NSTS Bancorp, Inc.

Previous wording

This section is intended to assist in the understanding of our financial performance through a discussion of our financial condition as of June 30, 2025 and as compared to our financial condition as of December 31, 2024, and our results of operations for the three and six months ended June 30, 2025 and 2024. This section should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

This section is intended to assist in the understanding of our financial performance through a discussion of our financial condition as of September 30, 2025 and as compared to our financial condition as of December 31, 2024, and our results of operations for the three and nine months ended September 30, 2025 and 2024. This section should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

North Shore Trust and Savings, a federally-chartered stock savings institution, was established in 1921 as North Shore Building and Loan, an Illinois-chartered institution. The Bank is a wholly owned subsidiary of NSTS Bancorp, Inc., and operates as a traditional savings institution focused primarily on serving the banking needs of customers in our market area of Lake County, Illinois and adjacent communities. We operate from our headquarters and main banking office in Waukegan, Illinois, as well as two additional full-service branch offices located in Waukegan and Lindenhurst, Illinois, respectively. We also have three loan production offices in Chicago, Aurora and Plainfield, Illinois. Our primary business activity is attracting deposits from the general public and using those funds to originate one- to four-family residential mortgage loans and purchase investments. We are subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency (the “OCC”).

Current wording

North Shore Trust and Savings, a federally-chartered stock savings institution, was established in 1921 as North Shore Building and Loan, an Illinois-chartered institution. The Bank is a wholly owned subsidiary of NSTS Bancorp, Inc., and operates as a traditional savings institution focused primarily on serving the banking needs of customers in our market area of Lake County, Illinois and adjacent communities. We operate from our headquarters and main banking office in Waukegan, Illinois, as well as two additional full-service branch offices located in Waukegan and Lindenhurst, Illinois. We also have three loan production offices in Chicago, Aurora and Plainfield, Illinois. Our primary business activity is attracting deposits from the general public and using those funds to originate one- to four-family residential mortgage loans and purchase investments. We are subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency (the “OCC”).

Previous wording

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated unaudited interim financial statements for the three and six months ended June 30, 2025 and 2024, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates.

Current wording

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated unaudited interim financial statements for the three and nine months ended September 30, 2025 and 2024, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates.

Previous wording

COMPARISON OF OPERATING RESULTS FOR THE three and six months ended June 30, 2025 and 2024

Current wording

COMPARISON OF OPERATING RESULTS FOR THE three and nine months ended September 30, 2025 and 2024

Previous wording

General. For the quarter ended June 30, 2025, we had a net loss of $258,000, compared to a net loss of $326,000 for the quarter ended June 30, 2024. The decrease in net loss for the quarter ended June 30, 2025 is due an increase in interest and noninterest income, partially offset by an increase in interest expense and noninterest expenses. For the six months ended June 30, 2025, we had a net loss of $586,000, compared to a net loss of $572,000 for the six months ended June 30, 2024. The increase in interest and noninterest income was offset by the increase in interest expense and noninterest expenses.

Current wording

General. For the quarter ended September 30, 2025, we had net income of $65,000, compared to a net loss of $171,000 for the quarter ended September 30, 2024. The change is due to an increase in interest and noninterest income, and a reversal of provision for credit losses during the current quarter. These benefits were partially offset by an increase in interest expense and noninterest expenses. For the nine months ended September 30, 2025, we had a net loss of $521,000, compared to a net loss of $743,000 for the nine months ended September 30, 2024. Similarly, the change is due to an increase in interest and noninterest income, and a reversal of provision for credit losses. These benefits were partially offset by an increase in interest expense and noninterest expenses.

Previous wording

***Net Interest Income.***Net interest income increased $20,000, to $1.8 million for quarter ended June 30, 2025. Our interest rate spread decreased to 2.19% for the quarter ended June 30, 2025 from 2.36% for the quarter ended June 30, 2024. Our net interest margin decreased to 2.77% for the quarter ended June 30, 2025 compared to 2.92% for the quarter ended June 30, 2024. The decrease in interest rate spread and margin is driven by an increased average balance of higher earning interest-bearing liabilities, specifically interest-bearing deposits, as a percentage of total assets.

Current wording

***Net Interest Income.***Net interest income increased $116,000, to $1.9 million for quarter ended September 30, 2025. Our interest rate spread increased to 2.48% for the quarter ended September 30, 2025 from 2.39% for the quarter ended September 30, 2024. Our net interest margin increased to 3.08% for the quarter ended September 30, 2025 compared to 2.96% for the quarter ended September 30, 2024. The increase in interest rate spread and margin is driven by a reduction of higher cost other borrowings. Additionally, the Bank received a loan payoff from a previously charged-off loan, which included $30,000 in interest income.

Previous wording

Average interest-earning assets of $260.7 million for the quarter ended June 30, 2025 increased $15.6 million compared to $245.1 million for the quarter ended June 30, 2024. The increase in average earning assets was driven by an increase in interest-bearing deposits at other banks, funded by an increase in average deposit balances during the period and reduction in investment securities. The average outstanding balance of loans, net increased slightly to $134.9 million for the quarter ended June 30, 2025, an increase of $200,000 from $134.7 million for the quarter ended June 30, 2024. Additionally, the average yield earned on those loans outstanding increased 21 basis points to 5.32% for the quarter ended June 30, 2025. This increase is a result of an overall increase in market rates on mortgage loans originated during 2024 and the first half of 2025, and still in our portfolio, as well as an increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.

Current wording

Average interest-earning assets of $252.8 million for the quarter ended September 30, 2025 increased $5.7 million compared to $247.1 million for the quarter ended September 30, 2024. The increase in average earning assets was driven by an increase in loans and interest-bearing deposits at other banks, funded by an increase in average deposit balances during the period and a reduction in investment securities. The average outstanding balance of loans, net increased to $138.7 million for the quarter ended September 30, 2025, an increase of $3.4 million from $135.3 million for the quarter ended September 30, 2024. Additionally, the average yield earned on those loans outstanding increased 37 basis points to 5.68% for the quarter ended September 30, 2025. This increase is a result of an overall increase in market rates on mortgage loans originated during 2024 and the first half of 2025, and still in our portfolio, the interest paid on a previously charged-off loan, as well as an increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.

Previous wording

Net interest income increased $146,000, to $3.6 million for the six months ended June 30, 2025 compared to $3.5 million for the six months ended June 30, 2024. Our interest rate spread decreased to 2.20% for the six months ended June 30, 2025 from 2.34% for the six months ended June 30, 2024. Our net interest margin decreased to 2.80% for the six months ended June 30, 2025 compared to 2.87% for the six months ended June 30, 2024. The decrease in interest rate spread and margin is driven by an increased average balance of higher earning interest-bearing liabilities, specifically interest-bearing deposits, as a percentage of total assets.

Current wording

Net interest income increased $262,000, to $5.6 million for the nine months ended September 30, 2025 compared to $5.3 million for the nine months ended September 30, 2024. Our interest rate spread decreased to 2.29% for the nine months ended September 30, 2025 from 2.35% for the nine months ended September 30, 2024. Our net interest margin decreased to 2.89% for the nine months ended September 30, 2025 compared to 2.90% for the nine months ended September 30, 2024. The decrease in interest rate spread and margin is driven by an increased average balance of higher earning interest-bearing liabilities, specifically interest-bearing deposits, as a percentage of total assets.

Previous wording

Average interest-earning assets of $260.3 million for the six months ended June 30, 2025 increased $16.9 million compared to $243.4 million for the six months ended June 30, 2024. The increase in average earning assets was driven by an increase in loans, net and interest-bearing deposits at other banks, funded by an increase in average deposit balances during the period and reduction in investment securities. The average outstanding balance of loans, net increased slightly to $134.4 million for the six months ended June 30, 2025, an increase of $4.4 million from $130.0 million for the six months ended June 30, 2024. Additionally, the average yield earned on those loans outstanding increased 43 basis points to 5.35% for the six months ended June 30, 2025. This increase is a result of an overall increase in market rates on mortgage loans originated during 2024 and the first half of 2025 and still in our portfolio, as well as an increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.

Current wording

Average interest-earning assets of $257.8 million for the nine months ended September 30, 2025 increased $13.2 million compared to $244.6 million for the nine months ended September 30, 2024. The increase in average earning assets was driven by an increase in loans, net and interest-bearing deposits at other banks, funded by an increase in average deposit balances during the period and a reduction in investment securities. The average outstanding balance of loans, net increased to $135.9 million for the nine months ended September 30, 2025, an increase of $4.1 million from $131.8 million for the nine months ended September 30, 2024. Additionally, the average yield earned on those loans outstanding increased 41 basis points to 5.46% for the nine months ended September 30, 2025. This increase is a result of an overall increase in market rates on mortgage loans originated during 2024 and the first half of 2025 and still in our portfolio, the interest paid on a previously charged-off loan, as well as an increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.

Previous wording

The cost of interest-bearing liabilities increased 26 basis points for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The net increase in our funding costs was primarily due to an increase in rates earned on time deposit accounts to remain competitive with the local market. The average yield on time deposits for the six months ended June 30, 2025 was 3.49%.

Current wording

The cost of interest-bearing liabilities increased 19 basis points for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The net increase in our funding costs was primarily due to an increase in rates earned on time deposit accounts to remain competitive with the local market. The average yield on time deposits for the nine months ended September 30, 2025 was 3.48%.

Previous wording

Provision for Credit Losses. During the quarter ended June 30, 2025, we recorded a provision for credit losses of $57,000, comprised of $44,000 provision for credit losses on loans and $13,000 provision for credit losses related to unfunded commitments. During the three months ended June 30, 2024, we recorded a provision for credit losses of $123,000, comprised of $90,000 in provision for credit losses to loans and $33,000 in provision for credit losses related to unfunded commitments, including loans committed for origination. During the six months ended June 30, 2025, we recorded a provision for credit losses of $20,000, comprised of $1,000 reversal of provision for credit losses on loans and $21,000 provision for credit losses related to unfunded commitments. During the six months ended June 30, 2024, we recorded a provision for credit losses of $122,000, comprised of $91,000 provision for credit losses on loans and $31,000 provision for credit losses related to unfunded commitments.

Current wording

Provision for Credit Losses. During the quarter ended September 30, 2025, we recorded a reversal of provision for credit losses of $(50,000) comprised of a $(39,000) reversal of provision for credit losses on loans and $(11,000) reversal of provision for credit losses related to unfunded commitments. During the three months ended September 30, 2024, we recorded a provision for credit losses of $20,000, comprised of $4,000 in provision for credit losses to loans and $16,000 in provision for credit losses related to unfunded commitments, including loans committed for origination. During the three months ended September 30, 2025, the Bank received a payoff on a loan previously charged-off totaling $99,000, resulting in a recovery to the allowance for credit losses. During the nine months ended September 30, 2025, we recorded a reversal of provision for credit losses of $(30,000), comprised of a $(40,000) reversal of provision for credit losses on loans and $10,000 provision for credit losses related to unfunded commitments. During the nine months ended September 30, 2024, we recorded a provision for credit losses of $142,000, comprised of $95,000 provision for credit losses on loans and $47,000 provision for credit losses related to unfunded commitments.

Previous wording

For the quarter ended June 30, 2025 compared to the same period ended June 30, 2024, noninterest income increased $234,000 to $735,000. Noninterest income increased $256,000 for the six months ended June 30, 2025 to $1.1 million compared to $813,000 for the six months ended June 30, 2024. The increases were driven by an increase in the gain on sale of mortgage loans during the quarter and six months ended June 30, 2025. The increase in gain on sale of mortgages was primarily the result of an overall increase in total mortgage loans originated during the periods. During the quarter ended June 30, 2025, we sold 102 loans totaling $28.0 million for a gain on sale of $507,000. During the quarter ended June 30, 2024, we sold 46 loans totaling $13.2 million for a gain on sale of $271,000. During the six months ended June 30, 2025, we sold 135 loans totaling $37.9 million for a gain on sale of $696,000. During the six months ended June 30, 2024, we sold 72 loans totaling $19.5 million for a gain on sale of $427,000. Management continues to look for opportunities and markets to sell loans as we continue to see increased loan production compared to prior years.

Current wording

For the quarter ended September 30, 2025 compared to the same period ended September 30, 2024, noninterest income increased $141,000 to $564,000. Noninterest income increased $397,000 for the nine months ended September 30, 2025 to $1.6 million compared to $1.2 million for the nine months ended September 30, 2024. The increases were driven by an increase in the gain on sale of mortgage loans during the quarter and nine months ended September 30, 2025. The increase in gain on sale of mortgages was primarily the result of an overall increase in total mortgage loans originated for sale during the periods. During the quarter ended September 30, 2025, we sold 66 loans totaling $19.4 million for a gain on sale of $393,000. During the quarter ended September 30, 2024, we sold 53 loans totaling $13.8 million for a gain on sale of $268,000. During the nine months ended September 30, 2025, we sold 176 loans totaling $57.3 million for a gain on sale of $1.1 million. During the nine months ended September 30, 2024, we sold 125 loans totaling $33.3 million for a gain on sale of $695,000. Management continues to look for opportunities and markets to sell loans as we continue to see increased loan production compared to prior years.

Previous wording

Noninterest expenses increased $252,000 for the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024. The increase in noninterest expenses was primarily driven by increases in salaries and employee benefits and deposit expenses. The increase in noninterest expenses was partially offset by a reduction in advertising expenses. The average number of employees increased to 52 for the quarter ended June 30, 2025 compared to 50 for the quarter ended June 30, 2024. The increase in headcount is based on additional loan officers brought in during 2025. Deposit expenses increased as a result of ATM losses totaling $40,000 due to an ATM robbery. Noninterest expenses increased $518,000 for the six months ended June 30, 2025, compared to the same period ended June 30, 2024. The increase in noninterest expenses was primarily driven by increases in salaries and employee benefits, loan expenses and deposit expenses. The average number of employees increased to 52 for the six months ended June 30, 2025 compared to 48 for the six months ended June 30, 2024. The increase in headcount is based on additional loan officers brought in during 2024 and 2025. Loan expenses increased as a result of an increase in loan originations during the periods. Deposit expenses increased as a result of ATM losses totaling $40,000 due to an ATM robbery. Additionally, the Bank recorded a provision for recourse reserve related to the loans sold into the secondary market due to an increase in the volume of loans sold over the past 4 quarters.

Current wording

Noninterest expenses increased $609,000 for the nine months ended September 30, 2025, compared to the same period ended September 30, 2024. The increase in noninterest expenses was primarily driven by increases in salaries and employee benefits, data processing related expenses, loan expenses and deposit expenses. The average number of employees increased to 52 for the nine months ended September 30, 2025 compared to 49 for the nine months ended September 30, 2024. The increase in headcount is based on additional loan officers brought in during 2024 and 2025. The increase in data processing costs was driven by system upgrades. Loan expenses increased as a result of an increase in loan originations during the period as well as a provision for recourse reserve related to the loans sold into the secondary market due to an increase in the volume of loans sold over the past 4 quarters. Deposit expenses increased as a result of ATM losses totaling $40,000 due to an ATM robbery.

Previous wording

***Provision for Income Tax Expense.***There was no provision for income tax expense recorded during the three and six months ended June 30, 2025 and 2024. Management estimates a taxable net loss for the year ended December 31, 2025 due to non-taxable income, such as income on tax exempt municipal securities and BOLI.

Current wording

***Provision for Income Tax Expense.***There was no provision for income tax expense recorded during the three and nine months ended September 30, 2025 and 2024. Management estimates a taxable net loss for the year ended December 31, 2025 due to non-taxable income, such as income on tax exempt municipal securities and BOLI.

Previous wording

During the quarter ended June 30, 2025, 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 three-year period ended June 30, 2025. 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 June 30, 2025, management maintained the full valuation allowance against the federal net operating losses and net deferred tax assets to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted.

Current wording

During the quarter ended September 30, 2025, 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 three-year period ended September 30, 2025. 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 September 30, 2025, management maintained the valuation allowance against the federal net operating losses and net deferred tax assets to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted.

Previous wording

Total Assets*.* Total assets decreased $2.7 million to $276.0 as of June 30, 2025 compared to $278.7 million at December 31, 2024. The decrease was driven by a reduction in cash and cash equivalents due to the paydown of the FHLB Advance during June 2025.

Current wording

Total Assets*.* Total assets decreased $8.9 million to $269.8 as of September 30, 2025 compared to $278.7 million at December 31, 2024. The decrease was driven by a reduction in cash and cash equivalents due to the paydown of the FHLB Advance during June 2025 and a reduction in deposits.

Previous wording

Cash and cash equivalents. Cash and cash equivalents decreased $6.0 million to $47.5 million as of June 30, 2025, from $53.5 million at December 31, 2024. The decrease was driven by the paydown of the FHLB Advance in June 2025 of $5.0 million. Currently, the Bank holds a majority of the cash on hand at the Federal Reserve Bank of Chicago, earning 4.40%, to keep the funds available for increasing loan demand. Management continues to actively monitor our liquidity position on a daily basis and maintain levels of liquid assets deemed adequate.

Current wording

Cash and cash equivalents. Cash and cash equivalents decreased $19.4 million to $34.1 million as of September 30, 2025, from $53.5 million at December 31, 2024. The decrease was driven by the paydown of the FHLB Advance in June 2025 of $5.0 million. Additionally, deposits decreased $4.1 million, reducing interest-earning bank deposits. Further, the Bank purchased securities available for sale, totaling $10.9 million during the nine months ended September 30, 2025. Currently, the Bank holds a majority of the cash on hand at the Federal Reserve Bank of Chicago, earning 4.15%, to keep the funds available for increasing loan demand. Management continues to actively monitor our liquidity position on a daily basis and maintain levels of liquid assets deemed adequate.

Previous wording

Securities Available for Sale. Securities available-for-sale decreased to $69.6 million as of June 30, 2025, compared to $71.2 million at December 31, 2024. There were no purchases or sales of securities available-for-sale during the six months ended June 30, 2025. During the six months ended June 30, 2025, the Bank received principal payments of $2.5 million, had maturities of $1.1 million, had net premium amortization and discount accretion of $242,000 and had a decrease in the unrealized loss on the portfolio of $2.2 million.

Current wording

Securities Available for Sale. Securities available-for-sale increased to $79.6 million as of September 30, 2025, compared to $71.2 million at December 31, 2024. The Bank purchased $10.9 million of securities available-for-sale during the nine months ended September 30, 2025. There were no sales of securities available for sale during the period. During the nine months ended September 30, 2025, the Bank received principal payments of $4.4 million, had maturities of $1.1 million, had net premium amortization and discount accretion of $359,000 and had a decrease in the unrealized loss on the portfolio of $3.3 million.

Previous wording

As of June 30, 2025, the securities available for sale portfolio included an unrealized loss position of $9.8 million, or 12.4% of the total book value of the portfolio. Management monitors the portfolio for credit losses and believes that the decline in value does not presently represent realized losses and is due to market volatility and increased market interest rates. While the Bank does not currently intend to sell securities in a loss position, management may consider the opportunity to reposition the investment securities portfolio in the future.

Current wording

As of September 30, 2025, the securities available for sale portfolio included an unrealized loss position of $8.7 million, or 9.9% of the total book value of the portfolio. Management monitors the portfolio for credit losses and believes that the decline in value does not presently represent realized losses and is due to market volatility and increased market interest rates. While the Bank does not currently intend to sell securities in a loss position, management may consider the opportunity to reposition the investment securities portfolio in the future.

Previous wording

***Loans held for sale.***Our loans held for sale increased $3.2 million to $4.4 million at June 30, 2025 compared to $1.2 million at December 31, 2024. The increase was primarily due an overall increase in the level of loans originated for sale during the second quarter of 2025. During the six months ended June 30, 2025, the Bank originated $38.4 million in loans held for sale.

Current wording

***Loans held for sale.***Our loans held for sale increased $882,000 to $2.1 million at September 30, 2025 compared to $1.2 million at December 31, 2024. The increase was primarily due an overall increase in the level of loans originated for sale during the third quarter of 2025. During the nine months ended September 30, 2025, the Bank originated $55.4 million in loans held for sale.

Previous wording

Loans, net. Our loans, net, increased by $2.5 million to $132.8 million at June 30, 2025 compared to $130.4 million at December 31, 2024. The Bank originated $18.2 million in loans to be held in the portfolio during the six months ended June 30, 2025 and had loan principal payments and payoffs of $15.8 million. In an effort to continue to grow loan originations, the Bank hired two additional mortgage loan originators during the six months ended June 30, 2025 and continues to look to hire additional loan officers.

Current wording

Loans, net. Our loans, net, increased by $2.5 million to $132.9 million at September 30, 2025 compared to $130.4 million at December 31, 2024. The Bank originated $26.1 million in loans to be held in the portfolio during the nine months ended September 30, 2025 and had loan principal payments and payoffs of $23.6 million. In an effort to continue to grow loan originations, the Bank has hired additional mortgage loan originators during the nine months ended September 30, 2025 and continues to look to hire additional loan officers.

Previous wording

As of June 30, 2025, the allowance for credit losses on loans (“ACL”) totaled $1.2 million, with a net change of approximately $1,000 during the six months ended June 30, 2025. While the balance of the ACL remained steady, the ACL as a percentage of the loans, net of unearned income decreased, driven by a reduction in peer group proxy rates. As of June 30, 2025, there were two loans individually assessed, of which neither had expected credit losses identified. The Bank actively monitors the loan portfolio for signs of weakening credit quality, noting as of June 30, 2025 the portfolio remains of high quality with limited credit concerns.

Current wording

As of September 30, 2025, the allowance for credit losses on loans (“ACL”) totaled $1.3 million, with a net change of approximately $59,000 during the nine months ended September 30, 2025. While the balance of the ACL remained steady, the ACL as a percentage of the loans, net of unearned income increased, driven by a shift in the portfolio mix, with an increase in construction loans which have a higher peer proxy rate. As of September 30, 2025, there were two loans individually assessed, of which neither had credit losses identified. The Bank actively monitors the loan portfolio for signs of weakening credit quality, noting as of September 30, 2025 the portfolio remains of high quality with limited credit concerns.

Previous wording

Deposits. Total deposits increased $2.8 million to $193.0 million at June 30, 2025 compared to $190.2 million at December 31, 2024. The increase primarily came in Time Deposits with customers entering the CD Special offered during the six months ended June 30, 2025. Additionally, there was a shift in funds from money market accounts to savings. Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity.

Current wording

Deposits. Total deposits decreased $4.1 million to $186.1 million at September 30, 2025 compared to $190.2 million at December 31, 2024. The decrease was primarily driven by a reduction in balances held in savings and money market accounts, some of which shifted into Time Deposits. The Bank had a large estate, totaling $1.7 million, pay out during the year. Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity.

Previous wording

Total Equity. Total equity increased $1.3 million to $77.8 million at June 30, 2025. The increase is primarily due to a decrease in the unrealized loss position on the securities available-for-sale portfolio during the six months ended June 30, 2025, partially offset by net losses of $586,000.

Current wording

Total Equity. Total equity increased $2.4 million to $78.9 million at September 30, 2025. The increase is primarily due to a decrease in the unrealized loss position on the securities available-for-sale portfolio during the nine months ended September 30, 2025, partially offset by net losses of $521,000.

Previous wording

The allowance for credit losses on loans as a percentage of total loans was 0.90% and 0.92% as of June 30, 2025 and December 31, 2024, respectively.

Current wording

The allowance for credit losses on loans as a percentage of total loans was 0.94% and 0.92% as of September 30, 2025 and December 31, 2024, respectively.

Previous wording

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB of Chicago and a $10.0 million unsecured Fed Funds line of credit with BMO Harris Bank. At June 30, 2025, we had the capacity to borrow approximately $81.5 million from the FHLB of Chicago. At June 30, 2025, we had no outstanding borrowings.

Current wording

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB of Chicago and a $10.0 million unsecured Fed Funds line of credit with BMO Harris Bank. At September 30, 2025, we had the capacity to borrow approximately $78.5 million from the FHLB of Chicago. At September 30, 2025, we had no outstanding borrowings.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used in operating activities was $2.0 million and $1.5 million for the six months ended June 30, 2025 and 2024, respectively. Net cash used in investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $1.7 million and $6.6 million for the six months ended June 30, 2025 and 2024, respectively, with the decrease in cash used in 2025 driven by a decrease in the cash used for the loan portfolio. Net cash (used in) provided by financing activities, consisting primarily of the activity in deposit accounts was ($2.3) million and $9.2 million for the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, the Bank repaid the $5.0 million FHLB Advance, resulting in additional cash used in financing activities compared to the prior year.

Current wording

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 $841,000 and $74,000 for the nine months ended September 30, 2025 and 2024, respectively. Net cash used in investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $10.5 million and $7.0 million for the nine months ended September 30, 2025 and 2024, respectively, with the increase in cash used in 2025 driven by investment security purchases. Net cash (used in) provided by financing activities, consisting primarily of the activity in deposit accounts was ($9.7) million and $10.2 million for the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025, the Bank repaid the $5.0 million FHLB Advance, resulting in additional cash used in financing activities compared to the prior year.

Previous wording

We are committed to maintaining a strong liquidity position. 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 June 30, 2025, totaled $69.6 million. 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.

Current wording

We are committed to maintaining a strong liquidity position. 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 September 30, 2025, totaled $70.4 million. 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.

Previous wording

As of June 30, 2025, the Bank was well capitalized under the regulatory framework for prompt corrective action. During the year ended December 31, 2020, the Bank elected to begin using the CBLR. Under CBLR, if a qualifying depository institution or depository institution holding company elects to use such measure, such institution or holding company will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds 9%, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios. North Shore Trust and Savings’ Tier 1 capital to Average Assets was 23.20% and 23.53% at June 30, 2025 and December 31, 2024, respectively.

Current wording

As of September 30, 2025, the Bank was well capitalized under the regulatory framework for prompt corrective action. During the year ended December 31, 2020, the Bank elected to begin using the CBLR. Under CBLR, if a qualifying depository institution or depository institution holding company elects to use such measure, such institution or holding company will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds 9%, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios. North Shore Trust and Savings’ Tier 1 capital to Average Assets was 24.11% and 23.53% at September 30, 2025 and December 31, 2024, respectively.

Previous wording

Commitments. At June 30, 2025, we had $2.2 million of outstanding commitments to originate loans. Our total letters and lines of credit and unused lines of credit totaled $11.2 million at June 30, 2025. 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 June 30, 2025.

Current wording

Commitments. At September 30, 2025, we had $1.9 million of outstanding commitments to originate loans. Our total letters and lines of credit and unused lines of credit totaled $10.1 million at September 30, 2025. 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 September 30, 2025.