Breaking Down NSTS Bancorp, Inc. (NSTS) Financial Health: Key Insights for Investors

You're looking at NSTS Bancorp, Inc. (NSTS) right now, wondering if the recent earnings jump signals a true turnaround or just a market blip, and that's a smart question to ask. The headline numbers from the Q3 2025 report, released in November, show a clear step in the right direction: the company swung to a net income of $0.065 million for the quarter, a significant improvement from the $0.171 million net loss in the same period last year, translating to a positive basic earnings per share (EPS) of $0.01. But, as a seasoned analyst, I look past the single-quarter win. The balance sheet shows total assets at a solid $269.8 million, with stockholders' equity at $78.9 million, giving us a book value per share of roughly $15.08. Still, the market's consensus is a 'Sell' rating, and with a net interest margin of 3.08%-while up from last year-it's clear the core banking business is still fighting for meaningful profitability, especially with nonperforming assets at $285,000. We need to defintely dig into what's driving this quarter's revenue of $2.51 million and whether it's sustainable.

Revenue Analysis

You need a clear picture of where NSTS Bancorp, Inc. (NSTS) is making its money, and the Q3 2025 results show a deliberate shift in the revenue mix. The short takeaway is that while the core lending business (Net Interest Income) is growing steadily, the real near-term opportunity is in their mortgage banking activity, which is driving significant noninterest income growth.

The company, which primarily serves the Lake County, Illinois, area, operates as a traditional savings institution. Like all banks, NSTS Bancorp, Inc.'s revenue is split into two main segments: Net Interest Income (NII) and Noninterest Income (fee-based revenue). For the third quarter of 2025, the total revenue was approximately $2.51 million.

Here's the quick math on the segment contributions for Q3 2025:

• Net Interest Income (NII): $1.95 million
• Noninterest Income: $564,000

This means NII still accounts for the lion's share, about 77.7% of the total revenue for the quarter. Still, the noninterest income segment is defintely a key growth driver you shouldn't ignore.

Growth in Core and Fee-Based Revenue

When we look at the year-over-year (YoY) growth, the difference between the two revenue streams is stark. Net Interest Income for Q3 2025 was $1.95 million, a solid increase from $1.83 million in Q3 2024, representing a growth of about 6.56%. This modest but steady growth is a sign of a healthy, albeit challenging, interest rate environment, where rising loan yields (at 5.68% for Q3 2025) are partially offset by higher deposit costs (at 1.99%).

The nine months year-to-date (YTD) net interest income tells a similar story, reaching $5.59 million, up from $5.32 million in the same period in 2024. This core segment provides stability. Exploring NSTS Bancorp, Inc. (NSTS) Investor Profile: Who's Buying and Why?

The Mortgage Banking Opportunity

The significant change in the revenue profile comes from Noninterest Income. This segment surged to $564,000 in Q3 2025, a jump of approximately 33.33% from $423,000 a year prior. This segment's growth is almost entirely due to one factor: gains on mortgage loan sales.

The gains on mortgage loan sales alone contributed $393,000 to noninterest income in Q3 2025, a sharp increase from $268,000 in Q3 2024. This signals a successful strategy to originate loans and sell them into the secondary market, which is a smart way to manage interest rate risk and boost fee income without tying up too much capital on the balance sheet. This is a high-margin business for them right now.

Here is a comparison of the key revenue components for the third quarter:

The TTM revenue as of June 30, 2025, was reported at $9.44 million, showing a substantial 69.39% growth year-over-year, which reflects a strong overall recovery and expansion from prior periods. What this estimate hides, however, is the quarter-to-quarter volatility inherent in mortgage banking, which is heavily dependent on interest rates and housing market activity.

Profitability Metrics

You need a clear picture of whether NSTS Bancorp, Inc. is actually making money, and the answer, as of the third quarter of 2025, is a qualified yes. The company is finally turning a modest quarterly profit, but its overall profitability ratios still signal a small, struggling community bank that is fighting for scale.

For the three months ended September 30, 2025, NSTS Bancorp, Inc. reported a net income of $65,000, a significant improvement from the net loss recorded in the same quarter last year. This quarterly profit is the first sign of a turnaround, but the year-to-date (YTD) picture is still a net loss of $521,000 for the nine months ended September 30, 2025. That's a better result than the 2024 YTD loss of $743,000, but it shows the company is still in a recovery phase.

Gross, Operating, and Net Profit Margins

In banking, we swap traditional manufacturing terms like 'Gross Profit' for 'Total Operating Revenue,' which is the sum of Net Interest Income (NII) and Noninterest Income. Here's the quick math for Q3 2025:

• Total Operating Revenue (NII + Noninterest Income): $1.95 million + $564,000 = $2.514 million.
• Operating Profit (Total Revenue less Noninterest Expense): $2.514 million - $2.50 million = $14,000.

This translates to a razor-thin Operating Margin of about 0.56% for the quarter. The Net Profit Margin for Q3 2025 was a slightly healthier 2.59% ($65,000 net income divided by $2.514 million revenue), but this is a quarterly snapshot. To be fair, the trailing twelve months (TTM) net margin is still negative at -6.17%, which is the reality of their recent history.

Comparing Profitability to Industry Averages

When you stack NSTS Bancorp, Inc. against its community bank peers, the margins look weak. The most critical metric for a bank is the Net Interest Margin (NIM), which measures the spread between interest earned on loans and paid on deposits. NSTS Bancorp, Inc.'s NIM for Q3 2025 was 3.08%. That's defintely below the industry average.

The average NIM for U.S. community banks was around 3.62% in Q2 2025, with a general range for high-performing community banks sitting between 3.5% and 4.5%. NSTS Bancorp, Inc. is lagging its peers by over 50 basis points. That's a significant difference in core lending profitability.

Here is a snapshot of key profitability ratios:

Analysis of Operational Efficiency

The biggest drag on NSTS Bancorp, Inc.'s profitability is its operational efficiency, or lack thereof. For a bank, we look at the Efficiency Ratio, which is Noninterest Expense divided by Total Operating Revenue (lower is better). The calculation for Q3 2025 is $2.50 million / $2.514 million, which gives you a staggering Efficiency Ratio of approximately 99.44%. This is a very high number. It means nearly every dollar of revenue is immediately eaten up by overhead costs like salaries, benefits, and data processing.

The average efficiency ratio for community banks is typically around 68%. The best-performing banks can get this number down to the 30% to 40% range. The trend here is clear: the company is too small, and its fixed costs are too high for its revenue base. This lack of scale is why, despite the Q3 profit, the stock has a negative P/E ratio and a consensus Sell rating from analysts. This is the core issue that needs to be solved, either through aggressive growth or a merger. You can read more about the market sentiment and ownership structure in Exploring NSTS Bancorp, Inc. (NSTS) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You're looking at NSTS Bancorp, Inc. (NSTS) and wondering how they fund their operations-it's a critical question for any financial institution. The direct takeaway is that NSTS Bancorp is an anomaly in the banking sector; they operate with virtually zero debt as of the end of the third quarter of 2025, relying almost entirely on equity capital.

This is a highly conservative financing structure, especially when compared to the industry norm. For a regional bank, the average Debt-to-Equity (D/E) ratio is typically around 0.5 as of November 2025, meaning they use 50 cents of debt for every dollar of equity. NSTS Bancorp's D/E ratio is effectively 0.0 right now. That's a huge difference.

The Zero-Debt Balance Sheet

The company recently made a clear move to de-leverage. In the third quarter of 2025, NSTS Bancorp repaid its entire outstanding borrowing, a $5.0 million Federal Home Loan Bank (FHLB) advance. This action left the company with no borrowings outstanding on its balance sheet as of September 30, 2025. This means both short-term and long-term debt are effectively zero.

Here's the quick math on their capital strength: The bank's Tier 1 leverage ratio, a key regulatory measure of capital adequacy, stood at a robust 24.11% as of September 30, 2025. This is significantly higher than the minimum required for a 'well-capitalized' bank, confirming their extremely strong equity position relative to their $269.8 million in total assets. They are defintely overcapitalized.

• Total Debt (Q3 2025): $0.00 (after FHLB advance repayment).
• Debt-to-Equity Ratio: 0.0 (Industry average is ~0.5).
• Tier 1 Leverage Ratio: 24.11% (Indicates exceptional capital cushion).

Equity Funding and Strategic Implications

NSTS Bancorp's high reliance on equity stems largely from its demutualization in 2022, which provided a significant capital infusion. The company is using this capital-including retained earnings and its initial public offering proceeds-to fund its primary business of originating one-to-four-family residential mortgage loans.

This equity-heavy approach has a few key implications for you as an investor:

The lack of debt means lower interest expense, which helps stabilize net interest income, but it also signals a conservative growth strategy. The market has been keenly watching this high capital base, with some analysts suggesting the company is a likely sale candidate given its post-conversion status and high capital levels. For more on the bank's overall performance, you can read the full analysis here: Breaking Down NSTS Bancorp, Inc. (NSTS) Financial Health: Key Insights for Investors.

Next Step

You: Monitor the next quarterly filing for any new debt activity or a formal announcement of a merger or acquisition, as that is the most logical use of this excess capital.

Liquidity and Solvency

You're looking at NSTS Bancorp, Inc. (NSTS) and asking the right question: can this company meet its near-term obligations? The short answer is yes, but the liquidity picture for a bank is always a little more complex than a simple ratio. We need to look past the surface-level metrics and dig into the cash flow and funding sources.

For a traditional company, a Current Ratio (current assets divided by current liabilities) of around 0.96 and a Quick Ratio (excluding inventory, which banks don't have much of) of 0.93 would be a yellow flag. Honestly, anything below 1.0 suggests a pinch. But for a bank, which holds most of its assets in long-term loans and securities, these ratios are less critical. The real story is in the available cash and the stability of its deposit base.

Working Capital and Funding Trends

The movement of cash and deposits in the first nine months of the 2025 fiscal year tells a clearer story about NSTS Bancorp, Inc.'s working capital (a non-GAAP term for banks, essentially their net liquid position). The firm saw a drop of $19.3 million in cash and cash equivalents from the end of 2024 through September 30, 2025. That's a big move, so you need to know why.

• Cash and equivalents dropped $19.3 million.
• Deposits, a primary funding source, declined to $186.1 million.
• The firm repaid $5.0 million in Federal Home Loan Bank (FHLB) advances.

Here's the quick math: the cash went out the door to fund new loans and, more importantly, to cover the net decline in deposits and repay debt. The good news is that NSTS Bancorp, Inc. has zeroed out its other borrowings, reducing its debt load.

Cash Flow Statement Overview (Nine Months Ended 9/30/2025)

The Consolidated Statements of Cash Flows for the nine months ended September 30, 2025, show a mixed but ultimately manageable flow. Cash flow is the backbone of a bank's ability to lend and operate, so this is defintely where we focus. The positive shift in operations is a huge win.

The net cash provided by operating activities jumped to $841,000. That's a strong sign that the core business-taking deposits and making loans-is generating cash, not burning it. Still, the $10.5 million used in investing activities and the ($9.7) million used in financing activities are what drove the overall cash balance down. The financing outflow is largely due to the net decline in deposits and the repayment of the $5.0 million FHLB Advance.

Liquidity Strengths and Concerns

The core strength of NSTS Bancorp, Inc.'s liquidity is its access to contingent funding. The company has an available borrowing capacity of approximately $78.5 million from the Federal Home Loan Bank (FHLB) of Chicago. That's a massive, immediate backstop, and a key reason why the low current ratio isn't a panic button. Plus, they have a $10.0 million unsecured Fed Funds line of credit.

The primary concern is the continued decline in deposits, which are the cheapest source of funding for any bank. If this trend continues, it forces the bank to rely more on higher-cost borrowings, which eats into the net interest margin. You can read more about the strategic direction in the Mission Statement, Vision, & Core Values of NSTS Bancorp, Inc. (NSTS).

Valuation Analysis

You want to know if NSTS Bancorp, Inc. (NSTS) is overvalued or undervalued. The short answer is that while the stock trades at a discount to its book value, its negative earnings and the clear analyst consensus point toward a challenging near-term outlook, suggesting it is a value trap rather than a deep-value buy.

As of November 2025, NSTS Bancorp's stock is trading around the $11.01 to $11.23 mark, giving it a market capitalization of approximately $57.7 million. The valuation metrics show a company struggling with profitability, which is a major red flag for any seasoned investor.

Here's the quick math on the key valuation ratios for NSTS Bancorp, Inc. based on the most recent 2025 fiscal year data:

• Price-to-Earnings (P/E) Ratio: The ratio is negative, reported as high as -68.81 or -94.85. This isn't a comparison point; it simply tells us the company is losing money. You can't value a company on earnings it doesn't have.
• Price-to-Book (P/B) Ratio: This is the most relevant metric for a bank. The P/B is low, sitting between 0.74 and 0.76. A P/B below 1.0 suggests the stock is trading for less than the value of its net assets (book value), which is often a signal of undervaluation.
• Enterprise Value-to-EBITDA (EV/EBITDA): This is not a meaningful metric here. Since the P/E is negative, the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is likely negative or very low, rendering the ratio useless for comparative valuation.

The P/B discount is the only thing offering a glimmer of hope, but you must ask why the market is pricing it that way. The discount reflects the market's skepticism about the bank's ability to return to profitability and generate a positive return on equity (ROE), which is currently negative at -1.04%.

Looking at the stock price trend over the last 12 months, the picture is one of erosion. The 52-week range is between a low of $10.72 and a high of $13.32. The stock started the year at $11.80 on January 1st, 2025, and has since dropped by about 6.7%, indicating a persistent downward pressure. The volume is also very light, which can make the stock price defintely volatile.

For income-focused investors, NSTS Bancorp, Inc. does not offer a dividend. The dividend yield and payout ratio are reported as Not Applicable (N/A). This is common for struggling banks that need to conserve capital to shore up their balance sheet.

The analyst community is aligned on this stock. The consensus rating is a firm Sell. This is a strong signal that professional analysts see significant risk and limited upside potential in the near term, despite the low Price-to-Book ratio. You can dive deeper into the full financial picture in our main post: Breaking Down NSTS Bancorp, Inc. (NSTS) Financial Health: Key Insights for Investors.

What this estimate hides is the potential for a capital raise or a significant balance sheet event that could either dilute shareholders or drastically change the book value. Finance: Consider the P/B ratio as a starting point for due diligence, but prioritize the negative earnings trend and the Sell rating before making any move.

Risk Factors

You're looking at NSTS Bancorp, Inc. (NSTS), a small-cap bank, and the first thing you need to understand is that its biggest risk is simply its size in a consolidating industry. While the company is financially sound from a capital perspective, it continues to struggle with profitability, which is a major red flag for any investor. The core takeaway here is that the bank's primary risks are strategic-a lack of scale and persistent negative earnings-rather than immediate credit quality issues.

The Q3 2025 earnings report, released in November 2025, shows a net income of only $65,000 for the quarter, but the year-to-date (YTD) net loss is still significant at $521,000. This sustained lack of profitability translates directly into weak fundamentals: the company had a negative net margin of 6.17% and a negative return on equity (ROE) of 1.04% for the quarter. Honestly, continuous losses are not a sustainable business model.

Operational and Strategic Risks

The most pressing risk is the lack of operating scale. NSTS Bancorp, Inc. operates primarily in Lake County, Illinois, with total assets of only $269.8 million as of September 30, 2025. This small footprint makes it defintely difficult to compete against larger regional and national banks on technology and product offerings.

This strategic vulnerability has led to direct shareholder action. In May 2025, a non-binding shareholder proposal recommended that the Board of Directors engage an investment banking firm to guide the company toward a merger or sale. The shareholder argument is simple: the bank is a likely acquisition candidate, especially since it passed its three-year post-demutualization cooling-off period in January 2025.

• Small operating scale limits competitive advantage.
• Majority of loan portfolio is concentrated in one- to four-family residential mortgages.
• Shareholder pressure for a sale or merger is increasing.

Financial and Market Risks

Interest rate risk remains a material concern for any thrift institution like NSTS Bancorp, Inc. While the net interest margin improved to 3.08% in Q3 2025, the cost of deposits is rising (up to 1.99% in Q3 2025 from 1.83% a year prior), which compresses that margin. Plus, a significant portion of their loan book is sensitive to rate hikes.

For instance, approximately 32.7% of their one- to four-family residential mortgage loans maturing after December 31, 2025, are Adjustable-Rate Mortgage (ARM) loans. As interest rates rise, the payment shock on these ARMs increases the risk of borrower default, putting pressure on credit quality.

Here's a quick look at the credit quality trend:

Mitigation and Capital Strength

To be fair, the bank has taken clear steps to strengthen its balance sheet and manage risks. The most powerful mitigation is the company's exceptional capital position. As of September 30, 2025, its Tier 1 capital ratio was a staggering 24.11%, far exceeding the regulatory threshold of 9% for a well-capitalized institution. This massive capital cushion provides a buffer against unexpected credit losses or market volatility.

Also, management has actively reduced its reliance on wholesale funding (non-deposit funding) by repaying a $5.0 million Federal Home Loan Bank (FHLB) advance, leaving zero FHLB borrowings outstanding at the end of Q3 2025. This improves liquidity and reduces interest expense. The Board also maintains robust risk oversight committees for lending, enterprise risk management, and asset/liability management. You can review the company's core principles here: Mission Statement, Vision, & Core Values of NSTS Bancorp, Inc. (NSTS).

Growth Opportunities

You're looking for a clear map of where NSTS Bancorp, Inc. (NSTS) goes from here, and the short answer is that its future value is tied less to organic growth and more to a potential strategic exit. The company operates as a traditional savings institution, and while it shows signs of operational improvement, the real near-term opportunity for investors is the likelihood of a sale or merger.

The core business, centered on one- to four-family residential mortgage lending in Lake County, Illinois, is stable but geographically constrained. NSTS Bancorp's primary growth driver in 2025 has been its ability to manage its net interest margin (NIM) and generate noninterest income from mortgage banking activities.

Here's the quick math on recent performance drivers:

• Net interest income for the nine months ended September 30, 2025, was $5.59 million, up from $5.32 million a year prior.
• The net interest margin (NIM) for Q3 2025 improved to 3.08%, a positive sign in a challenging rate environment.
• Noninterest income for Q3 2025 was boosted by a gain on the sale of mortgage loans, totaling $393,000.

Future Revenue and Earnings Outlook

To be fair, explicit analyst consensus projections for NSTS Bancorp's full-year 2025 revenue and earnings per share (EPS) are not available due to limited coverage. This is common for smaller community banks. We must, therefore, rely on the most recent actual data to gauge the run rate.

The trailing twelve-month (TTM) revenue as of June 30, 2025, stood at approximately $9.1 million. While the company reported a net loss of $521,000 for the nine months ended September 30, 2025, it did achieve a modest quarterly profit with a basic and diluted EPS of $0.01 in Q3 2025. That's a defintely positive step toward profitability, but the TTM EPS remains negative at -$0.18.

What this estimate hides is the potential for volatility in the mortgage loan sale gains, which are a key component of noninterest income. The primary financial focus should be on sustaining the NIM improvement and controlling deposit costs.

Strategic Catalysts and Competitive Edge

The most significant strategic initiative is the potential for a sale or merger. The three-year cooling-off period following its conversion to a stock holding company ended in January 2025, making it an attractive and likely acquisition candidate in the near term, especially given its stock trades at a discount to tangible book value. This is the single biggest opportunity for shareholder return.

In terms of competitive advantages, NSTS Bancorp's balance sheet strength is its anchor. Its Tier 1 capital ratio stood at a robust 24.11% as of September 30, 2025, which is far above the regulatory threshold and signals immense financial stability and resilience against market risks. This overcapitalization is a major selling point in any potential acquisition. You can review the company's core principles here: Mission Statement, Vision, & Core Values of NSTS Bancorp, Inc. (NSTS).

Other initiatives include the 2023 balance sheet repositioning and the ongoing operation of a loan production office in Chicago, which represents a measured, low-risk market expansion beyond its Lake County, Illinois, home base. The appointment of John S. Pucin to the Board of Directors in June 2025 also signals ongoing corporate governance focus.