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NSTS Bancorp, Inc.
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Dollars in thousands. The aggregate intrinsic value of outstanding and exercisable options at June 30, 2023 and 2024 were calculated based on the closing market price of the Company's common stock of June 30, 2023 and 2024 of $9.14 and $9.63, respectively, per share less the exercise price.
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.
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-41232
NSTS BANCORP, INC.
(Exact name of the registrant as specified in its charter)
| | |
Delaware | | 87-2522769 |
(State or Other Jurisdiction of | | (I.R.S. Employer |
Incorporation or Organization) | | Identification Number) |
| | |
700 S. Lewis Ave. Waukegan, Illinois | | 60085 |
(Address of principal executive offices) | | (Zip Code) |
(847) 336-4430
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | NSTS | NASDAQ Capital Market |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of August 5, 2024, the Registrant had 5,285,773 shares of its common stock outstanding.
NSTS Bancorp, Inc.
Form 10Q
Index
Part I. Financial Information
Item 1. Consolidated Financial Statements
NSTS BANCORP, INC.
Consolidated Balance Sheets
| | June 30, 2024 | | | | | |
| | (unaudited) | | | December 31, 2023 | |
| | (Dollars in thousands) | |
Assets: | | | | | | | | |
Cash and due from banks | | $ | 1,028 | | | $ | 1,000 | |
Interest-bearing bank deposits | | | 31,403 | | | | 30,388 | |
Cash and cash equivalents | | | 32,431 | | | | 31,388 | |
Time deposits with other financial institutions | | | 996 | | | | 1,991 | |
Securities available for sale | | | 75,301 | | | | 82,135 | |
Federal Home Loan Bank stock (FHLB) | | | 585 | | | | 550 | |
Loans held for sale | | | 5,180 | | | | 380 | |
Loans, net of unearned income | | | 132,305 | | | | 121,799 | |
Allowance for credit losses on loans | | | (1,267 | ) | | | (1,176 | ) |
Loans, net | | | 131,038 | | | | 120,623 | |
Premises and equipment, net | | | 5,268 | | | | 5,285 | |
Accrued interest receivable | | | 872 | | | | 758 | |
Bank-owned life insurance (BOLI) | | | 9,547 | | | | 9,441 | |
Other assets | | | 4,670 | | | | 4,225 | |
Total assets | | $ | 265,888 | | | $ | 256,776 | |
Liabilities: | | | | | | | | |
Deposits: | | | | | | | | |
Noninterest bearing | | $ | 11,188 | | | $ | 12,424 | |
Interest-bearing | | | | | | | | |
Demand and NOW checking | | | 14,936 | | | | 15,346 | |
Money market | | | 30,762 | | | | 32,027 | |
Savings | | | 41,145 | | | | 41,774 | |
Time deposits over $250,000 | | | 15,859 | | | | 9,975 | |
Other time deposits | | | 63,934 | | | | 57,280 | |
Total deposits | | | 177,824 | | | | 168,826 | |
Escrow deposits | | | 1,725 | | | | 1,382 | |
Other borrowings | | | 5,000 | | | | 5,000 | |
Accrued expenses and other liabilities | | | 4,839 | | | | 4,023 | |
Total liabilities | | $ | 189,388 | | | $ | 179,231 | |
Stockholders' equity: | | | | | | | | |
Common Stock ($0.01 par value; 10,000,000 shares authorized; 5,295,459 shares outstanding at June 30, 2024 and 5,315,261 shares at December 31, 2023) | | | 56 | | | | 56 | |
Treasury Stock, at cost (289,700 shares at June 30, 2024 and 269,898 shares at December 31, 2023) | | | (2,571 | ) | | | (2,381 | ) |
Additional paid-in capital | | | 51,240 | | | | 50,920 | |
Retained earnings | | | 40,483 | | | | 41,055 | |
Unallocated common shares held by ESOP | | | (3,776 | ) | | | (3,882 | ) |
Accumulated other comprehensive loss, net | | | (8,932 | ) | | | (8,223 | ) |
Total stockholders' equity | | | 76,500 | | | | 77,545 | |
Total liabilities and stockholders' equity | | $ | 265,888 | | | $ | 256,776 | |
See accompanying notes to consolidated unaudited financial statements
NSTS BANCORP, INC.
Consolidated Statements of Operations (unaudited)
|
|
For the three months ended |
|
|
For the six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
|
$ |
1,721 |
|
|
$ |
1,022 |
|
|
$ |
3,196 |
|
|
$ |
2,040 |
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
387 |
|
|
|
632 |
|
|
|
805 |
|
|
|
1,290 |
|
Tax-exempt |
|
|
61 |
|
|
|
100 |
|
|
|
124 |
|
|
|
202 |
|
Federal funds sold and other |
|
|
357 |
|
|
|
59 |
|
|
|
774 |
|
|
|
111 |
|
Time deposits with other financial institutions |
|
|
28 |
|
|
|
30 |
|
|
|
51 |
|
|
|
54 |
|
FHLB Stock |
|
|
9 |
|
|
|
5 |
|
|
|
18 |
|
|
|
9 |
|
Total interest income |
|
|
2,563 |
|
|
|
1,848 |
|
|
|
4,968 |
|
|
|
3,706 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
714 |
|
|
|
262 |
|
|
|
1,354 |
|
|
|
483 |
|
Other borrowings |
|
|
61 |
|
|
|
7 |
|
|
|
121 |
|
|
|
7 |
|
Total interest expense |
|
|
775 |
|
|
|
269 |
|
|
|
1,475 |
|
|
|
490 |
|
Net interest income |
|
|
1,788 |
|
|
|
1,579 |
|
|
|
3,493 |
|
|
|
3,216 |
|
Provision for credit losses |
|
|
123 |
|
|
|
30 |
|
|
|
122 |
|
|
|
2 |
|
Net interest income after provision for credit losses |
|
|
1,665 |
|
|
|
1,549 |
|
|
|
3,371 |
|
|
|
3,214 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of mortgage loans |
|
|
271 |
|
|
|
2 |
|
|
|
427 |
|
|
|
13 |
|
Rental income on office building |
|
|
16 |
|
|
|
16 |
|
|
|
32 |
|
|
|
32 |
|
Service charges on deposits |
|
|
64 |
|
|
|
69 |
|
|
|
125 |
|
|
|
133 |
|
Increase in cash surrender value of BOLI |
|
|
53 |
|
|
|
46 |
|
|
|
106 |
|
|
|
92 |
|
Other non-interest income |
|
|
97 |
|
|
|
14 |
|
|
|
123 |
|
|
|
24 |
|
Total noninterest income |
|
|
501 |
|
|
|
147 |
|
|
|
813 |
|
|
|
294 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
1,468 |
|
|
|
1,005 |
|
|
|
2,842 |
|
|
|
1,933 |
|
Equipment and occupancy |
|
|
198 |
|
|
|
167 |
|
|
|
412 |
|
|
|
333 |
|
Data processing |
|
|
217 |
|
|
|
161 |
|
|
|
412 |
|
|
|
322 |
|
Professional services |
|
|
172 |
|
|
|
123 |
|
|
|
283 |
|
|
|
244 |
|
Advertising |
|
|
91 |
|
|
|
27 |
|
|
|
175 |
|
|
|
51 |
|
Supervisory fees and assessments |
|
|
35 |
|
|
|
39 |
|
|
|
71 |
|
|
|
74 |
|
Loan expenses |
|
|
65 |
|
|
|
23 |
|
|
|
95 |
|
|
|
44 |
|
Deposit expenses |
|
|
58 |
|
|
|
55 |
|
|
|
112 |
|
|
|
107 |
|
Director fees |
|
|
56 |
|
|
|
56 |
|
|
|
104 |
|
|
|
112 |
|
Other non-interest expense |
|
|
132 |
|
|
|
131 |
|
|
|
250 |
|
|
|
237 |
|
Total noninterest expense |
|
|
2,492 |
|
|
|
1,787 |
|
|
|
4,756 |
|
|
|
3,457 |
|
(Loss) income before income taxes |
|
|
(326 |
) |
|
|
(91 |
) |
|
|
(572 |
) |
|
|
51 |
|
Income tax benefit |
|
|
— |
|
|
|
35 |
|
|
|
— |
|
|
|
7 |
|
Net (loss) income |
|
$ |
(326 |
) |
|
$ |
(126 |
) |
|
$ |
(572 |
) |
|
$ |
44 |
|
Basic and diluted (loss) earnings per share |
|
$ |
(0.07 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.12 |
) |
|
$ |
0.01 |
|
Weighted average shares outstanding |
|
|
4,925,388 |
|
|
|
4,976,127 |
|
|
|
4,957,483 |
|
|
|
4,982,992 |
|
See accompanying notes to consolidated unaudited financial statements
NSTS BANCORP, INC.
Consolidated Statements of Comprehensive Income (Loss) (unaudited)
|
|
For the three months ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
|
(Dollars in thousands) |
|
Net loss |
|
$ |
(326 |
) |
|
$ |
(126 |
) |
Unrealized net holding loss on securities |
|
|
|
|
|
|
|
|
Unrealized net holding loss on securities arising during period |
|
|
(222 |
) |
|
|
(1,802 |
) |
Tax effect |
|
|
63 |
|
|
|
515 |
|
Other comprehensive loss, net of taxes |
|
|
(159 |
) |
|
|
(1,287 |
) |
Comprehensive loss |
|
$ |
(485 |
) |
|
$ |
(1,413 |
) |
|
|
For the six months ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
|
(Dollars in thousands) |
|
Net (loss) income |
|
$ |
(572 |
) |
|
$ |
44 |
|
Unrealized net (loss) gain on securities |
|
|
|
|
|
|
|
|
Unrealized net holding (loss) gain on securities arising during period |
|
|
(991 |
) |
|
|
410 |
|
Tax effect |
|
|
282 |
|
|
|
(116 |
) |
Other comprehensive (loss) income, net of taxes |
|
|
(709 |
) |
|
|
294 |
|
Comprehensive (loss) income |
|
$ |
(1,281 |
) |
|
$ |
338 |
|
See accompanying notes to consolidated unaudited financial statements
NSTS BANCORP, INC.
Consolidated Statements of Stockholders’ Equity (unaudited)
|
|
Common Shares |
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Additional Paid-In Capital |
|
|
Retained earnings |
|
|
Accumulated other comprehensive loss |
|
|
Unallocated Common Shares Held by ESOP |
|
|
Total |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
Quarter ended June 30, 2023 |
|
Balance at March 31, 2023 |
|
|
5,397,959 |
|
|
$ |
54 |
|
|
$ |
— |
|
|
$ |
50,421 |
|
|
$ |
45,182 |
|
|
$ |
(9,544 |
) |
|
$ |
(4,044 |
) |
|
$ |
82,069 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(126 |
) |
|
|
— |
|
|
|
— |
|
|
|
(126 |
) |
ESOP shares committed to be released |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
|
|
— |
|
|
|
— |
|
|
|
54 |
|
|
|
47 |
|
Purchase of treasury stock from stock repurchase program |
|
|
(74,295 |
) |
|
|
— |
|
|
|
(649 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(649 |
) |
Compensation cost for stock options and restricted stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
Issuance of common shares for the restricted stock plan |
|
|
187,200 |
|
|
|
2 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Change in net unrealized loss on securities available for sale, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,287 |
) |
|
|
— |
|
|
|
(1,287 |
) |
Balance at June 30, 2023 |
|
|
5,510,864 |
|
|
$ |
56 |
|
|
$ |
(649 |
) |
|
$ |
50,440 |
|
|
$ |
45,056 |
|
|
$ |
(10,831 |
) |
|
$ |
(3,990 |
) |
|
$ |
80,082 |
|
|
|
|
|
|
|
Quarter ended June 30, 2024 |
|
Balance at March 31, 2024 |
|
|
5,315,261 |
|
|
$ |
56 |
|
|
$ |
(2,381 |
) |
|
$ |
51,080 |
|
|
$ |
40,809 |
|
|
$ |
(8,773 |
) |
|
$ |
(3,829 |
) |
|
$ |
76,962 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(326 |
) |
|
|
— |
|
|
|
— |
|
|
|
(326 |
) |
ESOP shares committed to be released |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
53 |
|
|
|
51 |
|
Purchase of treasury stock from stock repurchase program |
|
|
(8,399 |
) |
|
|
— |
|
|
|
(81 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(81 |
) |
Purchase of treasury stock from taxes withheld on stock awards |
|
|
(11,403 |
) |
|
|
— |
|
|
|
(109 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(109 |
) |
Compensation cost for stock options and restricted stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
162 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
162 |
|
Change in net unrealized loss on securities available for sale, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(159 |
) |
|
|
— |
|
|
|
(159 |
) |
Balance at June 30, 2024 |
|
|
5,295,459 |
|
|
$ |
56 |
|
|
$ |
(2,571 |
) |
|
$ |
51,240 |
|
|
$ |
40,483 |
|
|
$ |
(8,932 |
) |
|
$ |
(3,776 |
) |
|
$ |
76,500 |
|
See accompanying notes to consolidated unaudited financial statements
|
|
Common Shares |
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Additional Paid-In Capital |
|
|
Retained earnings |
|
|
Accumulated other comprehensive loss |
|
|
Unallocated Common Shares Held by ESOP |
|
|
Total |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
Six months ended June 30, 2023 |
|
Balance at December 31, 2022 |
|
|
5,397,959 |
|
|
$ |
54 |
|
|
$ |
— |
|
|
$ |
50,420 |
|
|
$ |
45,291 |
|
|
$ |
(11,125 |
) |
|
$ |
(4,098 |
) |
|
$ |
80,542 |
|
Cumulative impact of ASU 2016-13 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(279 |
) |
|
|
— |
|
|
|
— |
|
|
|
(279 |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44 |
|
|
|
— |
|
|
|
— |
|
|
|
44 |
|
ESOP shares committed to be released |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6 |
) |
|
|
— |
|
|
|
— |
|
|
|
108 |
|
|
|
102 |
|
Purchase of treasury stock from stock repurchase program |
|
|
(74,295 |
) |
|
|
— |
|
|
|
(649 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(649 |
) |
Compensation cost for stock options and restricted stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
Issuance of common shares for the restricted stock plan |
|
|
187,200 |
|
|
|
2 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Change in net unrealized loss on securities available for sale, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
294 |
|
|
|
— |
|
|
|
294 |
|
Balance at June 30, 2023 |
|
|
5,510,864 |
|
|
$ |
56 |
|
|
|
(649 |
) |
|
$ |
50,440 |
|
|
$ |
45,056 |
|
|
$ |
(10,831 |
) |
|
$ |
(3,990 |
) |
|
$ |
80,082 |
|
|
|
|
|
|
|
Six months ended June 30, 2024 |
|
Balance at December 31, 2023 |
|
|
5,315,261 |
|
|
$ |
56 |
|
|
$ |
(2,381 |
) |
|
$ |
50,920 |
|
|
$ |
41,055 |
|
|
$ |
(8,223 |
) |
|
$ |
(3,882 |
) |
|
$ |
77,545 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(572 |
) |
|
|
— |
|
|
|
— |
|
|
|
(572 |
) |
ESOP shares committed to be released |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
106 |
|
|
|
102 |
|
Purchase of treasury stock from stock repurchase program |
|
|
(8,399 |
) |
|
|
— |
|
|
|
(81 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(81 |
) |
Purchase of treasury stock from taxes withheld on stock awards |
|
|
(11,403 |
) |
|
|
— |
|
|
|
(109 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(109 |
) |
Compensation cost for stock options and restricted stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
324 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
324 |
|
Change in net unrealized loss on securities available for sale, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(709 |
) |
|
|
— |
|
|
|
(709 |
) |
Balance at June 30, 2024 |
|
|
5,295,459 |
|
|
$ |
56 |
|
|
$ |
(2,571 |
) |
|
$ |
51,240 |
|
|
$ |
40,483 |
|
|
$ |
(8,932 |
) |
|
$ |
(3,776 |
) |
|
$ |
76,500 |
|
See accompanying notes to consolidated unaudited financial statements
NSTS BANCORP, INC.
Consolidated Statements of Cash Flows (unaudited)
|
|
For the six months ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
|
(Dollars in thousands) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(572 |
) |
|
$ |
44 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
149 |
|
|
|
129 |
|
Securities amortization and accretion, net |
|
|
263 |
|
|
|
280 |
|
Loans originated for sale |
|
|
(21,945 |
) |
|
|
(703 |
) |
Proceeds from sales of loans held for sale |
|
|
20,042 |
|
|
|
716 |
|
Gain on sale of mortgage loans |
|
|
(427 |
) |
|
|
(13 |
) |
Provision for credit losses |
|
|
122 |
|
|
|
2 |
|
Earnings on bank owned life insurance |
|
|
(106 |
) |
|
|
(92 |
) |
ESOP expense |
|
|
102 |
|
|
|
102 |
|
Stock based compensation |
|
|
324 |
|
|
|
28 |
|
Net change in accrued interest receivable and other assets |
|
|
(277 |
) |
|
|
81 |
|
Net change in accrued expenses and other liabilities |
|
|
785 |
|
|
|
(438 |
) |
Net cash (used in) provided by operating activities |
|
|
(1,540 |
) |
|
|
136 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Net change in portfolio loans |
|
|
(12,976 |
) |
|
|
(1,794 |
) |
Principal repayments on mortgage-backed securities |
|
|
2,780 |
|
|
|
4,127 |
|
Maturities and calls of securities available for sale |
|
|
2,800 |
|
|
|
515 |
|
Purchase of Federal Home Loan Bank stock |
|
|
(35 |
) |
|
|
— |
|
Net change in time deposits with other financial institutions |
|
|
995 |
|
|
|
2,237 |
|
Purchases of premises and equipment, net |
|
|
(132 |
) |
|
|
(5 |
) |
Net cash (used in) provided by investing activities |
|
|
(6,568 |
) |
|
|
5,080 |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net change in deposits |
|
|
8,998 |
|
|
|
(11,471 |
) |
Net change in escrow deposits |
|
|
343 |
|
|
|
13 |
|
Proceeds from FHLB Advance |
|
|
— |
|
|
|
5,000 |
|
Purchase of treasury shares (8,399 shares) |
|
|
(81 |
) |
|
|
(649 |
) |
Purchase of treasury stock from taxes withheld on stock awards |
|
|
(109 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
9,151 |
|
|
|
(7,107 |
) |
Net change in cash and cash equivalents |
|
|
1,043 |
|
|
|
(1,891 |
) |
Cash and cash equivalents at beginning of period |
|
|
31,388 |
|
|
|
13,147 |
|
Cash and cash equivalents at end of period |
|
$ |
32,431 |
|
|
$ |
11,256 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
1,473 |
|
|
$ |
473 |
|
Loans transferred to held for sale from portfolio, net |
|
|
2,470 |
|
|
|
— |
|
See accompanying notes to consolidated unaudited financial statements
Notes to the Unaudited Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and conform to practices within the banking industry. The accounting policies followed in the preparation of the interim consolidated financial statements are consistent with those used in the preparation of the annual financial statements. The interim consolidated financial statements reflect all normal and recurring adjustments that are necessary, in the opinion of management, for fair statement of results for the interim periods presented. Results for the three and six month periods ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Nature of Operations
NSTS Bancorp, Inc. (“NSTS” or the “Company”, “we” or “our”) was formed to serve as the stock holding company for North Shore Trust and Savings (the “Bank”) in connection with the conversion of North Shore Trust and Savings, NSTS Financial Corporation and North Shore MHC, into the stock form of organization, which was completed on January 18, 2022. Shares of NSTS Bancorp, Inc. stock began trading on January 19, 2022 on the Nasdaq Capital Market under the trading symbol "NSTS."
The Bank operates primarily in the northern suburbs of Chicago, Illinois. During the third quarter of 2023, we established two additional loan production offices in Aurora and Plainfield, Illinois to expand our loan originations within the Chicagoland area. The lending teams operating in the Aurora and Plainfield, Illinois loan production offices originate as Oak Leaf Community Mortgage, a division of North Shore Trust and Savings, which complement the existing loan production office in Chicago. The Bank offers a variety of financial services to customers in our surrounding community. Financial services consist primarily of 1-4 family mortgage loans, savings accounts, and certificate of deposit accounts. There are no significant concentrations of loans to any one industry or customer. The Bank’s exposure to credit risk is significantly affected by changes in the economy in the Bank’s market area.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements were prepared in accordance with GAAP and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with NSTS Bancorp, Inc.’s Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The unaudited Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may vary from those estimates. Material estimates that could significantly change in the near-term include the adequacy of the allowance for credit losses, determination of the valuation allowance on deferred tax assets and the valuation of investment securities and the related tax effect. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year ending December 31, 2024. Certain amounts in prior year financial statements have been reclassified to conform to the current presentation. Subsequent events have been evaluated through the date of issuance of the unaudited Consolidated Financial Statements. No significant subsequent events have occurred through this date requiring adjustment to the financial statements or disclosures.
In March 2024, the FASB issued ASU No. 2024-01, “Compensation—Stock Compensation (Topic 718): Scope Applications of Profits Interests and Similar Awards” (ASU 2024-01). ASU 2024-01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S. GAAP. ASU 2024-01 is effective for annual periods beginning after December 15, 2025, although early adoption is permitted. Upon adoption, ASU 2024-01 is not expected to have an impact on the Company’s consolidated balance sheets or consolidated statements of income.
Note 2: Securities Available for Sale
The amortized cost and estimated fair value of debt securities at June 30, 2024 and December 31, 2023, by contractual maturity, are shown below. The accrued interest receivable for securities available for sale was $323,000 and $351,000 on June 30, 2024 and December 31, 2023, respectively. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties, therefore, these securities have been included in the below table based on average remaining life.
June 30, 2024 | | | U.S. Treasury Notes | | | | U.S. government agency obligations | | | | Municipal obligations | | | | Mortgage-backed residential obligations | | | | Collateralized mortgage obligations | | | | Total available-for-sale | |
| | (Dollars in thousands) | |
1 year or less | | $ | 1,500 | | | $ | 993 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,493 | |
1 to 5 years | | | — | | | | 3,576 | | | | 1,435 | | | | 8,689 | | | | 13,015 | | | | 26,715 | |
5 to 10 years | | | — | | | | 4,224 | | | | 1,241 | | | | 17,673 | | | | 8,999 | | | | 32,137 | |
After 10 years | | | — | | | | — | | | | 9,240 | | | | 1,382 | | | | 3,334 | | | | 13,956 | |
Fair value | | | 1,500 | | | | 8,793 | | | | 11,916 | | | | 27,744 | | | | 25,348 | | | | 75,301 | |
Gross unrealized gains | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Gross unrealized losses | | | — | | | | (1,133 | ) | | | (2,210 | ) | | | (4,999 | ) | | | (4,151 | ) | | | (12,493 | ) |
Amortized cost | | $ | 1,500 | | | $ | 9,926 | | | $ | 14,126 | | | $ | 32,743 | | | $ | 29,499 | | | $ | 87,794 | |
December 31, 2023 | | | U.S. Treasury Notes | | | | U.S. government agency obligations | | | | Municipal obligations | | | | Mortgage-backed residential obligations | | | | Collateralized mortgage obligations | | | | Total available-for-sale | |
| | (Dollars in thousands) | |
1 year or less | | $ | 2,973 | | | $ | — | | | $ | 1,292 | | | $ | — | | | $ | — | | | $ | 4,265 | |
1 to 5 years | | | — | | | | 4,769 | | | | 1,461 | | | | 8,976 | | | | 12,919 | | | | 28,125 | |
5 to 10 years | | | — | | | | 4,337 | | | | 882 | | | | 19,777 | | | | 9,756 | | | | 34,752 | |
After 10 years | | | — | | | | — | | | | 9,935 | | | | 1,598 | | | | 3,460 | | | | 14,993 | |
Fair value | | | 2,973 | | | | 9,106 | | | | 13,570 | | | | 30,351 | | | | 26,135 | | | | 82,135 | |
Gross unrealized gains | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | 1 | |
Gross unrealized losses | | | (22 | ) | | | (1,128 | ) | | | (1,882 | ) | | | (4,533 | ) | | | (3,938 | ) | | | (11,503 | ) |
Amortized cost | | $ | 2,995 | | | $ | 10,234 | | | $ | 15,451 | | | $ | 34,884 | | | $ | 30,073 | | | $ | 93,637 | |
As of June 30, 2024, and December 31, 2023, no securities were pledged to secure public deposits or for other purposes as required or permitted by law.
Information pertaining to securities with gross unrealized losses at June 30, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows:
| | Less than 12 Months | | | 12 Months or Longer | | | Total | |
| | (Dollars in thousands) | |
| | Fair | | | Unrealized | | | Fair | | | Unrealized | | | Fair | | | Unrealized | |
| | Value | | | Losses | | | Value | | | Losses | | | Value | | | Losses | |
June 30, 2024 | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasury Notes | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
U.S. government agency obligations | | | — | | | | — | | | | 8,793 | | | | 1,133 | | | | 8,793 | | | | 1,133 | |
Municipal obligations | | | 474 | | | | 21 | | | | 11,442 | | | | 2,189 | | | | 11,916 | | | | 2,210 | |
Mortgage-backed residential obligations | | | — | | | | — | | | | 27,744 | | | | 4,999 | | | | 27,744 | | | | 4,999 | |
Collateralized mortgage obligations | | | — | | | | — | | | | 25,348 | | | | 4,151 | | | | 25,348 | | | | 4,151 | |
Total | | $ | 474 | | | $ | 21 | | | $ | 73,327 | | | $ | 12,472 | | | $ | 73,801 | | | $ | 12,493 | |
December 31, 2023 | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasury Notes | | $ | — | | | $ | — | | | $ | 2,973 | | | $ | 22 | | | $ | 2,973 | | | $ | 22 | |
U.S. government agency obligations | | | — | | | | — | | | | 9,106 | | | | 1,128 | | | | 9,106 | | | | 1,128 | |
Municipal obligations | | | 279 | | | | 1 | | | | 12,796 | | | | 1,881 | | | | 13,075 | | | | 1,882 | |
Mortgage-backed residential obligations | | | — | | | | — | | | | 30,351 | | | | 4,533 | | | | 30,351 | | | | 4,533 | |
Collateralized mortgage obligations | | | — | | | | — | | | | 26,135 | | | | 3,938 | | | | 26,135 | | | | 3,938 | |
Total | | $ | 279 | | | $ | 1 | | | $ | 81,361 | | | $ | 11,502 | | | $ | 81,640 | | | $ | 11,503 | |
At June 30, 2024 and December 31, 2023, certain investment securities were in unrealized loss positions. There were no securities with identified credit losses at June 30, 2024 and December 31, 2023, respectively. Unrealized losses have not been recognized into income because, based on management's evaluation, the decline in fair value is largely due to increased market rates, temporary market conditions and trading spreads, and, as such, are considered to be temporary by the Bank. In addition, management has the intent and ability to hold the securities until they mature or they recover their carrying values.
All U.S. Treasuries, U.S. government agency obligations, mortgage-based residential obligations and collateralized mortgage obligations are agency-issued or government-sponsored enterprise issued. Agency-issued securities are generally guaranteed by a U.S. government agency, such as the Government National Mortgage Association. Government-sponsored enterprises, such as the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or the Small Business Administration, have either a direct or implied guarantee by the U.S. government.
The Bank holds two classifications of municipal bonds, general obligation bonds and revenue bonds. General obligation bonds are backed by the general revenue of the issuing municipality, while revenue bonds are supported by a specific revenue source. All general obligation and revenue bonds have a bond rating of investment grade by Standard and Poor's or Moody's Investor Services or are not rated. There have been no declines in investment grades on bonds in a loss position and as of June 30, 2024, all municipal bonds are paying as agreed.
There were no sales of securities available-for-sale during the three and six months ended June 30, 2024 and 2023.
Note 3: Loans and allowance for credit losses
A summary of loans by major category as of June 30, 2024 and December 31, 2023 is as follows:
| | June 30, 2024 | | | December 31, 2023 | |
| | (Dollars in thousands) | |
First mortgage loans | | | | | | | | |
1-4 family residential | | $ | 122,812 | | | $ | 111,081 | |
Multi-family | | | 3,051 | | | | 3,111 | |
Commercial | | | 4,149 | | | | 3,835 | |
Construction | | | 1,318 | | | | 2,508 | |
Total first mortgage loans | | | 131,330 | | | | 120,535 | |
Consumer loans | | | 234 | | | | 248 | |
Total loans | | | 131,564 | | | | 120,783 | |
Net deferred loan costs | | | 741 | | | | 1,016 | |
Allowance for credit losses on loans | | | (1,267 | ) | | | (1,176 | ) |
Total loans, net | | $ | 131,038 | | | $ | 120,623 | |
First mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balance of these loans totaled $15.6 million and $13.2 million at June 30, 2024 and December 31, 2023, respectively. Custodial escrow balances maintained in connection with the loans serviced were $267,000 and $231,000 at June 30, 2024 and December 31, 2023, respectively.
The accrued interest receivable for loans, net, was $533,000 and $392,000 for June 30, 2024 and December 31, 2023, respectively
In the normal course of business, loans are made by the Bank to directors and officers of the Company and the Bank (related parties). The terms of these loans, including interest rate and collateral, are similar to those prevailing for comparable transactions with other customers and do not involve more than a normal risk of collectability. At June 30, 2024 and December 31, 2023, such borrowers were indebted to the Bank in the aggregate amount of $532,000 and $550,000, respectively.
The following tables present the activity in the allowance for credit losses ("ACL") for the three and six months ended June 30, 2024 and 2023:
| | June 30, 2024 | |
| | 1-4 family | | | | | | | | | | | | | | | | | | | | | |
| | residential | | | Multi-family | | | Commercial | | | Construction | | | Consumer | | | Total | |
| | (Dollars in thousands) | |
Three months ended | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 1,091 | | | $ | 36 | | | $ | 37 | | | $ | 11 | | | $ | 2 | | | $ | 1,177 | |
Charge-offs | | | — | | | | — | | | | |