Victory State Bank presses beyond tough economy with rise in first-quarter net income, growth of total assets

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Staten Island, N.Y. — VSB Bancorp, Inc. (NASDAQ: VSBN) is reporting unaudited net income of $432,222 for the first quarter of 2010, a 15.9 percent increase over the same period last year.

The $59,171 increase in net income was due to a decrease in the provision for loan loss of $185,000, partially offset by an increase in non-interest expense of $50,913, a decrease in net interest income of $18,708 and a decrease in non-interest income of $11,495.

“The $18,708 decrease in net interest income occurred primarily because our interest income decreased by $156,341, while our cost of funds decreased by $137,633,” said Ralph M. Branca, president and CEO of Victory State Bank. “We had a $59,590 increase in interest income on loans, which was due to an $11.8 million increase in the average balance of loans, partially offset by a 47 basis-point decrease in yield from the first quarter of 2009 to the first quarter of 2010.”

Non-performing loans increased $5.2 million from yearend 2009. This month, Victory entered into modified repayment arrangements with the two borrowers whose loans comprise 90 percent of the increase in the non-performing loan balance.

“We have already collected most of their arrears and they have agreed to pay all remaining arrears over the upcoming year,” Branca said.

The most significant component of the decrease in interest expense was a $150,435 decrease in interest on time deposits, as the average cost declined by 67 basis points due to lower market interest rates.

“The first quarter of 2010 has shown little relief from the current economic crisis,” Branca said. “We continue to aggressively collect and seek positive resolutions on our delinquent loans. Once interest rates begin to rise, we expect to face additional interest-rate margin pressure as the rates on our prime-based loan portfolio probably will not rise until the prime rate exceeds 6 percent, which would represent a 275 basis-point increase from today.”

Victory’s total assets increased to $239.8 million at March 31, 2010, an increase of $2.8 million, or 1.2 percent, from December 31, 2009.

“While we are not immune from the current economic stresses, we continue to generate earnings and capital, allowing us to pay our tenth consecutive dividend to our stockholders,” said Joseph J. LiBassi, chairman of VSB Bancorp Inc.


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. Readers should not place undue reliance on the forward-looking statements, which reflect management’s view only as of the date of the statement.

About VSB Bancorp, Inc.

VSB Bancorp, Inc. (NASDAQ: VSBN) is the one-bank holding company for Victory State Bank. Victory State Bank is a Staten Island-based commercial bank, which commenced operations on Nov. 17, 1997. The bank’s initial capitalization of $7 million was primarily raised within the community of Staten Island, N.Y. The Bancorp’s total equity has increased to $25.1 million, primarily through the retention of earnings. Victory State Bank operates five full-service locations on Staten Island: The main office in the community of Great Kills, and branches in the communities of West Brighton, St. George, Dongan Hills and Rosebank. For additional information, Victory State Bank may be reached at 718-979-1100 or visited online at