SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
VSB BANCORP, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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previously. Identify the previous filing by registration statement number,
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VSB BANCORP, INC.
3155 Amboy Road
Staten Island, New York 10306
(718) 979-1100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of VSB BANCORP, INC.:
PLEASE TAKE NOTICE that our Annual Meeting of Stockholders will be held at the
principal office of Victory State Bank, 3155 Amboy Road, Staten Island, New York
on April 25, 2006 at 5:00 p.m. (New York time), for the following purposes:
1. To elect three directors for three-year terms;
2. To ratify the appointment of Crowe Chizek and Company LLC as
our independent registered public accountants for 2006; and
3. To transact any other business that may properly come before
the meeting or any adjournments.
The close of business on March 13, 2006 is the record date to determine which
stockholders are entitled to notice of and to vote at the meeting.
By order of the Board of Directors
/s/ JOAN NERLINO CADDELL
----------------------------------------
Joan Nerlino Caddell,
Corporate Secretary
March 24, 2006
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IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY, WHETHER YOU PLAN TO
ATTEND THE MEETING IN PERSON OR NOT
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Table of Contents
Summary.......................................................................1
General Information...........................................................2
The Proxy...................................................................2
Capital Stock Outstanding and Record Date...................................2
Forward-Looking Statements....................................................3
Proposal 1 - The Election of Directors........................................4
General Information Regarding Nominees and Our Other Directors..............4
Committees of the Board of Directors........................................5
Audit Committee.............................................................5
Audit Committee Report .....................................................6
Nominating Committee........................................................6
Human Resources (Compensation) Committee....................................7
Stockholder Communications with Directors...................................8
Attendance by Directors at Our Annual Meeting...............................8
Director Compensation.......................................................8
Management Compensation.....................................................8
Employment Agreement........................................................9
401(k) Plan.................................................................9
Employee Stock Ownership Plan..............................................10
Stock Option Plans.........................................................10
Security Ownership of Management and Certain Beneficial Owners.............11
Transactions with Directors and Officers and Their Related Interests.......12
Beneficial Ownership Reporting Compliance..................................13
Proposal 2 - Ratification of Independent Registered Public Accountants.......13
Audit and Other Fees.......................................................13
Non-retention of Prior Accountants.........................................14
Financial Information........................................................14
Other Matters................................................................14
Stockholder Nominations or Proposals.......................................14
Submission of Matters for Inclusion in Our 2007 Proxy Statement............15
Audit Committee Charter.....................................................A-1
We will provide, without charge, to each person solicited with this proxy
statement, upon the written request of any such person, a copy of our annual
report on Form 10-KSB, including the financial statements and the financial
statement schedules that we are required to file with the Securities and
Exchange Commission for our most recent fiscal year. The written request should
be directed to Raffaele Branca, Chief Financial Officer, VSB Bancorp, Inc., 3155
Amboy Road, Staten Island, New York 10306. The Form 10-KSB is also available on
the Internet as part of the Securities and Exchange Commission's EDGAR database
at http://www.sec.gov/edgar.shtml.
VSB Bancorp, Inc.
3155 Amboy Road
Staten Island, New York 10306
(718) 979-1100
Proxy Statement
SUMMARY
Q: Why am I receiving these materials?
A: Our Board of Directors is sending you these proxy materials in connection
with our annual meeting of stockholders, which will take place on April 25,
2006. You may attend the annual meeting in person but we ask that you send us
your proxy card and vote on the proposals described in this proxy statement to
make sure that your vote is counted.
Q: What proposals will stockholders vote on at the annual meeting?
A: There are two proposals that stockholders are scheduled to vote on at the
meeting:
o the election of three directors for three-year terms; and
o the ratification of the appointment of Crowe Chizek and Company LLC as
our independent registered public accountants.
Q: Who has been nominated as a director?
A: The Board of Directors, upon the recommendation of the Nominating
Committee, has nominated Alfred C. Johnsen, Carlos Perez MD and Bruno Savo for
election as directors. They are all now directors of both our company and our
subsidiary, Victory State Bank.
Q: How many votes are required for election as a director?
A: The three nominees with the highest vote totals will be elected.
Q: What shares can I vote?
A: You can vote all shares that you owned at the close of business on March
13, 2006 (the "Record Date"). You may cast one vote for each share of stock. You
may vote for up to three directors for three-year terms, but you may cast only
one vote per share for any single nominee.
Q: How can I vote my shares?
A: The best way to vote your shares is to mail your proxy card in the enclosed
pre-paid envelope. You can still attend the meeting and change your vote, but
sending your proxy card will make sure your vote is counted. If you own your
stock in street name through a stockbroker, please be sure to send your voting
instructions to your broker so your shares will be voted.
1
Q: Can I change my vote?
A: You may change your voting instructions at any time before the vote at the
annual meeting. You may do so by submitting a new proxy card on our form with a
later date, by signing any other document that revokes your proxy and causing it
to be delivered at the meeting, or by attending the meeting and voting in
person. Attending the meeting will not automatically revoke your proxy unless
you specifically so request. If you own your stock in street name, you must
contact your broker to change your vote.
General Information
We are furnishing this Proxy Statement and the accompanying form of
proxy to the stockholders of VSB Bancorp, Inc. in connection with our
solicitation of proxies for our Annual Meeting of Stockholders to be held on
April 25, 2006 at 5:00 p.m. (local time) at the main office of our subsidiary,
Victory State Bank, at 3155 Amboy Road, Staten Island, New York 10306, and at
any adjournments of the meeting.
We are first sending this Proxy Statement to our stockholders on or
about March 24, 2006.
The Proxy
Our Board of Directors is soliciting your proxy. If you properly sign
and return the enclosed form of proxy prior to or at the meeting and you do not
revoke it, all your shares covered by the proxy will be voted at the meeting
and, if you give instructions on how you want your shares to be voted, we will
follow those instructions. If you properly sign and return the proxy but you do
not specify how you want to vote, your shares will be voted for the election of
the director nominees named below and in favor of all other proposals described
in this Proxy Statement. If you hold your stock in street name through a broker,
please send your voting instructions to your broker.
We will solicit proxies by mail and by delivery to agents for street
name holders. We may also solicit proxies by telephone, facsimile or in person
by officers and other employees of ours or of our subsidiary. We will pay the
entire cost of this solicitation. We will reimburse financial institutions,
brokerage houses or other custodians, nominees or fiduciaries for their
reasonable expenses in forwarding the forms of proxy and proxy materials to
beneficial owners. You may revoke your proxy at any time before the vote is cast
for your shares, either by written notice or by your oral revocation at the
meeting. To be valid, written notice must be actually received by Joan Nerlino
Caddell, Corporate Secretary, VSB Bancorp, Inc., 3155 Amboy Road, Staten Island,
New York 10306 before the proxy is used at the meeting. Attendance at the
meeting will not in and of itself revoke a proxy.
Other than the matters listed on the attached Notice of Annual Meeting,
our Board of Directors does not know of any other matters that will be presented
for a vote at the meeting. If you sign the enclosed proxy, the holders of the
proxy will have the authority to vote your shares in accordance with their best
judgment on any other business that may properly come before the meeting.
Capital Stock Outstanding and Record Date
The close of business on March 13, 2006 is the record date to determine
which stockholders are entitled to notice of, and to vote at, the meeting. At
the close of business on that date, there were 1,509,822 shares of our common
stock outstanding and entitled to vote at the meeting. Common stock is our only
authorized class of stock. Each outstanding share is entitled to one vote at the
meeting on each matter to be voted upon. There will be no cumulative voting of
shares for the election of directors.
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If 503,274 shares of our common stock are represented at the meeting in
person or by proxy, representing one-third of the issued and outstanding share,
there will be a quorum. Abstentions and broker non-votes are counted to
determine whether there is a quorum.
On Proposal 1, the election of directors, you may vote for up to three
candidates. You may not cast more than one vote per share for any one nominee.
You may "Withhold Authority" to vote for some or all of the nominees named below
by so indicating in the appropriate space on the proxy. The three nominees with
the most votes will be elected to three-year terms. Votes that are withheld have
no effect on the election of directors.
On Proposal 2, the ratification of the independent registered public
accountants, you may vote "FOR", "AGAINST" or "ABSTAIN". Proposal 2 requires the
affirmative vote of a majority of the votes cast on Proposal 2 to be approved.
Abstentions and broker non-votes, as well a failing to submit a proxy card or a
ballot at the meeting, have no effect on the results of the vote on Proposal 2.
Please return your proxy to our transfer agent, Registrar and Transfer
Company, in the envelope we provide. Inspectors of election designated by the
Board will count the votes. There are no dissenters' rights arising out of any
of the proposals set forth in this Proxy Statement.
Forward-Looking Statements
When used in this proxy statement, or in any written or oral statement
made by us or our officers, directors or employees, the words and phrases "will
result," "expect," "will continue," "anticipate," "estimate," "project," or
similar terms are intended to identify "forward-looking statements." A variety
of factors could cause our actual results and experiences to differ materially
from the anticipated results or other expectations expressed in any
forward-looking statements. Some of the risks and uncertainties that may affect
our operations, performance, development and results, the interest rate
sensitivity of our assets and liabilities, and the adequacy of our loan loss
allowance, include, but are not limited to:
o deterioration in local, regional, national or global economic
conditions which could result in, among other things, an
increase in loan delinquencies, a decrease in property values,
or a change in the real estate turnover rate;
o changes in market interest rates or changes in the speed at
which market interest rates change;
o changes in laws and regulations affecting the financial
service industry;
o changes in competition; and
o changes in consumer preferences.
Please do not place undue reliance on any forward-looking statement,
which speaks only as of the date made. There are many factors, including those
described above, that could affect our future business activities or financial
performance and could cause our actual future results or circumstances to differ
materially from those we anticipate or project.
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Proposal 1 - The Election of Directors
General Information Regarding Nominees and Our Other Directors
Our Board of Directors has nine members. At the meeting, three
directors are to be elected, all for three-year terms, each to serve until his
or her successor is elected and has qualified. The Board of Directors has
nominated Alfred C. Johnsen, Carlos Perez MD and Bruno Savo for the three
directorships. All of the nominees are presently members of the Board of
Directors, with their terms expiring at the meeting.
If any nominee becomes unavailable for election, which we do not
anticipate, the shares represented by proxies that would otherwise have been
voted for such nominee will be voted for a substitute nominee designated by our
Board of Directors.
The following table provides information about the three nominees and
our other six directors. Length of service as a director includes service as a
director of Victory State Bank prior to our holding company reorganization.
Length of Service
as Director and Principal Occupation During Past 5 Years and
Name and Age Expiration of Term Directorships of Public Companies
------------ ------------------ ---------------------------------
Nominees:
Alfred C. Johnsen Director since 2003 Certified public accountant and owner of the firm Alfred C.
(59) Term expires 2006 Johnsen Certified Public Accounts.
Carlos Perez MD Director since 1997 Doctor of Gynecology.
(66) Term expires 2006
Bruno Savo Director since 2004 Vice President, S.L. Homes Development and Savo Bothers
(47) Term expires 2006 Development, local building firms that construct mainly
residential housing.
Continuing Directors:
Raffaele M. Branca Director since 1997 Executive Vice President and Chief Financial Officer, VSB
(41) Term expires 2008 Bancorp, Inc. and Victory State Bank; formerly Vice
President, Finance and Investment Portfolio Manager for River
Bank America; Formerly Vice President for Finance and
Investments of Hamilton Bancorp. Inc.
Robert S. Cutrona, Sr. Director since 1997 President of Project-One Services, Inc., a cleaning and
(68) Term expires 2008 maintenance firm.
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Chaim Farkas Director since 1997 President and Owner of Dataware Systems Lease, Inc., a
(52) Term expires 2008 computer services company.
Joseph J. LiBassi Director since 1997 Chairman, VSB Bancorp, Inc. and Victory State Bank;
(70) Term expires 2007 Self-employed investor.
Merton Corn Director since 1997 President and Chief Executive Officer, VSB Bancorp, Inc.
(71) Term expires 2007 and Victory State Bank; President and Chief Executive
Officer of Gateway State Bank from 1977 until its merger
with Staten Island Savings Bank in 1995; Senior Vice
President of Staten Island Savings Bank from August 1995 to
December 1995; President and Chief Executive Officer of
Community Capital Bank from December 1995 to November 1997.
Joan Nerlino Caddell Director since 1997 Secretary, VSB Bancorp, Inc. and Victory State Bank;
(48) Term expires 2007 Partner, Joan T. Nerlino & Associates PLLC, Attorneys
Partner, Nerlino & Gambale, LLP, Attorneys to the
Bank through December 31, 2005; Partner, Nerlino,
Gambale and Klapper LLP, Attorneys to the Bank through
February 28, 2002.
The Board of Directors held 14 meetings during 2005.
Our Board of Directors unanimously recommends that you vote IN FAVOR of
the election of Directors Johnsen, Perez and Savo as directors.
Committees of the Board of Directors
The Board of Directors has a nominating committee, an audit committee
and a human resources (compensation) committee. These committees all operate
jointly with comparable committees of the Board of Directors of Victory State
Bank having the same members. Except for the issue of stockholder
recommendations to the nominating committee for director candidates, which
applies only to the VSB Bancorp, Inc. nominating committee, the following
discussion regarding committees relates to both the Victory State Bank and VSB
Bancorp committees.
During the year ended December 31, 2005, each director attended at
least 75% of the total of the number of Board meetings held and the number of
meetings held by all committees on which he or she served, while he or she
served.
Audit Committee
The audit committee conducts the annual statutory directors'
examination of Victory State Bank, reviews reports of examination made by
regulatory authorities, reviews and discusses the audited financial statements
with our independent public accountants and makes periodic reports to the Board
of Directors regarding the findings of the regular audits by Victory State
Bank's internal auditor. The audit committee also receives a report from our
independent registered public accountants regarding critical accounting policies
and procedures, any material alternate treatment discussed with management, and
other written communications from those accountants to management. The audit
committee also approves the retention of our independent registered public
accountants, and recommends the approved firm to the Board of Directors for
approval by the Board.
The Board of Directors has determined that director Alfred C. Johnsen,
who is a member of the audit committee, qualifies as an audit committee
financial expert under the regulations of the Securities and Exchange Commission
5
and that he is independent of management. Mr. Johnsen will not be deemed an
expert for any other purpose as a result of being designated or identified as an
audit committee financial expert. The designation or identification of a person
as an audit committee financial expert does not impose on such person any
duties, obligations or liability that are greater than the duties, obligations
and liability imposed on such person as a member of the audit committee and
board of directors in the absence of such designation or identification. In
addition, the designation or identification of a person as an audit committee
financial expert does not affect the duties, obligations or liability of any
other member of the audit committee or board of directors.
The following is the report of our audit committee.
Audit Committee Report
During 2005, the audit committee reviewed the quality and integrity of
our financial statements, our compliance with legal and regulatory requirements,
the qualifications and independence of our independent public accountants, the
performance of the internal audit function and our independent public
accountants, and significant financial matters. Each of the audit committee
members satisfies the definition of independent director under National
Association of Securities Dealers Rule 4200. The audit committee met seven times
during 2005.
The Board and the audit committee have adopted a charter for the audit
committee. The charter was most recently re-approved, with minor changes, in
2006. The Board of Directors of the Bank has also approved the same charter for
its audit committee. A copy of the Audit Committee Charter is included as
Exhibit A.
The audit committee has reviewed our audited consolidated financial
statements and discussed the statements with management. The audit committee has
discussed with Crowe Chizek and Company LLC, our independent registered public
accountants for 2005, the matters required to be discussed by Statement of
Auditing Standards No. 61 (Communication with Audit Committees), as amended. The
audit committee received from Crowe Chizek and Company LLC the written
disclosures required by Independence Standards Board Standard No. 1, disclosing
to the audit committee all relationships with the accountants that may
reasonably bear on independence, confirming the accountants' independence and
confirming that the accountants discussed their independence with the audit
committee. Based on the review and discussions noted above, the audit committee
recommended to the Board that the audited consolidated financial statements be
included in our Annual Report for 2005 as sent to our stockholders.
Submitted by the audit committee:
Alfred C. Johnsen (Chairman), Joseph J. LiBassi and Carlos Perez MD
Nominating Committee
The nominating committee proposes candidates to the Board of Directors
for election as directors by stockholders. The committee also reviews issues of
independence and conflicts of interest regarding directors and candidates for
nomination. The nominating committee consists of directors Joseph J. LiBassi,
Alfred C. Johnsen and Carlos Perez MD. All of the members of the nominating
committee are independent of management. The nominating committee met once
during 2005. The Board of Directors has adopted a charter for the nominating
committee. The charter is available for review on our web site at
www.victorystatebank.com.
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We are principally engaged in business in Staten Island. Our existing
directors are active, well-known members of the community. In most cases, we
anticipate that existing directors will be renominated if they want to continue
to serve as directors. If an existing director will not be renominated for any
reason, or if the size of the board of directors has been increased, then the
nominating committee, in consultation with the other directors and based upon
their knowledge of the Staten Island community, will seek to identify
individuals known to them with character, experience, knowledge and business
relationships that reflect favorably on their ability to act as productive
members of the Board of Directors. Once candidates are identified, the committee
evaluates their credentials and forms a judgment as to which candidate or
candidates have the greatest ability to both guide us and assist in the growth
of our business. All candidates suggested to the committee will be evaluated in
the same manner, regardless of whether the candidate is suggested by a director,
officer, shareholder or other person.
We seek director nominees who, at a minimum, possess:
o knowledge of the business community in Staten Island;
o expertise in the evaluation of financial matters;
o the ability to review, absorb and comment on financial
statements which are an integral part of our operations;
o the character and reputation appropriate for a director of a
bank holding company; and
o no blemishes in their past which would cause concerns among
federal or state bank regulators who regularly examine the
operations of VSB Bancorp or its subsidiary, Victory State
Bank.
The nominating committee will consider, for inclusion in the Board of
Directors' slate of nominees for director, candidates suggested by stockholders.
In order to suggest a candidate, a stockholder must send a notice to the
nominating committee which we must receive at our principal office no later than
120 calendar days before the date which corresponds to the date of our proxy
statement for the prior year's annual meeting. The notice must be signed by the
stockholder and must provide the following information:
o A detailed resume of the proposed nominee showing his or her
academic and business achievements and history; his or her
experience and qualifications to be a director; and any other
information that the stockholder or the proposed nominee
considers relevant in evaluating the person's qualifications
to be a director;
o All information regarding the proposed nominee that would be
required to be disclosed to the Board of Governors of the
Federal Reserve System in our Annual Report on form FR Y-6;
o All other information relating to the proposed nominee that
would be required to be disclosed in a proxy statement under
the rules and regulations of the Securities and Exchange
Commission; and
o The name and address of the stockholder submitting the notice;
the number of shares owned by the stockholder; and a
description of any business, family or employment relationship
between the stockholder and the proposed nominee.
Human Resources (Compensation) Committee
The human resources committee makes salary and compensation decisions
for all officers at the level of Senior Vice President and above. The committee
also functions as the stock option committee under our various stock option
plans. The human resources committee consists of directors Carlos Perez MD,
chairman, Joseph J. LiBassi and Alfred C. Johnsen. The human resources committee
met twice during 2005.
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Stockholder Communications with Directors
Stockholders may communicate directly with a director by mailing or
delivering a letter addressed to the director by name at our principal office.
The envelope should be conspicuously marked on the outside front "Confidential."
We will forward any such letters to the named director unopened. Letters
addressed to the Board of Directors as a whole will be given to the Chairman of
the Board, who will then distribute copies to all directors.
Attendance by Directors at Our Annual Meeting
The Board has adopted a formal policy that all directors should attend
the annual meeting of stockholders. It has been the practice of Victory State
Bank and VSB Bancorp, Inc., to hold meetings of their Boards of Directors
immediately after the annual stockholders' meeting. Therefore, we anticipate
that most, if not all, of the directors will attend the annual meeting of
stockholders. In 2005, six of our nine directors attended the annual
stockholders' meeting of our company.
Director Compensation
Non-employee directors, other than the Chairman of the Board, receive
Board-approved attendance fees of $500 per board meeting and $200 per committee
meeting for committees of the Company or the Bank ($150 per meeting for meetings
of the Bank's loan committee). The committee attendance fee for the chairman of
the committee is $450 per meeting ($300 per loan committee meeting). The
Chairman of the Board received a director's fee fixed by the Board of $100,000
in 2005 but did not receive per meeting fees.
In 2004, upon approval of our 2004 Directors Stock Option Plan by our
stockholders, each of our directors received an option to purchase 5,000 shares
of our common stock at an exercise price of $22.00, which was the fair market
value of the stock on the date of grant.
Management Compensation
The following table sets forth the aggregate remuneration for services
in all capacities paid for the last three calendar years, to the chief executive
officer and to each executive officer whose aggregate direct remuneration
exceeded $100,000 for such year, for services rendered to VSB Bancorp, Inc. and
Victory State Bank.
Compensation
----------------------------------------------------------------------
Long Term All Other
Salary Bonus Compensation Compensation
Name and Principal Position Year ($) ($) (Options/SARs) ($)
--------------------------- ---------- ---------- ---------- ---------- ----------
Merton Corn 2005 $ 206,325 $ 87,915 -- $ 137,968(1)
President and Chief Executive Officer 2004 $ 204,000 $ 45,000 5,000 $ 84,866(1)
2003 $ 195,000 $ 40,000 -- $ 65,863(1)
2005 $ 153,769 $ 62,719 -- $ 23,932(1)
Raffaele M. Branca 2004 $ 151,311 $ 30,500 -- $ 23,275(1)
Executive Vice President 2003 $ 144,425 $ 28,638 5,000 $ 15,676(1)
8
(1) Represents the following items:
-------------------------------------------------------------------------------------------------------------------
401(k) match Vested value of Exercised Contributions to
and profit SARs that first value of the Employee
sharing plan vest during SARs during Stock Ownership
Name Year contribution the year the year Plan Miscellaneous
-------------------------------------------------------------------------------------------------------------------
Merton Corn 2005 $ 12,075 n/a $ 105,700 $ 11,745 $ 8,448
2004 $ 11,695 $ 14,500 $ 33,250 $ 13,670 $ 11,751
2003 $ 17,000 $ 38,000 n/a n/a $ 10,853
-------------------------------------------------------------------------------------------------------------------
Raffaele M. Branca 2005 $ 12,075 n/a n/a $ 11,745 $ 112
2004 $ 10,210 n/a n/a $ 12,123 $ 942
2003 $ 14,710 n/a n/a n/a $ 966
-------------------------------------------------------------------------------------------------------------------
Option/Stock Appreciation Rights ("SAR") Grants in Last Fiscal Year
There were no option or SAR grants in 2005.
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money Options/SAR at
Acquired on Realized Options/SAR at FY End Fiscal Year End
Name Exercise (#) ($) Exercisable/Unexercisable (#) Exercisable/Unexercisable ($)
------------------------------------------------------------------------------------------------------------------
Merton Corn 1,400 $130,704 - 22,000/-- $344,250/$--
Raffaele M. Branca -- $ -- 22,400/-- $233,490/$--
------------------------------------------------------------------------------------------------------------------
The value of unexercised, in-the-money SARs and options at December 31, 2005 is
the difference between the closing price of the common stock of VSB Bancorp,
Inc. on December 31, 2005 and the exercise price under such outstanding SARs and
options.
Employment Agreement
Victory State Bank has an employment agreement with President Merton
Corn. The employment agreement is intended to maintain a stable and competent
management base. Our continued success depends to a significant degree on the
skills and competence of Mr. Corn. The employment agreement, effective in
November 2002, has a five year term. The agreement provides for annual salary
increases of at least 5% per year beginning in November 2004. In addition, Mr.
Corn may receive annual bonuses at the discretion of the Board based upon the
performance of Victory State Bank and other factors.
Either party has had the right to terminate the agreement without cause
at any time after November 16, 2005 upon 90 days notice, and Mr. Corn will be
entitled to severance of from eight to twelve months salary, depending on when
the termination occurs, plus, if termination is by the Bank, continued medical
insurance coverage. If Mr. Corn's employment is terminated within one year after
a change in control, then he is entitled to a payment of 36 months salary plus
36 months of continued medical insurance coverage.
401(k) Plan
We maintain a qualified 401(k) salary deferral plan for all eligible
employees of Victory State Bank and our holding company who are at least 21
years of age, who work for one consecutive year and are credited with 1,000
hours of service in the plan year. Each participant may elect to make salary
deferral contributions to the 401(k) plan on a pre-tax basis. We match 100
percent of the first three percent of salary deferred by employees, including
Mr. Corn and Mr. Branca. Compensation for purposes of the 401(k) is capped at
9
$210,000 annually (subject to cost of living adjustments). At our sole
discretion, we can also make a discretionary (or profit sharing) contribution to
the Plan. This discretionary contribution is in addition to the matching
contribution. The matching contribution and the discretionary contribution vest
in annual installments of 20% beginning after the second anniversary of
eligibility in the 401(k) plan. Employee salary deferral contributions are
immediately vested. For 2005, we made a 2.75% discretionary contribution to the
Plan. Aggregate contributions to the accounts of an employee under the 401(k)
plan cannot exceed $42,000 annually (subject to cost of living adjustments).
Employee Stock Ownership Plan
We have an Employee Stock Ownership Plan (the "ESOP") for employees.
Employees of VSB Bancorp, Inc., Victory State Bank and any other subsidiaries
who have been credited with at least 1,000 hours of service during a designated
12-month period and who have attained age 21 will be eligible to participate in
the plan. The ESOP purchased 74,320 shares of our common stock from us out of
authorized but unissued shares in 2004 using the proceeds of a loan we made to
the ESOP.
Stock purchased with the proceeds of the loan will be allocated to
employee accounts in the ESOP gradually as it is released from the security
interest for the ESOP loan. The original loan was in the amount of $1,690,780,
and for 2005 we repaid $169,078 of the loan, so 8,371 shares of our common stock
were released from the lien of the loan. For 2004 we repaid $112,719 of the loan
and 5,700 shares of our common stock were released from the lien of the loan.
Those shares have been allocated to the ESOP accounts of all participating
employees.
The ESOP will continue to hold the stock, and any other amounts held
for the benefit of each employee, until that employee's employment terminates,
whether by retirement, resignation or termination by the employer. After
termination, the employee's vested balance will be distributed to the employee.
Benefits for each employee will vest over a seven-year period, with no vesting
during the first two years of employment, and 20% vesting each year for the next
five years of employment. The plan provides that in the event of a change in
control, all benefits will fully vest automatically. Employees received full
credit for service with Victory State Bank before the ESOP was implemented to
determine vesting of benefits.
In general, when stock is released from the security interest of the
ESOP loan, the stock is allocated based upon the relative compensation of each
participant for the year. Other amounts contributed to the ESOP that are
allocated to employees will be allocated in the same manner, based upon
compensation. However, profits allocated to employee accounts, such as any gain
on the sale of unallocated stock held by the ESOP, will be allocated based upon
each employee's relative ESOP account balances.
Stock Option Plans
We have five stock options plans. Four of them were originally approved
by stockholders of Victory State Bank. These plans became the stock option plans
of VSB Bancorp upon the holding company reorganization. The fifth plan was
approved by our stockholders in 2004. There are two plans for employees and two
plans for non-employee directors. The fifth plan approved in 2004 applies to all
directors, whether or not they are employees.
The employee plans, which are incentive stock option plans under the
Internal Revenue Code, provide for the grant of options to purchase 84,000
shares of our common stock. The director plans, which are non-qualified plans
under the Internal Revenue Code, provide for the grant of options to purchase
111,000 shares of our common stock. The exercise price of options under all the
plans may not be less than 100% of the fair market value of our stock on the
10
date of the grant of the option. The maximum option term is 10 years. Options
under the employee plans were granted with gradual vesting provisions, but in
December 2005, the Board of Directors accelerated the vesting of all unvested
options so that all outstanding options vested on or before December 31, 2005.
There were no option grants in 2005.
As adjusted, four non-employee directors have been granted options to
acquire 13,000 shares of our common stock under the plans; two non-employee
directors have been granted options to acquire 5,000 shares of our common stock
under the 2004 directors plan; and the Chairman of the Board has been granted
17,000 options to acquire shares of our common stock under the plans. The two
employee directors were granted options to acquire 5,000 shares of our common
stock under the 2004 directors plan, as disclosed above. Options to purchase all
available shares under the two non-employee director plans have been granted and
there remain available 10,000 additional shares for which options maybe granted
under the 2004 directors plan.
Upon a change of control of our company, all options issued under the
five plans immediately vest. No employee may receive incentive stock options if,
at the time of the grant, such person owns, directly and indirectly, more than
10% of our total combined voting power unless the stock option price is at least
110% of the fair market value of the common stock and the exercise of such
incentive stock option is limited by its terms to five years.
Payments for shares purchased upon the exercise of options may be made
in cash or cash equivalents. All stock options under the plans will be adjusted
for stock splits, reorganization, recapitalization, exchange of shares and stock
dividends. Any such changes to outstanding options will be made without a change
in the total price applicable to the unexercised portion of the option but with
a corresponding adjustment in the per share price and the number of shares
covered by the option.
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth, to our knowledge based upon a review of
our records and information provided in required filings, the beneficial
ownership of our stock as of the Record Date by directors, executive officers,
and any other person, entity or group known by us to beneficially own 5% or more
of our stock, including options exercisable now or within 60 days after the
Record Date.
Number Percent
Name of Shares of Total
---------------------------------------------- -------------------------- -----------
Directors and Executive Officers
---------------------------------------------- -------------------------- -----------
Raffaele M. Branca 72,564 (8)(11) 4.74%
Joan Nerlino Caddell 47,891 (1)(5)(6) 3.16%
Merton Corn (a) 140,756 (7)(11) 9.29%
Robert S. Cutrona, Sr. 34,291 (2)(5)(6)(11) 2.25%
Chaim Farkas 35,933 (3)(5)(6)(11) 2.36%
Alfred C. Johnsen 7,000 (11) 0.46%
Joseph J. LiBassi (a) 120,691 (5)(6)(9)(11) 7.91%
Carlos Perez MD 59,625 (4)(5)(6)(11) 3.92%
Bruno Savo 13,025 (10)(11) 0.86%
All directors and executive officers
as a group (9 persons) 531,776 33.16%
=========
(1) Excludes 4,200 shares, which are owned by Scott R. Caddell, Ms. Nerlino
Caddell's spouse, as to which she disclaims voting power and beneficial
ownership. Includes 4,000 shares that Ms. Caddell's two minor children own.
Includes 4,000 options granted under the 2004 Directors Stock Option Plan.
(2) Includes 20,000 shares owned as joint tenants with David P. Cutrona, his
son. Excludes 2,000 shares owned by Jennifer Gotlin Cutrona, Mr. Cutrona's
spouse, as to which Mr. Cutrona disclaims voting power and beneficial
ownership.
(3) Owned as joint tenants with Gail Farkas, his spouse.
11
(4) Includes 46,000 shares owned by the Carlos Perez M.D. Trust, of which Dr.
Perez is a beneficiary. Excludes 3,000 shares owned by Dr. Perez' adult
children, as to which Dr. Perez disclaims voting power and beneficial
ownership.
(5) Includes 4,000 stock options granted under the 2000 Directors' Plan.
(6) Includes 4,000 stock options granted to Mr. Cutrona and Dr. Perez, 8,000
stock options granted to Mr. LiBassi and 3,000 options granted to Ms.
Nerlino Caddell and Mr. Farkas under the 1998 Directors Plan.
(7) Excludes, as to Mr. Corn, 17,000 SARs that do not carry voting rights.
(8) Includes 17,400 options granted to Mr. Branca. Excludes 560 shares, which
are owned by Dawn Marie Branca, Mr. Branca's spouse, as to which Mr. Branca
disclaims voting power and beneficial ownership.
(9) Excludes 1,000 shares, which are owned by Melinda LiBassi, Mr. LiBassi's
spouse, as to which Mr. LiBassi disclaims voting power and beneficial
ownership.
(10) Includes 3,000 shares for Mr. Bruno Savo's three minor children, for which
Mr. Savo is the custodian.
(11) Includes 5,000 stock options granted under the 2004 stock option plan
(a) Merton Corn's address is c/o Victory State Bank, 3155 Amboy Road, Staten
Island, New York 10306 and Joseph J. LiBassi's address is c/o Victory State
Bank, 3155 Amboy Road, Staten Island, New York 10306.
Transactions with Directors and Officers and Their Related Interests
Some of our directors and officers and some of the corporations and
firms with which they are associated also are our customers in the ordinary
course of business, or have loans from Victory State Bank. None of them have
loans from VSB Bancorp, Inc. It is anticipated that some of these individuals,
corporations and firms will continue to be our customers or may continue to have
loans from Victory State Bank on a similar basis in the future. All loans
extended to such individuals, corporations and firms were made in the ordinary
course of business, did not involve more than normal risk of collectibility or
present other unfavorable features, and were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the same
time for comparable Victory State Bank transactions with unaffiliated persons.
Director Joan Nerlino Caddell is a member of the law firm of Joan T.
Nerlino & Associates, PLLC, which the Bank has retained for fiscal 2006.
Director Joan Nerlino Caddell was a member of the law firm of Nerlino & Gambale,
LLP, which we had retained during the last two fiscal years for the performance
of legal services on a matter by matter basis. Fees paid to the firms of which
Director Joan Nerlino Caddell was or is a partner totaled $113,332 in 2005 and
$105,772 in 2004.
Director Chaim Farkas is President and shareholder of the firm of
Dataware Systems Lease, Inc. ("Dataware") from which Victory State Bank
purchased computer hardware and related software in the ordinary course of
business. The fees paid to Dataware in the aggregate, totaled $36,191 in 2005
and $31,179 in 2004.
Director Bruno Savo, is a member of Boardwalk Estates, LLC, NBM
Development, LLC and Jolene Estates, LLC, limited liability companies, which
develop residential real estate for resale and Savino Savo, a former director
and the father of Bruno Savo, is the president of Village Green Shopping Center,
Inc. and Village Green Maintenance Corp, which are real estate companies. All of
these companies had loans or unused but available lines of credit from Victory
State Bank at December 31, 2005 and December 31, 2004. The loans and line of
credit facilities were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
Director Robert Cutrona, Sr., is President of Project-One Services,
Inc., a company that provides cleaning and construction services to the Bank in
the ordinary course of business. The fees paid to Project-One in the aggregate
totaled $88,793 in 2005 and $106,160 in 2004.
12
The Board of Directors has evaluated the relationships between its
directors and management and has determined that Directors Cutrona, Farkas,
Johnsen, LiBassi, Perez and Savo are independent of management under the rules
of the NASDAQ Stock Market.
Beneficial Ownership Reporting Compliance
Upon reaching age 70-1/2, Mr. Corn was required to take a minimum
distribution of 26 shares of stock previously credited to his sub account in the
Company's Employee Stock Ownership Plan. Mr. Corn elected to take that
distribution in cash and the Employee Stock Ownership Plan paid the cash to him
on December 9, 2005. Due to a misunderstanding regarding the nature and timing
of the transaction, he did not report the disposition until he filed a Form 5
with the Securities and Exchange Commission on January 5, 2006.
Proposal 2 - Ratification of Independent Registered Public Accountants
Our Audit Committee has approved the engagement of Crowe Chizek and
Company LLC to be our independent registered public accounting firm for 2006,
subject to the ratification of the engagement by our stockholders. At the Annual
Meeting, stockholders will consider and vote on the ratification of that
engagement of Crowe Chizek and Company LLC. We expect that representatives of
Crowe Chizek will attend the meeting and be available to respond to appropriate
questions. The representatives will be allowed to make a statement, if they
desire to do so.
Audit and Other Fees
The following table sets forth the aggregate fees billed or expected to
be billed by Crowe Chizek and Company LLC for services rendered to us during
2005 and 2004 on our behalf on a combined basis, including Victory State Bank
and VSB Bancorp, Inc., as well as all out-of-pocket costs incurred in connection
with these services, which have been billed or will be billed to us. It is the
policy of the audit committee that all non-audit services must be approved in
advance by the audit committee. Only the audit committee has the authority to
approve services to be provided by our independent registered public accountants
and all members of management are aware that they must report to the audit
committee any proposal to obtain non-audit services from our independent
accountants and obtain approval from such committee before any such services are
provided. All (100%) of the services provided by Crowe Chizek and Company, LLC
were approved in advance by the audit committee.
2005 2004
---------- ----------
Audit Fees $ 74,500 $ 78,500
Audit-Related Fees $ 1,500(1) $ --
Tax Fees $ 12,000(2) $ --
All Other Fees $ 30,500(3) $ --
(1) Includes $1,500 for services related to the filing of a Registration
Statement on Form S-8 in connection with the Company's ESOP.
(2) For preparation of 2005 tax return in 2006.
(3) Represents work performed by Crowe Chizek and Company LLC's consulting
practice to assist in the Company's preparation for future compliance with
Section 404 of the Sarbanes-Oxley Act.
13
Non-retention of Prior Accountants
The independent public accounting firm of Deloitte & Touche acted as
our independent public accountants for 2003. Our Board of Directors, on March 9,
2004, unanimously decided not to retain the firm of Deloitte & Touche LLP as our
independent public accountants for 2004 but to instead retain the firm of Crowe
Chizek and Company LLC, subject to stockholder approval. Deloitte & Touche LLP's
report on our financial statements for the 2003 and 2002 did not contain an
adverse opinion or disclaimer of opinion, and was not modified as to
uncertainty, audit scope, or accounting principles. The decision to change
accountants was approved by the Board of Directors upon the unanimous
recommendation of the audit committee of the Board of Directors.
We had no disagreements with Deloitte & Touche LLP, whether or not
resolved, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, to the best of our
knowledge, if not resolved to Deloitte & Touche LLP's satisfaction, would have
caused Deloitte & Touche LLP to make reference to the subject matter of the
disagreement in connection with its report. Deloitte & Touche LLP did not advise
us that:
o internal controls necessary to develop reliable financial
statements did not exist; or
o information has come to the attention of Deloitte & Touche LLP
which made Deloitte & Touche LLP unwilling to rely on
management's representations, or unwilling to be associated
with the financial statements prepared by management; or
o the scope of the audit should be expanded significantly, or
information has come to Deloitte & Touche LLP's attention that
Deloitte & Touche LLP has concluded will, or if further
investigated might, materially impact the fairness or
reliability of a previously issued audit report or the
underlying financial statements, or the financial statements
issued or to be issued covering the fiscal periods subsequent
to the date of the most recent audited financial statements
(including information that might preclude the issuance of an
unqualified audit report), and the issue was not resolved to
Deloitte & Touche LLP satisfaction prior to March 9, 2004.
During 2002 and 2003, or thereafter until the Board made its decision
on March 9, 2004, we did not consult with Crowe Chizek and Company LLC regarding
the application of accounting principles to a specific completed or contemplated
transaction, or the type of audit opinion that might be rendered on our
financial statements and no written or oral advice was provided that was an
important factor considered by the audit committee or the Board of Directors in
reaching a decision as to the accounting, auditing or financial reporting issue.
Our Board of Directors unanimously recommends that you vote IN FAVOR of the
ratification of the appointment of Crowe Chizek and Company LLC as our
independent registered public accountants for the fiscal year ending
December 31, 2006.
Financial Information
Accompanying this Proxy Statement is our Annual Report containing
financial and related information. The Annual Report is not part of this Proxy
Statement.
Other Matters
Stockholder Nominations or Proposals
Bylaw Limitations. Our bylaws provide that, except for proposals or
nominations by the Board of Directors, a stockholder will be permitted to
nominate a person to serve as a director or to present a proposal to
14
stockholders at a stockholders' meeting only by first satisfying certain
requirements. A stockholder must give advance written notice to our Secretary
before making any such nomination or submitting such a proposal. To be timely, a
stockholder's notice must be delivered to or mailed to and received at our
principal executive offices not less than ninety days prior to the date of the
annual meeting; provided, however, that as to any annual meeting held earlier
than 30 days in advance of the anniversary of the annual meeting in the previous
year, the notice must be received not later than the close of business on the
10th day following the day on which notice of the date of the annual meeting was
mailed or public disclosure of the date of the meeting is made.
The stockholder must sign the notice. The notice must state (i) the
name and address of such stockholder as they appear on our books and (ii) the
class and number of shares of our capital stock that the stockholder
beneficially owns.
As to notices of intent to submit a proposal for stockholder vote, the
notice must also state: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; and (ii) any material interest of the stockholder in the
proposed business. Only business which is a proper subject of stockholder action
may be proposed at or voted on at the meeting.
As to notices of intent to nominate a person as a director, the notice
must also state: (i) all information relating to each proposed nominee that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to applicable law and
regulation; and (ii) any business, familial or employment relationship between
such stockholder and such nominees. The notice must be accompanied by the
nominee's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected, provided, however, that we will not be
required to name such nominee in any proxy statement for a proxy solicitation by
our Board of Directors or to solicit votes for such nominee unless required by
law to do so.
Submission of Matters for Inclusion in Our 2007 Proxy Statement
Stockholders may submit proposals for inclusion in our 2007 proxy
material by satisfying the requirements of the regulations of the Securities and
Exchange Commission. We must receive those proposals by 5 p.m. local time not
less than 120 calendar days before the date in 2007 that corresponds to the date
that this proxy statement is released to stockholders in 2006. However, if the
date of the 2007 annual meeting is changed by more than 30 days from the date of
the 2006 annual meeting, then the deadline is a reasonable time before we begin
to print and mail our proxy materials. Proposals should be sent via registered,
certified, or express mail to: Office of the Chief Financial Officer, VSB
Bancorp, Inc., 3155 Amboy Road, Staten Island, New York 10306. The stockholder
must also satisfy all the other requirements of Securities and Exchange
Commission Rule 14a-8 in order to be able to include a proposal in our proxy
material.
Dated: March 24, 2006
15
Exhibit A
AUDIT COMMITTEE CHARTER
-----------------------
This charter shall be reviewed, reassessed, updated and approved annually by the
Audit Committee and the Board of Directors of VSB Bancorp, Inc. ("Bancorp").
Role and Independence
---------------------
The Audit Committee of the Board of Directors assists the board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing and reporting practices of the Bancorp and other such duties as
directed by the Board. The membership of the Committee shall consist of at least
three directors who are generally knowledgeable in financial and auditing
matters, each of whom is able to read and understand fundamental financial
statements, including the Bancorp's balance sheet and income statement and cash
flow statements or will become able to do so within a reasonable period time
after his or her appointment to the Audit Committee. At least one member of the
Committee will have accounting or related financial management expertise (i.e.
said member has past employment experience in finance or accounting, requisite
professional certification in accounting or any other comparable experience or
background which results in the individual's financial sophistication, including
being or having been a chief executive or chief financial officer or other
senior officer with financial oversight responsibility). Each member shall be
free of any relationship that, in the opinion of the Board, would interfere with
his or her individual exercise of independent judgment, and shall meet the
director independence requirements for serving on audit committees as set forth
in the corporate governance standards of the National Association of Securities
Dealers. Each member shall evaluate their status of director independence, at a
minimum, on an annual basis. The Committee is expected to maintain free and open
communication (including private executive sessions at least annually) with the
independent accountants, the internal auditors and the management of the
Bancorp. In discharging this oversight role, the Committee is empowered to
investigate any matter brought to its attention, with full power to retain, and
to set compensation for, outside counsel or other experts for this purpose.
The Board of Directors shall appoint one member of the Audit Committee as
Chairperson. He or she shall be responsible for leadership of the committee,
including preparing the agenda, presiding over the meetings, making committee
assignments and reporting to the board of directors. The Chairperson will also
maintain regular liaison with the CEO, CFO, the lead independent audit partner
and the internal audit partner.
Responsibilities
----------------
The Audit Committee's primary responsibilities include:
o Recommending to the Board the independent accountant to be
selected or retained to audit the financial statements of the
Bancorp. In so doing, the Committee will require from the
auditor receipt of a written affirmation that the auditor is
in fact independent and delineating all relationship between
the auditor and the Bancorp consistent with the Independence
Standards Board Standard No. 1. The Audit Committee shall also
discuss with the auditor any disclosed relationships or
services that may impact the auditor's independence.
Furthermore the Audit Committee shall take or recommend to the
Board that it take any actions necessary to oversee the
auditor's independence.
A-1
Exhibit A
o Overseeing the independent auditor relationship by discussing
with the auditor the nature and rigor of the audit process,
receiving and reviewing audit reports, and providing the
auditor full access to the Committee (and the Board) to report
on any and all appropriate matters.
o Providing guidance and oversight to the internal audit
activities of the Bancorp including reviewing the
organization, plans and results of such activity.
o Reviewing the audited financial statements and discussing them
with management and the independent auditor. These discussions
shall include consideration of the quality of the Bancorp's
accounting principles as applied in its financial reporting,
including review of estimates, reserves and accruals, review
of judgmental areas, review of audit adjustments whether or
not recorded and such other inquiries as may be appropriate.
Based on the review, the committee shall make its
recommendation to the Board as to the inclusion of the
Bancorp's audited financial statements in the company's annual
report on Form 10-KSB.
o Reviewing with management and the independent auditor the
quarterly financial information prior to the Bancorp's filing
of Form 10-QSB. This review may be performed by the committee
or its chairperson.
o Discussing with management, the internal auditors and the
external auditors the quality and adequacy of the Bancorp's
internal controls.
o Discussing with management the status of pending litigation,
taxation matters and other areas of oversight to the legal and
compliance area as may be appropriate.
o Reporting audit committee activities to the full Board and
issuing annually a report to be included in the proxy
statement (including appropriate oversight conclusions) for
submission to the shareholders.
o Reviewing the independent auditor's ultimate accountability to
the Board of Directors and to the Audit Committee as
representatives of shareholders and these shareholder
representatives' ultimate authority and responsibility to
select, evaluate and where appropriate, replace the
independent auditor (or to nominate the independent auditor to
be proposed for shareholder approval in any proxy statement).
Approving all non-audit services to be provided by the independent auditor after
giving due regard to the effect of such non-audit services on the independence
on the external auditor and the legality of providing such non-audit services.
A-2
REVOCABLE PROXY
VSB Bancorp, Inc.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
April 25, 2006
For All
For Withhold Except
The undersigned hereby appoints 1. The election as directors of the three [ ] [ ] [ ]
Joan Nerlino Caddell and Chaim nominees listed below to three year terms:
Farkas, or each of them
individually, each with full power Three Year Nominees:
of substitution, proxies and agents --------------------
for the undersigned to vote all Alfred C. Johnsen Carlos Perez MD Bruno Savo
shares of common stock of VSB
Bancorp Inc. which the undersigned
is entitled to vote at the Annual INSTRUCTION: To withhold authority to vote for any individual
Meeting of Stockholders, to be nominee(s), mark "For All Except" and write that nominee's name
held on April 25, 2006, at in the space provided below.
5:00 p.m., and at any and all
adjournments thereof. ------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF VSB For Against Abstain
BANCORP, INC. 2. The ratification of the appointment of [ ] [ ] [ ]
Crowe Chizek and Company LLC as
independent registered public accountants
for VSB Bancorp, Inc. for the fiscal year
ending December 31, 2006.
3. In their discretion, such other matters as may properly come before the
meeting and at any adjournments thereof, including whether or not to
adjourn the meeting.
---------------
Please be sure to sign | Date | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
and date this Proxy | | VOTE "FOR" THE NOMINEES NAMED ABOVE AND "FOR" EACH
in the box below. --------------- OF THE LISTED PROPOSALS.
--------------------------------------
| This proxy is revocable and will be voted as directed, but if no instructions are
| specified, this proxy will be voted FOR each of the proposals listed above. If
| any other business is presented at the Annual Meeting, this proxy will be voted by
| those named in this proxy in their discretion. At the present time, the Board of
| Directors knows of no other business to be presented at the Annual Meeting.
--------------------------------------
Stockholder sign above ___________
Co-holder (if any) sign above
^ Detach above card, sign, date and mail in postage paid envelope provided ^
VSB Bancorp, Inc.
--------------------------------------------------------------------------------
IMPORTANT: The undersigned acknowledges receipt from the Company prior
to the execution of this proxy of a Notice of Annual Meeting of Stockholders, a
Proxy Statement and an Annual Report.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
--------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENEVELOPE PROVIDED.
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