Part I. Financial Information

Item 1. Consolidated Financial Statements

 

NSTS BANCORP, INC.

Consolidated Balance Sheets

 

 

See accompanying notes to consolidated unaudited financial statements

 

 

NSTS BANCORP, INC.

Consolidated Statements of Operations (unaudited)

 

 

See accompanying notes to consolidated unaudited financial statements

 

NSTS BANCORP, INC.

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

 

 

 

See accompanying notes to consolidated unaudited financial statements

 

NSTS BANCORP, INC.

Consolidated Statements of Stockholders’ Equity (unaudited)

 

 

See accompanying notes to consolidated unaudited financial statements

 

 

 

See accompanying notes to consolidated unaudited financial statements

 

 

NSTS BANCORP, INC.

Consolidated Statements of Cash Flows (unaudited)

 

 

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, 2025, are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

 

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 out of three bank branch locations in the northern suburbs of Chicago, Illinois. In efforts to expand our loan originations within the Chicagoland area, the Bank also has three loan production offices, located in Chicago, Aurora and Plainfield, Illinois. The lending team operates as Oak Leaf Community Mortgage, powered by North Shore Trust and Savings. The Bank offers a variety of financial services to customers in our surrounding communities. 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, 2024. 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, 2025, are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year ending December 31, 2025. 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.

 

All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by business-line, the Company’s Chief Operating Decision Maker ("CODM") evaluates financial performance on a Company-wide basis. The Company's assigned business lines have similar economic characteristics, products, services and customers. Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable operating segment. 

 

Financial performance is reported to the CODM monthly, and the primary measure of performance is consolidated net income. The allocation of resources throughout the Company is determined annually based upon consolidated net income performance. The presentation of financial performance to the CODM is consistent with amounts and financial statement line items shown in the Company's consolidated balance sheets and consolidated statements of operations. Additionally, the Company's significant expenses are adequately segmented by category and amount in the consolidated statements of operations to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include salaries and employee benefits, equipment and occupancy expense, data processing, professional services and advertising.

 

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

 

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40).” The pronouncement requires public entities to disclose additional information about specific expense categories in the notes to the financial statements. The guidance is effective for public business entities for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is assessing ASU 2024-03 and its impact on its Consolidated Financial Statements and disclosures.

 

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Note 2: Securities Available for Sale

 

The amortized cost and estimated fair value of debt securities at June 30, 2025 and December 31, 2024, by contractual maturity, are shown below. The accrued interest receivable for securities available for sale was $260,000 and $278,000 on June 30, 2025 and December 31, 2024, 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, 2025		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		$	—			$	79			$	—			$	879			$	958
1 to 5 years			3,015				1,311				8,244				14,225				26,795
5 to 10 years			4,677				2,780				16,265				8,941				32,663
After 10 years			—				7,400				576				1,196				9,172
Fair value			7,692				11,570				25,085				25,241				69,588
Gross unrealized gains			—				—				—				—				—
Gross unrealized losses			(799	)			(2,428	)			(3,629	)			(2,975	)			(9,831	)
Amortized cost		$	8,491			$	13,998			$	28,714			$	28,216			$	79,419

 

December 31, 2024		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		$	1,000			$	—			$	—			$	—			$	1,000
1 to 5 years			3,047				1,452				8,971				15,086				28,556
5 to 10 years			4,610				2,401				15,794				7,786				30,591
After 10 years			—				7,883				1,150				2,069				11,102
Fair value			8,657				11,736				25,915				24,941				71,249
Gross unrealized gains			—				—				—				—				—
Gross unrealized losses			(1,062	)			(2,367	)			(4,766	)			(3,842	)			(12,037	)
Amortized cost		$	9,719			$	14,103			$	30,681			$	28,783			$	83,286

 

As of June 30, 2025, and December 31, 2024, 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, 2025 and December 31, 2024, 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, 2025
U.S. government agency obligations		$	—			$	—			$	7,692			$	799			$	7,692			$	799
Municipal obligations			—				—				11,570				2,428				11,570				2,428
Mortgage-backed residential obligations			—				—				25,085				3,629				25,085				3,629
Collateralized mortgage obligations			—				—				25,241				2,975				25,241				2,975
Total		$	—			$	—			$	69,588			$	9,831			$	69,588			$	9,831
December 31, 2024
U.S. government agency obligations		$	—			$	—			$	8,657			$	1,062			$	8,657			$	1,062
Municipal obligations			467				28				11,269				2,339				11,736				2,367
Mortgage-backed residential obligations			—				—				25,915				4,766				25,915				4,766
Collateralized mortgage obligations			—				—				24,941				3,842				24,941				3,842
Total		$	467			$	28			$	70,782			$	12,009			$	71,249			$	12,037

 

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At June 30, 2025 and December 31, 2024, all investment securities were in unrealized loss positions. There were no securities with identified credit losses at June 30, 2025 and December 31, 2024, 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. 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, 2025, all municipal bonds are paying as agreed. 

 

There were no sales of securities available-for-sale during the six months ended June 30, 2025 and 2024. 

 

Note 3: Loans and allowance for credit losses

 

A summary of loans by major category as of June 30, 2025 and December 31, 2024 is as follows:

 

		June 30, 2025				December 31, 2024
		(Dollars in thousands)
First mortgage loans
1-4 family residential		$	121,837			$	119,409
Multi-family			3,304				3,368
Commercial			4,271				4,197
Construction			3,901				3,651
Total first mortgage loans			133,313				130,625
Consumer loans			314				282
Total loans			133,627				130,907
Net deferred loan costs			408				650
Allowance for credit losses on loans			(1,200	)			(1,201	)
Total loans, net		$	132,835			$	130,356

 

First mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balance of these loans totaled $21.7 million and $13.9 million at June 30, 2025 and December 31, 2024, respectively. Custodial escrow balances maintained in connection with the loans serviced were $342,000 and $236,000 at June 30, 2025 and December 31, 2024, respectively. 

 

The accrued interest receivable for loans, net, was $563,000 and $560,000 for June 30, 2025 and December 31, 2024, 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, 2025 and December 31, 2024, such borrowers were indebted to the Bank in the aggregate amount of $575,000 and $587,000, respectively.

 

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The following tables present the activity in the allowance for credit losses ("ACL") for the three and six months ended June 30, 2025 and 2024:

 

		June 30, 2025
		1-4 family
		residential				Multi-family				Commercial				Construction				Consumer				Total
		(Dollars in thousands)
Three months ended
Beginning balance		$	1,034			$	37			$	38			$	45			$	2			$	1,156
Charge-offs			—				—				—				—				—				—
Recoveries			—				—				—				—				—				—
Net recoveries (charge-offs)			—				—				—				—				—				—
Provision for credit losses			22				—				6				16				—				44
Ending balance		$	1,056			$	37			$	44			$	61			$	2			$	1,200

 

		June 30, 2025
		1-4 family
		residential				Multi-family				Commercial				Construction				Consumer				Total
		(Dollars in thousands)
Six months ended
Beginning balance		$	1,056			$	37			$	41			$	65			$	2			$	1,201
Charge-offs			—				—				—				—				—				—
Recoveries			—				—				—				—				—				—
Net recoveries (charge-offs)			—				—				—				—				—				—
Provision for (release of) credit losses			—				—				3				(4	)			—				(1	)
Ending balance		$	1,056			$	37			$	44			$	61			$	2			$	1,200

 

		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			—				—				—				—				—				—
Recoveries			—				—				—				—				—				—
Net recoveries (charge-offs)			—				—				—				—				—				—
Provision for (release of) credit losses			74				—				4				13				(1	)		$	90
Ending balance		$	1,165			$	36			$	41			$	24			$	1			$	1,267

 

		June 30, 2024
		1-4 family
		residential				Multi-family				Commercial				Construction				Consumer				Total
		(Dollars in thousands)
Six months ended
Beginning balance		$	1,094			$	40			$	37			$	4			$	1			$	1,176
Charge-offs			—				—				—				—				—				—
Recoveries			—				—				—				—				—				—
Net recoveries (charge-offs)			—				—				—				—				—				—
Provision for (release of) credit losses			71				(4	)			4				20				—				91
Ending balance		$	1,165			$	36			$	41			$	24			$	1			$	1,267

 

The ACL on loans excludes $80,000 and $45,000 of allowance for off-balance sheet exposures as of June 30, 2025 and 2024, respectively, recorded within Other Liabilities on the Consolidated Balance Sheets. The net provision for credit losses for the three and six months ended June 30, 2025 in the table above excludes a provision for credit losses of $13,000 and $21,000, respectively, related to off balance sheet exposures. The net provision for credit losses for the three and six months ended June 30, 2024 in the table above excludes a provision for credit losses of $33,000 and $31,000, respectively, related to off balance sheet exposures.

 

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As of June 30, 2025, there were two collateral dependent loan totaling $287,000 in the one to four-family residential loan segment. These loans are collateralized by residential real estate and have no ACL as of June 30, 2025. There were no other collateral dependent loans as of June 30, 2025. There were no collateral dependent loans as of December 31, 2024. 

 

The Bank evaluates collectability based on payment activity and other factors. The Bank uses a graded loan rating system as a means of identifying potential problem loans, as follows:

 

Pass

Loans in these categories are performing as expected with low to average risk.

 

Special Mention

Loans in this category are internally designated by management as “watch loans.” These loans are starting to show signs of potential weakness and are closely monitored by management.

 

Substandard

Loans in this category are internally designated by management as “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the paying capacity of the obligors or the current net worth of the collateral pledged. Substandard loans present a distinct possibility that the Bank will sustain losses if such weaknesses are not corrected.

 

Doubtful

Loans classified as doubtful have all the weaknesses inherent in those designated as “substandard” with the added characteristic that the weaknesses may make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

 

On an annual basis, or more often if needed, the Bank formally reviews the ratings on commercial loans. In addition, the Bank performs an independent review of a significant portion of the commercial loan portfolio. Management uses the results of the independent review as part of its annual review process.

 

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The following tables present the credit risk profile of the Company's loan portfolio based on risk rating category and year of origination as of June 30, 2025 and  December 31, 2024.

 

		As of June 30, 2025
		Term loans amortized cost basis by origination year
		2025				2024				2023				2022				2021				Prior				Revolving loans amortized cost basis				Revolving loans converted to term loans amortized cost basis				Total
		(Dollars in thousands)
1-4 family residential
Pass		$	12,235			$	15,068			$	19,831			$	12,265			$	16,825			$	40,210			$	5,116			$	—			$	121,550
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				263				—				—				—				24				—				—				287
Total 1-4 family residential			12,235				15,331				19,831				12,265				16,825				40,234				5,116				—				121,837
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—				—
Multi-family
Pass			—				511				—				—				226				2,567				—				—			$	3,304
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Total multi-family			—				511				—				—				226				2,567				—				—				3,304
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—				—
Commercial
Pass			—				—				171				—				94				2,960				1,046				—			$	4,271
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Total commercial			—				—				171				—				94				2,960				1,046				—				4,271
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—				—
Construction
Pass			507				3,299				95				—				—				—				—				—			$	3,901
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Total construction			507				3,299				95				—				—				—				—				—				3,901
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—				—
Consumer
Pass			120				75				62				49				6				2				—				—			$	314
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Total consumer			120				75				62				49				6				2				—				—				314
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—				—
Total
Pass			12,862				18,953				20,159				12,314				17,151				45,739				6,162				—				133,340
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				263				—				—				—				24				—				—				287
Total			12,862				19,216				20,159				12,314				17,151				45,763				6,162				—				133,627
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—				—

    

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		As of December 31, 2024
		Term loans amortized cost basis by origination year
		2024				2023				2022				2021				Prior				Revolving loans amortized cost basis				Revolving loans converted to term loans amortized cost basis				Total
		(Dollars in thousands)
1-4 family residential
Pass		$	20,577			$	20,986			$	12,421			$	18,074			$	43,245			$	4,106			$	—			$	119,409
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Total 1-4 family residential			20,577				20,986				12,421				18,074				43,245				4,106				—				119,409
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—
Multi-family
Pass			515				—				—				230				2,623				—				—				3,368
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Total multi-family			515				—				—				230				2,623				—				—				3,368
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—
Commercial
Pass			148				301				—				96				3,158				494				—				4,197
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Total commercial			148				301				—				96				3,158				494				—				4,197
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—
Construction
Pass			3,134				517				—				—				—				—				—				3,651
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Total construction			3,134				517				—				—				—				—				—				3,651
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—
Consumer
Pass			127				77				58				18				2				—				—				282
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Total consumer			127				77				58				18				2				—				—				282
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—
Total
Pass			24,501				21,881				12,479				18,418				49,028				4,600				—				130,907
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Total			24,501				21,881				12,479				18,418				49,028				4,600				—				130,907
Current year-to-date gross write-offs			—				—				—				—				—				—				—				—

     

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The aging of the Bank’s loan portfolio as of June 30, 2025 and December 31, 2024, is as follows:

 

		31-89 Days Past Due and Accruing				Greater than 90 Days Past Due and Accruing				Non-Accrual				Total Past Due and Non-Accrual				Current				Total Loan Balance
		(Dollars in thousands)
June 30, 2025
1-4 family residential		$	455			$	—			$	287			$	742			$	121,095			$	121,837
Multi-family			—				—				—				—				3,304				3,304
Commercial			—				—				—				—				4,271				4,271
Construction			—				—				—				—				3,901				3,901
Consumer			—				—				—				—				314				314
Total		$	455			$	—			$	287			$	742			$	132,885			$	133,627
December 31, 2024
1-4 family residential		$	371			$	—			$	—			$	371			$	119,038			$	119,409
Multi-family			—				—				—				—				3,368				3,368
Commercial			—				—				—				—				4,197				4,197
Construction			—				—				—				—				3,651				3,651
Consumer			—				—				—				—				282				282
Total		$	371			$	—			$	—			$	371			$	130,536			$	130,907

 

The following table presents the amortized cost basis of loans on nonaccrual status recorded at June 30, 2025,  December 31, 2024 and January 1, 2024. There was no interest recognized on non-accrual loans for the six months ended June 30, 2025 and 2024.

 

		June 30, 2025								December 31, 2024								January 1, 2024
		Nonaccrual with no Allowance for Credit Losses				Total Nonaccrual				Nonaccrual with no Allowance for Credit Losses				Total Nonaccrual				Nonaccrual with no Allowance for Credit Losses				Total Nonaccrual
		(Dollars in thousands)
First mortgage loans
1-4 family residential		$	287			$	287			$	—			$	—			$	200			$	200
Multi-family			—				—				—				—				—				—
Commercial			—				—				—				—				—				—
Construction			—				—				—				—				—				—
Consumer loans			—				—				—				—				—				—
Total loans		$	287			$	287			$	—			$	—			$	200			$	200

 

The Bank may modify loans to borrowers experiencing financial difficulty by providing modifications to repayment terms; more specifically, modifications to loan interest rates. Management performs an analysis at the time of loan modification. Any reserve required is recorded through a provision to the allowance for credit losses on loans. There were no modifications on loans to borrowers experiencing financial difficulty during the six months ended June 30, 2025 and 2024.

 

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Note 4: Deposits

 

As of June 30, 2025 the scheduled maturities of time deposits are as follows:

 

For the 12 months ended
June 30,		Amount
		(Dollars in thousands)
2026		$	69,570
2027			8,937
2028			6,751
2029			6,008
2030 and beyond			3,598
Total		$	94,864

 

In the normal course of business, deposit accounts are held by directors and executive officers of the Company and the Bank (related parties). The terms for these accounts, including interest rates, fees, and other attributes, are similar to those prevailing for comparable transactions with other customers and do not involve more than the normal level of risk associated with deposit accounts. At June 30, 2025 and December 31, 2024, total deposits held by directors and officers of the Company and the Bank were $1.5 million and $1.1 million, respectively.

 

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Note 5: Other Borrowings

 

There were no additional borrowings made during the six months ended June 30, 2025 and 2024. In June 2025, the Company repaid the $5.0 million advance from FHLB Chicago. There was no outstanding borrowed funds at June 30, 2025. 

 

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

 

		For the three months ended								For the six months ended
		June 30,								June 30,
		2025				2024				2025				2024
		(Dollars in thousands)
FHLB of Chicago advances and other borrowings:
Average balance outstanding		$	4,396			$	5,000			$	4,696			$	5,000
Maximum amount outstanding at any month-end during the period			5,000				5,000				5,000				5,000
Average interest rate during the period			4.8	%			4.9	%			4.8	%			4.8	%

 

		June 30, 2025				December 31, 2024
		(Dollars in thousands)
Balance outstanding at end of period			—				5,000
Weighted average interest rate at end of period			N/A				4.8	%

 

The eligible borrowings are collateralized by $108.2 million and $103.8 million of first mortgage loans under a blanket lien arrangement at June 30, 2025 and December 31, 2024, respectively.

 

The following table shows the outstanding advances, additional borrowing capacity and total borrowing capacity from the FHLB Chicago at the dates presented. 

 

		June 30, 2025				December 31, 2024
		(Dollars in thousands)
Outstanding advances		$	—			$	5,000
Additional borrowing capacity			81,461				73,094
Total borrowing capacity		$	81,461			$	78,094

 

Additionally, at June 30, 2025 and December 31, 2024, we had a $10.0 million federal funds line of credit with BMO Harris Bank, none of which was drawn at June 30, 2025 and December 31, 2024. 

 

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Note 6: Fair Value Measurements

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

 

Level 1

Quoted prices in active markets for identical assets or liabilities

 

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

 

Level 3

Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities

 

An asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

 

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2025 or December 31, 2024.

 

Securities available for sale (Recurring)

Where quoted market prices are available in an active market, securities such as U.S. Treasuries, would be classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities would be classified within Level 3 of the hierarchy.

 

Individually Evaluated (Nonrecurring)
Individually evaluated loans are recorded at fair value on a nonrecurring basis. The fair value of loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made
in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional credit losses and adjusted accordingly.

 

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The following table presents the Bank’s assets that are measured at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2025 and December 31, 2024:

 

		Fair Value Measurements Using
		Fair Value				Level 1				Level 2				Level 3
		(Dollars in thousands)
June 30, 2025
Securities available-for-sale
U.S. government agency obligations		$	7,692			$	—			$	7,692			$	—
Municipal obligations			11,570				—				11,570				—
Mortgage-backed residential obligations			25,085				—				25,085				—
Collateralized mortgage obligations			25,241				—				25,241				—
Total		$	69,588			$	—			$	69,588			$	—
December 31, 2024
Securities available-for-sale
U.S. government agency obligations		$	8,657			$	—			$	8,657			$	—
Municipal obligations			11,736				—				11,736				—
Mortgage-backed residential obligations			25,915				—				25,915				—
Collateralized mortgage obligations			24,941				—				24,941				—
Total		$	71,249			$	—			$	71,249			$	—

 

The Bank may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with accounting principles generally accepted in the United States of America. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. There were no assets measured at fair value on a nonrecurring basis as of June 30, 2025 and December 31, 2024. 

 

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Note 7: Fair Value of Financial Instruments

 

Financial instruments are classified within the fair value hierarchy using the methodologies described in Note 6 – Fair Value Measurements. The following disclosures include financial instruments that are not carried at fair value on the Consolidated Balance Sheets. The calculation of estimated fair values is based on market conditions at a specific point in time and may not reflect current or future fair values. 

 

Certain financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market. The carrying value of these financial instruments assumes to approximate the fair value of these instruments. These instruments include cash and cash equivalents, non-interest bearing deposit accounts, time deposits with other financial institutions, FHLB stock, escrow deposits and accrued interest receivable and payable. 

 

		Carrying																Estimated
		Amount				Level 1				Level 2				Level 3				Fair Value
		(Dollars in thousands)
June 30, 2025
Financial assets:
Loans, net		$	132,835			$	—			$	—			$	124,366			$	124,366
Loans held for sale			4,429				—				4,664				—				4,664
Financial liabilities:
Interest-bearing deposits		$	180,589			$	—			$	181,036			$	—			$	181,036
December 31, 2024
Financial assets:
Loans, net		$	130,356			$	—			$	—			$	124,084			$	124,084
Loans held for sale			1,218				—				1,242				—				1,242
Financial liabilities:
Interest-bearing deposits		$	178,260			$	—			$	178,872			$	—			$	178,872
Other Borrowings			5,000				—				4,999				—				4,999

 

Note 8: Capital Ratios

 

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under accounting principles generally accepted in the United States of America, regulatory reporting requirements and regulatory capital standards. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

 

Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital to risk-weighted assets, common equity Tier 1 capital to total risk-weighted assets and of Tier I capital to average assets, as such individual components and calculations are defined by related standards.

 

As of June 30, 2025 the most recent notification from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification which management believes have changed the Bank’s category. On November 13, 2019, the federal regulators finalized and adopted a regulatory capital rule establishing a community bank leverage ratio (“CBLR”), which became effective on January 1, 2020. The intent of CBLR is to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions and depository institution holding companies, as directed under the Economic Growth, Relief, and Consumer Protection Act. Under CBLR, if a qualifying depository institution or depository institution holding company elects to use such measure, such institution or holding company will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds 9% subject to a limited two quarter grace period, during which the leverage ratio cannot drop 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios. The Bank elected to begin using CBLR for the first quarter of 2020. Management believes, as of June 30, 2025, that the Bank met all capital adequacy requirements to which it was subject.

 

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The Bank’s actual capital amounts and ratios as of June 30, 2025 and December 31, 2024, are presented below:

 

										Minimum Required to be
		Actual								Well-Capitalized (1)
		Amount				Ratio				Amount				Ratio
As of June 30, 2025		(Dollars in thousands)
Tier 1 capital (to Average Assets)		$	65,125				23.20	%		$	25,264				>9%
As of December 31, 2024
Tier 1 capital (to Average Assets)		$	64,634				23.53	%		$	24,722				>9%

 

(1) As defined by regulatory agencies. Failure to exceed the leverage ratio thresholds required under CBLR in the future, subject to any applicable grace period, would require the Bank to return to the risk-based capital ratio thresholds previously utilized under the fully phased-in Basel III Capital Rules to determine capital adequacy.

 

Note 9: Commitments and Contingencies

 

In the ordinary course of business, the Bank has various commitments and contingent liabilities that are not reflected in the accompanying financial statements. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the financial position of the Bank.

 

Financial Instruments

 

The Bank does not engage in the use of interest rate swaps or futures, forwards or option contracts.

 

At June 30, 2025 and December 31, 2024, unused lines of credit and outstanding commitments to originate loans were as follows:

 

		June 30, 2025				December 31, 2024
		(Dollars in thousands)
Unused line of credit		$	11,154			$	8,950
Commitments to originate loans			2,192				1,109
Total commitments		$	13,346			$	10,059

 

Concentrations of Credit Risk

 

The Bank generally originates single-family residential loans within its primary lending area. These loans are secured by the underlying properties.

 

The Bank maintains its cash in deposit accounts at the Federal Reserve Bank or other institutions, the balances of which may exceed federally insured limits. The Bank has not experienced any losses in such accounts. The Bank believes it is not exposed to any significant credit risk on cash and cash equivalents.

 

Interest Rate Risk

 

The Bank assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, fair values of its financial instruments will change when interest rate levels change, and that change may be either favorable or unfavorable to the Bank. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the overall interest rate risk.

 

Litigation

 

Due to the nature of its business activities, the Bank is at times subject to legal action which arises in the normal course of business. In the opinion of management, the ultimate resolution of these matters is not expected to have a material effect on the financial position or results of operations of the Bank.

 

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Note 10: Earnings Per Share

 

Basic EPS represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as stock options) were exercised or converted into additional common shares that should then share in the earnings of the entity. Diluted EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period, plus the effect of potential dilutive common share equivalents. 

 

There were no securities or other contracts that had a dilutive effect for the three and six months ended June 30, 2025 and 2024, and therefore the weighted average common shares outstanding used to calculate both basic and diluted EPS are the same. Shares held by the Employee Stock Ownership Plan ("ESOP") that have not been allocated to employees in accordance with the terms of the ESOP, referred to as "unallocated ESOP shares", are not deemed outstanding for EPS calculations. 

 

		Three Months Ended June 30,								Six months ended June 30,
		2025				2024				2025				2024
		(Income in thousands)								(Income in thousands)
Net loss applicable to common shares		$	(258	)		$	(326	)		$	(586	)		$	(572	)
Average number of common shares outstanding			5,246,571				5,308,341				5,247,847				5,352,903
Less: Average unallocated ESOP shares			359,919				382,953				362,557				395,420
Average number of common shares outstanding used to calculate basic loss per common share			4,886,652				4,925,388				4,885,290				4,957,483
Loss per common share basic and diluted		$	(0.05	)		$	(0.07	)		$	(0.12	)		$	(0.12	)

 

All unallocated ESOP shares have been excluded from the calculation of basic and diluted EPS. Due to the net loss position, all outstanding share option awards are anti-dilutive and excluded from the computation of diluted earnings per share.

  

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Note 11: Stock Based Compensation

 

ESOP

 

Employees participate in an Employee Stock Ownership Plan ("ESOP"). The ESOP borrowed funds from the Company to purchase 431,836 shares of stock at $10 per share. The Bank makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation. Participants receive the shares at the end of employment. Dividends on allocated shares increase participants accounts. 

 

There were no contributions to the ESOP during the first six months of 2025, as the annual loan payment will be made during the fourth quarter. Expense recorded was $63,000 and $51,000 for the three months ended June 30, 2025 and 2024, respectively, and is recognized over the service period. Expense recorded was $127,000 and $102,000 for the six months ended June 30, 2025 and 2024, respectively, and is recognized over the service period. 

 

Shares held by the ESOP were as follows: 

 

		As of June 30,
		2025				2024
		(Dollars in thousands)
Shares allocated			64,844				43,624
Shares committed for allocation			10,610				10,590
Shares distributed to plan participants			(1,597	)			—
Unallocated			356,382				377,622
Total ESOP shares			430,239				431,836
Fair value of unearned shares as of June 30, 2025 and 2024, respectively		$	4,394			$	3,636

 

Fair value of unearned shares is based on a stock price of $12.33 and $9.63 as of June 30, 2025 and 2024, respectively. 

 

Equity Incentive Plan

 

At the Company's annual meeting of stockholders held on May 24, 2023, stockholders approved the NSTS Bancorp, Inc. 2023 Equity Incentive Plan (“2023 Equity Plan”), which provides for the granting of up to 755,714 shares (215,918 shares of restricted stock and 539,796 shares available for future grants of stock options) of the Company’s common stock pursuant to equity awards made under the 2023 Equity Plan.

 

Stock options granted under the 2023 Equity Plan generally vest in equal annual installments over a service period of five years beginning on the date of grant. The vesting of the options accelerates upon death, disability or following a change in control of the Company. Stock options are generally granted at an exercise price equal to the fair value of the Company’s common stock on the grant date based on the closing market price of the Company's common stock on the date of grant, and have an expiration period of ten years. As of June 30, 2025, the Company has 26,296 shares available for future grants of stock options under the 2023 Equity Plan.  
The Company recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards. Upon exercise of vested options, management expects to first draw on treasury stock as the source for shares. 

 

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

 

Stock Option		Shares				Weighted Average Exercise Price				Aggregate Intrinsic Value (1)
Outstanding at March 31, 2024			442,500			$	9.36
Granted			—				—
Exercised			—				—
Forfeited			—				—
Outstanding at June 30, 2024			442,500			$	9.36			$	96
Exercisable - End of Period			111,500				9.36				30
Outstanding at March 31, 2025			492,500			$	9.59
Granted			—				—
Exercised			—				—
Forfeited			2,000				9.36
Outstanding at June 30, 2025			490,500			$	9.59			$	1,344
Exercisable - End of Period			186,800				9.36				555

 

Stock Option		Shares				Weighted Average Exercise Price				Aggregate Intrinsic Value (1)
Outstanding at December 31, 2023			442,500			$	9.36
Granted			—				—
Forfeited			—				—
Outstanding at June 30, 2024			442,500			$	9.36			$	96
Exercisable - End of Period			111,500				9.36				30
Outstanding at December 31, 2024			500,500			$	9.59
Granted			—				—
Exercised			—				—
Forfeited			10,000				9.36
Outstanding at June 30, 2025			490,500			$	9.59			$	1,344
Exercisable - End of Period			186,800				9.36				555

 

(1) Dollars in thousands. The aggregate intrinsic value of outstanding and exercisable options at June 30, 2025 and 2024 were calculated based on the closing market price of the Company's common stock of  June 30, 2025 and 2024 of $12.33 and $9.63, respectively, per share less the exercise price. 

 

Expected future expense relating to the non-vested options outstanding as of June 30, 2025 is $1.1 million over a weighted average period of 3.1 years. As of June 30, 2025, the Company had 490,500 in outstanding stock options with a weighted average remaining life of 8.1 years outstanding. 

 

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Restricted shares granted under the 2023 Equity Plan generally vest in equal annual installments over a service period of five years beginning on the date of grant. The vesting of the awards accelerates upon death, disability or following a change in control of the Company. The product of the number of shares granted and the grant date closing market price of the Company’s common stock determines the fair value of restricted shares under the 2023 Equity Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

 

As of June 30, 2025, the Company has 14,018 shares of restricted stock available for future grants under the 2023 Equity Plan. 

 

The following is a summary of the status of the Company's restricted shares as of and for the periods presented. 

 

Restricted Stock		Shares				Weighted Average Grant Date Fair Value
Non-vested balance as of March 31, 2024			178,000			$	9.36
Granted			—				—
Vested			35,600				9.36
Forfeited			—				—
Non-vested balance as of June 30, 2024			142,400			$	9.36
Non-vested balance as of March 31, 2025			149,740			$	9.57
Granted			—				—
Vested			33,260				9.36
Forfeited			—				—
Non-vested balance as of June 30, 2025			116,480			$	9.63

 

 

Restricted Stock		Shares				Weighted Average Grant Date Fair Value
Non-vested balance as of December 31, 2023			178,000			$	9.36
Granted			—				—
Vested			35,600				9.36
Forfeited			—				—
Non-vested balance as of June 30, 2024			142,400			$	9.36
Non-vested balance as of December 31, 2024			151,740			$	9.57
Granted			—				—
Vested			33,260				9.36
Forfeited			2,000				9.36
Non-vested balance as of June 30, 2025			116,480			$	9.63

 

 

Expected future expense related to the non-vested restricted shares outstanding as of period end is $1.1 million over a weighted average period of 4.0 years. 

 

The following table presents the stock based compensation expense for the periods presented. 

 

		Three Months Ended June 30,								Six months ended June 30,
		2025				2024				2025				2024
		(Dollars in thousands)								(Dollars in thousands)
Stock option expense		$	87			$	79			$	160			$	157
Restricted stock expense			88				83				172				167
Total stock based compensation expense		$	175			$	162			$	332			$	324

 

  

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This section is intended to assist in the understanding of our financial performance through a discussion of our financial condition as of June 30, 2025 and as compared to our financial condition as of December 31, 2024, and our results of operations for the three and six months ended June 30, 2025 and 2024. 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.

 

 

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 credit losses;

 

●

fluctuations in real estate values and both residential and commercial real estate market conditions;

 

●

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, or increase the level of defaults, losses and prepayments on loans;

 

●

our ability to manage our liquidity and to access cost-effective funding, including significant fluctuations in our deposit accounts;

 

●

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;

 

●

interruptions involving information technology and communications systems of service providers;

 

●

breaches or failures of information security controls or cyber-related incidents;

 

●

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;

 

●

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 Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

 

●

our ability to hire and retain key employees and our reliance on our executive officers; 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. 

 

 

General

 

On January 18, 2022, NSTS Bancorp, Inc. (“the Company”) became the holding company for North Shore Trust and Savings (“the Bank”) when North Shore MHC completed its conversion into the stock holding company form of organization. Shares of the Company's common stock began trading on January 19, 2022 on the Nasdaq Capital Market under the trading symbol “NSTS.”

 

NSTS Bancorp, Inc.

 

NSTS Bancorp, Inc. is a Delaware corporation which was incorporated in September 2021. As a savings and loan holding company, NSTS Bancorp, Inc. is regulated by the Board of Governors of the Federal 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 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, 2024. 

 

North Shore Trust and Savings

 

North Shore Trust and Savings, a federally-chartered stock savings institution, was established in 1921 as North Shore Building and Loan, an Illinois-chartered institution. The Bank is a wholly owned subsidiary of NSTS Bancorp, Inc., and operates as a traditional savings institution focused primarily on serving the banking needs of customers in our market area of Lake County, Illinois and adjacent communities. We operate from our headquarters and main banking office in Waukegan, Illinois, as well as two additional full-service branch offices located in Waukegan and Lindenhurst, Illinois, respectively. We also have three loan production offices in Chicago, Aurora and Plainfield, Illinois. Our primary business activity is attracting deposits from the general public and using those funds to originate one- to four-family residential mortgage loans and purchase investments. We are subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency (the “OCC”).

 

Our Business and Franchise

 

For over 100 years, we have served Lake County, Illinois and the surrounding communities. We have established deep ties to the community and developed customer relationships which have spanned generations. We pride ourselves in matching our products and services to the needs of the community.

 

North Shore Trust and Savings is primarily engaged in attracting deposits from the general public and using those funds to invest in loans and securities. Our principal sources of funds are customer deposits, repayments of loans, maturities of investments and funds borrowed from outside sources such as the Federal Home Loan
Bank of Chicago (“FHLB”). These funds are primarily used for the origination of loans, including one- to four-family residential first mortgage loans, commercial real estate mortgage loans, multi-family residential mortgage loans, one- to four- family residential construction loans and consumer loans. North Shore Trust and Savings derives its income principally from interest earned on loans and investment securities, the gain on sale of mortgage loans sold into the secondary mortgage market, and, to a lesser extent, from fees received in connection with the origination of loans, service charges on deposit accounts and for other services. We invest in bank owned life insurance (“BOLI”) to provide us with a funding source for our benefit plan obligations. BOLI also generally provides us noninterest income that is non-taxable. North Shore Trust and Savings’ primary expenses are interest expense on deposits and borrowings and general operating expenses.

 

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 established a loan production office in Chicago, Illinois in 2016 and two additional loan production offices in Aurora and Plainfield, Illinois in 2023, to originate loans outside of our branch network in a more densely populated metropolitan area, which we believe benefits us geographically. The lending team originates loans as Oak Leaf Community Mortgage, powered by North Shore Trust and Savings. 

 

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 six months ended June 30, 2025 and 2024, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates.

 

Of the significant accounting policies used in the preparation of our consolidated financial statements, we have identified certain items as critical accounting policies based on the associated estimates, assumptions, judgments and complexity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2024. 

 

 

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 credit losses, fee income and other noninterest income and noninterest expense. Noninterest expense principally consists of compensation, office occupancy and equipment expense, data processing, advertising and business promotion and other expenses. We expect that our noninterest expenses will increase as we grow and expand our operations. Our results of operations and financial condition are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, changes in accounting guidance, government policies and actions of regulatory authorities.

 

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.

 

 

		For the Three Months Ended June 30,
		2025												2024
		Average												Average
		Outstanding								Average Yield/				Outstanding								Average Yield/
		Balance				Interest				Rate				Balance				Interest				Rate
		(Dollars in thousands)
Interest-earning assets:
Loans, net			134,937				1,793				5.32	%			134,727				1,721				5.11	%
Federal funds sold and interest-bearing deposits in other banks			54,257				522				3.85	%			31,698				357				4.51	%
Time deposits with other financial institutions			1,494				18				4.82	%			1,816				28				6.17	%
Securities available for sale			69,423				396				2.28	%			76,269				448				2.35	%
FHLB stock			605				9				5.95	%			584				9				6.16	%
Total interest-earning assets			260,716				2,738				4.20	%			245,094				2,563				4.18	%
Noninterest-earning assets			19,757												19,843
Total assets			280,473												264,937
Interest-bearing liabilities:
Interest-bearing demand			17,385				2				0.05	%			15,214				2				0.05	%
Money market			28,139				44				0.63	%			30,982				50				0.65	%
Savings			41,880				16				0.15	%			41,641				16				0.15	%
Time deposits			92,921				815				3.51	%			77,812				646				3.32	%
Total interest-bearing deposits			180,325				877				1.95	%			165,649				714				1.72	%
Other borrowings			4,396				53				4.82	%			5,000				61				4.88	%
Total interest-bearing liabilities			184,721				930				2.01	%			170,649				775				1.82	%
Noninterest-bearing liabilities			18,574												17,902
Total liabilities			203,295												188,551
Equity			77,178												76,386
Total liabilities and equity			280,473												264,937
Net interest income							1,808												1,788
Interest rate spread(1)											2.19	%											2.36	%
Net interest-earning assets(2)			75,995												74,445
Net interest margin(3)											2.77	%											2.92	%
Average interest-earning assets to average-interest bearing liabilities			141.14	%											143.62	%

 

---

(1)	Equals the difference between the yield on average earning-assets and the cost of average interest-bearing liabilities.
(2)	Equals total interest-earning assets less total interest-bearing liabilities.
(3)	Equals net interest income divided by average interest-earning assets.

 

 

		For the Six Months Ended June 30,
		2025												2024
		Average												Average
		Outstanding								Average Yield/				Outstanding								Average Yield/
		Balance				Interest				Rate				Balance				Interest				Rate
		(Dollars in thousands)
Interest-earning assets:
Loans, net		$	134,423			$	3,593				5.35	%		$	130,031			$	3,196				4.92	%
Federal funds sold and interest-bearing deposits in other banks			53,652				1,030				3.84	%			32,439				774				4.77	%
Time deposits with other financial institutions			1,494				36				4.82	%			1,904				51				5.36	%
Securities available for sale			70,156				811				2.31	%			78,477				929				2.37	%
FHLB stock			595				18				6.05	%			567				18				6.35	%
Total interest-earning assets			260,320			$	5,488				4.22	%			243,418			$	4,968				4.08	%
Noninterest-earning assets			19,973												19,741
Total assets		$	280,293											$	263,159
Interest-bearing liabilities:
Interest-bearing demand		$	17,044			$	4				0.05	%		$	15,171			$	4				0.05	%
Money market			28,529				89				0.62	%			31,339				100				0.64	%
Savings			41,892				31				0.15	%			41,627				31				0.15	%
Time deposits			92,264				1,612				3.49	%			75,812				1,219				3.22	%
Total interest-bearing deposits		$	179,729			$	1,736				1.93	%		$	163,949			$	1,354				1.65	%
Other borrowings			4,696				113				4.81	%			5,000				121				4.84	%
Total interest-bearing liabilities			184,425			$	1,849				2.01	%			168,949			$	1,475				1.75	%
Noninterest-bearing liabilities			18,978												17,533
Total liabilities		$	203,403											$	186,482
Equity			76,890												76,677
Total liabilities and equity		$	280,293											$	263,159
Net interest income						$	3,639											$	3,493
Interest rate spread(1)											2.20	%											2.34	%
Net interest-earning assets(2)		$	75,895											$	74,469
Net interest margin(3)											2.80	%											2.87	%
Average interest-earning assets to average-interest bearing liabilities			141.15	%											144.08	%

 

---

(1)	Equals the difference between the yield on average earning-assets and the cost of average interest-bearing liabilities.
(2)	Equals total interest-earning assets less total interest-bearing liabilities.
(3)	Equals net interest income divided by average interest-earning assets.

 

 

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024

 

General. For the quarter ended June 30, 2025, we had a net loss of $258,000, compared to a net loss of $326,000 for the quarter ended June 30, 2024. The decrease in net loss for the quarter ended June 30, 2025 is due an increase in interest and noninterest income, partially offset by an increase in interest expense and noninterest expenses. For the six months ended June 30, 2025, we had a net loss of $586,000, compared to a net loss of $572,000 for the six months ended June 30, 2024. The increase in interest and noninterest income was offset by the increase in interest expense and noninterest expenses.

 

Net Interest Income. Net interest income increased $20,000, to $1.8 million for quarter ended June 30, 2025. Our interest rate spread decreased to 2.19% for the quarter ended June 30, 2025 from 2.36% for the quarter ended June 30, 2024. Our net interest margin decreased to 2.77% for the quarter ended June 30, 2025 compared to 2.92% for the quarter ended June 30, 2024. The decrease in interest rate spread and margin is driven by an increased average balance of higher earning interest-bearing liabilities, specifically interest-bearing deposits, as a percentage of total assets.

 

Average interest-earning assets of $260.7 million for the quarter ended June 30, 2025 increased $15.6 million compared to $245.1 million for the quarter ended June 30, 2024. The increase in average earning assets was driven by an increase in interest-bearing deposits at other banks, funded by an increase in average deposit balances during the period and reduction in investment securities. The average outstanding balance of loans, net increased slightly to $134.9 million for the quarter ended June 30, 2025, an increase of $200,000 from $134.7 million for the quarter ended June 30, 2024. Additionally, the average yield earned on those loans outstanding increased 21 basis points to 5.32% for the quarter ended June 30, 2025. This increase is a result of an overall increase in market rates on mortgage loans originated during 2024 and the first half of 2025, and still in our portfolio, as well as an increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.

 

The cost of interest-bearing liabilities increased 19 basis points for the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024. The net increase in our funding costs was primarily due to an increase in rates earned on time deposit accounts to remain competitive with the local market. The average yield on time deposits for the quarter ended June 30, 2025 was 3.51%.

 

Net interest income increased $146,000, to $3.6 million for the six months ended June 30, 2025 compared to $3.5 million for the six months ended June 30, 2024. Our interest rate spread decreased to 2.20% for the six months ended June 30, 2025 from 2.34% for the six months ended June 30, 2024. Our net interest margin decreased to 2.80% for the six months ended June 30, 2025 compared to 2.87% for the six months ended June 30, 2024. The decrease in interest rate spread and margin is driven by an increased average balance of higher earning interest-bearing liabilities, specifically interest-bearing deposits, as a percentage of total assets.

 

Average interest-earning assets of $260.3 million for the six months ended June 30, 2025 increased $16.9 million compared to $243.4 million for the six months ended June 30, 2024. The increase in average earning assets was driven by an increase in loans, net and interest-bearing deposits at other banks, funded by an increase in average deposit balances during the period and reduction in investment securities. The average outstanding balance of loans, net increased slightly to $134.4 million for the six months ended June 30, 2025, an increase of $4.4 million from $130.0 million for the six months ended June 30, 2024. Additionally, the average yield earned on those loans outstanding increased 43 basis points to 5.35% for the six months ended June 30, 2025. This increase is a result of an overall increase in market rates on mortgage loans originated during 2024 and the first half of 2025 and still in our portfolio, as well as an increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.

 

The cost of interest-bearing liabilities increased 26 basis points for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The net increase in our funding costs was primarily due to an increase in rates earned on time deposit accounts to remain competitive with the local market. The average yield on time deposits for the six months ended June 30, 2025 was 3.49%.

 

Provision for Credit Losses. During the quarter ended June 30, 2025, we recorded a provision for credit losses of $57,000, comprised of $44,000 provision for credit losses on loans and $13,000 provision for credit losses related to unfunded commitments. During the three months ended June 30, 2024, we recorded a provision for credit losses of $123,000, comprised of $90,000 in provision for credit losses to loans and $33,000 in provision for credit losses related to unfunded commitments, including loans committed for origination. During the six months ended June 30, 2025, we recorded a provision for credit losses of $20,000, comprised of $1,000 reversal of provision for credit losses on loans and $21,000 provision for credit losses related to unfunded commitments. During the six months ended June 30, 2024, we recorded a provision for credit losses of $122,000, comprised of $91,000 provision for credit losses on loans and $31,000 provision for credit losses related to unfunded commitments.

 

We will continue to assess and evaluate the estimated future credit loss impact of current market conditions in subsequent reporting periods, which will be highly dependent on credit quality, macroeconomic forecasts and conditions, as well as the composition of our loan and available-for-sale securities portfolios.

 

 

Noninterest Income. The following table shows the components of noninterest income for the periods presented.

 

		Three months ended June 30,								Six months ended June 30,
Noninterest income:		2025				2024				2025				2024
		(Dollars in thousands)
Gain on sale of mortgage loans		$	507			$	271			$	696			$	427
Rental income on office building			16				16				32				32
Service charges on deposits			64				64				123				125
Increase in cash surrender value of BOLI			57				53				113				106
Other			91				97				105				123
Total noninterest income		$	735			$	501			$	1,069			$	813

 

For the quarter ended June 30, 2025 compared to the same period ended June 30, 2024, noninterest income increased $234,000 to $735,000.  Noninterest income increased $256,000 for the six months ended June 30, 2025 to $1.1 million compared to $813,000 for the six months ended June 30, 2024. The increases were driven by an increase in the gain on sale of mortgage loans during the quarter and six months ended June 30, 2025. The increase in gain on sale of mortgages was primarily the result of an overall increase in total mortgage loans originated during the periods. During the quarter ended June 30, 2025, we sold 102 loans totaling $28.0 million for a gain on sale of $507,000. During the quarter ended June 30, 2024, we sold 46 loans totaling $13.2 million for a gain on sale of $271,000. During the six months ended June 30, 2025, we sold 135 loans totaling $37.9 million for a gain on sale of $696,000. During the six months ended June 30, 2024, we sold 72 loans totaling $19.5 million for a gain on sale of $427,000. Management continues to look for opportunities and markets to sell loans as we continue to see increased loan production compared to prior years.

 

Noninterest Expense. The following table shows the components of noninterest expense for the periods presented.

 

		Three months ended June 30,								Six months ended June 30,
Noninterest expense:		2025				2024				2025				2024
		(Dollars in thousands)
Salaries and employee benefits		$	1,642			$	1,468			$	3,175			$	2,842
Equipment and occupancy			210				198				434				412
Data processing			233				217				455				412
Professional services			180				172				316				283
Advertising			39				91				81				175
Supervisory fees and assessments			42				35				80				71
Loan expenses			79				65				171				95
Deposit expenses			107				58				175				112
Director fees			51				56				99				104
Other			161				132				288				250
Total noninterest expense		$	2,744			$	2,492			$	5,274			$	4,756

 

Noninterest expenses increased $252,000 for the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024. The increase in noninterest expenses was primarily driven by increases in salaries and employee benefits and deposit expenses. The increase in noninterest expenses was partially offset by a reduction in advertising expenses. The average number of employees increased to 52 for the quarter ended June 30, 2025 compared to 50 for the quarter ended June 30, 2024. The increase in headcount is based on additional loan officers brought in during 2025. Deposit expenses increased as a result of ATM losses totaling $40,000 due to an ATM robbery. Noninterest expenses increased $518,000 for the six months ended June 30, 2025, compared to the same period ended June 30, 2024. The increase in noninterest expenses was primarily driven by increases in salaries and employee benefits, loan expenses and deposit expenses.  The average number of employees increased to 52 for the six months ended June 30, 2025 compared to 48 for the six months ended June 30, 2024. The increase in headcount is based on additional loan officers brought in during 2024 and 2025. Loan expenses increased as a result of an increase in loan originations during the periods. Deposit expenses increased as a result of ATM losses totaling $40,000 due to an ATM robbery. Additionally, the Bank recorded a provision for recourse reserve related to the loans sold into the secondary market due to an increase in the volume of loans sold over the past 4 quarters.

 

Provision for Income Tax Expense. There was no provision for income tax expense recorded during the three and six months ended June 30, 2025 and 2024. Management estimates a taxable net loss for the year ended December 31, 2025 due to non-taxable income, such as income on tax exempt municipal securities and BOLI.

 

During the quarter ended June 30, 2025, management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing net operating losses. A significant piece of objective negative evidence evaluated is the cumulative taxable loss incurred over the three-year period ended June 30, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of June 30, 2025, management maintained the full valuation allowance against the federal net operating losses and net deferred tax assets to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted.

 

 

COMPARISON OF FINANCIAL CONDITION ATJUNE 30, 2025 AND DECEMBER 31, 2024

 

		At June 30,				At December 31,
		2025				2024
		(Dollars in thousands)
Selected Consolidated Financial Condition Data:
Cash and cash equivalents		$	47,488			$	53,481
Securities available for sale			69,588				71,249
FHLB stock			605				585
Loans held for sale			4,429				1,218
Loans, net			132,835				130,356
Total assets			275,976				278,688
Total deposits			192,960				190,156
Total equity		$	77,833			$	76,490

 

Total Assets. Total assets decreased $2.7 million to $276.0 as of June 30, 2025 compared to $278.7 million at December 31, 2024. The decrease was driven by a reduction in cash and cash equivalents due to the paydown of the FHLB Advance during June 2025.

 

Cash and cash equivalents. Cash and cash equivalents decreased $6.0 million to $47.5 million as of June 30, 2025, from $53.5 million at December 31, 2024. The decrease was driven by the paydown of the FHLB Advance in June 2025 of $5.0 million. Currently, the Bank holds a majority of the cash on hand at the Federal Reserve Bank of Chicago, earning 4.40%, to keep the funds available for increasing loan demand. Management continues to actively monitor our liquidity position on a daily basis and maintain levels of liquid assets deemed adequate.

 

Securities Available for Sale. Securities available-for-sale decreased to $69.6 million as of June 30, 2025, compared to $71.2 million at December 31, 2024. There were no purchases or sales of securities available-for-sale during the six months ended June 30, 2025. During the six months ended June 30, 2025, the Bank received principal payments of $2.5 million, had maturities of $1.1 million, had net premium amortization and discount accretion of $242,000 and had a decrease in the unrealized loss on the portfolio of $2.2 million. 

 

As of June 30, 2025, the securities available for sale portfolio included an unrealized loss position of $9.8 million, or 12.4% of the total book value of the portfolio. Management monitors the portfolio for credit losses and believes that the decline in value does not presently represent realized losses and is due to market volatility and increased market interest rates. While the Bank does not currently intend to sell securities in a loss position, management may consider the opportunity to reposition the investment securities portfolio in the future.

 

Loans held for sale. Our loans held for sale increased $3.2 million to $4.4 million at June 30, 2025 compared to $1.2 million at December 31, 2024. The increase was primarily due an overall increase in the level of loans originated for sale during the second quarter of 2025. During the six months ended June 30, 2025, the Bank originated $38.4 million in loans held for sale. 

 

Loans, net. Our loans, net, increased by $2.5 million to $132.8 million at June 30, 2025 compared to $130.4 million at December 31, 2024. The Bank originated $18.2 million in loans to be held in the portfolio during the six months ended June 30, 2025 and had loan principal payments and payoffs of $15.8 million. In an effort to continue to grow loan originations, the Bank hired two additional mortgage loan originators during the six months ended June 30, 2025 and continues to look to hire additional loan officers.

 

As of June 30, 2025, the allowance for credit losses on loans (“ACL”) totaled $1.2 million, with a net change of approximately $1,000 during the six months ended June 30, 2025. While the balance of the ACL remained steady, the ACL as a percentage of the loans, net of unearned income decreased, driven by a reduction in peer group proxy rates. As of June 30, 2025, there were two loans individually assessed, of which neither had expected credit losses identified. The Bank actively monitors the loan portfolio for signs of weakening credit quality, noting as of June 30, 2025 the portfolio remains of high quality with limited credit concerns.

 

Deposits. Total deposits increased $2.8 million to $193.0 million at June 30, 2025 compared to $190.2 million at December 31, 2024. The increase primarily came in Time Deposits with customers entering the CD Special offered during the six months ended June 30, 2025. Additionally, there was a shift in funds from money market accounts to savings. Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity.

 

Total Equity. Total equity increased $1.3 million to $77.8 million at June 30, 2025. The increase is primarily due to a decrease in the unrealized loss position on the securities available-for-sale portfolio during the six months ended June 30, 2025, partially offset by net losses of $586,000.

 

 

Asset Quality

 

The following table sets forth certain information with respect to our nonperforming assets. The increase in non-accrual loans from December 31, 2024 to June 30, 2025 was the result of two loans moving to non-accrual during the period. 

 

		At June 30,				At December 31,
		2025				2024
		(Dollars in thousands)
Nonaccrual loans		$	287			$	—
Loans 90+ days past due and accruing			—				—
Total non-performing loans			287				—
Other real estate owned, net			—				—
Total non-performing assets		$	287			$	—
Asset Quality Ratios: (1)
Non-accrual loans as a percent of total loans outstanding			0.21	%			—	%
Non-performing assets as a percent of total assets			0.10	%			—	%
Allowance for credit losses on loans as a percent of total loans outstanding			0.90	%			0.92	%
Allowance for credit losses on loans as a percent of non-performing loans(2)			418.12	%			—	%
Net charge-offs (recoveries) to average loans receivable			—	%			—	%

 

---

(1)	Asset quality ratios and capital ratios are end of period ratios, except for net charge-offs to average loans receivable.
(2)	Non-performing loans consist of non-accrual loans and loans that are 90 or more days past due and still accruing.

 

The allowance for credit losses on loans as a percentage of total loans was 0.90% and 0.92% as of June 30, 2025 and December 31, 2024, respectively.  

 

 

Liquidity and Capital Resources

 

The Bank maintains levels of liquid assets deemed adequate by management. We adjust our liquidity levels to fund deposit outflows, repay our borrowings, and to fund loan commitments. We also adjust liquidity, as appropriate, to meet asset and liability management objectives.

 

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB of Chicago and a $10.0 million unsecured Fed Funds line of credit with BMO Harris Bank. At June 30, 2025, we had the capacity to borrow approximately $81.5 million from the FHLB of Chicago. At June 30, 2025, we had no outstanding borrowings.

 

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

 

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used in operating activities was $2.0 million and $1.5 million for the six months ended June 30, 2025 and 2024, respectively. Net cash used in investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $1.7 million and $6.6 million for the six months ended June 30, 2025 and 2024, respectively, with the decrease in cash used in 2025 driven by a decrease in the cash used for the loan portfolio. Net cash (used in) provided by financing activities, consisting primarily of the activity in deposit accounts was ($2.3) million and $9.2 million for the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, the Bank repaid the $5.0 million FHLB Advance, resulting in additional cash used in financing activities compared to the prior year.

 

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Time deposits that are scheduled to mature in less than one year from June 30, 2025, totaled $69.6 million. Based on our deposit retention experience and current pricing strategy we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize FHLB of Chicago advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. 

 

As of June 30, 2025, the Bank was well capitalized under the regulatory framework for prompt corrective action. During the year ended December 31, 2020, the Bank elected to begin using the CBLR. Under CBLR, if a qualifying depository institution or depository institution holding company elects to use such measure, such institution or holding company will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds 9%, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios. North Shore Trust and Savings’ Tier 1 capital to Average Assets was 23.20% and 23.53% at June 30, 2025 and December 31, 2024, respectively. 

 

Commitments. At June 30, 2025, we had $2.2 million of outstanding commitments to originate loans. Our total letters and lines of credit and unused lines of credit totaled $11.2 million at June 30, 2025. The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at June 30, 2025.

 

		Total Amounts Committed at				Amount of Commitment Expiration – Per Period
		June 30, 2025				To 1 Year				1-3 Years				4-5 Years				After 5 Years
		(Dollars in thousands)
Unused line of credit		$	11,154			$	704			$	442			$	539			$	9,469
Commitments to originate loans			2,192				2,192				—				—				—
Total commitments		$	13,346			$	2,896			$	442			$	539			$	9,469

 

Cash Obligations. The following table summarizes our cash obligations at June 30, 2025.

 

		Total at				Payments Due By Period
		June 30, 2025				To 1 Year				1-3 Years				4-5 Years				After 5 Years
		(Dollars in thousands)
Time deposits		$	94,864			$	69,570			$	15,688			$	9,606			$	—
Total contractual obligations		$	94,864			$	69,570			$	15,688			$	9,606			$	—

  

 

Impact of Inflation and Changing Prices

 

The consolidated financial statements and the accompanying notes presented elsewhere in this document have been prepared in accordance with U.S. GAAP, which generally requires the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. Unlike most industrial companies, virtually all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

 

Changes in Accounting Principles

 

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

 

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40).” The pronouncement requires public entities to disclose additional information about specific expense categories in the notes to the financial statements. The guidance is effective for public business entities for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is assessing ASU 2024-03 and its impact on its Consolidated Financial Statements and disclosures.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 4.

 

Not required for smaller reporting companies.

 

 

CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures that are designed to provide assurance that the information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of June 30, 2025, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the Company's management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. 

 

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not presently involved in any legal proceedings of a material nature. From time to time, we are subject to various legal actions arising in the normal course of our business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on our financial condition, results of operations or cash flows.

 

ITEM 1A. RISK FACTORS

 

Not required for smaller reporting companies.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuer Purchases of Equity Securities

 

The following table reports information regarding repurchases of our common stock during the quarter ended June 30, 2025.

 

		(a)				(b)				(c)				(d)
Period		Total number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased As part of Publicly Announced Plans or Programs				Maximum Number of Shares that May Yet to be Purchased Under the Plans or Programs
April 1 - April 30, 2025			—								—				—
May 1 - May 31, 2025			—								—				—
June 1 - June 30, 2025			8,788				12.32				—				—
Total			8,788			$	12.32				—				—

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not Applicable.

 

ITEM 4.

 

Not Applicable.

ITEM 5. OTHER INFORMATION

 

None.

 

  

ITEM 6. EXHIBITS

 

31.1		Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of Steven G. Lear, President and Chief Executive Officer.
31.2		Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of Carissa H. Schoolcraft, Chief Financial Officer.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Stephen G. Lear, President and Chief Executive Officer, and Carissa H. Schoolcraft, Chief Financial Officer*
101.INS		Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

MINE SAFETY DISCLOSURES *The certification attached as Exhibit 32.1 to this quarterly report on Form 10-Q is “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		NSTS BANCORP, INC.
Dated: August 14, 2025		By:	/s/ Stephen G. Lear
		Stephen G. Lear
		President and Chief Executive Officer
		(Principal Executive Officer)
Dated: August 14, 2025		By:	/s/ Carissa H. Schoolcraft
		Carissa H. Schoolcraft
		Chief Financial Officer
		(Principal Financial and Accounting Officer)