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                                  UNITED STATES
                        SECURITY AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20849

                                   FORM 10-QSB

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                      FOR THE QUARTER ENDED MARCH 31, 2007

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OF THE EXCHANGE ACT
                            FOR THE TRANSITION PERIOD

                         COMMISSION FILE NUMBER 0-50237

                                VSB BANCORP, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its charter)

                                    New York
         --------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                                  11 - 3680128
                     --------------------------------------
                     (I. R. S. Employer Identification No.)

               4142 Hylan Boulevard, Staten Island, New York 10308
               ---------------------------------------------------
                    (Address of principal executive offices)

                                 (718) 979-1100
                            -------------------------
                            Issuer's telephone number

                                  Common Stock
                                ----------------
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.         Yes [X] No [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)                                   Yes [ ] No [X]

Transitional small business disclosure format:                    Yes [ ] No [X]

The Registrant had 1,891,759 common shares outstanding as of May 3, 2007.

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<PAGE>

                              CROSS REFERENCE INDEX

                                     PART I

<TABLE>
<CAPTION>
                                                                                                    Page
                                                                                                    ----
<S>       <C>                                                                                       <C>
Item 1    Consolidated Statements of Financial Condition as of March 31, 2007 and
                       December 31, 2006 (unaudited).                                               4
          Consolidated Statements of Operations for the Three Months Ended
                       March 31, 2007 and 2006 (unaudited)                                          5
          Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended
                       March 31, 2007 and the Year Ended December 31, 2006 (unaudited)              6
          Consolidated Statements of Cash Flows for the Three Months Ended
                       March 31, 2007 and 2006 (unaudited)                                          7
           Notes to Consolidated Financial Statements for the Three Months Ended
                       March 31, 2007 and 2006 (unaudited)                                          8 to 13

Item 2    Management's Discussion and Analysis of Financial Condition and Results of Operations     13 to 20
Item 3    Control and Procedures                                                                    20

                                     PART II

Item 1    Legal Proceedings                                                                         20 to 21
Item 4    Submission of Matters to a Vote of Security Holders                                       22

Signature Page                                                                                      23

          Exhibit 31.1, 31.2, 32.1, 32.2                                                            24 to 27
</TABLE>

                                        2
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     When used in this periodic report, 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  by our customers or the customers of
          our business borrowers.

     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.  We do not  undertake  any
obligation to update any forward-looking statement after it is made.

                                        3
<PAGE>

                                VSB BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                   (unaudited)

<TABLE>
<CAPTION>
                                                         MARCH 31,       DECEMBER 31,
                                                           2007             2006
                                                       -------------    -------------
<S>                                                    <C>              <C>
ASSETS:
 Cash and due from banks                               $  31,501,641    $  25,363,069
 Investment securities, available for sale               108,729,992      113,770,611
 Loans receivable                                         61,433,260       66,410,677
  Allowance for loan loss                                 (1,014,951)      (1,128,824)
                                                       -------------    -------------
    Loans receivable, net                                 60,418,309       65,281,853
 Bank premises and equipment, net                          4,237,101        1,554,363
 Accrued interest receivable                                 808,387          805,681
 Deferred taxes                                            1,721,300        2,030,647
 Other assets                                                983,350        3,078,535
                                                       -------------    -------------
      Total assets                                     $ 208,400,080    $ 211,884,759
                                                       =============    =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
 Deposits:
    Demand and checking                                $  64,010,794    $  67,371,582
    NOW                                                   20,286,959       19,935,769
    Money market                                          18,163,332       18,359,007
    Savings                                               12,422,987       12,526,485
    Time                                                  67,326,258       68,229,244
                                                       -------------    -------------
      Total Deposits                                     182,210,330      186,422,087
 Escrow deposits                                             394,197          261,063
 Subordinated debt                                         5,155,000        5,155,000
 Accounts payable and accrued expenses                     2,001,494        2,306,312
                                                       -------------    -------------
     Total liabilities                                   189,761,021      194,144,462
                                                       -------------    -------------

Employee Stock Ownership Plan Repurchase Obligation                -          399,026

STOCKHOLDERS' EQUITY:
 Common stock, ($.0001 par value, 3,000,000 shares
  authorized,  1,891,759 issued and outstanding at
  March 31, 2007 and December 31, 2006)                          189              189
 Additional paid in capital                                9,060,955        8,667,665
 Retained earnings                                        11,822,971       11,293,200
 Unearned Employee Stock Ownership Plan shares            (1,197,636)      (1,239,905)
 Accumulated other comprehensive loss,
   net of taxes of $913,673 and $1,203,679,
   respectively                                           (1,047,420)      (1,379,878)
                                                       -------------    -------------
    Total stockholders' equity                            18,639,059       17,341,271
                                                       -------------    -------------
     Total liabilities and stockholders'
        equity                                         $ 208,400,080    $ 211,884,759
                                                       =============    =============
</TABLE>

See notes to consolidated financial statements.

                                        4
<PAGE>

                                VSB BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                        THREE MONTHS      THREE MONTHS
                                                            ENDED             ENDED
                                                       MARCH 31, 2007    MARCH 31, 2006
                                                       --------------    --------------
<S>                                                    <C>               <C>
Interest and dividend income:
 Loans receivable                                      $    1,572,353    $    1,748,773
 Investment securities                                      1,300,460         1,205,762
 Other interest earning assets                                247,065           179,448
                                                       --------------    --------------
     Total interest income                                  3,119,878         3,133,983

Interest expense:
 NOW                                                           28,789            23,203
 Money market                                                  85,850            84,216
 Savings                                                       24,428            18,334
 Subordinated debt                                             89,040            89,040
 Time                                                         615,136           453,883
                                                       --------------    --------------
     Total interest expense                                   843,243           668,676

Net interest income                                         2,276,635         2,465,307
Provision (credit) for loan loss                              (30,000)           25,000
                                                       --------------    --------------
    Net interest income
       after provision for loan loss                        2,306,635         2,440,307
                                                       --------------    --------------
Non-interest income:
 Loan fees                                                     27,468            22,767
 Service charges on deposits                                  416,908           389,756
 Net rental income                                             14,813             3,375
 Other income                                                  82,174            67,651
                                                       --------------    --------------
     Total non-interest income                                541,363           483,549
                                                       --------------    --------------
Non-interest expenses:
 Salaries and benefits                                      1,017,330         1,032,077
 Occupancy expenses                                           337,975           259,460
 Legal expense                                                 14,526            58,874
 Professional fees                                             51,600            48,000
 Computer expense                                              67,216            60,528
 Directors' fees                                               52,150            55,900
 Other expenses                                               315,359           304,434
                                                       --------------    --------------
     Total non-interest expenses                            1,856,156         1,819,273
                                                       --------------    --------------
       Income before income taxes                             991,842         1,104,583

Provision/(benefit) for income taxes:
 Current                                                      442,730           519,974
 Deferred                                                      19,341            (5,302)
                                                       --------------    --------------
     Total provision for income taxes                         462,071           514,672
                                                       --------------    --------------
              Net income                               $      529,771    $      589,911
                                                       ==============    ==============
Earnings per share:
Basic                                                  $         0.29    $         0.33
                                                       ==============    ==============
Diluted                                                $         0.28    $         0.32
                                                       ==============    ==============
Comprehensive income                                   $      862,229    $       63,905
                                                       ==============    ==============
Book value per common share                            $         9.85    $         7.91
                                                       ==============    ==============
</TABLE>

All per share data has been adjusted for the 5 for 4 stock split, in the form of
a 25% stock dividend,  paid on May 18, 2006. See notes to consolidated financial
statements.

                                        5
<PAGE>

                                VSB BANCORP, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
       YEAR ENDED DECEMBER 31, 2006 AND THREE MONTHS ENDED MARCH 31, 2007
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                                      ACCUMULATED
                                     NUMBER OF              ADDITIONAL                  UNEARNED         OTHER            TOTAL
                                      COMMON      COMMON     PAID-IN      RETAINED        ESOP       COMPREHENSIVE    STOCKHOLDERS'
                                      SHARES      STOCK      CAPITAL      EARNINGS       SHARES          LOSS            EQUITY
                                    ---------   ---------   ----------   -----------   -----------   -------------    -------------
<S>                                 <C>         <C>         <C>          <C>           <C>           <C>              <C>
 Balance at December 31, 2005       1,509,822   $     151   $8,743,200   $ 8,621,693   $(1,408,983)  $  (1,424,127)   $  14,531,934

Reclass due to the adoption of
    SEC SAB 108                             -           -            -       125,914            -                 -         125,914
                                    ---------   ---------   ----------   -----------   -----------   -------------    -------------
 Balance at January 1, 2006         1,509,822         151    8,743,200     8,747,607    (1,408,983)     (1,424,127)      14,657,848

Exercise of stock option,
    including tax benefit               3,750                   46,232                                                       46,232
Amortization of earned portion
    of ESOP common stock                                                                   169,078                          169,078
5 for 4 stock split and purchase
    of fractional shares              378,187          38         (367)                                                        (329)
Amortization of deficit fair
    value of cost - ESOP                                        (6,785)                                                      (6,785)
Transfer to ESOP repurchase
    obligation                                                (114,615)                                                    (114,615)
Comprehensive income:
  Net income                                                               2,545,593                                      2,545,593
  Other comprehensive income, net:
    Change in unrealized loss on
     securities available for sale,
     net of tax effects                     -           -            -             -             -          44,249           44,249
                                    ---------   ---------   ----------   -----------   -----------   -------------    -------------
Total comprehensive income                                                                                                2,589,842

 Balance at December 31, 2006       1,891,759         189    8,667,665    11,293,200    (1,239,905)     (1,379,878)      17,341,271
                                    ---------   ---------   ----------   -----------   -----------   -------------    -------------

Amortization of earned portion
    of ESOP common stock                                                                    42,269                           42,269
Amortization of deficit fair
    value of cost - ESOP                                        (5,736)                                                      (5,736)
Transfer from ESOP repurchase
    obligation                                                 399,026                                                      399,026
Comprehensive income:
  Net income                                                                 529,771                                        529,771
  Other comprehensive income, net:
    Change in unrealized loss on
     securities available for sale,
     net of tax effects                     -           -            -             -             -         332,458          332,458
                                    ---------   ---------   ----------   -----------   -----------   -------------    -------------
Total comprehensive income                                                                                                  862,229

 Balance at March 31, 2007          1,891,759   $     189   $9,060,955   $11,822,971   $(1,197,636)  $  (1,047,420)   $  18,639,059
                                    =========   =========   ==========   ===========   ===========   =============    =============
</TABLE>

All per share data has been adjusted for the 5 for 4 stock split, in the form of
a 25% stock dividend,  paid on May 18, 2006. See notes to consolidated financial
statements.

                                        6
<PAGE>

                                VSB BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                        THREE MONTHS      THREE MONTHS
                                                            ENDED             ENDED
                                                       MARCH 31, 2007    MARCH 31, 2006
                                                       --------------    --------------
<S>                                                    <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                           $      529,771    $      589,911
  Adjustments to reconcile net income to net cash
    provided by operating activities
  Depreciation and amortization                               143,851           102,325
  Accretion of income, net of amortization
   of premium                                                 (57,712)          (90,622)
  ESOP compensation expense                                    36,533            40,248
  Provision/(credit) for loan losses                          (30,000)           25,000
  Increase in prepaid and other assets                        (47,681)         (492,133)
  Increase in accrued interest receivable                      (2,706)          (23,231)
  Decrease/(increase) in deferred income taxes                 19,341            (5,302)
  (Decrease)/increase in accrued expenses and
    other liabilities                                        (304,818)            5,648
                                                       --------------    --------------
        Net cash provided by operating activities             286,579           151,844
                                                       --------------    --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net decrease in loan receivable                           4,948,058         3,169,202
  Proceeds from repayment of investment securities,
      available for sale                                    5,666,281         4,812,832
  Purchases of investment securities, available
   for sale                                                         -       (10,970,080)
  Purchases of premises and equipment                        (683,723)          (22,234)
                                                       --------------    --------------
        Net cash provided by/(used in) investing
         activities                                         9,930,616        (3,010,280)
                                                       --------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (decrease)/increase in deposits                      (4,078,623)        2,461,097
                                                       --------------    --------------
        Net cash (used in)/provided by financing
         activities                                        (4,078,623)        2,461,097
                                                       --------------    --------------

NET INCREASE/(DECREASE) IN CASH
  AND CASH EQUIVALENTS                                      6,138,572          (397,339)
                                                       --------------    --------------

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                      25,363,069        31,324,147
                                                       --------------    --------------

CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                        $   31,501,641    $   30,926,808
                                                       ==============    ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
  Cash paid during the period for:
    Interest                                           $      995,097    $      794,699
                                                       ==============    ==============
    Taxes                                              $      541,294    $      384,889
                                                       ==============    ==============
  Transfer of construction in progress to premises
     and equipment                                     $    2,142,866    $            -
                                                       ==============    ==============
</TABLE>

See notes to consolidated financial statements.

                                        7
<PAGE>

VSB BANCORP, INC.

NOTES TO CONSOLIDATED  FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
2007 AND 2006
--------------------------------------------------------------------------------

1.   GENERAL

     VSB Bancorp,  Inc.  ("Bancorp" or "Company") became the holding company for
Victory State Bank ("Bank"),  a New York State chartered  commercial bank on May
30, 2003 as the result of a reorganization  of the Bank into the holding company
form of organization.  Through the Bank, the Company is primarily engaged in the
business of commercial banking, and to a lesser extent retail banking, in Staten
Island New York. The  stockholders  of the Bank became the  stockholders  of VSB
Bancorp,  Inc. as a result of the reorganization,  receiving three shares of VSB
Bancorp,  Inc.  stock for each two shares of  Victory  State  Bank  stock.  Each
stockholder owned the same percentage  interest in VSB Bancorp immediately after
the reorganization that the stockholder owned in the Bank immediately before the
reorganization, subject to immaterial differences due to adjustments for cash in
lieu of fractional shares. VSB Bancorp now owns 100% of the capital stock of the
Bank. No stockholders of the Bank exercised  dissenter's  rights to receive cash
instead of shares of the Company.  The transaction  between these entities under
common control was accounted for at historical cost on an "as if pooled basis".

     Through  the Bank,  the  Company is  primarily  engaged in the  business of
commercial  banking,  and to a lesser  extent retail  banking.  The Bank gathers
deposits from  individuals and businesses  primarily in Staten Island,  New York
and makes loans  throughout that community.  The Bank invests funds that are not
used for lending primarily in government securities,  mortgage backed securities
and collateralized  mortgage  obligations.  Customer deposits are insured, up to
the applicable limit, by the Federal Deposit Insurance Corporation ("FDIC"). The
Bank is supervised by the New York State Banking Department and the FDIC.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The following is a description of the significant  accounting and reporting
policies  followed in preparing and  presenting  the  accompanying  consolidated
financial   statements.   These  policies  conform  with  accounting  principles
generally accepted in the United States of America ("GAAP").

     Principles of Consolidation - The consolidated  financial statements of the
Company  include the accounts of the Company,  including its subsidiary  Victory
State Bank. All significant  inter-company accounts and transactions between the
Company and Bank have been eliminated in consolidation.

     Use of Estimates - The  preparation  of financial  statements in conformity
with GAAP requires  management to make estimates and assumptions that affect the
reported  amounts of assets and  liabilities  and the  disclosure  of contingent
assets and  liabilities at the date of the financial  statements and the amounts
of revenues and expenses during the reporting period.  Actual results can differ
from those estimates. The allowance for loan losses, prepayment estimates on the
mortgage-backed  securities and Collateralized  Mortgage Obligation  portfolios,
contingencies and fair values of financial  instruments are particularly subject
to change.

     Reclassifications - Some items in the prior year financial  statements were
reclassified to conform to the current presentation.

                                        8
<PAGE>

     Cash and Cash Equivalents - Cash and cash  equivalents  consists of cash on
hand, due from banks and interest-bearing  deposits. Net cash flows are reported
for  customer  loan and  deposit  transactions  and  interest-bearing  deposits.
Regulation D of the Board of Governors of the Federal  Reserve  system  requires
that Victory State Bank maintain  non-interest-bearing  deposits or cash on hand
as reserves  against its demand  deposits.  The amount of reserves which Victory
State  Bank is  required  to  maintain  depends  upon its  level of  transaction
accounts.  During the fourteen day period from March 29, 2007 through  April 11,
2007,  Victory  State Bank was required to maintain  reserves,  after  deducting
vault cash, of $2,927,000.  Reserves are required to be maintained on a fourteen
day basis,  so, from time to time,  Victory  State Bank may use  available  cash
reserves on a day to day basis,  so long as the  fourteen  day average  reserves
satisfy  Regulation  D  requirements.  Victory  State Bank is required to report
transaction account levels to the Federal Reserve on a weekly basis.

     Interest-bearing  bank balances -  Interest-bearing  bank  balances  mature
overnight and are carried at cost.

     Investment   Securities,   Available  for  Sale  -  Investment  securities,
available for sale, are to be held for an unspecified period of time and include
securities  that  management  intends  to use  as  part  of its  asset/liability
strategy. These securities may be sold in response to changes in interest rates,
prepayments or other factors and are carried at estimated  fair value.  Gains or
losses  on  the  sale  of  such   securities  are  determined  by  the  specific
identification method. Interest income includes amortization of purchase premium
and accretion of purchase  discount.  Premiums and  discounts are  recognized in
interest income using a method that  approximates the level yield method without
anticipating   prepayments,   except  for   mortgage-backed   securities   where
prepayments are estimated.  Unrealized  holding gains or losses, net of deferred
income taxes,  are excluded  from  earnings and reported as other  comprehensive
income in a separate component of stockholders' equity until realized.  Declines
in the fair value of securities  below their cost that are other than  temporary
are reflected as realized  losses.  In estimating  other-than-temporary  losses,
management considers: (1) the length of time and extent that fair value has been
less than cost,  (2) the  financial  condition  and near term  prospects  of the
issuer,  and (3) the  Company's  ability and intent to hold the  security  for a
period sufficient to allow for any anticipated recovery in fair value.

     The Company  invests  primarily  in agency  Collateralized  Mortgage-Backed
Obligations  ("CMOs") with estimated average lives primarily under 4.5 years and
Mortgage-Backed Securities. These securities are primarily issued by the Federal
National  Mortgage  Association  ("FNMA"),   the  Government  National  Mortgage
Association ("GNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") and
are primarily comprised of mortgage pools guaranteed by FNMA, GNMA or FHLMC. The
Company  also  invests  in whole loan  CMOs,  all of which are AAA rated.  These
securities  expose the Company to risks such as interest  rate,  prepayment  and
credit  risk and  thus pay a higher  rate of  return  than  comparable  treasury
issues.

     Loans  Receivable - Loans  receivable,  that  management has the intent and
ability to hold for the  foreseeable  future or until  maturity  or payoff,  are
stated at unpaid principal  balances,  adjusted for deferred net origination and
commitment  fees and the allowance for loan losses.  Interest income on loans is
credited as earned.

     It is the  policy of the  Company  to  provide a  valuation  allowance  for
probable  incurred  losses  on  loans  based on the  Company's  past  loan  loss
experience,  known and inherent risks in the portfolio, adverse situations which
may  affect  the  borrower's  ability to repay,  estimated  value of  underlying
collateral and current  economic  conditions in the Company's  lending area. The
allowance is increased by provisions  for loan losses charged to earnings and is
reduced by  charge-offs,  net of  recoveries.  While  management  uses available
information to estimate losses on loans,  future  additions to the allowance may
be  necessary  based  upon the  expected  growth of the loan  portfolio  and any
changes in economic conditions beyond management's control. In addition, various
regulatory  agencies,   as  an  integral  part  of  their  examination  process,
periodically  review the Bank's  allowance  for loan losses.  Such  agencies may
require the Bank to  recognize  additions  to the  allowance  based on judgments
different from those of management. Management believes, based upon all relevant
and available information, that the allowance for loan losses is adequate.

     The  Company  has a policy  that all loans 90 days  past due are  placed on
non-accrual  status. It is the Company's policy to cease the accrual of interest
on  loans to  borrowers  past due less  than 90 days  where a  probable  loss is
estimated  and to reverse out of income all  interest  that is due.  The Company
applies  payments  received on non-accrual  loans to the  outstanding  principal
balance due before  applying any amount to interest,  until the loan is restored
to an accruing  status.  On a limited basis,  the Company may apply a payment to
interest on a non-accrual loan if there is no impairment or no estimated loss on
this asset. The Company continues to accrue interest on construction  loans that
are 90 days past contractual maturity date if the loan is expected to be paid in
full in the next 60 days and all interest is paid up to date.

                                        9
<PAGE>

     Loan  origination  fees and  certain  direct  loan  origination  costs  are
deferred and the net amount recognized over the contractual loan terms using the
level-yield method, adjusted for periodic prepayments in certain circumstances.

     The  Company  considers  a loan  to be  impaired  when,  based  on  current
information,  it is  probable  that the  Company  will be unable to collect  all
principal and interest  payments due according to the  contractual  terms of the
loan agreement.  Loans that experience  insignificant payment delays and payment
shortfalls generally are not classified as impaired. Impairment is measured on a
loan by loan basis for commercial  and  construction  loans.  Impaired loans are
measured based on the present value of expected future cash flows  discounted at
the loan's effective interest rate or, as a practical  expedient,  at the loan's
observable  market price or the fair value of the collateral.  The fair value of
the collateral, as reduced by costs to sell, is utilized if a loan is collateral
dependent.  Large groups of smaller balance  homogeneous loans, such as consumer
loans and residential loans, are collectively evaluated for impairment.

     Long-Lived Assets - The Company  periodically  evaluates the recoverability
of long-lived  assets,  such as premises and  equipment,  to ensure the carrying
value has not been impaired.  In performing the review for  recoverability,  the
Company would  estimate the future cash flows expected to result from the use of
the  asset.  If the sum of the  expected  future  cash  flows  is less  than the
carrying  amount an impairment  will be  recognized.  The Company  reports these
assets at the lower of the carrying value or fair value.

     Subordinated Debt - In August of 2003, the Company formed VSB Capital Trust
I (the  "Trust").  The  Trust is a  statutory  business  trust  organized  under
Delaware law and the Company owns all of its common securities. The Trust issued
$5.0 million of Trust Preferred  Capital  Securities to an independent  investor
and $155,000 of common  securities  to the Company.  The Company  issued a $5.16
million subordinated  debenture to the Trust. The subordinated  debenture is the
sole asset of the Trust.  The  subordinated  debenture  and the Trust  Preferred
Capital  Securities  pay interest and  dividends,  respectively,  on a quarterly
basis, at a rate of 6.909%,  for the first five years.  They mature thirty years
after the issuance of the securities and are non-callable for five years.  After
the first  five  years,  the  Trust  Preferred  Securities  may be called by the
Company at any quarterly  interest  payment date at par and the rate of interest
that  fluctuates  quarterly  based upon 300 basis  points  over the 90 day LIBOR
rate. The Trust is not consolidated with the Company.

     Premises and Equipment - Premises,  leasehold  improvements,  and furniture
and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are accumulated by the  straight-line  method over
the estimated useful lives of the respective  assets,  which range from three to
ten years.  Leasehold  improvements  are amortized at the lesser of their useful
life or the term of the lease.

     Federal  Home  Loan  Bank  (FHLB)  Stock - The Bank is a member of the FHLB
system. Members are required to own a certain amount of stock based on the level
of borrowings  and other  factors,  and may invest in additional  amounts.  FHLB
stock is carried at cost, classified as a restricted security,  and periodically
evaluated  for  impairment.  Because  this  stock  is  viewed  as  a  long  term
investment, impairment is based on ultimate recovery of par value. Both cash and
stock dividends are reported as income.

     Income  Taxes - The Company  utilizes the  liability  method to account for
income  taxes.  Under this  method,  deferred  tax assets  and  liabilities  are
determined  on  differences  between  financial  reporting  and the tax bases of
assets and  liabilities  and are  measured  using the enacted tax rates and laws
expected  to be in effect when the  differences  are  expected  to  reverse.  As
changes in tax laws or rates are enacted,  deferred  tax assets and  liabilities
are adjusted through the provision for income taxes.

     Financial Instruments - In the ordinary course of business, the Company has
entered into off-balance sheet financial  instruments,  primarily  consisting of
commitments to extend credit.

                                       10
<PAGE>

     Basic and Diluted Net Income Per Common  Share - Basic net income per share
of common stock is based on 1,826,519 shares and 1,811,906 shares,  the weighted
average number of common shares outstanding for the three months ended March 31,
2007 and 2006,  respectively.  Diluted  net income per share of common  stock is
based on 1,876,460 and 1,858,416,  the weighted  average number of common shares
and potentially  dilutive  common shares  outstanding for the three months ended
March  31,  2007  and  2006,  respectively.   The  weighted  average  number  of
potentially  dilutive common shares  excluded in calculating  diluted net income
per common share due to the anti-dilutive effect is 51,184 and 72,716 shares for
the three  months  ended March 31,  2007 and 2006,  respectively.  Common  stock
equivalents were calculated using the treasury stock method.  All per share data
throughout  this report has been adjusted to reflect,  retroactively,  a 5-for-4
stock split, in the form of a 25% stock dividend, that was declared by the Board
of Directors to stockholders of record on May 3, 2006.

     The  reconciliation of the numerators and the denominators of the basic and
diluted per share computations for the three ended March 31, are as follows:

<TABLE>
<CAPTION>
                                           Three Months Ended                          Three Months Ended
                                             March 31, 2007                              March 31, 2006
                             ------------------------------------------   ------------------------------------------
                                                Weighted                                    Weighted
                                  Net           Average      Per Share         Net           Average     Per Share
Reconciliation of EPS           Income          Shares         Amount        Income          Shares        Amount
-----------------------      ------------      ---------   ------------   ------------      ---------   ------------
<S>                          <C>               <C>         <C>            <C>               <C>         <C>
Basic income per
  common share
----------------

Net income available to
 common stockholders         $    529,771      1,826,519   $       0.29   $    589,911      1,811,906   $       0.33
                                                           ============                                 ============
Effect of dilutive
  shares
------------------

  Weighted average
    shares, if converted                          49,941                                       46,510
                                               ---------                                    ---------
Diluted net income per
  common share
----------------------

Net income available to
 common stockholders         $    529,771      1,876,460   $       0.28   $    589,911      1,858,416   $       0.32
                             ============      =========   ============   ============      =========   ============
</TABLE>

     Stock Based  Compensation - FAS 123, Revised,  requires companies to record
compensation  expense  for stock  options  provided to  employees  in return for
employment  service.  The cost is measured at the fair value of the options when
granted,  and this cost is expensed over the employment service period, which is
normally the vesting  period of the options.  This applies to awards  granted or
modified  in fiscal  years  beginning  in 2006.  Compensation  cost will also be
recorded  for prior  option  grants  that vest after the date of  adoption.  The
effect on result of operations  will depend on the level of future option grants
and the  calculation  of the fair value of the  options  granted at such  future
date,  as well as the  vesting  periods  provided,  and so cannot  currently  be
predicted.

STOCK OPTIONS

     Options to buy stock are granted to directors, officers and employees under
five stock option plans approved by stockholders between 1998 and 2004 which, in
the aggregate,  provide for issue up to 243,750  options.  Exercise price is the
market price at the date of grant, and  compensation  expense will be recognized
in the income statement in accordance with FAS 123, Revised.  The maximum option
term is ten years, and the options vesting period is up to five years.

                                       11
<PAGE>

     There were no stock option grants in 2007 and 2006.

     The stock option components of the five stock option plans, as of March 31,
2007, and changes during the three months ended, consist of the following:

                                                            2007
                                            ------------------------------------
                                                          Weighted
                                                           Average    Aggregate
                                                          Exercise    Intrinsic
                                            Shares (2)   Price (2)    Value (1)
                                            ----------   ----------   ----------
Options outstanding                            177,998   $    10.36
 at the beginning of the year

     Granted                                         -            -
     Canceled                                        -            -
     Exercised                                       -            -
                                            ----------
Options outstanding at March  31, 2007         177,998   $    10.36   $  799,211
                                            ==========   ==========   ==========
Options exercisable at March 31, 2007          177,998   $    10.36   $  799,211
                                            ==========   ==========   ==========

Weighted average remaining contractual life of
options outstanding at March 31, 2007              4.5 Years

     Employee  Stock  Ownership Plan ("ESOP") - The cost of shares issued to the
ESOP,  but not yet  allocated  to  participants,  is  shown  as a  reduction  of
stockholders'  equity.  Compensation  expense  is based on the  market  price of
shares as they are  committed  to be  released  to  participant  accounts.  Cash
dividends on allocated ESOP shares reduce retained  earnings;  cash dividends on
unearned ESOP shares reduce debt and accrued interest.  As the Company now lists
on a national  exchange,  NASDAQ Capital  Markets,  it is no longer  required to
reclassify out of stockholders'  equity an amount equal to the put option of the
allocated ESOP shares.

     Comprehensive  Income -  Comprehensive  income  consists  of net income and
other comprehensive income. Other comprehensive income includes unrealized gains
and  losses,  net of taxes,  on  securities  available  for sale  which are also
recognized as separate components of equity.

     Recently-Issued   Accounting   Standards  -  SFAS  No.  157,   "Fair  Value
Measurements."  SFAS  157  defines  fair  value,  establishes  a  framework  for
measuring fair value in generally accepted  accounting  principles,  and expands
disclosures about fair value measurements. SFAS 157 is effective for the Company
on  January  1, 2008 and is not  expected  to have a  significant  impact on the
Company's financial statements.

     SFAS No. 159,  "The Fair Value Option for  Financial  Assets and  Financial
Liabilities-Including  an amendment of FASB Statement No. 115." SFAS 159 permits
entities to choose to measure eligible items at fair value at specified election
dates.  Unrealized gains and losses on items for which the fair value option has
been elected are reported in earnings at each  subsequent  reporting  date.  The
fair value  option (i) may be applied  instrument  by  instrument,  with certain
exceptions, (ii) is irrevocable (unless a new election date occurs) and (iii) is
applied only to entire instruments and not to portions of instruments.  SFAS 159
is  effective  for the Company on January 1, 2008 and is not  expected to have a
significant impact on the Company's financial statements.

                                       12
<PAGE>

     In July 2006, the FASB issued FASB  Interpretation  No. 48, "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN
48"), which prescribes a recognition  threshold and measurement  attribute for a
tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim  periods,  disclosure and  transition.  The Company adopted FIN 48 as of
January 1, 2007. A tax position is  recognized  as a benefit only if it is "more
likely than not" that the tax position would be sustained in a tax  examination,
with a tax  examination  being presumed to occur.  The amount  recognized is the
largest  amount of tax benefit that is greater than 50% likely of being realized
on  examination.  For tax positions not meeting the "more likely than not" test,
no tax  benefit  is  recorded.  The  adoption  had no  affect  on the  Company's
consolidated financial position or results of operations.

     The Company and its  subsidiaries are subject to U.S. federal income tax as
well as income tax of the state of New York. The Company is no longer subject to
examination  by taxing  authorities  for years before 2002. The Company does not
expect the total amount of unrecognized tax benefits to  significantly  increase
in the next twelve months.

     The Company  recognizes  interest related to income tax matters as interest
expense  and  penalties  related to income tax  matters  as other  expense.  The
Company did not have any amounts  accrued for interest and  penalties at January
1, 2007 and March 31, 2007.

ITEM 2

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

FINANCIAL CONDITION AT MARCH 31, 2007

Total assets were  $208,400,080  at March 31, 2007, a decrease of $3,484,679 or,
1.6%,  from  December  31, 2006.  The decline  resulted  from  deposit  outflow,
principally in non-interest demand deposits and time deposit accounts. We funded
the decline in deposits  primarily  with a reduction our purchases of investment
securities,  which caused a decline in that  portfolio  during the  quarter.  In
addition,  loan volume  declined,  and funds  generated by the net  reduction in
loans and the reduction in the investment  securities portfolio were invested in
overnight investments. The net decrease in assets can be summarized as follows:

  o  A $6,138,572 increase in cash and equivalents; offset by
  o  A $4,863,544 decrease in net loans receivable; and
  o  A $5,040,619 decrease in investment securities available for sale; and

     $2,142,866,  reported as  construction in progress at December 31, 2006 was
transferred  to premises and equipment  when we opened and occupied our new main
office at 4142 Hylan  Boulevard  on February  20,  2007.  In  addition,  we also
experienced  changes in other asset  categories  due to normal  fluctuations  in
operations.

     Our deposits  (including  escrow  deposits) were  $182,604,527 at March 31,
2007, a decrease of $4,078,623, or 2.2%, from December 31, 2006. The decrease in
deposits  resulted from decreases of $3,227,654 in non-interest  demand deposit,
$195,675 in money market accounts,  $103,498 in savings accounts and $902,986 in
time deposits,  partially offset by an increase of $351,190 in NOW accounts. The
decrease in  non-interest  bearing  accounts was due to the normal  fluctuations
associated  with the demand  accounts and a softening of the real estate  market
which lowers our aggregate real estate related demand deposits. The reduction in
time  deposits  represents  the  maturity  of jumbo  CD's  associated  with 1031
exchange trusts, also an effect of the weak real estate market.

                                       13
<PAGE>

     Total  stockholders'  equity was $18,639,059 at March 31, 2007, an increase
of  $1,297,788  from  December 31, 2006.  The increase  reflected  net income of
$529,771 for the three  months ended March 31, 2007  increased by a reduction of
$42,269 in Unearned ESOP shares  reflecting the effect of the gradual payment of
the loan we made to fund the ESOP's  purchase of our stock.  The unrealized loss
on  securities  available  for sale  decreased  by $332,458 for the three months
ended  March  31,  2007  principally  due to the  prepayment  of the  investment
securities  and the change in market  interest  rates.  The  unrealized  loss is
excluded  from  the  calculation  of  regulatory  capital.  Management  does not
anticipate selling securities in this portfolio,  but changes in market interest
rates or in the demand for funds may change  management's  plans with respect to
the securities portfolio. If there is a material increase in interest rates, the
market  value  of the  available  for sale  portfolio  may  decline.  Management
believes that the principal and interest  payments on this  portfolio,  combined
with  the  existing  liquidity,  will be  sufficient  to fund  loan  growth  and
potential deposit outflow.

     The change in stockholders' equity also included an increase of $393,290 in
additional  paid in capital  primarily due to a $399,026  transfer from the ESOP
repurchase obligation back to additional paid in capital, as our common stock is
now  listed on the NASDAQ  Capital  Market and  therefore  we no longer  have an
obligation to repurchase stock that the ESOP distributes to participants.

     For financial  statement  reporting  purposes,  we record the  compensation
expense  related to the ESOP when shares are  committed to be released  from the
security interest for the loan. The amount of the compensation  expense is based
upon the fair market value of the shares at that time, not the original purchase
price.  The initial  sale of shares to the ESOP did not  increase our capital by
the amount of the purchase price because the purchase price was paid by the loan
we made to the ESOP.  Instead,  capital increases as the shares are allocated or
committed  to be  allocated  to  employee  accounts  (i.e.,  as the ESOP loan is
gradually repaid),  based upon the fair market value of the shares at that time.
When we calculate  earnings per share,  only shares allocated or committed to be
allocated to employee  accounts are considered to be outstanding.  However,  all
shares that the ESOP owns are legally  outstanding,  so they have voting  rights
and, if we pay dividends, dividends will be paid on all ESOP shares.

RESULTS OF  OPERATIONS  FOR THE THREE  MONTHS ENDED MARCH 31, 2007 AND MARCH 31,
2006

     Our results of operations depend primarily on net interest income, which is
the difference between the income we earn on our loan and investment  portfolios
and our cost of funds,  consisting  primarily  of  interest  we pay on  customer
deposits.  Our operating expenses  principally consist of employee  compensation
and benefits,  occupancy expenses,  professional fees, advertising and marketing
expenses  and  other  general  and  administrative   expenses.  Our  results  of
operations  are  significantly  affected  by general  economic  and  competitive
conditions,  particularly changes in market interest rates,  government policies
and actions of regulatory authorities.

     General.  We had net income of  $529,771  for the  quarter  ended March 31,
2007, compared to net income of $589,911 for the comparable quarter in 2006. The
principal categories which make up the 2007 net income are:

     o    Interest income of $3,119,878
     o    Reduced by interest expense of $843,243
     o    Increased by a credit to the provision for loan losses of $30,000
     o    Increased by non-interest income of $541,363
     o    Reduced by non-interest expense of $1,856,156
     o    Reduced by $462,071 in income tax expense

     We discuss each of these  categories  individually  and the reasons for the
differences  between the quarters ended March 31, 2007 and 2006 in the following
paragraphs.  In general, the principal reason for the decline in net income when
comparing  the  first  quarter  of 2007  with  the  same  quarter  in 2006 was a
reduction in interest-earning  assets, which reduced net interest income, and an
increase in occupancy  expenses due to the addition of one new branch office and
our new main office.

                                       14
<PAGE>

     We have  implemented  a number of  programs  in an attempt  to reverse  the
decline in total  assets.  These  include the  increase in the number of banking
offices we maintain from four at year end 2005 to five at year end 2006. We have
opened a new main office in Great Kills  section of Staten Island in 2007 and we
closed  our  original  main  office in  Oakwood,  as the lease  expired  at that
location. In addition, we have started to offer new products such as debit cards
and online bill pay.  Adding new  branches  and new  products  also  creates new
expenses  associated  with  their  introduction  and  their  ongoing  operation.
Although  there can be no  assurance  that  these  actions  will be  successful,
management  continues to exert efforts to grow our banking  franchise because we
believe that growth is an important  road in the direction of an increase in net
income.

     Interest Income. Interest income was $3,119,878 for the quarter ended March
31,  2007,  compared to  $3,133,983  for the quarter  ended  March 31,  2006,  a
decrease of $14,105,  or 0.45%.  The  principal  reason for this  decrease was a
$9,943,899 decrease in the average balance of our loan portfolio.  Loans are our
highest yielding asset category,  and to the extent that we are unable to invest
available  funds in  satisfactory  loans,  we must  invest  those funds in lower
yielding  investment  securities and overnight  investments at lower yields.  In
addition,  the decline in the loan  portfolio was also a component of an overall
decline in total  assets.  The decline in the  average  balance of loans was the
principal  component  of a  $4,424,248  decline in average  earning  assets from
$199,285,167 for the first quarter of 2006 to $194,860,919 for the first quarter
of 2007.  This decline in average loans was  partially  offset by an increase in
the average  loan  yield.  The  decrease in interest  income from the decline in
average loans was also  partially  mitigated by an increase of $3,050,812 in the
average  balance of investment  securities  and an increase of $2,468,829 in the
average balance of other  interest-earning  assets, coupled with the increase in
the average yields on those assets.

     The yields on all  principal  asset  categories  increased as the Fed Funds
rate increased,  causing  increases in other interest rate indexes,  such as the
Prime  Rate,  and  market  interest  rates  generally.  The  yields  on our loan
portfolio and our other interest earning assets,  principally  short term liquid
assets, increased more rapidly than the yield on our investment securities. This
occurred because most of our loans and liquid assets tend to have interest rates
that adjust more quickly as market interest rates change while the rates we earn
on our  investment  securities  are  primarily  either fixed rates or rates that
adjust at less frequent intervals than our the rates on our loans.

     The average  balance of our loans  decreased  13.6% to $63,248,356  for the
quarter  ended  March 31, 2007 from  $73,192,245  during the 2006  quarter.  The
decrease in average  balance  reflects  the  volatility  inherent in the shorter
maturity  loans,  the  increase  in  competition  for such loans and the general
softening of the real estate market.  The average yield on loans increased by 65
basis points,  from 9.37% to 10.02%, as the Prime Rate rose during the first six
months of 2006.  The net effect of the increase in average yield and the decline
in average loan balance was a $176,420 decrease in interest income from our loan
portfolio.  In the  future,  fluctuations  in the prime  rate will have a direct
effect on our loan yields, except to the extent that the effect of a significant
future  decline in the prime rate may cause a lesser  reduction in yield because
many of our loans have  interest  rate floors that would be  triggered if such a
decline occurs.

     The average yield on our investment securities portfolio increased 22 basis
points, from 4.51% to 4.73%, also due to increases in market interest rates. The
yield on  investment  securities  increased  more slowly than the yield on loans
because  most of the bonds and notes in our  investment  portfolio  have  either
fixed  interest rates or interest rates that react more slowly than our loans to
changes  in  market  interest  rate  conditions.  The  average  balance  of  our
investment portfolio increased by $3,050,812, or 2.81%, between the periods. The
increase in yield and volume resulted in an overall $94,698 increase in interest
income  from  investment   securities.   The  investment   securities  portfolio
represented 84.8% of average non-loan interest earning assets in the 2007 period
compared to 86.1% in the 2006 period.

     Finally, we had a $67,617 increase in income from overnight funds and other
interest  earning  assets  due to the  higher  market  rates on  short  term and
overnight  investments  and an increase in average  balance.  The yield on these
investments  increased  86 basis  points  from the first  quarter of 2006 to the
first quarter of 2007,  reflecting  the effect of increases in the federal funds
rate  during  the first  half of 2006.  We  increased  the  average  balance  of
overnight   investments  because  they  provide  us  with  greater  reinvestment
flexibility  as we exert efforts to increase our loan  portfolio and because the
gap between the rates on overnight  investments  versus the rates on  investment
securities  narrowed as  short-term  market  rates rose while  longer term rates
remained more steady.

                                       15
<PAGE>

     Interest Expense. Interest expense was $843,243 for the quarter ended March
31, 2007, compared to $668,676 for the quarter ended March 31, 2006, an increase
of 26.1%.  More than 92%,  or  $161,253,  of the  $174,567  increase in interest
expense  was  represented  by an  increase  in the  cost of our  time  deposits.
Although the average  balance of time accounts  decreased by $699,622 (or 1.0%),
the  effect of the  balance  decline  was far  outweighed  by a 101 basis  point
increase in the average cost of time  deposits.  The increase in rate was due to
the increase in market rates between the two comparable quarters.

     Our average cost of funds increased from 2.13% to 2.79% between the periods
primarily  due to the  increase  in the  cost of time  deposits  and to a lesser
extent,  the increased cost of other interest bearing deposits.  Competition and
the increase in prevailing  market  interest  rates  required an increase in the
rates we offered on both new and renewing time  deposits.  While we were able to
impose greater limits on interest rate increases in other deposit  categories as
market  interest rates rose,  further  increases in market rates, if they occur,
can be  expected  to compel  increases  in the  rates we offer on these  deposit
categories  to  maintain  our  competitive  posture.  Any  further  increase  in
competition  may  accelerate  the increase in our cost of funds  resulting  from
increases in market interest rates as more banks compete for customer deposits.

     Net Interest Income Before  Provision for Loan Losses.  Net interest income
before the provision for loan losses was  $2,276,635 for the quarter ended March
31, 2007, a decrease of $188,672,  or 7.7% over the $2,465,307 in the comparable
2006 quarter.  The decrease resulted principally from an increase in our cost of
funds  and a decline  in the  average  balance  of our loan  portfolio.  Our net
interest  spread  decreased  to 3.68% in the first  quarter of 2007  compared to
4.13% in the first  quarter of 2006 and our net  interest  margin  decreased  to
4.72% in the first  quarter of 2007  compared  to 4.90% in the first  quarter of
2006,  respectively.  On the asset side,  the average yield on earning assets in
the 2007  period  rose to 6.47%  from  6.26% in the  March  2006  period,  or an
increase of 21 basis points. On the liability side, there was an increase in our
cost of funds of 66 basis points from 2006.

     We note that our margin  declined more slowly than our spread  because,  as
the average yields on our assets increase,  checking accounts, which represent a
no-cost funding source,  become more valuable because we can invest the proceeds
of those  deposits at higher  yields.  However,  our average  volume of checking
accounts has declined  recently.  This has resulted from a softening real estate
market,  which causes the aggregate balance of demand deposits to decline due to
our strategy of attracting deposits from attorneys and other customers linked to
the real  estate  businesses.  Management  continually  seeks to maintain a high
level of non-interest  checking accounts through  developing  relationships with
local  businesses and attorneys.  Maintaining a high  percentage of non-interest
checking  accounts is  particularly  advantageous  in a rising rate  environment
because  these  no-cost  funds can be  invested at the higher  yields.  However,
increases in market interest rates make  interest-bearing  deposit products more
attractive to customers and may cause funds to shift from non-interest  checking
into interest-bearing deposit products.

     Provision for Loan Losses.  For the quarter ended March 31, 2007, we took a
$30,000 credit to the provision for loan losses, compared to a $25,000 provision
for loan  losses  for the  quarter  ended  March  31,  2006.  The  credit to the
provision for loan losses was due to the decline the loan portfolio balance, and
the level of recoveries on loans previously charged-off,  which are added to the
allowance for loan loss.  The  provision  for loan losses in any period  depends
upon the amount  necessary to bring the  allowance  for loan losses to the level
management  believes is  adequate,  after  taking into  account  charge offs and
recoveries. Our allowance for loan losses is based on management's evaluation of
the risks  inherent in our loan  portfolio and the general  economy.  Management
periodically  evaluates  both broad  categories of performing  loans and problem
loans individually to assess the appropriate level of the allowance.

     Although   management   uses   available    information   to   assess   the
appropriateness  of the  allowance  on a quarterly  basis in  consultation  with
outside  advisors  and the board of  directors,  changes  in  national  or local
economic  conditions,  the  circumstances  of  individual  borrowers,  or  other
factors,  may change,  increasing  the level of problem  loans and  requiring an
increase in the level of the allowance.  The allowance for loan loss represented
1.65% of total loans at March 31,  2007,  but there can be no  assurance  that a
higher level,  or a higher  provision for loan losses,  will not be necessary in
the future.

                                       16
<PAGE>

     Non-interest Income.  Non-interest income was $541,363 for the three months
ended March 31, 2007, compared to $483,549 during the same period last year. The
$57,814,  or 12.0%,  increase in  non-interest  income was a direct  result of a
$27,152 increase in service charges on deposits  (primarily  non-sufficient fund
fees), an $11,438  increase in net rental income and a $14,523 increase in other
income. Service fees on deposit accounts, principally non-sufficient funds fees,
increased  from  2006 to 2007 as the  volume  of  deposit  account  transactions
generating fee income increased. The increase in other income is a direct result
of the Bank taking on a select, limited group of licensed consumer check cashing
companies as deposit customers.  These companies generate fee income through per
item charges on their deposits.

     Non-interest  Expense.  Non-interest expense was $1,856,156 for the quarter
ended March 31, 2007,  compared to  $1,819,273  for the quarter  ended March 31,
2006. The principal causes of the $36,883 increase were:

  o  $14,747  decrease in salaries and benefits  expense,  due to a reduction in
     our  incentive  compensation  accrual,  partially  offset by normal  salary
     increases,  an  increase  in SAR  related  expenses , a slight  increase in
     staffing to support branch growth and higher benefit costs.
  o  $78,515 in higher occupancy  expenses due to the operation of our branch in
     Rosebank and the opening of our new main office in Great Kills.
  o  $44,348  decrease in legal  expenses due to the recovery of legal fees paid
     on an  unsecured  commercial  loan that was  previously  charged  off and a
     reduction in attorney fees from the 2006 quarter.

     Income Tax Expense.  Income tax expense was $462,071 for the quarter  ended
March 31, 2007, compared to income tax expense of $514,672 for the quarter ended
March 31,  2006.  The  reduction  in income tax expense was due to the  $112,741
decrease in income before  income taxes in the 2007  quarter.  Our effective tax
rate remained the same for the quarters ended March 31, 2007 and 2006 at 46.6%.

                                       17
<PAGE>

                                VSB BANCORP, INC.
                       CONSOLIDATED AVERAGE BALANCE SHEETS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                           Three                                   Three
                                                        Months Ended                            Months Ended
                                                       March 31. 2007                          March 31. 2006
                                            -------------------------------------   --------------------------------------
                                               Average                     Yield/       Average                     Yield/
                                               Balance        Interest      Cost        Balance       Interest      Cost
                                            -------------    ----------    ------    -------------   -----------   -------
<S>                                         <C>              <C>            <C>      <C>             <C>              <C>
Assets:
Interest-earning assets:
  Loans receivable                          $  63,248,356    $ 1,572,353    10.02%   $  73,192,245   $ 1,748,773      9.37%
  Investment securities, afs                  111,582,498      1,300,460     4.73      108,531,686     1,205,762      4.51
  Other interest-earning assets                20,030,065        247,065     5.00       17,561,236       179,448      4.14
                                            -------------    -----------             -------------   -----------
  Total interest-earning assets               194,860,919      3,119,878     6.47      199,285,167     3,133,983      6.26

Non-interest earning assets                    16,607,790                               14,168,160
                                            -------------                            -------------
  Total assets                              $ 211,468,709                            $ 213,453,327
                                            =============                            =============
Liabilities and equity:
Interest-bearing liabilities:
  Savings accounts                          $  12,410,880         24,428     0.80    $  14,798,671        18,334      0.50
  Time accounts                                66,760,483        615,136     3.74       67,460,105       453,883      2.73
  Money market accounts                        18,383,022         85,850     1.89       19,878,287        84,216      1.72
  Now accounts                                 19,765,134         28,789     0.59       20,126,130        23,203      0.47
  Subordinated debt                             5,155,000         89,040     6.91        5,155,000        89,040      6.91
                                            -------------    -----------             -------------   -----------
    Total interest-bearing liabilities        122,474,519        843,243     2.79      127,418,193       668,676      2.13
  Checking accounts                            68,086,917                               68,300,650
                                            -------------                            -------------
Total deposits and subordinated debt          190,561,436                              195,718,843
Other liabilities                               2,794,791                                2,668,707
                                            -------------                            -------------
  Total liabilities                           193,356,227                              198,387,550
Equity                                         18,112,482                               15,065,777
                                            -------------                            -------------
  Total liabilities and equity              $ 211,468,709                            $ 213,453,327
                                            =============                            =============
Net interest income/net interest
 rate spread                                                 $ 2,276,635     3.68%                   $ 2,465,307      4.13%
                                                             ===========    ======                   ===========   =======

Net interest earning assets/net
 interest margin                            $  72,386,400                    4.72%   $  71,866,974                    4.90%
                                            =============                   ======   =============                 =======

Ratio of interest-earning assets
 to interest-bearing liabilities                     1.59 x                                   1.56 x
                                            =============                            =============
Return on Average Assets (1)                         1.01%                                    1.06%
                                            =============                            =============
Return on Average Equity (1)                        11.75%                                   15.06%
                                            =============                            =============
Tangible Equity  to Total Assets                     8.94%                                    6.71%
                                            =============                            =============
</TABLE>

(1) Ratios have been annualized.

                                       18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Our primary  sources of funds are increases in deposits,  proceeds from the
repayment of investment  securities,  and the  repayment of loans.  We use these
funds  principally  to purchase new  investment  securities  and to fund new and
renewing loans in our loan portfolio.

     During the three  months  ended March 31,  2007,  we had a net  decrease in
total  deposits of  $4,078,623  as a result of a  $3,227,654  decrease in demand
deposits,  a $902,986  decrease in time deposits,  a $103,498 decline in savings
accounts and a $195,675 decline in money market accounts,  partially offset by a
$351,190  increase in NOW  accounts.  We received  proceeds  from  repayment  of
investment  securities of $5,666,281  which we used to fund the deposit outflow.
We had a net loan  reduction of  $4,948,058  and we used  $2,826,589 of cash for
capitalized  leasehold  improvements  and  equipment  for our new main office in
Great  Kills.  These  changes  resulted in an overall  increase in cash and cash
equivalents of $6,138,572.

     In contrast,  during the three  months  ended March 31, 2006,  we had a net
increase  in deposits of  $2,461,097,  proceeds  from  repayment  of  investment
securities  totaled  $4,812,832  and a  net  decrease  in  loans  receivable  of
$3,169,202.  We used the resulting increase in funds, along with other available
funds, primarily to purchase $10,970,080 of investment securities.

     Victory State Bank satisfied all capital ratio  requirements of the Federal
Deposit Insurance  Corporation at March 31, 2007, with a Tier I Leverage Capital
ratio of 11.33%,  a ratio of Tier I Capital  to  Risk-Weighted  Assets  ratio of
26.94%, and a Total Capital to Risk-Weighted Assets ratio of 28.08%.

     VSB Bancorp,  Inc.  satisfied all capital ratio requirements of the Federal
Reserve at March 31, 2007,  with a Tier I Leverage  Capital  ratio of 11.67%,  a
ratio of Tier I Capital to  Risk-Weighted  Assets  ratio of 27.72%,  and a Total
Capital to Risk-Weighted Assets ratio of 28.86%.

     The following table sets forth our contractual  obligations and commitments
for future lease payments, time deposit maturities and loan commitments.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS AT MARCH 31, 2007

<TABLE>
<CAPTION>
                                                                      Payment due by Period
                                        ----------------------------------------------------------------------------------
                                          Less than       One to three     Four to five         After       Total Amounts
Contractual Obligations                   One Year           years            years          five years       committed
-------------------------------------   --------------   --------------   --------------   --------------   --------------
<S>                                     <C>              <C>              <C>              <C>              <C>
Minimum annual rental  payments under
 non-cancelable operating leases        $      391,585   $      795,425   $      821,832   $    2,533,146   $    4,541,988
Remaining contractual maturities of
 time deposits                              64,265,368        1,310,021        1,750,869                -       67,326,258
                                        --------------   --------------   --------------   --------------   --------------
  Total contractual cash obligations    $   64,656,953   $    2,105,446   $    2,572,701   $    2,533,146   $   71,868,246
                                        ==============   ==============   ==============   ==============   ==============

<CAPTION>
                                                            Amount of commitment Expiration by Period
                                        ----------------------------------------------------------------------------------
                                          Less than       One to three     Four to five         After       Total Amounts
Other commitments                         One Year           years            years          five years       committed
                                        --------------   --------------   --------------   --------------   --------------
<S>                                     <C>              <C>              <C>              <C>              <C>
Loan commitments                        $   18,585,173   $   12,507,481   $      250,000   $            -   $   31,342,654
                                        ==============   ==============   ==============   ==============   ==============
</TABLE>

     Our loan commitments shown in the above table represent both commitments to
make new loans and  obligations to make  additional  advances on existing loans,
such as construction loans in process and lines of credit.  Substantially all of
these  commitments  involve  loans  with  fluctuating  interest  rates,  so  the
outstanding  commitments do not expose us to interest rate risk upon fluctuation
in market  rates.  We consider  the amount of  outstanding  commitments  when we
assess our allowance for loan losses.

                                       19
<PAGE>

CRITICAL ACCOUNTING POLICIES AND JUDGMENTS

     We are required to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities at the date of the financial  statements and the amounts of revenues
and  expenses  during the  reporting  period.  The  allowance  for loan  losses,
prepayment  estimates  on  the  mortgage-backed  securities  and  Collateralized
Mortgage  Obligation  portfolios,  contingencies  and fair  values of  financial
instruments are  particularly  subject to change and to management's  estimates.
Actual  results  can differ from those  estimates  and may have an impact on our
financial statements.

ITEM 3 - CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures:  As of March 31, 2007, we
undertook an  evaluation of our  disclosure  controls and  procedures  under the
supervision and with the  participation  of Merton Corn,  President and CEO, and
Raffaele M. Branca,  Executive Vice President and CFO.  Disclosure  controls are
the systems and  procedures we use that are designed to ensure that  information
we are  required  to  disclose  in the  reports  we file  or  submit  under  the
Securities  Exchange  Act of 1934  (such as annual  reports  on Form  10-KSB and
quarterly  periodic reports on Form 10-QSB) is recorded,  processed,  summarized
and  reported,  in a manner  which will allow senior  management  to make timely
decisions on the public disclosure of that information.  Messrs. Corn and Branca
concluded that our current  disclosure  controls and procedures are effective in
ensuring  that such  information  is (i) collected  and  communicated  to senior
management in a timely  manner,  and (ii)  recorded,  processed,  summarized and
reported within the time periods  specified in the SEC's rules and forms.  Since
our last evaluation of our disclosure controls, we have not made any significant
changes in, or corrective actions taken regarding,  either our internal controls
or other factors that could significantly affect those controls.

     We intend to continually  review and evaluate the design and  effectiveness
of our disclosure  controls and procedures and to correct any deficiencies  that
we may discover.  Our goal is to ensure that senior management has timely access
to all material financial and non-financial  information concerning our business
so that they can evaluate that  information  and make  determinations  as to the
nature and  timing of  disclosure  of that  information.  While we  believe  the
present design of our disclosure controls and procedures is effective to achieve
this goal,  future  events may cause us to modify our  disclosure  controls  and
procedures.

PART II

ITEM 1 - LEGAL PROCEEDINGS

The Bank is a defendant in an action pending in Supreme Court,  Richmond County,
commenced by IndyMac Bank, F.S.B. against the Bank, LaMattina & Associates, Inc.
("LAI") and various  individuals and entities alleged to be officers,  directors
or otherwise to have  relationships  with LAI. LAI was a deposit customer of the
Bank  engaged in the business of providing  real estate  settlement  services to
lenders making  residential  mortgage loans.  The plaintiff  alleges that it was
such a lender and that it had provided  funds to LAI by wiring those funds to an
account  of LAI at the  Bank to use to  fund  mortgage  loans  to be made by the
plaintiff,  only to have LAI not use those funds for their intended purpose. The
action was commenced in August 2005. In November 2005, the plaintiff amended its
complaint to add the Bank as a defendant.  The  plaintiff  amended its complaint
again and the Bank moved to dismiss the  claims.  In  February  2007,  the court
dismissed  two of the claims  against  the Bank but  allowed  the  Plaintiff  to
proceed and conduct discovery with respect to two claims, one for negligence and
the other for conversion.

                                       20
<PAGE>

The amended complaint  requests monetary damages against the Bank of $1,817,041.
The Bank intends to defend  aggressively the amended claims and has referred the
litigation  to its  insurance  carrier,  which  has  indicated  that the  claims
asserted  against the Bank are covered by insurance.  The Bank has also asserted
cross-claims  against various former  customers,  principals of those customers,
and other related  persons on the grounds that if the Bank is held liable to the
plaintiff,  then the  liability is the result of the misdeeds or  negligence  of
those other parties.

VSB Bancorp,  Inc., is not involved in any pending legal proceedings.  The Bank,
from time to time, is involved in routine collection proceedings in the ordinary
course of  business  on loans in default.  Management  believes  that such other
routine  legal  proceedings  in the  aggregate  are  immaterial to our financial
condition or results of operations.

                                       21
<PAGE>

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to security  holders for a vote during the period
from January 1, 2007 through March 31, 2007.  VSB Bancorp,  Inc. held its fourth
Annual Meeting of Stockholders on April 24, 2007 at its principal  office,  4142
Hylan  Boulevard,  Staten  Island,  New York 10308 at 5:00 P.M. At that meeting,
1,742,449  shares of the capital stock of the Company were represented in person
or by proxy,  being 92.1 % of all outstanding shares of the capital stock of the
Company,  with a quorum  being  present.  The  Annual  Meeting  was held for the
purpose of voting on two proposals, with the results of the voting as follows:

     1.   The election of three directors for three-year terms:

                                          Percentage                 Percentage
           Director            Votes      of shares        Votes     of shares
           Elected              For         voted        Withheld      voted
     --------------------   -----------   ----------   ------------  ----------
     Joseph J. LiBassi        1,698,949         97.5%        43,500         2.5%
     Merton Corn              1,698,949         97.5%        43,500         2.5%
     Joan Nerlino Caddell     1,697,158         97.4%        45,291         2.6%

     No other persons received any votes.

     The following directors continued as directors of the Company:  Raffaele M.
     Branca,  Robert S. Cutrona,  Sr., Chaim Farkas,  Alfred C. Johnsen,  Carlos
     Perez MD, and Bruno Savo.

     2.   The ratification of the appointment of Crowe Chizek and Company LLC as
          our independent public accountants for the fiscal year ending December
          31, 2007.

                  Percentage                     Percentage        Proxies
       Votes      of shares         Votes        of shares         marked
        For         voted          Against         voted          Abstained
     ---------   ------------    ------------   ------------    ------------
     1,682,699           97.9%         36,000            2.1%         23,750

There were no broker non-votes.

                                       22
<PAGE>

     SIGNATURE PAGE

     In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned  thereunto
duly authorized.


                                          VSB Bancorp, Inc.


     Date: May 8, 2007                    /s/ Merton Corn
                                          --------------------------------------
                                          Merton Corn
                                          President and Chief Executive Officer


     Date: May 8, 2007                    /s/ Raffaele M. Branca
                                          --------------------------------------
                                          Raffaele M. Branca
                                          Executive Vice President and
                                          Chief Financial Officer




                                  EXHIBIT INDEX

Exhibit
Number      Description of Exhibit
--------    --------------------------------------------------------------------
31.1        Rule 13A-14(a)/15D-14(a) Certification of Chief Executive Officer
31.2        Rule 13A-14(a)/15D-14(a) Certification of Chief Financial Officer
32.1        Certification by CEO pursuant to 18 U.S.C. 1350.
32.2        Certification by CFO pursuant to 18 U.S.C. 1350.

ITEM 6 - EXHIBITS

Exhibit
Number      Description of Exhibit
--------    --------------------------------------------------------------------
31.1        Rule 13A-14(a)/15D-14(a) Certification of Chief Executive Officer
31.2        Rule 13A-14(a)/15D-14(a) Certification of Chief Financial Officer
32.1        Certification by CEO pursuant to 18 U.S.C. 1350.
32.2        Certification by CFO pursuant to 18 U.S.C. 1350.

                                       23