rental income                                    13,554         3,839
  Other income                                         98,250        84,072
                                                 ------------  ------------
    Total non-interest income                         641,626       627,098

Non-interest expenses:
  Salaries and benefits                             1,123,631     1,024,502
  Occupancy expenses                                  335,816       342,956
  Professional fees                                    42,287        81,759
  Legal expenses                                       88,331        94,328
  Computer expense                                     95,452        94,842
  Director fees                                        57,450        62,475
  FDIC and NYSBD assessments                           42,000        66,000
  Other expenses                                      350,882       289,095
                                                 ------------  ------------
    Total non-interest expenses                     2,135,849     2,055,957

      Income before income taxes                      845,262       433,139
                                                 ------------  ------------

Provision (benefit) for income taxes:
  Current                                             342,486       249,586
  Deferred                                            (46,620)      (67,792)
                                                 ------------  ------------
    Total provision for income taxes                  295,866       181,794

        Net income                               $    549,396  $    251,345
                                                 ============  ============

Basic income per common share                    $       0.32  $       0.14
                                                 ============  ============

Diluted net income per share                     $       0.32  $       0.14
                                                 ============  ============

Book value per common share                      $      16.34  $      15.54
                                                 ============  ============

Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100