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, 2004

[ ]   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.)


                 3155 Amboy Road, Staten Island, New York 10306
                 ----------------------------------------------
                    (Address of principal executive offices)


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


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


The Registrant had 1,428,582 common shares outstanding as of May 4, 2004.
<PAGE>

                              CROSS REFERENCE INDEX

                                     PART I

                                                                            Page
                                                                            ----

Item 1   Consolidated Statements of Financial Condition as
          of March 31, 2004 and December 31, 2003 (unaudited).                 4

         Consolidated Statements of Operations for the Three Months
          Ended March 31, 2004 and 2003 (unaudited).                           5

         Consolidated Statements of Changes in Stockholders' Equity
          for the Three Months Ended March 31, 2004 and the Year
          Ended December 31, 2003 (unaudited).                                 6

         Consolidated Statements of Cash Flows for the Three Months
          Ended March 31, 2004 and 2003 (unaudited).                           7

         Consolidated Average Balance Sheets for the Three Months
          Ended March 31, 2004 and 2003 (unaudited).                           8

         Notes to Consolidated Financial Statements for the Three
          Months Ended March 31, 2004 and 2003 (unaudited).              9 to 13

Item 2   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                     13 to 18

Item 3   Control and Procedures                                               19

                              PART II

Item 2   Changes in Securities                                                20

Item 4   Submission of Matters to a Vote of Security Holders            20 to 21


         Signature Page                                                       22

         Exhibit 31.1, 31.2, 32.1, 32.2                                 23 to 28

                                 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.

         Please do not place undue reliance on any forward-looking statement,
which speaks only as of the date we make it. There are many factors, including
those we have 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.

                                       3
<PAGE>
<TABLE>
<CAPTION>

                                VSB Bancorp, Inc.
                 Consolidated Statements of Financial Condition
                                   (unaudited)

                                                        March 31,       December 31,
                                                          2004             2003
                                                      -------------    -------------
<S>                                                   <C>              <C>
Assets:
 Cash and due from banks                              $  37,536,113    $  30,187,741
 Money market investments, held to maturity                 539,884          599,356
 Investment securities, available for sale               78,903,488       83,171,547
 Loans receivable                                        67,541,410       67,981,461
  Allowance for loan loss                                (1,224,893)      (1,162,776)
                                                      -------------    -------------
    Loans receivable, net                                66,316,517       66,818,685
 Bank premises and equipment, net                         2,014,634        2,132,154
 Accrued interest receivable                                560,170          588,232
 Deferred taxes                                             765,150          934,710
 Other assets                                               538,444          542,545
                                                      -------------    -------------
      Total assets                                    $ 187,174,400    $ 184,974,970
                                                      =============    =============
Liabilities and stockholders' equity:
Liabilities:
 Deposits:
    Demand and checking                               $  78,953,873    $  77,416,339
    NOW                                                  23,816,835       23,627,653
    Money market                                         23,942,246       23,709,155
    Savings                                              11,534,669       10,394,955
    Time                                                 30,204,372       32,287,215
                                                      -------------    -------------
       Total Deposits                                   168,451,995      167,435,317
 Escrow deposits                                            456,610          267,484
 Trust preferred securities                               5,000,000        5,000,000
 Accounts payable and accrued
  expenses                                                1,833,235        1,630,544
                                                      -------------    -------------
    Total liabilities                                   175,741,840      174,333,345
                                                      -------------    -------------
Stockholders' equity:
 Common stock, ($.0001 par value, 3,000,000 shares
    authorized, 1,411,982 issued and outstanding at
    March 31, 2004; 1,055,998 issued and
    outstanding at December 31, 2003)                           141              106
 Additional paid in capital                               7,080,155        7,031,499
 Retained earnings                                        4,278,856        3,779,686
 Accumulated other comprehensive income/(loss),
  net of taxes of $64,034 and ($148,001),
  respectively                                               73,408         (169,666)
                                                      -------------    -------------
    Total stockholders' equity                           11,432,560       10,641,625
                                                      -------------    -------------
    Total liabilities and stockholders'
     equity                                           $ 187,174,400    $ 184,974,970
                                                      =============    =============
</TABLE>

                 See notes to consolidated financial statements.

                                      4
<PAGE>

                                VSB Bancorp, Inc.
                      Consolidated Statements of Operations
                                   (unaudited)

                                          Three months     Three months
                                             ended            ended
                                         March 31, 2004   March 31, 2003
                                         --------------   --------------
Interest and dividend income:
 Loans receivable                        $    1,313,740   $    1,163,683
 Investment securities                          843,624          472,600
 Other interest earning assets                   26,783           51,712
                                         --------------   --------------
     Total interest income                    2,184,147        1,687,995

Interest expense:
 NOW                                             23,782           30,646
 Money market                                    47,810           81,811
 Savings                                         13,438           14,582
 Trust preferred                                 86,363               --
 Time                                            78,112           91,291
                                         --------------   --------------
     Total interest expense                     249,505          218,330

Net interest income                           1,934,642        1,469,665
Provision for loan loss                          50,000           40,000
                                         --------------   --------------
     Net interest income
      after provision for loan loss           1,884,642        1,429,665
                                         --------------   --------------
Non-interest income:
 Loan fees                                       15,523           40,828
 Service charges on deposits                    427,690          337,049
 Net rental income/(loss)                         8,032           (4,175)
 Other income                                    22,537           10,624
                                         --------------   --------------
     Total non-interest income                  473,782          384,326
                                         --------------   --------------
Non-interest expenses:
 Salaries and benefits                          796,267          674,781
 Occupancy expenses                             231,327          250,320
 Legal expense                                   30,875           28,650
 Professional fees                               46,250           34,500
 Computer expense                                64,694           73,365
 Other expenses                                 254,403          251,948
                                         --------------   --------------
     Total non-interest expenses              1,423,816        1,313,564

       Income before income taxes               934,608          500,427
                                         --------------   --------------
Provision/(benefit) for income taxes:
 Current                                        477,913          249,401
 Deferred                                       (42,475)         (15,060)
                                         --------------   --------------
     Total provision for income taxes           435,438          234,341

              Net income                 $      499,170   $      266,086
                                         ==============   ==============
Basic income per common share            $         0.35   $         0.19
                                         ==============   ==============
Diluted net income per share             $         0.34   $         0.18
                                         ==============   ==============
Comprehesive income                      $      742,244   $       74,520
                                         ==============   ==============
Book value per common share              $         8.10   $         6.97
                                         ==============   ==============

                See notes to consolidated financial statements.

All per share data has been adjusted for the 4 for 3 stock split, payable on
March 8, 2004.

                                       5
<PAGE>
<TABLE>
<CAPTION>

                                VSB Bancorp, Inc.
           Consolidated Statements of Changes in Stockholders' Equity
       Year Ended December 31, 2003 and Three Months Ended March 31, 2004
                                   (unaudited)

                                                                                                  Accumulated
                                        Number of                    Additional                     Other           Total
                                         Common        Common         Paid-In        Retained    Comprehensive   Stockholders'
                                         Shares        Stock          Capital        Earnings    Earnings/(Loss)    Equity
                                      -----------    -----------    -----------    -----------    -----------    -----------
<S>                                    <C>          <C>            <C>            <C>            <C>            <C>
Balance at December 31, 2002            1,056,000    $       106    $ 7,076,486    $ 2,259,313    $   427,212    $ 9,763,117

Cost of holding company
    reorganization                             (2)                      (44,987)                                     (44,987)
Comprehensive income:
  Other comprehensive income, net:
    unrealized holding loss arising
    during the year                                                                                  (596,878)      (596,878)
  Net income                                   --             --             --      1,520,373             --      1,520,373
                                      -----------    -----------    -----------    -----------    -----------    -----------
Total comprehensive income                                                                                           923,495

Balance at December 31, 2003            1,055,998            106      7,031,499      3,779,686       (169,666)    10,641,625
                                      -----------    -----------    -----------    -----------    -----------    -----------

Exercise of stock option                    4,000                        49,024                                       49,024
4 for 3 stock split and purchase
  of fractional shares                    351,984             35           (368)                                        (333)
Comprehensive income:
  Other comprehensive income, net:
    unrealized holding gain arising
    during the year                                                                                   243,074        243,074
  Net income                                   --             --             --        499,170             --        499,170
                                      -----------    -----------    -----------    -----------    -----------    -----------
Total comprehensive income                                                                                           742,244

Balance at March 31, 2004               1,411,982    $       141    $ 7,080,155    $ 4,278,856    $    73,408    $11,432,560
                                      ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

                See notes to consolidated financial statements.

All per share data has been adjusted for the 4 for 3 stock split, payable on
March 8, 2004.

                                       6
<PAGE>
<TABLE>
<CAPTION>

                                VSB Bancorp, Inc.
                      Consolidated Statements of Cash Flows
                                   (unaudited)

                                                                 Three months      Three months
                                                                     ended            ended
                                                                March 31, 2004    March 31, 2003
                                                                --------------    --------------
<S>                                                             <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                    $      499,170    $      266,086
  Adjustments to reconcile net loss to net cash
    used in operating activities
  Depreciation and amortization                                        125,943           131,249
  Accretion of income, net of amortization of premium                  (18,812)           11,003
  Provision for loan losses                                             50,000            40,000
  Decrease in prepaid and other assets                                   4,101            76,207
  Decrease/(increase) in accrued interest receivable                    28,062            (4,613)
  Increase in deferred income taxes                                    (42,475)          (15,060)
  Increase in accrued expenses and other liabilities                   202,691            81,197
                                                                --------------    --------------
        Net cash provided by operating activities                      848,680           586,069
                                                                --------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net decrease/(increase) in loan receivable                           527,499          (285,560)
  Proceeds from maturities of money market investments                 360,826                --
  Proceeds from repayment of investments securities,
    available for sale                                               4,666,649        11,020,181
  Purchases of money market investments                               (301,354)               --
  Purchase of investments securities, available for sale                    --       (23,363,797)
  Purchases of premises and equipment                                   (8,423)         (161,822)
                                                                --------------    --------------
        Net cash provided by / (used in) investing activities        5,245,197       (12,790,998)
                                                                --------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase in deposits                                           1,205,804        24,410,921
  Exercise stock option                                                 49,024                --
  4 for 3 stock split and the purchase of fractional shares               (333)               --
                                                                --------------    --------------
        Net cash provided by financing activities                    1,254,495        24,410,921
                                                                --------------    --------------
NET INCREASE IN CASH
  AND CASH EQUIVALENTS                                               7,348,372        12,205,992
                                                                --------------    --------------
CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                               30,187,741        26,095,803
                                                                --------------    --------------
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                                 $   37,536,113    $   38,301,795
                                                                ==============    ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
  Cash paid during the period for:
    Interest                                                    $      331,161    $      211,819
                                                                ==============    ==============
    Taxes                                                       $      205,151    $      413,942
                                                                ==============    ==============
</TABLE>

                See notes to consolidated financial statements.

                                       7
<PAGE>
<TABLE>
<CAPTION>

                                VSB Bancorp, Inc.
                       Consolidated Average Balance Sheets
                                   (unaudited)

                                                        Three                                      Three
                                                     Months Ended                               Months Ended
                                                    March 31, 2004                             March 31, 2003
                                       ----------------------------------------   ----------------------------------------
                                         Average                       Yield/       Average                       Yield/
                                         Balance        Interest        Cost        Balance        Interest        Cost
                                       ------------   ------------   ----------   ------------   ------------   ----------
<S>                                    <C>            <C>                  <C>    <C>            <C>                  <C>
Assets:
Interest-earning assets:
  Loans receivable                     $ 68,325,409   $  1,313,740         7.65%  $ 64,673,558   $  1,163,683         7.30%
  Money market investments                  553,356          1,565         1.14             --             --           --
  Investment securities, AFS             81,194,597        843,624         4.18     45,594,710        472,600         4.21
  Other interest-earning assets          12,204,726         25,218         0.83     20,946,125         51,712         0.99
                                       ------------   ------------   ----------   ------------   ------------
  Total interest-earning assets         162,278,088      2,184,147         5.38    131,214,393      1,687,995         5.22

Non-interest earning assets              11,501,827                                  9,285,059
                                       ------------                               ------------
  Total assets                         $173,779,915                               $140,499,452
                                       ============                               ============

Liabilities and equity:
Interest-bearing liabilities:
  Savings accounts                     $ 10,756,272         13,438         0.50   $  7,866,248         14,582         0.75
  Time accounts                          31,734,320         78,112         0.99     21,502,664         91,291         1.72
  Money market accounts                  22,723,658         47,810         0.85     26,323,548         81,811         1.26
  NOW accounts                           22,681,478         23,782         0.42     23,376,238         30,646         0.53
  Trust preferred                         5,000,000         86,363         6.91             --             --           --
                                       ------------   ------------   ----------   ------------   ------------
  Total interest-bearing liabilities     92,895,728        249,505         1.08     79,068,698        218,330         1.12
  Checking accounts                      68,182,383                                 50,188,283
                                       ------------                               ------------
Total deposits                          161,078,111                                129,256,981
Other liabilities                         1,708,984                                  1,303,839
                                       ------------                               ------------
  Total liabilities                     162,787,095                                130,560,820
Equity                                   10,992,820                                  9,938,632
                                       ------------                               ------------
  Total liabilities and equity         $173,779,915                               $140,499,452
                                       ============                               ============
Net interest income/net
 interest rate spread                                 $  1,934,642         4.30%                 $  1,469,665         4.10%
                                                      ============   ==========                  ============   ==========
Net interest earning assets/
 net interest margin                   $ 69,382,360                        4.76%  $ 52,145,695                        4.54%
                                       ============                  ==========   ============                  ==========

Ratio of interest-earning assets to
 interest-bearing liabilities                  1.75x                                      1.66x
                                       ============                               ============
</TABLE>

                See notes to consolidated financial statements.

                                        8
<PAGE>

VSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE months ENDED
March 31, 2004 and 2003 (Unaudited)
--------------------------------------------------------------------------------

1.   GENERAL

     VSB Bancorp, Inc. ("Bancorp" or "Company") became the holding company for
Victory State Bank, a New York State chartered commercial bank, on May 30, 2003
as the result of a reorganization of Victory State Bank into the holding company
form of organization. The stockholders of Victory State 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 Victory State
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 Victory State Bank. No stockholders of Victory
State Bank exercised dissenter's rights to receive cash instead of shares of VSB
Bancorp. The transaction between these entities under common control was
accounted for at historical cost on an as if pooled basis.

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 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 subsidiaries, Victory
State Bank (the "Bank") and VSB Capital Trust I (the "Trust"). All significant
inter-company accounts and transactions between the Company and Bank or the
Trust have been eliminated in consolidation. All adjustments consisting of
normal recurring accruals, which in the opinion of management are necessary for
fair presentation of the consolidated financial statements, have been included.

     Risks and Uncertainties - 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.

     Cash and Cash Equivalents - Cash and cash equivalents include cash on hand
and cash due from banks (including cash items in process of clearing).
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 18, 2004 through March 31,
2004, Victory State Bank was required to maintain reserves, after deducting
vault cash, of $4,086,000. 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. Due to increases in the volume of transaction
accounts, Victory State Bank is now required to report transaction account
levels to the Federal Reserve on a weekly basis.

     Money Market Investments, Held to Maturity - Money market investments
represent short-term investments (with original maturities of one year or less)
which are held to maturity. These investments are carried at cost, adjusted for
the accretion of discount or the amortization of premium using a method which
approximates the level yield method over the period to maturity. Carrying values
of these investments approximate current market values.

                                       9
<PAGE>

     Investment Securities, Available for Sale - Investment securities,
available for sale, are to be held for an indefinite 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. Premiums and discounts are recognized in interest income
using a method that approximates the level yield method. Unrealized holding
gains or losses, net of deferred income tax, are excluded from earnings and
reported as other comprehensive income (net of tax amount) in a separate
component of stockholders' equity until realized.

     The Company invests primarily in agency Collateralized Mortgage-Backed
Obligations ("CMOs") with average lives 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
estimated 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 operations 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. We apply
payments received on non-accrual loans to the outstanding principal balance due.
On a limited basis, we may apply a payment to interest on a non-accrual loan if
there is no impairment of principal and no estimatible loss on this asset. We
continue 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.

     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.

     We consider a loan to be impaired when, based on current information, it is
probable that we will be unable to collect all principal and interest payments
due according to the contractual terms of the loan agreement. 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.

     Long-Lived Assets - We periodically evaluate 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, we would

                                       10
<PAGE>

estimate the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows is less
than the carrying amount, an impairment will be recognized. We report these
assets at the lower of the carrying value or fair value, less the cost to sell.

     Trust Preferred Securities - In August of 2003, we formed VSB Capital Trust
I (the "Trust"). The Trust is a statutory business trust organized under
Delaware law and we own 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 us. We 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%.
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 then fluctuates quarterly based upon 300 basis
points over the 90 day LIBOR rate.

     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.

     Income Taxes - We utilize 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.

     Commitments and Off Balance Sheet Instruments - In the ordinary course of
business, we have entered into off-balance sheet financial instruments,
primarily consisting of commitments to extend credit.

     Basic and Diluted Net Income Per Common Share - Basic net income per share
of common stock is based on 1,411,982 shares, the weighted average number of
shares of common stock outstanding. Diluted net income per share of common stock
is based on 1,486,803 shares, the weighted average number of shares of common
stock and common stock equivalents outstanding for the three months ended March
31, 2004, and is calculated using the treasury method. The weighted average
number of common stock equivalents excluded in calculating diluted net income
per common share due to the anti-dilutive effect is 52,444 for the three months
ended March 31, 2004. Common stock equivalents were calculated using the
treasury stock method.

     The following table presents a reconciliation of the components used to
compute basic and diluted earnings per share for the three month period ended
March 31, 2004 and 2003.

                                       11
<PAGE>

                                                      Three Months Ended
                                                          March 31,
                                                 ---------------------------
                                                     2004           2003
                                                 ------------   ------------
Basic earnings per share
Net income as reported                           $    499,170   $    266,086
Weighted average common
  shares outstanding                                1,411,982      1,408,000
                                                 ------------   ------------

      Basic earnings per share                   $       0.35   $       0.19
                                                 ============   ============
Earnings per share assuming dilution
Net income available to common
shareholders                                     $    499,170   $    266,086
                                                 ============   ============
Weighted average common
  shares outstanding                                1,411,982      1,408,000
Add dilutive effect of:
    Stock options                                      74,821         53,960
                                                 ------------   ------------
Weighted average common and dilutive
    potential common shares outstanding             1,486,803      1,461,960
                                                 ------------   ------------

    Diluted earnings per share                   $       0.34   $       0.18
                                                 ============   ============

All per share data has been adjusted for the 4 for 3 stock split, payable on
March 8, 2004.

     Stock Based Compensation - At March 31, 2004, we had stock-based employee
compensation plans. We account for these plans under APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. No
stock-based employee compensation expense has been reflected in net income for
stock options as all rights and options to purchase stock granted under these
plans have an exercise price equal to the market value of the underlying stock
on the date of grant.

     The following table illustrates the effect on net income and earnings per
share if expense was measured using fair value recognition of FASB Statement No.
123, Accounting for Stock-Based Compensation.

                                                      Three Months Ended
                                                          March 31,
                                                 ---------------------------
                                                     2004           2003
                                                 ------------   ------------

Net income as reported                           $    499,170   $    266,086
Deduct: Stock-based compensation expense
  determined under the fair value based method        (10,966)        (5,167)
                                                 ------------   ------------

Pro forma net income                                  488,204        260,919

Basic earnings per share as reported             $       0.35   $       0.19
Pro forma basic earnings per share               $       0.35   $       0.19

Diluted earnings per share as reported           $       0.34   $       0.18
Pro forma diluted earnings per share             $       0.33   $       0.18

All per share data has been adjusted for the 4 for 3 stock split, payable on
March 8, 2004 .

                                       12
<PAGE>

Recently-Issued Accounting Standards - In March 2004, the Sec issued Staff
Accounting Bulletin (SAB) No. 105 "Application of Accounting Principles to Loan
Commitments". This SAB related to Financial Accounting Standards Board (FASB)
Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities"
for valuing loan commitments, considered to be derivatives, on mortgage loans
that will be sold. This SB is effective for commitments entered into after April
1, 2004. The adoption of SAB No. 105 will not have a material impact on the
financial position or results of operation.

Management continuously monitors emerging issues and accounting bulletins, some
of which could potentially impact the Company's financial statements.

Item 2

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Financial Condition

     Our total assets were $187,174,400 at March 31, 2004, an increase of
$2,199,430, or 1.2%, since December 31, 2003. The increase resulted from the
investment of funds which were available to us as the result of an increase in
deposits. The deposit increase was caused generally by our efforts to grow our
franchise and specifically by the deposit increases at our branch offices. Our
investment of these funds generated the following increase in assets.

     o   A $7,348,372 increase in cash and due from banks.

The net increase in assets was partially offset by the following decreases in
assets:

     o   A $4,268,059 decrease in investment securities available for sale.
     o   A $502,168 decrease in net loans receivable.

In addition, we also experienced decreases in other asset categories due to
normal fluctuations in operations.

     Our deposits were $168,908,605 at March 31, 2004, an increase of
$1,205,804, or 0.7%, from December 31, 2003, which provided most of the funds
used for the increase in assets. Substantially all of the increase in deposits
was due to a $1,537,534 increase in non-interest demand deposits.

     In August of 2003, we formed VSB Capital Trust I (the "Trust"). The Trust
is a statutory business trust organized under Delaware law and its common
securities are wholly owned by the Company. 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 subordinated debenture
aggregating $5.16 million 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%. 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 interest rate fluctuates quarterly based upon 300
basis points over the 90 day LIBOR rate. The holders of the Trust Preferred
Securities do not have mandatory redemption rights except in the event of
default or other specified conditions. Dividends on the Trust Preferred Capital
Securities are recorded as interest expense. Costs associated with the issuance
of the securities totaling $142,500 were capitalized and are being amortized
over five years, the estimated life of the securities. VSB Capital Trust I is
consolidated with VSB Bancorp, Inc. under the principles of consolidation,
whereby the subordinated debt and inter-company payables and receivables are

                                       13
<PAGE>

eliminated, leaving the trust preferred securities and the associated interest
payable as liabilities of the Bancorp offset by the cash received from the
issuance of the trust preferred securities.

     On August 28, 2003, VSB Bancorp, Inc. received the net proceeds of $4.86
million from the $5 million trust preferred securities that it issued. The
Bancorp can include up to 25% of its total capital base as Tier 1 capital from
the $5 million trust preferred issue.

     We opened for business in November 1997 and management has worked
throughout the past six years to grow our franchise. From one office in 1997, we
now have four offices. From no deposits, no loans and less than $7.0 million of
assets on the day we opened for business in 1997, we have grown to total assets
of $187.2 million, total deposits of $168.9 million and capital of $11.4 million
by March 31, 2004.

     Management intends to exert efforts to continue growing our company in the
future. However, both internal and external factors could adversely affect our
future growth. The recent down turn in the economy has made it more difficult
for us to originate new loans that meet our underwriting standards. Not only
does that cause us to invest available funds in lower-yielding securities and
deposits with other banks, but it also slows the development of non-loan
relationships which sometimes flow from cross-selling to loan customers.

     A continuation of adverse general economic conditions could make it
difficult for us to execute our growth plans. Furthermore, regulatory capital
requirements could have a negative effect on our ability to grow if growth
outpaces our ability to support that growth with increased capital. We increased
our capital through an offering of trust preferred securities at the holding
company level by VSB Bancorp in the third quarter of 2003. We contributed
substantially all of the proceeds of the offering to our subsidiary, Victory
State Bank, thus increasing its capital and allowing us to satisfy regulatory
capital requirements applicable to both the bank and the bank holding company
while we continue to grow. However, trust preferred securities cause us to incur
an interest expense at the holding company level.

     Total stockholders' equity was $11,432,560 at March 31, 2004, an increase
of $790,935 during the first three months. The increase reflected net income of
$499,170 for the three months and an increase of $243,074 in other comprehensive
income due to an increase in the unrealized gain in securities available for
sale during the first three months of 2004 and a net increase of $48,656 in
additional paid in capital due to the exercise of options to purchase 4,000
shares of common stock. VSB Bancorp, Inc. satisfied all capital ratio
requirements of the Federal Reserve at March 31, 2004, with a Tier I Leverage
Capital Ratio of 8.72%, a ratio of Tier I Capital to Risk-Weighted Assets Ratio
of 16.53%, and a Total Capital to Risk-Weighted Assets Ratio of 19.11%.

Results of Operations for the Quarters Ended March 31, 2004 and March 31, 2003

     General. We had net income of $499,170 for the quarter ended March 31,
2004, compared to net income of $266,086 for the comparable quarter in 2003. The
principal categories which make up the 2004 net income are:

     o   Interest income of $2,184,147
     o   Reduced by interest expense of $249,505
     o   Reduced by the provision for loan losses of $50,000
     o   Increased by non-interest income of $473,782
     o   Reduced by non-interest expense of $1,423,816
     o   Reduced by $435,438 in income tax expense.

     We discuss each of these categories individually and the reasons for the
differences between the quarter ended March 31, 2004 and the comparable quarter
in 2003 in the following paragraphs. The over-riding factor affecting the

                                       14
<PAGE>

changes in our operating results in all these categories is our continued
implementation of our growth strategy as we discussed above. Opening new
branches, as we did in December 2002, initially has a dampening effect on net
income because we must begin incurring the staffing and occupancy expense of a
new branch before we generate funds from that branch for investment. However, we
expect that the longer term consequences of branch expansion will be positive,
as deposits and loans are gradually generated by new branches and then invested
in interest earning assets.

     Interest Income. Interest income was $2,184,147 for the quarter ended March
31, 2004, compared to $1,687,995 for the quarter ended March 31, 2003, an
increase of $496,152, or 29.4%. The principal reason for the increase was a
$35,599,887 increase in the average balance of investment securities, as we
shifted some of our overnight and similar investments into investment securities
to improve yields. We also invested new deposits and the proceeds of the trust
preferred securities offering in investment securities, pending planned
redeployment in loans as, when and if appropriate opportunities are available.
This generated a $371,024 increase in interest earned on investment securities.

     We increased the average balance of our loans by 5.6% from $64,673,558
during the 2003 quarter to $68,325,409 during the 2004 quarter, which was the
principal reason for a $150,057 increase in interest income from loans. A
portion of the increase also resulted from a shift in our lending strategy to
require minimum rates on a larger portion of our prime-based loan portfolio. We
also received $18,550 of interest during the quarter on account of a prior
period for loans that had been designated as non-accrual. In contrast, during
the first quarter of 2003, reported interest was reduced by $22,000 because we
designated a number of loans as non-accrual and reversed interest income that we
had accrued but not received. Finally, we had a $24,929 decrease in income from
overnight funds and other interest earning assets as we redeployed funds
invested in those categories into investment securities to improve yields.

     Interest Expense. Interest expense was $249,505 for the quarter ended March
31, 2004, compared to $218,330 for the quarter ended March 31, 2003, an increase
of 14.3%. The increase was the direct result of $86,363 of interest on trust
preferred securities and was partially offset by the lower rates paid on
principal interest bearing deposit categories - savings, time deposit, money
market and NOW accounts - as the lower interest rate environment offset the
growth of our deposit base. Our average cost of funds declined from 1.12% to
1.08% between the periods, and our average cost of interest-bearing deposits
(excluding the cost of the trust preferred securities) declined from 1.12 % to
..75%. Furthermore, we continued to increase the volume of non-interest checking
accounts, a zero cost funding source, which represented 57% of the growth in
average total deposits. This increase was a direct result of our efforts to
increase low cost funding sources.

     Net Interest Income Before Provision for Loan Losses. Net interest income
before the provision for loan losses was $1,934,642 for the quarter ended March
31, 2004, an increase of $464,977, or 31.6% over the $1,469,665 we had in the
comparable 2003 quarter. The increase was driven primarily by the increase in
the volume of interest-earning assets. We have continued to implement our growth
strategy which resulted in an increase of $31,063,695 in interest earning
assets, most of which increase was invested in investment securities. Our
interest rate spread improved from the 2003 to the 2004 quarter, principally for
the following reasons:

     o   lower market interest rates allowed us to decrease our cost of
         deposits, thereby offsetting the increase in our average costs due to
         the higher expense of the trust preferred securities;
     o   we were more aggressive in imposing minimum interest rate floors on our
         new loan originations to combat the effects of the low prime interest
         rate;
     o   we shifted investments from overnight type investments to investment
         securities with higher yields while also using new funds to increase
         the volume of investment securities; and
     o   as discussed above, we received interest during the 2004 quarter on a
         non-accruing loan that was paid for a prior period and we had the
         reverse situation in the 2003 quarter due to designating loans as
         non-accrual.

                                       15
<PAGE>

     Loans are our highest yielding asset category, and due to interest rate
floors on many of our prime-based loans, our loan yields have been relatively
constant in recent quarters. In contrast, the average yield on other (non-loan)
interest earning assets was approximately 3.73% during the 2004 quarter,
compared to approximately 3.17% during the 2003 quarter. This improvement
resulted from our strategy to reduce overnight and similar investments in favor
of investment securities with higher yields. The average level of investment
securities represented 86.4% of non-loan earning assets in the 2004 quarter
compared to 68.5% in the 2003 quarter. The growth in the loan portfolio was
slower than the growth in the investment securities portfolio due to competitive
pressures for loans in our marketplace.

     Most of our loans have interest rates that are based upon the fluctuating
prime rate, which was 4.00% through the first quarter of 2004 as compared to
4.25% in the first quarter of 2003. Despite the prime rate decline, the effect
of that decline on our yields was moderated because many of our prime-based
loans have interest rate floors. The loans, which are most commonly made at
interest rates from 100 to 150 basis points above the prime rate, have interest
rate floors that are usually at 7.00%, so the decline in the prim rate from
4.25% to 4.00% did not result in a reduction in our yield on those loans.
However, we note that as the prime rate increases, the rate of interest on these
loans will not increase until the prime rate reaches from 5.50% to 6.00%, while
our cost of funds can be expected to increase as market interest rates begin to
rise. The yield on our non-loan investments decreased from the 2003 quarter to
the 2004 quarter because declining market rates drove down the yields we could
earn on those investments, but the decrease was tempered by our shifting of the
mix of investments towards higher yielding investment securities and away from
lower yielding other interest earning assets.

     Provision for Loan Losses. The provision for loan losses was $50,000 for
the quarter ended March 31, 2004, compared to $40,000 for the quarter ended
March 31, 2003. The increase in the provision was primarily due to a moderate
increase in the rate of delinquencies in the loan portfolio. 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 adequacy 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 losses represented 1.81% of total loans at
March 31, 2004, but there can be no assurance that a higher level, or a higher
provision for loan losses, will not be necessary in the future.

     Non-interest Income. Non-interest income was $473,782 for the three months
ended March 31, 2004, compared to $384,326 during the same period last year. The
$89,456, or 23.3%, increase in non-interest income was a direct result of a
$90,641 increase in service charges on deposits, more specifically because of
the increase in the deposit base and the associated increase in aggregate
overdraft fees charged to customers.

     Non-interest Expense. Non-interest expense was $1,423,816 for the quarter
ended March 31, 2004, compared to $1,313,564 for the quarter ended March 31,
2003. Of the $110,252 increase, the principal causes were:

     o   $121,486 in higher salary and benefits costs due to normal salary
         increase, a slight increase in staffing to support growth and higher
         benefit costs. We had 50 full time equivalent employees at March 31,
         2004 compared to 49 at March 31, 2003.
     o   $11,750 in higher professional fees.
     o   $18,993 decrease in occupancy expenses and an $8,671 decrease in
         computer expenses due to the retirement of certain depreciable assets.

                                       16
<PAGE>

     Income Tax Expense. Income tax expense was $435,438 for the quarter ended
March 31, 2004, compared to income tax expense of $234,341 for the quarter ended
March 31, 2003, due to the $434,181 increase of income before income taxes in
the 2004 quarter. Our effective tax rate remained the same for the quarter ended
March 31, 2004 and 2003 at 46.6%.

Liquidity and Capital Resources

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

     During the three months ended March 31, 2004, we had a net increase in
deposits of $1,205,804 and proceeds from repayment of investment securities
totaled $4,666,649. The increase in deposits is primarily attributable to
deposit increases at our newest branch office. In the first three months of
2004, our loan portfolio remained substantially the same as new loan
originations were offset by the repayment of construction loans. The increase in
funds available for investment was used primarily to increase cash and cash
equivalents.

     In contrast, during the comparable period of 2003, deposits increased by
$24,410,921 and proceeds from the repayment of investment securities totaled
$11,020,181. We used those funds to finance a $285,560 increase in our loan
portfolio and to purchase $23,363,797 of investment securities and money market
investments.

     In August 2003, we completed an issuance of $5.0 million of trust preferred
securities. The trust preferred securities were issued by a special purpose
business trust, VSB Capital Trust I, owned by the Company and sold to an
independent investor. The securities have a maturity of 30 years and the holders
are entitled to receive cumulative cash distributions at rate of 6.909% per
annum. In general, the securities will be callable by the Company after five
years.

     The principal reason that we entered into the trust preferred securities
transaction was to increase regulatory capital to support growth. Although the
proceeds of the trust preferred securities do not constitute capital under GAAP,
the Board of Governors of the Federal Reserve System permits a bank holding
company to include such proceeds as capital when determining satisfaction of
regulatory capital ratios, up to 25% of total capital. The Company contributed
$4.2 million of the proceeds of the trust preferred securities to Victory State
Bank as additional capital in order to increase the bank's capital ratios and
allow for future growth. Victory State Bank satisfied all capital ratio
requirements of the Federal Deposit Insurance Corporation, at March 31, 2004,
with a Tier I Leverage Capital Ratio of 9.07%, a ratio of Tier I Capital to
Risk-Weighted Assets Ratio of 17.18%, and a Total Capital to Risk-Weighted
Assets Ratio of 18.43%.

     In both the first three months of 2004 and 2003, funds available to us
exceeded the amount of investments we chose to make, so we experienced a
$7,348,372 increase in cash and cash equivalents in the first three months of
2004 pending reinvestment in loans and investment securities and a $12,205,992
increase in cash and cash equivalents during the first three months of 2003.
Total cash and cash equivalents at March 31, 2004 were $37,536,113. One of the
important tasks facing management in upcoming periods is to seek to
satisfactorily deploy this level of cash and cash equivalents, as well as a
portion of our investment securities, into higher yielding interest-earning
assets such as loans.

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

                                       17
<PAGE>
<TABLE>
<CAPTION>

Contractual Obligations and Commitments at March 31, 2004

Contractual Obligations                                                Payment due by Period
                                            ------------------------------------------------------------------------
                                             Less than     One to three   Four to five       After     Total Amounts
                                             One Year          years          years       five years     committed
                                            ------------   ------------   ------------   ------------   ------------
<S>                                         <C>            <C>            <C>            <C>            <C>
Minimum annual rental  payments under
  non-cancelable operating leases           $    330,843   $    641,093   $    438,968   $  1,565,905   $  2,976,809
Remaining contractual maturities of time
  deposits                                    27,397,648      1,721,826      1,084,898             --     30,204,372
                                            ------------   ------------   ------------   ------------   ------------
 Total contractual cash obligations         $ 27,728,491   $  2,362,919   $  1,523,866   $  1,565,905   $ 33,181,181
                                            ============   ============   ============   ============   ============

</TABLE>
<TABLE>
<CAPTION>

Other commitments                                         Amount of commitment Expiration by Period
                                            ------------------------------------------------------------------------
                                             Less than     One to three   Four to five       After     Total Amounts
                                             One Year          years          years       five years     committed
                                            ------------   ------------   ------------   ------------   ------------
<S>                                         <C>            <C>            <C>            <C>            <C>
Loan commitments                            $ 18,510,149   $  9,021,393   $      7,500   $         --   $ 27,539,042
                                            ============   ============   ============   ============   ============

</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 risks upon
fluctuations in market rates. We consider the amount of outstanding commitments
when assessing the adequacy of our allowance for loan losses.

Critical Accounting Policies and Judgments

     The Company's consolidated financial statements are prepared based on the
application of certain accounting policies, the most significant of which are
described in Note 2 "Summary of Significant Accounting Policies" in the Notes to
the Consolidated Financial Statements and in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations: Impact of New
Accounting Pronouncements" in the Company's Form 10-KSB as filed on March 24,
2004. Certain of these policies require numerous estimates and strategic or
economic assumptions that may prove inaccurate or subject to variations and may
significantly affect the Company's reported results and financial position for
the period or future periods. The use of estimates, assumptions, and judgments
are necessary when financial assets and liabilities are required to be recorded
at, or adjusted to reflect, fair value. The Company's assets and liabilities
that are carried at fair value inherently result in more financial statement
volatility. Fair values and the information used to record valuation adjustments
for certain assets and liabilities are based on either quoted market prices or
provided by other independent third-party sources, when available. When such
information is not available, the Company's management estimates valuation
adjustments primarily by using internal cash flow and other financial modeling
techniques. Changes in underlying factors, assumptions, or estimates in any of
these areas could have a material impact on the Company's future financial
condition and results of operations. We consider the allowance for loan losses
to be a critical accounting policy.

     Allowance for loan losses - The Company's Allowance for Loan Losses is
established through a provision for loan losses based on management's evaluation
of the risks inherent in its loan portfolio and the general economy. Such
evaluation, which includes a review of all loans on which full collectibility
may not be reasonably assured, considers among other matters, the estimated net
realizable value of the underlying collateral, economic conditions, any
historical loan loss experience and other factors that warrant recognition in
providing for an adequate loan loss allowance. The Company identifies and
evaluates the following pools or similar loan categories when evaluating the
Allowance for Loan Losses: Commercial Loans - Secured and Unsecured; Real Estate
Loans - Commercial and One-to-four family; Construction Loans - Commercial and
One-to-four family and Other Loans - Consumer and Other Loans.

                                       18
<PAGE>

     It is the policy of the Company to provide a valuation allowance for
estimated 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 Bank's lending area. The allowance is
increased by provisions for loan losses charged to operations 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.

Item 3 - Controls and Procedures

     Evaluation of Disclosure Controls and Procedures: As of March 31, 2004, we
undertook an evaluation of our disclosure controls and procedures under the
supervision and with the participation of Merton Corn, our President and CEO,
and Raffaele Branca, our 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 2 - Changes in Securities

     During the period covered by this report, the Board of Directors approved a
4 for 3 stock split in the form of a 33 1/3 stock dividend, which was paid on
March 8, 2004 to shareholders of record at the close of business on February 17,
2004. Shareholders received one additional share of VSB Bancorp, Inc. stock for
every three shares held, and cash in lieu of fractional shares at the rate of
$21.75 per whole share, the average of the high and low trading price on the
record date, as adjusted for the split. We settled 15.33 shares of VSB Bancorp,
Inc. common stock for cash as a result of the 4 for 3 stock split.

                                       19
<PAGE>
<TABLE>
<CAPTION>

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, 2004 through March 31, 2004. VSB Bancorp, Inc. held its first
Annual Meeting of Stockholders on April 27, 2004 at its principal office, 3155
Amboy Road, Staten Island, New York 10306, at 5:00 P.M. At that meeting,
1,243,003 shares of the capital stock of the Company were represented in person
or by proxy, being 88.0% 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 four proposals, with the results of the voting as follows:

     1.  The approval of an employee stockownership plan and the sale of 74,320
         shares of VSB Bancorp, Inc. common stock to the plan out of authorized
         but unissued shares:

                 Percentage of                   Percentage of                    Percentage of
    Votes           shares          Votes           shares           Votes           shares           Broker
     For            voted          Against          voted          Abstained         voted           Non-Votes
  ---------     -------------     ---------     -------------     -----------     -------------     -----------
<S>                 <C>             <C>              <C>            <C>               <C>             <C>
   820,300          91.0%           11,331           1.3%           70,000            7.7%            341,372
</TABLE>
<TABLE>
<CAPTION>

     2.  The approval of a 2004 Directors Stock Option Plan allowing for the
         grant of options to acquire 55,000 shares of our stock and the grant of
         options to purchase 5,000 shares to each of our nine directors:

                 Percentage of                   Percentage of                    Percentage of
    Votes           shares          Votes           shares           Votes           shares           Broker
     For            voted          Against          voted          Abstained         voted           Non-Votes
  ---------     -------------     ---------     -------------     -----------     -------------     -----------
<S>                 <C>             <C>              <C>            <C>               <C>             <C>
   800,212          88.7%           57,583           6.4%           43,836            4.9%            341,372
</TABLE>

     3.  The election of five directors, including three for three-year terms
         and two for two-year terms: Percentage of Percentage of

     Director                  Votes         shares        Votes        shares
     Elected                    For           voted       Withheld       voted
------------------------    ------------    ---------    ----------    ---------

Three Year Terms:
------------------------
Joseph J. LiBassi             1,221,404       98.3%        21,599         1.7%
Merton Corn                   1,221,404       98.3%        21,599         1.7%
Joan Nerlino Caddell          1,221,404       98.3%        21,599         1.7%

Two Year Terms:
------------------------
Alfred C. Johnsen             1,221,404       98.3%        21,599         1.7%
Bruno Savo                    1,221,404       98.3%        21,599         1.7%

No other persons received any votes.

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

                                       20
<PAGE>
<TABLE>
<CAPTION>

     4.  The ratification of the appointment of Crowe Chizek and Company LLC as
         our independent public accountants for the fiscal year ending December
         31, 2004

                 Percentage of                   Percentage of                    Percentage of
    Votes           shares          Votes           shares           Votes            shares
     For            voted          Against          voted          Abstained          voted
  ---------     -------------     ---------     -------------     -----------     -------------
<S>                <C>             <C>              <C>            <C>               <C>
  1,220,004         98.2%           2,599            0.2%            20,400           1.6%
</TABLE>

                                       21
<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 11, 2004                /s/ MERTON CORN
                                       -----------------------------------------
                                       Merton Corn
                                       President and Chief Executive Officer


     Date: May 11, 2004                /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.


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