10-Q 1 nsts20240614_10q.htm FORM 10-Q nsts20240614_10q.htm
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Table of Contents

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-41232

 

NSTS BANCORP, INC.

(Exact name of the registrant as specified in its charter)

   

Delaware

 

87-2522769

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification Number)

   

700 S. Lewis Ave. Waukegan, Illinois

 

60085

(Address of principal executive offices)

 

(Zip Code)

(847) 336-4430

(Registrants telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

NSTS

NASDAQ Capital Market

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

  

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No

 

As of August 5, 2024, the Registrant had 5,285,773 shares of its common stock outstanding.

 



 

 

 

NSTS Bancorp, Inc.

 

Form 10Q

 

Index

 

PART I.

FINANCIAL INFORMATION

2

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

2
 

CONSOLIDATED BALANCE SHEETS

2
 

CONSOLIDATED STATEMENTS OF OPERATIONS

3
 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

4
 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

5
 

CONSOLIDATED STATEMENTS OF CASH FLOWS

7
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

26

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

37

ITEM 4.

CONTROLS AND PROCEDURES

38
     

PART II.

OTHER INFORMATION

38

ITEM 1.

LEGAL PROCEEDINGS

38

ITEM 1A.

RISK FACTORS

38

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

38

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

38

ITEM 4.

MINE SAFETY DISCLOSURES

38

ITEM 5.

OTHER INFORMATION

38

ITEM 6.

EXHIBITS

39

SIGNATURES

40
 

 

 

 

 

Part I. Financial Information

Item 1. Consolidated Financial Statements

 

NSTS BANCORP, INC.

Consolidated Balance Sheets

 

  

June 30, 2024

     
  

(unaudited)

  

December 31, 2023

 
  

(Dollars in thousands)

 

Assets:

        

Cash and due from banks

 $1,028  $1,000 

Interest-bearing bank deposits

  31,403   30,388 

Cash and cash equivalents

  32,431   31,388 

Time deposits with other financial institutions

  996   1,991 

Securities available for sale

  75,301   82,135 

Federal Home Loan Bank stock (FHLB)

  585   550 

Loans held for sale

  5,180   380 

Loans, net of unearned income

  132,305   121,799 

Allowance for credit losses on loans

  (1,267)  (1,176)

Loans, net

  131,038   120,623 

Premises and equipment, net

  5,268   5,285 

Accrued interest receivable

  872   758 

Bank-owned life insurance (BOLI)

  9,547   9,441 

Other assets

  4,670   4,225 

Total assets

 $265,888  $256,776 

Liabilities:

        

Deposits:

        

Noninterest bearing

 $11,188  $12,424 

Interest-bearing

        

Demand and NOW checking

  14,936   15,346 

Money market

  30,762   32,027 

Savings

  41,145   41,774 

Time deposits over $250,000

  15,859   9,975 

Other time deposits

  63,934   57,280 

Total deposits

  177,824   168,826 

Escrow deposits

  1,725   1,382 

Other borrowings

  5,000   5,000 

Accrued expenses and other liabilities

  4,839   4,023 

Total liabilities

 $189,388  $179,231 

Stockholders' equity:

        

Common Stock ($0.01 par value; 10,000,000 shares authorized; 5,295,459 shares outstanding at June 30, 2024 and 5,315,261 shares at December 31, 2023)

  56   56 

Treasury Stock, at cost (289,700 shares at June 30, 2024 and 269,898 shares at December 31, 2023)

  (2,571)  (2,381)

Additional paid-in capital

  51,240   50,920 

Retained earnings

  40,483   41,055 

Unallocated common shares held by ESOP

  (3,776)  (3,882)

Accumulated other comprehensive loss, net

  (8,932)  (8,223)

Total stockholders' equity

  76,500   77,545 

Total liabilities and stockholders' equity

 $265,888  $256,776 

 

See accompanying notes to consolidated unaudited financial statements

 

 

 

NSTS BANCORP, INC.

Consolidated Statements of Operations (unaudited)

 

   

For the three months ended

   

For the six months ended

 
   

June 30,

   

June 30,

 
   

2024

   

2023

   

2024

   

2023

 
   

(Dollars in thousands)

                 

Interest income:

                               

Loans, including fees

  $ 1,721     $ 1,022     $ 3,196     $ 2,040  

Securities

                               

Taxable

    387       632       805       1,290  

Tax-exempt

    61       100       124       202  

Federal funds sold and other

    357       59       774       111  

Time deposits with other financial institutions

    28       30       51       54  

FHLB Stock

    9       5       18       9  

Total interest income

    2,563       1,848       4,968       3,706  

Interest expense:

                               

Deposits

    714       262       1,354       483  

Other borrowings

    61       7       121       7  

Total interest expense

    775       269       1,475       490  

Net interest income

    1,788       1,579       3,493       3,216  

Provision for credit losses

    123       30       122       2  

Net interest income after provision for credit losses

    1,665       1,549       3,371       3,214  

Noninterest income:

                               

Gain on sale of mortgage loans

    271       2       427       13  

Rental income on office building

    16       16       32       32  

Service charges on deposits

    64       69       125       133  

Increase in cash surrender value of BOLI

    53       46       106       92  

Other non-interest income

    97       14       123       24  

Total noninterest income

    501       147       813       294  

Noninterest expense:

                               

Salaries and employee benefits

    1,468       1,005       2,842       1,933  

Equipment and occupancy

    198       167       412       333  

Data processing

    217       161       412       322  

Professional services

    172       123       283       244  

Advertising

    91       27       175       51  

Supervisory fees and assessments

    35       39       71       74  

Loan expenses

    65       23       95       44  

Deposit expenses

    58       55       112       107  

Director fees

    56       56       104       112  

Other non-interest expense

    132       131       250       237  

Total noninterest expense

    2,492       1,787       4,756       3,457  

(Loss) income before income taxes

    (326 )     (91 )     (572 )     51  

Income tax benefit

          35             7  

Net (loss) income

  $ (326 )   $ (126 )   $ (572 )   $ 44  

Basic and diluted (loss) earnings per share

  $ (0.07 )   $ (0.03 )   $ (0.12 )   $ 0.01  

Weighted average shares outstanding

    4,925,388       4,976,127       4,957,483       4,982,992  

 

 

See accompanying notes to consolidated unaudited financial statements

 

 

NSTS BANCORP, INC.

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

 

   

For the three months ended June 30,

 
   

2024

   

2023

 
   

(Dollars in thousands)

 

Net loss

  $ (326 )   $ (126 )

Unrealized net holding loss on securities

               

Unrealized net holding loss on securities arising during period

    (222 )     (1,802 )

Tax effect

    63       515  

Other comprehensive loss, net of taxes

    (159 )     (1,287 )

Comprehensive loss

  $ (485 )   $ (1,413 )

 

   

For the six months ended June 30,

 
   

2024

   

2023

 
   

(Dollars in thousands)

 

Net (loss) income

  $ (572 )   $ 44  

Unrealized net (loss) gain on securities

               

Unrealized net holding (loss) gain on securities arising during period

    (991 )     410  

Tax effect

    282       (116 )

Other comprehensive (loss) income, net of taxes

    (709 )     294  

Comprehensive (loss) income

  $ (1,281 )   $ 338  

 

See accompanying notes to consolidated unaudited financial statements

 

 

NSTS BANCORP, INC.

Consolidated Statements of Stockholders Equity (unaudited)

 

   

Common Shares

   

Common Stock

   

Treasury Stock

   

Additional Paid-In Capital

   

Retained earnings

   

Accumulated other comprehensive loss

   

Unallocated Common Shares Held by ESOP

   

Total

 
           

(Dollars in thousands)

 
           

Quarter ended June 30, 2023

 

Balance at March 31, 2023

    5,397,959     $ 54     $     $ 50,421     $ 45,182     $ (9,544 )   $ (4,044 )   $ 82,069  

Net loss

                            (126 )                 (126 )

ESOP shares committed to be released

                      (7 )                 54       47  

Purchase of treasury stock from stock repurchase program

    (74,295 )           (649 )                             (649 )

Compensation cost for stock options and restricted stock

                      28                         28  

Issuance of common shares for the restricted stock plan

    187,200       2             (2 )                        

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

                                  (1,287 )           (1,287 )

Balance at June 30, 2023

    5,510,864     $ 56     $ (649 )   $ 50,440     $ 45,056     $ (10,831 )   $ (3,990 )   $ 80,082  
           

Quarter ended June 30, 2024

 

Balance at March 31, 2024

    5,315,261     $ 56     $ (2,381 )   $ 51,080     $ 40,809     $ (8,773 )   $ (3,829 )   $ 76,962  

Net loss

                            (326 )                 (326 )

ESOP shares committed to be released

                      (2 )                 53       51  

Purchase of treasury stock from stock repurchase program

    (8,399 )           (81 )                             (81 )

Purchase of treasury stock from taxes withheld on stock awards

    (11,403 )           (109 )                             (109 )

Compensation cost for stock options and restricted stock

                      162                         162  

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

                                  (159 )           (159 )

Balance at June 30, 2024

    5,295,459     $ 56     $ (2,571 )   $ 51,240     $ 40,483     $ (8,932 )   $ (3,776 )   $ 76,500  

 

See accompanying notes to consolidated unaudited financial statements

 

 

   

Common Shares

   

Common Stock

   

Treasury Stock

   

Additional Paid-In Capital

   

Retained earnings

   

Accumulated other comprehensive loss

   

Unallocated Common Shares Held by ESOP

   

Total

 
           

(Dollars in thousands)

 
           

Six months ended June 30, 2023

 

Balance at December 31, 2022

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

Cumulative impact of ASU 2016-13

                            (279 )                 (279 )

Net income

                            44                   44  

ESOP shares committed to be released

                      (6 )                 108       102  

Purchase of treasury stock from stock repurchase program

    (74,295 )           (649 )                             (649 )

Compensation cost for stock options and restricted stock

                      28                         28  

Issuance of common shares for the restricted stock plan

    187,200       2             (2 )                        

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

                                  294             294  

Balance at June 30, 2023

    5,510,864     $ 56       (649 )   $ 50,440     $ 45,056     $ (10,831 )   $ (3,990 )   $ 80,082  
           

Six months ended June 30, 2024

 

Balance at December 31, 2023

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

Net loss

                            (572 )                 (572 )

ESOP shares committed to be released

                      (4 )                 106       102  

Purchase of treasury stock from stock repurchase program

    (8,399 )           (81 )                             (81 )

Purchase of treasury stock from taxes withheld on stock awards

    (11,403 )           (109 )                             (109 )

Compensation cost for stock options and restricted stock

                      324                         324  

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

                                  (709 )           (709 )

Balance at June 30, 2024

    5,295,459     $ 56     $ (2,571 )   $ 51,240     $ 40,483     $ (8,932 )   $ (3,776 )   $ 76,500  

 

See accompanying notes to consolidated unaudited financial statements

 

 

 

NSTS BANCORP, INC.

Consolidated Statements of Cash Flows (unaudited)

 

   

For the six months ended June 30,

 
   

2024

   

2023

 
   

(Dollars in thousands)

 

Cash flows from operating activities:

               

Net (loss) income

  $ (572 )   $ 44  

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

               

Depreciation

    149       129  

Securities amortization and accretion, net

    263       280  

Loans originated for sale

    (21,945 )     (703 )

Proceeds from sales of loans held for sale

    20,042       716  

Gain on sale of mortgage loans

    (427 )     (13 )

Provision for credit losses

    122       2  

Earnings on bank owned life insurance

    (106 )     (92 )

ESOP expense

    102       102  

Stock based compensation

    324       28  

Net change in accrued interest receivable and other assets

    (277 )     81  

Net change in accrued expenses and other liabilities

    785       (438 )

Net cash (used in) provided by operating activities

    (1,540 )     136  

Cash flows from investing activities:

               

Net change in portfolio loans

    (12,976 )     (1,794 )

Principal repayments on mortgage-backed securities

    2,780       4,127  

Maturities and calls of securities available for sale

    2,800       515  

Purchase of Federal Home Loan Bank stock

    (35 )      

Net change in time deposits with other financial institutions

    995       2,237  

Purchases of premises and equipment, net

    (132 )     (5 )

Net cash (used in) provided by investing activities

    (6,568 )     5,080  

Cash flows from financing activities:

               

Net change in deposits

    8,998       (11,471 )

Net change in escrow deposits

    343       13  

Proceeds from FHLB Advance

          5,000  

Purchase of treasury shares (8,399 shares)

    (81 )     (649 )

Purchase of treasury stock from taxes withheld on stock awards

    (109 )      

Net cash provided by (used in) financing activities

    9,151       (7,107 )

Net change in cash and cash equivalents

    1,043       (1,891 )

Cash and cash equivalents at beginning of period

    31,388       13,147  

Cash and cash equivalents at end of period

  $ 32,431     $ 11,256  

Supplemental disclosures of cash flow information:

               

Cash paid during the period for interest

  $ 1,473     $ 473  

Loans transferred to held for sale from portfolio, net

    2,470        

 

See accompanying notes to consolidated unaudited financial statements

 

 

Notes to the Unaudited Consolidated Financial Statements

 

Note 1: Summary of Significant Accounting Policies

 

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and conform to practices within the banking industry. The accounting policies followed in the preparation of the interim consolidated financial statements are consistent with those used in the preparation of the annual financial statements. The interim consolidated financial statements reflect all normal and recurring adjustments that are necessary, in the opinion of management, for fair statement of results for the interim periods presented. Results for the three and six month periods ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

 

Nature of Operations

 

NSTS Bancorp, Inc. (“NSTS” or the “Company”, “we” or “our”) 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, into the stock form of organization, which was completed on January 18, 2022. Shares of NSTS Bancorp, Inc. stock began trading on January 19, 2022 on the Nasdaq Capital Market under the trading symbol "NSTS."

 

The Bank operates primarily in the northern suburbs of Chicago, Illinois. During the third quarter of 2023, we established two additional loan production offices in Aurora and Plainfield, Illinois to expand our loan originations within the Chicagoland area. The lending teams operating in the Aurora and Plainfield, Illinois loan production offices originate as Oak Leaf Community Mortgage, a division of North Shore Trust and Savings, which complement the existing loan production office in Chicago. The Bank offers a variety of financial services to customers in our surrounding community. Financial services consist primarily of 1-4 family mortgage loans, savings accounts, and certificate of deposit accounts. There are no significant concentrations of loans to any one industry or customer. The Bank’s exposure to credit risk is significantly affected by changes in the economy in the Bank’s market area.

 

Basis of Presentation

 

The accompanying unaudited Consolidated Financial Statements were prepared in accordance with GAAP and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with NSTS Bancorp, Inc.’s Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The unaudited Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

 

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may vary from those estimates. Material estimates that could significantly change in the near-term include the adequacy of the allowance for credit losses, determination of the valuation allowance on deferred tax assets and the valuation of investment securities and the related tax effect. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year ending December 31, 2024. Certain amounts in prior year financial statements have been reclassified to conform to the current presentation. Subsequent events have been evaluated through the date of issuance of the unaudited Consolidated Financial Statements. No significant subsequent events have occurred through this date requiring adjustment to the financial statements or disclosures.

 

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. GAAP. 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.

 

8

 
 

Note 2: Securities Available for Sale

 

The amortized cost and estimated fair value of debt securities at June 30, 2024 and December 31, 2023, by contractual maturity, are shown below. The accrued interest receivable for securities available for sale was $323,000 and $351,000 on June 30, 2024 and December 31, 2023, respectively. 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 the below table based on average remaining life.

 

June 30, 2024

  U.S. Treasury Notes   U.S. government agency obligations   Municipal obligations   Mortgage-backed residential obligations   Collateralized mortgage obligations   Total available-for-sale 
  

(Dollars in thousands)

 

1 year or less

 $1,500  $993  $  $  $  $2,493 

1 to 5 years

     3,576   1,435   8,689   13,015   26,715 

5 to 10 years

     4,224   1,241   17,673   8,999   32,137 

After 10 years

        9,240   1,382   3,334   13,956 

Fair value

  1,500   8,793   11,916   27,744   25,348   75,301 

Gross unrealized gains

                  

Gross unrealized losses

     (1,133)  (2,210)  (4,999)  (4,151)  (12,493)

Amortized cost

 $1,500  $9,926  $14,126  $32,743  $29,499  $87,794 

 

December 31, 2023

  U.S. Treasury Notes   U.S. government agency obligations   Municipal obligations   Mortgage-backed residential obligations   Collateralized mortgage obligations   Total available-for-sale 
  

(Dollars in thousands)

 

1 year or less

 $2,973  $  $1,292  $  $  $4,265 

1 to 5 years

     4,769   1,461   8,976   12,919   28,125 

5 to 10 years

     4,337   882   19,777   9,756   34,752 

After 10 years

        9,935   1,598   3,460   14,993 

Fair value

  2,973   9,106   13,570   30,351   26,135   82,135 

Gross unrealized gains

        1         1 

Gross unrealized losses

  (22)  (1,128)  (1,882)  (4,533)  (3,938)  (11,503)

Amortized cost

 $2,995  $10,234  $15,451  $34,884  $30,073  $93,637 

 

As of June 30, 2024, and December 31, 2023, no securities were pledged to secure public deposits or for other purposes as required or permitted by law.

 

Information pertaining to securities with gross unrealized losses at June 30, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows:

 

  

Less than 12 Months

  

12 Months or Longer

  

Total

 
  

(Dollars in thousands)

 
  

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

 
  

Value

  

Losses

  

Value

  

Losses

  

Value

  

Losses

 

June 30, 2024

                        

U.S. Treasury Notes

 $  $  $  $  $  $ 

U.S. government agency obligations

        8,793   1,133   8,793   1,133 

Municipal obligations

  474   21   11,442   2,189   11,916   2,210 

Mortgage-backed residential obligations

        27,744   4,999   27,744   4,999 

Collateralized mortgage obligations

        25,348   4,151   25,348   4,151 

Total

 $474  $21  $73,327  $12,472  $73,801  $12,493 

December 31, 2023

                        

U.S. Treasury Notes

 $  $  $2,973  $22  $2,973  $22 

U.S. government agency obligations

        9,106   1,128   9,106   1,128 

Municipal obligations

  279   1   12,796   1,881   13,075   1,882 

Mortgage-backed residential obligations

        30,351   4,533   30,351   4,533 

Collateralized mortgage obligations

        26,135   3,938   26,135   3,938 

Total

 $279  $1  $81,361  $11,502  $81,640  $11,503 

 

9

 

At June 30, 2024 and December 31, 2023, certain investment securities were in unrealized loss positions. There were no securities with identified credit losses at June 30, 2024 and December 31, 2023, respectively. 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. 

 

All U.S. Treasuries, U.S. government agency obligations, mortgage-based residential obligations and collateralized mortgage obligations are agency-issued or government-sponsored enterprise issued. Agency-issued securities are generally guaranteed by a U.S. government agency, such as the Government National Mortgage Association. Government-sponsored enterprises, such as the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or the Small Business Administration, have either a direct or implied guarantee by the U.S. government. 

 

The Bank holds two classifications of municipal bonds, general obligation bonds and revenue bonds. General obligation bonds are backed by the general revenue of the issuing municipality, while revenue bonds are supported by a specific revenue source. All general obligation and revenue bonds have a bond rating of investment grade by Standard and Poor's or Moody's Investor Services or are not rated. There have been no declines in investment grades on bonds in a loss position and as of   June 30, 2024, all municipal bonds are paying as agreed. 

 

There were no sales of securities available-for-sale during the three and six months ended June 30, 2024 and 2023

 

 

Note 3: Loans and allowance for credit losses

 

A summary of loans by major category as of June 30, 2024 and December 31, 2023 is as follows:

 

  

June 30, 2024

  

December 31, 2023

 
  

(Dollars in thousands)

 

First mortgage loans

        

1-4 family residential

 $122,812  $111,081 

Multi-family

  3,051   3,111 

Commercial

  4,149   3,835 

Construction

  1,318   2,508 

Total first mortgage loans

  131,330   120,535 

Consumer loans

  234   248 

Total loans

  131,564   120,783 

Net deferred loan costs

  741   1,016 

Allowance for credit losses on loans

  (1,267)  (1,176)

Total loans, net

 $131,038  $120,623 

 

First mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balance of these loans totaled $15.6 million and $13.2 million at June 30, 2024 and December 31, 2023, respectively. Custodial escrow balances maintained in connection with the loans serviced were $267,000 and $231,000 at June 30, 2024 and December 31, 2023, respectively.

 

The accrued interest receivable for loans, net, was $533,000 and $392,000 for June 30, 2024 and December 31, 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). The terms of these loans, including interest rate and collateral, are similar to those prevailing for comparable transactions with other customers and do not involve more than a normal risk of collectability. At  June 30, 2024 and December 31, 2023, such borrowers were indebted to the Bank in the aggregate amount of $532,000 and $550,000, respectively.

 

10

 

The following tables present the activity in the allowance for credit losses ("ACL") for the three and six months ended June 30, 2024 and 2023:

 

  

June 30, 2024

 
  

1-4 family

                     
  

residential

  

Multi-family

  

Commercial

  

Construction

  

Consumer

  

Total

 
  

(Dollars in thousands)

 

Three months ended

                        

Beginning balance

 $1,091  $36  $37  $11  $2  $1,177 

Charge-offs