What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-28 compared with 2024-03-28 · 223 added, 281 removed, 1170 unchanged (30% of the section changed)

19 unchanged sentences

Other Information

On March 27, 2024, the Board of Directors approved the amended and restated employment agreement by and among NSTS Bancorp, Inc., North Shore Trust and Savings and Stephen G.

The amended and restated employment contract was revised to reflect the now current title and position of Mr.

Lear of Chief Executive Officer, President and Chairman of the Board of NSTS Bancorp, Inc.

and Chairman of the Board of North Shore Trust and Savings.

In addition, the amended and restated employment agreement provides that upon termination of Mr.

Lear’s employment for any reason, other than cause, we will provide for the continuation of the welfare benefits of medical, dental or other health coverage, at the same premium cost to Mr.

Lear and at the same coverage level as in effect as of the effective date of termination until the eighteen month anniversary of the effective date of termination.

A copy of the amended and restated employment agreement with Mr.

Lear is filed as an exhibit to this Annual Report on Form 10 -K.

Additionally, on March 27, 2024, the Board of Directors approved the employment agreement by and among NSTS Bancorp, Inc., North Shore Trust and Savings and Nathan E.

Walker, President and Chief Executive Officer of North Shore Trust and Savings and Executive Vice President of NSTS Bancorp, Inc.

The employment agreement has an initial term of three years, which extends automatically for one additional year on each anniversary of the effective date of the agreement, so that the remaining term is again three years, unless one party gives the other party written notice of nonrenewal at least 90 days prior to the applicable anniversary date.

The employment agreement provides that Mr.

Walker's base salary may be increased, but not decreased, at the discretion of the Board of Directors.

In addition to the base salary, the agreement provides that Mr.

Walker will be eligible to receive an annual bonus as may be determined by the Board of Directors.

Walker is also eligible to participate in the NSTS Bancorp, Inc.

2023 Equity Incentive Plan as well as in any additional short-term incentive compensation or long-term or equity incentive plans that may be adopted by the Board of Directors in the future.

Walker is also entitled to participate in all employee benefit plans arrangements and perquisites offered to our employees and officers, and the reimbursement of reasonable business expenses incurred in the performance of his duties.

We may also provide Mr.

Walker with reimbursement for monthly membership dues at a country club or similar club, and other perquisites such as an automobile allowance and/or cell phone expense reimbursement as determined by the Board of Directors.

The employment agreement is terminable with or without cause by us.

Walker has no right to compensation or other benefits pursuant to the employment agreement for any period after termination for cause, as defined in the agreement.

In the event we terminate Mr.

Walker's employment without cause or Mr.

voluntarily resigns for “good reason” (i.e., a “qualifying termination event”), we will pay Mr.

Walker a severance payment equal to the base salary that Mr.

Walker would have received had he continued employment for the remainder of the then-current term.

The severance payment will be paid as salary continuation in substantially equal installments in accordance with our regular payroll practice over the remainder of the then-current term.

Walker must sign a general release of claims to receive the severance payment.

A “good reason” condition for purposes of the employment agreement includes a material reduction in base salary, a material adverse change in responsibilities, titles, powers or duties, relocation of Mr.

Walker's principal place of employment to a location more than 25 miles from his current principal place of employment, or material breach of the employment agreement by us.

In addition, the agreement provides that upon termination of Mr.

Walker’s employment for any reason, other than cause, we will provide for the continuation of the welfare benefits of medical, dental or other health coverage, at the same premium cost to Mr.

Walker and at the same coverage level as in effect as of the effective date of termination until the eighteen month anniversary of the effective date of termination.

If a qualifying termination event occurs within 24 months following a change in control of NSTS Bancorp, Inc.

or North Shore Trust and Savings, Mr.

Walker would be entitled to (in lieu of the payments and benefits described in the previous paragraph) a severance payment equal to two and one -half times the sum of (i) Mr.

Walker's base salary, plus (ii) the average annual bonus earned by Mr.

Walker for the three ( 3 ) years immediately preceding the year in which the change in control occurs.

This change in control severance will be paid in a lump sum payment.

Walker must sign a general release of claims to receive the change in control severance payment.

Also, upon termination of employment, Mr.

Walker will be required to adhere to a one -year non-solicitation restriction set forth in his employment agreement.

The employment agreement terminates upon Mr.

Walker’s death, and in such event, his estate or beneficiary will be paid his accrued benefits through such date.

The foregoing description of Mr.

Walker's employment agreement is a summary only, and accordingly, does not purport to be complete and is qualified in its entirety to the full text of the agreement, a copy of which is included as an exhibit to this Annual Report on Form 10 -K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

18 unchanged sentences

(1) Consists of outstanding stock options to purchase 500,500 shares of common stock granted under the Company’s stock-based compensation plans.

(2) Represents the weighted average exercise price of stock options granted in 2023.

(2) Represents the weighted average exercise price of stock options granted in 2023 and 2024.

(3) Represents the number of available shares that may be granted as stock options and other stock awards under the 2023 Equity Incentive Plan.

17 unchanged sentences

Lear dated March 27, 2024* (6)

mployment Agreement by and among NSTS Bancorp, Inc., North Shore Trust and Savings and Nathan E.

Employment Agreement by and among NSTS Bancorp, Inc., North Shore Trust and Savings and Nathan E.

Walker dated March 27, 2024*

11 unchanged sentences

2023 Equity Incentive Plan* (5)

Insider Trading Policy

Subsidiaries of NSTS Bancorp, Inc.

25 unchanged sentences

001-41232) filed on June 16, 2023, and incorporated herein by reference.

(6) Filed as an exhibit to NSTS Bancorp, Inc's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (File No.

001-41232) and incorporated herein by reference.

Form 10-K Summary

15 unchanged sentences

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 18 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses (ASC 326) .

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously acceptable generally accepted accounting principles.

Our opinion is not modified with respect to this matter.

Basis for Opinion

62 unchanged sentences

5,249,826 and 5,315,261 shares outstanding at December 31, 2024 and December 31, 2023, respectively)

Treasury Stock, at cost ( 269,898 shares at December 31, 2023)

Treasury Stock, at cost ( 352,033 and 269,898 shares at December 31, 2024 and 2023, respectively)

( 3,240 ) ( 2,381 )

Additional paid-in capital

26 unchanged sentences

Net interest income

Provision for (reversal of) credit losses

Net interest income after provision for (reversal of) credit losses

Provision for credit losses

Net interest income after provision for credit losses

Noninterest income:

16 unchanged sentences

Total noninterest expense

(Loss) income before income taxes

Loss before income taxes

( 789 ) ( 2,958 )

Income tax expense (benefit)

Net (loss) income

Income tax expense

$ ( 789 ) $ ( 3,957 )

Basic and diluted (loss) earnings per share

Basic and diluted loss per share

( 0.16 ) ( 0.79 )

7 unchanged sentences

(Dollars in thousands)

Net (loss) income

$ ( 789 ) $ ( 3,957 )

Unrealized net holding gain (loss) on securities

Unrealized net holding gain (loss) on securities arising during period, net of realized loss on sales of $ 1,794,000 and $ 0 , in the years ended December 31, 2023 and 2022, respectively

Unrealized net holding (loss) gain on securities

Unrealized net holding (loss) gain on securities arising during period, net of realized loss on sales of $ 0 and $ 1,794,000 , in the years ended December 31, 2024 and 2023, respectively

( 535 ) 4,058

152 ( 1,156 )

Other comprehensive income (loss), net of taxes

Other comprehensive (loss) income, net of taxes

( 383 ) 2,902

11 unchanged sentences

5,397,959 $ 54 $ — $ 50,420 $ 45,291 $ ( 11,125 ) $ ( 4,098 ) $ 80,542

Cumulative impact of ASU 2016-13

— — — — ( 279 ) — — ( 279 )

Proceeds of stock offering and issuance of common shares (net of issuance costs of $ 2.5 million)

— — — — ( 3,957 ) — — ( 3,957 )

Issuance of common shares donated to the NSTS Charitable Foundation

ESOP shares committed to be released

— — — ( 17 ) — — 216 199

Purchase of common shares by the ESOP ( 431,836 shares)

Purchase of treasury stock from stock repurchase program

( 269,898 ) — ( 2,381 ) — — — — ( 2,381 )

ESOP shares committed to be released

Compensation cost for stock options and restricted stock

— — — 519 — — — 519

Change in net unrealized loss on securities available for sale, net

Issuance of common shares for the restricted stock plan

187,200 2 — ( 2 ) — — — —

Balance at December 31, 2022

Change in net unrealized gain on securities available for sale, net

— — — — — 2,902 — 2,902

Cumulative impact of ASU 2016-13

Balance at December 31, 2023

5,315,261 $ 56 $ ( 2,381 ) $ 50,920 $ 41,055 $ ( 8,223 ) $ ( 3,882 ) $ 77,545

4 unchanged sentences

( 93,732 ) — ( 970 ) — — — — ( 970 )

Purchase of treasury stock from taxes withheld on net share settlement of restricted stock awards

( 11,403 ) — ( 109 ) — — — — ( 109 )

Reissuance of treasury stock for options exercised

23,000 — 220 ( 5 ) — — — 215

Compensation cost for stock options and restricted stock

13 unchanged sentences

Cash flows from operating activities:

Net (loss) income

$ ( 789 ) $ ( 3,957 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Securities amortization and accretion, net

5 unchanged sentences

Loss on sale of securities

Provision for (reversal of) credit losses

Provision for credit losses

Earnings on bank owned life insurance

( 220 ) ( 192 )

Issuance of common shares donated to North Shore Trust and Savings Charitable Foundation

Stock based compensation expense

4 unchanged sentences

Cash flows from investing activities:

Purchases of loans, net

Net change in portfolio loans

1 unchanged sentence

Principal repayments on mortgage-backed securities

Purchases of securities available for sale

Maturities and calls of securities available for sale

Sales of securities available for sale

Decrease (increase) in time deposits with other financial institutions, net

2,486 ( 1,008 )

Purchase of Federal Home Loan Bank stock

Net change in time deposits with other financial institutions

Purchases of premises and equipment, net

( 319 ) ( 516 )

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

( 8,163 ) 24,950

3 unchanged sentences

Net change in escrow deposits

Repayment of FHLB advance

Proceeds from FHLB advance

2 unchanged sentences

Purchase of treasury shares

Net proceeds from issuance of common shares

Net cash used in financing activities

( 970 ) ( 2,381 )

Purchase of treasury stock from taxes withheld on net share settlement of restricted stock awards

Proceeds from exercise of stock options

Net cash provided by (used in) financing activities

20,823 ( 7,140 )

Net change in cash and cash equivalents

5 unchanged sentences

Supplemental disclosures of cash flow information:

Loans transferred to held for sale from portfolio, net

Cash paid during the period for:

5 unchanged sentences

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.

The audited financial statements as well as other financial information at or prior to January 18, 2022 contained in this Annual Report on Form 10 -K relate solely to the consolidated financial results of North Shore MHC and its consolidated subsidiaries, NSTS Financial Corporation and North Shore Trust and Savings.

NSTS Bancorp, Inc.

12 unchanged sentences

Certain amounts in prior year financial statements have been reclassified to conform to the 2024 presentation.

Employee Retention Credit

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020 and the subsequent extension of the CARES Act, the Bank was eligible for a refundable employee retention credit subject to certain criteria.

The Bank qualified for the tax credit for the quarters ended June 30, 2021 and September 30, 2021 under the CARES Act.

The Bank utilized the gross receipts method of calculating eligibility.

Based on the eligibility, the tax credit is equal to 70 % of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee is $ 10,000 of qualified wages per quarter.

The Employee Retention Credit was recorded during the second quarter of 2022, when the Bank determined it was eligible.

The credit is recorded as other non-interest income and offsets $ 503,000 of salaries and employee benefits expense previously recorded during 2021.

During 2023, the Bank has received $ 259,000 of the Employee Retention Credit, which represents the tax credit for the quarter ended June 30, 2021.

The Bank cannot reasonably estimate when it will receive the remaining refunds.

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.

Use of Estimates

12 unchanged sentences

Comprehensive Income

Comprehensive income includes net income (losses) and other changes in net worth which bypass the statement of operations.

Comprehensive income includes net loss and other changes in net worth which bypass the statement of operations.

For all periods presented, other comprehensive income includes only one additional component, the change in unrealized gains and losses on available-for-sale investment securities.

4 unchanged sentences

Investment Securities

Securities are classified as available-for-sale and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss).

Securities are classified as available-for-sale and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss.

Discounts are accreted into interest income over the estimated life of the related security and premiums are amortized against income over the earlier of the call date or weighted average life of the related security using the level yield method.

3 unchanged sentences

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will sell, the security before recovery of its amortized cost basis.

If either of the aforementioned criteria exists, the Company will record an ACL related to securities available-for-sale with an offsetting entry to the provision for credit losses on securities on the income statement.

Losses are charged against the allowance when management believes the available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale securities, totaling $ 351,000 as of December 31, 2023, is excluded from the estimate of credit losses.

Accrued interest receivable on available-for-sale securities, totaling $ 278,000 and $ 351,000 as of December 31, 2024 and 2023, respectively, is excluded from the estimate of credit losses.

If either of these criteria does not exist, the Company will evaluate the securities individually to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors, such as market interest rate fluctuations.

2 unchanged sentences

The Company also considers the extent to which the securities are issued by the federal government or its agencies, and any guarantee of issued amounts by those agencies.

The amount of the impairment related to other factors is recognized in other comprehensive income (loss).

Prior to the adoption of ASU No.

2016 - 13 (CECL) on January 1, 2023, the Company evaluated its available-for-sale securities in accordance with the methodology specified in the preceding paragraph except that the credit portion of the impairment would reduce the amortized cost basis of the security.

The amount of the impairment related to other factors is recognized in other comprehensive loss.

Federal Home Loan Bank Stock

The Bank, as a member of the Federal Home Loan Bank (FHLB) system, is required to maintain an investment in capital stock of the FHLB.

Based on redemption provisions of the FHLB, the stock has no quoted market price and is carried at cost of $ 550,000 at December 31, 2023 and 2022 and is evaluated for impairment at each reporting date.

Based on redemption provisions of the FHLB, the stock has no quoted market price and is carried at cost of $ 585,000 and $ 550,000 at December 31, 2024 and 2023, respectively, and is evaluated for impairment at each reporting date.

Loans Held for Sale

30 unchanged sentences

Mortgage Loans

1 - 4 family mortgage loans in this segment are made to individuals.

One- to four -family mortgage loans in this segment are made to individuals.

The loans are secured by real estate with the Bank typically in a first lien position.

The Bank generally does not originate loans with a loan-to-value ratio greater than 80 % unless mortgage insurance is obtained and generally does not grant loans that would be classified as subprime upon origination.

The Bank generally does not grant loans that would be classified as subprime upon origination.

The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

18 unchanged sentences

changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices;

changes in international, national, regionally and local conditions;

changes in international, national, regional and local conditions;

● changes in the experience, depth and ability of lending management;

11 unchanged sentences

The Company’s ACL methodology is intended to reflect all loan portfolio risk, but management recognizes the inability to accurately depict all future credit losses in a current ACL estimate, as the impact of various factors cannot be fully known.

Accrued interest receivable on loans, totaling $ 392,000 as of December 31, 2023, is excluded from the amortized cost basis of financing receivables for the purpose of determining the allowance for credit losses.

Accrued interest receivable on loans, totaling $ 560,000 and $ 392,000 as of December 31, 2024 and 2023, respectively, is excluded from the amortized cost basis of financing receivables for the purpose of determining the allowance for credit losses.

Allowance for Credit Losses on Unfunded Loan Commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk by a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The ACL related to off-balance sheet credit exposures, which is within other liabilities on the Company’s Consolidated Balance Sheet, is estimated at each balance sheet date under the CECL model, and is adjusted as determined necessary through the provision for credit losses on the statement of operations.

The ACL related to off-balance sheet credit exposures, which is within other liabilities on the Company’s Consolidated Balance Sheets, is estimated at each balance sheet date under the CECL model, and is adjusted as determined necessary through the provision for credit losses on the statement of operations.

The estimate for ACL on unfunded loan commitments includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Prior to the implementation of ASU No.

2016 - 13 (CECL) on January 1, 2023, the allowance for credit losses was subject to the guidance included in ASC 310 and ASC 450.

Under that guidance, the Company was required to use an incurred loss methodology to estimate credit losses that were estimated to be incurred in the loan portfolio and that could ultimately materialize into confirmed losses in the form of charge-offs.

The incurred loss methodology was a backward-looking approach to loss recognition and based on the concept of a triggering event having taken place, causing a loss to be inherent within the portfolio.

Additionally, loans that were identified as impaired under the definition of ASC 310, were required to be assessed on an individual basis.

The allowance for credit losses and resulting provision expense levels for comparative periods presented were estimated in accordance with these requirements.

The allowance for loan losses (the “allowance”) is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.

Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management.

This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of general and allocated components, as further described below.

General Component

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments:

first mortgage loans and consumer loans.

Management uses an average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment.

This historical loss factor is adjusted for the following qualitative factors:

levels/trends in delinquencies;

trends in volume and terms of loans;

effects of changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices;

experience/ability/depth of lending management and staff;

and national and local economic trends and conditions.

Allocated Component

The allocated component relates to loans that are classified as impaired.

Based on internal ratings, loans are evaluated for impairment on a loan-by-loan basis.

Impairment is measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all circumstances surrounding the loan and borrower, including the length of the delay, reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the amount of principal and interest owed.

The Bank periodically may agree to modify the contractual terms of loans.

When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring (TDR).

All TDRs are classified as impaired and management performs an impairment analysis at the time of restructuring.

Premises and Equipment

31 unchanged sentences

Payment for such performance obligations are generally received at the time performance obligations are satisfied.

Operating Segments

The Company's revenue is primarily derived from the business of banking.

The Company's financial performance is monitored on consolidated basis by Mr.

Stephen Lear, CEO and Chairman of the Board, who is considered to be the Company's Chief Operating Decision Maker ("CODM").

Financial performance is reported to the CODM monthly, and the primary measure of performance is consolidated net income.

The allocation of resources throughout the Company is determined annually based upon consolidated net income performance.

The presentation of financial performance to the CODM is consistent with amounts and financial statement line items shown in the Company's consolidated balance sheets and consolidated statements of operations.

Additionally, the Company's significant expenses are adequately segmented by category and amount in the consolidated statements of operations to include all significant items when considering both qualitative and quantitative factors.

Significant expenses of the Company include salaries and employee benefits, equipment and occupancy expense, data processing, professional services and advertising.

All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment.

While the Company has assigned certain management responsibilities by business-line, the Company’s CODM evaluates financial performance on a Company-wide basis.

The Company's assigned business lines have similar economic characteristics, products, services and customers.

Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable operating segment.

Dividend Restrictions

81 unchanged sentences

(Dollars in thousands)

$ — $ — $ 2,973 $ 22 $ 2,973 $ 22

government agency obligations

19 unchanged sentences

At December 31, 2024 and 2023, certain investment securities were in unrealized loss positions.

There were no securities with identified credit losses at December 31, 2023, and no securities with other than temporary impairment losses at December 31, 2022.

There were no securities with identified credit losses at December 31, 2024 and 2023.

Unrealized losses have not been recognized into income because, based on management's evaluation, the decline in fair value is largely due to increased market rates, temporary market conditions and trading spreads, and, as such, are considered to be temporary by the Bank.

In addition, management has the intent and ability to hold the securities until they mature or they recover their carrying values.

Treasuries, U.S.

government agency obligations, mortgage-based residential obligations and collateralized mortgage obligations are agency-issued or government-sponsored enterprise issued.

30 unchanged sentences

The unpaid principal balance of these loans totaled $ 13.9 million and $ 13.2 million at December 31, 2024 and 2023 , respectively.

Custodial escrow balances maintained in connection with the foregoing loan servicing were $ 231,000 at December 31, 2023 and 2022 .

Custodial escrow balances maintained in connection with the foregoing loan servicing were $ 236,000 and $ 231,000 at December 31, 2024 and 2023 , respectively.

In the normal course of business, loans are made by the Bank to directors and officers of the Company and the Bank (related parties).

2 unchanged sentences

Allowance for Credit Losses

The following tables present the activity in the allowance for credit losses and allowance for loan losses for the years ended December 31, 2023 and 2022:

The following tables present the activity in the allowance for credit losses for the years ended December 31, 2024 and 2023:

December 31, 2024

3 unchanged sentences

$ 1,094 $ 40 $ 37 $ 4 $ 1 $ 1,176

Cumulative effect of change in accounting principle

335 23 29 — ( 3 ) 384

Net recoveries (charge-offs)

Provision for (release of) credit losses

(Release of) Provision for credit losses

( 38 ) ( 3 ) 4 61 1 25

2 unchanged sentences

December 31, 2023

1-4 family residential

(Dollars in thousands)

1 unchanged sentence

$ 581 $ 19 $ 19 $ — $ 5 $ 624

Net recoveries

Release of loan losses

( 169 ) ( 50 ) ( 6 ) ( 5 ) ( 230 )

Ending balance

$ 581 $ 19 $ 19 $ 5 $ 624

The ACL on loans excludes $ 14,000 of allowance for off-balance sheet exposures as of December 31, 2023 recorded within Other Liabilities on the Consolidated Balance Sheets.

The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2022 were as follows:

Collectively evaluated

Individually evaluated

Allowance for loan losses

Recorded investment in loans

Allowance for loan losses

Recorded investment in loans

Allowance for loan losses

Recorded investment in loans

(Dollars in thousands)

December 31, 2022

1-4 family residential

$ 512 $ 94,711 $ 69 $ 873 $ 581 $ 95,584

19 3,237 — — 19 3,237

Cumulative effect of change in accounting principle

335 23 29 — ( 3 ) 384

Net recoveries (charge-offs)

Provision for (release of) credit losses

178 ( 2 ) ( 11 ) 4 ( 1 ) 168

Ending balance

$ 1,094 $ 40 $ 37 $ 4 $ 1 $ 1,176

The ACL on loans excludes $ 60,000 and $ 14,000 of allowance for off-balance sheet exposures as of December 31, 2024 and 2023, respectively, recorded within Other Liabilities on the Consolidated Balance Sheets.

There were no collateral dependent loans as of December 31, 2024.

As of December 31, 2023, collateral dependent loans totaled $ 200,000 in the one to four -family residential loan segment.

12 unchanged sentences

Management uses the results of the independent review as part of its annual review process.

The following tables present the credit risk profile of the Company's loan portfolio based on risk rating category and year of origination as of December 31, 2023 and the risk rating category and class of loan as of December 31, 2022.

The following tables present the credit risk profile of the Company's loan portfolio based on risk rating category and year of origination as of December 31, 2024 and 2023.

As of December 31, 2024

46 unchanged sentences

Special Mention

— — — — — — — —

24,501 21,881 12,479 18,418 49,028 4,600 — 130,907

Current year-to-date gross write-offs

— — — — — — — —

As of December 31, 2023

Term loans amortized cost basis by origination year

Revolving loans amortized cost basis

Revolving loans converted to term loans amortized cost basis

(Dollars in thousands)

December 31, 2022

1-4 family residential

$ 23,395 $ 18,950 $ 19,605 $ 47,517 $ 1,414 $ — $ 110,881

Special Mention

— — — — — — —

— — — 200 — — 200

Total 1-4 family residential

23,395 18,950 19,605 47,717 1,414 — 111,081

Current year-to-date gross write-offs

— — — — — — —

— — 239 2,872 — — 3,111

Special Mention

— — — — — — —

Total multi-family

— — 239 2,872 — — 3,111

Current year-to-date gross write-offs

— — — — — — —

186 — 100 3,399 150 — 3,835

Special Mention

— — — — — — —

Total commercial

186 — 100 3,399 150 — 3,835

Current year-to-date gross write-offs

— — — — — — —

2,508 — — — — — 2,508

Special Mention

— — — — — — —

Total construction

2,508 — — — — — 2,508

Current year-to-date gross write-offs

— — — — — — —

122 95 28 3 — — 248

Special Mention

— — — — — — —

Total consumer

122 95 28 3 — — 248

Current year-to-date gross write-offs

— — — — — — —

26,211 19,045 19,972 53,791 1,564 — 120,583

Special Mention

— — — — — — —

— — — 200 — — 200

26,211 19,045 19,972 53,991 1,564 — 120,783

Current year-to-date gross write-offs

— — — — — — —

The aging of the Bank’s loan portfolio as of December 31, 2024 and 2023, is as follows:

19 unchanged sentences

— — — — 248 248

$ 131 $ — $ 200 $ 331 $ 120,452 $ 120,783

The following table presents the amortized cost basis of loans on nonaccrual status recorded at December 31, 2024 and 2023.

As of January 1, 2023, the amortized cost basis of loans on nonaccrual status was $ 154,000 .

December 31, 2024

1 unchanged sentence

Nonaccrual with no Allowance for Credit Losses

(Dollars in thousands)

4 unchanged sentences

$ — $ — $ 200 $ 200

Loans individually evaluated for impairment by class of loans as of December 31, 2022 were are follows:

Recorded investment

Unpaid principal balance

Related allowance

Average recorded investment

Interest income recognized

(Dollars in thousands)

December 31, 2022

With no related allowance recorded

1-4 family residential

$ 429 $ 635 $ — $ 442 $ 29

With a related allowance recorded

1-4 family residential

$ 444 $ 444 $ 69 $ 452 $ 21

Total individually assessed as of December 31, 2022

$ 873 $ 1,079 $ 69 $ 894 $ 50

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality.

For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.

The Bank may modify loans to borrowers experiencing financial difficulty by providing modifications to repayment terms;

3 unchanged sentences

As of January 1, 2023, the Company adopted ASU 2022 - 02, Financial Instruments - Credit Losses (Topic 326 ):

Troubled Debt Restructuring and Vintage Disclosures , see Note 1.

There were no modifications on loans to borrowers experiencing financial difficulty during the year ended December 31, 2023.

There were no new troubled debt restructurings during the year ended December 31, 2022.

Troubled Debt Restructuring and Vintage Disclosures .

There were no modifications on loans to borrowers experiencing financial difficulty during the year ended December 31, 2024 and 2023.

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process as of December 31, 2024.

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $ 64,000 as of December 31, 2023.

Premises and Equipment

10 unchanged sentences

$ 5,311 $ 5,285

Other Real Estate Owned

There was no other real estate owned ("OREO") at December 31, 2023 and 2022.

Additionally, there was no movement in OREO during the years ended December 31, 2023 and 2022.

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $ 64,000 as of December 31, 2023.

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process as of December 31, 2022.

As of December 31, 2023 , for years below ended December 31, the scheduled maturities of time deposits are as follows:

Depreciation expense was $ 293,000 and $ 266,000 for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024 , for the years below ended December 31, the scheduled maturities of time deposits are as follows:

(Dollars in thousands)

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The terms for these accounts, including interest rates, fees, and other attributes, are similar to those prevailing for comparable transactions with other customers and do not involve more than the normal level of risk associated with deposit accounts.

At December 31, 2023 and 2022 , total deposits held by directors and officers of the Company and the Bank were $ 739,000 and $ 724,000 , respectively.

At December 31, 2024 and 2023 , total deposits held by directors and officers of the Company and the Bank were $ 1.1 million and $ 739,000 , respectively.

Other Borrowings

During the year ended December 31, 2023, the Company borrowed $ 5.0 million from the FHLB Chicago at a rate of 4.78 % for 24 months, payable on June 20, 2025.

There were no additional borrowings made during the year ended December 31, 2024.

In June 2023, the Company borrowed $ 5.0 million from the FHLB Chicago at a rate of 4.78 % for 24 months, payable on June 20, 2025.

The advance is collateralized by loans pledged to the FHLB and is payable at maturity, with a prepayment penalty if repayment is made prior to the maturity date.

Additionally, during the fourth quarter of 2023, the Company borrowed $ 10.0 million from the Federal Reserve Bank of Chicago as part of the Bank Term Funding Program, at a rate of 5.31 % for 12 months, payable in November 2024.

Additionally, during the fourth quarter of 2023, the Company borrowed $ 10.0 million from the Federal Reserve Bank of Chicago ("FRB") as part of the Bank Term Funding Program, at a rate of 5.31 % for 12 months, payable in November 2024.

The borrowing was repaid in December 2023.

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Outstanding advances

$ 5,000 $ 5,000

Additional borrowing capacity

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(Dollars in thousands)

Current expense (benefit)

Current expense

Total current expense

Deferred benefit

( 389 ) ( 1,150 )

Total current expense (benefit)

Deferred (benefit) expense

Change in valuation allowance

5 unchanged sentences

(Dollars in thousands)

(Loss) Income before income tax expense

Loss before income tax expense

$ ( 789 ) $ ( 2,958 )

Tax benefit (expense) at statutory federal rate of 21 % applied to income before income tax benefit (expense)

State income tax benefit (expense), net of federal effect

Tax benefit at statutory federal rate of 21 % applied to income before income tax benefit

State income tax benefit, net of federal effect

Tax-exempt security and loan income, net of TEFRA adjustments

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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 on Federal NOLs and other temporary differences, other than those arising from the unrealized loss on securities available-for-sale, has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized.

On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $ 2.5 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized.

NOL carryforwards for state income tax purposes were approximately $ 5.4 million and $ 5.6 million at December 31, 2024 and 2023 , respectively, and will begin expiring in 2025.

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64,844 43,624

Shares distributed to plan participants

366,992 388,212

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Stock options granted under the 2023 Equity Plan generally vest in equal annual installments over a service period of five years beginning on the date of grant.

The vesting of the options accelerates upon death, disability or an involuntary termination at or following a change in control of the Company.

The vesting of the options accelerates upon death, disability or following a change in control of the Company.

Stock options are generally granted at an exercise price equal to the fair value of the Company’s common stock on the grant date based on the closing market price of the Company's common stock on the date of grant, and have an expiration period of ten years.

In June 2023, the Company granted 465,500 stock options under the 2023 Equity Plan.

In December 2024, the Company granted 58,000 stock options under the 2023 Equity Plan.

As of December 31, 2024, the Company has 16,296 shares available for future grants of stock options under the 2023 Equity Plan.

The fair value of stock options granted is estimated utilizing the Black-Scholes option pricing model using the following assumptions:

The fair value of stock options granted in 2024 is estimated utilizing the Black-Scholes option pricing model using the following assumptions:

an expected life of 6.5 years, risk-free rate of 4.38 %, volatility of 28.0 % and a dividend yield of 0.0 %.

The fair value of stock options granted in 2023 is estimated utilizing the Black-Scholes option pricing model using the following assumptions:

an expected life of 6.5 years, risk-free rate of 3.82 %, volatility of 29.0 % and a dividend yield of 0.0 %.

Due to the limited historical information of the Company’s stock, management considered the weighted historical volatility of the common stock of the Company and other similar entities for an appropriate period in determining the volatility rate used in the estimation of fair value.

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The weighted average grant date fair value of stock options granted during the year ended December 31, 2024 was $ 4.38 .

The weighted average grant date fair value of stock options granted during the year ended December 31, 2023 was $ 3.56 .

The following is a summary of the Company's stock option activity and related information for the periods presented.

There was no stock option activity for the year ended December 31, 2022.

Weighted Average Exercise Price

1 unchanged sentence

Options, outstanding January 1, 2023

Options, outstanding December 31, 2023

465,500 $ 9.36 $ 70

Exercisable - End of Period

23,000 $ 9.36 $ 3

Options, outstanding January 1, 2024

465,500 $ 9.36 $ 70

( 23,000 ) 9.36

Options, outstanding December 31, 2024

6 unchanged sentences

Restricted shares granted under the 2023 Equity Plan generally vest in equal annual installments over a service period of five years beginning on the date of grant.

The vesting of the awards accelerates upon death, disability or an involuntary termination at or following a change in control of the Company.

The vesting of the awards accelerates upon death, disability or following a change in control of the Company.

The product of the number of shares granted and the grant date closing market price of the Company’s common stock determines the fair value of restricted shares under the 2023 Equity Plan.

Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

On June 15, 2023, the Company granted to employees, under the 2023 Equity Plan, 187,200 shares of restricted stock with a total grant-date fair value of $ 1.8 million.

On December 19, 2024, the Company granted to employees, under the 2023 Equity Plan, 16,700 shares of restricted stock with a total grant-date fair value of $ 189,000 .

Additionally, on June 15, 2023, the Company granted to employees, under the 2023 Equity Plan, 187,200 shares of restricted stock with a total grant-date fair value of $ 1.8 million.

These restricted stock awards vest in equal installments over a five -year period beginning one year from the date of grant.

As of December 31, 2024, the Company has 12,018 shares of restricted stock available for future grants under the 2023 Equity Plan.

The following is a summary of the status of the Company's restricted shares as of December 31, 2023 and changes thereto during the period presented.

The following is a summary of the status of the Company's restricted shares as of December 31, 2024 and changes thereto during the periods presented.

Restricted Stock

4 unchanged sentences

178,000 $ 9.36

Nonvested balance as of December 31, 2023

178,000 $ 9.36

( 42,960 ) 9.36

Nonvested balance as of December 31, 2024

151,740 $ 9.57

Expected future expense related to the non-vested restricted shares outstanding as of period end is $ 1.3 million over a weighted average period of 3.6 years.

6 unchanged sentences

For the year ended December 31, 2024, the total deferred tax benefit related to the $ 767,000 of stock based compensation expense was $ 123,000 .

Due to the passing of Director Bond, Jr., 18,400 stock options and 7,360 restricted stock awards vested during the fourth quarter of the year ended December 31, 2024.

The early vesting of the stock options and restricted stock awards resulted in an additional expense of $ 57,000 and $ 60,000 , respectively, during the year ended December 31, 2024.

Due to the passing of Director Dolan, 23,000 stock options and 9,200 restricted stock awards vested during the fourth quarter of the year ended December 31, 2023.

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The Bank generally originates single-family residential loans within its primary lending area which is Waukegan, Illinois and the surrounding area.

The Bank’s underwriting policies require such loans to be made at approximately 80 % loan-to-value, based upon appraised values, unless private mortgage insurance is obtained, or the loan is guaranteed by the government.

These loans are secured by the underlying properties.

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Individually Evaluated (Nonrecurring)

Individually evaluated (formerly, impaired) loans are recorded at fair value on a nonrecurring basis.

Individually evaluated loans are recorded at fair value on a nonrecurring basis.

The fair value of loans is generally based on recent real estate appraisals.

9 unchanged sentences

Securities Available-for-sale

$ 2,973 $ 2,973 $ — $ —

government agency obligations

21 unchanged sentences

These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.

There were no assets measured at fair value on a nonrecurring basis as of December 31, 2023 and the valuation techniques used to measure nonrecurring Level 3 fair value measurements as of December 31, 2023 and 2022 , were as follows:

Fair Value Measurements Using

(Dollars in thousands)

December 31, 2022

Impaired loans

$ 375 — — 375 $ —

The numerical range of unobservable inputs for the valuation assumptions used in calculating the amounts disclosed above is not meaningful to this presentation.

There were no assets measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023.

Fair Value of Financial Instruments

Financial instruments are classified within the fair value hierarchy using the methodologies described in Note 13 – Fair Value Measurements.

Fair value estimates, methods and assumptions for the Company’s financial instruments that are

not recorded at fair value on a recurring or non-recurring basis are set forth below.

Fair value estimates, methods and assumptions for the Company’s financial instruments that are not recorded at fair value on a recurring or non-recurring basis are set forth below.

Fair values are estimated for portfolios of loans with similar financial characteristics.

27 unchanged sentences

$ 120,623 $ — $ — $ 110,288 $ 110,288

Loans held for sale

380 — 387 — 387

Financial liabilities:

1 unchanged sentence

156,402 — 156,092 — 156,092

Other borrowings

5,000 — 4,990 — 4,990

Earnings Per Share

5 unchanged sentences

Year Ended December 31,

Net (loss) income applicable to common shares

Net loss applicable to common shares

$ ( 789 ) $ ( 3,957 )

5 unchanged sentences

4,911,461 5,004,498

(Loss) Earnings per common share basic and diluted

Loss per common share basic and diluted

$ ( 0.16 ) $ ( 0.79 )

All unallocated ESOP shares have been excluded from the calculation of basic and diluted EPS.

The computation of diluted earnings per share excludes certain outstanding share option awards that were outstanding and anti-dilutive, since the grant date fair value of these outstanding share option awards exceeded the average market price of the Company's common shares.

Due to the net loss position, all outstanding share option awards are anti-dilutive and excluded from the computation of diluted earnings per share.

Condensed Parent Only Financial Information

12 unchanged sentences

Treasury Stock

( 3,240 ) ( 2,381 )

Additional paid-in capital

18 unchanged sentences

Total expense

Losses before income tax expense (benefit) and equity in undistributed (losses) earnings of subsidiary

Losses before income tax expense and equity in undistributed earnings (losses) of subsidiary

$ ( 1,184 ) $ ( 1,045 )

Income tax expense (benefit)

Losses before equity in undistributed (losses) earnings of subsidiary

Income tax expense

Losses before equity in undistributed earnings (losses) of subsidiary

$ ( 1,184 ) $ ( 1,141 )

Equity in undistributed (losses) earnings of subsidiary

Equity in undistributed earnings (losses) of subsidiary

395 ( 2,816 )

Net (loss) income

$ ( 789 ) $ ( 3,957 )

4 unchanged sentences

Cash flows from operating activities:

Net (loss) income

$ ( 789 ) $ ( 3,957 )

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net change in other assets

Net change in accrued expenses and other liabilities

Issuance of common shares donated to North Shore Trust and Savings Charitable Foundation

Equity in undistributed losses (earnings) of subsidiary

Equity in undistributed (earnings) losses of subsidiary

( 395 ) 2,816

Net cash (used in) provided by operating activities

Net cash used in operating activities

( 1,088 ) ( 1,351 )

3 unchanged sentences

Cash flows from financing activities:

Net proceeds from issuance of common shares

Proceeds from conversion transferred to subsidiary

Purchase of treasury shares

Net cash (used in ) provided by financing activities

( 970 ) ( 2,381 )

Purchase of treasury stock from taxes withheld on stock awards

Proceeds from exercise of stock options

Net cash used in financing activities

( 864 ) ( 2,381 )

Net change in cash

1 unchanged sentence

Cash at beginning of period

18,634 22,194

Cash at end of period

1 unchanged sentence

Changes in Accounting Principles

Accounting for Financial Instruments – Credit Losses

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.

ASU 2016 - 13 was issued to provide financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date to enhance the decision making process.

The CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities, and other receivables at the time the financial asset is originated or acquired.

The expected credit losses are adjusted each period for changes in expected lifetime credit losses.

For available for-sale securities where fair value is less than cost, credit-related impairment, if any, will be recognized in an allowance for credit losses and adjusted each period for changes in expected credit risk.

This model replaces the multiple existing impairment models, which generally require that a loss be incurred before it is recognized.

We adopted ASU 2016 - 13 using the current expected credit loss (“CECL”) methodology for financial assets measured at amortized cost, effective January 1, 2023.

Results for the periods beginning after January 1, 2023 are presented under ASU 2016 - 13, while prior period amounts are reported in accordance with the previously applicable accounting standards.

The Company recorded a reduction to retained earnings of approximately $ 279,000 upon adoption of ASU 2016 - 13.

The transition adjustment included an increase to the allowance for credit losses on loans of $ 384,000 and an increase to the allowance for credit losses on off-balance sheet credit exposure of approximately $ 5,000 .

The transition adjustment included a corresponding increase in deferred tax assets.

The following table illustrates the impact of ASU 2016 - 13 adoption:

Allowance for credit losses as reported under ASU 2016-13

Allowance pre-ASU 2016-13 Adoption

Impact on Allowance of ASU 2016-13 Adoption

(Dollars in thousands)

First mortgage loans

1-4 family residential

$ 916 $ 581 $ 335

Consumer loans

Allowance for credit losses for all loans

$ 1,008 $ 624 $ 384

Allowance for credit losses on off-balance sheet exposures

In March 2022, FASB issued ASU 2022 - 02, Financial Instruments-Credit Losses (Topic 326 ):

Troubled Debt Restructurings and Vintage Disclosures .

The amendments in this update eliminate the accounting guidance and related disclosures for TDRs by creditors in Subtopic 310 - 40, Receivables — Troubled Debt Restructurings by Creditors , while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requiring an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326 - 20, Financial Instruments — Credit Losses — Measured at Amortized Cost .

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and are applied prospectively, except with respect to the recognition and measurement of TDRs, where an entity has the option to apply a modified retrospective transition method.

Early adoption of the amendments in this update is permitted.

An entity may elect to early adopt the amendments regarding TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

January 1, 2023, we adopted ASU

02, which superseded the current disclosure requirements for TDRs.

In March 2024, the FASB issued ASU No.

2024 - 01, “Compensation—Stock Compensation (Topic 718 ):

Scope Applications of Profits Interests and Similar Awards” (ASU 2024 - 01 ).

ASU 2024 - 01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S.

ASU 2024 - 01 is effective for annual periods beginning after December 15, 2025, although early adoption is permitted.

Upon adoption, ASU 2024 - 01 is not expected to have an impact on the Company’s consolidated balance sheets or consolidated statements of income.

On November 27, 2023, the FASB issued ASU 2023 - 07, "Segment Reporting (ASC 280 ):

Improvements to Reportable Segment Disclosures", intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

Provisions in the amendment include:

( 1 ) Requirement that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss (collectively referred to as the "significant expense principle");

( 2 ) Requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition.

The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss;

( 3 ) Requirement that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by ASC 280 in interim periods;

( 4 ) Clarification that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit.

However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements;

( 5 ) Requirement that a public entity disclose the title and position of the CODM and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources;

and ( 6 ) Requirement that a public entity that has a single reportable segment provide all the disclosures by the amendments in the update and all existing segment disclosures in ASC 280.

The amendments in the update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

For public business entities, amendments in the update should be applied retrospectively to all periods presented in the financial statements, and upon transition the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

The Company adopted this standard effective January 1, 2024, resulting in additional disclosure only, and did not have a material impact on the consolidated financial statements.

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 adopt this ASU for the reporting period beginning January 1, 2025, and does not expect the amendments to have a material impact to the financial statements of the Company.

Subsequent Events

22 unchanged sentences

Apolonio Arenas

/s/ Thaddeus M.

March 28, 2025

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures