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VSB Bancorp, Inc. (VSBN) |
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CEOCFO Current
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This is a printer friendly page! VSB
Bancorp, Inc. – with a competitive advantage because the bulk of their business is in
industries where many of the larger banks have difficulty lending BIO: Family: Wife: Jacqueline Education: Employment: Various positions at President and CEO at CEOCFOinterviews: Mr.
Corn, please tell us about VSB? Mr. Corn: “VSB has been around for about five-and-a-half years; the Bancorp owns Victory State Bank, which is a commercial bank headquartered with all branches on Staten Island. The need for a small bank to serve professional and commercial customers as opposed to consumers is based on the ability to know your customers better. This allows you to service their needs better, and make commercial loans to brand new businesses and to retail businesses that never show a profit but have been around for a long time and always pay their bills, but don’t demonstrate; in their financial statements the ability to repay debt. That capacity is lost in larger banks that now do computer-based screening for loan applications, so if you don’t’ pass the screening, you don’t get the loan. While commercial loan officers in those banks, are entitled to override those screenings; they do so at their own peril; if they are wrong, they have to justify the decision.” CEOCFOinterviews: You recently changed to the Bancorp format; what is the reasoning there? Mr. Corn: “The primary reason is the ability to raise capital through the issuance of Trust Preferred stock. Trust Preferred capital is a dead issue, which the regulators recognize as capital up to the expense of twenty five percent in total capital. Because of the technical nature of the issue, the bank can’t issue the stock without the intermediary process of the holding company. We poll the holding company as a way to leverage our existing capital.” CEOCFOinterviews: Will you explain to us why your concept is right for the Staten Island area? Mr. Corn: “Staten Island is an entrepreneurial community and it is only seven by fourteen miles in size. The fact that it is an island creates a bit of chauvinism in the residents; they like to feel distinct from the rest of the city, and a bank based on Staten Island instead of a New York City bank like Citibank, or Chase, is a shorter shrift. People like to identify with the Island, and therefore, Victory State Bank gets the benefit. Victory Boulevard is a main thoroughfare in Staten Island, and everybody understands the name is identified with Staten Island. So firstly, it is an entrepreneurial community and it is a community with a relatively high household income, partially because often there is more than one generation living in the household, unlike the rest of the city, the nuclear family is not the mainstay of the family; the non-nuclear family is. When we look at the loan application, we will see that a 28 or 32 year-old will live at home with his parents, and that is not typical of the rest of the city.” CEOCFOinterviews: What types of commercial customers come to you? Mr. Corn: “The largest industry on Staten Island is home building. We do a lot of construction lending and loans to contractors, as well as some lending to retailers and that is the crux of our lending. There are very few manufacturers or wholesalers on the Island; the bulk of the business is the service industries and many of the larger banks have difficulty lending in those areas, so we have the competitive advantage.” CEOCFOinterviews: How do you reach your customers? Mr. Corn: “We go out and knock on doors. We contact all new businesses on Staten Island by mail, and we follow-up by telephone. We contact existing businesses by telephone and then follow-up by personal visits. By the time I reach someone I haven’t talked to before, he is already upset because I haven’t reached him, he says, “What am I, chopped liver? You talk to my next door neighbor and my previous employer, why haven’t you called me?” The people on the Island expect to be reached by us on a very personal basis, and we try to comply with that.” CEOCFOinterviews: Is word-of-mouth very important for you as well? Mr. Corn: “Certainly, we ask our existing customers who tell us how happy they are with the bank, to tell their friends. We get a disproportionate amount of the new businesses on the Island, because we tend to price our services below the competition. We offer free business checking accounts, with an average balance of a thousand dollars and that is better than any deal in town. Our NSF (non sufficient funds charge) is twenty dollars, which is lower than anyone else is on the Island. We offer immediate credit against checks deposited, so that there aren’t any charges by collected funds because we are treating all deposits as if they are collected. We don’t service charge if someone deposits a check that is returned; it is a great nuisance for someone who already feels he has been set upon by getting a bad check from a customer, to then be hit by the bank for an additional charge. Obviously, it costs the bank money to do this, but we think that over the long-haul it tightens the relationship with the customer, allows them to stay with us longer, and therefore it is justifiable.” CEOCFOinterviews: Do most customers come in through the lending side, and then take on your additional services? Mr. Corn: “I would say the large attraction is the lending side, whether that is most, I don’t’ know, but it is certainly a larger proportion of our customer base.” CEOCFOinterviews: Is Internet banking a big feature for you? Mr. Corn: “We offer Internet banking through our website victorystatebank.com. The same fifty to one hundred customers use it all the time; it has not hit the bulk of our existing customers. We are trying to increase the usage, but right now it is not a heavily used product.” CEOCFOinterviews: You mentioned that your service fees are low. How do you stack up in the lending fees area? Mr. Corn: “We think our rates are comparable to those of our competition; if they are higher, by an eight or a quarter percent, our customer base seems to think it is worth because they get much faster service. We represent to our customers, that we will give them an answer generally within a day and no longer than a week. Our internal loans, which are in the authority of the officers to approve, are usually approved within one day. Our larger loans, that have to go to a directors loan committee, are approved within a week because we require that the directors meet each week if there are loans to be presented, so that our customers don’t have to wait.” CEOCFOinterviews: Do you see any need for additional branches? Mr. Corn: “We probably will have five to seven branches on Staten Island before we branch off the Island. We have been opening branches at a little less than one a year, and we hope to continue at that pace.” CEOCFOinterviews: Is there anything in the works off the Island? Mr. Corn: “We are not presently looking off the Island because we haven’t completed our work on the Island. The logical places for us to look however, would be Brooklyn and those areas of Jersey that are connected to Staten Island by bridges.” CEOCFOinterviews: What happens when the housing boom starts to slip? Mr. Corn: “It is certainly a risk and it is certainly inevitable. Our customer base is people who build form one to ten houses, rather than fifty to a hundred. We think that their market will continue to exist on a stock-building basis, and we will be less impacted than the larger banks that rely on mortgage lending and related booms.” CEOCFOinterviews: Is there still a considerable amount of land on Staten Island? Mr. Corn: “There is, but there is also some anti-development feeling on the Island, as the Island becomes more congested and traffic becomes heavier. We think that rather than looking at the large tracks of land, we will look at the fuller ones that are more suited to our customer base.” CEOCFOinterviews: In closing, why should investors be interested in VSB Bancorp? Mr. Corn: “The bank has shown dramatic increases in both size and earning per share. That is partially attributed to the fact that we are operating form a small base and it is easy to leverage that small base. On the other hand, the bank broke even in only eleven months, which is far more rapid than is typical. The plusses are that we, the management team and I, know the Island well because we have been here a long time and are known to the Island so that people come to us to do business. The drawbacks are equally obvious; because of our size, certain segments of the market are not available. Because of our choice of market, we are leaving some money on the table in the mortgage market. The things that I would consider as an investor, is the ability of the bank to continue to grow and increase its profitability as it becomes larger and as it becomes more difficult to steal market share from our participants. We have been able to do that and I think we will be able to do that for some time. When we would reach a plateau, is somewhere in the future that I can’t identify, but as an investor, that would be my area of concern.” disclaimers |
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