Business Context and Reporting Period
Company: NSTS Bancorp, Inc. (NSTS)
Reporting Period: Quarter and six months ended June 30, 2025
Business Overview: NSTS is the holding company for North Shore Trust and Savings, a federally-chartered stock savings institution operating primarily in Lake County, Illinois, and the greater Chicagoland area. The bank focuses on attracting deposits to fund one- to four-family residential mortgage loans, commercial real estate loans, and investment securities. It operates three full-service branches and three loan production offices.
Key Financial Metrics
| Metric | Q2 2025 (3 Months) | Q2 2024 (3 Months) | YTD 2025 (6 Months) | YTD 2024 (6 Months) |
|---|---|---|---|---|
| Net Interest Income | $1,808,000 | $1,788,000 | $3,639,000 | $3,493,000 |
| Net Interest Margin (NIM) | 2.77% | 2.92% | 2.80% | 2.87% |
| Noninterest Income | $735,000 | $501,000 | $1,069,000 | $813,000 |
| Noninterest Expense | $2,744,000 | $2,492,000 | $5,274,000 | $4,756,000 |
| Net Loss | $(258,000) | $(326,000) | $(586,000) | $(572,000) |
| Loss Per Share (Basic/Diluted) | $(0.05) | $(0.07) | $(0.12) | $(0.12) |
| Total Assets | $275,976,000 (as of June 30, 2025) | |||
| Total Deposits | $192,960,000 (as of June 30, 2025) | |||
| Loans, Net | $132,835,000 (as of June 30, 2025) | |||
| Stockholders' Equity | $77,833,000 (as of June 30, 2025) | |||
| Cash and Cash Equivalents | $47,488,000 (as of June 30, 2025) |
Material Changes vs. Prior Period
- Profitability: The Company reported a net loss of $258,000 for Q2 2025, an improvement from the $326,000 loss in Q2 2024. However, the YTD 2025 loss of $586,000 slightly increased compared to the $572,000 loss in YTD 2024.
- Net Interest Income: NII increased due to higher loan yields (up 21 bps QoQ) and increased loan balances. However, the Net Interest Margin compressed to 2.77% (from 2.92% prior year) due to rising costs of interest-bearing liabilities, specifically time deposits.
- Noninterest Income: Significant growth driven by gains on the sale of mortgage loans, which rose to $507,000 in Q2 2025 from $271,000 in Q2 2024. This reflects increased loan origination volume (102 loans sold in Q2 2025 vs. 46 in Q2 2024).
- Noninterest Expense: Expenses increased $252,000 in Q2 2025. Drivers included higher salaries and benefits due to hiring additional loan officers and a $40,000 loss from an ATM robbery recorded under deposit expenses.
- Balance Sheet: Total assets decreased $2.7 million from year-end 2024, primarily due to the repayment of a $5.0 million FHLB advance. Loans held for sale increased significantly to $4.4 million from $1.2 million at year-end.
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management anticipates continued loan production growth but notes that results are subject to general economic conditions and interest rate fluctuations. The Company expects noninterest expenses to increase as operations expand.
- Unusual Items:
- ATM Robbery: A $40,000 loss was recorded in deposit expenses due to an ATM robbery.
- Securities Portfolio: The available-for-sale securities portfolio held an unrealized loss of $9.8 million (12.4% of book value) as of June 30, 2025. Management attributes this to market volatility and interest rate changes, not credit deterioration, and does not intend to sell these securities at a loss.
- Risks: Key risks include interest rate volatility affecting margins, credit quality deterioration in the loan portfolio, and liquidity management challenges if deposit retention rates decline. The Company maintains a full valuation allowance against federal net operating losses due to cumulative taxable losses.
- Capital: The Bank is "well-capitalized" under the Community Bank Leverage Ratio (CBLR) framework, with a Tier 1 capital to average assets ratio of 23.20%.
Investor Verification Checklist
- ATM Robbery Impact: Verify if the $40,000 ATM loss is a one-time event or indicative of broader security risks.
- Securities Unrealized Losses: Monitor the $9.8 million unrealized loss in the securities portfolio for potential credit downgrades or forced sales.
- Deposit Retention: Assess the stability of the $69.6 million in time deposits maturing within one year, as failure to retain these could increase funding costs.
- Loan Growth vs. Expense: Evaluate whether the increased loan origination volume justifies the rise in salaries and loan-related expenses.
- Non-Accrual Loans: Note the emergence of $287,000 in non-accrual loans (two loans) in Q2 2025, compared to zero at year-end 2024.