NSTS 10-K & 10-Q changes, risk factors and insider trading

North Shore Trust and Savings is a community-oriented savings institution headquartered in Waukegan, Illinois. Our business strategy is to continually enhance our products and services with a focus on one- to four- family residential first mortgage loans, and to maintain our holdings of commercial real estate and multi-family residential real estate loans. Our traditional lending market is centered in our retail branch area of Lake County, Illinois and has expanded to counties in the greater Chicagoland area in Illinois as well as Kenosha County in Wisconsin. We currently operate three full-service banking offices in Lake County, Illinois and three loan production offices in Chicago, Plainfield and Aurora, Illinois. Our primary sources of funds consist of attracting deposits from the general public and using those funds along with funds from the FHLB of Chicago and other sources to originate loans to our customers and invest in securities. As of December 31, 2024,2025, we had total assets of $278.7$266.6 million, including $130.4$128.6 million in net loans and $71.2$78.7 million of securities available for sale, total deposits of $190.2$181.5 million and total equity of $76.5$80.0 million. For the year ended December 31, 2024,2025, we had a net loss of $789,000$386,000 compared to a net loss of $4.0 million$789,000 for the year ended December 31, 2023.2024.

Our results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on our loan and investment portfolios and interest expense on deposits and borrowings. Our net interest income is largely determined by our net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities. 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. 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.

Allowance for Credit Losses. OnThe JanuaryCurrent 1,Expected 2023,Credit weLosses 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. The accounting estimates relating to the allowance for credit losses is a “critical accounting policy” as:

Total Assets. Total assets increaseddecreased $21.9$12.1 million to $278.7$266.6 million as of December 31, 20242025 compared to $256.8$278.7 million at December 31, 2023.2024. The increasedecrease was driven by an increase in loans, net, funded by an increase in time deposits and a reduction in securitiestotal availabledeposits forheld saleat duethe tobank, maturitiesreducing cash and principalcash paymentsequivalents. ofAdditionally, securities.loans, net decreased.

Cash and cash equivalents. Cash and cash equivalents increaseddecreased $22.1$19.5 million to $53.5$34.0 million as of December 31, 2024,2025, from $31.4$53.5 million at December 31, 2023.2024. The increase in cashdecrease was driven by ana increasereduction in timetotal depositsdeposits, duringas well as purchases of securities available-for-sale throughout the sameyear periodended andDecember principal31, payments received on securities available for sale.2025. Additionally, the Bankcash soldand $5.9cash millionequivalents balance at December 31, 2024 was higher due to timing of loansa onloan Decembersale, 30,and 2024,cash resultingcoming in an increase in cash held as ofat the end of the year. Currently, the Bank holds a majority of the cash on hand at the Federal Reserve Bank of Chicago, earning 4.40%,Chicago to keep the funds available to fund loan demand. Management continues to actively monitor our liquidity position on a daily basis and maintains levels of liquid assets deemed adequate.

Securities Available for Sale. Securities available-for-sale decreasedincreased to $71.2$78.7 million as of December 31, 2024,2025, compared to $82.1$71.2 million at December 31, 2023.2024. The Bank purchased $10.8 million of securities available-for-sale during the year ended December 31, 2025. There were no purchases or sales of securities available-for-sale during the year ended December 31, 2024.2025. During the year ended December 31, 2024,2025, the Bank received principal payments of $5.5$5.8 million, had maturities of $4.3$1.1 million, had net premium amortization and discount accretion of $515,000$461,000 and had ana increasedecrease in the unrealized loss on the portfolio of $535,000.$4.0 million. During the year the Bank purchased U.S. Treasury securities to replace the previously matured securities.

Loans, net. Our loans, net, increaseddecreased by $9.8$1.8 million to $128.6 million at December 31, 2025 compared to $130.4 million at December 31, 2024 compared to $120.6 million at December 31, 2023.2024. The Bank originated $43.2$36.5 million in loans to be held in the portfolio during the year ended December 31, 20242025 and had loan principal payments and payoffs and changes to deferred fees and costs of $25.0$30.5 million. In an effort to continue to grow loan originations, the Bank hired threetwo additional mortgage loan originators during the year ended December 31, 2024.2025. The Bank sold $8.4$7.8 million in loans that were originally held in the portfolio to local community banks.

As of December 31, 2024,2025, the allowance for credit losses on loans (“ACL”) totaled $1.2$1.1 million, ana increasedecrease of $25,000$73,000 compared to December 31, 2023.2024. The increasedecrease in the ACL is driven by ana increasedecrease in the portfolio loan balances,balances partially offset byand a reduction in proxy expected lifetime loss rates due to high credit quality of the portfolio and positive economic factors such as a lowerstable inflation rate and stable unemployment rates. As of December 31, 2024,2025, there were notwo loans individually assessedassessed, andboth of which had no loansallowance werefor ratedcredit substandard or watch.losses. As of December 31, 2024,2025, the Bank has notwo non-accrual loans and two loans past due greater than 30 days. The Bank actively monitors the loan portfolio for signs of weakening credit quality, noting as of December 31, 20242025 the portfolio remains of high quality with limited credit concerns.

Deposits. Total deposits increaseddecreased $21.4$8.7 million to $181.5 million at December 31, 2025 compared to $190.2 million at December 31, 20242024. compared to $168.8$3.3 million of the decrease was the result of maturities of time deposits that did not renew at the then offered rate. During the year ended December 31, 2023.2025, Thethe increaseBank saw increased competition in deposits is primarily within the time deposit accountsmarket, asprimarily stemming from specials offered by credit unions in the Bankmarket continuedarea. toAdditionally, offermoney amarket competitiveand CDsavings specialaccounts decreased $3.2 million and $2.9 million, respectively during the year ended December 31, 2024.2025. A portion of this decrease was driven by one large estate account that moved money in 2025, due to distributions of the estate. Non-interest bearing checking accounts increased $1.4 million for the year ended December 31, 2025. Based on current offering rates in our market area and our current deposit pricing strategy, as well as our strong historical deposit retention, management anticipates that a portion of the maturing time deposits will not renew, however a significant portion of maturing time deposits will be retained. Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity.

Other Borrowings. As of December 31, 2024,2025, the Bank has $5.0 million inno outstanding advances from FHLB Chicago, nor any additional borrowings outstanding. The Bank paid off the advance from FHLB Chicago withtotaling a$5.0 term of 24 months at 4.78%, that is scheduled to maturemillion, in June 2025.2025 Nothat additionalwas borrowingsoutstanding wereas made during the year endedof December 31, 2024.

Total Equity. Total equity decreasedincreased $1.0$3.5 million to $76.5$80.0 million at December 31, 2024.2025. The decreaseincrease is primarily due to ana increasedecrease in the unrealized loss position on the securities available-for-sale portfolio,portfolio and an increase in additional paid-in capital as stock compensation continues to vest. These increases were offset by a reductiondecrease in retained earnings dueas toa result of a net loss during the year and an increase in treasury stock as a result of stock repurchases completed during the year ended December 31, 2024.year.

General. For the year ended December 31, 2024,2025, we had a net loss of $789,000,$386,000, compared to a net loss of $4.0 million$789,000 for the year ended December 31, 2023.2024. The decrease in net loss for the year-ended December 31, 20242025 is primarily dueattributable to aan lossincrease onin salenet ofinterest securitiesincome, an increase in noninterest income, and a valuationreversal allowance on the deferred tax assets recognized in 2023 which did not occur in 2024. Additionally, net interest income afterof provision for credit losses increased $946,000, and the gain on sale of loans increased $1.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. However, the increase in noninterest expenses of $1.9 million during year ended December 31, 2024 compared to December 31, 2023 partially offsets the decrease in net loss.losses.

Net Interest Income. Net interest income increased $841,000,$402,000, to $7.1$7.5 million for year ended December 31, 20242025 compared to $6.2$7.1 million for the year ended December 31, 2023.2024. Our interest rate spread decreasedincreased to 2.31% for the year ended December 31, 2025 from 2.29% for the year ended December 31, 20242024. fromOur 2.33%net interest margin increased to 2.91% for the year ended December 31, 2023.2025 Our net interest margin increasedcompared to 2.86% for the year ended December 31, 2024 compared to 2.64% for the year ended December 31, 2023.2024. The decreaseincreases in interest rate spread is driven by an increased average balance of higher earning interest-bearing liabilities, specifically interest-bearing deposits, as a percentage of total assets. The increase in the interest margin isare driven by an increase in yields earned on loansloans, anddriving interest-bearingan depositsoverall increase in otheryields banks.on interest-earning assets.

Average interest-earning assets of $256.8 million for the year ended December 31, 2025 increased $9.6 million compared to $247.2 million for the year ended December 31, 2024 increased $11.9 million compared to $235.3 million for the year ended December 31, 2023.2024. 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 year and reduction in investment securities. The average outstanding balance of loans, net increased to $136.8 million for the year ended December 31, 2025, an increase of $3.6 million from $133.2 million for the year ended December 31, 2024, an increase of $25.8 million from $107.4 million for the year ended December 31, 2023.2024. Additionally, the average yield earned on those loans outstanding increased 10336 basis points to 5.09%5.45% for the year ended December 31, 2024.2025. This increase is a result of an overall increase in market rates on mortgage loans originated during 2024, as well as increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.

The cost of interest-bearing liabilities increased 939 basis points for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The net increase in our funding costs was primarily due to ana increaseshift in ratesour offereddeposit onbalances, with an increased percentage of the total portfolio being related to higher-rate time depositdeposits accountscompared to remaincore competitive with the local market.deposits.

Provision for Credit Losses. During the year ended December 31, 2024,2025, we recorded a reversal of provision for credit losses of $71,000,$(192,000), comprised of $25,000$(172,000) reversal of provision for credit losses on loans and $46,000$(20,000) reversal provision for credit losses related to unfunded commitments.

For the year ended December 31, 20242025 compared to the same period ended December 31, 2023,2024, noninterest income increased $3.1 million$331,000 to $1.9$2.3 million. The increase was driven by an increase in the gain on sale of mortgage loans and no loss on sale of securities during the year ended December 31, 2024. Gain on sale of mortgage loans increased $1.2 million, from $32,000 to $1.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.loans. The increase in gain on sale of mortgages was primarily the result of an overall increase in total mortgage loans originated during the period. During the year ended December 31, 2025, we sold 244 loans totaling $75.5 million for a gain on sale of $1.6 million. During the year ended December 31, 2024, we sold 199 loans totaling $53.1 million for a gain on sale of $1.2 million. Included in the number and amount of loans sold during the periodperiods were loans sold that were originated as held for investment, but subsequently sold to local community banks, totaling $7.8 million, for a total gain on sale of $321,000, and $8.4 million, for a total gain on sale of $352,000. Management continues to look$352,000, for opportunitiesthe years ended December 31, 2025 and markets2024, to sell loans as we continue to see increased loan production compared to prior years.respectively.

Provision for Income Tax Expense. During the year ended December 31, 2024,2025, the Bank recorded no income tax expense. The changeincrease in valuation allowance of $389,000$196,000 was offset by an equal deferred tax benefit.

Federal net operating losses as of December 31, 20242025 are $6.7$7.4 million, of which $1.3 million is subject to expire in 2027, the remainder does not expire. State net operating losses as of December 31, 2025 are $6.1 million and will begin expiring in 2026. During the year ended December 31, 2024,2025, 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 four-year period ended December 31, 2024.2025. 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 December 31, 2024,2025, a full valuation allowance of $2.5$3.2 million, against the net deferred tax assets has been recorded. 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 $515,000 has been recorded on the related deferred tax asset.

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 $9.4$4.1 million and $431,000$9.4 million for the years ended December 31, 20242025 and 2023,2024, respectively. Net cash (used in) or provided by investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $(8.2)$9.8 million and $25.0$8.2 million for the years ended December 31, 20242025 and 2023,2024, respectively. Net cash provided by (used in) provided by financing activities, consisting primarily of the activity in deposit accounts and FHLB of Chicago advances, was $20.8$(13.7) million and $(7.1)$20.8 million for the years ended December 31, 20242025 and 2023,2024, respectively.

On December 14, 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation, and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: (1) The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, and (2) The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: (1) Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (2) Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The ASU is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company will adoptadopted this ASUstandard effective for theits reportingfiscal periodyear beginningended JanuaryDecember 1,31, 2025, and doesdid not expect the amendments to have a material impact toon the consolidated financial statements of the Company.statements.

This section is intended to assist in the understanding of our financial performance through a discussion of our financial condition as of MarchJune 31,30, 2026 and as compared to our financial condition as of December 31, 2025, and our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025. 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.

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”).

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 MarchJune 31,30, 2026 and 2025, 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.

COMPARISON OF OPERATING RESULTS FOR THE three and six months ended MarchJune 31,30, 2026 and 2025

Net Interest Income. Net interest income increaseddecreased $26,000,$62,000, to $1.9$1.7 million for quarter ended MarchJune 31,30, 2026. Our interest rate spread increased to 2.42%2.21% for the quarter ended MarchJune 31,30, 2026 from 2.23%2.19% for the quarter ended MarchJune 31,30, 2025. Our net interest margin increased slightly to 2.98%2.78% for the quarter ended MarchJune 31,30, 2026 compared to 2.82%2.77% for the quarter ended MarchJune 31,30, 2025. The slight increase in interest rate spread and margin is driven by a modest reduction of higher cost other borrowings.

Average interest-earning assets of $248.9$251.3 million for the quarter ended MarchJune 31,30, 2026 decreased $11.0$9.4 million compared to $259.9$260.7 million for the quarter ended MarchJune 31,30, 2025. The decrease in average earning assets was driven by a decrease in interest-bearing deposits at other banks, resulting from a decrease in average deposit balances and other borrowings during the period. The average outstanding balance of loans, net remained relatively flat, goingdecreased, from $133.9$134.9 million for the quarter ended MarchJune 31,30, 20252025, to $133.2$129.3 million for the quarter ended MarchJune 31,30, 2026. The average yield earned on those loans outstanding increaseddecreased 819 basis points to 5.46%5.13% for the quarter ended MarchJune 31,30, 2026. This increasedecrease is adriven resultby the reversal of an increased loan demand for specialty portfolio products which are originated at higheraccrued interest rateson andfour withloans additionalthat originationwere fees.moved to non-accrual during the period.

The cost of interest-bearing liabilities decreased 2625 basis points for the quarter ended MarchJune 31,30, 2026 compared to the quarter ended MarchJune 31,30, 2025. This shift is primarily attributable to higher rates offered on time deposits that ran through 20242025 and into 2025.2026. Many of the matured time deposits originated during this period were renewed at lower offering rates. Additionally the reduction is due to the bank having no other borrowings outstanding for the quarter ended June 30, 2026, compared to an average balance of $4.4 million outstanding during the quarter ended June 30, 2025.

Provision for Credit Losses. During the quarter ended MarchJune 31,30, 2026, we recorded a provision for credit losses of $1,000 comprised of a $1,000 provision for credit losses related to unfunded commitments. During the quarter ended June 30, 2025, we recorded a provision for credit losses of $57,000, comprised of a $44,000 provision for credit losses on loans and $13,000 in provision for credit losses related to unfunded commitments, including loans committed for origination. During the six months ended June 30, 2026, we recorded a reversal of provision for credit losses of $26,000$25,000 comprised of a $33,000 reversal of provision for credit losses on loans and $7,000 of provision for credit losses related to unfunded commitments. During the quartersix months ended MarchJune 31,30, 2025, we recorded a reversal of provision for credit losses of $37,000,$20,000, comprised of a $45,000$1,000 reversal of provision for credit losses on loans and $8,000$21,000 in provision for credit losses related to unfunded commitments, including loans committed for origination.

Provision for Income Tax Expense. There was no provision for income tax expense recorded during the three and six months ended MarchJune 31,30, 2026 and 2025. Management estimates a taxable net loss for the year ended December 31, 2026 due to non-taxable income, such as income on tax exempt municipal securities and BOLI.

During the quarter ended MarchJune 31,30, 2026, 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 MarchJune 31,30, 2026. 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 MarchJune 31,30, 2026, 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.

COMPARISON OF FINANCIAL CONDITION AT MarchJune 31,30, 2026 and December 31, 2025

Total Assets. Total assets increased $3.7$3.3 million to $270.3$269.9 million as of MarchJune 31,30, 2026 compared to $266.6 million at December 31, 2025. The increase was driven by an increase in cash and cash equivalents as a result of an increase in deposits and escrow deposits.

Cash and cash equivalents. Cash and cash equivalents increased $9.4$13.5 million to $43.4$47.5 million as of MarchJune 31,30, 2026, from $34.0 million at December 31, 2025. The increase was driven by an increase in total deposits and escrow deposits during the period and a reduction in loans held for sale and securities available for sale. Management continues to actively monitor our liquidity position on a daily basis and maintain levels of liquid assets deemed adequate.

Securities Available for Sale. Securities available-for-sale decreased to $76.7$74.6 million as of MarchJune 31,30, 2026, compared to $78.7 million at December 31, 2025. There were no purchases or sales of securities available for sale during the period. During the threesix months ended MarchJune 31,30, 2026, the Bank received principal payments and maturities of $1.6$3.6 million, hadrecognized net premium amortization and discount accretion of $108,000$209,000 and had an increase in the unrealized loss on the portfolio of $279,000.$308,000.

As of MarchJune 31,30, 2026, the securities available for sale portfolio included an unrealized loss position of $8.3$8.4 million, or 9.8%10.1% 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.

Loans held for sale. Our loans held for sale decreased $2.7$3.1 million to $1.8$1.4 million at MarchJune 31,30, 2026 compared to $4.5 million at December 31, 2025. The change in loans held for sale is the result of timing of originations and sales of loans. On average, the Bank holds loans held for sale less than 30 days. The divestiture of OLCM resulted in less originations made during the three months ended June 30, 2026, resulting in less loans held for sale at the end of the quarter.

Loans, net. Our loans, net, decreased by $988,000$2.1 million to $127.6$126.5 million at MarchJune 31,30, 2026 compared to $128.6 million at December 31, 2025. The Bank originated $7.7$16.6 million in loans to be held in the portfolio during the threesix months ended MarchJune 31,30, 2026, transferred $2.5$5.3 million of loans to held for sale, and had loan principal payments and payoffs of $6.2$13.4 million.

As of MarchJune 31,30, 2026, the allowance for credit losses on loans (“ACL”) totaled $1.1 million, with a net change of approximately $33,000 during the threesix months ended MarchJune 31,30, 2026. There was minimal change in the ACL as a percentage of total loans. As of MarchJune 31,30, 2026, there were threesix loans individually assessed, of which none had credit losses identified. The Bank actively monitors the loan portfolio for signs of weakening credit quality, notingand believes that even with the increase in non-accrual loans as of MarchJune 31,30, 20262026, the portfolio remains of high quality with limited credit concerns.

Deposits. Total deposits increased $2.4$2.6 million to $183.9$184.1 million at MarchJune 31,30, 2026 compared to $181.5 million at December 31, 2025. The increase was driven by an increase in time deposits. The Bank continues to run a 13 month time deposit special to assist in retaining the previous time deposit specials as those mature. Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity.

Total Equity. Total equity remained roughly flat. The increaseincreases in the unrealized loss position of the securities available for sale portfolio wasand the net loss were offset by an increase in additional paid in capital and a decrease in the unallocated common shares held by the ESOP. The changes in the additional paid in capital and unallocated common shares held by the ESOP were related to benefit plan expenses and commitments of allocations within the ESOP.

The allowance for credit losses on loans as a percentage of total loans was 0.85%0.86% and 0.87% as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

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 uncommitted, unsecured line of credit with BMO Harris Bank. At MarchJune 31,30, 2026, we had the capacity to borrow approximately $74.5$74.0 million from the FHLB of Chicago. At MarchJune 31,30, 2026, we had no outstanding borrowings.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities was $5.5$8.4 million and $(2.72.0) million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The change was driven by a transfer of loans to loans held for sale and subsequently sold in the first quarterhalf of 2026, resulting in additional cash provided by operating activities. Net cash provided by (used in) investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $351,000$2.3 million and $2.4$(1.7) million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively, with the decreaseincrease in cash provided in 2026 driven by increasedproceeds cash used forfrom the loanBOLI portfolio.death benefit. Net cash provided by (used in) financing activities, consisting primarily of the activity in deposit accounts was $3.5$2.8 million and $4.2$(2.3) million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The change was driven by the repayment of the FHLB Advance in the six months ended June 30, 2025 that did not reoccur during the same period ended June 30, 2026.

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 MarchJune 31,30, 2026, totaled $69.2$68.0 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.

As of MarchJune 31,30, 2026, 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. However, in November 2025, the OCC and the FDIC jointly issued a proposal to reduce the minimum leverage ratio for opting-in banks from 9% to 8%, effective July 1, 2026. North Shore Trust and Savings’ Tier 1 capital to Average Assets was 24.93%25.48% and 24.32% at MarchJune 31,30, 2026 and December 31, 2025, respectively.

Commitments. At MarchJune 31,30, 2026, we had $2.6$2.9 million of outstanding commitments to originate loans. Our total letters and lines of credit and unused lines of credit totaled $6.5$5.8 million at MarchJune 31,30, 2026. 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 MarchJune 31,30, 2026.

Cash Obligations. The following table summarizes our cash obligations at MarchJune 31,30, 2026.