SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2009
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ______________________
Commission File No. 001-52751
FSB Community Bankshares, Inc.
------------------------------
(Exact name of registrant as specified in its charter)
United States 74-3164710
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
45 South Main Street, Fairport, New York 14450
----------------------------------------- -----
(Address of Principal Executive Offices) Zip Code
(585) 223-9080
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(Registrant's telephone number)
N/A
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(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
YES X NO
---- ----.
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 during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
YES NO
---- ----.
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES NO X
---- ----.
As of November 13, 2009 there were 1,785,000 shares of the Registrant's
common stock, par value $0.10 per share, outstanding, 946,050 of which were held
by FSB Community Bankshares, MHC, the Registrant's mutual holding company.
FSB Community Bankshares, Inc.
FORM 10-Q
Index
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Page
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Part I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30, 2009
and December 31, 2008 1
Consolidated Statements of Operations for the Three Months Ended
September 30, 2009 and 2008 2
Consolidated Statements of Operations for the Nine Months Ended
September 30, 2009 and 2008 3
Consolidated Statements of Stockholders' Equity for the Nine Months Ended
September 30, 2009 and 2008 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2009 and 2008 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 27
Item 4T. Controls and Procedures 27
Part II. Other Information
Item 1. Legal Proceedings 27
Item 1A. Risk Factors 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5. Other Information 28
Item 6. Exhibits 29
Signature Page 30
Part I. Financial Information
Item 1. Consolidated Financial Statements
FSB COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
September 30, 2009 and December 31, 2008 (unaudited)
(Dollars in thousands, except per share data)
September 30, December 31,
Assets 2009 2008
---------------- ---------------
Cash and due from banks $ 7,472 $ 2,154
Interest-earning demand deposits 2,571 1,019
---------------- ---------------
Cash and Cash Equivalents 10,043 3,173
Securities available for sale 81,638 43,925
Securities held to maturity (fair value 2009 -$6,500, 2008- $7,091) 6,433 7,289
Investment in FHLB stock 2,002 2,312
Loans receivable, net of allowance for loan losses of: 2009 - $360,
2008 - $345 116,963 135,713
Accrued interest receivable 1,353 1,032
Premises and equipment, net 2,582 2,308
Other assets 665 383
Total Assets $ 221,679 $ 196,135
================ ==============
Liabilities & Stockholders' Equity
Deposits:
Non-interest-bearing $ 3,906 $ 3,487
Interest-bearing 156,241 124,035
---------------- --------------
Total Deposits 160,147 127,522
Short-term borrowings - 3,850
Long-term borrowings 37,172 41,631
Advances from borrowers for taxes and insurance 942 2,152
Official bank checks 2,340 348
Other liabilities 604 591
--------------- --------------
Total Liabilities 201,205 176,094
--------------- --------------
Stockholders' Equity
Preferred Stock- no par- 1,000,000 shares authorized;
no shares issued and outstanding -- --
Common Stock- $0.10 par value - 10,000,000 shares authorized;
1,785,000 shares issued and outstanding 179 179
Additional paid-in-capital 7,276 7,286
Retained earnings 13,293 13,249
Accumulated other comprehensive income (loss) 330 (43)
Unearned ESOP shares - at cost (604) (630)
--------------- --------------
Total Stockholders' Equity 20,474 20,041
--------------- --------------
Total Liabilities and Stockholders' Equity $ 221,679 $ 196,135
=============== ==============
See accompanying notes to consolidated financial statements
1
FSB COMMUNITY BANKSHARES, INC.
Consolidated Statements of Operations
Three Months Ended September 30, 2009 and 2008 (unaudited)
(Dollars in thousands, except per share data)
2009 2008
--------------- ------------------
Interest and Dividend Income
Loans $ 1,669 $ 1,962
Securities - taxable 415 350
Mortgage-backed securities 264 288
Other 2 14
--------------- ------------------
Total Interest and Dividend Income 2,350 2,614
Interest expense
Deposits 844 998
Borrowings:
Short-term - 1
Long-term 404 464
--------------- ------------------
Total Interest Expense 1,248 1,463
--------------- ------------------
Net Interest Income 1,102 1,151
Provision for Loan Losses 7 8
--------------- ------------------
Net Interest Income After Provision
for Loan Losses 1,095 1,143
--------------- ------------------
Other Income
Service fees 73 57
Fee income 5 53
Impairment loss on securities available for sale - (57)
Gain on sale of loans 4 2
Other 51 34
--------------- ------------------
Total Other Income 133 89
--------------- ------------------
Other Expense
Salaries and employee benefits 613 655
Occupancy expense 130 118
Data processing costs 25 22
Advertising 76 54
Equipment expense 92 84
Electronic banking 21 15
Directors' fees 25 28
Mortgage fees and taxes 71 86
FDIC Premium expense 80 6
Other expense 152 129
--------------- ------------------
Total Other Expenses 1,285 1,197
--------------- ------------------
Income (Loss) Before Income Taxes (57) 35
Provision (Benefit) for Income Taxes (23) 34
--------------- ------------------
Net Income (Loss) $ (34) $ 1
=============== ==================
Earnings (Loss) per common share $ (0.02) $ 0.00
=============== ==================
See accompanying notes to consolidated financial statements
2
FSB COMMUNITY BANKSHARES, INC.
Consolidated Statements of Operations
Nine Months Ended September 30, 2009 and 2008 (unaudited) (
Dollars in thousands, except per share data)
2009 2008
--------------- ------------------
Interest and Dividend Income
Loans $ 5,333 $ 5,626
Securities - taxable 983 1,033
Mortgage-backed securities 889 792
Other 5 104
--------------- ------------------
Total Interest and Dividend Income 7,210 7,555
Interest expense
Deposits 2,586 3,205
Borrowings:
Short-term 1 1
Long-term 1,234 1,273
--------------- ------------------
Total Interest Expense 3,821 4,479
--------------- ------------------
Net Interest Income 3,389 3,076
Provision for Loan Losses 21 14
--------------- ------------------
Net Interest Income After Provision
for Loan Losses 3,368 3,062
--------------- ------------------
Other Income
Service fees 188 148
Fee income 33 107
Gain on sale of securities available for sale 92 -
Impairment loss on securities available for sale - (57)
Gain on sale of loans 49 8
Other 154 108
--------------- ------------------
Total Other Income 516 314
--------------- ------------------
Other Expense
Salaries and employee benefits 1,862 1,839
Occupancy expense 379 346
Data processing costs 72 63
Advertising 160 203
Equipment expense 269 249
Electronic banking 60 50
Directors' fees 82 85
Mortgage fees and taxes 187 182
FDIC Premium expense 261 13
Other expense 490 461
--------------- ------------------
Total Other Expenses 3,822 3,491
--------------- ------------------
Income (Loss) Before Income Taxes 62 (115)
Provision (Benefit) for Income Taxes 18 (20)
--------------- ------------------
Net Income (Loss) $ 44 $ (95)
=============== ==================
Earnings (Loss) per common share $ 0.03 $ 0.06
=============== ==================
See accompanying notes to consolidated financial statements
3
FSB COMMUNITY BANKSHARES, INC.
Consolidated Statements of Stockholders' Equity
Nine Months Ended September 30, 2009 and 2008 (unaudited)
(Dollars in thousands)
Accumulated
Additional Other Unearned
Common Paid in Retained Comprehensive ESOP
Stock Capital Earnings Income (Loss) Shares Total
--------- ----------- ------------- --------------- ------------ ----------
Balance - January 1, 2008 $ 179 $ 7,293 $ 13,224 $ 118 $ (665) $ 20,149
Comprehensive loss:
Net loss - - (95) - - (95)
Change in net unrealized gain
(loss) on securities available
for sale, net of taxes - - - (220) - (220)
Total Comprehensive Loss (315)
ESOP shares committed to be
released - (5) - - 27 22
--------- ----------- ------------- --------------- ------------ -----------
Balance - September 30, 2008 $ 179 $ 7,288 $ 13,129 $ (102) $ (638) $ 19,856
======== =========== ============= =============== ============ ===========
Balance - January 1, 2009 $ 179 $ 7,286 $ 13,249 $ (43) $ (630) $ 20,041
-----------
Comprehensive income:
Net income - - 44 - - 44
Change in net unrealized gain
(loss) on securities available
for sale, net of reclassification
adjustment and taxes - - - 373 - 373
-----------
Total Comprehensive Income 417
ESOP shares committed to be released - (10) - - 26 16
--------- ----------- ------------- --------------- ------------ -----------
Balance - September 30, 2009 $ 179 $ 7,276 $ 13,293 $ 330 $ (604) $ 20,474
======== =========== ============= =============== ============ ===========
See accompanying notes to consolidated financial statements
4
FSB COMMUNITY BANKSHARES, INC.
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2009 and 2008 (unaudited)
(Dollars in thousands)
2009 2008
----------------- ------------------
Cash Flows From Operating Activities
Net Income (Loss) $ 44 $ (95)
Adjustments to reconcile net income (loss) to net cash provided by (used
by)
operating activities:
Net amortization of premiums and discounts on investments 479 233
Gain on sale of securities available for sale (92) -
Impairment loss on securities available-for-sale - 57
Gain on sale of loans to others (49) (9)
Proceeds from loans sold to others 12,709 -
Loans originated for sale (12,660) -
Amortization of net deferred loan origination fees and costs 11 (17)
Depreciation and amortization 221 201
Provision for loan losses 21 14
Expense related to ESOP 16 22
Deferred income tax benefit (43) (36)
Increase in accrued interest receivable (321) (76)
Increase in other assets (272) (258)
Increase (decrease) in other liabilities (103) 153
----------------- ------------------
Net Cash Provided by (Used By) Operating Activities (39) 189
----------------- ------------------
Cash Flows From Investing Activities
Purchase of securities held to maturity - (3,001)
Proceeds from maturities and calls of securities held to maturity - 20,999
Proceeds from principal paydowns of securities held to maturity 850 1,970
Purchase of securities available for sale (79,566) (51,439)
Proceeds from maturities and calls of securities available for sale 33,037 7,500
Proceeds from principal paydowns of securities available for sale 3,602 2,206
Proceeds from sales of securities available for sale 5,355 -
Net (increase) decrease in loans 18,718 (14,543)
Proceeds from loans sold to others - 1,918
Redemption (purchase) of Federal Home Loan Bank stock 310 (779)
Purchase of premises and equipment (495) (28)
----------------- ------------------
Net Cash Used By Investing Activities (18,189) (35,197)
----------------- ------------------
Cash Flows From Financing Activities
Net increase in deposits 32,625 13,206
Net decrease in short-term borrowings (3,850) -
Proceeds from long-term borrowings - 21,500
Repayments on long-term borrowings (4,459) (4,459)
Net decrease in advances from borrowers
for taxes and insurance (1,210) (913)
Net increase in official bank checks 1,992 2,827
----------------- ------------------
Net Cash Provided By Financing Activities 25,098 32,161
----------------- ------------------
Net Increase (Decrease) in Cash
and Cash Equivalents 6,870 (2,847)
Cash and Cash Equivalents- Beginning 3,173 9,444
----------------- ------------------
Cash and Cash Equivalents- Ending $ 10,043 $ 6,597
================= ==================
5
FSB COMMUNITY BANKSHARES, INC.
Consolidated Statements of Cash Flows, (Continued)
2009 2008
-------------- -----------------
Supplementary Cash Flows Information
Interest paid $ 3,836 $ 4,536
============== =================
Income taxes paid $ 115 $ 1
============== =================
See accompanying notes to consolidated financial statements
6
Notes to Consolidated Financial Statements
Note 1-Basis of Presentation
The accompanying unaudited consolidated financial statements of FSB Community
Bankshares, Inc. and its wholly owned subsidiary Fairport Savings Bank
(collectively, the "Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the applicable instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and
footnotes necessary for a complete presentation of consolidated financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation have been included.
The Company follows accounting standard set by the Financial Accounting
Standards Board, commonly referred to as the "FASB". The FASB sets generally
accepted accounting principles ("GAAP") that the Company follows. References to
GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards
Codification, sometimes referred to as the Codification or ASC. The FASB
finalized the Codification effective for periods ending on or after September
15, 2009.
The unaudited consolidated financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" should be read in
conjunction with the Company's audited consolidated financial statements for the
year ended December 31, 2008, included in the Annual Report filed on Form 10-K
with the Securities and Exchange Commission ("SEC") on March 31, 2009.
Operating results for the three and nine months ended September 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009.
The consolidated financial statements at September 30, 2009 and December 31,
2008 and for the three and nine months ended September 30, 2009 and 2008 include
the accounts of the Company, Fairport Savings Bank (the "Bank") and the Bank's
wholly-owned subsidiary, Oakleaf Services Corporation ("Oakleaf"). All
inter-company balances and transactions have been eliminated in consolidation.
Certain amounts from prior periods may have been reclassified, when necessary,
to conform to current period presentation.
The Company has evaluated subsequent events through November 13, 2009 which is
the date the consolidated financial statements were issued.
Note 2-Fair Value Measurement and Disclosure
Management uses its best judgment in estimating the fair value of the Company's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates herein are not necessarily indicative of the amounts the Company
could have realized in a sale transaction on the dates indicated. The estimated
fair value amounts have been measured as of their respective reporting dates and
have not been re-evaluated or updated for purposes of these consolidated
financial statements subsequent to those respective dates. As such, the
estimated fair values of these financial instruments subsequent to the
respective reporting dates may be different than the amounts reported at each
reporting date.
7
Note 2-Fair Value Accounting and Measurement (Continued)
In September 2006, the Financial Accounting Standards Board ("FASB") issued ASC
Topic 820, Fair Value Measurements and Disclosures, which defines fair value,
establishes a framework for measuring fair value under GAAP, and expands
disclosures about fair value measurements. ASC Topic 820 applies to other
accounting pronouncements that require or permit fair value measurements.
ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to
valuation methods used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy
under ASC Topic 820 are as follows:
Level 1: Unadjusted quoted prices in active markets that are accessible at
the measurement date for identical unrestricted assets or liabilities.
Level 2: Quoted prices in markets that are not active, or inputs that are
observable either directly or indirectly, for substantially the full term
of the asset or liability.
Level 3: Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable (i.e. supported
with little or no market activity).
An asset or liability's level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value measurement.
For assets measured at fair value on a recurring basis, the fair value
measurements by level within the fair value hierarchy used are as follows at
September 30, 2009 and at December 31, 2008:
(Dollars in Thousands) Total Level 1 Level 2 Level 3
----- ------- ------- -------
September 30, 2009
Securities available for sale $ 81,638 $ 13 $ 81,625 $ -
============ ============ ============ ============
December 31, 2008
Securities available for sale $ 3,925 $ 6 $ 43,919 $ -
============ ============ ============ ============
No assets or liabilities have been measured on a non-recurring basis at
September 30, 2009 or December 31, 2008.
FASB ASC Topic 825-10-50, Disclosure about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the consolidated balance sheets, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the defined fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. ASC Topic 825-10-50 excludes certain
financial instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
8
Note 2-Fair Value Accounting and Measurement (Continued)
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments at September 30, 2009 and
December 31, 2008:
Cash, Due from Banks, and Interest-Bearing Demand Deposits
The carrying amounts of these assets approximate their fair values.
Investment Securities
The fair value of securities available for sale (carried at fair value) and held
to maturity (carried at amortized cost) are determined by obtaining quoted
market prices on nationally recognized securities exchanges (Level 1), or matrix
pricing (Level 2), which is a mathematical technique used widely in the industry
to value debt securities without relying exclusively on quoted market prices for
the specific securities but rather by relying on the securities' relationship to
other benchmark quoted prices. For certain securities which are not traded in
active markets or are subject to transfer restrictions, valuations are adjusted
to reflect illiquidity and/or non-transferability, and such adjustments are
generally based on available market evidence (Level 3). In the absence of such
evidence, management's best estimate is used. Management's best estimate
consists of both internal and external support on certain Level 3 investments.
Internal cash flow models using a present value formula that includes
assumptions market participants would use along with indicative exit pricing
obtained from broker/dealers (where available) are used to support fair values
of certain Level 3 investments. The Company had no Level 3 investment securities
at September 30, 2009 or December 31, 2008.
Investment in FHLB Stock
The carrying value of FHLB stock approximates its fair value based on the
redemption provisions of the FHLB stock.
Loans
The fair values of loans are estimated using discounted cash flow analyses,
using market rates at the balance sheet date that reflect the credit and
interest rate-risk inherent in the loans. Projected future cash flows are
calculated based upon contractual maturity or call dates, projected repayments
and prepayments of principal. Generally, for variable rate loans that reprice
frequently and with no significant change in credit risk, fair values are based
on carrying values.
There were no loans held for sale during the three or nine months ended
September 30, 2009 and September 30, 2008.
Accrued Interest Receivable and Payable
The carrying amount of accrued interest receivable and payable approximates fair
value.
9
Deposits
The fair values disclosed for demand deposits (e.g., NOW accounts, non-interest
checking, regular savings and certain types of money market accounts) are, by
definition, equal to the amount payable on demand at the reporting date (i.e.,
their carrying amounts). The carrying amounts for variable-rate certificates of
deposit approximate their fair values at the reporting date. Fair values for
fixed rate certificates of deposit are estimated using a discounted cash flow
calculation that applies market interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on time
deposits.
Borrowings
The fair values of FHLB long-term borrowings are estimated using discounted cash
flow analyses, based on the quoted rates for new FHLB advances with similar
credit risk characteristics, terms and remaining maturity. The carrying amount
of short-term borrowings approximate their fair value.
Off-Balance Sheet Instruments
The fair values for off-balance sheet financial instruments (lending commitments
and lines of credit) are estimated using the fees currently charged to enter
into similar agreements, taking into account market interest rates, the
remaining terms and present credit worthiness of the counterparties.
The carrying amounts and estimated fair values of the Company's financial
instruments at September 30, 2009 and December 31, 2008 are as follows:
September 30, 2009 December 31, 2008
----------------------------------- -----------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------- ----------------- --------------- ------------------
(In Thousands)
Financial assets:
Cash and due from banks $7,472 $7,472 $2,154 $2,154
Interest bearing demand deposits 2,571 2,571 1,019 1,019
Securities available for sale 81,638 81,638 43,925 43,925
Securities held to maturity 6,433 6,500 7,289 7,091
FHLB stock 2,002 2,002 2,312 2,312
Loans, net 116,963 119,092 135,713 136,610
Accrued interest receivable 1,353 1,353 1,032 1,032
Financial liabilities:
Deposits 160,147 161,313 127,522 129,245
Short-term borrowings - - 3,850 3,850
Long-term borrowings 37,172 37,460 41,631 41,899
Accrued interest payable 138 138 153 153
Off-balance sheet instruments:
Commitments to extend credit - - - -
10
Note 3 - Securities
The amortized cost and estimated fair value of securities with gross unrealized
gains and losses at September 30, 2009 and December 31, 2008 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- ---------------- ---------------- ---------------
(In Thousands)
September 30 2009:
Available for Sale:
Equity securities $ 9 $ 4 $ - $ 13
U.S. Government obligations 59,577 148 (80) 59,645
Mortgage-backed securities -
residential 21,597 387 (4) 21,980
--------------- ---------------- ---------------- ---------------
$ 81,183 $ 539 $ (84) $ 81,638
=============== ================ ================ ===============
Held to Maturity:
Mortgage-backed securities -
residential $ 6,433 $ 90 $ (23) $ 6,500
=============== ================ ================ ===============
December 31, 2008:
Available for Sale:
Equity securities $ 9 $ - $ (3) $ 6
U.S. Government obligations 22,196 82 (49) 22,229
Mortgage-backed securities -
residential 21,785 38 (133) 21,690
--------------- ---------------- ---------------- ---------------
$ 43,990 $ 120 $ (185) $ 43,925
=============== ================ ================ ===============
Held to Maturity:
Mortgage-backed securities -
residential $ 7,289 $ - $ (198) $ 7,091
=============== ================ ================ ===============
Note 3 - Securities (continued)
Mortgage-backed securities consist of securities issued by FNMA, FHLMC, GNMA,
and FFCB (Federal Farm Credit Bank) collateralized by residential mortgages.
The amortized cost and estimated fair value by contractual maturity of debt
securities at September 30, 2009 are shown below. Actual maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations.
Available for Sale Held to Maturity
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
--------------- ---------------- ---------------- ---------------
(In Thousands) (In Thousands)
Due in one year or less $ - $ - $ - $ -
Due after one year through five years 2,500 2,502 - -
Due after five years through ten years 17,544 17,559 - -
Due after ten years 39,533 39,584 - -
Mortgage-backed securities -
residential 21,597 21,980 6,433 6,500
--------------- ---------------- ---------------- ---------------
$ 81,174 $ 81,625 $ 6,433 $ 6,500
=============== ================= ================ ===============
There was a gross $92,000 gain on sale of available for sale securities in the
first nine months of 2009 resulting from proceeds of $5,355,000. There were no
sales of securities available for sale for the nine months ended September 30,
2008.
No securities were pledged to secure public deposits or for any other purpose
required or permitted by law at September 30, 2009 and December 31, 2008.
The following table shows gross unrealized losses and fair value, aggregated by
investment category and length of time that individual securities have been in a
continuous unrealized loss position, at September 30, 2009 and December 31,
2008:
11
Note 3 - Securities (continued)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
-------------- -------------- -------------- -------------- -------------- --------------
(In Thousands)
September 30, 2009:
U.S. Government
obligations $ 3,527 $ 80 $ - $ - $ 13,527 $ 80
mortgaged-backed
securities -
residential 3,996 12 1,063 15 5,059 27
-------------- -------------- -------------- -------------- -------------- --------------
$ 17,523 $ 92 $ 1,063 $ 15 $ 18,586 $ 107
============== ============== ============== ============== ============== ==============
December 31, 2008:
Equity securities $ 6 $ 3 $ - $ - $ 6 $ 3
U.S. Government
obligations 3,354 49 - - 3,354 49
mortgaged-backed
securities -
residential 22,556 268 1,335 63 23,891 331
-------------- -------------- -------------- -------------- -------------- --------------
$ 25,916 $ 320 $ 1,335 $ 63 $ 27,251 $ 383
============== ============== ============== ============== ============== ==============
Management 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 (1) the length of time and the extent
to which the fair value has been less than the amortized cost basis, (2) the
financial condition of the issuer (and guarantor, if any) and adverse conditions
specifically related to the security, industry or geographic area, (3) failure
of the issuer of the security to make scheduled interest or principal payments,
(4) any changes to the rating of a security by a rating agency, and (5) the
presence of credit enhancements, if any, including the guarantee of the federal
government or any of its agencies.
At September 30, 2009, ten debt securities have been in a continuous unrealized
loss position for less than twelve months. No debt securities and two
mortgage-backed securities have been in a continuous unrealized loss position
for more than twelve months. The debt securities and mortgage-backed securities
were issued by U.S. government sponsored agencies and are paying in accordance
with their terms with no deferrals of interest or defaults. As management
believes the Company does not intend to sell and will not be required to sell
these securities prior to recovery or maturity, no declines are deemed to be
other than temporary.
Note 4 - Federal Home Loan Bank of New York Stock
Federal Home Loan Bank of New York ("FHLB") stock represents the required
investment in the common stock of a correspondent bank.
12
Management evaluates the FHLB stock for impairment in accordance with FASB ASC
Topic 942-10-15, Financial Services - Depository and Lending. Management's
determination of whether this investment is impaired is based on their
assessment of the ultimate recoverability of its cost rather than by recognizing
temporary declines in value. The determination of whether a decline affects the
ultimate recoverability of cost is influenced by criteria such as (1) the
significance of the decline in net assets of the FHLB as compared to the capital
stock amount for the FHLB and the length of time this situation has persisted,
(2) commitments by the FHLB to make payments required by law or regulation and
the level of such payments in relation to the operating performance of the FHLB,
and (3) the impact of legislative and regulatory changes on institutions and,
accordingly, on the customer base of the FHLB.
Management believes no impairment charge is necessary related to the FHLB stock
as of September 30, 2009.
Note 5 - Comprehensive Income (Loss)
Accounting principles generally require that recognized revenue, expenses,
gains, and losses be included in net income. Although certain changes in assets
and liabilities, such as unrealized gains and losses on available for sale
securities, are reported as a separate component of the stockholders' equity
section of the consolidated balance sheets, such items, along with net income,
are components of comprehensive loss.
The components of other comprehensive income (loss) and related tax effects for
the three and nine months ended September 30, 2009 and 2008 are as follows:
For the Three Months For the Nine Months Ended
Ended September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
(In Thousands) (In Thousands)
Unrealized holding gain (loss) on available
for sale securities $ 768 $ (72) $ 429 $ (395)
Reclassification adjustment for realized
gains included in net income - - (92) -
Reclassification adjustment for impairment
loss on available for sale securities - 57 - 57
----------- ------------- -------------- --------------
Net Unrealized Gain (Loss) 768 (15) 521 (338)
Tax effect 232 (7) 148 (118)
----------- ------------- -------------- --------------
Net of tax amount $ 536 $ (8) $ 373 $ (220)
=========== ============= ============== ==============
13
Note 6 - Earnings (Loss) Per Common Share
Earnings (loss) per common share are calculated by dividing the net income
(loss) by the weighted-average number of common shares outstanding during the
period. The Company has not granted any restricted stock awards or stock options
and, during the three and nine months ended September 30, 2009 and 2008, had no
potentially dilutive common stock equivalents. Unallocated common shares held by
the ESOP are not included in the weighted-average number of common shares
outstanding for purposes of calculating earnings (loss) per common share until
they are committed to be released. The weighted average common shares
outstanding were 1,724,649 for the three months ended September 30, 2009 and
1,723,781 for the nine months ended September 30, 2009 and 1,718,526 for the
three and nine months ended September 30, 2008.
Note 7 - Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 168, "The FASB Accounting
Standards Codification TM and the Hierarchy of Generally Accepted Accounting
Principles - a replacement of FASB Statement No. 162," ("SFAS 168"). SFAS 168
establishes the FASB Accounting Standards Codification TM ("Codification") as
the source of authoritative generally accepted accounting principles ("GAAP")
for nongovernmental entities. The Codification does not change GAAP. Instead, it
takes the thousands of individual pronouncements that currently comprise GAAP
and reorganizes them into approximately 90 accounting Topics, and displays all
Topics using a consistent structure. Contents in each Topic are further
organized first by Subtopic, then Section and finally Paragraph. The Paragraph
level is the only level that contains substantive content. Citing particular
content in the Codification involves specifying the unique numeric path to the
content through the Topic, Subtopic, Section and Paragraph structure. FASB
suggests that all citations begin with "FASB ASC," where ASC stands for
Accounting Standards Codification. Changes to the ASC subsequent to June 30,
2009 are referred to as Accounting Standards Updates ("ASU").
In conjunction with the issuance of SFAS 168, the FASB also issued its first
Accounting Standards Update No. 2009-1, "Topic 105 -Generally Accepted
Accounting Principles" ("ASU 2009-1") which includes SFAS 168 in its entirety as
a transition to the ASC. ASU 2009-1 is effective for interim and annual periods
ending after September 15, 2009 and will not have an impact on the Company's
financial position or results of operations but will change the referencing
system for accounting standards.
Certain of the following pronouncements were issued prior to the issuance of the
ASC and adoption of the ASUs. For such pronouncements, citations to the
applicable Codification by Topic, Subtopic and Section are provided where
applicable in addition to the original standard type and number.
14
Note 7 - Recent Accounting Pronouncements (continued)
The FASB issued SFAS 166 (not yet reflected in FASB ASC), "Accounting for
Transfers of Financial Assets - an amendment of FASB Statement No. 140," ("SFAS
166") in June 2009. SFAS 166 limits the circumstances in which a financial asset
should be derecognized when the transferor has not transferred the entire
financial asset by taking into consideration the transferor's continuing
involvement. The standard requires that a transferor recognize and initially
measure at fair value all assets obtained (including a transferor's beneficial
interest) and liabilities incurred as a result of a transfer of financial assets
accounted for as a sale. The concept of a qualifying special-purpose entity is
removed from SFAS 140 along with the exception from applying FIN 46(R). The
standard is effective for the first annual reporting period that begins after
November 15, 2009, for interim periods within the first annual reporting period,
and for interim and annual reporting periods thereafter. Earlier application is
prohibited. The Company does not expect the standard to have any impact on the
Company's consolidated financial statements.
The FASB issued ASU 2009-05, "Fair Value Measurements and Disclosures (Topic
820) - Measuring Liabilities at Fair Value" in August, 2009 to provide guidance
when estimating the fair value of a liability. When a quoted price in an active
market for the identical liability is not available, fair value should be
measured using (a) the quoted price of an identical liability when traded as an
asset; (b) quoted prices for similar liabilities or similar liabilities when
traded as assets; or (c) another valuation technique consistent with the
principles of Topic 820 such as an income approach or a market approach. If a
restriction exists that prevents the transfer of the liability, a separate
adjustment related to the restriction is not required when estimating fair
value. The ASU was effective October 1, 2009 for the Company and will have no
impact on consolidated financial position or operations.
Note 8 - Formation of Subsidiary
On August 14, 2009 the Board of Directors of Fairport Savings Bank approved
through resolution the formation of a wholly-owned subsidiary to be known as FSB
Mortgage Corp. to engage in the activities of residential lending. Applications
have been submitted to the appropriate regulatory agencies and the bank is
awaiting approval.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Throughout the Management's Discussion and Analysis ("MD&A"), the term "the
Company" refers to the consolidated entity of FSB Community Bankshares, Inc.,
Fairport Savings Bank, and Oakleaf Services Corporation, a wholly owned
subsidiary of Fairport Savings Bank. At September 30, 2009, FSB Community
Bankshares, MHC the Company's mutual holding company parent, held 946,050
shares, or 53.0%, of the Company's common stock, engaged in no significant
activities, and was not included in the MD&A.
Forward Looking Statements
This Quarterly Report contains forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements are
subject to certain risks and uncertainties, including, among other things,
changes in general economic conditions, either nationally or in our market
areas, that are worse than expected; competition among depository and other
financial institutions; inflation and changes in the interest rate environment
15
that reduce our margins or reduce the fair value of financial instruments;
adverse changes in the securities markets; changes in laws or government
regulations or policies affecting financial institutions, including changes in
regulatory fees and capital requirements; our ability to enter new markets
successfully and capitalize on growth opportunities; our ability to successfully
integrate acquired entities, if any; changes in consumer spending, borrowing and
savings habits; changes in accounting policies and practices, as may be adopted
by the bank regulatory agencies, the Financial Accounting Standards Board, the
Securities and Exchange Commission and the Public Company Accounting Oversight
Board; changes in our organization, compensation and benefit plans; changes in
our financial condition or results of operations that reduce capital available
to pay dividends; and changes in the financial condition or future prospects of
issuers of securities that we own, that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements.
The Company does not undertake, and specifically declines any obligation, to
publicly release the results of any revisions that may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
Critical Accounting Policies
The Company follows accounting standard set by the Financial Accounting
Standards Board, commonly referred to as the "FASB". The FASB sets generally
accepted accounting principles ("GAAP") that the Company follows. References to
GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards
Codification, sometimes referred to as the Codification or ASC. The FASB
finalized the Codification effective for periods ending on or after September
15, 2009.
The most significant accounting policies followed by the Company are presented
in Note 1 to the consolidated financial statements ("the Consolidated Financial
Statements") included in the Company's Annual Report filed on Form 10-K with the
Securities and Exchange Commission on March 31, 2009. These policies, along with
the disclosures presented in the other consolidated financial statement notes
and in this discussion, provide information on how significant assets and
liabilities are valued in the consolidated financial statements and how those
values are determined. Based on the valuation techniques used and the
sensitivity of financial statement amounts to the methods, assumptions and
estimates underlying those amounts, management has identified the determination
of the allowance for loan losses and the evaluation of investment securities for
other than temporary impairment to be the accounting areas that require the most
subjective and complex judgments, and as such could be the most subject to
revision as new information becomes available.
Allowance for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred in the loan portfolio. The allowance for
loan losses is recorded through a provision for loan losses charged to earnings.
Loan losses are charged against the allowance when management believes the
un-collectability of a loan balance is confirmed. Subsequent recoveries, if any,
are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and
is based upon management's periodic review of the collectability of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral and prevailing economic conditions.
16
This evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.
The allowance consists of specific, general, and unallocated components. The
specific component relates to loans that are classified as doubtful, substandard
or special mention. For such loans that are also classified as impaired, an
allowance is generally established when the collateral value of the impaired
loan is lower than the carrying value of that loan. The general component covers
non-classified loans and is based on historical loss experience adjusted for
qualitative factors. An unallocated component is maintained to cover
uncertainties that could affect management's estimate of probable losses. The
unallocated component of the allowance reflects the margin of imprecision
inherent in the underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.
As a substantial percentage of our loan portfolio is collateralized by real
estate, appraisals of the underlying value of property securing loans are
critical in determining the amount of the allowance required for specific loans.
Assumptions are instrumental in determining the value of properties. Overly
optimistic assumptions or negative changes to assumptions could significantly
affect the valuation of a property securing a loan and the related allowance
determined. Management carefully reviews the assumptions supporting such
appraisals to determine that the resulting values reasonably reflect amounts
realizable on the related loans.
Management performs a quarterly evaluation of the adequacy of the allowance for
loan losses. We consider a variety of factors in establishing this estimate
including, but not limited to: current economic conditions, delinquency
statistics, geographic concentrations, the adequacy of the underlying
collateral, the financial strength of the borrower, results of internal loan
reviews, and other relevant factors. This evaluation is inherently subjective as
it requires material estimates by management that may be susceptible to
significant change based on changes in economic and real estate market
conditions.
Actual loan losses may be significantly more than the allowance we have
established which could have a material negative effect on our financial
results.
Other than temporary impairment. When the fair value of a held to maturity or
available for sale security is less than its amortized cost basis, an assessment
is made at the balance sheet date as to whether other-than-temporary impairment
(OTTI) is present.
The Company considers numerous factors when determining whether a potential OTTI
exists and the period over which the debt security is expected to recover. The
principal factors considered are (1) the length of time and the extent to which
the fair value has been less than the amortized cost basis, (2) the financial
condition of the issuer (and guarantor, if any) and adverse conditions
specifically related to the security, industry or geographic area, (3) failure
of the issuer of the security to make scheduled interest or principal payments,
(4) any changes to the rating of a security by a rating agency, and (5) the
presence of credit enhancements, if any, including the guarantee of the federal
government or any of its agencies.
For debt securities, OTTI is considered to have occurred if (1) the Company
intends to sell the security, (2) it is more likely than not the Company will be
required to sell the security before recovery of its amortized cost basis, or
(3) if the present value of expected cash flows is not sufficient to recover the
entire amortized cost basis. In determining the present value of expected cash
flows, the Company discounts the expected cash flows at the effective interest
17
Critical Accounting Policies (Continued)
rate implicit in the security at the date of acquisition or, for debt securities
that are beneficial interests in securitized financial assets, at the current
rate used to accrete the beneficial interest. In estimating cash flows expected
to be collected, the Company uses available information with respect to security
prepayment speeds, expected deferral and default rates and severity, whether
subordinated interests, if any, are capable of absorbing estimated losses and
the value of any underlying collateral.
In determining whether OTTI has occurred for equity securities, the Company
considers the applicable factors described above 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.
Comparison of Financial Condition at September 30, 2009 and December 31, 2008
Total Assets. Total assets increased by $25.5 million, or 13.0%, to $221.7
million at September 30, 2009 from $196.1 million at December 31, 2008. The
increase in total assets primarily reflects increases in securities classified
as available for sale and cash and cash equivalents, partially offset by a
decrease in net loans receivable.
Cash and cash equivalents increased by $6.9 million, or 216.5% to $10.0 million
at September 30, 2009 from $3.2 million at December 31, 2008.
Total securities increased by $36.9 million, or 72.0%, to $88.1 million at
September 30, 2009 from $51.2 million at December 31, 2008. Securities
classified as available for sale increased $37.7 million to $81.6 million at
September 30, 2009 from $43.9 million at December 31, 2008. The $37.7 million
increase was attributable to the purchase of $70.8 million of U.S. government
agency securities, purchases of $8.8 million of mortgage-backed securities, and
a $521,000 increase in the fair value of securities available for sale,
partially offset by maturities and calls of $33.0 million of U.S. government
agency securities classified as available for sale, the sale of $5.3 million of
mortgage-backed securities classified as available for sale, and $4.1 million in
principal repayments received and amortization.
Securities classified as held to maturity decreased $856,000 to $6.4 million at
September 30, 2009 from $7.3 million at December 31, 2008 primarily as a result
of principal repayments received from mortgage-backed securities. All securities
purchased in 2009 have been classified as securities available for sale to
provide a portfolio of marketable securities for liquidity as an alternative to
borrowings. The Company has reviewed its investment securities portfolio at
September 30, 2009, and has determined that no other-than-temporary impairment
exists in the portfolio.
Investment in FHLB of New York stock decreased by $310,000, or 13.4%, to $2.0
million at September 30, 2009, from $2.3 million at December 31, 2008 due to
stock redemptions. The FHLB of New York requires members to purchase and redeem
stock based on the level of borrowings.
Net loans receivable decreased by $18.7 million, or 13.8%, to $117.0 million at
September 30, 2009 from $135.7 million at December 31, 2008. The decrease in
loans receivable was primarily the result of sales of fixed rate residential
mortgages totaling $12.7 million in the first nine months of 2009 and normal
amortization. Total loans sold and serviced as of September 30, 2009 totaled
$15.9 million compared to $5.1 million as of December 31, 2008. Management made
the decision to sell long term, fixed rate loans in this historically low
interest rate environment. The Bank sold these loans at gains which are recorded
in other income, and will realize servicing income on these loans as long as
these loans are outstanding. Management believes that selling these loans was a
prudent interest rate decision in order to position the consolidated balance
sheet for higher interest rates in the future. The Company continues to execute
its business plan of making high quality loans to existing customers and new
18
Comparison of Financial Condition at September 30, 2009 and December 31, 2008
(continued)
customers in our market area with $20.1 million of residential mortgage loan
originations in the first nine months of 2009. We may experience further
declines in our total residential mortgages loan portfolio with additional
mortgage loan sales based on the current economic conditions and our desired
interest rate sensitivity position. In the current interest rate environment we
intend to continue to sell a portion of our existing fixed-rate residential
mortgage loans on a servicing retained basis, resulting in additional loan
servicing income.
The Company has never been involved with, and has no direct exposure to,
sub-prime lending activities. Credit quality continues to be the highest
priority when underwriting loans. Subjective judgments about a borrower's
ability to repay and the value of any underlying collateral are made prior to
approving a loan.
We believe our stringent underwriting standards have directly resulted in our
low level of non-accruing loans.
Deposits and Borrowings. Total deposits increased by $32.6 million, or
25.6%, to $160.1 million at September 30, 2009 from $127.5 million at December
31, 2008. Certificates of deposit, including IRAs, increased by $22.4 million.
Transaction accounts, including checking, NOW, money market and savings
accounts, increased by $10.2 million. The net deposit growth was attributable to
the Webster branch growth of $14.1 million, Irondequoit branch growth of $6.7
million, Penfield branch growth of $7.9 million and Fairport branch growth of
$3.9 million. We continue to promote core customer relationship banking, with
bonus rates and incentive offerings.
Combined short and long term borrowings decreased by $8.3 million, or 18.3%, to
$37.2 million at September 30, 2009 from $45.5 million on December 31, 2008. The
decrease in borrowings included $3.9 million in short term borrowings and $4.4
million in long term borrowings. We repaid these borrowings in the first nine
months of 2009 using increased deposits.
Stockholders' Equity. Total stockholders' equity increased by $433,000 or
2.2%, to $20.5 million at September 30, 2009 from $20.0 million at December 31,
2008. The increase resulted principally from increases of $373,000 in
accumulated other comprehensive income and $44,000 in net income for the nine
months ended September 30, 2009.
Non-Performing Assets. At September 30, 2009, the Company had $93,000 in
loans classified as non-performing assets compared to $146,000 in loans
classified as non-performing at December 31, 2008. At September 30, 2009
management has evaluated the Bank's loan loss reserve and believes it is
adequately funded based on the quality of the current loan portfolio. At
September 30, 2009, there were no loans or other assets that are not disclosed
or disclosed as classified or special mention, where known information about
possible credit problems of borrowers caused us to have serious doubts as to the
ability of the borrowers to comply with the present loan repayment terms and
which may result in disclosure of such loans in the future.
Average balances and yields. The following tables set forth average balance
sheets, average yields and costs, and certain other information at and for the
periods indicated. All average balances are daily average balances. Non-accrual
loans were included in the computation of average balances, where applicable,
but have been reflected in the table as loans carrying a zero yield. The yields
set forth below include the effect of deferred fees, discounts and premiums that
are amortized or accreted to interest income. Yields have been annualized.
19
For the Three Months Ended September 30,
-------------------------------------------------------------------
2009 2008
------------------------------- ----------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
---------- ---------- ------- ------------ ----------- ---------
(Dollars in thousands)
Interest-earning assets:
Loans......................... $ 117,379 $ 1,669 5.69% $ 134,873 $ 1,962 5.82%
Securities.................... 52,972 415 3.13 29,211 350 4.79
Mortgage-backed securities.... 27,468 264 3.84 24,997 288 4.61
Other......................... 5,335 2 0.15 3,063 14 1.83
---------- ---------- ---------- ----------
Total interest-earning assets 203,154 2,350 4.63% 192,144 2,614 5.44%
---------- ---------- ----------
Non-interest-earning assets... 4,625 5,554
---------- ----------
Total assets............... $ 207,779 $ 197,698
========== ==========
Interest-bearing liabilities:
NOW accounts.................. $ 8,627 $ 13 0.60% $ 7,776 $ 24 1.23%
Passbook savings.............. 15,827 26 0.66 14,248 32 0.90
Money market savings.......... 22,787 88 1.54 11,860 57 1.92
Individual retirement accounts 17,857 161 3.61 16,339 177 4.33
Certificates of deposit....... 77,475 556 2.87 75,916 708 3.73
Borrowings.................... 37,426 404 4.32% 44,838 465 4.15%
---------- ---------- ---------- ----------
Total interest-bearing
liabilities.............. 179,999 1,248 2.77% 170,977 1,463 3.42%
---------- ---------- ---------- ----------
Non-interest-bearing liabilities:
Demand deposits......... 3,763 3,220
Other......................... 3,877 3,671
---------- ----------
Total liabilities........ 187,639 177,868
Stockholders' equity.......... 20,140 19,830
---------- ----------
Total liabilities and
stockholders' equity..... $ 207,779 $ 197,698
=========== ==========
Net interest income........... $ 1,102 $ 1,151
========== ==========
Interest rate spread (1)...... 1.86% 2.02%
Net interest-earning assets (2) $ 23,155 $ 21,167
=========== ==========
2.17%
Net interest margin (3)....... 2.40%
Average interest-earning assets
to average interest-bearing
liabilities................ 113% 112%
---------------------
(1) Interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing
liabilities.
(2) Net interest-earning assets represent total interest-earning assets less
total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by total interest
-earning assets.
20
For the Nine Months Ended September 30,
-------------------------------------------------------------------
2009 2008
------------------------------- ----------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
---------- ---------- ------- ------------ ----------- ---------
(Dollars in thousands)
Interest-earning assets:
Loans......................... $ 124,995 $ 5,333 5.69 % $ 28,300 $ 5,626 5.85%
Securities.................... 37,676 983 3.48 9,018 1,033 4.75
Mortgage-backed securities.... 28,386 889 4.18 3,138 792 4.56
Other......................... 5,771 5 0.12 5,055 104 2.74
---------- ---------- ---------- ----------
Total interest-earning assets 196,828 7,210 4.88% 185,511 7,555 5.43%
---------- ----------
Non-interest-earning assets... 4,513 5,122
---------- ----------
Total assets............... $ 201,341 $ 190,633
========== ==========
Interest-bearing liabilities:
NOW accounts.................. $ 8,118 $ 41 0.67% $ 6,733 $ 51 1.01%
Passbook savings.............. 14,476 76 0.70 13,984 103 .98
Money market savings......... 20,182 267 1.76 11,307 176 2.08
Individual retirement accounts 17,519 494 3.76 16,246 538 4.42
Certificates of deposit....... 75,369 1,708 3.02 75,456 2,337 4.13
Borrowings.................... 38,703 1,235 4.25 40,774 1,274 4.17
---------- ---------- ---------- ----------
Total interest-bearing
liabilities.............. 174,367 3,821 2.92% 164,500 4,479 3.63%
---------- ----------- --------- ----------
Non-interest-bearing liabilities:
Demand deposits......... 3,580 3,202
Other......................... 3,154 2,904
---------- ----------
Total liabilities........ 181,101 170,606
Stockholders' equity.......... 20,240 20,027
---------- ----------
Total liabilities and
stockholders' equity..... $ 201,341 $ 190,633
=========== ==========
Net interest income........... $ 3,389 $ 3,076
========== ==========
Interest rate spread (1)...... 1.96% 1.80%
Net interest-earning assets (2) $ 22,461 $ 21,011
=========== ==========
Net interest margin (3)....... 2.30% 2.21%
Average interest-earning assets
to average interest-bearing
liabilities................ 113% 113%
Comparison of Operating Results for the Three Months Ended September 30, 2009
and September 30, 2008
General. We had a net loss of $34,000 for the three months ended September
30, 2009 compared to net income of $1,000 for the three months ended September
30, 2008. The decrease of $35,000 in net income for the third quarter of 2009
compared to the third quarter of 2008 resulted primarily from a decrease in net
interest income of $49,000, an increase in other expense of $88,000, partially
offset by an increase in other income of $44,000, and a decrease in income tax
expense of $57,000. The decrease in net interest income was the result of a
volume reduction in higher yielding assets, mainly mortgages, being replaced by
an increased volume of lower yielding assets, primarily investment securities,
partially offset by the Company's ability to reduce the deposit costs in a low
interest rate environment. The net interest margin decreased to 2.17% in the
third quarter of 2009 from 2.40% in the third quarter of 2008. Another factor
that negatively affected the third quarter of 2009 compared to the third quarter
of 2008 was an additional $74,000 in FDIC premium expense recorded in other
expense.
21
Interest and Dividend Income. Interest and dividend income decreased by
$264,000 or 10.1%, to $2.3 million for the three months ended September 30, 2009
from $2.6 million for the three months ended September 30, 2008. The decrease in
interest and dividend income resulted from a $293,000 or 14.9% decrease in
interest income from loans, a $24,000 or 8.3% decrease in interest income from
mortgage-backed securities, a $12,000 or 85.7% decrease in other interest income
primarily interest earning demand accounts, partially offset by a $65,000 or
18.6% increase in securities income. Average interest-earning assets increased
by $11.0 million, or 5.7%, to $203.2 million for the three months ended
September 30, 2009 from $192.1 million for the three months ended September 30,
2008. The yield on interest-earning assets decreased by 81 basis points to 4.63%
for the three months ended September 30, 2009 compared to 5.44% for the three
months ended September 30, 2008, reflecting a yield decrease in all interest
earning asset categories as a result of a decrease in interest rates by the
Federal Reserve from a Federal Fund rate of 2.00% at September 30, 2008 to a
targeted Federal Fund rate range of 0.00% - 0.25% at September 30, 2009.
Interest Expense. Interest expense decreased $215,000 or 14.7%, to $1.2
million for the three months ended September 30, 2009 from $1.5 million for the
three months ended September 30, 2008. The decrease in interest expense resulted
from lower average rates paid on these liabilities despite an increase in the
aggregate average balance. The average balance of interest-bearing liabilities
increased $9.0 million, or 5.3%, to $180.0 million for the three months ended
September 30, 2009 compared to $171.0 million for the three months ended
September 30, 2008. The average cost of interest-bearing liabilities decreased
by 65 basis points to 2.77% for the three months ended September 30, 2009 from
3.42% for the three months ended September 30, 2008. The average cost of deposit
accounts decreased by 79 basis points to 2.37% for the three months ended
September 30, 2009 compared to 3.16% for the three months ended September 30,
2008. The average cost of borrowings increased by 17 basis points to 4.32% for
the three months ended September 30, 2009 compared to 4.15% for the three months
ended September 30, 2008. The decrease in interest expense reflects the Bank's
management of lower deposit costs in a historically low interest rate
environment.
At September 30, 2009, we had $27.1 million of certificates of deposit,
including IRAs that will mature during the fourth quarter of 2009 with a
weighted average cost of 2.65%. Based on current market rates, if these funds
remain with Fairport Savings Bank with similar maturities, the rates paid on
these deposits will decrease.
Net Interest Income. Net interest income decreased $49,000 or 4.3%, to $1.1
million for the three months ended September 30, 2009 from $1.2 million for the
three months ended September 30, 2008. The decrease in net interest income was
due primarily to an increase in lower yielding earning assets, partially offset
by a lower average cost of deposits lowering the overall cost of interest
bearing liabilities. The Company's net interest margin decreased 23 basis points
to 2.17% for the three months ended September 30, 2009 from 2.40% for the three
months ended September 30, 2008.
Provision for Loan Losses. Based on management's evaluation of the factors
that determine the level of the allowance for loan losses, we recorded $7,000 in
provision for loan losses for the three month period ended September 30, 2009
compared to an $8,000 provision for loan losses for the three months ended
September 30, 2008. The allowance for loan losses as of September 30, 2009 was
$360,000 or 0.31% of total loans, compared to $335,000 or 0.24% of total loans
as of September 30, 2008. We ended the quarter with $93,000 in non-accrual loans
as of September 30, 2009 compared to no non-accrual loans as of September 30,
2008. We recorded a $4,000 charge off in the third quarter of 2009 compared to
no charge offs in the third quarter of 2008. We had no foreclosed real estate at
September 30, 2009 or 2008.
22
Other Income. Total other income increased $44,000 or 49.4%, to $133,000
for the three months ended September 30, 2009 compared to $89,000 for the three
months ended September 30, 2008. In the three months ended September 30, 2009,
there was an increase of $19,000 in other income primarily from mortgage fees
and gain on sale of mortgage loans in the secondary market and a $16,000
increase in service fee income in deposit account service charge fees, partially
offset by a decrease of $48,000 in commissions from Oakleaf Services
insurance/annuity and security sales. In the three months ended September 30,
2008, the Company recorded a $57,000 other-than-temporary impairment loss
related to its investment in Freddie Mac common stock; there was no
other-than-temporary impairment loss recorded in 2009.
Other Expense. Total other expense increased $88,000, or 7.4%, to $1.3
million for the three months ended September 30, 2009 compared to $1.2 million
for the three months ended September 30, 2008. The increase was primarily the
result of a $74,000 increase in FDIC insurance premium expense to $80,000 for
the three months ended September 30, 2009, compared to $6,000 for the three
months ended September 30, 2008. Advertising expense increased by $22,000, other
expense increased by $23,000, occupancy expense increased by $12,000, and
equipment expense increased by $8,000 primarily due to additional expenses
associated with the new Webster branch that opened in the third quarter of 2009.
The increase was partially offset by a decrease in salaries and benefits expense
of $42,000 resulting from two management positions left vacant, and board
approved reductions in year end incentive and discretionary pension contribution
accruals in the third quarter of 2009 compared to the third quarter of 2008.
Income Tax Expense. We had pre-tax loss of $57,000 for the three months
ended September 30, 2009 versus pre-tax income of $35,000 for the three months
ended September 30, 2008, which resulted in a $23,000 tax benefit for the three
months ended September 30, 2009, versus a $34,000 tax expense for the three
months ended September 30, 2008, a change of $57,000. The effective tax benefit
rate was 40.3% for the three months ended September 30, 2009 compared to a tax
expense rate of 97.1% for the three months ended September 30, 2008 due to no
tax benefit recognized as a result of the $57,000 other-than-impairment loss
recorded in 2008 for tax purposes as a capital loss.
Comparison of Operating Results for the Nine Months Ended September 30, 2009 and
September 30, 2008
General. We had net income of $44,000 for the nine months ended September
30, 2009 compared to a net loss of $95,000 for the nine months ended September
30, 2008. The $139,000 improvement was attributable to an increase in net
interest income of $313,000, an increase in other income of $202,000, partially
offset by an increase in other expenses of $331,000, a $7,000 increase in the
provision for loan losses, and an increase in income tax of $38,000. The net
interest income improvement was generated by an increase in interest-earning
assets and the Company's ability to reduce the deposit costs in a low interest
rate environment, both of which positively impacted the net interest margin in
the first nine months of 2009 compared to the first nine months of 2008.
Decreased short term interest rates have provided an opportunity to lower our
costs on deposits at a faster rate than our interest earning assets, providing
positive results in our net interest margin. The net interest margin increased
by 9 basis points to 2.30% for the nine months ended September 30, 2009 from
2.21% for the nine months ended September 30, 2008.
Interest and Dividend Income. Interest and dividend income decreased by
$345,000 or 4.6% to $7.2 million for the nine months ended September 30, 2009
from $7.6 million for the nine months ended September 30, 2008. The $345,000
decrease in interest and dividend income resulted primarily from a $293,000 or
5.2% decrease in interest income from loans, a $50,000 or 4.8% decrease in
interest income from securities, and a $99,000 or 95.2% decrease in interest
income from other sources, partially offset by a $97,000 or 12.3% increase in
mortgage-backed securities interest income. Average interest-earning assets
increased by $11.3 million, or 6.1%, to $196.8 million for the nine months ended
September 30, 2009 from $185.5 million for the nine months ended September 30,
2008. The yield on interest earning assets decreased by 55 basis points to 4.88%
for the nine months ended September 30, 2009 compared to 5.43% for the nine
months ended September 30, 2008, reflecting decreases in interest yields in all
asset categories due to the 175 basis point drop in interest rates by the
Federal Reserve since September 30, 2008.
23
Interest Expense. Interest expense decreased $658,000, or 14.7%, to $3.8
million for the nine months ended September 30, 2009 from $4.5 million for the
nine months ended September 30, 2008. The decrease in interest expense resulted
from lower average rates paid on deposit liabilities despite an increase in the
aggregate average balance. Average balances in interest bearing liabilities
increased $9.9 million, or 6.0%, to $174.4. million for the nine months ended
September 30, 2009 compared to $164.5 million for the nine months ended
September 30, 2008. The average cost of interest-bearing liabilities decreased
by 71 basis points to 2.92% for the nine months ended September 30, 2009 from
3.63% for the nine months ended September 30, 2008. The average cost of deposit
accounts decreased by 91 basis points to 2.54% for the nine months ended
September 30, 2009 compared to 3.45% for the nine months ended September 30,
2008. The average cost of borrowings increased by 8 basis points to 4.25% for
the nine months ended September 30, 2009 compared to 4.17% for the nine months
ended September 30, 2008. The decrease in interest expense reflects a lower cost
of funds in deposits in a lower interest rate environment.
Net Interest Income. Net interest income increased $313,000, or 10.2%, to
$3.4 million for the nine months ended September 30, 2009 from $3.1 million for
the nine months ended September 30, 2008. The increase in net interest income
was due primarily to a decrease in the average cost of our interest-bearing
liabilities of 71 basis points, while the average yield on our interest-earning
assets decreased by 55 basis points. Our net interest margin increased by 9
basis points to 2.30% for the nine months ended September 30, 2009 from 2.21%
for the nine months ended September 30, 2008. The increase in net interest
margin was also attributable to the effect of a decrease of 175 basis points in
short term rates by the Federal Reserve Bank from September 30, 2008 to
September 30, 2009.
Provision for Loan Losses. Based on management's evaluation of the factors
that determine the level of the allowance for loan losses, we recorded a $21,000
provision for loan losses for the nine month period ended September 30, 2009
compared to the $14,000 provision for loan losses for the nine month period
ended September 30, 2008. Management believes we continue to maintain
exceptional credit quality within our loan portfolio with one charge-off of
$4,000 recorded within the first nine months of 2009. The allowance for loan
losses as of September 30, 2009 was $360,000, or 0.31% of total loans, compared
to $335,000, or 0.24% of total loans as of September 30, 2008. We had
non-accrual loans totaling $93,000, or 0.08% of total loans receivable as of
September 30, 2009 compared to no non-accrual loans as of September 30, 2008.
Other Income. Total other income increased $202,000, or 64.3%, to $516,000
for the nine months ended September 30, 2009 compared to $314,000 for the nine
months ended September 30, 2008. The primary increase was due to the Bank
completing a sale of $5.3 million mortgage-backed securities on which it
recorded a pre-tax gain on sale of securities of $92,000 in May 2009. We also
had an increase of $40,000 in service fees resulting from an increase in
checking account service charge fees and an $87,000 increase in other income
which was primarily the result of mortgage fees, and gain on sale of fixed rate
mortgages to Freddie Mac. The Company recorded a $57,000 other-than-temporary
impairment loss on its available for sale securities in 2008, with no
other-than-temporary impairment loss recorded in 2009. There was also a $74,000
reduction in fee income in the first nine months of 2009 compared to 2008
resulting from a decrease in Oakleaf subsidiary revenue.
Other Expense. Total other expense increased $331,000, or 9.5%, to $3.8
million for the nine months ended September 30, 2009 compared to $3.5 million
for the nine months ended September 30, 2008. The increase was primarily the
result of an additional $248,000 in FDIC premiums due to the $91,000 special
24
assessment accrued in the second quarter and a $157,000 combined first, second
and third quarter assessment at increased rates over the prior year. There was a
$23,000 increase in salaries and benefits expense primarily due to annual cost
of living raises effective January 1 of each year, additional expenses
associated with new branch staffing, partially offset by savings in incentive
and pension benefit accruals with a board approved expense reduction plan
implemented in February 2009. In the nine months ended September 30, 2009
compared to the nine months ended September 30, 2008 there was also an increase
in occupancy expense of $33,000, and an increase in equipment expense of
$20,000, and an increase in other expense of $29,000 due to additional expenses
associated with the new Webster branch, partially offset by $43,000 less in
advertising expense due to a decrease in deposit product promotions.
Income Taxes. We had pre-tax net income of $62,000 for the nine months
ended September 30, 2009 versus a pre-tax loss of $115,000 for the nine months
ended September 30, 2008, which resulted in a $18,000 tax expense for the nine
months ended September 30, 2009, versus a $20,000 tax benefit for the nine
months ended September 30, 2008, a change of $38,000. The effective tax rate was
29.0% for the nine months ended September 30, 2009 compared to (17.4%) for the
nine months ended September 30, 2008.
Liquidity and Capital Resources
Liquidity is the ability to meet current and future financial obligations of a
short-term nature. Our primary sources of funds consist of deposit inflows, loan
repayments, advances from the Federal Home Loan Bank of New York, maturities and
principal repayments of securities, and recently, but to a lesser extent, loan
sales. While maturities and scheduled amortization of loans and securities are
predictable sources of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition. Our
asset/liability management committee is responsible for establishing and
monitoring our liquidity targets and strategies in order to ensure that
sufficient liquidity exists for meeting the borrowing needs and deposit
withdrawals of our customers as well as unanticipated contingencies. We seek to
maintain a liquidity ratio of 10.0% or greater. For the quarter ended September
30, 2009, our liquidity ratio averaged 18.8%. We believe that we have enough
sources of liquidity to satisfy our short and long-term liquidity needs as of
September 30, 2009.
We regularly adjust our investments in liquid assets based upon our assessment
of:
(i) expected loan demand;
(ii) expected deposit flows;
(iii) yields available on interest-earning deposits and securities; and
(iv) the objectives of our asset/liability management program.
Excess liquid assets are invested generally in interest-earning deposits,
short-term and intermediate-term securities and federal funds sold.
Our most liquid assets are cash and cash equivalents. The levels of these assets
are dependent on our operating, financing, lending and investing activities
during any given period. At September 30, 2009, cash and cash equivalents
totaled $10.0 million.
Our cash flows are derived from operating activities, investing activities and
financing activities as reported in our Consolidated Statements of Cash Flows
included in our Consolidated Financial Statements.
25
At September 30, 2009, we had $2.8 million in loan commitments outstanding. In
addition to commitments to originate loans, we had $7.9 million in unused lines
of credit to borrowers. Certificates of deposit, including individual retirement
accounts comprised solely of certificates of deposits, due within one year of
September 30, 2009 totaled $73.9 million, or 74.3% of our certificates of
deposit and 46.1% of total deposits. If these deposits do not remain with us, we
will be required to seek other sources of funds including loan sales, other
deposit products, including certificates of deposit, and Federal Home Loan Bank
advances. Depending on market conditions, we may be required to pay higher rates
on such deposits or other borrowings than we currently pay on the certificates
of deposit due on or before September 30, 2010. We believe, however, based on
past experience that a significant portion of such deposits will remain with us.
We have the ability to attract and retain deposits by adjusting the interest
rates offered.
Our primary investing activity is and will continue to be originating loans.
During the three months ended September 30, 2009, we originated $6.8 million of
loans.
Financing activities consist primarily of activity in deposit accounts and
Federal Home Loan Bank borrowings. We experienced a net increase in total
deposits of $18.1 million for the quarter ended September 30, 2009. Deposit
flows are affected by the overall level of interest rates, the interest rates
and products offered by us and our local competitors, and by other factors.
Liquidity management is both a daily and long-term function of business
management. If we require funds beyond our ability to generate them internally,
borrowing agreements exist with the Federal Home Loan Bank of New York, which
provides an additional source of funds. Federal Home Loan Bank borrowings
decreased by $8.3 million to $37.2 million for the nine months ended September
30, 2009, compared to a net increase of $17.0 million to $42.6 million for the
nine months ended September 30, 2008. Historically, Federal Home Loan Bank
borrowings have primarily been used to fund loan demand and expanding the
investment portfolio. At September 30, 2009, we had the ability to borrow
approximately $87.8 million from the Federal Home Loan Bank of New York, of
which $37.2 million had been advanced.
Fairport Savings Bank is subject to various regulatory capital requirements,
including a risk-based capital measure. The risk-based capital guidelines
include both a definition of capital and a framework for calculating
risk-weighted assets by assigning balance sheet assets and off-balance sheet
items to broad risk categories. At September 30, 2009, Fairport Savings Bank
exceeded all regulatory capital requirements, and was considered "well
capitalized" under regulatory guidelines.
Off-Balance Sheet Arrangements
In the ordinary course of business, the Company is a party to credit-related
financial instruments with off-balance sheet risk to meet the financing needs of
our customers. These financial instruments include commitments to extend credit.
We follow the same credit policies in making commitments as we do for on-balance
sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. The commitments for equity lines of credit may expire
without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. The amount of collateral
obtained, if it is deemed necessary by us, is based on our credit evaluation of
the customer.
26
At September 30, 2009 and 2008, we had $2.8 million and $3.6 million,
respectively, of commitments to grant loans, and $7.9 million and $7.7 million,
respectively, of unfunded commitments under lines of credit.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable since the Company is a smaller reporting company.
Item 4T. Controls and Procedures
Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act)
as of the end of the period covered by this report. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that, as of
the end of the period covered by this report, our disclosure controls and
procedures were effective to ensure that information required to be disclosed in
the reports that the Company files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
There were no significant changes made in the Company's internal control over
financial reporting or in other factors that could significantly affect the
Company's internal control over financial reporting during the period covered by
this report that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
The Company and its subsidiaries are subject to various legal actions
arising in the normal course of business. In the opinion of management, the
resolution of these legal actions is not expected to have a material adverse
effect on the Company's financial condition or results of operations.
Item 1A. Risk Factors
In addition to the other information contained this Quarterly Report on
Form 10-Q, the following risk factors represent material updates and additions
to the risk factors previously disclosed in the Company's Annual Report on Form
10-K for the Year Ended December 31, 2008, and Quarterly Reports on Form 10-Q
for the quarters ended March 31, 2009 and June 30, 2009, as filed with the
Securities and Exchange Commission. Additional risks not presently known to us,
or that we currently deem immaterial, may also adversely affect our business,
financial condition or results of operations. Further, to the extent that any of
the information contained in this Quarterly Report on Form 10-Q constitutes
forward-looking statements, the risk factors set forth below also are cautionary
statements identifying important factors that could cause our actual results to
differ materially from those expressed in any forward-looking statements made by
or on behalf of us.
The FDIC Has Proposed A Rule That Would Require Us to Prepay Our Insurance
Premiums
On September 29, 2009, the Federal Deposit Insurance Corporation issued a
proposed rule pursuant to which all insured depository institutions would be
required to prepay their estimated assessments for the fourth quarter of 2009,
and for all of 2010, 2011 and 2012. Under the proposed rule, this pre-payment
would be due on December 30, 2009. Under the proposed rule, the assessment rate
27
for the fourth quarter of 2009 and for 2010 would be based on each institution's
total base assessment rate for the third quarter of 2009, modified to assume
that the assessment rate in effect on September 30, 2009 had been in effect for
the entire third quarter, and the assessment rate for 2011 and 2012 would be
equal to the modified third quarter assessment rate plus an additional 3 basis
points. In addition, each institution's base assessment rate for each period
would be calculated using its third quarter assessment base, adjusted quarterly
for an estimated 5% annual growth rate in the assessment base through the end of
2012. Based on our deposits and assessment rate at September 30, 2009, we
estimate that our prepayment amount will be approximately $852,687. We expect
that we will be able to make the prepayment from available cash on hand.
A Legislative Proposal Has Been Introduced That Would Eliminate our Primary
Federal Regulator and Require us to Convert to a National Bank or State Bank.
The House Financial Services Committee has released a draft of proposed
restructuring legislation that would implement sweeping changes to the current
bank regulatory structure. The proposed legislation, developed in conjunction
with the U.S. Treasury Department, would establish a Financial Services
Oversight Council and merge our primary regulator, the Office of Thrift
Supervision, into the Office of the Comptroller of the Currency, the primary
federal regulator for national banks. The proposal also contemplates that a
division of thrift supervision within the Office of the Comptroller of the
Currency would regulate federal thrifts. The proposal, if adopted, also would
subject FSB Community Bankshares, Inc. to be regulated as a bank holding company
by the Federal Reserve Board.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) There were no sales of unregistered securities during the period
covered by this Report.
(b) Not applicable.
(c) There were no issuer repurchases of securities during the period
covered by this Report.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
28
Item 6. Exhibits
The following exhibits are either filed as part of this report or are
incorporated herein by reference:
3.1 Charter of FSB Community Bankshares, Inc.*
3.2 Bylaws of FSB Community Bankshares, Inc.*
4 Form of Common Stock Certificate of FSB Community Bankshares, Inc.*
10.1 Amended and Restated Employment Agreement between FSB Community
Bankshares, Inc. and Dana C. Gavenda**
10.2 Supplemental Executive Retirement Plan*
10.3 Form of Employee Stock Ownership Plan*
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
----------------------
* Filed as exhibits to the Company's Registration Statement on Form SB-2,
and any amendments thereto, with the Securities and Exchange Commission
(Registration No. 333-141380) on March 16, 2007.
** Filed as an exhibit to the Company's Current Report on form 8-K filed
with the Securities and Exchange Commission on April 7, 2009.
29
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FSB COMMUNITY BANKSHARES, INC.
Date: November 13, 2009 /s/ Dana C. Gavenda
-----------------------------------
Dana C. Gavenda
President and Chief Executive Officer
Date: November 13, 2009 /s/ Kevin D. Maroney
-----------------------------------
Kevin D. Maroney
Executive Vice President and Chief
Financial Officer
30