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EX-32.1 - VSB BANCORP INCex32_1.htm
EX-31.1 - VSB BANCORP INCex31_1.htm
EX-31.2 - VSB BANCORP INCex31_2.htm
EX-32.2 - VSB BANCORP INCex32_2.htm
UNITED STATES
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20849

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2011

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

COMMISSION FILE NUMBER 0-50237

VSB Bancorp, Inc.
(Exact name of registrant as specified 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
Registrant’s telephone number
 
Common Stock
(Title of Class)

Indicate by check mark whether the registrant (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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer o
Smaller Reporting Company x

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

Par Value: $0.0001 Class of Common Stock

The Registrant had 1,825,009 common shares outstanding as of May 4, 2011.

 
 

 

CROSS REFERENCE INDEX
 
     
Page
       
PART I
   
       
 
4
   
5
   
6
   
7
   
8 to 23
       
 
23 to 33
 
33
       
   
       
 
34
       
 
35
       
 
Exhibit 31.1, 31.2, 32.1, 32.2
 
36 to 39

 
2

 

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:

 
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;
 
changes in market interest rates or changes in the speed at which market interest rates change;
 
changes in laws and regulations affecting the financial service industry;
 
changes in the public’s perception of financial institutions in general and banks in particular;
 
changes in competition; and
 
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

 

VSB Bancorp, Inc.
(unaudited)

   
March 31,
   
December 31,
 
   
2011
   
2010
 
             
Assets:
           
Cash and due from banks
  $ 37,660,747     $ 28,764,987  
Investment securities, available for sale
    117,364,785       121,307,907  
Loans receivable
    79,898,528       81,538,224  
Allowance for loan loss
    (1,301,598 )     (1,277,220 )
Loans receivable, net
    78,596,930       80,261,004  
Bank premises and equipment, net
    2,604,130       2,732,229  
Accrued interest receivable
    624,239       673,967  
Other assets
    1,340,078       1,513,605  
Total assets
  $ 238,190,909     $ 235,253,699  
Liabilities and stockholders’ equity:
               
Liabilities:
               
Deposits:
               
Demand and checking
  $ 70,621,956     $ 66,407,225  
NOW
    31,369,855       35,138,867  
Money market
    27,737,090       27,057,632  
Savings
    15,952,574       14,938,440  
Time
    64,503,282       63,644,963  
Total deposits
    210,184,757       207,187,127  
Escrow deposits
    320,904       219,530  
Accounts payable and accrued expenses
    1,550,376       1,802,186  
Total liabilities
    212,056,037       209,208,843  
                 
Stockholders’ equity:
               
Common stock ($.0001 par value, 3,000,000 shares authorized, 1,989,509 issued, 1,825,009 outstanding at March 31, 2011 and at December 31, 2010)
    199       199  
Additional paid in capital
    9,256,237       9,249,600  
Retained earnings
    17,886,510       17,563,435  
Treasury stock, at cost (164,500 shares at March 31, 2011and at December 31, 2010)
    (1,643,797 )     (1,643,797 )
Unearned Employee Stock Ownership Plan shares
    (521,324 )     (563,594 )
Accumulated other comprehensive income, net of taxes of $975,759 and $1,213,545, respectively
    1,157,047       1,439,013  
                 
Total stockholders’ equity
    26,134,872       26,044,856  
                 
Total liabilities and stockholders’ equity
  $ 238,190,909     $ 235,253,699  

See notes to consolidated financial statements.

 
4

 

VSB Bancorp, Inc.
(unaudited)

   
Three months
   
Three months
 
   
ended
   
ended
 
   
March 31, 2011
   
March 31, 2010
 
Interest and dividend income:
           
Loans receivable
  $ 1,454,292     $ 1,390,296  
Investment securities
    1,012,552       1,162,222  
Other interest earning assets
    11,138       9,207  
Total interest income
    2,477,982       2,561,725  
Interest expense:
               
NOW
    33,089       39,252  
Money market
    59,379       62,486  
Savings
    12,696       11,460  
Time
    121,506       160,117  
Total interest expense
    226,670       273,315  
Net interest income
    2,251,312       2,288,410  
Provision for loan loss
    30,000       90,000  
                 
Net interest income after provision for loan loss
    2,221,312       2,198,410  
                 
Non-interest income:
               
Loan fees
    27,570       2,304  
Service charges on deposits
    522,237       540,701  
Net rental income
    11,613       11,983  
Other income
    46,283       46,686  
Total non-interest income
    607,703       601,674  
Non-interest expenses:
               
Salaries and benefits
    980,003       963,616  
Occupancy expenses
    376,563       363,790  
Legal expense
    64,986       89,521  
Professional fees
    80,451       66,200  
Computer expense
    65,322       66,955  
Directors’ fees
    62,450       58,950  
FDIC and NYSBD assessments
    94,000       94,000  
Other expenses
    309,275       300,344  
Total non-interest expenses
    2,033,050       2,003,376  
Income before income taxes
    795,965       796,708  
Provision/(benefit) for income taxes:
               
Current
    414,690       442,310  
Deferred
    (50,516 )     (77,824 )
Total provision for income taxes
    364,174       364,486  
Net income
  $ 431,791     $ 432,222  
Earnings per share:
               
Basic
  $ 0.24     $ 0.25  
Diluted
  $ 0.24     $ 0.25  
Comprehensive income
  $ 149,825     $ 654,963  
Book value per common share
  $ 14.32     $ 14.22  
 
See notes to consolidated financial statements.

 
5

 

VSB Bancorp, Inc.
Year Ended December 31, 2010 and Three Months Ended March 31, 2011
(unaudited)

   
Number of
                               
Accumulated
       
   
Common
       
Additional
         
Treasury
   
Unearned
   
Other
   
Total
 
   
Shares
   
Common
 
Paid-In
   
Retained
   
Stock,
   
ESOP
   
Comprehensive
   
Stockholders’
 
   
Outstanding
   
Stock
 
Capital
   
Earnings
   
at cost
   
Shares
   
Gain
   
Equity
 
                                               
Balance at January 1, 2010
    1,762,191     $ 195   $ 9,317,719     $ 16,112,741     $ (1,840,249 )   $ (732,672 )   $ 1,626,215     $ 24,483,949  
                                                               
Exercise of stock option, including tax benefit
    44,375       4     292,207                                       292,211  
Stock-based compensation
                  70,811                                       70,811  
Amortization of earned portion of ESOP common stock
                                          169,078               169,078  
Amortization of cost over fair value - ESOP
                  (35,551 )                                     (35,551 )
Cash dividends declared ($0.24 per share)
                          (429,935 )                             (429,935 )
Purchase of treasury stock, at cost
    (17,057 )                           (199,134 )                     (199,134 )
Contribution to RRP Trust from treasury shares
    35,500             (395,586 )             395,586                        
Comprehensive income:
                                                             
Net income
                          1,880,629                               1,880,629  
Other comprehensive income, net:
                                                             
Change in unrealized gain on securities available for sale, net of tax effects
                                      (187,202 )     (187,202 )
Total comprehensive income
                                                          1,693,427  
                                                               
Balance at December 31, 2010
    1,825,009     $ 199   $ 9,249,600     $ 17,563,435     $ (1,643,797 )   $ (563,594 )   $ 1,439,013     $ 26,044,856  
                                                               
Stock-based compensation
                  23,390                                       23,390  
Amortization of earned portion of ESOP common stock
                                          42,270               42,270  
Amortization of cost over fair value - ESOP
                  (16,753 )                                     (16,753 )
Cash dividends declared ($0.06 per share)
                          (108,716 )                             (108,716 )
Purchase of treasury stock, at cost
                                                           
Comprehensive income:
                                                             
Net income
                          431,791                               431,791  
Other comprehensive income, net:
                                                             
Change in unrealized gain on securities available for sale, net of tax effects
                                      (281,966 )     (281,966 )
Total comprehensive income
                                                          149,825  
                                                               
Balance at March 31, 2011
    1,825,009     $ 199   $ 9,256,237     $ 17,886,510     $ (1,643,797 )   $ (521,324 )   $ 1,157,047     $ 26,134,872  
 
See notes to consolidated financial statements.

 
6

 

VSB Bancorp, Inc.
(unaudited)

   
Three months
   
Three months
 
   
ended
   
ended
 
   
March 31, 2011
   
March 31, 2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 431,791     $ 432,222  
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation and amortization
    148,541       152,206  
Accretion of income, net of amortization of premium
    33,344       8,770  
ESOP compensation expense
    25,517       25,688  
Stock-based compensation expense
    23,390       1,944  
Provision for loan losses
    30,000       90,000  
Decrease in prepaid and other assets
    173,527       105,153  
Decrease in accrued interest receivable
    49,728       63,464  
Increase in deferred income taxes
    (50,516 )     (77,824 )
Increase in accrued expenses and other liabilities
    36,492       412,267  
Net cash provided by operating activities
    901,814       1,213,890  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Net change in loan receivable
    1,667,929       868,869  
Proceeds from repayment and calls of investment securities, available for sale
    9,431,300       10,242,054  
Purchases of investment securities, available for sale
    (6,075,129 )     (8,941,161 )
Purchases of premises and equipment, net
    (20,442 )     (21,594 )
Net cash provided by investing activities
    5,003,658       2,148,168  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net increase in deposits
    3,099,004       1,664,732  
Cash dividends paid
    (108,716 )     (103,542 )
Net cash provided by financing activities
    2,990,288       1,561,190  
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
    8,895,760       4,923,248  
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    28,764,987       39,716,919  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 37,660,747     $ 44,640,167  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
Interest
  $ 231,064     $ 302,984  
Taxes
  $ 186,900     $ 86,725  
 
See notes to consolidated financial statements.

 
7

 
 
VSB BANCORP, INC.



1.
GENERAL

VSB Bancorp, Inc. (referred to using terms such as “we,” “us,” or the “Company”) is the holding company for Victory State Bank (the “Bank”), a New York chartered commercial bank. Our primary business is owning all of the issued and outstanding stock of the Bank. Our common stock is listed on the NASDAQ Global Market. We trade under the symbol “VSBN”.

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. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the local Staten Island economic and real estate markets. 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.

Cash and Cash Equivalents – Cash and cash equivalents consists of cash on hand, due from banks and interest-bearing deposits. Interest-bearing deposits with original maturities of 90 days or less are included in this category. Customer loan and deposit transactions are reported on a net cash basis. Regulation D of the Board of Governors of the Federal Reserve System requires that Victory State Bank maintain 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 24, 2011 through April 6, 2011, Victory State Bank was required to maintain reserves, after deducting vault cash, of $3,734,000. 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.
 
 
8

 
 
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. For debt securities with other than temporary impairment (OTTI) that management does not intend to sell or expect to be required to sell, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

The Company invests primarily in agency collateralized mortgage-Backed obligations (“CMOs”) with estimated average lives primarily under 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 appropriate.

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 but has not been paid. 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.

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.
 
 
9

 
 
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. Loans with modified terms that the Company would not normally consider, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. 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.

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 fifteen 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, which is the price the Bank pays for the FHLB Stock. 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. As such, 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 Company recognizes interest and/or penalties related to income tax matters in income tax expense.

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.

Basic and Diluted Net Income Per Common Share - The Company has stock compensation awards with non-forfeitable dividend rights which are considered participating securities. As such, earnings per share is computed using the two-class method. Basic earnings per common share is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period which excludes the participating securities. Diluted earnings per common share includes the dilutive effect of additional potential common shares from stock-based compensation plans, but excludes awards considered participating securities. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.
 
 
10

 
 
Basic net income per share of common stock is based on 1,761,754 shares and 1,725,522 shares, the weighted average number of common shares outstanding for the three months ended March 31, 2011 and 2010, respectively. Diluted net income per share of common stock is based on 1,766,550 and 1,744,620, the weighted average number of common shares outstanding plus potentially dilutive common shares for the three months ended March 31, 2011 and 2010, 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 23,171 and 34,120 shares for the three months ended March 31, 2011 and 2010, respectively. Common stock equivalents were calculated using the treasury stock method.
 
The reconciliation of the numerators and the denominators of the basic and diluted per share computations for the three months ended March 31, are as follows:
 
Reconciliation of EPS
           
   
Three months ended
   
Three months ended
 
   
March 31, 2011
   
March 31, 2010
 
Basic
           
Distributed earnings allocated to common stock
  $ 105,705     $ 103,531  
Undistributed earnings allocated to common sock
    317,557       328,691  
Net earnings allocated to common stock
  $ 423,262     $ 432,222  
                 
Weighted common shares outstanding including participating securities
    1,797,254       1,725,522  
Less: Participating securities
    (35,500 )      
Weighted average shares
    1,761,754       1,725,522  
                 
Basic EPS
  $ 0.24     $ 0.25  
                 
Diluted
               
Net earnings allocated to common stock
  $ 423,262     $ 432,222  
                 
Weighted average shares for basic
    1,761,754       1,725,522  
Dilutive effects of:
               
Stock Options
    4,796       19,098  
Unvested shares not considered particpating securtities
           
      1,766,550       1,744,620  
                 
Diluted EPS
  $ 0.24     $ 0.25  
 
Net earnings allocated to common stock for the period is distributed earnings during the period, such as dividends on common shares outstanding, plus a proportional amount of retained income for the period based on restricted shares granted but unvested compared to the total common shares outstanding.

Stock Based Compensation - The Company records 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.

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.
 
 
11

 
 
Stock Repurchase ProgramsOn September 8, 2008, the Company announced that its Board of Directors had authorized a Rule 10b5-1 stock repurchase program for the repurchase of up to 100,000 shares of the Company’s common stock. On April 21, 2009, the Company announced that its Board of Directors had authorized a second Rule 10b5-1 stock repurchase program for the repurchase of up to an additional 100,000 shares of the Company’s common stock. At March 31, 2011, the Company had repurchased a total of 200,000 shares of its common stock under these stock repurchase programs, which are now completed. Stock repurchases under the program have been accounted for using the cost method, in which the Company will reflect the entire cost of repurchased shares as a separate reduction of stockholders’ equity on its balance sheet.

Retention and Recognition Plan – At the April 27, 2010 Annual Meeting, the stockholders of VSB Bancorp, Inc. approved the adoption of the 2010 Retention and Recognition Plan (the “RRP”). The RRP authorizes the award of up to 50,000 shares of its common stock to directors, officers and employees. In conjunction with the approval the RRP, stockholders approved the award of 4,000 shares of stock to each of its eight directors who had at least five years of service. The director awards will vest over five years, with 20% vesting annually for each of the first five years after the award is made, subject to acceleration and forfeiture. On June 8, 2010, an additional 3,500 shares of stock were awarded to the President and CEO of the Company, which will vest over a 65 month period, with 20% vesting annually for each of the first five years starting in November 2011, subject to acceleration and forfeiture. The recipient of an award will not be required to make any payment to receive the award or the stock covered by the award. As of March 31, 2011, 35,500 shares of the RRP have been awarded. The Company recognizes compensation expense for the shares awarded under the RRP gradually as the shares vest, based upon the market price of the shares on the date of the award. For the three months ended March 31, 2011, the Company recognized $20,186 of compensation expense related to the shares awarded. The income tax benefit resulting from this expense was $9,235. As of March 31, 2011, there was approximately $316,077 of unrecognized compensation costs related to the shares awarded. These costs are expected to be recognized over the next 4.0 years.

A summary of the status of the Company’s nonvested plan shares as of March 31, 2011 is as follows:

For the Three Months Ended March 31, 2011:
       
       
 
 
   
Shares
   
Weighted Average
Grant Date Share Value
 
             
Non vested at beginning of period
  35,500     $ 11.46  
Granted
           
Vested
           
Non vested at end of period
  35,500     $ 11.46  
 
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-Adopted Accounting Standards - In January 2010, the FASB issued guidance to improve disclosure requirements related to fair value measurements and disclosures. The guidance requires that a reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and that activity in Level 3 should be presented on a gross basis rather than one net number for information about purchases, issuances, and settlements. The guidance also requires that a reporting entity should provide fair value measurement disclosures for each class of assets and liabilities and about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 31, 2009 except for the roll forward of activity in Level 3 which is effective for interim and annual reporting periods beginning after December 31, 2010. Adopting this pronouncement did not have a material effect on the results of operations or financial condition of the Company.
 
 
12

 
 
In July 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” (“ASU 2010-20”). ASU 2010-20 requires companies to provide a greater level of disaggregated information regarding: (1) the credit quality of their financing receivables; and (2) their allowance for credit losses. ASU 2010-20 further requires companies to disclose credit quality indicators, past due information, and modifications of their financing receivables. For public companies, ASU 2010-20 is effective for interim and annual reporting periods ending on or after December 15, 2010. ASU 2010-20 encourages, but does not require, comparative disclosures for earlier reporting periods that ended before initial adoption. Adoption of ASU 2010-20 did not have a material impact on the Company.

In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-2, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring” (“ASU 2011-2”). ASU 2011-2 clarifies the guidance for determining whether a loan restructuring constitutes a troubled debt restructuring (“TDR”) outlined in Accounting Standards Codification (“ASC”) No. 310-40, “Receivables—Troubled Debt Restructurings by Creditors,” by providing additional guidance to a creditor in making the following required assessments needed to determine whether a restructuring is a TDR: (i) whether or not a concession has been granted in a debt restructuring; (ii) whether a temporary or permanent increase in the contractual interest rate precludes the restructuring from being a TDR; (iii) whether a restructuring results in an insignificant delay in payment; (iv) whether a borrower that is not currently in payment default is experiencing financial difficulties; and (v) whether a creditor can use the effective interest rate test outlined in debtor’s guidance on restructuring of payables (ASC Topic No. 470-60-55-10) when evaluating whether or not a restructuring constitutes a TDR. ASU 2011-2 is effective for interim periods beginning on or after June 15, 2011. Adoption of ASU 2011-2 is not expected to have a material effect.
 
3.  INVESTMENT SECURITIES, AVAILABLE FOR SALE
 
The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolio at March 31, 2011 and December 31, 2010 and the corresponding amounts of unrealized gains and losses therein:
 
    March 31, 2011  
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
                         
FNMA MBS - Residential
  $ 3,242,248     $ 131,083     $     $ 3,373,331  
GNMA MBS - Residential
    3,956,203       61,431       (114,368 )     3,903,266  
Whole Loan MBS - Residential
    1,087,865       26,462             1,114,327  
Collateralized mortgage obligations
    106,945,662       2,350,314       (322,115 )     108,973,861  
    $ 115,231,978     $ 2,569,290     $ (436,483 )   $ 117,364,785  
 
 
13

 
 
    December 31, 2010  
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
                         
FNMA MBS - Residential
  $ 3,428,696     $ 142,521     $     $ 3,571,217  
GNMA MBS - Residential
    4,092,912       65,164       (76,964 )     4,081,112  
Whole Loan MBS - Residential
    1,212,246       23,255             1,235,501  
Collateralized mortgage obligations
    109,921,495       2,906,359       (407,777 )     112,420,077  
    $ 118,655,349     $ 3,137,299     $ (484,741 )   $ 121,307,907  

There were no sales of investment securities for the three months ended March 31, 2011 and the year ended December 31, 2010.

The amortized cost and fair value of the investment securities portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities, especially for collateralized mortgage obligations, if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

   
March 31, 2011
 
   
Amortized
   
Fair
 
   
Cost
   
Value
 
                 
Less than one year
  $ 488,042     $ 491,085  
Due after one year through five years
    1,008,856       1,023,374  
Due after five years through ten years
    25,024,490       26,218,396  
Due after ten years
    88,710,590       89,631,930  
    $ 115,231,978     $ 117,364,785  

The following table summarizes the investment securities with unrealized losses at March 31, 2011 and December 31, 2010 by aggregated major security type and length of time in a continuous unrealized loss position:
 
March 31, 2011
 
Less than 12 months
   
More than 12 months
    Total  
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Loss
   
Value
   
Loss
   
Value
   
Loss
 
                                     
FNMA MBS
  $     $     $     $     $     $  
GNMA MBS
    2,871,870       (114,368 )                 2,871,870       (114,368 )
Whole Loan MBS
                                   
Collateralized mortgage obligations
    24,585,331       (322,115 )                 24,585,331       (322,115 )
    $ 27,457,201     $ (436,483 )   $     $     $ 27,457,201     $ (436,483 )
 
 
14

 
 
December 31, 2010
 
Less than 12 months
   
More than 12 months
    Total  
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Loss
   
Value
   
Loss
   
Value
   
Loss
 
                                     
FNMA MBS
  $     $     $     $     $     $  
GNMA MBS
    2,991,961       (76,964 )                 2,991,961       (76,964 )
Whole Loan MBS
                                   
Collateralized mortgage obligations
    20,223,509       (407,777 )                 20,223,509       (407,777 )
    $ 23,215,470     $ (484,741 )   $     $     $ 23,215,470     $ (484,741 )
 
The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

At March 31, 2011, the unrealized loss on investment securities was caused by interest rate increases. We expect that these securities, at maturity, will not be settled for less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is not more likely than not the Company will be required to sell the securities before recovery of the amortized cost basis less any current-period loss, these investments are not considered other-than-temporarily impaired. At March 31, 2011, there were no debt securities with unrealized losses with aggregate depreciation of 5% or more from the Company’s amortized cost basis.

Securities pledged had a fair value of $53,980,996 and $66,089,701 at March 31, 2011 and December 31, 2010, respectively and were pledged to secure public deposits and balances in excess of the deposit insurance limit on certain customer accounts.
 
4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of FASB ASC 820, “Financial Instruments”. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The following methods and assumptions were used by the Company in estimating fair values of financial instruments:

Interest-bearing Bank Balances – Interest-bearing bank balances mature within one year and are carried at cost which are estimated to be reasonably close to fair value.

Money Market Investments – The fair value of these securities approximates their carrying value due to the relatively short time to maturity

Investment Securities, Available For Sale – The estimated fair value of these securities is determined by using available market information and appropriate valuation methodologies. The estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
 
 
15

 
 
Loans Receivable - The fair value of commercial and construction loans is approximated by the carrying value as the loans are tied directly to the Prime Rate and are subject to change on a daily basis, subject to the applicable interest rate floors. The fair value of the remainder of the portfolio is determined by discounting the future cash flows of the loans using the appropriate discount rate.

Other Financial Assets - The fair value of these assets, principally accrued interest receivable, approximates their carrying value due to their short maturity.

Non-Interest Bearing and Interest Bearing Deposits - The fair value disclosed for non-interest bearing deposits is equal to the amount payable on demand at the reporting date. The fair value of interest bearing deposits is based upon the current rates for instruments of the same remaining maturity. Interest bearing deposits with a maturity of greater than one year are estimated using a discounted cash flow approach that applies interest rates currently being offered.

Other Liabilities - The estimated fair value of other liabilities, which primarily include accrued interest payable, approximates their carrying amount.

The carrying amounts and estimated fair values of financial instruments, at March 31, 2011 and December 31, 2010 are as follows:

   
March 31, 2011
   
December 31, 2010
 
   
Carrying
   
Fair
   
Carrying
   
Fair
 
   
Amount
   
Value
   
Amount
   
Value
 
Financial Assets:
                       
Cash and cash equivalents
  $ 37,660,747     $ 37,660,747     $ 28,764,987     $ 28,764,987  
Investment securities, available for sale
    117,364,785       117,364,785       121,307,907       121,307,907  
Loans receivable
    78,596,930       79,674,706       80,261,004       81,526,941  
Other financial assets
    624,239       624,239       673,967       673,967  
                                 
Total Financial Assets
  $ 234,246,701     $ 235,324,477     $ 231,007,865     $ 232,273,802  
                                 
Financial Liabilities:
                               
Non-interest bearing deposits
  $ 70,942,860     $ 70,942,860     $ 66,626,755     $ 66,626,755  
Interest bearing deposits
    139,562,801       139,516,616       140,779,902       140,634,427  
Other liabilities
    15,881       15,881       19,039       19,039  
                                 
Total Financial Liabilities
  $ 210,521,542     $ 210,475,357     $ 207,425,696     $ 207,280,221  
 
ASC 825 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing and asset or liability.
 
 
16

 
 
The fair value of securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
 
    Fair Value Measurements at March 31, 2011 Using  
   
Total
   
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
 
Assets:
                       
FNMA MBS - Residential
  $ 3,373,331     $     $ 3,373,331     $  
GNMA MBS - Residential
    3,903,266             3,903,266        
Whole Loan MBS- Residential
    1,114,327             1,114,327        
Collateralized mortgage obligations
    108,973,861             108,973,861        
Total Available for sale
                               
Securities
  $ 117,364,785     $     $ 117,364,785     $  

    Fair Value Measurements at December 31, 2010 Using  
   
Total
   
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
 
Assets:
                       
FNMA MBS - Residential
  $ 3,571,217     $     $ 3,571,217     $  
GNMA MBS - Residential
    4,081,112             4,081,112        
Whole Loan MBS-Residential
    1,235,501             1,235,501        
Collateralized mortgage obligations
    112,420,077             112,420,077        
Total Available for sale
                               
Securities
  $ 121,307,907     $     $ 121,307,907     $  
 
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis, that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

 
17

 
 
Assets and Liabilities Measured on a Non-Recurring Basis
 
Assets and liabilities measured at fair value on a non-recurring basis are summarized below:
 
Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria and updated appraisals when received.
 
   
Fair Value Measurements at March 31, 2011 Using
 
   
Total
   
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
 
                         
Assets:
                       
Impaired loans
  $ 629,084             $ 629,084  
 
    Fair Value Measurements at December 31, 2010 Using  
   
Total
   
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
 
                         
Assets:
                       
Impaired loans
  $
643,758
            $
643,758
 
 
As of March 31, 2011, we had two impaired loans with specific reserves that were collateral dependent. Collateral dependent impaired loans, which are measured for impairment using the fair value of the collateral, had a carrying amount of $721,555, with a valuation allowance of $92,471.

As of December 31, 2010, we had two impaired loans with specific reserves that were collateral dependent. Collateral dependent impaired loans, which are measured for impairment using the fair value of the collateral, had a carrying amount of $727,217, with a valuation allowance of $83,459.
 
 
18

 
 
5. LOANS RECEIVABLE, NET

Loans receivable, net at March 31, 2011 and December 31, 2010 are summarized as follows:

   
March 31,
   
December 31,
 
   
2011
   
2010
 
Commercial loans (principally variable rate):
           
Secured
  $ 1,108,776     $ 1,393,532  
Unsecured
    12,176,011       12,924,378  
Total commercial loans
    13,284,787       14,317,910  
                 
Real estate loans:
               
Commercial
    58,662,519       58,204,596  
Residential
    2,455,644       2,460,114  
Total real estate loans
    61,118,163       60,664,710  
                 
Construction loans (net of undisbursed funds of $2,770,500 and $2,672,000, respectively)
    4,794,500       5,874,500  
                 
Consumer loans
    491,890       533,860  
Other loans
    451,745       386,750  
      943,635       920,610  
Total loans receivable
    80,141,085       81,777,730  
                 
Less:
               
Unearned loans fees, net
    (242,557 )     (239,506 )
Allowance for loan losses
    (1,301,598 )     (1,277,220 )
                 
Total
  $ 78,596,930     $ 80,261,004  

Nonaccrual loans outstanding at March 31, 2011 and December 31, 2010 are summarized as follows:

   
March 31,
   
December 31,
 
   
2011
   
2010
 
Nonaccrual loans:
           
Unsecured commercial loans
  $     $ 37,706  
Commercial real estate
    2,068,392       4,064,281  
Residential real estate
    2,273,650       2,276,306  
Construction
           
Total nonaccrual loans
  $ 4,342,042     $ 6,378,293  

   
March 31,
   
December 31,
 
   
2011
   
2010
 
Interest income that would have been recorded during the period on nonaccrual loans outstanding in accordance with original terms
  $ 82,467     $ 469,484  
 
At March 31, 2011 and December 31, 2010, there were no loans 90 days past due and still accruing interest.
 
 
19

 
 
The following table presents the aging of the past due loan balances as of March 31, 2011 and December 31, 2010 by class of loan:
 
March 31, 2011
                   
 
         
 
 
   
Total
   
30-59
Days
Past Due
   
60-89
Days
Past Due
   
Greater
than 90 Days
Past Due
   
Total
Past Due
   
Loans
Not
Past Due
 
                                         
Commercial loans:
                                       
Unsecured
  $ 12,176,011     $ 29,757     $ 2,133     $     $ 31,890     $ 12,144,121  
Secured
    1,108,776                               1,108,776  
Real Estate loans
                                               
Commercial
    58,662,519       1,133,680       1,850,000       2,068,392       5,052,072       53,610,447  
Residential
    2,455,644             28,710       2,273,650       2,302,360       153,284  
Construction loans
    4,794,500       397,500                   397,500       4,397,000  
Consumer loans
    491,890       2,768       370             3,138       488,752  
Other loans
    451,745       2,167                   2,167       449,578  
Total loans
  $ 80,141,085     $ 1,565,872     $ 1,881,213     $ 4,342,042     $ 7,789,127     $ 72,351,958  
 
December 31, 2010
                     
 
           
 
 
   
Total
   
30-59
Days
Past Due
   
60-89
Days
Past Due
   
Greater
than 90 Days
Past Due
   
Total
Past Due
   
Loans
Not
Past Due
 
                                                 
Commercial loans:
                                               
Unsecured
  $ 12,924,378     $ 46,562     $ 42,708     $ 37,706     $ 126,976     $ 12,797,402  
Secured
    1,393,532                               1,393,532  
Real Estate loans
                                               
Commercial
    58,204,596       3,103,589       277,960       4,064,281       7,445,830       50,758,766  
Residential
    2,460,114                   2,276,306       2,276,306       183,808  
Construction loans
    5,874,500       795,000                   795,000       5,079,500  
Consumer loans
    533,860       11,277                   11,277       522,583  
Other loans
    386,750       2,279                   2,279       384,471  
Total loans
  $ 81,777,730     $ 3,958,707     $ 320,668     $ 6,378,293     $ 10,657,668     $ 71,120,062  
 
Nonaccrual loans include smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

Individually impaired loans were as follows:
 
   
March 31,
   
December 31,
 
   
2011
   
2010
 
             
Loans with no allocated allowance for loan losses:            
Commercial real estate
  $ 39,033     $ 39,377  
Loans with allocated allowance for loan losses:
               
Commercial and financial
    41,037       36,837  
Commercial real estate
    721,555       3,448,695  
    $ 801,625     $ 3,524,909  
                 
Amount of the allowance for loan losses allocated:
               
Commercial and financial
  $ 4,104     $ 7,367  
Commercial real estate
    92,471       83,459  
    $ 96,575     $ 90,826  

 
20

 

The following table sets forth certain information about impaired loans at:
 
   
March 31,
   
December 31,
 
   
2011
   
2010
 
Average of individually impaired loans during year
  $ 2,593,352     $ 813,419  
Interest income recognized during time period that loans were impaired, using cash-basis method of accounting
  $     $  
 
Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debts such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans categorized as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position as some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and vales, highly questionable and improbable.

The following table sets forth at March 31, 2011 and December 31, 2010, the aggregate carrying value of our assets categorized as Special Mention, Substandard and Doubtful according to asset type:
 
    At March 31, 2011  
   
Special
               
Not
       
   
Mention
   
Substandard
   
Doubtful
   
Classified
   
Total
Commercial Loans:
                             
Secured
  $     $     $     $ 1,108,776     $ 1,108,776  
Unsecured
    210,772       283,506             11,681,733       12,176,011  
Commercial Real Estate
    3,794,301       7,863,898             47,004,320       58,662,519  
Residential Real Estate
    28,710       2,273,650             153,284       2,455,644  
Construction
    397,500                   4,397,000       4,794,500  
Consumer
    18,302                   473,588       491,890  
Other
    9,061                   442,684       451,745  
Total loans
  $ 4,458,646     $ 10,421,054     $     $ 65,261,385     $ 80,141,085  
 
 
21

 
 
    At December 31, 2010  
   
Special
               
Not
       
   
Mention
   
Substandard
   
Doubtful
   
Classified
   
Total
 
Commercial Loans:
                             
Secured
  $     $     $     $ 1,393,532     $ 1,393,532  
Unsecured
    459,160       37,706             12,427,512       12,924,378  
Commercial Real Estate
    4,250,511       5,623,816