NSTS BANCORP, INC. This section is intended to assist in the understanding of our financial performance through a discussion of our financial condition as ofSeptember 30, 2022 and as compared to our financial condition as ofDecember 31, 2021 , and our results of operations for the three and nine months ended months endedSeptember 30, 2022 and 2021. This section should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q. Forward-Looking Statements This filing contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "plan," "seek," "expect" and words of similar meaning. These forward-looking statements include, but are not limited to: ? statements of our goals, intentions and expectations; ? statements regarding our business plans, prospects, growth and operating strategies;
? statements regarding the quality of our loan and investment portfolios; and
? estimates of our risks and future costs and benefits.
These forward-looking statements are based on current beliefs and expectations
of our management and are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond our
control. In addition, these forward-looking statements are subject to
assumptions with respect to future business strategies and decisions that are
subject to change.
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The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
? general economic conditions, either nationally or in our market areas,
that are different than expected
? changes in the level and direction of loan delinquencies and
charge-offs and changes in estimates of the adequacy of the allowance
for loan losses;
? our ability to access cost-effective funding;
? major catastrophes such as tornadoes, floods or other natural
disasters, the related disruption to local, regional and global
economic activity and financial markets, and the impact that any of the
foregoing may have on us and our customers and other constituencies;
? further data processing and other technological changes that may be
more difficult or expensive than expected;
? success or consummation of new business initiatives may be more
difficult or expensive than expected;
? the inability of third-party service providers to perform;
? fluctuations in real estate values and both residential and commercial
real estate market conditions;
? demand for loans and deposits in our market area;
? our ability to continue to implement our business strategies;
? competition among depository and other financial institutions;
? inflation and changes in the interest rate environment that reduce our
margins and yields, reduce the fair value of financial instruments or
reduce the origination levels in our lending business, orincrease the
level of defaults, losses and prepayments on loans;
? 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;
? our ability to manage market risk, credit risk and operational risk in
the current economic conditions;
? our ability to enter new markets successfully and capitalize on growth
opportunities;
? our ability to successfully integrate any assets, liabilities,
customers, systems and management personnel we may acquire into our
operations and our ability to realize related revenue synergies and
cost savings within expected time frames and any goodwill charges
related thereto;
? changes in consumer spending, borrowing and savings habits;
? changes in accounting policies and practices, as may be adopted by the
bank regulatory agencies, the Financial Accounting StandardsBoard, the
Securities and Exchange Commission or thePublic Company Accounting Oversight Board ; ? our ability to hire and retain key employees; and
? our compensation expense associated with equity allocated or awarded to
our employees.
Because of these and other uncertainties, our actual future results may be
materially different from the results indicated by these forward-looking
statements. Except as required by applicable law or regulation, we do not
undertake, and we specifically disclaim any obligation, to update any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
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Table of Contents General OnJanuary 18, 2022 ,NSTS Bancorp, Inc. ("the Company") became the holding company forNorth Shore Trust and Savings ("the Bank") when North Shore MHC completed its conversion into the stock holding company form of organization. In connection with the conversion, the Company sold 5,290,000 shares of common stock at a price of$10 per share, for gross proceeds of$52.9 million . The Company also contributed 107,959 shares of common stock and$150,000 in cash toNorth Shore Trust andSavings Charitable Foundation, Inc. Shares of the Company's common stock began trading onJanuary 19, 2022 on theNasdaq Capital Market under the trading symbol "NSTS."NSTS Bancorp, Inc. NSTS Bancorp, Inc. is aDelaware corporation which was incorporated inSeptember 2021 . As a savings and loan holding company,NSTS Bancorp, Inc. is regulated by theBoard of Governors of theFederal Reserve System ("Federal Reserve Board"). The Company's primary business activities relate to owning all of the outstanding shares of capital stock of the Bank. The unaudited financial statements and other financial information contained in this Quarterly Report on Form 10-Q should be read in conjunction with North Shore MHC's Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 .
North Shore Trust and Savings, a federally-chartered stock savings institution, was established in 1921 asNorth Shore Building and Loan, anIllinois -chartered institution. Since its inception, the Bank has operated as a traditional savings institution focused primarily on serving the banking needs of customers in our market area ofLake County, Illinois and adjacent communities. We operate from our headquarters and main banking office inWaukegan, Illinois , as well as two additional full-service branch offices located inWaukegan andLindenhurst, Illinois , respectively. We have a loan production office inChicago, Illinois . Our primary business activity is attracting deposits from the general public and using those funds to originate one- to four-family residential mortgage loans and purchase investments. We are subject to comprehensive regulation and examination by theOffice of the Comptroller of the Currency (the "OCC"). Our Business and Franchise
For 100 years, we have served
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Our principal business consists of originating loans for one- to four-family residential properties, multi-family and non-owner occupied commercial real estate loans, and to a lesser extent home equity loans and lines of credit, construction loans, and other consumer loans in the market areas surrounding our branch footprint. We also established a loan production office in theRoscoe Village neighborhood ofChicago, Illinois in 2016 to originate loans outside of our branch network in a more densely populated metropolitan area, which we believe benefits us geographically. We attract retail deposits from the general public in the areas surrounding our main office and branches, offering a wide variety of deposit products. We also invest in investment securities. Our revenues are derived primarily from interest on loans, noninterest income from the sale of one- to four-family residential mortgage loans in the secondary market and interest on investments. Our primary sources of funds are deposits, and principal and interest payments on loans and securities.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated unaudited interim financial statements for the three and nine months ended months endedSeptember 30, 2022 , which have been prepared in accordance withU.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates. Our significant accounting policies are discussed in detail in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 . There have been no material changes to our critical accounting policies as compared to the critical accounting policies described in the Annual Report on Form 10-K. COVID-19 In light of the recent events surrounding the COVID-19 pandemic, we are continually assessing the effects of the pandemic on our employees, customers and communities. InMarch 2020 , the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted. The CARES Act contains many provisions related to banking, lending, mortgage forbearance and taxation. We worked diligently to help support our customers through the PPP, loan modifications and loan deferrals. During the years endedDecember 31, 2020 and 2021, we had funded 40 SBA PPP loans totaling$1.3 million to existing customers and key prospects located primarily in our markets. As ofSeptember 30, 2022 , all PPP loans were forgiven by the SBA. In addition, during the years endedDecember 31, 2021 and 2020, we granted loan modifications under the CARES Act generally in the form of three-month deferrals of principal payments and a three-month extension of the maturity date. We handle loan modification requests on a case-by-case basis considering the effects of the COVID-19 pandemic and the related economic slowdown on our customers and their current and projected cash flows through the terms of their respective loans. We believe the customer interaction during this time provided us with an opportunity to broaden and deepen our customer relationships while benefiting the local communities we serve. In total we modified 50 loans with principal balances totaling$9.7 million . As ofSeptember 30, 2022 , all COVID-19 loan modifications have returned to repayment status. Under the provisions of the CARES Act signed into law onMarch 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 Employee Retention Credit for the quarters endedJune 30, 2021 andSeptember 30, 2021 under the CARES Act. The Bank utilized the gross receipts method of calculating eligibility. Based on the eligibility, the Employee Retention 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 previously recorded as an expense during 2021. As ofSeptember 30, 2022 , the Bank cannot reasonably estimate when it will receive the refunds. The CARES Act and related Employee Retention Credit was terminated as ofSeptember 30, 2021 , and therefore the Bank does not expect to file for any additional refunds. 28
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Overview
This discussion is intended to focus on certain financial information regarding
our consolidated company and may not contain all the information that is
important to the reader. The purpose of this discussion is to provide the reader
with a more thorough understanding of our financial statements. As such, this
discussion should be read carefully and in conjunction with the consolidated
financial statements and accompanying notes contained elsewhere in this report.
Our results of operations depend, to a large extent, on net interest income,
which is the difference between the income earned on our loan and investment
portfolios and interest expense on deposits and borrowings. Our net interest
income is largely determined by our net interest spread, which is the difference
between the average yield earned on interest-earning assets and the average rate
paid on interest-bearing liabilities, and the relative amounts of
interest-earning assets and interest-bearing liabilities. Results of operations
are also affected by our provisions for loan losses, fee income and other
noninterest income and noninterest expense. Noninterest expense principally
consists of compensation, office occupancy and equipment expense, data
processing, advertising and business promotion and other expenses. We expect
that our noninterest expenses will increase as we grow and expand our
operations. In addition, our compensation expense will increase due to the new
stock benefit plans we intend to implement. Our results of operations and
financial condition are also significantly affected by general economic and
competitive conditions, particularly changes in interest rates, the impact of
the COVID-19 pandemic, changes in accounting guidance, government policies and
actions of regulatory authorities.
Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The
following table shows for the periods indicated the total dollar amount of
interest from average interest-earning assets and the resulting yields, as well
as the interest expense on average interest-bearing liabilities, expressed both
in dollars and rates, and the net interest margin. All average balances are
based on daily balances. The table also reflects the yields on the Company's
interest-earning assets and costs of interest-bearing liabilities for the
periods shown.
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For the Three Months Ended September 30,
2022 2021
Average Average
Outstanding Average Yield/ Outstanding Average Yield/
Balance Interest Rate Balance Interest Rate
(Dollars in thousands)
Interest-earning
assets:
Loans, net $ 96,751 $ 877 3.63 % $ 97,179 $ 853 3.51 %
Federal funds sold and
interest-bearing
deposits in other
banks 24,480 111 1.81 % 24,638 6 0.10 %
Time deposits with
other financial
institutions 4,243 14 1.32 % 5,728 11 0.77 %
Securities available
for sale 127,644 682 2.14 % 97,608 327 1.34 %
FHLB stock 550 4 2.91 % 550 4 2.91 %
Total interest-earning
assets 253,668 $ 1,688 2.66 % 225,703 $ 1,201 2.13 %
Noninterest-earning
assets 20,618 15,624
Total assets $ 274,286 $ 241,327
Interest-bearing
liabilities:
Interest-bearing
demand $ 17,547 $ 2 0.05 % $ 18,718 $ 2 0.04 %
Money market 46,497 24 0.21 % 46,330 24 0.21 %
Savings 48,489 18 0.15 % 45,344 17 0.15 %
Time deposits 60,699 148 0.98 % 63,903 182 1.14 %
Total interest-bearing
deposits $ 173,232 $ 192 0.44 % $ 174,295 $ 225 0.52 %
Other borrowings(1) - - - % 5,000 - - %
Total interest-bearing
liabilities 173,232 $ 192 0.44 % 179,295 $ 225 0.50 %
Noninterest-bearing
liabilities 17,554 16,156
Total liabilities $ 190,786 $ 195,451
Equity 83,500 45,876
Total liabilities and
equity $ 274,286 $ 241,327
Net interest income $ 1,496 $ 976
Interest rate
spread(2) 2.22 % 1.63 %
Net interest-earning
assets(3) $ 80,436 $ 46,408
Net interest margin(4) 2.36 % 1.73 %
Average
interest-earning
assets to
average-interest
bearing liabilities 146.43 % 125.88 %
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For the Nine Months Ended September 30,
2022 2021
Average Average
Outstanding Average Yield/ Outstanding Average Yield/
Balance Interest Rate Balance Interest Rate
(Dollars in thousands)
Interest-earning assets:
Loans, net $ 96,726 $ 2,603 3.59 % $ 96,968 $ 2,662 3.66 %
Federal funds sold and
interest-bearing
deposits in other banks 47,288 213 0.60 % 25,892 16 0.08 %
Time deposits with other
financial institutions 3,810 25 0.87 % 7,827 59 1.01 %
Securities available for
sale 116,683 1,638 1.87 % 93,242 1,026 1.47 %
FHLB stock 550 11 2.67 % 537 10 2.48 %
Total interest-earning
assets 265,057 $ 4,490 2.26 % 224,466 3,773 2.24 %
Noninterest-earning
assets 20,491 16,768
Total assets $ 285,548 $ 241,234
Interest-bearing
liabilities:
Interest-bearing demand $ 17,492 $ 7 0.05 % $ 17,488 6 0.05 %
Money market 45,751 69 0.20 % 47,052 72 0.20 %
Savings 48,595 55 0.15 % 44,464 50 0.15 %
Time deposits 63,261 443 0.93 % 64,931 588 1.21 %
Total interest-bearing
deposits $ 175,099 $ 574 0.44 % $ 173,935 $ 716 0.55 %
Other borrowings(1) 2,601 - - % 4,487 - - %
Total interest-bearing
liabilities 177,700 $ 574 0.43 % 178,422 716 0.54 %
Noninterest-bearing
liabilities 24,993 16,703
Total liabilities $ 202,693 $ 195,125
Equity 82,855 46,109
Total liabilities and
equity $ 285,548 $ 241,234
Net interest income $ 3,916 3,057
Interest rate spread(2) 1.83 % 1.70 %
Net interest-earning
assets(3) $ 87,357 $ 46,044
Net interest margin(4) 1.97 % 1.82 %
Average interest-earning
assets to
average-interest bearing
liabilities 149.16 % 125.81 %
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(1) Other borrowings consists of 0% interest rate FHLB advances. (2) Equals the difference between the yield on average earning-assets and the
cost of average interest-bearing liabilities.
(3) Equals total interest-earning assets less total interest-bearing liabilities.
(4) Equals net interest income divided by average interest-earning assets.
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COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED
General. For the three months endedSeptember 30, 2022 , the Company had net income of$118,000 , compared to net income of$16,000 for the same period endedSeptember 30, 2021 . The increase in net income is primarily the result of a reversal of the provision for loan losses, and an increase in interest income, primarily from securities available for sale, offset by a decrease in noninterest income and an increase in noninterest expense. Additionally, for the nine months endedSeptember 30, 2022 , the Company had a net loss of$12,000 , compared to net income of$2,000 for the same period endedSeptember 30, 2021 . The changes in net income (loss) are primarily the result of an increase of noninterest expenses, which are expected to reoccur in future periods and are the result of additional expenses related to being a public company, offset by the recognition of the Employee Retention Credit during the second quarter of 2022. Net Interest Income. Net interest income was$1.5 million and$1.0 million for the three months endedSeptember 30, 2022 and 2021. Net interest income was$3.9 million and$3.1 million for the nine months endedSeptember 30, 2022 and 2021, respectively. The average yield on total interest-earning assets increased 53 basis points in the third quarter of 2022 compared to 2021. This increase was driven by an increase of 12 basis points in the average yield on loans, net, to 3.63%, an increase of 80 basis points for the average yield on investments, net, to 2.14%, and an increase in the average yield on interest-bearing deposits in other banks of 171 basis points, to 1.81%. Management continues to deploy funds into the investments portfolio, helping to increase the average yield earned on investments. The average yield on total interest-earning assets increased 2 basis points in the first nine months of 2022 compared to 2021. During 2021, borrowers continued to take advantage of the lower interest rate environment and refinanced their mortgages, driving down the yield on loans during 2021 and the beginning of 2022. However, during 2022, as interest rates on mortgages have risen, the average yield on the loan portfolio has increased. Notwithstanding a general increase in market interest rates during 2022, the cost of interest-bearing liabilities decreased 6 basis points for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 , and decreased 11 basis points for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The net decrease in our funding costs was primarily driven by a decrease in the average yield of time deposits. During the first quarter of 2022, subsequent to the conversion closing, certain customers withdrew their funds held in time deposits prior to the maturity of these deposits. Upon the withdrawal of these funds, the customers were charged an interest penalty which resulted in a lower overall funding cost during the quarter. Provision for Loan Losses. The allowance for loan losses is established through a provision for loan losses charged to earnings as losses are estimated to have occurred in our loan portfolio. Loan losses are charged against the allowance when management believes the collectability 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 and is based upon management's periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of the underlying collateral, and prevailing economic conditions. The evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. A loan is considered impaired when, based on current information or events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. When a loan is impaired, the measurement of such impairment is based upon the fair value of the collateral of the loan. If the fair value of the collateral is less than the recorded investment in the loan, we will recognize the impairment by creating a valuation allowance with a corresponding charge against earnings. An allowance is also established for uncollectible interest on loans classified as substandard. The allowance is established by a charge to interest income equal to all interest previously accrued, and income is subsequently recognized only to the extent that cash payments are received. When, in management's judgment, the borrower's ability to make interest and principal payments is back to normal, the loan is returned to accrual status. During the three months endedSeptember 30, 2022 and 2021, a reversal of provision of$84,000 and$12,000 , respectively, was recorded. During the nine months endedSeptember 30, 2022 , a reversal of provision of$100,000 was recorded, compared to a provision of$5,000 for the same period endingSeptember 30, 2021 . The reversal of the provision in 2022 was primarily the result of strong economic factors leading to a reduction in the qualitative adjustment of the allowance for loan loss. The rolling average unemployment rate in Kenosha/Lake Counties continues to decline. Additionally, the Bank has reduced its qualitative adjustment due to reduced COVID-19 uncertainties. The Bank has not experienced losses specific to COVID-19 during the pandemic. Net recoveries of$6,000 were recorded during the nine months endedSeptember 30, 2022 , compared to net charge-offs of$92,000 during the same period endedSeptember 30, 2021 . Additionally, during the three months ended September, 2022, there were no recoveries or charge-offs recorded. During the three months endedSeptember 30, 2021 , recoveries of$3,000 were recorded. The establishment of the allowance for loan 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. Various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to make additional provisions for estimated loan losses based upon judgments different from those of management. 32
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Noninterest Income. The following table shows the components of noninterest income for the periods presented.
Three months ended September 30, Nine months ended September 30,
Noninterest income: 2022 2021 2022 2021
(Dollars in thousands)
Gain on sale of mortgage loans $ 30 $ 71 $ 99 $ 316
Gain on sale of securities - 131 - 131
Rental income on office building 16 11 37 32
Service charges on deposits 75 75 222 216
Increase in cash surrender value of BOLI 45 46 132 134
Other 19 39 572 142
Total noninterest income $ 185 $ 373 $ 1,062 $ 971
Noninterest income decreased $188,000 , or 50.4%, to $185,000 for the quarter
ended September 30, 2022 compared to $373,000 for the quarter ended September
30, 2021 . The primary driver of the decrease is the absence of gain on sale of
securities during the three months ended September 30, 2022 compared to $131,000
during the three months ended September 30, 2021 . Management did not sell any
securities during the three months ended September 30, 2022 due to the
unrealized loss position of the portfolio. Additionally, the decrease was driven
by a decrease in the gain on sale of loans. During the three months ended
September 30, 2022 , we sold $1.8 million in loans compared to $3.1 million
during the three months ended September 30, 2021 . The decrease in sale of
mortgage loans was partially due to the decision to originate a higher
percentage of loans for the portfolio, as well as an overall decrease in total
loans originated during the period.
Noninterest income increased $91,000 , or 9.4%, to $1.1 million for the nine
months ended September 30, 2022 compared to $971,000 for the same period ended
September 30, 2021 . The increase is due to the recognition of the Employee
Retention Credit during the second quarter of 2022, offset by a reduction in the
volume of mortgage loans sold and the resulting gain on the sale of mortgage
loans. During the nine months ended September 30, 2022 , we sold $7.5 million in
loans compared to $15.4 million during the nine months ended September 30, 2021 .
The decrease in sale of mortgage loans was partially due to the decision to
originate a higher percentage of loans for the portfolio, as well as an overall
decrease in total loans originated during the period. Additionally, there were
no gains on sales of securities during the nine months ended September 30, 2022
compared to $131,000 during the nine months ended September 30, 2021 . Management
did not sell any securities during the three months ended September 30, 2022 due
to the unrealized loss position of the portfolio.
Noninterest Expense. The following table shows the components of noninterest expense for the periods presented.
Three months ended September 30, Nine months ended September 30,
Noninterest expense: 2022 2021 2022 2021
(Dollars in thousands)
Salaries and employee benefits $ 993 $ 824 $ 3,003 $ 2,515
Equipment and occupancy 154 168 496 509
Data processing 159 136 461 464
Professional services 141 32 411 144
Advertising 29 15 67 53
Supervisory fees and assessments 33 32 111 95
Loan expenses 16 27 65 99
Deposit expenses 61 49 149 144
Foreclosure and other real estate owned
expenses - 14 - 22
Other 92 59 394 224
Total noninterest expense $ 1,678 $ 1,356 $ 5,157 $ 4,269
Noninterest expense increased $322,000 , or 24.5%, to $1.7 million for the
three months ended September 30, 2022 compared to $1.4 million for the
three months ended September 30, 2021 . The primary drivers for the increase in
noninterest expense are salaries and employee benefits and professional services
expenses. The Bank, in accordance with our strategic plan, continues to invest
in hiring and growing the strength of our lending team, resulting in an increase
in the average number of full-time equivalent employees during the period to 38
employees as of September 30, 2022 , compared to 35 employees as of September 30,
2021 . Additionally, in an effort to attract and retain employees, the Bank
established an Employee Stock Ownership Plan "ESOP" at the closing of the
conversion, which resulted in the recognition of additional ESOP related
expenses of $54,000 during the three months ended September 30, 2022 .
Professional service fees increased $109,000 , or 340.6%, to $141,000 during the
three months ended September 30, 2022 compared to $32,000 for the three months
ended September 30, 2021 . This increase is the results of additional expenses
associated with being a public company and are expected to reoccur in future
periods.
Noninterest expense increased $888,000 , or 20.8%, to $5.2 million for the
nine months ended September 30, 2022 compared to $4.3 million for the
nine months ended September 30, 2021 . The primary drivers for the increase in
noninterest expense are salaries and employee benefits and professional services
expenses. Salaries and employee benefits increased $488,000 , or 19.4% as a
result of an increase in the number of full-time equivalent employees during the
periods. Additionally, ESOP related expenses of $151,000 was recognized during
the nine months ended September 30, 2022 . Professional service fees increased
$267,000 , or 185.4%, to $411,000 during the nine months ended September 30, 2022
compared to $144,000 for the nine months ended September 30, 2021 . This increase
is the result of additional expenses associated with being a public company and
are expected to reoccur in future periods. Other noninterest expense increased
$170,000 , or 75.9.0%, to $394,000 during the nine months ended September 30,
2022 compared to $224,000 for the nine months ended September 30, 2021 ,
primarily due to additional expenses associated with the filing for the Employee
Retention Credit.
Provision for Income Tax Expense (Benefit). During the three months ended
September 30, 2022 , the Company recognized income tax benefit of $31,000 ,
compared to an income tax benefit of $11,000 during the same period
ended September 30, 2021 . The increase in benefit is primarily due to the
recognition of deferred tax assets during the third quarter of 2022. Income tax
benefit decreased $181,000 , or 73.0%, to $67,000 for the nine months ended
September 30, 2022 compared to $248,000 for the nine months ended September 30,
2021 , primarily due to the recognition of the Employee Retention Credit income
during 2022.
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