**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

**FORM10-QSB**

 

**ý****Quarterly report under Section13 or 15 (d) of the Securities Exchange Act of 1934**

 

**For the quarterly period ended****September 30, 2005**

 

**o****Transition report under Section 13or 15 (d) of the Exchange Act**

 

**For the transition period from                        to                   **

 

**Commission File Number 000-51112**

 

**NSBHOLDINGS, INC.**

(Exact Name ofSmall Business Issuer as Specified in Its Charter)

 

| **GEORGIA**                                                      | ** ** | **20-2118147**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization) |       | (I.R.S. Employer  Identification No.) |

 

###### **4077 Forsyth Road**

###### **Macon, Georgia 31210**

(Address ofPrincipal Executive Offices)

 

**(478)745-7720**

(Issuer’sTelephone Number, Including Area Code)

 

###### **Not Applicable**

(Former Name,Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Check whether the issuer:(1) filed all reports required to be filed by Section 12, 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

Yes      ý            No o

 

Indicate by checkmarkwhether the registrant is a shell company (as defined by Rule 12b-2 of theExchange Act).

 

Yes      o            No ý

 

**APPLICABLEONLY TO CORPORATE ISSUERS**

 

State the number ofshares outstanding of each of the issuer’s classes of common equity, as of thelatest practicable date: Common Stock $5 par value, 2,604,052 sharesoutstanding at September 30, 2005

 

Transitional SmallBusiness Disclosure Format (check one):           Yes  o    No   ý

 

 

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**NSB HOLDINGS, INC.**

 

INDEX

 
| PART I:                                                                 | FINANCIAL INFORMATION                                                                                                          |   |
|-------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|--------|
| ITEM 1.                                                                 | FINANCIAL STATEMENTS                                                                                                           |   |
|                                                                    |                                                                                                                           |   |
| The following financial  statements are provided for NSB Holdings, Inc. |                                                                                                                           |
|                                                                    |                                                                                                                           |   |
|                                                                    | Consolidated Balance Sheets – September 30, 2005 (unaudited) and December 31, 2004 (audited).                             |   |
|                                                                    |                                                                                                                           |   |
|                                                                    | Consolidated Statements of Income  (unaudited) – For the Three Months and Nine Months Ended September 30, 2005  and 2004. |   |
|                                                                    |                                                                                                                           |   |
|                                                                    | Consolidated Statements of Cash  Flows (unaudited) – For the Nine Months Ended September 30, 2005 and 2004.               |   |
|                                                                    |                                                                                                                           |   |
|                                                                    | Notes to  Consolidated Financial Statements (unaudited)                                                                        |   |
|                                                                    |                                                                                                                           |   |
| ITEM  2.                                                                | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                    |   |
|                                                                    |                                                                                                                           |   |
| ITEM 3.                                                                 | Controls and Procedures                                                                                                        |   |
|                                                                    |                                                                                                                           |   |
| PART  II:                                                               | OTHER  INFORMATION                                                                                                             |   |

 

1

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**NSB HOLDINGS, INC.**

**ConsolidatedBalance Sheets**

**September 30, 2005****(Unaudited) and****December 31, 2004****(Audited)**

 
| *** ***                                                                                                               | *** *** | **As of**                    | *** *** |
|----------------------------------------------------------------------------------------------------------------------------|--------------|------------------------------|--------------|
| ** **                                                                                                                 | ** **   | **September 30,  2005** | ** **   | **December 31,  2004** | ** ** |
| **Assets**                                                                                                                 |         |                         |         |   |   |
|                                                                                                                       |         |                         |         |   |   |
| Cash and due  from banks                                                                                                   |         | $                            | 2,980,311    |   | $ | 5,275,001 |   |
| Federal funds  sold                                                                                                        |         | 3,217,000                    |         | 4,556,000 |   |
| Total cash and  cash equivalents                                                                                           |         | 6,197,311                    |         | 9,831,001 |   |
| Securities  available for sale, at fair value                                                                              |         | 32,019,792                   |         | 19,135,653 |   |
| Federal Home  Loan Bank stock, restricted, at cost                                                                         |         | 1,255,700                    |         | 1,186,600 |   |
| Loans held for  sale                                                                                                       |         | 2,127,309                    |         | 890,529 |   |
| Loans, net of  unearned income                                                                                             |         | 305,740,617                  |         | 228,282,068 |   |
| Less - allowance  for loan losses                                                                                          |         | (3,893,125                   | )            | (2,800,000 | ) |
| Loans, net                                                                                                                 |         | 301,847,492                  |         | 225,482,068 |   |
|                                                                                                                       |         |                         |         |   |   |
| Bank premises  and equipment, net                                                                                          |         | 5,899,895                    |         | 4,608,777 |   |
| Accrued interest  receivable                                                                                               |         | 2,157,174                    |         | 1,157,596 |   |
| Other assets                                                                                                               |         | 6,120,219                    |         | 1,024,796 |   |
| **Total  Assets**                                                                                                          |         | $                            | 357,624,892  |   | $ | 263,317,020 |   |
|                                                                                                                       |         |                         |         |   |   |
| **Liabilities  and Shareholders’ Equity**                                                                             |         |                         |         |   |   |
| ** **                                                                                                                 |         |                         |         |   |   |
| Deposits:                                                                                                                  |         |                         |         |   |   |
| Non-interest  bearing                                                                                                      |         | $                            | 23,320,032   |   | $ | 16,947,999 |   |
| Interest bearing                                                                                                           |         | 281,836,311                  |         | 204,300,185 |   |
| Total deposits                                                                                                             |         | 305,156,343                  |         | 221,248,184 |   |
|                                                                                                                       |         |                         |         |   |   |
| Federal funds  purchased                                                                                                   |         | —                       |         | — |   |
| FHLB borrowings                                                                                                            |         | 16,200,000                   |         | 19,200,000 |   |
| Trust Preferred  Securities                                                                                                |         | 10,310,000                   |         | — |   |
| Accrued interest  payable                                                                                                  |         | 1,081,163                    |         | 663,695 |   |
| Accrued expenses  and other liabilities                                                                                    |         | 544,126                      |         | 239,393 |   |
| Total  liabilities                                                                                                         |         | 333,291,632                  |         | 241,351,272 |   |
| Shareholders’  Equity:                                                                                                |         |                         |         |   |   |
| Common stock, $5  par value, authorized 10,000,000 shares, issued and outstanding 2,604,052 in  2005 and 1,736,054 in 2004 |         | 13,020,260                   |         | 8,680,270 |   |
| Preferred stock,  authorized 2,000,000 shares, outstanding -0- shares                                                      |         | —                       |         | — |   |
| Paid-in capital  surplus                                                                                                   |         | 7,706,902                    |         | 12,047,356 |   |
| Retained  earnings                                                                                                         |         | 3,997,808                    |         | 1,353,621 |   |
| Accumulated  other comprehensive income (loss)                                                                             |         | (391,710                     | )            | (115,499 | ) |
| Total  shareholders’ equity                                                                                           |         | 24,333,260                   |         | 21,965,748 |   |
| **Total  Liabilities and Shareholders’ Equity**                                                                       |         | $                            | 357,624,892  |   | $ | 263,317,020 |   |

 

2

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**NSB HOLDINGS, INC.**

**ConsolidatedStatements of Income**

**For the Three Months and Nine Months Ended September30****, 2005****and 2004**

**(Unaudited)**

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                            | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                            | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Interest and Dividend Income:**                     |       |                   |       |                   |       |   |   |   |   |
| Interest and  fees on loans                           |       | $                      | 5,538,806  |                   | $          | 2,655,032 |   | $ | 14,188,148 |   | $ | 6,764,045 |   |
| Interest on  securities:                              |       |                   |       |                   |       |   |   |   |   |
| Taxable income                                        |       | 225,691                |       | 115,503                |       | 565,802 |   | 315,021 |   |
| Non-taxable  income                                   |       | 36,095                 |       | 13,621                 |       | 86,111 |   | 19,779 |   |
| Income on  federal funds sold                         |       | 31,634                 |       | 6,114                  |       | 81,692 |   | 17,583 |   |
| Other interest  and dividend income                   |       | 19,741                 |       | 5,057                  |       | 44,168 |   | 12,383 |   |
| Total interest  and dividend income                   |       | 5,851,967              |       | 2,795,327              |       | 14,965,921 |   | 7,128,811 |   |
| **Interest Expense:**                                 |       |                   |       |                   |       |   |   |   |   |
| Deposits                                              |       | 2,084,508              |       | 737,531                |       | 5,067,511 |   | 2,006,171 |   |
| FHLB borrowings                                       |       | 145,742                |       | 65,308                 |       | 389,457 |   | 126,307 |   |
| Federal funds  purchased                              |       | 17,449                 |       | 9,081                  |       | 35,980 |   | 11,481 |   |
| Other interest  expense                               |       | 146,779                |       | —                 |       | 241,322 |   | — |   |
| Total interest  expense                               |       | 2,394,478              |       | 811,920                |       | 5,734,270 |   | 2,143,959 |   |
|                                                  |       |                   |       |                   |       |   |   |   |   |
| Net interest  income before provision for loan losses |       | 3,457,489              |       | 1,983,407              |       | 9,231,651 |   | 4,984,852 |   |
| Less - provision  for loan losses                     |       | 247,000                |       | 532,500                |       | 1,087,000 |   | 892,000 |   |
| Net interest  income after provision for loan losses  |       | 3,210,489              |       | 1,450,907              |       | 8,144,651 |   | 4,092,852 |   |
| **Noninterest Income:**                               |       |                   |       |                   |       |   |   |   |   |
| Service charges  on deposit accounts                  |       | 106,880                |       | 61,709                 |       | 292,966 |   | 172,860 |   |
| Other service  charges, commissions and fees          |       | 19,922                 |       | 12,590                 |       | 53,095 |   | 29,928 |   |
| Gain on sales /  calls of investment securities       |       | —                 |       | —                 |       | — |   | — |   |
| Other income                                          |       | 226,016                |       | 15,328                 |       | 414,143 |   | 38,870 |   |
| Total  noninterest income                             |       | 352,818                |       | 89,627                 |       | 760,204 |   | 241,658 |   |
| **Noninterest Expense:**                              |       |                   |       |                   |       |   |   |   |   |
| Salaries                                              |       | 655,858                |       | 373,086                |       | 1,762,379 |   | 1,025,423 |   |
| Employee  benefits                                    |       | 251,734                |       | 124,209                |       | 686,342 |   | 345,418 |   |
| Net occupancy  expense                                |       | 99,946                 |       | 47,013                 |       | 264,822 |   | 156,285 |   |
| Equipment rental  and depreciation of equipment       |       | 70,117                 |       | 45,935                 |       | 198,830 |   | 133,098 |   |
| Loss on sales of  assets                              |       | —                 |       | —                 |       | — |   | — |   |
| Other expenses                                        |       | 648,628                |       | 325,613                |       | 1,806,259 |   | 984,558 |   |
| Total  noninterest expense                            |       | 1,726,283              |       | 915,856                |       | 4,718,632 |   | 2,644,782 |   |
|                                                  |       |                   |       |                   |       |   |   |   |   |
| **Income Before Income Taxes**                        |       | 1,837,024              |       | 624,678                |       | 4,186,223 |   | 1,689,728 |   |
| Provision for  income taxes                           |       | 685,413                |       | 228,387                |       | 1,542,036 |   | 622,291 |   |
| **Net Income**                                        |       | $                      | 1,151,611  |                   | $          | 396,291 |   | $ | 2,644,187 |   | $ | 1,067,437 |   |
| **Earnings per share:**                               |       |                   |       |                   |       |   |   |   |   |
| Basic                                                 |       | $                      | 0.44       |                   | $          | 0.15 |   | $ | 1.02 |   | $ | 0.47 |   |
| Diluted                                               |       | $                      | 0.40       |                   | $          | 0.15 |   | $ | 0.92 |   | $ | 0.44 |   |

 

3

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**NSB HOLDINGS, INC.**

**ConsolidatedStatements of Cash Flows**

**For the Nine Months Ended****September 30, 2005****and 2004**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                         | ** ** | **2005**                                 | ** ** | **2004** | ** ** |
| **Cash Flows from Operating Activities:**                                          |       |                                     |       |   |   |
| Net income                                                                         |       | $                                        | 2,644,187  |   | $ | 1,067,437 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                     |       |   |   |
| Provision for  loan losses                                                         |       | 1,087,000                                |       | 892,000 |   |
| Depreciation                                                                       |       | 236,799                                  |       | 162,743 |   |
| Net amortization  of securities                                                    |       | 44,831                                   |       | 62,255 |   |
| Loss on sales of  assets                                                           |       | —                                   |       | — |   |
| Gain on sales /  calls of investment securities                                    |       | —                                   |       | — |   |
| Loans held for  sale                                                               |       | (1,236,780                               | )          | — |   |
| Change in cash  surrender value of life insurance                                  |       | (4,059,730                               | )          | — |   |
| Changes in  accrued income and other assets                                        |       | (1,868,770                               | )          | (1,921,226 | ) |
| Changes in  accrued expenses and other liabilities                                 |       | 864,194                                  |       | 229,545 |   |
| Net cash  provided by operating activities                                         |       | (2,288,269                               | )          | 492,754 |   |
| **Cash Flows from Investing Activities:**                                          |       |                                     |       |   |   |
| Net change in  loans to customers                                                  |       | (77,452,424                              | )          | (62,403,056 | ) |
| Purchase of  available for sale securities                                         |       | (10,582,577                              | )          | (7,728,684 | ) |
| Sales of  securities available for sale                                            |       | —                                   |       | 497,500 |   |
| Proceeds from  maturities/calls of available for sale securities                   |       | 500,000                                  |       | 1,645,000 |   |
| Purchase of  mortgage backed securities                                            |       | (4,507,430                               | )          | (2,999,500 | ) |
| Proceeds from  paydowns on mortgage-backed securities                              |       | 1,313,999                                |       | 1,047,518 |   |
| Purchase of  interest rate floors                                                  |       | (237,667                                 | )          | — |   |
| Purchase of FHLB  stock                                                            |       | (69,100                                  | )          | (510,000 | ) |
| Property and  equipment expenditures                                               |       | (1,527,917                               | )          | (1,354,882 | ) |
| Proceeds from  sales of assets                                                     |       | —                                   |       | — |   |
| Net cash used in  investing activities                                             |       | (92,563,116                              | )          | (71,806,104 | ) |
| **Cash Flows from Financing Activities:**                                          |       |                                     |       |   |   |
| Net change in  deposits                                                            |       | 83,908,159                               |       | 54,360,678 |   |
| Net increase  (decrease) in federal funds purchased                                |       | —                                   |       | — |   |
| FHLB borrowings                                                                    |       | (3,000,000                               | )          | 10,200,000 |   |
| Proceeds from  Trust preferred securities                                          |       | 10,310,000                               |       | — |   |
| Proceeds from  issuance of common stock                                            |       | —                                   |       | 5,999,994 |   |
| Payment for  fractional shares                                                     |       | (464                                     | )          | — |   |
| Cash dividends  paid                                                               |       | —                                   |       | — |   |
| Net cash  provided by financing activities                                         |       | 91,217,695                               |       | 70,560,672 |   |
| **Net Increase (Decrease) in Cash and Cash  Equivalents**                          |       | (3,633,690                               | )          | (752,678 | ) |
|                                                                                    |            |                                          |            |  |  |  |  |

 

4

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# ***(1)  Basis of Presentation***

 

NewSouthern Bank began operation on December 10, 2001 and operates as a statechartered bank in Macon, Georgia. In November 2000, the organizers of the Bankbegan the process of establishing the Bank. From that time until commencement of operations, the proposed Bank was adevelopment stage enterprise.  The Bankchanged its name to Atlantic Southern Bank effective July 11, 2005.  The Bank will continue to operate under thename of New Southern Bank, a Division of Atlantic Southern Bank, in aseven-county area in Central Georgia.  TheBank will operate under the name of Atlantic Southern Bank outside theseven-county area in Central Georgia.  TheBank provides a variety of financial services to individuals and smallbusinesses through its offices in Middle Georgia.  Its primary deposit products are checking,savings and term certificate accounts and its primary lending products arecommercial real estate loans.

 

At the April 27, 2004 Annual Meeting ofShareholders, the shareholders approved the proposal to reorganize the Bankinto a holding company structure by virtue of a share exchange whereby eachshare of Bank common stock issued and outstanding was to be converted into andexchanged for the right to receive one share of NSB Holdings, Inc. commonstock.  NSB Holdings, Inc. is a companyorganized by the Bank for the purpose of serving as its holding company. Theshare exchange was consummated on January 3, 2005, and NSB Holdings, Inc.effective as of that date became the holding company for New Southern Bank.  New Southern Bank common stock is NSBHoldings’ only significant asset.  Nochanges in the management or business strategy of the Bank have occurred orwill occur as a result of the holding company reorganization.

 

Theaccompanying unaudited financial statements have been prepared in accordancewith generally accepted accounting principles for interim financialinformation, and with the instructions to Form 10-QSB and Item 310 (b) ofRegulation S-B of the Securities and Exchange Commission.  Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements.  Inthe opinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included.Operating results for the period ended September 30, 2005, are not necessarily indicative of the results that may beexpected for the year ended December31, 2005.  For further informationrefer to the financial statements and footnotes thereto included in the Bank’sAnnual Report on Form 10-KSB for the year ended December 31, 2004, which was filed with the FDIC.

 

# ***(2)  New andPending Pronouncements***

 

Aspermitted by SFAS No. 123, *Accounting for Stock-BasedCompensation,*the Company currently accounts for share-basedpayments to employees using APB opinion No. 25’s intrinsic value method and, assuch, generally recognizes no compensation expense for employee stockoptions.  The impact of adoption of SFASNo. 123(R) cannot be predicted at this time because it will depend on levels ofshare-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior periods, theimpact of that standard would not have materially affected the Company’sconsolidated financial statements.  SFASNo. 123(R) also requires the benefits of tax deductions in excess of recognizedcompensation cost to be reported as a financing cash flow, rather than as anoperating cash flow as required under current literature.  This requirement will reduce net operatingcash flows and increase net financing cash flows in the periods afteradoption.  While the company cannotestimate what those amounts will be in the future (because they depend on,among other things, when employees exercise stock options), the amount ofoperating cash flows recognized in prior periods for such excess tax deductionswere insignificant.  SFAS No. 123(R) iseffective as of the beginning of the first interim or annual reporting periodthat begins after December 15, 2005.  OnApril 14, 2005, the Securities and Exchange Commission (the “SEC”) announced anew rule that amends the compliance dates for SFAS No. 123(R).  The SEC’s new rule allows companies toimplement SFAS No. 123(R) at the beginning of their next fiscal year, insteadof the next reporting period, that begins after December 15, 2005.  SFAS No. 123(R) is effective for the Companybeginning in the first quarter of 2006.

 

There are no other recentaccounting pronouncements that have had, or are expected to have, a materialeffect on the Company’s financial statements.

 

5

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***(3)  Other Comprehensive Income***

 

During the nine monthsended September 30, 2005, theCompany had unrealized holding losses on investment securities which werereported as comprehensive loss.  Ananalysis of accumulated other comprehensive income since December 31, 2004 follows:

 
| Accumulated other comprehensive income (loss) at  December 31, 2004  |   | $        | (115,499 | ) |
|---------------------------------------------------------------------------|--------|----------|----------|---|
| Other comprehensive income, net of tax:                                   |   |     |     |
| Gross change in  unrealized loss on securities available for sale         |   | (460,352 | )        |
| Deferred tax  effect                                                      |   | 184,141  |     |
| Net change                                                                |   | (276,211 | )        |
| Less:  Reclassification adjustment for gains realized in net income       |   | —   |     |
| Accumulated other comprehensive income (loss) at  September 30, 2005 |   | $        | (391,710 | ) |

 

# ***(4)  EarningsPer Share***

 

Basicearnings per share are based on the weighted average number of common sharesoutstanding during the period while the effects of potential shares outstandingduring the period are included in diluted earnings per share. All share and per share amounts have beenadjusted for the stock split.

 

 The reconciliation of the amounts used in thecomputation of both “basic earnings per share” and “diluted earnings per share”for each period is presented as follows:

 

**For the Nine Months Ended September 30, 2005**

 
| ** **                                  | ** ** | ** **   | ** ** | **Average** | ** ** | ** **    | ** ** |
|---------------------------------------------|------------|--------------|------------|-------------|------------|---------------|------------|
| ** **                                  | ** ** | **Net**      | ** ** | **Common**  | ** ** | **Per Share** | ** ** |
| ** **                                  | ** ** | **Earnings** | ** ** | **Shares**  | ** ** | **Amount**    | ** ** |
| Basic earnings per share                    |       | $            | 2,644,187  |        | 2,604,052  |          | 1.02       |   |
| Effect of  dilutive common stock issuances: |       |         |       |        |       |          |       |
| Stock options                               |       | —       |       | 274,439     |       | (0.10         | )          |
| Diluted earnings  per share                 |       | $            | 2,644,187  |        | 2,878,491  |          | 0.92       |   |

 

**For the Nine Months Ended September 30, 2004**

 
| ** **                                  | ** ** | ** **   | ** ** | **Average** | ** ** | ** **    | ** ** |
|---------------------------------------------|------------|--------------|------------|-------------|------------|---------------|------------|
| ** **                                  | ** ** | **Net**      | ** ** | **Common**  | ** ** | **Per Share** | ** ** |
| ** **                                  | ** ** | **Earnings** | ** ** | **Shares**  | ** ** | **Amount**    | ** ** |
| Basic earnings per share                    |       | $            | 1,067,437  |        | 2,256,650  |          | 0.47       |   |
| Effect of  dilutive common stock issuances: |       |         |       |        |       |          |       |
| Stock options                               |       | —       |       | 156,619     |       | (0.03         | )          |
| Diluted earnings  per share                 |       | $            | 1,067,437  |        | 2,413,269  |          | 0.44       |   |

 

# ***(5)  Trust Preferred Securities***

 

On April 28, 2005, NSBStatutory Trust 1 (“NST”), a wholly owned subsidiary of the Company closed apooled private offering of 10,000 Trust Preferred Securities with a liquidationamount of $1,000 per security. The proceeds of the offering were loaned to theCompany in exchange for junior subordinated debentures with terms similar tothe Trust Preferred Securities. The sole assets of NST are the juniorsubordinated debentures of the Company and payments thereunder. The juniorsubordinated debentures and the back-up obligations, in the

 

6

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aggregate, constitute afull and unconditional guarantee by the Company of the obligations of NST underthe Trust Preferred Securities. Distributions on the Trust Preferred Securitiesare payable semi-annually at the annual rate of three month LIBOR plus 205basis points and are included in interest expense in the consolidated financialstatements. These securities are considered Tier 1 capital (with certainlimitations applicable) under current regulatory guidelines. As of September 30,2005, the outstanding principal balance of the Trust Preferred Securities was$10,000,000.

 

The junior subordinateddebentures are subject to mandatory redemption, in whole or in part, uponrepayment of the Trust Preferred Securities at maturity or their earlierredemption at the liquidation amount. Subject to the Company having receivedprior approval of the Federal Reserve, if then required, the Trust PreferredSecurities are redeemable prior to the maturity date of June 15, 2035 at theoption of the Company on or after March, 2009 at par, on or after June, 2005 ata premium, or upon the occurrence of specific events defined within the trustindenture. The Company has the option to defer distributions on the TrustPreferred Securities from time to time for a period not to exceed 20consecutive quarterly periods.

 

# ***(6)  Interest RateFloors***

 

In the third quarter, theCompany entered into various interest rate contracts not held in the tradingaccount (“interest rate protection products”) to help manage the Company’sinterest rate sensitivity.  Suchcontracts generally have a fixed notional principal amount and include interestrate floors.  Interest rate floors arecontracts the Company purchased whereby the Company receives or pays,respectively, interest if the specified index falls below the floor rate orrises above the cap rate.  The fair valueof such interest rate derivative contracts are recorded in other assets orother liabilities. The interest rate risk factor in these contracts isconsidered in the overall interest rate risk management strategy and theCompany’s interest rate risk management program.

 

# ***(7)  SalaryContinuation Plan***

 

During the second quarter of 2005, the Bank establisheda Salary Continuation Agreement for its President and certain executiveofficers whereby benefits are payable at age fifty to sixty-seven for a periodof twelve to fifteen years after retirement. The present value of the estimated liability is being accrued over theexpected remaining years of employment. The Bank expensed approximately $34,720 for the nine month period ended September30, 2005 under this plan.

 

The Bank is the owner and beneficiary of lifeinsurance policies purchased during the second quarter of 2005 on the lives ofthe President and certain key officers. The Bank intends to use these policies to fund the Salary ContinuationPlan described above.  The carrying valueof the policies was approximately $4,059,730 at September 30, 2005. The Bankaccrued income of approximately $59,730 for the nine month period ended September30, 2005 for the increase in the cash surrender value of these policies.

 

7

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**NSB HOLDINGS, INC.**

**Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

**For Each of the Nine Months inthe Period Ended**

**September 30, 2005 and 2004**

 

The following discussion of financial condition as of September 30, 2005 compared to December 31, 2004, and the results ofoperations for the nine months ended September30, 2005 compared to the Nine months ended September 30, 2004 should be read in conjunction with thecondensed financial statements and accompanying footnotes appearing in thisreport.  Please note that the Companyacquired its only asset, 100% of the common stock of New Southern Bank, as ofJanuary 3, 2005.  All information for2004 is information regarding New Southern Bank.

 

##### ***Advisory Note Regarding Forward-Looking Statements***

 

The statements contained in this report on Form 10-QSB that arenot historical facts are forward-looking statements subject to the safe harborcreated by the Private Securities Litigation Reform Act of 1995.  We caution readers of this report that suchforward-looking statements involve known and unknown risks, uncertainties andother factors which may cause the actual results, performance or achievementsof us to be materially different from those expressed or implied by suchforward-looking statements.  Although webelieve that our expectations of future performance is based on reasonableassumptions within the bounds of our knowledge of our business and operations,there can be no assurance that actual results will not differ materially fromour expectations.

 

Factors which could cause actual results to differ fromexpectations include, among other things:

 

•                  the challenges, costs andcomplications associated with the continued development of our branches;

•                  the potential that loancharge-offs may exceed the allowance for loan losses or that such allowancewill be increased as a result of factors beyond the control of us;

•                  our dependence on seniormanagement;

•                  competition from existingfinancial institutions operating in our market areas as well as the entry intosuch areas of new competitors with greater resources, broader branch networksand more comprehensive services;

•                  adverse conditions in the stockmarket, the public debt market, and other capital markets (including changes ininterest rate conditions);

•                  changes in deposit rates, the netinterest margin, and funding sources;

•                  inflation, interest rate, market,and monetary fluctuations;

•                  risks inherent in making loansincluding repayment risks and value of collateral;

•                  the strength of the United Stateseconomy in general and the strength of the local economies in which we conductoperations may be different than expected resulting in, among other things, adeterioration in credit quality or a reduced demand for credit, including theresultant effect on our loan portfolio and allowance for loan losses;

•                  fluctuations in consumer spendingand saving habits;

•                  the demand for our products andservices;

•                  technological changes;

•                  the challenges and uncertaintiesin the implementation of our expansion and development strategies;

•                  the ability to increase marketshare;

•                  the adequacy of expenseprojections and estimates of impairment loss;

•                  the impact of changes inaccounting policies by the Securities and Exchange Commission;

•                  unanticipated regulatory orjudicial proceedings;

•                  the potential negative effects offuture legislation affecting financial institutions (including withoutlimitation laws concerning taxes, banking, securities, and insurance);

•                  the effects of, and changes in,trade, monetary and fiscal policies and laws, including interest rate policiesof the Board of Governors of the Federal Reserve System;

•                  the timely development andacceptance of products and services, including products and services offeredthrough alternative delivery channels such as the Internet;

•                  the impact on our business, aswell as on the risks set forth above, of various domestic or internationalmilitary or terrorist activities or conflicts;

•                  other factors described in thisreport and in other reports we have filed with the Securities and ExchangeCommission; and

•                  Our success at managing the risksinvolved in the foregoing.

 

#### **Forward-lookingstatements speak only as of the date on which they are made.  We undertake no obligation to update anyforward-looking statement to reflect events or circumstances after the date onwhich the statement is made to reflect the occurrence of unanticipated events.**

 

8

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**CRITICALACCOUNTING POLICIES**

 

Allowancefor Loan Losses - A loan is considered impaired, based on current informationand events, if it is probable that the Company will be unable to collect thescheduled payments of principal or interest when due according to thecontractual terms of the loan agreement. Uncollateralized loans are measuredfor impairment based on the present value of expected future cash flowsdiscounted at the historical effective interest rate, while allcollateral-dependent loans are measured for impairment based on the fair valueof the collateral. The Bank uses several factors in determining if a loan isimpaired. The internal asset classification procedures include a thoroughreview of significant loans and lending relationships and include theaccumulation of related data. This data includes loan payment status, borrowers’financial data, and borrowers’ operating factors such as cash flows, operatingincome or loss, etc.

 

Theallowance for loan losses is established through charges to earnings in theform of a provision for loan losses. Increases and decreases in the allowancedue to changes in the measurement of the impaired loans are included in theprovision for loan losses. Loans continue to be classified as impaired unlessthey are brought fully current and the collection of scheduled interest andprincipal is considered probable. When a loan or portion of a loan is determinedto be uncollectible, the portion deemed uncollectible is charged against theallowance and subsequent recoveries, if any, are credited to the allowance.

 

Management’speriodic evaluation of the adequacy of the allowance also considers impairedloans and takes into consideration the Bank’s past loan loss experience, knownand inherent risks in the portfolio, adverse situations that may affect theborrowers’ ability to repay, estimated value of any underlying collateral, andcurrent economic conditions. While management believes that it has establishedthe allowance in accordance with generally accepted accounting principles andhas taken into account the views of its regulators and the current economicenvironment, there can be no assurance that in the future the Bank’s regulatorsor its economic environment will not require further increases in theallowance.

 

**RECENTDEVELOPMENTS**

 

The Board of Directors ofthe Company announced a three-for-two split of the Company’s outstanding commonstock in the form of a 50 percent stock dividend to be effected on September30, 2005, as to shareholders of record on September 20, 2005, through theissuance of one additional share of such stock for every two whole shares ownedby such holder.  No fractional shareswere issued, and in lieu thereof, each shareholder entitled to a fractionalshare received cash for such fractional shares at a rate of $16.00 per share.  All share and per share amounts have beenadjusted for the stock split.

 

9

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### **Financial Condition**

 

Thecomposition of assets and liabilities for the Company is as follows:

 
| ** **                     | ** ** | **September 30,** | ** ** | **December 31,** | ** ** | ** **  | ** ** | ** **   | ** ** |
|--------------------------------|------------|------------------------|------------|-----------------------|------------|-------------|------------|--------------|------------|
| ** **                     | ** ** | **2005**               | ** ** | **2004**              | ** ** | **$Change** | ** ** | **% Change** | ** ** |
| **Assets:**                    |       |                   |       |                  |       |        |       |         |       |
| Cash and due  from banks       |       | $                      | 2,980,311  |                  | $          | 5,275,001   |       | $            | (2,294,690 | ) | -43.50 | % |
| Federal funds  sold            |       | 3,217,000              |       | 4,556,000             |       | (1,339,000  | )          | -29.39       | %          |
| Securities  available for sale |       | 32,019,792             |       | 19,135,653            |       | 12,884,139  |       | 67.33        | %          |
| Loans                          |       | 305,740,617            |       | 228,282,068           |       | 77,458,549  |       | 33.93        | %          |
| Total assets                   |       | 357,624,892            |       | 263,317,020           |       | 94,307,872  |       | 35.82        | %          |
| **Liabilities:**               |       |                   |       |                  |       |        |       |         |       |
| Deposits                       |       | 305,156,343            |       | 221,248,184           |       | 83,908,159  |       | 37.92        | %          |
| FHLB borrowings                |       | 16,200,000             |       | 19,200,000            |       | (3,000,000  | )          | -15.63       | %          |
|                           |       |                   |       |                  |       |        |       |         |       |
| Loan to Deposit  Ratio         |       | 100.19                 | %          | 103.18                | %          |        |       |         |       |
|                                |            |                        |            |                       |            |             |            |              |            |  |  |  |

 

Themost significant change in the composition of assets was the increase in loansdue to continued growth of the Company. The most significant change in the composition of liabilities was theincrease in deposits to fund loan growth.

 

### **Asset Quality**

 

Thecomposition of nonperforming assets which includes nonaccruing loans,repossessed collateral and loans for which payments are more than 90 days pastdue is shown below.

 
| ** **                                                                                | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| Loans on nonaccrual                                                                       |       | $                      | 356,174    |                  | $          | 137,314 |   |
| Loans greater than 90 days past due                                                       |       | —                 |       | —                |       |
| Other real estate owned                                                                   |       | —                 |       | —                |       |
| Other repossessed collateral                                                              |       | —                 |       | —                |       |
|                                                                                      |       |                   |       |                  |       |
| Total  nonperforming assets                                                               |       | $                      | 356,174    |                  | $          | 137,314 |   |
|                                                                                      |       |                   |       |                  |       |
| Total  nonperforming assets as a percentage of total loans (gross) and other real  estate |       | 0.13                   | %          | 0.06                  | %          |

 

Theincrease in loans on a nonaccrual represents one loan totaling $242,000 whichwas transferred by management to a non-accrual status during the year.  At this time, management does not expect anymaterial losses due to the collateral position and specific reserves related tothese credits.  There were no relatedparty loans, which were considered nonperforming at September 30, 2005.

 

10

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Asummary of changes in the allowance for loan losses of the Company is asfollows:

 
| ** **                          | ** ** | ** ** | ** ** | **% of Loans** | ** ** |
|-------------------------------------|------------|------------|------------|----------------|------------|
| Balance at December 31, 2004   |       | $          | 2,800,000  |           | 1.23       | % |
|                                |       |       |       |           |       |
| Add: Provision  for loan losses     |       | 1,087,000  |       |           |       |
|                                |       | 3,887,000  |       |           |       |
| Less: Net  (charge-offs) recoveries |       | 6,125      |       |           |       |
|                                |       |       |       |           |       |   |
| Balance at September 30, 2005  |       | $          | 3,893,125  |           | 1.27       | % |

 

Theloan portfolio is reviewed periodically to evaluate the outstanding loans andto measure the performance of the portfolio and the adequacy of the allowancefor loan losses.  This analysis includes areview of delinquency trends, actual losses, and internal credit ratings.  Management’s judgment as to the adequacy ofthe allowance is based upon a number of assumptions about future events whichit believes to be reasonable, but which may or may not be reasonable.  However, because of the inherent uncertaintyof assumptions made during the evaluation process, there can be no assurancethat loan losses in future periods will not exceed the allowance for loanlosses or that additional allocations to the allowance will not be required.

 

Managementtakes a number of factors into consideration when determining the additions tobe made to the loan loss allowance.  As anew institution, the Bank does not yet have a sufficient history of portfolioperformance on which to base additions. Accordingly, additions to the reserve are primarily based on maintaininga ratio of the allowance for loan losses to total loans in a range of 1.00% to1.50%.  Under this methodology,charge-offs will increase the amount of additions to the allowance andrecoveries will reduce additions.

 

Inaddition, management performs an on-going loan review process.  All new loans are risk rated under loanpolicy guidelines. On a monthly basis, the composite risk ratings are evaluatedin a model that assesses the adequacy of the current allowance for loan losses,and this evaluation is presented to the Board of Directors each month.   Large loans are reviewed periodically.  Risk ratings may be changed if it appearsthat new loans may not have received the proper initial grading or, if onexisting loans, credit conditions have improved or worsened.

 

Asthe Bank matures, the additions to the loan loss allowance will be based moreon historical performance, the detailed loan review and allowance adequacyevaluation.

 

TheBank’s policy is to place loans on non-accrual status when it appears that thecollection of principal and interest in accordance with the terms of the loanis doubtful.  Any loan which becomes 90days past due as to principal or interest is automatically placed onnon-accrual.  Exceptions are allowed for90-day past due loans when such loans are well secured and in process ofcollection.

 

### **Results of Operations**

 

# ***General***

 

TheCompany’s results of operations are determined by its ability to effectivelymanage interest income and expense, to minimize loan and investment losses, togenerate noninterest income and to control noninterest expense.  Since interest rates are determined by marketforces and economic conditions beyond the control of the Company, the abilityto generate interest income is dependent upon the Bank’s ability to obtain anadequate spread between the rate earned on earning assets and the rate paid oninterest-bearing liabilities.

 

11

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# **Thefollowing table shows the significant components of Net Income:**

 
| ** **                    | ** ** | **Nine Months Ended  September 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|-------------------------------|------------|-------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                    | ** ** | **2005**                                  | ** ** | **2004**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Interest Income               |       | $                                         | 14,965,921 |       | $          | 7,128,811         |       | $ | 7,837,110 |   | 109.94 | % |
| Interest Expense              |       | 5,734,270                                 |       | 2,143,959  |       | 3,590,311         |       | 167.46 | % |
| Net Interest Income           |       | 9,231,651                                 |       | 4,984,852  |       | 4,246,799         |       | 85.19 | % |
| Provision for Loan Losses     |       | 1,087,000                                 |       | 892,000    |       | 195,000           |       | 21.86 | % |
| Net Income                    |       | 2,644,187                                 |       | 1,067,437  |       | 1,576,750         |       | 147.71 | % |
| Net Income Per Diluted Shares |       | $                                         | 0.92       |       | $          | 0.44              |       | 0.48 |   | 109.09 | % |
|                               |            |                                           |            |            |            |                   |            |  |  |  |  |  |

 

# **Theincreases in interest income and interest expense are primarily due to thecontinued growth in loans and deposits of the Bank.  The increase in the provision for loan losses** as compared to the nine month period ended September30, 2004 is primarily related to the significant growth in our loan portfolio.  All share and per share amounts have beenadjusted for the stock split.

 

Composition of other noninterest income is as follows:

 
| ** **                                     | ** ** | **Nine Months Ended  September 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|------------------------------------------------|------------|-------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                     | ** ** | **2005**                                  | ** ** | **2004**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Service charges on deposit accounts            |       | $                                         | 292,966    |       | $          | 172,860           |       | $ | 120,106 |   | 69.48 | % |
| Other service charges, commissions and fees    |       | 53,095                                    |       | 29,928     |       | 23,167            |       | 77.41 | % |
| Gain on sales / calls of investment securities |       | —                                    |       | —     |       | —            |       | — |   |
| Other income                                   |       | 414,143                                   |       | 38,870     |       | 375,273           |       | 965.46 | % |
| Total noninterest income                       |       | 760,204                                   |       | 241,658    |       | 518,546           |       | 214.58 | % |
|                                                |            |                                           |            |            |            |                   |            |  |  |  |  |  |

 

Servicecharges on deposit accounts are evaluated against service charges from otherbanks in the local market and against the Bank’s own cost structure inproviding the deposit services.  Thisincome should grow with the growth in the Bank’s demand deposit accountbase.  Other income consists primarily ofincome from mortgage loan brokerage activity started in 2004.

 

12

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Compositionof other noninterest expense is as follows:

 
| ** **                                    | ** ** | **Nine Months Ended  September 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|-----------------------------------------------|------------|-------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                    | ** ** | **2005**                                  | ** ** | **2004**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Salaries                                      |       | $                                         | 1,762,379  |       | $          | 1,025,423         |       | $ | 736,956 |   | 71.87 | % |
| Employee benefits                             |       | 686,342                                   |       | 345,418    |       | 340,924           |       | 98.70 | % |
| Net occupancy expense                         |       | 264,822                                   |       | 156,285    |       | 108,537           |       | 69.45 | % |
| Equipment rental and depreciation of equipmen |       | 198,830                                   |       | 133,098    |       | 65,732            |       | 49.39 | % |
| Loss on sales of assets                       |       | —                                    |       | —     |       | —            |       | — |   |
| Other expenses                                |       | 1,806,259                                 |       | 984,558    |       | 821,701           |       | 83.46 | % |
| Total  noninterest expense                    |       | 4,718,632                                 |       | 2,644,782  |       | 2,073,850         |       | 78.41 | % |
|                                               |            |                                           |            |            |            |                   |            |  |  |  |  |  |

 

Theincreases in noninterest expenses are primarily due to the growth of thebank.  The most significant increases inthe third quarter of 2005 are increases in salaries and employee benefits.  The increase in salaries and employeesbenefits represents normal increases in salaries and an increase in the numberof employees.  At September 30, 2005, thenumber of full-time equivalent employees was 60 compared to 37 at September 30,2004.  The increase in the number offull-time equivalent employees is directly related to the growth of the bankand the hiring for two new branches.  Additionally, the bank relocated its Operations Department during thefirst quarter of 2005. The bank operates from five facilities as of September,2005 compared to two facilities as of September, 2004.  The increases in other expenses are notattributable to any one particular item, but represent normal increases.

 

Othermajor expenses included in other expenses are as follows:

 
| ** **                   | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------|------------|-------------------------------------------|------------|
| ** **                   | ** ** | **2005**                                  | ** ** | **2004** | ** ** |
| Advertising                  |       | 157,586                                   |       | 109,170 |   |
| Brokerage fees               |       | 231,553                                   |       | 75,416 |   |
| Data processing              |       | 167,067                                   |       | 135,025 |   |
| Director and committtee fees |       | 165,025                                   |       | 45,400 |   |

 

Theincrease in brokerage fees is due to the growth in total brokereddeposits.  Director and committee feesincreased significantly due to the fact that the bank began paying director andcommittee fees during June of 2004.

 

### **Liquidity**

 

TheBank’s internal and external liquidity resources are considered by managementto be adequate to handle expected growth and normal cash flow demands fromexisting deposits and loans.

 

TheBank’s liquid assets as a percentage of total deposits were as follows:

 
| ** **                                | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| Liquid assets as a percentage of deposits |       | 2.03                   | %          | 4.44                  | %          |

 

TheBank’s available federal fund lines of credit with correspondent banks andadvances outstanding were as follows:

 
| ** **                              | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| Federal funds purchased lines available |       | $                      | 17,450,000 |                  | $          | 12,750,000 |   |
| Federal funds purchased outstanding     |       | —                 |       | —                |       |
|                                         |            |                        |            |                       |            |  |  |

 

13

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The Bank had advances from the Federal Home Loan Bank(the “FHLB”) as follows:

 
| ** **                                                         | ** ** | **September 30, 2005** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                         | ** ** | **Due Date**                | ** ** | **Outstanding** | ** ** |
| Three month Libor plus fifty-two basis points,  current rate 3.52% |       | July 7, 2008           |       | $ | 6,000,000 |   |
| Three month Libor minus fifty basis points, current  rate 3.85%    |       | June 18, 2007          |       | $ | 5,000,000 |   |
| One month Libor plus five basis points, current rate  3.97%        |       | October 20, 2006       |       | $ | 5,200,000 |   |
| Overnight funds rate -                                             |       |                        |       | $ | — |   |

 

Stock in the FHLB and a blanket lien on residential,multifamily and commercial loans with a carrying value of $31,793,568 securethe current advances. The Bank is required to maintain a minimum investment inFHLB stock of the lesser of 0.2% of total assets or $25,000,000, plus 4.5% oftotal advances while the advance agreement is in effect.

 
| ** **                   | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                   | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| Federal Home Loan Bank stock |       | $                      | 1,255,700  |                  | $          | 1,186,600 |   |
|                              |            |                        |            |                       |            |  |  |

 

Atleast monthly, management analyzes the level of off-balance sheet commitmentssuch as unfunded loan equivalents, loan repayments, maturity of investmentsecurities, liquid investment, and available fund lines in an attempt tominimize the possibility that a potential shortfall will exist.

 

### **Capital**

 

Thefollowing table summarizes the capital position of the Company:

 
| ** **                                         | ** ** | **September 30,** | ** ** | **December 31,** | ** ** | ** **        | ** ** | ** **   | ** ** |
|----------------------------------------------------|------------|------------------------|------------|-----------------------|------------|-------------------|------------|--------------|------------|
| ** **                                         | ** ** | **2005**               | ** ** | **2004**              | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Total Capital -  Bank                              |       | $                      | 34,261,052 |                  | $          | 21,965,748        |       | $            | 12,295,304 |   | 55.97 | % |
| Total Capital -  Consolidated                      |       | $                      | 32,788,000 |                  | $          | 21,965,748        |       | $            | 10,822,252 |   | 49.27 | % |
|                                               |       |                   |       |                  |       |              |       |         |       |
| Tier 1 Leverage  Ratio - Bank                      |       | 9.96                   | %          | 8.91                  | %          | 1.05              | %          | 11.78        | %          |
| Tier 1 Leverage  Ratio - Consolidated              |       | 9.45                   | %          | 8.91                  | %          | 0.54              | %          | 6.06         | %          |
|                                               |       |                   |       |                  |       |              |       |         |       |
| Tier 1 Risk  Weighted Capital Ratio - Bank         |       | 10.41                  | %          | 10.21                 | %          | 0.20              | %          | 1.96         | %          |
| Tier 1 Risk  Weighted Capital Ratio - Consolidated |       | 9.87                   | %          | 10.21                 | %          | -0.34             | %          | -3.33        | %          |
|                                               |       |                   |       |                  |       |              |       |         |       |
| Total Risk  Weighted Capital Ratio - Bank          |       | 11.58                  | %          | 9.06                  | %          | 2.52              | %          | 27.81        | %          |
| Total Risk  Weighted Capital Ratio - Consolidated  |       | 11.61                  | %          | 9.06                  | %          | 2.55              | %          | 28.15        | %          |

 

Thecapital of the Company exceeded all prescribed regulatory capitalguidelines.  Regulations require that themost highly rated banks maintain a Tier 1 leverage ratio of 3% plus anadditional cushion of at least 1 to 2 percentage points.  Tier 1 capital consists of commonshareholders’ equity, less certain intangibles. Regulations require that the Bank maintain a minimum total risk weightedcapital ratio of 8%, with one-half of this amount, or 4%, made up of Tier Icapital.

 

Theincrease in the Bank’s capital ratios is primarily due to the issuance of$10,000,000 in Trust Preferred Securities during the second quarter of 2005.

 

14

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TheCompany’s management, including the Chief Executive Officer and Chief FinancialOfficer, supervised and participated in an evaluation of the effectiveness ofits disclosure controls and procedures (as defined in federal securities rules)as of the end of the period covered by this report.  Based on, and as of the date of, thatevaluation, the Company’s Chief Executive Officer and Chief Financial Officerhave concluded that the Company’s disclosure controls and procedures wereeffective in accumulating and communicating information to management,including the Chief Executive Officer and Chief Financial Officer, asappropriate to allow timely decisions regarding required disclosures of thatinformation under the Securities and Exchange Commission’s rules and forms andthat the Company’s disclosure controls and procedures are designed to ensurethat the information required to be disclosed in reports that are filed orsubmitted by the Company under the Securities Exchange Act is recorded,processed, summarized and reported within the time periods specified in theSecurities and Exchange Commission’s rules and forms.

 

#### **During the third quarter of 2005, there were no significantchanges in the Company’s internal control over financial reporting or, to theCompany’s knowledge, in other factors that could significantly affect thoseinternal controls subsequent to the date the Company carried out its evaluationthat have materially affected, or are reasonably likely to materially affect,the Company’s internal control over financial reporting, and there have been nocorrective actions with respect to significant deficiencies or materialweaknesses.**

 

15

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#### **PART II: OTHER INFORMATION:**

 

Item 1. Legal Proceedings

 

Thereare no material legal proceedings to which the Company is a party or of whichtheir property is the subject.

 

Item 2. Unregistered Sales of Equity Securitiesand Use of Proceeds

 

None

 

Item 3. Defaults Upon Senior Securities

 

NotApplicable

 

Item 4. Submission of Matters to a Voteof Security-Holders

 

Therewere no matters submitted to security holders for a vote during the threemonths ended September 30, 2005.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

(a)   Exhibits:

 

31.1         Certificationof Chief Executive Officer Pursuant to Rule 13a-14 under the SecuritiesExchange Act of 1934, as amended

 

31.2         Certificationof Chief Financial Officer Pursuant to Rule 13a-14 under the SecuritiesExchange Act of 1934, as amended

 

32.1         Certificationof Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2         Certificationof Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

**SIGNATURES**

 

In accordance with the requirements ofthe Securities Exchange Act, the registrant caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.

 
| **NSB HOLDINGS, INC.**                |
|---------------------------------------|
| ** **                            |
|                                  |
| /s/ Mark A. Stevens                   |   |
|                                  |
| Mark A. Stevens                       |
| President and Chief Executive Officer |

 

 

Date: November 11, 2005

 

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