10q10k10q10k.net

What changed in NSTS Bancorp, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of NSTS Bancorp, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+320 added−280 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-30)

Top changes in NSTS Bancorp, Inc.'s 2023 10-K

320 paragraphs added · 280 removed · 199 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

144 edited+47 added−22 removed151 unchanged
Biggest changeAt or for the Year Ended December 31, 2022 2021 (Dollars in thousands) Total loans outstanding at end of period $ 102,991 $ 96,501 Total non-accrual loans at end of period 154 102 Total non-performing loans at end of period 154 143 Total average loans outstanding 97,714 96,843 Allowance for loan losses, beginning of period 779 870 Reversal of provision for loan losses (230 ) (23 ) Charge-offs: 1-4 family residential — — Multi-family — — Commercial — — Consumer — 99 Total charge-offs $ — $ 99 Recoveries on loans previously charged-off: 1-4 family residential $ (75 ) $ (31 ) Multi-family — — Commercial — — Consumer — — Total recoveries $ (75 ) $ (31 ) Net (recoveries) charge-offs $ (75 ) $ 68 Allowance for loan losses, end of period $ 624 $ 779 Allowance for loan losses as a percent of non-performing loans 405.19 % 544.76 % Allowance for loan losses as a percent of total loans outstanding 0.61 % 0.81 % Allowance for loan losses as a percent of total non-accrual loans 405.19 % 763.73 % Ratio of net (recoveries) charge-offs during the period to average loans outstanding during the period (0.08 )% 0.07 % 11 Table of Contents The allowance for loan losses is established through a provision for loan losses.
Biggest changeAt or for the Year Ended December 31, 2023 2022 (Dollars in thousands) Total loans outstanding at end of period $ 120,783 $ 102,991 Total non-accrual loans at end of period 200 154 Total non-performing loans at end of period 200 154 Total average loans outstanding 107,438 97,714 Allowance for credit losses, beginning of period 624 779 Cumulative effect of ASU 2016-13 adoption (CECL) 384 N/A Provision for (reversal of) credit losses 168 (230 ) Charge-offs: 1-4 family residential — — Multi-family — — Commercial — — Construction — — Consumer — — Total charge-offs $ — $ — Recoveries on loans previously charged-off: 1-4 family residential $ — $ (75 ) Multi-family — — Commercial — — Construction — — Consumer — — Total recoveries $ — $ (75 ) Net (recoveries) charge-offs $ — $ (75 ) Allowance for credit losses, end of period $ 1,176 $ 624 Allowance for credit losses as a percent of non-performing loans 588.00 % 405.19 % Allowance for credit losses as a percent of total loans outstanding 0.97 % 0.61 % Allowance for credit losses as a percent of total non-accrual loans 588.00 % 405.19 % Ratio of net (recoveries) charge-offs during the period to average loans outstanding during the period 0.00 % (0.08 )% 11 Table of Contents The allowance for credit losses is established through a provision for credit losses.
In addition to originating loans, during the year ended December 31, 2022, we purchased nine loans totaling $5.3 million, which consisted primarily of 1-4 family adjustable rate mortgages in our primary lending area. Prior to purchasing, these loans were reviewed for compliance with our underwriting criteria. All loans were purchased with servicing retained by the originating bank.
In addition to originating loans, during the previous year ended December 31, 2022, we purchased nine loans totaling $5.3 million, which consisted primarily of 1-4 family adjustable rate mortgages in our primary lending area. Prior to purchasing, these loans were reviewed for compliance with our underwriting criteria. All loans were purchased with servicing retained by the originating bank.
For loans which are secured by real estate, property valuations are undertaken by an independent third-party appraiser approved by our board of directors. Consistent with our interest rate risk strategy, we have sold, on a servicing released basis a significant portion of our fixed rate one- to four-family residential mortgage loans.
For loans which are secured by real estate, property valuations are undertaken by an independent third-party appraiser approved by our board of directors. Consistent with our interest rate risk strategy, we have sold, on a servicing released basis a portion of our fixed rate one to four-family residential mortgage loans.
Such agencies may require North Shore Trust and Savings to make additional provisions for estimated loan losses based upon judgments different from those of management. The following table shows how our allowance for loan losses is allocated by type of loan at each of the dates indicated.
Such agencies may require North Shore Trust and Savings to make additional provisions for estimated credit losses based upon judgments different from those of management. The following table shows how our allowance for credit losses is allocated by type of loan at each of the dates indicated.
However, actual losses are dependent upon future events and, as such, further additions to the level of the allowance for loan losses may become necessary. As of January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) . Refer to “Item 7.
However, actual losses are dependent upon future events and, as such, further additions to the level of the allowance for credit losses may become necessary. As of January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) . Refer to “Item 7.
An undercapitalized bank’s compliance with a capital restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized.
An undercapitalized bank’s compliance with a capital restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized.
The Gramm-Leach-Bliley Act, or GLBA, and its implementing regulations issued by federal regulatory agencies require financial institutions (including banks) to adopt policies and procedures regarding the disclosure of nonpublic personal information about their customers to non-affiliated third parties.
The Gramm-Leach-Bliley Act (the "GLBA"), and its implementing regulations issued by federal regulatory agencies require financial institutions (including banks) to adopt policies and procedures regarding the disclosure of nonpublic personal information about their customers to non-affiliated third parties.
Our Business and Franchise For 100 years, we have served Lake County, Illinois and the surrounding communities. We have established deep ties to the community and developed customer relationships which have spanned generations. We pride ourselves in matching our products and services to the needs of the community.
Our Business and Franchise For over 100 years, we have served Lake County, Illinois and the surrounding communities. We have established deep ties to the community and developed customer relationships which have spanned generations. We pride ourselves in matching our products and services to the needs of the community.
Under applicable regulations, an institution is deemed to be “well-capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.
Under applicable regulations, an institution is deemed to be “well-capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a leverage ratio of 5% or greater and a common equity Tier 1 ratio of 6.5% or greater.
The federal system of regulation and supervision establishes a comprehensive framework of activities in which North Shore Trust and Savings may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund, and not for the protection of stockholders.
The federal system of regulation and supervision establishes a comprehensive framework of activities in which North Shore Trust and Savings may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund (the "DIF"), and not for the protection of stockholders.
An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%.
An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a leverage ratio of less than 3% or a common equity Tier 1 ratio of less than 3%.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%.
There is a presumption of control upon the acquisition of 10% or more of a class of voting stock if the holding company involved has its shares registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, if the holding company involved does not have its shares registered under the Exchange Act, if no other persons will own, control or hold the power to vote a greater percentage of that class of voting security after the acquisition. 24 Table of Contents Federal Securities Laws NSTS Bancorp, Inc. common stock is registered with the SEC.
There is a presumption of control upon the acquisition of 10% or more of a class of voting stock if the holding company involved has its shares registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, if the holding company involved does not have its shares registered under the Exchange Act, if no other persons will own, control or hold the power to vote a greater percentage of that class of voting security after the acquisition. 25 Table of Contents Federal Securities Laws NSTS Bancorp, Inc. common stock is registered with the SEC.
An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater.
An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage ratio of 4% or greater and a common equity Tier 1 ratio of 4.5% or greater.
Notable amendments include (i) significant changes to the collection of beneficial ownership information and the establishment of a beneficial ownership registry, which requires corporate entities (generally, any corporation, limited liability company, or other similar entity with 20 or fewer employees and annual gross income of $5 million or less) to report beneficial ownership information to FinCEN (which will be maintained by FinCEN and made available upon request to financial institutions); (ii) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information leading to the successful prosecution of violations of the anti-money laundering laws in any judicial or administrative action brought by the Secretary of the Treasury or the U.S.
Notable amendments include (i) significant changes to the collection of beneficial ownership information ("BOI") and the establishment of a beneficial ownership registry, which requires corporate entities (generally, any corporation, limited liability company, or other similar entity with 20 or fewer employees and annual gross income of $5.0 million or less) to report BOI to FinCEN (which will be maintained by FinCEN and made available upon request to financial institutions); (ii) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information leading to the successful prosecution of violations of the anti-money laundering laws in any judicial or administrative action brought by the Secretary of the U.S.
An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%.
An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a leverage ratio of less than 4% or a common equity Tier 1 ratio of less than 4.5%.
These funds are primarily used for the origination of loans, including one- to four-family residential first mortgage loans, commercial real estate mortgage loans, multi-family residential mortgage loans and consumer loans.
These funds are primarily used for the origination of loans, including one- to four-family residential first mortgage loans, commercial real estate mortgage loans, multi-family residential mortgage loans, one- to four- family residential construction loans and consumer loans.
Treasury obligations, securities of various federal agencies and of state and municipal governments, time deposits at federally insured banks and savings institutions, corporate debt obligations and federal funds. Our investment strategy is established by the board of directors. At December 31, 2022 2021 Amortized Market Amortized Market Cost Value Cost Value (Dollars in thousands) Securities available-for-sale U.S.
Treasury obligations, securities of various federal agencies and of state and municipal governments, time deposits at federally insured banks and savings institutions, corporate debt obligations and federal funds. Our investment strategy is established by the board of directors. At December 31, 2023 2022 Amortized Market Amortized Market Cost Value Cost Value (Dollars in thousands) Securities available-for-sale U.S.
An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the excess is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2022, North Shore Trust and Savings was in compliance with the loans-to-one borrower limitations. Capital Distributions .
An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the excess is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2023, North Shore Trust and Savings was in compliance with the loans-to-one borrower limitations. Capital Distributions .
The two largest commercial real estate loans outstanding were $1.8 million and $1.2 million, and both loans were paying in accordance with all of their contractual terms. Although terms for commercial real estate and multi-family residential loans vary, our underwriting standards generally allow for terms not exceeding 30 years and loan-to-value ratios of not more than 75%.
The two largest commercial real estate loans outstanding were $1.7 million and $1.2 million, and both loans were paying in accordance with all of their contractual terms. Although terms for commercial real estate and multi-family residential loans vary, our underwriting standards generally allow for terms not exceeding 30 years and loan-to-value ratios of not more than 75%.
Various officers or combinations of officers of North Shore Trust and Savings have the authority within specifically identified limits to approve new loans. As of December 31, 2022, the maximum loan amount that may be approved by an individual officer is $648,250, which is consistent with secondary market limits for conforming loans.
Various officers or combinations of officers of North Shore Trust and Savings have the authority within specifically identified limits to approve new loans. As of December 31, 2023 , the maximum loan amount that may be approved by an individual officer is $648,250, which is consistent with secondary market limits for conforming loans.
Available-for-sale securities are accounted for at fair value, with unrealized gains and losses on these securities, net of income tax provisions, reflected as accumulated other comprehensive income. At December 31, 2022, all securities were classified as securities available for sale. At December 31, 2022, we had no investments in a single issuer other than securities issued by U.S.
Available-for-sale securities are accounted for at fair value, with unrealized gains and losses on these securities, net of income tax provisions, reflected as accumulated other comprehensive income. At December 31, 2023 , all securities were classified as securities available for sale. At December 31, 2023 , we had no investments in a single issuer other than securities issued by U.S.
For many of these tasks a bank must keep records to be made available to its primary federal regulator. Anti-money laundering rules and policies are developed by a bureau within the Treasury Department, the Financial Crimes Enforcement Network ("FinCEN"), but compliance by individual institutions is overseen by its primary federal regulator.
For many of these tasks a bank must keep records to be made available to its primary federal regulator. Anti-money laundering rules and policies are developed by a bureau within the U.S. Department of the Treasury (the "U.S. Treasury"), the Financial Crimes Enforcement Network ("FinCEN"), but compliance by individual institutions is overseen by its primary federal regulator.
An insured depository institution’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as North Shore Trust and Savings.
An insured depository institution’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and its implementing Regulation W. An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as North Shore Trust and Savings.
The establishment of the allowance for loan losses is significantly affected by uncertainties and management judgment and there is a likelihood that different amounts would be reported under different conditions or assumptions. Various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses.
The establishment of the allowance for credit losses is significantly affected by uncertainties and management judgment and there is a likelihood that different amounts would be reported under different conditions or assumptions. Various regulatory agencies, as an integral part of their examination process, periodically review our allowance for credit losses.
Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years. 21 Table of Contents The FDIC has authority to increase insurance assessments.
Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years. 22 Table of Contents The FDIC has authority to increase insurance assessments.
At December 31, 2022, none of our commercial real estate or multi-family loans were delinquent more than 30 days, nor were any on non-accrual. We have had no charge-offs of commercial real estate and multi-family residential loans for the years ended December 31, 2022 and 2021.
At December 31, 2023 , none of our commercial real estate or multi-family loans were delinquent more than 30 days, nor were any on non-accrual. We have had no charge-offs of commercial real estate and multi-family residential loans for the years ended December 31, 2023 and 2022 .
The federal banking agencies have adopted an interagency policy statement on the allowance for loan losses. The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines.
The federal banking agencies have adopted an interagency policy statement on the allowance for credit losses. The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines.
Any change in applicable laws or regulations, whether by the OCC, the FDIC, the Federal Reserve Board, the SEC or Congress, could have a material adverse impact on the operations and financial performance of NSTS Bancorp, Inc. and North Shore Trust and Savings.
Any change in applicable laws or regulations, whether by the OCC, the FDIC, the Federal Reserve Board, the SEC or the U.S. Congress, could have a material adverse impact on the operations and financial performance of NSTS Bancorp, Inc. and North Shore Trust and Savings.
The fair values are expected to recover as the securities approach their maturity dates. The following table sets forth the amount of investment securities which mature during each of the periods indicated and the weighted average yields for each range of maturities as of December 31, 2022.
The fair values are expected to recover as the securities approach their maturity dates. The following table sets forth the amount of investment securities which mature during each of the periods indicated and the weighted average yields for each range of maturities as of December 31, 2023 .
North Shore Trust and Savings was in compliance with this requirement as of December 31, 2022 based on its ownership of $550,000 in capital stock of the FHLB of Chicago. The stock has no quoted market value and is carried at cost.
North Shore Trust and Savings was in compliance with this requirement as of December 31, 2023 based on its ownership of $550,000 in capital stock of the FHLB of Chicago. The stock has no quoted market value and is carried at cost.
The election is available to federal savings associations that had total consolidated assets of $20 billion or less as of December 31, 2017. North Shore Trust and Savings has not exercised the covered savings association election.
The election is available to federal savings associations that had total consolidated assets of $20.0 billion or less as of December 31, 2017. North Shore Trust and Savings has not exercised the covered savings association ("CSA") election.
Applicable regulations authorize a federal association that has exercised the covered savings association election to terminate the election and thereby again operate as a federal savings association that has not made a covered savings association election. We have no current plans to elect to be treated as a covered savings association. Capital Requirements .
Applicable regulations authorize a federal association that has exercised the CSA election to terminate the election and thereby again operate as a federal savings association that has not made a CSA election. We have no current plans to elect to be treated as a CSA. Capital Requirements .
General valuation allowances represent loss allowances which have been established to recognize the inherent losses associated with lending activities, but which, unlike specific allocations, have not been allocated to specific problem assets. When an insured institution classifies one or more assets, or portions thereof, as “loss,” it is required to charge off such amount.
General valuation allowances represent loss allowances which have been established to recognize the estimated credit losses associated with lending activities, but which, unlike specific allocations, have not been allocated to specific problem assets. When an insured institution classifies one or more assets, or portions thereof, as “loss,” it is required to charge off such amount.
We actively monitor the performance of these loans through the receipt of regular reports from the originating lender regarding the loan's performance. As of December 31, 2022, all purchased loans are paying as pursuant to their contractual terms.
We actively monitor the performance of these loans through the receipt of regular reports from the originating lender regarding the loan's performance. As of December 31, 2023, all purchased loans are paying as pursuant to their contractual terms.
These commercial real estate loans included 12 loans secured primarily by investor properties, which include multiple one- to four-family residences. Additionally, North Shore Trust and Savings has two commercial real estate loans secured by retail frontage.
These commercial real estate loans included 13 loans secured primarily by investor properties, which include multiple one to four-family residences. Additionally, North Shore Trust and Savings has two commercial real estate loans secured by retail frontage.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Current Accounting Developments" for further discussion. We review and classify loans on no less frequently than a quarterly basis and our board of directors is provided with reports on our classified and criticized assets. We classify assets in accordance with the management guidelines described above.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Current Accounting Developments" for further discussion. We rev iew and classify loans on no less frequently than a quarterly basis and our board of directors is provided with reports on our classified and criticized assets. We classify assets in accordance with the management guidelines described above.
The following table shows the scheduled contractual maturities of our loans as of December 31, 2022, before giving effect to net deferred loan costs and the allowance for loan losses. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.
The following table shows the scheduled contractual maturities of our loans as of December 31, 2023 , before giving effect to net deferred loan costs and the allowance for credit losses. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.
Attorney General resulting in monetary sanctions exceeding $1 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30% of the monetary sanctions collected and will receive increased protections; (iii) increased penalties for violations of anti-money laundering laws and regulations; (iv) improvements to existing information sharing provisions that permit financial institutions to share information relating to suspicious activity reports with foreign branches, subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks; and (v) expanded duties and enforcement powers for FinCEN.
Attorney General resulting in monetary sanctions exceeding $1.0 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30% of the monetary sanctions collected and will receive increased protections; (iii) increased penalties for violations of anti-money laundering laws and regulations; (iv) improvements to existing information sharing provisions that permit financial institutions to share information relating to suspicious activity reports with foreign branches, subsidiaries, and affiliates (except those located in the People's Republic of China, the Russian Federation or certain other jurisdictions) for the purpose of combating illicit finance risks; and (v) expanded duties and enforcement powers for FinCEN.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: ● general economic conditions, either nationally or in our market areas, that are different than expected; ● changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses; ● inflation and changes in the interest rate environment that reduce our margins and yields, reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans; ● our ability to access cost-effective funding, including significant fluctuations in our deposit accounts; ● major catastrophes such as tornadoes, floods or other natural disasters, as well as public health emergencies and pandemics, the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on us and our customers and other constituencies; ● further data processing and other technological changes that may be more difficult or expensive than expected; ● success or consummation of new business initiatives may be more difficult or expensive than expected; ● the inability of third-party service providers to perform; ● fluctuations in real estate values and both residential and commercial real estate market conditions; ● demand for loans and deposits in our market area; ● our ability to continue to implement our business strategies; ● competition among depository and other financial institutions; ● adverse changes in the securities markets; 2 Table of Contents ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; ● our ability to manage market risk, credit risk and operational risk in the current economic conditions; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; ● 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 or the Public Company Accounting Oversight Board; ● our ability to hire and retain key employees and our reliance on our executive officers; and ● our compensation expense associated with equity allocated or awarded to our employees.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: ● general economic conditions, either nationally or in our market areas, that are different than expected; ● changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for credit losses; ● fluctuations in real estate values and both residential and commercial real estate market conditions; ● inflation and changes in the interest rate environment that reduce our margins and yields, reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans; ● our ability to manage our liquidity and to access cost-effective funding, including significant fluctuations in our deposit accounts; ● major catastrophes such as tornadoes, floods or other natural disasters, as well as public health emergencies and pandemics, the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on us and our customers and other constituencies; ● further data processing and other technological changes that may be more difficult or expensive than expected; ● success or consummation of new business initiatives may be more difficult or expensive than expected; ● interruptions involving information technology and communications systems of service providers; ● breaches or failures of information security controls or cyber-related incidents; ● demand for loans and deposits in our market area; ● our ability to continue to implement our business strategies; ● competition among depository and other financial institutions; ● adverse changes in the securities markets; 2 Table of Contents ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; ● our ability to manage market risk, credit risk and operational risk in the current economic conditions; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; ● 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 or the Public Company Accounting Oversight Board; ● our ability to hire and retain key employees and our reliance on our executive officers; and ● our compensation expense associated with equity allocated or awarded to our employees.
However, federal savings associations that have made such an election are subject to the narrower authority of national banks in certain areas such as branching and subsidiary activities in certain respects. A covered savings association may generally not retain any assets, subsidiaries or activities not permitted for national banks.
However, federal savings associations that have made such an election are subject to the narrower authority of national banks in certain areas such as branching and subsidiary activities in certain respects. A CSA may generally not retain any assets, subsidiaries or activities not permitted for national banks.
Generally, a federal savings association, including a covered savings association, may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.
Generally, a federal savings association, including a CSA, may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.
Additionally, at December 31, 2022 we had a $10.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at December 31, 2022.
Additionally, at December 31, 2023 and 2022 we had a $10.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at December 31, 2023 and 2022.
North Shore Trust and Savings otherwise has implemented policies and procedures to comply with the foregoing requirements. The Treasury Department’s Office of Foreign Assets Control, or OFAC, is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress.
North Shore Trust and Savings otherwise has implemented policies and procedures to comply with the foregoing requirements. The U.S. Treasury's Office of Foreign Assets Control ("OFAC") is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of the U.S. Congress.
North Shore Trust and Savings has established appropriate anti-money laundering and customer identification programs. North Shore Trust and Savings also maintains records of cash purchases of negotiable instruments, files reports of certain cash transactions exceeding $10,000 (daily aggregate amount) and reports suspicious activity that might signify money laundering, tax evasion or other criminal activities pursuant to the Bank Secrecy Act.
North Shore Trust and Savings has established appropriate anti-money laundering and customer identification programs. North Shore Trust and Savings also maintains records of cash purchases of negotiable instruments, files reports of certain cash transactions exceeding $10,000 (daily aggregate amount) and reports suspicious activity that might signify money laundering, tax evasion or other criminal activities pursuant to the BSA.
NSTS Bancorp, Inc. could remain an “emerging growth company” for up to five years, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.
NSTS Bancorp, Inc. could remain an “emerging growth company” for up to five years following its intital public offering in 2022, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.
Our policy is to obtain an appraisal on real estate subject to foreclosure proceedings prior to the time of foreclosure. We obtain re-appraisals on a periodic basis, generally on at least an annual basis, on foreclosed properties. We also conduct inspections on foreclosed properties. We account for our impaired loans in accordance with generally accepted accounting principles.
Our policy is to obtain an appraisal on real estate subject to foreclosure proceedings prior to the time of foreclosure. We obtain re-appraisals on a periodic basis, generally on at least an annual basis, on foreclosed properties. We also conduct inspections on foreclosed properties. We account for our problem and potential problem loans in accordance with generally accepted accounting principles.
A covered savings association may make loans to its customers without regard to the lending restrictions applicable to federal savings associations, such as the percentage of capital or assets limits on various types of loans and the QTL Test.
A CSA may make loans to its customers without regard to the lending restrictions applicable to federal savings associations, such as the percentage of capital or assets limits on various types of loans and the QTL Test.
In addition, North Shore Trust and Savings and NSTS Bancorp, Inc. have an agreement that establishes a method for allocating and for reimbursing the payment of their consolidated tax liability. Employees and Human Capital Resources At December 31, 2022, we had 35 full-time equivalent employees.
In addition, North Shore Trust and Savings and NSTS Bancorp, Inc. have an agreement that establishes a method for allocating and for reimbursing the payment of their consolidated tax liability. Employees and Human Capital Resources At December 31, 2023 , we had 46 full-time equivalent employees.
As of December 31, 2022, North Shore Trust and Savings met the criteria for being considered “well-capitalized.” Insurance of Deposit Accounts . The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as North Shore Trust and Savings, generally up to a maximum of $250,000 per separately insured depositor.
As of December 31, 2023 , North Shore Trust and Savings met the criteria for being considered “well-capitalized.” Insurance of Deposit Accounts . The DIF of the FDIC insures deposits at FDIC-insured financial institutions such as North Shore Trust and Savings, generally up to a maximum of $250,000 per separately insured depositor.
In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider such factors as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on and the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.
In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider such factors as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on and the risk to the federal DIF, the convenience and needs of the community and competitive factors.
At December 31, 2022, our largest multi-family residential mortgage loan was an $861,000 loan secured by various one- to four-family investment homes and one multi-family apartment building located in Waukegan and North Chicago, Illinois, and was performing in accordance with its terms.
At December 31, 2023 , our largest multi-family residential mortgage loan was an $823,000 loan secured by various one to four-family investment homes and one multi-family apartment building located in Waukegan and North Chicago, Illinois, and was performing in accordance with its terms.
All insured depository institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. The OCC is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act.
All insured depository institutions have a responsibility under the CRA and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. The OCC is required to assess the federal savings association’s record of compliance with the CRA.
Government agencies or U.S. Government sponsored enterprises, which had an aggregate book value in excess of 10% of our stockholders’ equity. At December 31, 2022, the available-for-sale securities portfolio had a net unrealized loss position of $15.6 million. Some investment securities held in the portfolio have declined in value but do not presently represent realized losses.
Government agencies or U.S. Government sponsored enterprises, which had an aggregate book value in excess of 10% of our stockholders’ equity. At December 31, 2023, the available-for-sale securities portfolio had a net unrealized loss position of $11.5 million. Some investment securities held in the portfolio have declined in value but do not presently represent realized losses.
Our allowance for loan losses includes a portion which is allocated by type of loan, based primarily upon our periodic reviews of the risk elements within the various categories of loans. The specific components relate to certain impaired loans.
Our allowance for credit losses includes a portion which is allocated by type of loan, based primarily upon our periodic reviews of the risk elements within the various categories of loans. The specific components relate to certain individually evaluated loans.
Many of the amendments, including those with respect to beneficial ownership, require FinCEN to promulgate rules. On September 29, 2022, FinCEN finalized the first of three proposed rules to implement changes to the beneficial ownership requirements and related amendments set forth in the Corporate Transparency Act.
Many of the amendments, including those with respect to beneficial ownership, require FinCEN to promulgate rules. On September 29, 2022, FinCEN finalized the first of three proposed rules to implement changes to the beneficial ownership requirements and related amendments set forth in the CTA.
Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.
Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8.0%, and a 4.0% Tier 1 capital to total assets (known as the "leverage ratio").
The FDIC also has the authority to terminate deposit insurance or recommend to the OCC that enforcement action be taken with respect to a particular federal savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances. 20 Table of Contents Standards for Safety and Soundness .
The FDIC also has the authority to terminate deposit insurance or recommend to the OCC that enforcement action be taken with respect to a particular federal savings association. If such action is not taken by the OCC, the FDIC has authority to take action under specified circumstances. Standards for Safety and Soundness .
We also offer adjustable rate mortgage (“ARM”) loans where the interest rate either adjusts on an annual basis or is fixed for the initial three or five years and then adjusts annually. As of December 31, 2022, approximately 15.6% of our one- to four-family residential mortgage loans maturing after December 31, 2023 were ARM loans.
We also offer adjustable rate mortgage (“ARM”) loans where the interest rate either adjusts on an annual basis or is fixed for the initial three or five years and then adjusts annually. As of December 31, 2023 , approximately 25.5% of our one to four-family residential mortgage loans maturing after December 31, 2024 were ARM loans.
Applications for other loans typically are taken personally by one of our loan officers, although they may be received by a branch office initially and then referred to a loan officer. All loan applications are processed and underwritten centrally at our branch office located in Lindenhurst, Illinois.
Applications for other loans typically are taken personally by one of our loan officers, although they may be received by a branch office initially and then referred to a loan officer. All loan applications are processed and underwritten at our office locations in Lindenhurst, Plainfield and Aurora, Illinois.
Freddie Mac guarantees the timely payment of interest and the ultimate return of principal on participation certificates. Fannie Mae is a private corporation chartered by the U.S. Congress with a mandate to establish a secondary market for mortgage loans. Fannie Mae guarantees the timely payment of principal and interest on Fannie Mae securities.
Freddie Mac issues participation certificates backed principally by conventional mortgage loans. Freddie Mac guarantees the timely payment of interest and the ultimate return of principal on participation certificates. Fannie Mae is a private corporation chartered by the U.S. Congress with a mandate to establish a secondary market for mortgage loans.
The following table shows changes in our allowance for loan losses during the periods presented.
The following table shows changes in our allowance for credit losses during the periods presented.
Our consumer loans amounted to $249,000, or 0.2%, of our total loan portfolio at December 31, 2022. At December 31, 2022, our consumer loans were comprised of loans secured by deposits, auto loans and unsecured personal loans.
Our consumer loans amounted to $248,000 , or 0.2% , of our total loan portfolio at December 31, 2023 . At December 31, 2023 , our consumer loans were comprised of loans secured by deposits, auto loans and unsecured personal loans.
NSTS Bancorp, Inc. was formed to serve as the stock holding company for North Shore Trust and Savings (the “Bank”) in connection with the conversion of North Shore Trust and Savings, NSTS Financial Corporation and North Shore MHC (collectively, the “Company,” “we” or “our”), from the mutual to the stock form of organization, which was completed on January 18, 2022.
NSTS Bancorp, Inc. was formed to serve as the stock holding company for North Shore Trust and Savings (the “Bank”) in connection with the conversion of North Shore Trust and Savings, NSTS Financial Corporation and North Shore MHC, from the mutual to the stock form of organization, which was completed on January 18, 2022.
Expense and Tax Allocation North Shore Trust and Savings has an agreement with NSTS Bancorp, Inc., to provide it with certain administrative support services for compensation not less than the fair market value of the services provided. During the year ended December 31, 2022, the total of these services was $411,000.
Expense and Tax Allocation North Shore Trust and Savings has an agreement with NSTS Bancorp, Inc., to provide it with certain administrative support services for compensation not less than the fair market value of the services provided. During the year ended December 31, 2023, the total of these services was $1.2 million.
A qualifying community bank that exercises the election and has capital equal to or exceeding the applicable percentage is considered compliant with all applicable regulatory capital requirements. Qualifying institutions may elect to utilize the CBLR in lieu of the generally applicable risk-based capital requirements.
A qualifying community bank that exercises the election and has capital equal to or exceeding the applicable percentage is considered compliant with all applicable regulatory capital requirements. Qualifying institutions may elect to utilize the CBLR in lieu of the generally applicable risk-based capital requirements. North Shore Trust and Savings has elected to utilize the CBLR framework.
The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, institutions deemed less risky of failure pay lower assessments.
The FDIC charges insured depository institutions premiums to maintain the DIF. Under the FDIC’s risk-based assessment system, institutions deemed less risky of failure pay lower assessments.
At December 31, 2022, we had a total of 10 multi-family residential mortgage loans and the average size of our multi-family residential mortgage loans was approximately $324,000. Our commercial real estate loan portfolio amounted to $3.9 million, or 3.8% of the total loan portfolio, at December 31, 2022.
At December 31, 2023 , we had a total of 10 multi-family residential mortgage loans and the average size of our multi-family residential mortgage loans was approximately $311,000. Our commercial real estate loan portfolio amounted to $3.8 million, or 3.2% of the total loan portfolio, at December 31, 2023 .
Our deposits consist of checking, both interest-bearing and noninterest-bearing, money market, savings and time deposit accounts. As of December 31, 2022, 69.0% of the funds deposited with North Shore Trust and Savings were in core deposits, which are deposits other than time deposits.
Our deposits consist of checking, both interest-bearing and noninterest-bearing, money market, savings and time deposit accounts. As of December 31, 2023 , 60.2% of the funds deposited with North Shore Trust and Savings were in core deposits, which are deposits other than time deposits.
North Shore Trust and Savings, also, is a member of and owns stock in the FHLB of Chicago, which is one of the 11 regional banks in the Federal Home Loan Bank System.
North Shore Trust and Savings, also, is a member of and owns stock in the FHLB of Chicago, which is one of the 11 regional banks in the FHLB System.
At December 31, 2022 2021 (Dollars in thousands) Fixed-rate $ 118,524 $ 98,000 Adjustable-rate 2,681 2,950 Total securities available for sale $ 121,205 $ 100,950 Investment Activities Investments in mortgage-backed securities involve a risk that actual prepayments will be greater than estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments thereby changing the net yield on such securities.
At December 31, 2023 2022 (Dollars in thousands) Fixed-rate $ 80,899 $ 118,524 Adjustable-rate 1,236 2,681 Total securities available for sale $ 82,135 $ 121,205 Investment Activities Investments in mortgage-backed securities involve a risk that actual prepayments will be greater than estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments thereby changing the net yield on such securities.
There was no related specific valuation allowance in the allowance for loan losses on our classified loans at December 31, 2022 and 2021.
There was no related specific valuation allowance in the allowance for credit losses on our classified loans at December 31, 2023 and 2022 .
A federal savings association that has elected covered savings association status is subject to the laws and regulations governing the establishment of branches by national banks. Generally, intrastate and interstate branching is authorized to the extent that the law of the state involved authorizes branching for banks that it charters. Such authority is subject to OCC approval for new branches.
A federal savings association that has elected CSA status is subject to the laws and regulations governing the establishment of branches by national banks. Generally, intrastate and interstate branching is authorized to the extent that the law of the state involved authorizes branching for banks that it charters.
In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations.
In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, the Community Reinvestment Act of 1977 (the "CRA") and fair lending laws and regulations.
Loan operations are also subject to state and federal laws applicable to credit transactions, such as the: ● Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ● Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; and ● Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
Loan operations are also subject to state and federal laws applicable to credit transactions, such as the: ● Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ● Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; ● Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ● Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
One- to Four-Family Residential Mortgage Lending . One of our primary lending activities continues to be the origination of loans secured by first mortgages on one- to four-family residences in our market area. As of December 31, 2022, $95.6 million, or 92.8% of our total loan portfolio, consisted of one- to four-family residential mortgage loans.
One to Four-Family Residential Mortgage Lending . One of our primary lending activities continues to be the origination of loans secured by first mortgages on one to four-family residences in our market area. As of December 31, 2023 , $111.1 million, or 92.0% of our total loan portfolio, consisted of one to four-family residential mortgage loans.
A federal savings association also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form. Community Reinvestment Act and Fair Lending Laws .
A federal savings association also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form.
Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. Emerging Growth Company Status NSTS Bancorp, Inc. is an emerging growth company.
Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
The following table shows certain information regarding our borrowings at or for the dates indicated: At or For the Year Ended December 31, 2022 2021 (Dollars in thousands) FHLB of Chicago advances and other borrowings: Average balance outstanding $ 1,945 $ 4,616 Maximum amount outstanding at any month-end during the period 5,000 5,000 Balance outstanding at end of period — 5,000 Average interest rate during the period 0.0 % 0.0 % Weighted average interest rate at end of period 0.0 % 0.0 % As of December 31, 2022, there were no outstanding borrowings.
The following table shows certain information regarding our borrowings at or for the dates indicated: At or For the Year Ended December 31, 2023 2022 (Dollars in thousands) FHLB of Chicago advances and other borrowings: Average balance outstanding $ 3,461 $ 1,945 Maximum amount outstanding at any month-end during the period 15,000 5,000 Balance outstanding at end of period 5,000 — Average interest rate during the period 5.0 % 0.0 % Weighted average interest rate at end of period 4.8 % 0.0 % As of December 31, 2023 , there was $5.0 million in outstanding borrowings with the FHLB Chicago.
The Bank is eligible to borrow up to a total of $68.6 million and $60.8 million at December 31, 2022 and 2021, respectively, which would be collateralized by $86.6 million and $76.8 million of first mortgage loans under a blanket lien arrangement at December 31, 2022 and 2021, respectively.
The Bank is eligible to borrow up to a total of $77.2 million and $68.6 million at December 31, 2023 and 2022 , respectively, which would be collateralized by $102.6 million and $86.6 million of first mortgage loans under a blanket lien arrangement at December 31, 2023 and 2022 , respectively.

… 133 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed0 unchanged
Biggest changeRoscoe Street, Chicago, Illinois 60618(1) N/A N/A (1) The loan production office is leased by North Shore Trust and Savings and does not accept deposits. The lease expired on December 31, 2022 and was renewed through December 31, 2023.
Biggest changeRoscoe Street, Chicago, Illinois 60618 (1) N/A N/A 75 Executive Dr, Aurora, Illinois 60504 (2) N/A N/A 24252 West Main Street, Plainfield, Illinois 60544 (2) N/A N/A (1) The loan production office is leased by North Shore Trust and Savings and does not accept deposits. The lease expired on December 31, 2023 and was not renewed.
Item 2. Properties We currently conduct business from our main office, two full-service branch offices and one loan production office. The following table sets forth the net book value of the land, building and leasehold improvements and certain other information with respect to our offices at December 31, 2022.
Item 2. Properties We currently conduct business from our main office, two full-service branch offices and three loan production offices. The following table sets forth the net book value of the land, building and leasehold improvements and certain other information with respect to our offices at December 31, 2023 .
Description/Address Net Book Value of Property Amount of Deposits (Dollars in thousands) Main Office: 700 S. Lewis Avenue, Waukegan, Illinois 60085 $ 791 $ 114,324 Branch Offices: 1233 N. Green Bay Road, Waukegan, Illinois 60085 937 44,208 3060 W. Sand Lake Road, Lindenhurst, Illinois 60046 3,185 20,182 Total $ 4,913 $ 178,714 Loan Production Offices: 2149 W.
Description/Address Net Book Value of Property Amount of Deposits (Dollars in thousands) Main Office: 700 S. Lewis Avenue, Waukegan, Illinois 60085 $ 823 $ 106,529 Branch Offices: 1233 N. Green Bay Road, Waukegan, Illinois 60085 1,040 39,610 3060 W. Sand Lake Road, Lindenhurst, Illinois 60046 3,316 22,687 Total $ 5,179 $ 168,826 Loan Production Offices: 2149 W.
Added
A new lease was signed for 875 N. Michigan Ave, Chicago, IL 60611 which is set to expire in December 2024. (2) T he loan production offices are leased by North Shore Trust and Savings and do not accept deposits. The leases are short-term in nature and expire in 12-24 months.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeIn the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not Applicable. PART II
Biggest changeIn the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on our financial condition, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+9 added−0 removed4 unchanged
Biggest changeAdditionally, Federal Reserve policy could restrict future dividends on our common stock, depending on our earnings and capital position and likely needs. See “Supervision and Regulation – Federal Banking Regulations - Capital Distributions” and "Supervision and Regulation - Holding Company Regulations". There were no unregistered sales of NSTS Bancorp, Inc.'s common stock during the year ended December 31, 2022.
Biggest changeAdditionally, Federal Reserve policy could restrict future dividends on our common stock, depending on our earnings and capital position and likely needs. See “Supervision and Regulation – Federal Banking Regulations - Capital Distributions” and "Supervision and Regulation - Holding Company Regulations".
As of March 27, 2023, there were 5,397,959 shares of our common stock issued and outstanding, which were held by approximately 280 stockholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms).
As of March 25, 2024, there were 5,585,159 shares of our common stock issued and 5,315,261 shares outstanding, which were held by approximately 229 stockholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms).
Additionally, there were no repurchases of shares of NSTS Bancorp, Inc.’s common stock during the year ended December 31, 2022. 26 Table of Contents Item 6. [Reserved]
There were no unregistered sales of NSTS Bancorp, Inc.'s common stock during the year ended December 31, 2023 . 29 Table of Contents Item 6. [Reserved]
Added
Is suer Purchases of Securities On March 29, 2023, the Company adopted a program to repurchase up to 269,898 shares, or 5%, of its then outstanding common stock. The original program expired on September 29, 2023 and was extended with a new expiration date of September 30, 2024, unless terminated earlier.
Added
As of October 30, 2023, the Company had completed the share repurchase program, repurchasing a total of 269,898 shares for approximately $2.4 million at an average cost of $8.82 per share.
Added
Effective December 21, 2023, the Company's Board of Directors authorized a new share repurchase program that authorizes the Company to repurchase up to an aggregate of 265,763 shares, or 5%, of its then outstanding common stock. The program will be in effect until December 31, 2024, unless earlier terminated.
Added
Under the new share repurchase program, the Company is authorized to repurchase shares from time to time in the open market or negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws.
Added
In connection with the share repurchase program, the Company intends to implement a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1 under the Securities Exchange Act.
Added
The trading plan will allow the Company to repurchase shares of its common stock at times when it otherwise might have been prevented from doing so under insider trading laws by requiring that an agent selected by the Company repurchase shares of common stock on the Company's behalf on pre-determined terms.
Added
The following table sets forth information about the Company's purchases of its common stock during the three months ended December 31, 2023. There were no repurchases during the months ended November 30, 2023 and December 31, 2023.
Added
(a) (b) (c) (d) Period Total number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased As part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet to be Purchased Under the Plans or Programs (1) October 1 - October 31, 2023 117,217 $ 8.75 117,217 — Total 117,217 $ 8.75 117,217 — (1) On March 29, 2023, the Company adopted a program to repurchase up to 269,898 shares, or 5%, of its then outstanding common stock.
Added
The original program expired on September 29, 2023 and was extended with a new expiration date of September 30, 2024, unless terminated earlier. As of October 30, 2023, the Company had repurchased all of the shares remaining available to be repurchased pursuant to the terms of the then existing stock repurchase program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8. Financial Statements and Supplementary Data 36 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 36 Item 9A. Controls and Procedures 37
Biggest changeItem 6. [Reserved] 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 40 Item 8. Financial Statements and Supplementary Data 40 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 40 Item 9A. Controls and Procedures 41

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

47 edited+64 added−59 removed31 unchanged
Biggest changeAt or For the Year Ended December 31, 2022 2021 Average Outstanding Balance Interest Average Yield/ Rate Average Outstanding Balance Interest Average Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans $ 97,714 $ 3,618 3.70 % $ 98,409 $ 3,569 3.63 % Interest-bearing bank deposits 38,061 259 0.68 % 33,384 35 0.10 % Time deposits with other financial institutions 3,926 41 1.04 % 6,889 66 0.96 % Securities available for sale 118,988 2,415 2.03 % 94,289 1,355 1.44 % Federal Home Loan Bank stock 550 15 2.73 % 540 13 2.41 % Total interest-earning assets $ 259,239 $ 6,348 2.45 % $ 233,511 $ 5,038 2.16 % Noninterest-earning assets 21,010 16,159 Total assets $ 280,249 $ 249,670 Interest-bearing liabilities: Interest-bearing demand $ 17,817 $ 9 0.05 % $ 17,738 $ 8 0.05 % Money market 45,328 96 0.21 % 46,985 96 0.20 % Savings 48,787 73 0.15 % 45,609 68 0.15 % Time deposits 61,414 586 0.95 % 67,253 768 1.14 % Total interest-bearing deposits $ 173,346 $ 764 0.44 % $ 177,585 $ 940 0.53 % Other borrowings (1) 1,945 — 0.00 % 4,616 — 0.00 % Total interest-bearing liabilities $ 175,291 $ 764 0.44 % $ 182,201 $ 940 0.52 % Noninterest-bearing liabilities 23,038 21,417 Total liabilities $ 198,329 $ 203,618 Equity 81,920 46,052 Total liabilities and equity $ 280,249 $ 249,670 Net interest income $ 5,584 $ 4,098 Interest rate spread (2) 2.01 % 1.64 % Net interest-earning assets (3) 83,948 51,310 Net interest margin (4) 2.15 % 1.75 % Average interest-earning assets to average-interest bearing liabilities 147.89 % 128.16 % (1) Other borrowing consists of 0% interest rate FHLB of Chicago advances.
Biggest changeAt or For the Year Ended December 31, 2023 2022 Average Outstanding Balance Interest Average Yield/ Rate Average Outstanding Balance Interest Average Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans $ 107,438 $ 4,360 4.06 % $ 97,714 $ 3,618 3.70 % Interest-bearing bank deposits 9,805 348 3.55 % 38,061 259 0.68 % Time deposits with other financial institutions 2,736 94 3.44 % 3,926 41 1.04 % Securities available for sale 114,744 2,902 2.53 % 118,988 2,415 2.03 % Federal Home Loan Bank stock 550 24 4.36 % 550 15 2.73 % Total interest-earning assets $ 235,273 $ 7,728 3.28 % $ 259,239 $ 6,348 2.45 % Noninterest-earning assets 21,550 21,010 Total assets $ 256,823 $ 280,249 Interest-bearing liabilities: Interest-bearing demand $ 16,714 $ 9 0.05 % $ 17,817 $ 9 0.05 % Money market 36,875 226 0.61 % 45,328 96 0.21 % Savings 45,696 68 0.15 % 48,787 73 0.15 % Time deposits 56,573 1,033 1.83 % 61,414 586 0.95 % Total interest-bearing deposits $ 155,858 $ 1,336 0.86 % $ 173,346 $ 764 0.44 % Other borrowings 3,461 172 4.97 % 1,945 — 0.00 % Total interest-bearing liabilities $ 159,319 $ 1,508 0.95 % $ 175,291 $ 764 0.44 % Noninterest-bearing liabilities 17,896 23,038 Total liabilities $ 177,215 $ 198,329 Equity 79,608 81,920 Total liabilities and equity $ 256,823 $ 280,249 Net interest income $ 6,220 $ 5,584 Interest rate spread (1) 2.33 % 2.01 % Net interest-earning assets (2) 75,954 83,948 Net interest margin (3) 2.64 % 2.15 % Average interest-earning assets to average-interest bearing liabilities 147.67 % 147.89 % (1) Equals the difference between the yield on average earning-assets and the cost of average interest-bearing liabilities.
A receivable is recorded in other assets on the consolidated balance sheets to reflect the remaining amount of the credit yet to be received. The CARES Act and related Employee Retention Credit was terminated as of September 30, 2021, and therefore the Company does not expect to file for any additional refunds. Allowance for Loan Losses .
A receivable is recorded in other assets on the consolidated balance sheets to reflect the remaining amount of the credit yet to be received. The CARES Act and related Employee Retention Credit was terminated as of September 30, 2021, and therefore the Company does not expect to file for any additional refunds. Allowance for Credit Losses .
Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results. 34 Table of Contents Liquidity and Capital Resources North Shore Trust and Savings maintains levels of liquid assets deemed adequate by management.
Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results. 37 Table of Contents Liquidity and Capital Resources North Shore Trust and Savings maintains levels of liquid assets deemed adequate by management.
Our results of operations and financial condition are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, changes in accounting guidance, government policies and actions of regulatory authorities. 27 Table of Contents Critical Accounting Policies In reviewing and understanding financial information for NSTS Bancorp, Inc., you are encouraged to read and understand the significant accounting policies used in preparing our financial statements.
Our results of operations and financial condition are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, changes in accounting guidance, government policies and actions of regulatory authorities. 30 Table of Contents Critical Accounting Policies In reviewing and understanding financial information for NSTS Bancorp, Inc., you are encouraged to read and understand the significant accounting policies used in preparing our financial statements.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations This discussion and analysis reflects the consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of the financial condition and results of operations of NSTS Bancorp, Inc. and North Shore Trust and Savings for the years ended December 31, 2022 and 2021.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations This discussion and analysis reflects the consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of the financial condition and results of operations of NSTS Bancorp, Inc. and North Shore Trust and Savings for the years ended December 31, 2023 and 2022 .
Results of operations are also affected by our provisions for loan losses, fee income and other noninterest income and noninterest expense. Noninterest expense principally consists of compensation, office occupancy and equipment expense, data processing, advertising and business promotion and other expenses. We expect that our noninterest expenses will increase as we grow and expand our operations.
Results of operations are also affected by our provisions for credit losses, fee income and other noninterest income and noninterest expense. Noninterest expense principally consists of compensation, office occupancy and equipment expense, data processing, advertising and business promotion and other expenses. We expect that our noninterest expenses will increase as we grow and expand our operations.
Management reviews the quarterly reports from the OCC, which show the impact of changing interest rates on net portfolio value. The following table sets forth our NPV as of December 31, 2022 and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.
Management reviews the quarterly reports from the OCC, which show the impact of changing interest rates on net portfolio value. The following table sets forth our NPV as of December 31, 2023 and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.
In addition to modeling changes in NPV, we also analyze potential changes to net interest income (“NII”) for a 12-month period under rising and falling interest rate scenarios. The following table shows our NII model as of December 31, 2022.
In addition to modeling changes in NPV, we also analyze potential changes to net interest income (“NII”) for a 12-month period under rising and falling interest rate scenarios. The following table shows our NII model as of December 31, 2023 .
As of December 31, 2022, tax years remaining open for State of Illinois and Wisconsin were 2018 through 2021. Federal tax years that remained open were 2019 through 2021. As of December 31, 2022, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.
As of December 31, 2023 , tax years remaining open for State of Illinois and Wisconsin were 2019 through 2022. Federal tax years that remained open were 2020 through 2022. As of December 31, 2023 , there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.
Due to the uncertainty that the Bank will be able to generate future state taxable income sufficient to utilize the net operating loss carryforwards, a full valuation allowance of $371,000 has been recorded on the related deferred tax asset. There were no uncertain tax positions outstanding as of December 31, 2022 and 2021.
Additionally, due to the uncertainty that the Bank will be able to generate future state taxable income sufficient to utilize the net operating loss carryforwards, a full valuation allowance of $532,000 has been recorded on the related deferred tax asset. There were no uncertain tax positions outstanding as of December 31, 2023 and 2022 .
We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Time deposits that are scheduled to mature in less than one year from December 31, 2022, totaled $30.6 million.
We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Time deposits that are scheduled to mature in less than one year from December 31, 2023 , totaled $46.6 million.
We also originate multi-family and commercial real estate loans and, to a lesser extent, construction, home equity, and consumer loans. We currently operate three full-service banking offices in Lake County, Illinois and one loan production office in Chicago.
We also originate multi-family and commercial real estate loans and, to a lesser extent, construction, home equity, and consumer loans. We currently operate three full-service banking offices in Lake County, Illinois and three loan production offices in Chicago, Plainfield and Aurora, Illinois.
Net cash (used in) provided by financing activities, consisting primarily of the activity in deposit accounts, proceeds from the issuance of common stock and FHLB of Chicago advances, was $(67.0) million and $100.1 million for the years ended December 31, 2022 and 2021, respectively. We are committed to maintaining a strong liquidity position.
Net cash used in financing activities, consisting primarily of the activity in deposit accounts, proceeds from the issuance of common stock and FHLB of Chicago advances, was $7.1 million and $67.0 million for the years ended December 31, 2023 and 2022 , respectively. We are committed to maintaining a strong liquidity position.
These policies are described in Note 1 of the notes to our consolidated financial statements beginning on page 47 of this filing. Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.
These policies are described in Note 1 of the notes to our consolidated financial statements included within this filing. Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.
The following table summarizes our contractual cash obligations at December 31, 2022.
The following table summarizes our contractual cash obligations at December 31, 2023 .
The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $3.0 million and $1.5 million for the year ended December 31, 2022 and 2021, respectively.
The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $431,000 and $3.0 million for the years ended December 31, 2023 and 2022 , respectively.
During 2022, management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated is the cumulative taxable loss incurred over the three-year period ended December 31, 2022.
During the year ended December 31, 2023, management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing net operating losses. A significant piece of objective negative evidence evaluated is the cumulative taxable loss incurred over the four-year period ended December 31, 2023.
Net cash used in investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $44.5 million and $11.8 million for the years ended December 31, 2022 and 2021, respectively.
Net cash provided by or (used in) investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $25.0 million and $(44.5) million for the years ended December 31, 2023 and 2022 , respectively.
For the year ended December 31, 2022, we had a net income of $27,000 compared to a net loss of $55,000 for the year ended December 31, 2021.
For the year ended December 31, 2023, we had a net loss of $4.0 million compared to net income of $27,000 for the year ended December 31, 2022 .
The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at December 31, 2022.
Our total letters and lines of credit and unused lines of credit totaled $4.1 million at December 31, 2023 . Commitments . The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at December 31, 2023 .
Total at Payments Due By Period December 31, 2022 To 1 Year 1-3 Years 4-5 Years After 5 Years (Dollars in thousands) Time deposits $ 55,386 $ 30,618 $ 20,078 $ 4,690 $ — Total contractual obligations $ 55,386 $ 30,618 $ 20,078 $ 4,690 $ — Impact of Inflation and Changing Prices The financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation.
Total at Payments Due By Period December 31, 2023 To 1 Year 1-3 Years 4-5 Years After 5 Years (Dollars in thousands) Time deposits $ 67,255 $ 46,637 $ 13,945 $ 6,673 $ — Other borrowings 5,000 — 5,000 — — Total contractual obligations $ 72,255 $ 46,637 $ 18,945 $ 6,673 $ — Impact of Inflation and Changing Prices The financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation.
Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates. Current Accounting Developments The following ASU has been issued by the FASB but is not yet effective.
Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.
Our interest rate spread increased to 2.01% for the year ended December 31, 2022 from 1.64% for the year ended December 31, 2021, and our net interest margin increased to 2.15% for the year ended December 31, 2022 from 1.75% for the year ended December 31, 2021.
Our interest rate spread increased to 2.33% for the year ended December 31, 2023 from 2.01% for the same period ending December 31, 2022. Our net interest margin increased to 2.64% for the year ended December 31, 2023 from 2.15% for the same period ended December 31, 2022.
We also have the ability to borrow from the FHLB of Chicago and a $10.0 million unsecured Fed Funds facility with BMO Harris Bank. At December 31, 2022, we had no outstanding advances from the FHLB of Chicago and had the capacity to borrow approximately $68.6 million from the FHLB of Chicago.
We also have the ability to borrow from the FHLB of Chicago and a $10.0 million unsecured Fed Funds facility with BMO Harris Bank.
Change in Interest Rates in Basis Points Net Interest (Rate Shock) Income $ Change % Change (Dollars in thousands) 300bp $ 6,442 $ (736 ) (10.3 )% 200 6,805 (373 ) (5.2 )% 100 7,067 (111 ) (1.5 )% Static 7,178 — 0.0 % -100 6,898 (280 ) (3.9 )% -200 6,633 (545 ) (7.6 )% The table above indicates that as of December 31, 2022, in the event of an immediate and sustained 300 basis point increase in interest rates, our net interest income for the twelve months ending December 31, 2023 would be expected to decrease by $736,000, or 10.3% to $6.4 million.
Change in Interest Rates in Basis Points Net Interest (Rate Shock) Income $ Change % Change (Dollars in thousands) 300bp $ 5,985 $ (239 ) (3.8 )% 200 6,169 (55 ) (0.9 )% 100 6,251 27 0.4 % Static 6,224 — 0.0 % -100 6,025 (199 ) (3.2 )% -200 5,833 (391 ) (6.3 )% The table above indicates that as of December 31, 2023 , in the event of an immediate and sustained 300 basis point increase in interest rates, our net interest income for the twelve months ending December 31, 2024 would be expected to decrease by $239,000, or 3.8% to $6.0 million.
The following table shows the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and expense during the periods indicated.
(2) Equals total interest-earning assets less total interest-bearing liabilities. (3) Equals net interest income divided by average interest-earning assets. 33 Table of Contents Rate/Volume Analysis . The following table shows the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and expense during the periods indicated.
North Shore Trust and Savings’ Tier 1 capital to Average Assets was 24.81% and 16.11% at December 31, 2022 and 2021, respectively. Off-Balance Sheet Arrangements . At December 31, 2022, we had $793,000 of outstanding commitments to originate loans. Our total letters and lines of credit and unused lines of credit totaled $2.9 million at December 31, 2022. Commitments .
North Shore Trust and Savings’ Tier 1 capital to Average Assets was 24.72% and 24.81% at December 31, 2023 and 2022 , respectively. Off-Balance Sheet Arrangements . At December 31, 2023 , we had $3.8 million of outstanding commitments to originate loans.
Total Amounts Committed at Amount of Commitment Expiration – Per Period December 31, 2022 To 1 Year 1-3 Years 4-5 Years After 5 Years (Dollars in thousands) Unused line of credit $ 2,872 $ 125 $ 650 $ 852 $ 1,245 Commitments to originate loans 793 793 — — — Total commitments $ 3,665 $ 918 $ 650 $ 852 $ 1,245 35 Table of Contents Contractual Cash Obligations .
Total Amounts Committed at Amount of Commitment Expiration – Per Period December 31, 2023 To 1 Year 1-3 Years 4-5 Years After 5 Years (Dollars in thousands) Unused line of credit $ 4,050 $ 561 $ 927 $ 247 $ 2,315 Commitments to originate loans 3,770 3,770 — — — Total commitments $ 7,820 $ 4,331 $ 927 $ 247 $ 2,315 38 Table of Contents Contractual Cash Obligations .
For the Year Ended December 31, 2022 2021 (Dollars in thousands) Noninterest income: Gain on sale of mortgage loans $ 106 $ 410 Gain on sale of securities - 131 Rental income on office building 53 42 Service charges on deposits 291 289 Increase in cash surrender value of BOLI 178 181 Other 608 156 Total noninterest income $ 1,236 $ 1,209 Noninterest income stayed flat at $1.2 million for the years ended December 31, 2022 and 2021.
For the Year Ended December 31, 2023 2022 (Dollars in thousands) Noninterest income: Gain on sale of mortgage loans $ 32 $ 106 Loss on sale of securities (1,794 ) — Rental income on office building 64 53 Service charges on deposits 270 291 Increase in cash surrender value of BOLI 192 178 Other 86 608 Total noninterest income $ (1,150 ) $ 1,236 Noninterest income decreased $2.4 million for the year ended December 31, 2023 compared 2022.
For the year ended December 31, 2022 2021 (Dollars in thousands) Noninterest expense: Salaries and employee benefits $ 3,846 $ 3,141 Equipment and occupancy 658 665 Data processing 632 613 Professional services 500 139 Advertising 90 71 Supervisory fees and assessments 142 126 Loan expenses 86 129 Deposit expenses 203 183 Director fees 223 225 Other 497 307 Total noninterest expense $ 6,877 $ 5,599 Noninterest expense increased $1.3 million, or 23.2%, to $6.9 million for the year ended December 31, 2022, compared to $5.6 million for the year ended December 31, 2021.
For the year ended December 31, 2023 2022 (Dollars in thousands) Noninterest expense: Salaries and employee benefits $ 4,554 $ 3,846 Equipment and occupancy 739 658 Data processing 684 632 Professional services 601 500 Advertising 104 90 Supervisory fees and assessments 140 142 Loan expenses 117 86 Deposit expenses 217 203 Director fees 216 223 Other 480 497 Total noninterest expense $ 7,852 $ 6,877 Noninterest expense increased $975,000 for the year ended December 31, 2023 to $7.9 million compared to $6.9 million for 2022.
Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity. 29 Table of Contents Other Borrowings . During the year ended December 31, 2022, the Bank repaid the 0% interest FHLB Advance of $5.0 million, resulting in no Other Borrowings as of December 31, 2022. Total Equity .
Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity. 32 Table of Contents Other borrowings. During the year ended December 31, 2023, the Bank borrowed $5.0 million from the FHLB Chicago with a term of 24 months at 4.78%.
As of December 31, 2022, North Shore Trust and Savings was well capitalized under the regulatory framework for prompt corrective action. During the year ended December 31, 2020, North Shore Trust and Savings elected to begin using the CBLR.
During the year ended December 31, 2020, North Shore Trust and Savings elected to begin using the CBLR.
As of December 31, 2022, we had total assets of $264.2 million, including $103.4 million in net loans and $121.2 million of securities available for sale, total deposits of $178.7 million and total equity of $80.5 million.
As of December 31, 2023 , we had total assets of $256.8 million, including $120.6 million in net loans and $82.1 million of securities available for sale, total deposits of $168.8 million and total equity of $77.5 million.
During the year ended December 31, 2022, the Bank recorded income tax expense of $146,000, consisting of $133,000 current tax benefit, $64,000 deferred tax expense and $215,000 change in valuation allowance. Federal net operating losses as of December 31, 2022 and 2021 are $1.7 million and $1.5 million, respectively, and do not expire.
During the year ended December 31, 2023, the Bank recorded income tax expense of $1.0 million, consisting of $9,000 current tax expense, $2.1 million change in valuation allowance and $1.2 million deferred tax benefit.
Net interest income increased $1.5 million, or 36.6%, to $5.6 million for the year ended December 31, 2022 compared to $4.1 million for the year ended December 31, 2021.
Additionally, the Bank recorded a higher provision for credit losses during the year ended 2023 compared to the year ended 2022. Net Interest Income. Net interest income increased $636,000, or 11.4%, to $6.2 million for the year ended December 31, 2023 compared to $5.6 million for the year ended December 31, 2022.
Change in Interest NPV as % of Rates In Basis Points Net Portfolio Value Portfolio Value of Assets (Rate Shock) Amount $ Change % Change NPV Ratio Change (Dollars in thousands) 300bp $ 63,320 $ (15,081 ) (19.2 )% 27.4 % (3.1 )% 200 68,051 (10,350 ) (13.2 )% 28.5 % (2.0 )% 100 73,189 (5,212 ) (6.6 )% 29.6 % (0.9 )% Static 78,401 — — 30.5 % — -100 81,297 2,896 3.7 % 30.5 % 0.0 % -200 83,505 5,104 6.5 % 30.3 % (0.2 )% Net Interest Income Analysis .
Change in Interest NPV as % of Rates In Basis Points Net Portfolio Value Portfolio Value of Assets (Rate Shock) Amount $ Change % Change NPV Ratio Change (Dollars in thousands) 300bp $ 58,780 $ (13,947 ) (19.2 )% 26.4 % (3.1 )% 200 63,144 (9,583 ) (13.2 )% 27.5 % (2.0 )% 100 67,743 (4,984 ) (6.9 )% 28.5 % (1.0 )% Static 72,727 — — 29.5 % — -100 75,239 2,512 3.5 % 29.6 % 0.1 % -200 77,083 4,356 6.0 % 29.4 % (0.1 )% Net Interest Income Analysis .
Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize FHLB of Chicago advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.
However, if a substantial portion of these deposits is not retained, we may utilize FHLB of Chicago advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. As of December 31, 2023 , North Shore Trust and Savings was well capitalized under the regulatory framework for prompt corrective action.
It is established through a provision for loan losses charged to earnings. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries are added to the allowance.
The allowance for credit losses, including the allowance for credit losses on loans, allowance for credit losses on off-balance sheet liabilities and the allowance for credit losses on available-for-sale securities, is established through a provision for credit losses charged to earnings. Credit losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.
Years Ended December 31, 2022 vs. 2021 Total Increase (Decrease) Due to Increase Volume Rate (Decrease) (Dollars in thousands) Interest-earning assets: Loans $ (25 ) $ 74 $ 49 Federal funds sold and interest-bearing deposits in other banks 6 218 224 Time deposits in other banks (31 ) 6 (25 ) Investment securities 412 648 1,060 FHLB of Chicago stock — 2 2 Total interest-earning assets $ 362 $ 948 $ 1,310 Interest-bearing liabilities: Interest-bearing demand $ - $ 1 $ 1 Money market (3 ) 3 — Savings 5 — 5 Time deposit (63 ) (119 ) (182 ) Total interest-bearing liabilities $ (61 ) $ (115 ) $ (176 ) Change in net interest income $ 423 $ 1,063 $ 1,486 Comparison of Operating Results for the Years Ended December 31, 2022 and 2021 General.
Years Ended December 31, 2023 vs. 2022 Total Increase (Decrease) Due to Increase Volume Rate (Decrease) (Dollars in thousands) Interest-earning assets: Loans $ 378 $ 364 $ 742 Federal funds sold and interest-bearing deposits in other banks (314 ) 403 89 Time deposits in other banks (16 ) 69 53 Investment securities (89 ) 576 487 FHLB of Chicago stock — 9 9 Total interest-earning assets $ (41 ) $ 1,421 $ 1,380 Interest-bearing liabilities: Interest-bearing demand $ (1 ) $ 1 $ — Money market (21 ) 151 130 Savings (5 ) — (5 ) Time deposit (50 ) 497 447 Total interest-bearing deposits $ (77 ) $ 649 $ 572 Other borrowings — 172 172 Total interest-bearing liabilities $ (77 ) $ 821 $ 744 Change in net interest income $ 36 $ 600 $ 636 Comparison of Operating Results for the Years Ended December 31, 2023 and 2022 General.
To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for loan losses may be required that would adversely impact earnings in future periods. 28 Table of Contents Comparison of Financial Condition at December 31, 2022 and December 31, 2021 At December 31, 2022 2021 (Dollars in thousands) Selected Consolidated Financial Condition Data: Total assets $ 264,206 $ 340,869 Cash and cash equivalents 13,147 121,611 Securities available for sale 121,205 100,950 Federal Home Loan Bank stock 550 550 Loans, net 103,359 96,534 Total deposits 178,714 285,621 Other borrowings — 5,000 Total equity $ 80,542 $ 45,183 Total Assets .
See Note 1 – Basis of Presentation and Changes in Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for a discussion of our allowance for credit losses. 31 Table of Contents Comparison of Financial Condition at December 31, 2023 and December 31, 2022 At December 31, 2023 2022 (Dollars in thousands) Selected Consolidated Financial Condition Data: Total assets $ 256,776 $ 264,206 Cash and cash equivalents 31,388 13,147 Securities available for sale 82,135 121,205 Federal Home Loan Bank stock 550 550 Loans, net 120,623 103,359 Total deposits 168,826 178,714 Other borrowings 5,000 — Total equity $ 77,545 $ 80,542 General.
The FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326) . The ASU introduces a new credit loss model, the current expected credit loss model ("CECL"), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.
Current Accounting Developments In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ,” also known as Current Expected Credit Losses, or CECL.
Notwithstanding a general increase in market interest rates during 2022, the cost of interest-bearing liabilities decreased 8 basis points for the year ended December 31, 2022 compared to the year ended December 31, 2021. The net decrease in our funding costs was primarily driven by a decrease in the average yield of time deposits.
The increased yield on securities available-for-sale was the result of an overall increase in market rates available at the time of purchase throughout 2022. The cost of interest-bearing deposits increased 42 basis points, to 0.86%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2023, a full valuation allowance of $2.1 million, against the net deferred tax assets has been recorded.
For the year ended December 31, 2022, we had net income of $27,000, compared to a net loss of $55,000 for the year ended December 31, 2021.
Treasury notes with an average expected yield in excess of 5.0% and to fund additional residential loan growth and general working capital at the Bank. For the year ended December 31, 2023, we had a net loss of $4.0 million, compared to net income of $27,000 for the year ended December 31, 2022.
Total equity increased $35.3 million, or 78.1%, to $80.5 million at December 31, 2022, from $45.2 million at December 31, 2021. The increase in total equity is the result of the net proceeds of the conversion stock offering, less unallocated shares of the ESOP, offset by the increase in the unrealized loss on securities available for sale.
Total Equity . Total equity decreased $3.0 million to $77.5 million at December 31, 2023 primarily due to the net loss of $4.0 million for the year ended December 31, 2023 and the repurchase of outstanding shares. This decrease was partially offset by a decrease in the unrealized loss position on the securities available-for-sale portfolio.
During the year ended December 31, 2022, the Bank did not sell any securities available for sale, primarily as a result of the unrealized loss position of the securities. Management does not currently intend to sell securities in an unrealized loss position. Additionally, during 2022, we sold $8.6 million in loans compared to $21.2 million during 2021.
During 2023, the Bank sold approximately $30.3 million in book value of lower yielding available-for-sale investment securities, generating a loss of $1.8 million. Additionally, the gain on sale of mortgage loans decreased $74,000, or 69.8%, to $32,000 for the year ended December 31, 2023 compared to $106,000 for the year ended December 31, 2022.
During the fourth quarter of 2022, management increased interest rates on premium money market accounts and new time deposits to stay competitive with rates offered in our market area. 31 Table of Contents Reversal of Provision for Loan Losses.
The net increase in our funding costs for 2023 was primarily due to a CD special offered during 2023 to attract and retain customers, as well as an increase in rates offered on money market accounts, which were increased in the fourth quarter of 2022 and the first quarter of 2023 to remain competitive with the local market and to seek to retain deposits.
Removed
In addition, our compensation expense will increase due to the new stock benefit plans we intend to implement.
Added
Determining the allowance for loan and lease losses has historically been identified as a critical accounting policy. On January 1, 2023, we adopted the new CECL accounting methodology which requires entities to estimate and recognize an allowance for lifetime expected credit losses for loans and other financial assets measured at amortized cost.
Removed
We have identified the evaluation of the allowance for loan losses as a critical accounting policy where amounts are sensitive to material variation. The allowance for loan losses represents management’s estimate for probable losses that are inherent in our loan portfolio but which have not yet been realized as of the date of our balance sheet.
Added
Previously, an allowance for loan and lease losses was recognized based on probable incurred losses.
Removed
The allowance is an amount that management believes will cover known and inherent losses in the loan portfolio based on evaluations of the collectability of loans.
Added
The accounting estimates relating to the allowance for credit losses is also a “critical accounting policy” as: ● changes in the provision for credit losses can materially affect our financial results; ● estimates relating to the allowance for credit losses require us to project future borrower performance, including cash flows, delinquencies and charge-offs, along with, when applicable, collateral values, based on a reasonable and supportable forecast period utilizing forward-looking economic scenarios in order to estimate probability of default and loss given default; ● the allowance for credit losses is influenced by factors outside of our control such as industry and business trends, geopolitical events and the effects of laws and regulations as well as economic conditions such as trends in housing prices, interest rates, GDP, inflation, energy prices and unemployment; and ● considerable judgment is required to determine whether the models used to generate the allowance for credit losses produce an estimate that is sufficient to encompass the current view of lifetime expected credit losses.
Removed
The evaluations take into consideration such factors as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, estimated losses relating to specifically identified loans, and current economic conditions.
Added
Because our estimates of the allowance for credit losses involve judgment and are influenced by factors outside our control, there is uncertainty inherent in these estimates. Our estimate of lifetime expected credit losses is inherently uncertain because it is highly sensitive to changes in economic conditions and other factors outside of our control.
Removed
This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impacted loans, value of collateral, estimated losses on our commercial and residential loan portfolios, and general amounts for historical loss experience.
Added
Changes in such estimates could significantly impact our allowance and provision for credit losses.
Removed
All of these estimates may be susceptible to significant changes as more information becomes available. While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance.
Added
During the first half of the year ended December 31, 2023, deposit balances decreased as a result of various large customers moving money to higher yielding accounts outside the Bank. During the second half of the year ended December 31, 2023, the Bank offered highly competitive special CDs for terms of 13 and 30 months.
Removed
Historically, our estimates of the allowance for loan loss have not required significant adjustments from management’s initial estimates. In addition, the OCC as an integral part of their examination processes periodically reviews our allowance for loan losses.
Added
With the introduction of this offer, deposit balances stabilized. As a result of the overall decrease in deposits, the Bank borrowed $5.0 million from the FHLB Chicago in June, 2023 and an additional $10.0 million from the Federal Reserve Bank in November, 2023.
Removed
The OCC may require the recognition of adjustments to the allowance for loan losses based on its judgment of information available to them at the time of their examinations.
Added
Additionally, with the continued rise of market interest rates, the unrealized losses on the securities available-for-sale portfolio increased during 2023. During the fourth quarter, management repositioned the balance sheet by selling $30.3 million in securities for a recognized loss of $1.8 million.
Removed
Total assets decreased $76.7 million, or 22.5%, to $264.2 million at December 31, 2022 compared to $340.9 million at December 31, 2021. The decrease is a direct result of a decrease in cash and cash equivalents as a result of refunds issued due to the oversubscription of stock purchases related to the stock offering and conversion. Cash and cash equivalents.
Added
A portion of the funds received from the sale was used to pay down a portion of the borrowings entered into during 2023 with the remaining held primarily in cash as of December 31, 2023. During 2023, the Board approved a stock buyback program totaling 5% of the then outstanding shares.
Removed
The funds received as part of the conversion were primarily held in cash and cash equivalents at December 31, 2021, and excess funds were disbursed during the first quarter of 2022. The disbursement resulted in a decrease in cash and cash equivalents during the period.
Added
This program was completed during the fourth quarter of 2023. A second stock buyback program was approved during the fourth quarter, allowing for an additional 5% of the then outstanding shares to be repurchased. This program is expected to be completed during 2024. Total Assets .
Removed
Additionally, management continued to deploy the remaining funds from the stock offering primarily in securities available for sale, resulting in a further decrease to the balance of cash and cash equivalents as of December 31, 2022 compared to December 31, 2021.
Added
Total assets decreased $7.4 million to $256.8 million as of December 31, 2023 compared to $264.2 million at December 31, 2022. The decrease in total assets was driven by a decrease in deposits during the year. The decrease in deposits resulted in an overall reduction to cash throughout the year prior to the balance sheet repositioning.
Removed
The Bank monitors our liquidity position on a daily basis and continues to maintain levels of liquid assets deemed adequate by management. Securities Available for Sale . Securities available for sale increased $20.2 million, or 20.0%, to $121.2 million at December 31, 2022 compared to $101.0 million at December 31, 2021.
Added
Subsequent to the balance sheet repositioning, cash and cash equivalents increased while securities available-for-sale decreased. Cash and cash equivalents. Cash and cash equivalents increased $18.3 million to $31.4 million as of December 31, 2023 from $13.1 million at December 31, 2022.
Removed
This increase was the result of management's efforts to reduce the cash and cash equivalents balance by investing in higher yielding assets.
Added
The increase in cash was the result of the balance sheet repositioning described above, which resulted in proceeds of approximately $28.5 million. A portion of the proceeds was used to repay $10.0 million in borrowings from the Federal Reserve Bank. Additionally, during December 2023, the Bank invested approximately $750,000 in time deposits with other financial institutions.
Removed
During the year ended December 31, 2022, the Bank purchased $59.5 million in securities available for sale, which was partially offset by principal repayments and maturities of $22.9 million, an increase in the unrealized loss on available for sale securities of $15.4 million, due to increases in market interest rates, and amortization and accretion of premiums and discounts of $958,000.
Added
The remaining proceeds remain in an interest-bearing deposit account with the Federal Reserve Bank. Management continues to actively monitor our liquidity position on a daily basis and maintain levels of liquid assets deemed adequate. Time deposits with other financial institutions.
Removed
During the year ended December 31, 2022, the Bank purchased U.S. Treasury Notes of $12.3 million, resulting in a slight adjustment to the mix of the securities available-for-sale as well as reducing the duration of the portfolio while maintaining a higher yielding portfolio. Loans, net .
Added
Time deposits with other financial institutions decreased $2.5 million to $2.0 million as of December 31, 2023, compared to $4.5 million at December 31, 2022. The decrease is due to maturities within the portfolio. Management has redeployed the maturing time deposits to higher yielding loan originations.
Removed
Our loans, net, increased by $6.8 million, or 7.0%, to $103.4 million at December 31, 2022 compared to $96.5 million at December 31, 2021. The increase in loans was primarily driven by the purchase of a loan pool consisting of 9 loans totaling $5.3 million.
Added
With a portion of the proceeds of the securities sale, management invested approximately $750,000 in time deposits with other financial institutions, with maturities of six months and a weighted average rate of 5.65%. Securities Available for Sale . Securities available-for-sale decreased to $82.1 million as of December 31, 2023, compared to $121.2 million at December 31, 2022.
Removed
The loan pool was purchased with a $113,000 premium that is amortized over the life of the loans. The loans included in the loan pool followed the same underwriting standards required for loans originated by the Bank and are 1-4 family residential mortgages located in Cook County.

… 90 more changes not shown on this page.

Other NSTS 10-K year-over-year comparisons