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VSB Bancorp Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 11, 2011 04:20PM
VSB Bancorp Inc. (VSBN) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
Our deposits (including escrow deposits) were $210,505,661 at March 31, 2011, an increase of $3,099,004 or 1.49%, from December 31, 2010 as a result of our active solicitation of retail deposits to increase funds for investment. The increase in deposits resulted from increases of $4,214,731 in non-interest demand deposits, $1,014,134 in savings accounts, $858,319 in time deposits, $679,458 in money market accounts and $101,374 in escrow deposits, partially offset by a decrease of $3,769,012 in NOW accounts.
Total stockholders equity was $26,134,872 at March 31, 2011, an increase of $90,016, or 0.35%, from December 31, 2010. The increase reflected: (i) $323,075 net increase in retained earnings due to net income of $431,791 for the three months ended March 31, 2011 partially offset by $108,716 of dividends paid in 2011; (ii) a decrease in the net unrealized gain on securities available for sale of $281,966; and (iii) a reduction of $42,270 in Unearned ESOP shares reflecting the gradual payment of the loan we made to fund the ESOP s purchase of our stock.
Interest Income. Interest income was $2,477,982 for the quarter ended March 31, 2011, compared to $2,561,725 for the quarter ended March 31, 2010, a decrease of $83,743, or 3.3%. The main reason for the decline was a 61 basis point decrease in the yield on investment securities, partially offset by a $2,727,841 increase in average balance between the periods, which caused a $149,670 decline in interest income on investment securities. On the positive side, interest income on loans increased by $63,996 as the average balance of loans increased between the periods.
Net Interest Income Before Provision for Loan Losses. Net interest income before the provision for loan losses was $2,251,312 for the quarter ended March 31, 2011, compared to $2,288,410 for the quarter ended March 31, 2010, a decrease of $37,098, or 1.6%. The decrease was primarily because the reduction in our interest income was greater than the reduction in our cost of funds when comparing the quarter ended March 31, 2011 to the same period ended 2010. The average yield on interest earning assets declined by 22 basis points, while the average cost of funds declined by 14 basis points. The reduction in the yield on assets was principally due to the 61 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 24 basis point drop in the cost of time deposits.
Provision for Loan Losses. We took a provision for loan losses of $30,000 for the quarter ended March 31, 2011 compared to a provision for loan losses of $90,000 for the quarter ended March 31, 2010. The $60,000 decrease in the provision was due to our evaluation of our loan portfolio and the low level of charge-offs in the 2011 period. A number of factors justified the reduction. We experienced a decrease of $2,540,831 in non-performing loans from $6,882,873 at March 31, 2010 to $4,342,042 at March 31, 2011. Most of those loans are secured by real estate. We individually evaluated the non-performing mortgage loans based primarily upon updated appraisals and we determined that the level of our allowance was appropriate to address inherent losses. In addition, we had recoveries (which are added back to the allowance for loan losses) of $32,175 in the first quarter of 2011, as compared to $24,394 in the first quarter of 2010. We are aggressively collecting charged-off loans in an effort to recover the amounts charged off whenever we believe that collection efforts are likely to be fruitful.
Non-interest Income. Non-interest income was $607,703 for the quarter ended March 31, 2011, compared to $601,674 during the same period last year. The $6,029, or 1.0%, increase in non-interest income was a direct result of an increase in loan fees, as we collected late fees on loans that were previously non-accrual, which was partially offset by $18,464 decrease in service charges on deposits due to normal fluctuation in non-sufficient fund fees.