10-K: NSTS Bancorp Narrows Losses in 2025, Boosts Equity

NSTS Bancorp, Inc. reported a reduced net loss of $386,000 for fiscal year 2025, an improvement from the $789,000 loss in 2024, driven by increased net interest income and a reversal of credit loss provisions.

Summary

• NSTS Bancorp, Inc. reported a net loss of $386,000 for the year ended December 31, 2025, a significant improvement from the $789,000 net loss in 2024.
• Total assets decreased by $12.1 million to $266.6 million as of December 31, 2025, from $278.7 million at December 31, 2024.
• Total deposits decreased by $8.7 million to $181.5 million at December 31, 2025, compared to $190.2 million at December 31, 2024, partly due to increased competition in the time deposit market and a large estate account distribution.
• Total equity increased by $3.5 million to $80.0 million at December 31, 2025, primarily due to a decrease in unrealized losses on the securities available-for-sale portfolio and an increase in additional paid-in capital from stock compensation.
• Net interest income increased by $402,000 to $7.5 million for 2025, up from $7.1 million in 2024, driven by higher yields on loans.
• A reversal of provision for credit losses of $(192,000) was recorded in 2025, compared to a provision of $71,000 in 2024, reflecting a decrease in portfolio loan balances and reduced expected lifetime loss rates.
• Noninterest income increased by $331,000 to $2.3 million in 2025, mainly due to a higher gain on sale of mortgage loans ($1.6 million in 2025 vs. $1.2 million in 2024).
• Noninterest expenses rose by $593,000 to $10.3 million in 2025, primarily due to increases in salaries and employee benefits (4% salary increase, 11% health insurance cost increase, 15% 401K employer contribution increase) and data processing investments.
• The loan portfolio, net, decreased by $1.8 million to $128.6 million at December 31, 2025, with 91.3% consisting of oneto four-family residential mortgage loans.
• Non-accruing loans totaled $284,000 at December 31, 2025, up from $0 at December 31, 2024, all within the 1-4 family residential segment.
• The Bank paid off a $5.0 million FHLB Chicago advance in June 2025, resulting in no outstanding borrowings from FHLB Chicago at year-end 2025.
• NSTS Bancorp, Inc. is an emerging growth company and has elected to use the extended transition period for complying with new or revised financial accounting standards.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing. While the company continues to report a net loss, the significant reduction in loss, improved net interest income, and strong capital position are favorable. However, declining assets and deposits, along with unrealized losses on securities, present ongoing challenges.

Positives

• Net loss significantly decreased to $386,000 in 2025 from $789,000 in 2024, indicating improved operational performance.
• Net interest income increased by $402,000 to $7.5 million, driven by higher yields on loans (5.45% in 2025 vs. 5.09% in 2024).
• A reversal of provision for credit losses of $(192,000) was recorded in 2025, reflecting strong credit quality and positive economic factors.
• Noninterest income increased by $331,000, primarily due to a higher gain on sale of mortgage loans ($1.6 million in 2025 vs. $1.2 million in 2024).
• Total equity increased by $3.5 million to $80.0 million, bolstered by a decrease in unrealized losses on available-for-sale securities.
• The Bank paid off its $5.0 million FHLB Chicago advance in June 2025, reducing its outstanding borrowings.
• North Shore Trust and Savings received an 'Outstanding' CRA rating in its most recent federal examination, demonstrating strong community engagement.
• The Bank's CBLR was 24.32% at December 31, 2025, significantly exceeding the 9% regulatory requirement, classifying it as 'well-capitalized'.

Negatives

• The company reported a net loss of $386,000 for the fiscal year 2025, continuing a trend of losses.
• Total assets decreased by $12.1 million, and total deposits decreased by $8.7 million, indicating a shrinking balance sheet.
• Cash and cash equivalents decreased by $19.5 million, driven by deposit reductions and securities purchases.
• Noninterest expenses increased by $593,000, primarily due to higher salaries and employee benefits, and data processing costs.
• The Bank recorded a valuation allowance of $3.2 million against net deferred tax assets due to cumulative taxable losses over the past five years, limiting the ability to realize these assets.
• Non-accruing loans increased to $284,000 at December 31, 2025, from $0 at December 31, 2024, indicating a slight deterioration in asset quality.
• The securities available-for-sale portfolio had a net unrealized loss position of $8.1 million at December 31, 2025, or 9.3% of total book value, primarily due to increased market interest rates.

Risks

• General economic conditions, nationally or in 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 margins and yields, reduce the fair value of financial instruments, or increase defaults.
• Ability to manage liquidity and access cost-effective funding, including significant fluctuations in deposit accounts.
• Major catastrophes such as natural disasters or public health emergencies and their impact on economic activity and financial markets.
• Further data processing and other technological changes that 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, as the company is a high-value target.
• Demand for loans and deposits in the market area.
• Ability to continue to implement business strategies.
• Competition among depository and other financial institutions, many of which are larger and have greater financial resources.
• Adverse changes in the securities markets.
• Changes in laws or government regulations or policies affecting financial institutions, including regulatory fees and capital requirements.
• Ability to manage market risk, credit risk, and operational risk in current economic conditions.
• Ability to enter new markets successfully and capitalize on growth opportunities.
• Ability to successfully integrate any acquired assets, liabilities, customers, systems, and management personnel.
• Changes in consumer spending, borrowing, and savings habits.
• Changes in accounting policies and practices.
• Ability to hire and retain key employees and reliance on executive officers.
• Compensation expense associated with equity allocated or awarded to employees.
• Uncertainty regarding the CFPB's future authority, staffing, and regulatory priorities, which could impact supervisory and enforcement activity.
• Potential negative impact on interchange fee levels and network pricing due to proposed Federal Reserve Board rules, even if the Durbin Amendment does not directly apply.
• The ultimate scope, timing, and operational impact of the Section 1071 requirements (small business lending rule) on North Shore Trust and Savings remain uncertain.
• The proposed rulemaking by the FDIC and OCC defining 'unsafe or unsound practice' and revising 'matters requiring attention' could impact supervisory efforts and enforcement actions.
• The potential for the Federal Reserve Board to reinstate Regulation D reserve requirements in the future.
• The ultimate outcome of litigation and regulatory changes related to debit card interchange framework.
• The inability to accurately depict all future credit losses in a current ACL estimate, as the impact of various factors cannot be fully known.
• The risk that a substantial portion of maturing time deposits will not renew, potentially requiring the use of FHLB advances or higher interest rates on deposits, leading to increased interest expense.

Future Outlook

Management anticipates that a portion of maturing time deposits will not renew due to increased market competition, potentially requiring the Bank to utilize FHLB advances or raise interest rates on deposits, which could lead to higher interest expense. The company will continue to assess and evaluate the estimated future credit loss impact of current market conditions, macroeconomic forecasts, and portfolio composition. The ultimate scope, timing, and operational impact of the CFPB's Section 1071 small business lending rule and the final CIRCIA rule remain uncertain. The company expects to continue to assess management and staffing needs and may add personnel to implement its business strategy.

Management Comments

• Management continues to actively monitor our liquidity position on a daily basis and maintains levels of liquid assets deemed adequate.
• Management monitors the securities available-for-sale 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.
• Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity.
• We believe that our ability to attract and retain top quality employees is a key to our future success.
• We continue to elevate individuals from within the organization into new roles and we expect to continue to assess our management and staffing needs and are likely to add personnel in the future in order to fully implement our business strategy.
• Management believes that the Bank maintains no uncertain tax positions for tax reporting purposes and accordingly, no liability is required to be recorded.
• Management does not believe there were any material subsequent events during this period that would have required further recognition or disclosure in the consolidated financial statements included in this report.

Industry Context

StockSavvy.ai notes that NSTS Bancorp's improved net loss in 2025, despite a decrease in total assets and deposits, suggests effective management of interest rate dynamics and credit risk in a challenging banking environment. The increase in net interest income and reversal of credit loss provisions are positive indicators, contrasting with broader industry pressures from rising interest rates and deposit competition. The company's strong capital ratios, particularly its CBLR, position it favorably compared to peers facing stricter capital requirements. However, the decline in deposits and cash, coupled with unrealized losses on securities, highlights common liquidity and interest rate sensitivity challenges faced by many community banks.

Comparison to Industry Standards

• NSTS Bancorp's CBLR of 24.32% significantly exceeds the 9% regulatory requirement, indicating a very strong capital position compared to the industry standard for community banks. This is well above the minimums for 'well-capitalized' status (e.g., 5% leverage ratio, 6.5% common equity Tier 1 ratio under Basel III for larger banks, or 9% CBLR for electing community banks).
• The reversal of provision for credit losses in 2025, coupled with low non-accruing loans ($284,000) and no charge-offs on commercial real estate, multi-family, or consumer loans, suggests superior asset quality management compared to some industry segments that may be experiencing increased delinquencies or provisions in a higher interest rate environment.
• The net unrealized loss of $8.1 million on available-for-sale securities, representing 9.3% of the portfolio's book value, is a common challenge across the banking sector due to rising interest rates impacting bond valuations. This is comparable to many regional and community banks that hold significant fixed-income portfolios.
• The decrease in total deposits and cash, alongside increased competition for time deposits from credit unions, reflects a broader trend in the banking industry where institutions are competing fiercely for funding in a rising rate environment, often leading to higher deposit costs or deposit outflows, similar to what larger banks like JPMorgan Chase or Bank of America have discussed in their earnings calls regarding deposit betas.

Corporate Governance

Legal Proceedings

• The company is not presently involved in any legal proceedings of a material nature.
• From time to time, the company is subject to various legal actions arising in the normal course of business, but management expects their resolution not to have a material adverse effect on financial condition, results of operations, or cash flows.

Related Party Transactions

• North Shore Trust and Savings has an agreement with NSTS Bancorp, Inc. to provide administrative support services for compensation not less than fair market value, totaling $1.3 million during 2025.
• North Shore Trust and Savings and NSTS Bancorp, Inc. have an agreement for allocating and reimbursing consolidated tax liability.
• Loans are made by the Bank to directors and officers of the Company and the Bank (related parties) on terms similar to those for comparable transactions with other customers, not involving more than normal risk of collectability. Aggregate indebtedness for such borrowers was $564,000 at December 31, 2025, and $587,000 at December 31, 2024.
• Deposit accounts are held by directors and officers of the Bank (related parties) with terms similar to those for other customers, not involving more than normal risk. Total deposits held by directors and officers were $1.3 million at December 31, 2025, and $1.1 million at December 31, 2024.

Stakeholder Impact

• Shareholders: Experienced a reduced net loss, which is positive, and an increase in total equity, but no cash dividends are currently intended. Stock options and restricted stock awards continue to vest, impacting equity compensation.
• Employees: Benefit from the Employee Stock Ownership Plan (ESOP) and 401(k) matching contributions. Salaries and employee benefits increased, reflecting investment in human capital and retention efforts. The company aims to attract and retain top talent.
• Customers: The Bank continues to focus on serving banking needs in its market area, offering a variety of deposit accounts and loan products, including specialized portfolio loan products. Online banking services are provided.
• Regulators: The Bank maintains strong capital ratios, exceeding 'well-capitalized' requirements, and received an 'Outstanding' CRA rating, indicating compliance and good standing with regulatory bodies. Ongoing monitoring of new regulations (e.g., CFPB, CIRCIA) is in place.
• Creditors: The Bank paid off its FHLB advance, reducing its outstanding borrowings. Liquidity is actively monitored to meet financial obligations.

Next Steps

• Continue to assess and evaluate the estimated future credit loss impact of current market conditions in subsequent reporting periods.
• Monitor the status of the proposed CIRCIA rule and its potential impact on the Bank's cybersecurity reporting requirements.
• Evaluate the effects of proposed amendments to AML and CFT programs on North Shore Trust and Savings and its AML programs.
• Assess management and staffing needs and potentially add personnel to fully implement the business strategy.
• Management may consider the opportunity to reposition the investment securities portfolio in the future.

Key Dates

Recommendation

NSTS Bancorp's significant reduction in net loss for 2025, coupled with an increase in total equity and a strong capital position, indicates a positive trajectory in operational efficiency and balance sheet health. The reversal of credit loss provisions is a notable strength. However, the continued net loss, declining total assets and deposits, and unrealized losses in the securities portfolio present headwinds. The company operates in a competitive and evolving regulatory environment. Given the mixed signals – improvement in profitability metrics but ongoing challenges in growth and market value of investments – a 'hold' recommendation is appropriate. Investors should monitor the company's ability to grow deposits, manage interest rate risk, and return to sustained profitability.

Keywords

NSTS Bancorp, 10-K, Financial Results, Net Loss, Equity, Deposits, Loans, Net Interest Income, Credit Losses, Banking, Community Bank, Illinois, Wisconsin, Mortgage Lending, Cybersecurity, Regulatory Compliance, Capital Ratios, SEC Filing