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VSB Bancorp Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 15, 2011 06:24PM
VSB Bancorp Inc. (VSBN) filed Annual Report for the period ended 2010-12-31.
Highlight of Business Operations:
Median household income increased to $55,039 from $50,064 during the decade of the 90 s. Per capita income in 1999 was $23,905 in Staten Island, slightly higher than $23,389, the per capita income of New York State. One third of the households in Staten Island had household income of more than $75,000 in 1999. These income levels compare favorably with the national household median of $41,994 and the national per capita median of $21,587. The Census Department has not published comparable data for recent years, but management believes that median household income continues to be strong and that these income levels in Staten Island provide satisfactory support for personal home ownership, in turn supporting the home building industry, which is a major industry focus for Victory State Bank. However, recent economic disruption will have an adverse effect on local income levels because of increased unemployment, a reduction in wage increases, and possible wage reductions for employed persons. Although according to the United States Bureau of Labor Statistics, the unemployment rate in Staten Island and the New York metro area is below the national average, the unemployment rate has stabilized in the past year and may increase in the future as financial service firms and public sector employers report continuing layoffs.
Until the recent decline in the residential housing market, the median sales price of existing single family homes increased steadily from 2000 through 2006. According to the New York State Association of Realtors, the median price increased from $211,000 to $425,000 during that period. According to a report by the Center for an Urban Future, this means that the cost of a single family home on Staten Island is now out of reach to many middle-class families. As the population grew during the 1990s, total housing units increased as well, to 163,993 in 2000, as compared to 139,726 in 1990, an increase of 17.4%. However, perhaps confirming the reduction in affordability to the middle class, the growth in housing units has slowed, with an estimated 180,104 housing units at June 30, 2009, an increase of 9.9% since April 1, 2000. This slowing growth presents challenges to management because of our focus on the home building industry and related sectors of the local economy.
Our FDIC regular insurance premium was $345,226 in 2010 compared to $268,015 in 2009 (excluding the $101,950 special assessment described below), an increase of 28.8%. The FDIC also imposed a special assessment in 2009 on all FDIC-insured banks equal to 5 basis points on total assets minus Tier 1 capital. Our special assessment in 2009 amounted to $101,950. As required by The Dodd –Frank Wall Street Reform and Consumer Protection Law (the “Dodd-Frank” Act), the FDIC has recently revised its deposit insurance premium assessment rates. Our Bank, even though we are in the lowest regulatory risk category, will be subject to an assessment rate between five (5) and nine (9) basis points per annum. In general, the rates are applied to our bank s total assets less tangible capital, in contrast to the former rule which applied the assessment rate to our level of deposits.
Loan Portfolio Composition. Our loan portfolio consists primarily of commercial mortgage loans and unsecured commercial loans. Unsecured commercial loans include loans with personal guaranties or personal obligations in all cases, and, in some cases, may also include loans with illiquid personal property collateral. At December 31, 2010, we had total unsecured commercial loans outstanding of $12,924,378, or 15.8% of total loans, and commercial real estate loans of $58,204,596, or 71.1% of total loans. There were $5,874,500 of construction loans secured by real estate, $5,387,500 of which were construction loans to businesses for the construction of either commercial property or residential property for sale, representing 6.6% of total loans. Other loans in our portfolio principally included commercial loans secured by assets other than real estate totaling $1,393,532 or 1.7% of total loans at December 31, 2010; residential mortgage loans of $2,460,114, or 3.0% of total loans and consumer non-mortgage loans of $533,860 or 0.7% of total loans. Although we generally do not make traditional permanent residential mortgage loans, we occasionally make residential mortgage loans to the principals of commercial customers. For the year ended December 31, 2010, approximately $61,645,509, or 75.4%, of loans for business purposes had adjustable interest rates based on the prime rate of interest.