What changed in this filing

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Item 1. Business

2026-03-27 compared with 2025-03-28 · 94 added, 103 removed, 787 unchanged (20% of the section changed)

23 unchanged sentences

adverse changes in the securities markets;

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, especially in light of the new United States presidential administration;

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

our ability to manage market risk, credit risk and operational risk in the current economic conditions;

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Lewis Ave., Waukegan, Illinois 60085, and its telephone number is (847) 336-4430.

NSTS Bancorp, Inc.

completed its stock offering in connection with the conversion on January 18, 2022.

NSTS Bancorp, Inc.

sold 5,290,000 shares of common stock at $10.00 per share in its subscription offering for gross proceeds of approximately $52.9 million.

In connection with the conversion, it also issued 107,959 shares of common stock and $150,000 in cash to NSTS Charitable Foundation, Inc.

Shares of NSTS Bancorp, Inc.’s common stock began trading on January 19, 2022 on The Nasdaq Capital Market under the trading symbol “NSTS.”

Shares of NSTS Bancorp, Inc.’s common stock trade on The Nasdaq Capital Market under the trading symbol “NSTS.”

NSTS Bancorp, Inc., as the holding company of North Shore Trust and Savings, is authorized to pursue other business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies.

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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.

We are also an active originator of residential home loans in Lake County, Illinois as well as other counties in the greater Chicagoland area, as well as Kenosha County in Wisconsin.

We are an active originator of residential home loans in Lake County, Illinois as well as other counties in the greater Chicagoland area, as well as Kenosha County in Wisconsin.

We established a loan production office in Chicago, Illinois in 2016 to originate loans outside of our branch network in a more densely populated metropolitan area, which we believe benefits us geographically.

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In addition to our main office, we have two additional full service offices in Waukegan and Lindenhurst, Illinois, respectively, and three loan production offices located in Chicago, Plainfield and Aurora, Illinois.

We currently are evaluating sites for additional loan production branch offices in surrounding communities to be established over the next few years.

Our market area consists of Lake County, Cook County and Will County which are located in Illinois, and Kenosha County which is located in Wisconsin.

Our market area consists of Lake County, Cook County and Will County which are located in Illinois, and Kenosha County, Wisconsin.

The largest employers in Lake County are pharmaceutical and healthcare companies, including Abbott Laboratories, AbbVie, and Baxter International.

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Additionally, North Shore Trust and Savings has two commercial real estate loans secured by retail frontage.

The two largest commercial real estate loans outstanding were $1.6 million and $1.1 million, and both loans were paying in accordance with all of their contractual terms.

The two largest commercial real estate loans outstanding were $1.4 million and $1.0 million, both loans were paying in accordance with all of their contractual terms.

Although terms for commercial real estate and multi-family residential loans vary, our underwriting standards generally allow for terms not exceeding 30 years and loan-to-value ratios of not more than 75%.

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Construction Lending.

At December 31, 2024, our construction lending amounted to $3.7 million, or 2.8% of the total loan portfolio.

The construction loan portfolio consisted of 13 loans, the largest totaling $940,000, which is the construction of a single family home in the Chicago, Illinois metro area expected to be completed in 2025, in which the loan will convert to a conventional mortgage loan with a remaining term of 29 years.

At December 31, 2025, our construction lending outstanding amounted to $3.9 million, or 3.0% of the total loan portfolio.

The Bank has an additional $1.3 million in unfunded portions of construction loans available to borrowers.

The construction loan portfolio consisted of 10 loans, the largest totaling $1.0 million, which is the rehabilitation of a condo unit in Chicago, Illinois metro area expected to be completed in 2026, at which time the loan will convert to a conventional mortgage loan with a remaining term of 29 years.

In addition to single family residential construction projects, our construction lending consists of land loans for properties zoned for residential construction.

There are unfunded commitments of $4.8 million related to construction loans as of December 31, 2024.

Consumer Lending .

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When a loan is identified for individual evaluation for expected credit losses, the measurement of the loan in the allowance for credit losses is based on present value of expected future cash flows, except that expected credit losses for all collateral-dependent loans are measured based on the fair value of the collateral.

As of December 31, 2024 , and 2023 , loans identified for individual evaluation of expected credit losses, amounted to $0 and $200,000 , respectively.

As of December 31, 2025 , loans identified for individual evaluation of expected credit losses, amounted to $284,000 .

There were no loans identified for individual evaluation of expected credit losses as of December 31, 2024.

Federal regulations and our policies require that we utilize an internal asset classification system as a means of reporting problem and potential problem assets.

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We classify assets in accordance with the management guidelines described above.

At December 31, 2024 , we had no loans classified as "special mention," “doubtful,” “loss,” or "substandard."

At December 31, 2025 , we had two loans classified as "substandard" totaling $284,000 and we had no loans classified as "special mention," “doubtful,” or “loss.”

Modifications on loans to borrowers experiencing financial difficulty .

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Allowance for credit losses, beginning of period

Cumulative effect of ASU 2016-13 adoption (CECL)

Provision for credit losses

(Reversal of) Provision for credit losses

1-4 family residential

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Such risk ratings are periodically reviewed by management and revised as deemed appropriate.

At both December 31, 2024 and December 31, 2023 our allowance for credit losses amounted to $1.2 million .

Our allowance for credit losses amount to $1.1 million and $1.2 million at December 31, 2025 and December 31, 2024, respectively .

The establishment of the allowance for credit losses is significantly affected by uncertainties and management judgment and there is a likelihood that different amounts would be reported under different conditions or assumptions.

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As of December 31, 2025 , our securities available-for-sale portfolio totaled $78.7 million, or 29.5% of total assets at such date.

The largest component of our investment securities portfolio at December 31, 2024 was investment in pass-through mortgage-backed securities issued by Fannie Mae, Ginnie Mae and Freddie Mac, which amounted to $25.9 million, followed by collateralized mortgage obligations issued by Fannie Mae, Ginnie Mae and Freddie Mac, which amounted to $24.9 million.

The largest component of our investment securities portfolio at December 31, 2025 was investment in collateralized mortgage obligations issued by Fannie Mae, Ginnie Mae and Freddie Mac, which amounted to $27.2 million, followed by pass-through mortgage-backed securities issued by Fannie Mae, Ginnie Mae and Freddie Mac, which amounted to $23.8 million.

Our investment in U.S.

government and federal agency obligations as of December 31, 2025 , was $8.5 million and our investment in municipal obligations as of December 31, 2025 , was $12.1 million.

During the year ended December 31, 2024, the investments in short term U.S.

Treasuries matured, resulting in no holdings at the end of the year.

Additionally, the Bank has investments in short term U.S.

Treasuries, which amounted to $7.1 million.

Ginnie Mae is a government agency within the Department of Housing and Urban Development which is intended to help finance government-assisted housing programs.

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Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.

Therefore, these securities have been included in based on average remaining life.

Therefore, these securities have been included based on average remaining life.

The below yields represent tax equivalent yield.

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(Dollars in thousands)

Savings accounts

Checking-interest bearing

Savings accounts

Total interest-bearing deposits

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4.00% - 4.99%

5.00% - or more

Total certificate accounts

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There were no additional borrowings made during the year ended December 31, 2025.

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.

The borrowing was repaid in December 2023.

The borrowing was collateralized by securities pledged to the FRB and was payable at maturity with no prepayment penalty.

In June 2023, the Company borrowed $5.0 million from the FHLB Chicago at a rate of 4.78% for 24 months, which was paid off in June 2025.

The following table shows certain information regarding our borrowings at or for the dates indicated:

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Weighted average interest rate at end of period

As of December 31, 2024 , there was $5.0 million in outstanding borrowings with the FHLB Chicago.

As of December 31, 2025 , there were no outstanding borrowings with the FHLB Chicago.

The Bank is eligible to borrow up to a total of $79.1 million and $78.1 million at December 31, 2025 and 2024 , respectively, which would be collateralized by $105.1 million and $103.8 million of first mortgage loans under a blanket lien arrangement at December 31, 2025 and 2024 , respectively.

Additionally, at December 31, 2024 and 2023 we had a $10.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at December 31, 2024 and 2023.

Additionally, at December 31, 2025 and 2024 we had a $10.0 million uncommitted, unsecured line of credit with the BMO Harris Bank, none of which was drawn at December 31, 2025 and 2024.

Expense and Tax Allocation

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We continue to elevate individuals from within the organization into new roles and we expect to continue to assess our management and staffing needs and are likely to add personnel in the future in order to fully implement our business strategy.

During the year ended December 31, 2023, as part of the strategic growth initiatives, the Bank hired a mortgage lending team of 10 individuals, operating as Oak Leaf Community Mortgage, powered by North Shore Trust and Savings.

These additional employees joined the Bank between September 11, 2023 and October 2, 2023.

During the year ended December 31, 2024, the Bank continued to invest in the mortgage lending team, adding additional loan officers and support staff.

In an effort to continue our investment in our employees and as part of the conversion, North Shore Trust and Savings established the Employee Stock Ownership Plan ("ESOP") for its employees.

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govern the classification of assets;

provide oversight for the adequacy of loan loss reserves for regulatory purposes;

provide oversight for the adequacy of credit loss reserves for regulatory purposes;

and establish the timing and amounts of assessments and fees.

Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings and other factors (known as an institution's CAMELS rating).

Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, earnings, liquidity, and sensitivity to market risk (known as an institution's CAMELS rating).

These CAMELS ratings are inherently subjective and the receipt of a less-than-satisfactory rating in one or more categories may result in enforcement action by the banking regulators against a financial institution.

A less-than-satisfactory CAMELS rating may also prevent a financial institution, such as North Shore Trust and Savings or its holding company, NSTS Bancorp, Inc., from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, the Community Reinvestment Act of 1977 (the "CRA") and fair lending laws and regulations.

In addition, we must comply with significant anti-money laundering ("AML") and anti-terrorism laws and regulations, the Community Reinvestment Act of 1977 (the "CRA") and fair lending laws and regulations.

Government agencies have the authority to impose monetary penalties and other sanctions on institutions that fail to comply with these laws and regulations, which could significantly affect our business activities, including our ability to acquire other financial institutions or expand our branch network.

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The CFPB also has the authority to require reports from institutions with less than $10.0 billion in assets, such as North Shore Trust and Savings, to support the CFPB in implementing federal consumer protection laws, supporting examination activities, and assessing and detecting risks to consumers and financial markets.

Uncertainty regarding the CFPB's future authority, staffing and regulatory priorities under the Trump Administration, including as a result of ongoing litigation and potential administrative efforts to reduce the agency's footprint, could impact the CFPB's future supervisory and enforcement activity.

As a savings and loan holding company, NSTS Bancorp, Inc.

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A CSA retains its federal savings association charter and continues to be subject to the corporate governance laws and regulations applicable to such associations, including as to its bylaws, board of directors and stockholders, capital distributions and mergers.

A CSA may make loans to its customers without regard to the lending restrictions applicable to federal savings associations, such as the percentage of capital or assets limits on various types of loans and the QTL Test.

A CSA may make loans to its customers without regard to the lending restrictions applicable to federal savings associations, such as the percentage of capital or asset limits on various types of loans and the QTL Test.

However, federal savings associations that have made such an election are subject to the narrower authority of national banks in certain areas such as branching and subsidiary activities, in certain respects.

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Federal regulations require federally insured depository institutions to meet several minimum capital standards:

a common Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6%, a total capital to risk-based assets ratio of 8%, and a 4% Tier 1 capital to total assets (known as the "leverage ratio").

The EGRRCPA required the federal banking agencies, including the OCC, to establish a "community bank leverage ratio" ("CBLR") of between 8% and 10% for institutions with assets of less than $10.0 billion.

The EGRRCPA requires the federal banking agencies, including the OCC, to establish a "community bank leverage ratio" ("CBLR") of between 8% and 10% for institutions with assets of less than $10.0 billion.

The CBLR is the ratio of a bank's tangible Tier 1 equity capital to average total consolidated assets and has been set by the regulators at 9%.

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%.

Institutions with capital complying with the ratio and otherwise meeting the specified requirements and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements.

A qualifying institution may opt in and out of the CBLR framework on its quarterly call report.

The CBLR option was effective January 1, 2020 and is available to institutions with assets of less than $10.0 billion that meet other specified criteria.

The CBLR option became effective January 1, 2020 and is available to institutions with assets of less than $10.0 billion that meet other specified criteria.

The rule also established a two-quarter grace period for a qualifying institution whose leverage ratio falls below the 8% requirement so long as the bank maintains a leverage ratio of 7% or greater.

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On October 24, 2023, the OCC, the FDIC and the Federal Reserve Board jointly issued a final rule to revise the CRA's implementing regulations.

While the final rule formally took effect on April 1, 2024, the majority of its provisions have a compliance date of January 1, 2026.

The final rule implements a revised regulatory framework that, like the current framework, is based on bank asset size and business model.

Under the final rule, federal agencies will evaluate small banks (i.e., those with assets of less than $600.0 million as of December 31 in either of the prior two calendar years), such as North Shore Trust and Savings, under either the current small bank test, referred to in the final rule as the Small Bank Lending Test or, at the Bank's option, the new "Retail Lending Test," however, banks of all sizes will maintain the option to elect to be evaluated under a strategic plan with the final rule updating the standards for obtaining approval for such plan.

The new Retail Lending Test evaluates a bank's record of helping to meet the credit needs of its community through the origination and purchase of home mortgage, multifamily, small business, small farm and, in certain cases, automobile loans.

For small banks that opt to be evaluated under the Retail Lending Test, the agencies will evaluate the distribution of the bank's major product lines in its facility-based assessment areas and any outside retail lending area, if applicable.

For each applicable performance test, the agencies will assign conclusions reflecting the bank's performance in its facility-based assessment areas, and in the case of the new Retail Lending Test, the agencies will assign one of five conclusions to the bank:

"Outstanding;" "High Satisfactory;" "Low Satisfactory;" "Needs to Improve;" or "Substantial Noncompliance." For small banks evaluated under the current Small Bank Lending Test, the agencies will assign one of four conclusions:

"Outstanding;" "Satisfactory;" "Needs to Improve;" or "Substantial Noncompliance." At this time, we are unable to determine what impact, if any, the CRA reform may have on the operations of North Shore Trust and Savings.

Under the final rule, banks with over $2 billion in total assets as of December 31 in either of the prior two calendar years are required to be evaluated under the new "Retail Lending Test," the new "Retail Products and Services Test," the new "Community Development Financing Test" and the new "Community Development Services Test," but banks of all sizes maintain the option to elect to be evaluated under a strategic plan with the final rule updating the standards for obtaining approval for such plan.

The applicability date for the majority of the provisions in the final rule was January 1, 2026, and additional requirements will be applicable on January 1, 2027.

However, the new CRA regulations have been subject to litigation and, on July 16, 2025, the agencies issued a joint notice of proposed rulemaking to rescind the final rule issued in October 2023 and reinstate the CRA framework that existed prior to the October 2023 final rule.

Small Business Lending Rule.

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The rule also addresses the CFPB's approach to privacy interests and the publication of section 1071 data, shielding certain demographic data from underwriters and other persons, recordkeeping requirements and enforcement provisions.

Compliance with the small business lending rule beginning July 18, 2025 is required for covered financial institutions that originate the most covered credit transactions for small businesses (i.e., at least 2,500 covered originations in either 2022 and 2023 or 2023 and 2024).

However, institutions with a moderate transaction volume (i.e., at least 500 but less than 2,500 covered originations in either 2022 and 2023 or 2023 and 2024) have until January 16, 2026 to begin complying with the rule and those with the lowest volume (i.e., at least 100 but less than 500 covered originations in either 2022 and 2023 or 2023 and 2024) have until October 18, 2026.

The 2023 final rule initially required large lenders to comply by October 1, 2024, with later compliance dates for institutions with a moderate transaction volume (i.e., at least 500 but fewer than 2,500 covered originations in either 2022 and 2023, or 2023 and 2024) and institutions with the lowest volume (i.e., at least 100 but fewer than 500 covered originations in either 2022 and 2023, or 2023 and 2024).

A financial institution that did not originate at least 100 covered originations in calendar years 2022 and 2023, or 2023 and 2024, but subsequently originates at least 100 covered originations in two consecutive calendar years will be required to comply with the final rule.

North Shore Trust and Savings had less than 100 covered originations in both 2022 and 2023 and 2023 and 2024, and therefore is not yet subject to comply.

North Shore Trust and Savings had fewer than 100 covered originations in both 2022 and 2023, and 2023 and 2024 and has originated fewer than 100 covered originations thus far in 2025 and 2026, and therefore is not yet subject to compliance.

Importantly, however, on November 13, 2025, the CFPB issued a notice of proposed rulemaking that would further revise the small business lending rule by narrowing the scope of covered institutions and data points and extending the compliance date for all entities subject to the rule to January 1, 2028.

As a result, the ultimate scope, timing and operational impact of the Section 1071 requirements on North Shore Trust and Savings remain uncertain.

Interchange Fees .

The Dodd-Frank Act includes provisions that restrict interchange fees to those which are reasonable and proportionate for certain debit card issuers and limits the ability of networks and issuers to restrict debit card transaction routing, known as the Durbin Amendment.

On October 25, 2023, the FRB proposed rules that would reduce the maximum permissible interchange fee cap and would adopt an approach for future adjustments to such cap.

Although the interchange fee restrictions in the Durbin Amendment do not apply to debit card issuers with total assets of less than $10.0 billion, which would include North Shore Trust and Savings, such restrictions may negatively impact the pricing all debit card processors may charge.

In October 2023, the Federal Reserve Board proposed rules that would reduce the maximum permissible interchange fee cap and would adopt an approach for future adjustments to such cap.

Although the Durbin Amendment generally does not apply to debit card issuers with total assets of less than $10.0 billion, which would include North Shore Trust and Savings, interchange fee levels and network pricing applicable to all debit card transactions may be negatively impacted.

In addition, various aspects of the debit card interchange framework, including the Federal Reserve Board's Regulation II, have been the subject of ongoing industry litigation and legal challenges.

The ultimate outcome of such litigation, as well as the timing and scope of any final regulatory changes, remains uncertain.

Incentive Compensation .

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While the proposed rule is not final, we have made efforts to ensure that our incentive compensation plans do not encourage unsound risks.

Ability-to-Pay Rules and Qualified Mortgages .

As required by the Dodd-Frank Act, the CFPB issued a series of final rules amending Regulation Z, the implementing regulation of the Truth-in-Lending Act.

These rules require mortgage lenders to make a reasonable and good-faith determination, based on verified and documented information, that a consumer applying for a residential mortgage loan has a reasonable ability to repay the loan according to its terms.

These rules prohibit creditors, such as the Bank, from extending residential mortgage loans without regard for the consumer’s ability to repay and add restrictions and requirements to residential mortgage origination and servicing practices.

In addition, these rules restrict the imposition of prepayment penalties and restrict compensation practices relating to residential mortgage loan origination.

On April 27, 2021, the CFPB issued two new rules that modified qualified mortgage loan requirements and provided flexibility to banks and other lenders in determining consumers’ ability-to-repay.

Compliance with these rules was required by October 1, 2022.

The Bank complies with, and will continue to comply with, all applicable qualified mortgage loan requirements.

Transactions with Related Parties .

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Formal enforcement actions by the OCC may range from the issuance of a capital directive, formal agreement or cease and desist order against institutions, and can also include the removal of officers and/or directors of the institution.

The OCC can appoint receivers and/or conservators for the institutions it supervises if certain circumstances are met.

The OCC can appoint receivers and/or conservators for the institutions it supervises if certain circumstances arise.

Civil penalties can be assessed for various types of conduct against the institution and/or its officers and directors.

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Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

On October 30, 2025, the FDIC and OCC issued a notice of proposed rulemaking that would define an "unsafe or unsound practice" as this term has not previously been formally defined by the bank regulatory agencies.

In addition, the proposed rulemaking seeks to revise the framework for issuing "matters requiring attention" during an examination.

With respect to unsafe or unsound practices, the proposed rule seeks to base the determination of whether a practice is unsafe or unsound on whether the practice is likely to have material financial impact on the institution.

Specifically, the FDIC and OCC noted in the proposed rulemaking that, based on their supervisory experience and as a matter of policy, the agencies propose implementing a definition of "unsafe or unsound practice" for purposes of section 8 of the FDIA that would focus on material risks to the financial condition of an institution and would generally require that an imprudent practice, act, or failure to act, if continued, be likely to materially harm the institution's financial condition.

With respect to matters requiring attention, the proposed rule provides that the agencies may issue a matter requiring attention only for a practice, act, or failure to act, alone or together with one or more other practices, acts, or failures to act, that (i) is contrary to generally accepted standards of prudent operation;

and if continued, could reasonably be expected to, under current or reasonably foreseeable conditions, materially harm the financial condition of the institution;

or present a material risk of loss to the DIF;

or has already caused material harm to the financial condition of the institution;

or (ii) is an actual violation of a banking or banking-related law or regulation.

This proposed rule is intended to ensure supervision efforts are appropriately focused on material financial risks, increase consistency in supervisory reviews and provide more clarity on what constitutes an unsafe or unsound practice and what may trigger a matter requiring attention finding.

Reserve Requirements .

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As of December 31, 2025, North Shore Trust and Savings was in compliance with these requirements.

A federal savings association that is a highly rated savings association and that has not elected CSA status, may generally establish new branches upon prior public notice of its intent to establish a new branch.

A federal savings association that has elected CSA status is subject to the laws and regulations governing the establishment of branches by national banks.

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Under the FDIC's risk-based assessment system, institutions deemed less risky of failure pay lower assessments.

Assessments for institutions of less than $10.0 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution's failure within three years.

Assessments for institutions with less than $10.0 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution's failure within three years.

The FDIC has authority to increase insurance assessments.

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We cannot predict what assessment rates will be in the future.

On November 16, 2023, the FDIC approved a final rule to implement a special assessment on certain banking organizations with financial institution subsidiaries with more than $5.0 billion in assets, in order to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in March 2023.

The special assessment began being collected with the first quarterly assessment period of 2024 at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly periods and is subject to periodic adjustments.

The assessment base is equal to uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5.0 billion.

Because North Shore Trust and Savings' uninsured deposits at the measurement date were below $5.0 billion, North Shore Trust and Savings was not subject to this special assessment.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

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Privacy and Cybersecurity .

The Gramm-Leach-Bliley Act (the "GLBA"), and its implementing regulations issued by federal regulatory agencies require financial institutions (including banks) to adopt policies and procedures regarding the disclosure of nonpublic personal information about their customers to non-affiliated third parties.

In general, financial institutions are required to explain to customers their policies and procedures regarding the disclosure of such nonpublic personal information and, unless otherwise required or permitted by law, financial institutions are prohibited from disclosing such information except as provided in their policies and procedures.

The Gramm-Leach-Bliley Act (the "GLBA"), and its implementing regulations issued by federal regulatory agencies require financial institutions (including banks) to adopt policies and procedures regarding the disclosure of non-public personal information about their customers to non-affiliated third parties.

In general, financial institutions are required to explain to customers their policies and procedures regarding the disclosure of such non-public personal information and, unless otherwise required or permitted by law, financial institutions are prohibited from disclosing such information except as provided in their policies and procedures.

Specifically, the GLBA established certain information security guidelines that require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate committee thereof, to develop, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against anticipated threats or hazards to the security or integrity of such information and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

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Recent cyber-attacks against banks and other financial institutions that resulted in unauthorized access to confidential customer information have prompted the federal banking regulators to issue extensive guidance on cybersecurity.

Among other things, financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks posed by compromised customer credentials, including security measures to authenticate customers accessing Internet-based services.

Among other risk-management considerations, financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks posed by compromised customer credentials, including security measures to authenticate customers accessing Internet-based services.

A financial institution also should have a robust business continuity program to recover from a cyberattack and procedures for monitoring the security of third-party service providers that may have access to nonpublic data at the institution.

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On March 28, 2024, CISA issued a notice of proposed rulemaking to implement CIRCIA and, under such proposal, regulated financial institutions such as banks would be required to comply with CIRCIA.

CISA has indicated that it intends to finalize the rule in late 2025.

It is uncertain what impact, if any, the final CIRCIA rule may have on banks.

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These statutes and related rules and regulations impose requirements and limitations on specified financial transactions and accounts and other relationships intended to guard against money laundering and terrorism financing.

The principal requirements for an insured depository institution include (i) establishment of an anti-money laundering program that includes training and audit components, (ii) establishment of a "know your customer" program involving due diligence to confirm the identities of persons seeking to open accounts and to deny accounts to those persons unable to demonstrate their identities, (iii) the filing of currency transaction reports for deposits and withdrawals of large amounts of cash, (iv) additional precautions for accounts sought and managed for non-U.S.

The principal requirements for an insured depository institution include (i) establishment of an AML program that includes training and audit components, (ii) establishment of a "know your customer" program involving due diligence to confirm the identities of persons seeking to open accounts and to deny accounts to those persons unable to demonstrate their identities, (iii) the filing of currency transaction reports for deposits and withdrawals of large amounts of cash, (iv) additional precautions for accounts sought and managed for non-U.S.

persons and (v) verification and certification of money-laundering risk with respect to private banking and foreign correspondent banking relationships.

For many of these tasks a bank must keep records to be made available to its primary federal regulator.

Anti-money laundering rules and policies are developed by a bureau within the U.S.

AML rules and policies are developed by a bureau within the U.S.

Department of the Treasury (the "U.S.

Treasury"), the Financial Crimes Enforcement Network ("FinCEN"), but compliance by individual institutions is overseen by its primary federal regulator.

North Shore Trust and Savings has established appropriate anti-money laundering and customer identification programs.

Treasury") and the Financial Crimes Enforcement Network ("FinCEN"), but compliance by individual institutions is overseen by its primary federal regulator.

North Shore Trust and Savings has established appropriate AML and customer identification programs.

North Shore Trust and Savings also maintains records of cash purchases of negotiable instruments, files reports of certain cash transactions exceeding $10,000 (daily aggregate amount) and reports suspicious activity that might signify money laundering, tax evasion or other criminal activities pursuant to the BSA.

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On January 1, 2021, the U.S.

Congress passed the Corporate Transparency Act (the "CTA") as part of the National Defense Authorization Act, which enacted the most significant overhaul of the anti-money laundering laws since the USA PATRIOT Act.

Congress passed the Corporate Transparency Act (the "CTA") as part of the National Defense Authorization Act, which enacted the most significant overhaul of the AML laws since the USA PATRIOT Act.

Notable amendments include (i) significant changes to the collection of beneficial ownership information ("BOI") and the establishment of a beneficial ownership registry, which requires corporate entities (generally, any corporation, limited liability company, or other similar entity with 20 or fewer employees and annual gross income of $5.0 million or less) to report BOI to FinCEN (which will be maintained by FinCEN and made available upon request to financial institutions);

(ii) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information leading to the successful prosecution of violations of the anti-money laundering laws in any judicial or administrative action brought by the Secretary of the U.S.

(ii) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information leading to the successful prosecution of violations of the AML laws in any judicial or administrative action brought by the Secretary of the U.S.

Treasury or the U.S.

Attorney General resulting in monetary sanctions exceeding $1.0 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30% of the monetary sanctions collected and will receive increased protections;

(iii) increased penalties for violations of anti-money laundering laws and regulations;

(iii) increased penalties for violations of AML laws and regulations;

(iv) improvements to existing information-sharing provisions that permit financial institutions to share information relating to suspicious activity reports with foreign branches, subsidiaries, and affiliates (except those located in the People's Republic of China, the Russian Federation or certain other jurisdictions) for the purpose of combating illicit finance risks;

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Many of the amendments, including those with respect to beneficial ownership, require FinCEN to promulgate rules.

On September 29, 2022, FinCEN finalized the first of three proposed rules to implement changes to the beneficial ownership requirements and related amendments set forth in the CTA.

The final rule prescribes which corporate entities created in or registered to do business in the U.S.

will be required to report BOI directly to FinCEN.

This first rule is effective and compliance is required as of January 1, 2025 for reporting companies created or registered prior to January 1, 2024, however, on December 26, 2024, a federal appeals court issued a nationwide injunction halting enforcement of BOI reporting requirements.

NSTS will continue to monitor the status of the BOI rule going forward.

On December 21, 2023, FinCEN finalized the second of the three proposed rules which allows for FinCEN, upon request, to disclose BOI to a statutorily defined group of governmental authorities and financial institutions.

The second final rule identifies the entities FinCEN is allowed to provide access to BOI to include (i) federal agencies engaged in national security, intelligence or law enforcement activity, (ii) state, local and tribal law enforcement agencies with court authorization, (iii) foreign law enforcement agencies, judges, prosecutors and other authorities that meet specific criteria, (iv) U.S.

Treasury personnel, (v) financial institutions using BOI in order to comply with customer due diligence ("CDD") requirements and (vi) regulators, acting in a supervisory capacity, evaluating such institutions for CDD-related compliance.

The second final rule provides that such CDD requirements could include anti-money laundering ("AML") and countering the financing of terrorism (“CFT”) obligations set forth under the BSA (e.g., anti-money laundering program, customer identification, suspicious activity reports filing and enhanced due diligence requirements) and compliance with the OFAC sanctions.

This rule provides that FinCEN may disclose BOI to an authorized financial institution provided that such institution has developed and implemented administrative, technical, and physical safeguards reasonably designed to protect the information and has received the relevant reporting company's consent to such disclosure.

The second final rule became effective on February 20, 2024.

However, in March 2025, FinCEN issued an interim final rule that removes the requirement for U.S.

companies and U.S.

persons to report BOI to FinCEN under the CTA.

On July 19, 2024, the federal banking agencies proposed amendments to update the requirements for supervised institutions to establish, implement and maintain effective, risk-based and reasonably designed AML and CFT programs.

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Interest and other charges collected or contracted by North Shore Trust and Savings are subject to state usury laws and federal laws concerning interest rates.

Loan operations are also subject to state and federal laws applicable to credit transactions, such as the:

Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of North Shore Trust and Savings also are subject to, among others, the:

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Loan operations are also subject to state and federal laws applicable to credit transactions, such as:

the Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

the Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

the Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lending servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

the Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of North Shore Trust and Savings also are subject to, among others:

the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

the Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

the Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Federal Home Loan Bank System

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Future Legislation and Regulation

presidential administration has recently taken action to put new leadership in place at various U.S.

federal bank supervisory agencies, including appointing a new Acting Chairman of the FDIC and Acting Comptroller of the OCC, and nominating individuals to serve as the permanent Comptroller of the OCC and Director of the CFPB.

The administration has also indicated that it would like to see changes made to certain financial regulations, including the Dodd-Frank Act.

Further, the U.S.

Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.

Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied.

The substance or impact of the proposed new leadership changes at the federal bank supervisory agencies, pending or future legislation or regulation, and any changes to existing financial regulations, cannot be predicted, although these developments could affect the regulatory structure under which we operate and may materially impact our business operations.

Our business, financial condition, results of operations or prospects may be adversely affected, perhaps materially, as a result.

The federal banking regulatory environment continues to evolve and remains subject to change as a result of shifts in executive branch leadership, agency priorities, legislative activity and supervisory approaches.

In addition, the U.S.

Congress may from time to time enact legislation that affects the regulation of financial institutions and the financial services industry, and federal regulatory agencies may periodically propose and adopt new regulations or modify existing regulations or supervisory guidance.

These developments may include changes to capital, liquidity, resolution planning, consumer protection, corporate governance, executive compensation, or other prudential or compliance requirements applicable to banks and bank holding companies.

The scope, timing and impact of future legislative or regulatory changes, including changes in supervisory expectations or examination practices, cannot be predicted with certainty.

However, such changes could affect the regulatory framework under which we operate, increase our compliance costs, limit our business activities or strategic flexibility, or otherwise adversely affect our business, financial condition, results of operations or prospects in a material manner.

Federal Securities Laws

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also will not be subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors review and attest as to the effectiveness of our internal control over financial reporting.

We plan to elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

We have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

Such an election is irrevocable during the period a company is an emerging growth company.

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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 1. Business