{"url_path":"/sec/nsts/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Consolidated Financial Statements**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1881592/0001437749-26-017061-index.html","accession_number":"0001437749-26-017061","cik":"0001881592","ticker":"NSTS","issuer_name":"NSTS Bancorp, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1881592/0001437749-26-017061-index.html","primary_entity_key":"0001881592","primary_entity_name":"NSTS Bancorp, Inc."},"word_count":14903,"has_tables":true,"body_markdown":"**Item 1. Consolidated Financial Statements**\n\n \n\n**NSTS BANCORP, INC.**\n\n**Consolidated Balance Sheets**\n\n \n\n  \n**March 31, 2026**\n   * *** **\n\n  \n**(unaudited)**\n  \n**December 31, 2025**\n \n\n  \n**(Dollars in thousands)**\n \n\n**Assets:**\n   ** **   ** **\n\nCash and due from banks\n $1,032  $1,242 \n\nInterest-bearing bank deposits\n  42,358   32,800 \n\nCash and cash equivalents\n  43,390   34,042 \n\nTime deposits with other financial institutions\n  996   1,245 \n\nSecurities available for sale\n  76,717   78,719 \n\nFederal Home Loan Bank stock (FHLB)\n  605   605 \n\nLoans held for sale\n  1,759   4,459 \n\nLoans, net of unearned income\n  128,742   129,763 \n\nAllowance for credit losses on loans\n  (1,095)  (1,128)\n\nLoans, net\n  127,647   128,635 \n\nPremises and equipment, net\n  5,053   5,113 \n\nAccrued interest receivable\n  918   925 \n\nBank-owned life insurance (BOLI)\n  9,954   9,894 \n\nOther assets\n  3,279   3,011 \n\nTotal assets\n $270,318  $266,648 \n\n**Liabilities:**\n   ** **   ** **\n\nDeposits:\n        \n\nNoninterest bearing\n $13,841  $13,306 \n\nInterest-bearing\n        \n\nDemand and NOW checking\n  14,593   14,289 \n\nMoney market\n  26,088   25,735 \n\nSavings\n  37,222   38,660 \n\nTime deposits over $250,000\n  26,289   23,370 \n\nOther time deposits\n  65,840   66,112 \n\nTotal deposits\n  183,873   181,472 \n\nEscrow deposits\n  2,662   1,599 \n\nAccrued expenses and other liabilities\n  3,809   3,603 \n\nTotal liabilities\n $190,344  $186,674 \n\n**Stockholders' equity:**\n   ** **   ** **\n\nCommon Stock\n  56   56 \n\nTreasury Stock, at cost\n  (3,087)  (3,087)\n\nAdditional paid-in capital\n  52,533   52,348 \n\nRetained earnings\n  39,841   39,880 \n\nUnallocated common shares held by ESOP\n  (3,408)  (3,462)\n\nAccumulated other comprehensive loss, net\n  (5,961)  (5,761)\n\nTotal stockholders' equity\n  79,974   79,974 \n\nTotal liabilities and stockholders' equity\n $270,318  $266,648 \n\n \n\n \n\n  \n**March 31, 2026**\n  \n**December 31, 2025**\n \n\n  \n**Common Stock**\n  \n**Common Stock**\n \n\nPar value\n $0.01  $0.01 \n\nShares authorized\n  10,000,000   10,000,000 \n\nShares issued\n  5,599,859   5,599,859 \n\nShares outstanding\n  5,261,533   5,261,533 \n\nTreasury shares\n  338,326   338,326 \n\n*See accompanying notes to consolidated unaudited financial statements*\n\n \n\n2\n\n[Table of Contents](#toc)\n\n \n\n \n\n**NSTS BANCORP, INC.**\n\n**Consolidated Statements of Operations (unaudited)**\n\n \n\n \n \n\n**For the three months ended**\n\n \n\n \n \n\n**March 31,**\n\n \n\n \n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\n**Interest income:**\n\n \n \n \n** **\n \n \n \n** **\n\nLoans, including fees\n\n \n$\n1,818\n \n \n$\n1,800\n \n\nSecurities\n\n \n \n \n \n \n \n \n \n\nTaxable\n\n \n \n405\n \n \n \n355\n \n\nTax-exempt\n\n \n \n60\n \n \n \n60\n \n\nFederal funds sold and other\n\n \n \n285\n \n \n \n508\n \n\nTime deposits with other financial institutions\n\n \n \n11\n \n \n \n18\n \n\nFHLB Stock\n\n \n \n6\n \n \n \n9\n \n\nTotal interest income\n\n \n \n2,585\n \n \n \n2,750\n \n\n**Interest expense:**\n\n \n \n \n** **\n \n \n \n** **\n\nDeposits\n\n \n \n728\n \n \n \n859\n \n\nOther borrowings\n\n \n \n—\n \n \n \n60\n \n\nTotal interest expense\n\n \n \n728\n \n \n \n919\n \n\n**Net interest income**\n\n \n \n1,857\n \n \n \n1,831\n \n\n**Reversal of provision for credit losses**\n\n \n \n(26\n)\n \n \n(37\n)\n\n**Net interest income after reversal of provision for credit losses**\n\n \n \n1,883\n \n \n \n1,868\n \n\n**Noninterest income:**\n\n \n \n \n** **\n \n \n \n** **\n\nGain on sale of mortgage loans\n\n \n \n475\n \n \n \n189\n \n\nRental income on office building\n\n \n \n16\n \n \n \n16\n \n\nService charges on deposits\n\n \n \n59\n \n \n \n59\n \n\nIncrease in cash surrender value of BOLI\n\n \n \n60\n \n \n \n56\n \n\nOther non-interest income\n\n \n \n45\n \n \n \n14\n \n\nTotal noninterest income\n\n \n \n655\n \n \n \n334\n \n\n**Noninterest expense:**\n\n \n \n \n** **\n \n \n \n** **\n\nSalaries and employee benefits\n\n \n \n1,611\n \n \n \n1,533\n \n\nEquipment and occupancy\n\n \n \n238\n \n \n \n224\n \n\nData processing\n\n \n \n258\n \n \n \n222\n \n\nProfessional services\n\n \n \n89\n \n \n \n136\n \n\nAdvertising\n\n \n \n24\n \n \n \n42\n \n\nSupervisory fees and assessments\n\n \n \n33\n \n \n \n38\n \n\nLoan expenses\n\n \n \n67\n \n \n \n92\n \n\nDeposit expenses\n\n \n \n58\n \n \n \n68\n \n\nDirector fees\n\n \n \n56\n \n \n \n48\n \n\nOther non-interest expense\n\n \n \n143\n \n \n \n127\n \n\nTotal noninterest expense\n\n \n \n2,577\n \n \n \n2,530\n \n\nLoss before income taxes\n\n \n \n(39\n)\n \n \n(328\n)\n\n**Income tax expense**\n\n \n \n—\n \n \n \n—\n \n\n**Net loss**\n\n \n$\n(39\n)\n \n$\n(328\n)\n\n**Basic and diluted loss per share**\n\n \n$\n(0.01\n)\n \n$\n(0.07\n)\n\n**Weighted average shares outstanding**\n\n \n \n4,917,167\n \n \n \n4,883,913\n \n\n \n\n*See accompanying notes to consolidated unaudited financial statements*\n\n \n\n3\n\n[Table of Contents](#toc)\n\n \n\n**NSTS BANCORP, INC.**\n\n**Consolidated Statements of Comprehensive Income (Loss) (unaudited)**\n\n \n\n \n \n\n**For the three months ended March 31,**\n\n \n\n \n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\n**Net loss**\n\n \n$\n(39\n)\n \n$\n(328\n)\n\n**Unrealized net holding (loss) gain on securities**\n\n \n \n \n** **\n \n \n \n** **\n\nUnrealized net holding (loss) gain on securities arising during period\n\n \n \n(279\n)\n \n \n1,508\n \n\nTax effect\n\n \n \n79\n \n \n \n(429\n)\n\nOther comprehensive (loss) income, net of taxes\n\n \n \n(200\n)\n \n \n1,079\n \n\n**Comprehensive (loss) income**\n\n \n$\n(239\n)\n \n$\n751\n \n\n \n\n*See accompanying notes to consolidated unaudited financial statements*\n\n \n\n4\n\n[Table of Contents](#toc)\n\n \n\n**NSTS BANCORP, INC.**\n\n**Consolidated Statements of Stockholders**’**Equity (unaudited)**\n\n \n\n \n \n\n**Common Shares**\n\n \n \n\n**Common Stock**\n\n \n \n\n**Treasury Stock**\n\n \n \n\n**Additional Paid-In Capital**\n\n \n \n\n**Retained earnings**\n\n \n \n\n**Accumulated other comprehensive loss**\n\n \n \n\n**Unallocated Common Shares Held by ESOP**\n\n \n \n\n**Total**\n\n \n\n \n \n \n \n** **\n \n\n**(Dollars in thousands)**\n\n \n\n \n \n \n* *\n** **\n \n\n**Quarter ended March 31, 2025**\n\n \n\n**Balance at December 31, 2024**\n\n \n \n5,249,826\n \n \n$\n56\n \n \n$\n(3,240\n)\n \n$\n51,684\n \n \n$\n40,266\n \n \n$\n(8,606\n)\n \n$\n(3,670\n)\n \n$\n76,490\n \n\nNet loss\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(328\n)\n \n \n—\n \n \n \n—\n \n \n \n(328\n)\n\nESOP shares committed to be released\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n11\n \n \n \n—\n \n \n \n—\n \n \n \n53\n \n \n \n64\n \n\nForfeiture of restricted stock\n\n \n \n(2,000\n)\n \n \n—\n \n \n \n—\n \n \n \n(8\n)\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(8\n)\n\nCompensation cost for stock options and restricted stock\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n165\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n165\n \n\nChange in net unrealized loss on securities available for sale, net\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n1,079\n \n \n \n—\n \n \n \n1,079\n \n\n**Balance at March 31, 2025**\n\n \n \n5,247,826\n \n \n$\n56\n \n \n$\n(3,240\n)\n \n$\n51,852\n \n \n$\n39,938\n \n \n$\n(7,527\n)\n \n$\n(3,617\n)\n \n$\n77,462\n \n\n \n \n \n* *\n** **\n \n\n**Quarter ended March 31, 2026**\n\n \n\n**Balance at December 31, 2025**\n\n \n \n5,261,533\n \n \n$\n56\n \n \n$\n(3,087\n)\n \n$\n52,348\n \n \n$\n39,880\n \n \n$\n(5,761\n)\n \n$\n(3,462\n)\n \n$\n79,974\n \n\nNet loss\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(39\n)\n \n \n—\n \n \n \n—\n \n \n \n(39\n)\n\nESOP shares committed to be released\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n12\n \n \n \n—\n \n \n \n—\n \n \n \n54\n \n \n \n66\n \n\nCompensation cost for stock options and restricted stock\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n173\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n173\n \n\nChange in net unrealized loss on securities available for sale, net\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(200\n)\n \n \n—\n \n \n \n(200\n)\n\n**Balance at March 31, 2026**\n\n \n \n5,261,533\n \n \n$\n56\n \n \n$\n(3,087\n)\n \n$\n52,533\n \n \n$\n39,841\n \n \n$\n(5,961\n)\n \n$\n(3,408\n)\n \n$\n79,974\n \n\n \n\n*See accompanying notes to consolidated unaudited financial statements*\n\n \n\n5\n\n[Table of Contents](#toc)\n\n \n\n \n\n**NSTS BANCORP, INC.**\n\n**Consolidated Statements of Cash Flows (unaudited)**\n\n \n\n \n \n\n**For the three months ended March 31,**\n\n \n\n \n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\n**Cash flows from operating activities:**\n\n \n \n \n** **\n \n \n \n** **\n\nNet loss\n\n \n$\n(39\n)\n \n$\n(328\n)\n\nAdjustments to reconcile net loss to net cash provided by (used in) operating activities:\n\n \n \n \n \n \n \n \n \n\nDepreciation\n\n \n \n76\n \n \n \n75\n \n\nSecurities amortization and accretion, net\n\n \n \n108\n \n \n \n121\n \n\nLoans originated for sale\n\n \n \n(17,976\n)\n \n \n(11,268\n)\n\nProceeds from sales of loans held for sale\n\n \n \n23,669\n \n \n \n10,080\n \n\nGain on sale of mortgage loans\n\n \n \n(475\n)\n \n \n(189\n)\n\nReversal of provision for credit losses\n\n \n \n(26\n)\n \n \n(37\n)\n\nEarnings on bank owned life insurance\n\n \n \n(60\n)\n \n \n(56\n)\n\nESOP expense\n\n \n \n66\n \n \n \n64\n \n\nStock based compensation\n\n \n \n173\n \n \n \n157\n \n\nChange in deferred income taxes\n\n \n \n(79\n)\n \n \n429\n \n\nNet change in accrued interest receivable and other assets\n\n \n \n(103\n)\n \n \n(531\n)\n\nNet change in accrued expenses and other liabilities\n\n \n \n199\n \n \n \n(1,193\n)\n\nNet cash provided by (used in) operating activities\n\n \n \n5,533\n \n \n \n(2,676\n)\n\n**Cash flows from investing activities:**\n\n \n \n \n** **\n \n \n \n** **\n\nNet change in portfolio loans\n\n \n \n(1,497\n)\n \n \n161\n \n\nPrincipal repayments on mortgage-backed securities\n\n \n \n1,615\n \n \n \n1,317\n \n\nMaturities and calls of securities available for sale\n\n \n \n—\n \n \n \n1,000\n \n\nNet change in time deposits with other financial institutions\n\n \n \n249\n \n \n \n—\n \n\nPurchases of premises and equipment, net\n\n \n \n(16\n)\n \n \n(54\n)\n\nNet cash provided by investing activities\n\n \n \n351\n \n \n \n2,424\n \n\n**Cash flows from financing activities:**\n\n \n \n \n** **\n \n \n \n** **\n\nNet change in deposits\n\n \n \n2,401\n \n \n \n3,528\n \n\nNet change in escrow deposits\n\n \n \n1,063\n \n \n \n697\n \n\nNet cash provided by financing activities\n\n \n \n3,464\n \n \n \n4,225\n \n\nNet change in cash and cash equivalents\n\n \n \n9,348\n \n \n \n3,973\n \n\nCash and cash equivalents at beginning of period\n\n \n \n34,042\n \n \n \n53,481\n \n\n**Cash and cash equivalents at end of period**\n\n \n$\n43,390\n \n \n$\n57,454\n \n\n**Supplemental disclosures of cash flow information:**\n\n \n \n \n** **\n \n \n \n** **\n\nCash paid during the period for interest\n\n \n$\n716\n \n \n$\n916\n \n\nLoans transferred to held for sale from portfolio, net\n\n \n \n2,518\n \n \n \n—\n \n\n \n\n*See accompanying notes to consolidated unaudited financial statements*\n\n \n\n6\n\n[Table of Contents](#toc)\n\n \n\n**Notes to the Unaudited Consolidated Financial Statements**\n\n \n\n**Note 1: Summary of Significant Accounting Policies**\n\n \n\nThe 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* month period ended *March 31, 2026*, are *not* necessarily indicative of the results that *may*be expected for the year ending *December **31,* *2026.*\n\n \n\n**Nature of Operations**\n\n \n\nNSTS 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.\"\n\n \n\nThe 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.\n\n \n\n****\n\n**Basis of Presentation**\n\n \n\nThe 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, 2025*. 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.\n\n \n\nManagement 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* months ended *March 31, 2026*, are *not* necessarily indicative of results that *may*be expected for any other interim period or the entire fiscal year ending *December 31, 2026.*Certain amounts in prior year financial statements have been reclassified to conform to the current presentation. Refer to Note *12* for subsequent events that have occurred 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.\n\n \n\nAll 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. \n\n \n\nFinancial 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.\n\n \n\nIn *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, and does *not* expect the amendments to have a material impact to the annual financial statements of the Company. \n\n \n\n*7*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**Note 2: Securities Available for Sale**\n\n \n\nThe amortized cost and estimated fair value of debt securities at *March 31, 2026* and *December 31, 2025*, by contractual maturity, are shown below. The accrued interest receivable for securities available for sale was $285,000 and $326,000 on *March 31, 2026* and *December 31, 2025,*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.\n\n \n\n**March 31, 2026**\n \n**U.S. Treasury notes**\n  \n**U.S. government agency obligations**\n  \n**Municipal obligations**\n  \n**Mortgage-backed residential obligations**\n  \n**Collateralized mortgage obligations**\n  \n**Total available-for-sale**\n \n\n  \n**(Dollars in thousands)**\n \n\n1 year or less\n $1,003  $—  $199  $—  $3,864  $5,066 \n\n1 to 5 years\n  6,048   7,020   1,202   8,489   14,553   37,312 \n\n5 to 10 years\n  —   1,223   4,579   13,109   6,251   25,162 \n\nAfter 10 years\n  —   —   5,956   1,191   2,030   9,177 \n\nFair value\n  7,051   8,243   11,936   22,789   26,698   76,717 \n\nGross unrealized gains\n  —   —   —   —   —   — \n\nGross unrealized losses\n  (46)  (669)  (2,026)  (3,031)  (2,565)  (8,337)\n\nAmortized cost\n $7,097  $8,912  $13,962  $25,820  $29,263  $85,054 \n\n \n\n**December 31, 2025**\n \n**U.S. Treasury notes**\n  \n**U.S. government agency obligations**\n  \n**Municipal obligations**\n  \n**Mortgage-backed residential obligations**\n  \n**Collateralized mortgage obligations**\n  \n**Total available-for-sale**\n \n\n  \n**(Dollars in thousands)**\n \n\n1 year or less\n $—  $—  $198  $—  $1,412  $1,610 \n\n1 to 5 years\n  *7,085*   *7,208*   *1,202*   *8,860*   *17,757*   *42,112* \n\n5 to 10 years\n  —   1,326   3,642   14,336   5,918   25,222 \n\nAfter 10 years\n  —   —   7,104   573   2,098   9,775 \n\nFair value\n $7,085  $8,534  $12,146  $23,769  $27,185  $78,719 \n\nGross unrealized gains\n  4   —   —   —   1   5 \n\nGross unrealized losses\n  (7)  (685)  (1,829)  (2,990)  (2,552)  (8,063)\n\nAmortized cost\n $7,088  $9,219  $13,975  $26,759  $29,736  $86,777 \n\n \n\nAs of *March 31, 2026*, and *December 31, 2025*, no securities were pledged to secure public deposits or for other purposes as required or permitted by law.\n\n \n\nInformation pertaining to securities with gross unrealized losses at *March 31, 2026* and *December 31, 2025*, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows:\n\n \n\n  \n**Less than 12 Months**\n  \n**12 Months or Longer**\n  \n**Total**\n \n\n  \n**(Dollars in thousands)**\n \n\n  \n**Fair**\n  \n**Unrealized**\n  \n**Fair**\n  \n**Unrealized**\n  \n**Fair**\n  \n**Unrealized**\n \n\n  \n**Value**\n  \n**Losses**\n  \n**Value**\n  \n**Losses**\n  \n**Value**\n  \n**Losses**\n \n\n**March 31, 2026**\n   ** **   ** **   ** **   ** **   ** **   ** **\n\nU.S. Treasury notes\n $7,051  $46  $—  $—  $7,051  $46 \n\nU.S. government agency obligations\n  993   8   7,250   661   8,243   669 \n\nMunicipal obligations\n  —   —   11,936   2,026   11,936   2,026 \n\nMortgage-backed residential obligations\n  —   —   22,789   3,031   22,789   3,031 \n\nCollateralized mortgage obligations\n  2,505   31   24,193   2,534   26,698   2,565 \n\nTotal\n $10,549  $85  $66,168  $8,252  $76,717  $8,337 \n\n**December 31, 2025**\n   ** **   ** **   ** **   ** **   ** **   ** **\n\nU.S. Treasury notes\n $2,990  $7  $—  $—  $2,990  $7 \n\nU.S. government agency obligations\n  1,000   1   7,534   684   8,534   685 \n\nMunicipal obligations\n  —   —   12,146   1,829   12,146   1,829 \n\nMortgage-backed residential obligations\n  —   —   23,769   2,990   23,769   2,990 \n\nCollateralized mortgage obligations\n  1,530   24   24,654   2,528   26,184   2,552 \n\nTotal\n $5,520  $32  $68,103  $8,031  $73,623  $8,063 \n\n \n\n*8*\n\n[Table of Contents](#toc)\n\n \n\nAt *March 31, 2026* and *December 31, 2025*, many of the investment securities were in unrealized loss positions. There were no securities with identified credit losses at *March 31, 2026* and *December 31, 2025*, 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. \n\n \n\nAll 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. \n\n \n\nThe 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 *March 31, 2026*, all municipal bonds are paying as agreed. \n\n \n\nThere were no sales of securities available-for-sale during the *three* months ended *March 31, 2026* and *2025*. \n\n \n\n \n\n**Note 3: Loans and allowance for credit losses**\n\n \n\nA summary of loans by major category as of *March 31, 2026* and *December 31, 2025* is as follows:\n\n \n\n  \n**March 31, 2026**\n  \n**December 31, 2025**\n \n\n  \n**(Dollars in thousands)**\n \n\nFirst mortgage loans\n        \n\n1-4 family residential\n $116,914  $118,222 \n\nMulti-family\n  3,425   3,240 \n\nCommercial\n  3,797   3,813 \n\nConstruction\n  4,027   3,921 \n\nTotal first mortgage loans\n  128,163   129,196 \n\nConsumer loans\n  322   268 \n\nTotal loans\n  128,485   129,464 \n\nNet deferred loan costs\n  257   299 \n\nAllowance for credit losses on loans\n  (1,095)  (1,128)\n\nTotal loans, net\n $127,647  $128,635 \n\n \n\nFirst mortgage loans serviced and subserviced for others are *not* included in the accompanying Consolidated Balance Sheets. The unpaid principal balance of these loans totaled $39.5 million and $41.0 million at *March 31, 2026* and *December 31, 2025*, respectively. Custodial escrow balances maintained in connection with the loans serviced were $396,000 and $480,000 at *March 31, 2026* and *December 31, 2025*, respectively. \n\n \n\nThe accrued interest receivable for loans, net, was $586,000 and $577,000 for *March 31, 2026* and *December 31, 2025,*respectively\n\n \n\nIn 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 *March 31, 2026* and *December 31, 2025*, such borrowers were indebted to the Bank in the aggregate amount of $547,000 and $564,000, respectively.\n\n \n\n*9*\n\n[Table of Contents](#toc)\n\n \n\nThe following tables present the activity in the allowance for credit losses (\"ACL\") for the *three* months ended *March 31, 2026* and *2025*:\n\n \n\n  \n**March 31, 2026**\n \n\n  \n**1-4 family**\n   * *** **  * *** **  * *** **  * *** **  * *** **\n\n  \n**residential**\n  \n**Multi-family**\n  \n**Commercial**\n  \n**Construction**\n  \n**Consumer**\n  \n**Total**\n \n\n  \n**(Dollars in thousands)**\n \n\n**Three months ended**\n   ** **   ** **   ** **   ** **   ** **   ** **\n\nBeginning balance\n $989  $39  $37  $61  $2  $1,128 \n\nCharge-offs\n  —   —   —   —   —   — \n\nRecoveries\n  —   —   —   —   —   — \n\nNet recoveries (charge-offs)\n  —   —   —   —   —   — \n\n(Release of) provision for credit losses\n  (33)  —   (3)  2   1   \n(33\n)\n\nEnding balance\n $956  $39  $34  $63  $3  $1,095 \n\n \n\n  \n**March 31, 2025**\n \n\n  \n**1-4 family**\n   * *** **  * *** **  * *** **  * *** **  * *** **\n\n  \n**residential**\n  \n**Multi-family**\n  \n**Commercial**\n  \n**Construction**\n  \n**Consumer**\n  \n**Total**\n \n\n  \n**(Dollars in thousands)**\n \n\n**Three months ended**\n   ** **   ** **   ** **   ** **   ** **   ** **\n\nBeginning balance\n $1,056  $37  $41  $65  $2  $1,201 \n\nCharge-offs\n  —   —   —   —   —   — \n\nRecoveries\n  —   —   —   —   —   — \n\nNet recoveries (charge-offs)\n  —   —   —   —   —   — \n\n(Release of) provision for credit losses\n  (22)  —   (3)  (20)  —   (45)\n\nEnding balance\n $1,034  $37  $38  $45  $2  $1,156 \n\n \n\nThe ACL on loans excludes $46,000 and $67,000 of allowance for off-balance sheet exposures as of *March 31, 2026* and *2025,* respectively, recorded within Other Liabilities on the Consolidated Balance Sheets. Off-balance sheet exposures consist of unused lines of credit, the unused portion of construction loans and commitments to originate loans. The net release of provision for credit losses for the *three* months ended *March 31, 2026*in the table above excludes a provision for credit losses of $7,000 related to off balance sheet exposures. The net release of provision for credit losses for the *three* months ended *March 31, 2025*in the table above excludes a provision for credit losses of $8,000 related to off balance sheet exposures.\n\n \n\n*10*\n\n[Table of Contents](#toc)\n\n \n\nAs of *March 31, 2026*, there were *three* collateral dependent loans totaling $1.7 million in the *one* to *four*-family residential loan segment. These loans are collateralized by residential real estate and have no ACL as of *March 31, 2026.*As of *December 31, 2025,*there were *two* collateral dependent loans totaling $284,000 in the *one* to *four*-family residential loan segment. These loans are collateralized by residential real estate and have no ACL as of *December 31, 2025.*There were no other collateral dependent loans as of *March 31, 2026*and *December 31, 2025. *\n\n \n\nThe 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:\n\n \n\nPass\n\nLoans in these categories are performing as expected with low to average risk.\n\n \n\nSpecial Mention\n\nLoans 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.\n\n \n\nSubstandard\n\nLoans 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.\n\n \n\nDoubtful\n\nLoans 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.\n\n \n\nOn 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.\n\n \n\n*11*\n\n[Table of Contents](#toc)\n\n \n\nThe following tables present the credit risk profile of the Company's loan portfolio based on risk rating category and year of origination as of *March 31, 2026* and *December 31, 2025*.\n\n \n\n  \n**As of March 31, 2026**\n   * *** **\n\n  \n**Term loans amortized cost basis by origination year**\n   * *** **  * *** **  * *** **  * *** **\n\n  \n**2026**\n  \n**2025**\n  \n**2024**\n  \n**2023**\n  \n**2022**\n  \n**Prior**\n  \n**Revolving loans amortized cost basis**\n  \n**Revolving loans converted to term loans amortized cost basis**\n  \n**Total**\n \n\n  \n**(Dollars in thousands)**\n    ** **\n\n**1-4 family residential**\n                                    \n\nPass\n $2,581  $14,994  $12,426  $14,540  $10,720  $52,947  $6,982  $—  $115,190 \n\nSpecial Mention\n  —   —   —   1,441   —   —   —   —   1,441 \n\nSubstandard\n  —   —   262   —   —   21   —   —   283 \n\n**Total 1-4 family residential**\n  2,581   14,994   12,688   15,981   10,720   52,968   6,982   —   116,914 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Multi-family**\n                                    \n\nPass\n  220   —   504   —   —   2,701   —   —  $3,425 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total multi-family**\n  220   —   504   —   —   2,701   —   —   3,425 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Commercial**\n                                    \n\nPass\n  —   —   —   162   —   2,863   772   —  $3,797 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total commercial**\n  —   —   —   162   —   2,863   772   —   3,797 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Construction**\n                                    \n\nPass\n  332   2,646   963   86   —   —   —   —  $4,027 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total construction**\n  332   2,646   963   86   —   —   —   —   4,027 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Consumer**\n                                    \n\nPass\n  83   122   38   40   35   4   —   —  $322 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total consumer**\n  83   122   38   40   35   4   —   —   322 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Total**\n                                    \n\nPass\n  3,216   17,762   13,931   14,828   10,755   58,515   7,754   —   126,761 \n\nSpecial Mention\n  —   —   —   1,441   —   —   —   —   1,441 \n\nSubstandard\n  —   —   262   —   —   21   —   —   283 \n\n**Total**\n  3,216   17,762   14,193   16,269   10,755   58,536   7,754   —   128,485 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n                                     \n\n    \n\n*12*\n\n[Table of Contents](#toc)\n\n \n\n     \n\n  \n**As of December 31, 2025**\n \n\n  \n**Term loans amortized cost basis by origination year**\n  ** **** **** ** ** **** **** ** ** **** **** **\n\n  \n**2025**\n  \n**2024**\n  \n**2023**\n  \n**2022**\n  \n**2021**\n  \n**Prior**\n  \n**Revolving loans amortized cost basis**\n  \n**Revolving loans converted to term loans amortized cost basis**\n  \n**Total**\n \n\n  \n**(Dollars in thousands)**\n  ** **** **** **\n\n**1-4 family residential**\n ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** **\n\nPass\n $16,653  $13,335  $16,423  $10,870  $16,434  $37,769  $6,454  $—   117,938 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   262   —   —   —   22   —   —   284 \n\n**Total 1-4 family residential**\n  16,653   13,597   16,423   10,870   16,434   37,791   6,454   —   118,222 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Multi-family**\n ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** **\n\nPass\n  —   507   —   —   221   2,512   —   —   3,240 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total multi-family**\n  —   507   —   —   221   2,512   —   —   3,240 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Commercial**\n ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** **\n\nPass\n  —   —   165   —   92   2,834   722   —   3,813 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total commercial**\n  —   —   165   —   92   2,834   722   —   3,813 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Construction**\n ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** **\n\nPass\n  2,156   1,676   89   —   —   —   —   —   3,921 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total construction**\n  2,156   1,676   89   —   —   —   —   —   3,921 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Consumer**\n ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** **\n\nPass\n  130   46   47   40   3   2   —   —   268 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   —   —   —   —   —   —   —   — \n\n**Total consumer**\n  130   46   47   40   3   2   —   —   268 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n**Total**\n ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** ** ** **** **** **\n\nPass\n  18,939   15,564   16,724   10,910   16,750   43,117   7,176   —   129,180 \n\nSpecial Mention\n  —   —   —   —   —   —   —   —   — \n\nSubstandard\n  —   262   —   —   —   22   —   —   284 \n\n**Total**\n  18,939   15,826   16,724   10,910   16,750   43,139   7,176   —   129,464 \n\nCurrent year-to-date gross write-offs\n  —   —   —   —   —   —   —   —   — \n\n \n\n*13*\n\n[Table of Contents](#toc)\n\n \n\nThe aging of the Bank’s loan portfolio as of *March 31, 2026* and *December 31, 2025*, is as follows:\n\n \n\n  \n**31-89 Days Past Due and Accruing**\n  \n**Greater than 90 Days Past Due and Accruing**\n  \n**Non-Accrual**\n  \n**Total Past Due and Non-Accrual**\n  \n**Current**\n  \n**Total Loan Balance**\n \n\n  \n**(Dollars in thousands)**\n \n\n**March 31, 2026**\n   ** **   ** **   ** **   ** **   ** **   ** **\n\n1-4 family residential\n $1,530  $—  $283  $1,813  $115,101  $116,914 \n\nMulti-family\n  —   —   —   —   3,425   3,425 \n\nCommercial\n  —   —   —   —   3,797   3,797 \n\nConstruction\n  —   —   —   —   4,027   4,027 \n\nConsumer\n  —   —   —   —   322   322 \n\nTotal\n $1,530  $—  $283  $1,813  $126,672  $128,485 \n\n                         \n\n**December 31, 2025**\n   ** **   ** **   ** **   ** **   ** **   ** **\n\n1-4 family residential\n $641  $—  $284  $925  $117,297  $118,222 \n\nMulti-family\n  —   —   —   —   3,240   3,240 \n\nCommercial\n  —   —   —   —   3,813   3,813 \n\nConstruction\n  —   —   —   —   3,921   3,921 \n\nConsumer\n  —   —   —   —   268   268 \n\nTotal\n $641  $—  $284  $925  $128,539  $129,464 \n\n \n\nThe following table presents the amortized cost basis of loans on nonaccrual status recorded at *March 31, 2026* and *December 31, 2025*. There was *no* interest recognized on non-accrual loans for the *three* months ended *March 31, 2026* and *2025.*\n\n \n\n  \n**March 31, 2026**\n  \n**December 31, 2025**\n  \n**January 1, 2025**\n* *\n\n  \n**Nonaccrual with no Allowance for Credit Losses**\n  \n**Total Nonaccrual**\n  \n**Nonaccrual with no Allowance for Credit Losses**\n  \n**Total Nonaccrual**\n  \n**Nonaccrual with no Allowance for Credit Losses**\n  \n**Total Nonaccrual**\n* *\n\n  \n**(Dollars in thousands)**\n\nFirst mortgage loans\n                        \n\n1-4 family residential\n $283  $283  $284  $284  $—  $—* *\n\nMulti-family\n  —   —   —   —   —   —* *\n\nCommercial\n  —   —   —   —   —   —* *\n\nConstruction\n  —   —   —   —   —   —* *\n\nConsumer loans\n  —   —   —   —   —   —* *\n\nTotal loans\n $283  $283  $284  $284  $—  $—* *\n\n \n\nThe 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 *three* months ended *March 31, 2026* and *2025*.\n\n \n\n*14*\n\n[Table of Contents](#toc)\n\n \n\n \n\n \n\n**Note 4: Deposits**\n\n \n\nAs of *March 31, 2026* the scheduled maturities of time deposits are as follows:\n\n \n\n**For the 12 months ended**\n   ** **\n\n**March 31,**\n \n**Amount**\n \n\n  \n**(Dollars in thousands)**\n \n\n2027\n $69,213 \n\n2028\n  12,663 \n\n2029\n  4,621 \n\n2030\n  4,397 \n\n2031 and beyond\n  1,235 \n\nTotal\n $92,129 \n\n \n\nIn 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 *March 31, 2026* and *December 31, 2025*, total deposits held by directors and officers of the Company and the Bank were $1.3 million.\n\n \n\n*15*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**Note 5: Other Borrowings**\n\n \n\nThere were no additional borrowings made during the *three* months ended *March 31, 2026* and *2025.* There was no outstanding borrowed funds at *March 31, 2026*and *December 31, 2025. *\n\n \n\nThe following table shows certain information regarding our borrowings at or for the dates indicated:\n\n \n\n  \n**For the three months ended**\n \n\n  \n**March 31,**\n \n\n  \n**2026**\n  \n**2025**\n \n\n  \n**(Dollars in thousands)**\n \n\n**FHLB of Chicago advances and other borrowings:**\n   ** **   ** **\n\nAverage balance outstanding\n $—  $5,000 \n\nMaximum amount outstanding at any month-end during the period\n  —   5,000 \n\nAverage interest rate during the period\n  *N/A*   4.8%\n\n \n\nAt *March 31, 2026*and *December 31, 2025,*the Bank had borrowing capacity from the FHLB Chicago totaling $74.5 million and $79.1 million, respectively. The eligible borrowings are collateralized by $99.0 million and $105.1 million of *first* mortgage loans under a blanket lien arrangement at *March 31, 2026* and *December 31, 2025*, respectively.\n\n \n\nAdditionally, at *March 31, 2026* and *December 31, 2025*, we had a $10.0 million uncommitted, unsecured line of credit with BMO Harris Bank, none of which was drawn at *March 31, 2026* and *December 31, 2025*. \n\n \n\n*16*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**Note 6: Fair Value Measurements**\n\n \n\nFair 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:\n\n \n\n**Level 1**\n\nQuoted prices in active markets for identical assets or liabilities\n\n \n\n**Level 2**\n\nObservable 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\n\n \n\n**Level 3**\n\nUnobservable inputs supported by little or *no* market activity and are significant to the fair value of the assets or liabilities\n\n \n\nAn 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.\n\n \n\nFollowing is a description of the valuation methodologies used for assets measured at fair value. There have been *no* changes in the methodologies used at *March 31, 2026* or *December 31, 2025*.\n\n \n\nSecurities available for sale (Recurring)\n\nWhere 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.\n\n \n\nIndividually Evaluated (Nonrecurring)\nIndividually 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\nin 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.\n\n \n\n*17*\n\n[Table of Contents](#toc)\n\n \n\nThe 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 *March 31, 2026* and *December 31, 2025*:\n\n \n\n  \n**Fair Value Measurements Using**\n \n\n  \n**Fair Value**\n  \n**Level 1**\n  \n**Level 2**\n  \n**Level 3**\n \n\n  \n**(Dollars in thousands)**\n \n\n**March 31, 2026**\n   ** **   ** **   ** **   ** **\n\nSecurities available-for-sale\n                \n\nU.S. Treasury notes\n $7,051  $7,051  $—  $— \n\nU.S. government agency obligations\n  8,243   —   8,243   — \n\nMunicipal obligations\n  11,936   —   11,936   — \n\nMortgage-backed residential obligations\n  22,789   —   22,789   — \n\nCollateralized mortgage obligations\n  26,698   —   26,698   — \n\nTotal\n $76,717  $7,051  $69,666  $— \n\n                 \n\n**December 31, 2025**\n   ** **   ** **   ** **   ** **\n\nSecurities available-for-sale\n                \n\nU.S. Treasuries\n $7,085  $7,085  $—  $— \n\nU.S. government agency obligations\n  8,534   —   8,534   — \n\nMunicipal obligations\n  12,146   —   12,146   — \n\nMortgage-backed residential obligations\n  23,769   —   23,769   — \n\nCollateralized mortgage obligations\n  27,185   —   27,185   — \n\nTotal\n $78,719  $7,085  $71,634  $— \n\n \n\nThe 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 *March 31, 2026*and *December 31, 2025. *\n\n \n\n*18*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**Note 7: Fair Value of Financial Instruments**\n\n \n\nFinancial 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. \n\n \n\nCertain 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. \n\n \n\nThe carrying amounts and estimated fair values by fair value hierarchy of certain financial instruments are as follows:\n\n \n\n \n \n\n**Carrying**\n\n \n \n \n* *\n** **\n \n \n* *\n** **\n \n \n* *\n** **\n \n\n**Estimated**\n\n \n\n \n \n\n**Amount**\n\n \n \n\n**Level 1**\n\n \n \n\n**Level 2**\n\n \n \n\n**Level 3**\n\n \n \n\n**Fair Value**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\n**March 31, 2026**\n\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n\nFinancial assets:\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nLoans, net\n\n \n$\n127,647\n \n \n$\n—\n \n \n$\n—\n \n \n$\n121,719\n \n \n$\n121,719\n \n\nLoans held for sale\n\n \n \n1,759\n \n \n \n—\n \n \n \n1,794\n \n \n \n—\n \n \n \n1,794\n \n\nFinancial liabilities:\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nInterest-bearing deposits\n\n \n$\n170,032\n \n \n$\n—\n \n \n$\n170,170\n \n \n$\n—\n \n \n$\n170,170\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n**December 31, 2025**\n\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n\nFinancial assets:\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nLoans, net\n\n \n$\n128,635\n \n \n$\n—\n \n \n$\n—\n \n \n$\n122,290\n \n \n$\n122,290\n \n\nLoans held for sale\n\n \n \n4,459\n \n \n \n—\n \n \n \n4,548\n \n \n \n—\n \n \n \n4,548\n \n\nFinancial liabilities:\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nInterest-bearing deposits\n\n \n$\n168,166\n \n \n$\n—\n \n \n$\n168,431\n \n \n$\n—\n \n \n$\n168,431\n \n\n \n\n \n\n**Note 8: Capital Ratios**\n\n \n\nThe 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.\n\n \n\nQuantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios 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.\n\n \n\nAs of *March 31, 2026* 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 new 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. The CBLR is the ratio of a bank's tangible Tier *1* equity capital to average total consolidated assets and has been set by the regulators at *9%.* However, in *November 2025,*the OCC and the FDIC jointly issued a proposal to reduce the minimum leverage ratio for opting-in banks from *9%* to *8%,* effective *July 1, 2026.*Institutions with capital complying with the ratio and otherwise meeting the specified requirements and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. A qualifying institution *may*opt in and out of the CBLR framework on its quarterly call report. The CBLR option became effective *January 1, 2020*and is available to institutions with assets of less than *$10.0* billion that meet other specified criteria. The rule also established a *two*-quarter grace period for a qualifying institution whose leverage ratio falls below the *9%* requirement so long as the bank maintains a leverage ratio of *7%* or greater. A qualifying community bank that exercises the election and has capital equal to or exceeding the applicable percentage is considered compliant with all applicable regulatory capital requirements. Qualifying institutions *may*elect to utilize the CBLR in lieu of the generally applicable risk-based capital requirements. The Bank elected to begin using CBLR for the *first* quarter of *2020.*\n\n \n\n*19*\n\n[Table of Contents](#toc)\n\n \n\nThe Bank’s actual capital amounts and ratios as of *March 31, 2026* and *December 31, 2025*, are presented below:\n\n \n\n   * *** **  * *** ** \n**Minimum Required to be**\n \n\n  \n**Actual**\n  \n**Well-Capitalized (1)**\n \n\n  \n**Amount**\n  \n**Ratio**\n  \n**Amount**\n  \n**Ratio**\n \n\n**As of March 31, 2026**\n \n**(Dollars in thousands)**\n \n\nTier 1 capital (to Average Assets)\n $66,828   24.93% $24,126   >9% \n\n**As of December 31, 2025**\n   ** **   ** **   ** **   ** **\n\nTier 1 capital (to Average Assets)\n $66,366   24.32% $24,563   >9% \n\n \n\n(*1*) As defined by regulatory agencies. Failure to exceed the leverage ratio thresholds required under CBLR in the future, subject to any applicable grace period, would require the Bank to return to the risk-based capital ratio thresholds previously utilized under the fully phased-in Basel III Capital Rules to determine capital adequacy.\n\n \n\n \n\n**Note 9: Commitments and Contingencies**\n\n \n\nIn the ordinary course of business, the Bank has various commitments and contingent liabilities that are *not* reflected in the accompanying financial statements. In the opinion of management, the ultimate disposition of these matters is *not* expected to have a material adverse effect on the financial position of the Bank.\n\n \n\nFinancial Instruments\n\n \n\nThe Bank does *not* engage in the use of interest rate swaps or futures, forwards or option contracts.\n\n \n\nAt *March 31, 2026* and *December 31, 2025*, unused lines of credit and outstanding commitments to originate loans were as follows:\n\n \n\n \n \n\n**March 31, 2026**\n\n \n \n\n**December 31, 2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\nUnused line of credit\n\n \n$\n6,545\n \n \n$\n7,220\n \n\nCommitments to originate loans\n\n \n \n2,624\n \n \n \n1,586\n \n\nTotal commitments\n\n \n$\n9,169\n \n \n$\n8,806\n \n\n \n\nConcentrations of Credit Risk\n\n \n\nThe Bank generally originates single-family residential loans within its primary lending area. These loans are secured by the underlying properties.\n\n \n\nThe 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.\n\n \n\nInterest Rate Risk\n\n \n\nThe 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.\n\n \n\nLitigation\n\n \n\nDue 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.\n\n \n\n*20*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**Note 10: Earnings Per Share**\n\n \n\nBasic 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. \n\n \n\nThere were no securities or other contracts that had a dilutive effect for the *three* months ended *March 31, 2026*and *2025,* 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. \n\n \n\n  \n**Three Months Ended March 31,**\n \n\n  \n**2026**\n  \n**2025**\n \n\n  \n**(Income in thousands)**\n \n\nNet loss applicable to common shares\n $(39) $(328)\n\n         \n\nAverage number of common shares outstanding\n  5,261,533   5,249,137 \n\nLess: Average unallocated ESOP shares\n  344,366   365,224 \n\nAverage number of common shares outstanding used to calculate basic loss per common share\n  4,917,167   4,883,913 \n\nLoss per common share basic and diluted\n $(0.01) $(0.07)\n\n \n\nAll 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. \n\n  \n\n*21*\n\n[Table of Contents](#toc)\n\n  \n\n \n\n**Note 11: Stock Based Compensation**\n\n \n\n***ESOP***\n\n \n\nEmployees 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. \n\n \n\nThere were no contributions to the ESOP during the *first* *three* months of *2026,* as the annual loan payment will be made during the *fourth* quarter. Expense recorded was $66,000 and $64,000 for the *three* months ended *March 31, 2026*and *2025*, respectively, and is recognized over the service period. \n\n \n\nShares held by the ESOP were as follows: \n\n \n\n  \n**As of March 31,**\n \n\n  \n**2026**\n  \n**2025**\n \n\n  \n**(Dollars in thousands)**\n \n\nShares allocated\n  85,669   64,844 \n\nShares committed for allocation\n  5,403   5,305 \n\nShares distributed to plan participants\n  (3,625)  (1,597)\n\nUnallocated\n  340,764   361,687 \n\nTotal ESOP shares\n  428,211   430,239 \n\n         \n\nFair value of unearned shares as of March 31, 2026 and 2025, respectively\n $3,973  $4,083 \n\n \n\nFair value of unearned shares is based on a stock price of $11.66 and $11.29 as of *March 31, 2026* and *2025*, respectively. \n\n \n\n**Equity Incentive Plan**\n\n \n\nAt 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.\n\n \n\nStock 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 *March 31, 2026*, the Company has 26,296 shares available for future grants of stock options under the *2023* Equity Plan.  \n\nThe 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. \n\n \n\n*22*\n\n[Table of Contents](#toc)\n\n  \n\nThe following is a summary of the Company's stock option activity and related information for the periods presented. \n\n \n\n**Stock Option**\n \n**Shares**\n  \n**Weighted Average Exercise Price**\n  \n**Aggregate Intrinsic Value (1)**\n \n\n             \n\nOutstanding at December 31, 2024\n  500,500  $9.59   * * \n\nGranted\n  —   —   * * \n\nExercised\n  —   —   * * \n\nForfeited\n  (8,000)  9.36   * * \n\nOutstanding at March 31, 2025\n  492,500  $9.59  $837 \n\nExercisable - End of Period\n  106,900   9.36   206 \n\n             \n\nOutstanding at December 31, 2025\n  467,500  $9.61   * * \n\nGranted\n  —   —   * * \n\nExercised\n  —   —   * * \n\nForfeited\n  —   —   * * \n\nOutstanding at March 31, 2026\n  467,500  $9.61  $958 \n\nExercisable - End of Period\n  175,400   9.49   381 \n\n \n\n(*1*) Dollars in thousands. The aggregate intrinsic value of outstanding and exercisable options at *March 31, 2026*and *2025* were calculated based on the closing market price of the Company's common stock of *March 31, 2026*and *2025* of $11.66 and $11.29, respectively, per share less the exercise price. \n\n \n\nExpected future expense relating to the non-vested options outstanding as of *March 31, 2026* is $833,000 over a weighted average period of 2.4 years. As of *March 31, 2026,*the Company had 292,100 in nonvested stock options. As of *March 31, 2026*, the Company had 467,500 in outstanding stock options with a weighted average remaining life of 7.4 years outstanding. \n\n \n\n*23*\n\n[Table of Contents](#toc)\n\n \n\nRestricted 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.\n\n \n\nAs of *March 31, 2026*, the Company has 14,018 shares of restricted stock available for future grants under the *2023* Equity Plan. \n\n \n\nThe following is a summary of the status of the Company's restricted shares as of and for the periods presented. \n\n \n\n**Restricted Stock**\n \n**Shares**\n  \n**Weighted Average Grant Date Fair Value**\n \n\n         \n\nNon-vested balance as of December 31, 2024\n  151,740  $9.57 \n\nGranted\n  —   — \n\nVested\n  —   — \n\nForfeited\n  2,000   9.36 \n\nNon-vested balance as of March 31, 2025\n  149,740  $9.57 \n\n         \n\nNon-vested balance as of December 31, 2025\n  113,140  $9.58 \n\nGranted\n  —   — \n\nVested\n  —   — \n\nForfeited\n  —   — \n\nNon-vested balance as of March 31, 2026\n  113,140  $9.58 \n\n \n\nExpected future expense related to the non-vested restricted shares outstanding as of period end is $828,000 over a weighted average period of 2.4 years. \n\n \n\nThe following table presents the stock based compensation expense for the periods presented. \n\n \n\n  \n**Three Months Ended March 31,**\n \n\n  \n**2026**\n  \n**2025**\n \n\n  \n**(Dollars in thousands)**\n \n\nStock option expense\n $86  $73 \n\nRestricted stock expense\n  87   84 \n\nTotal stock based compensation expense\n $173  $157 \n\n  \n\n*24*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**Note 12: Subsequent Events**\n\n \n\nOn *April 4, 2026,*Nathan E. Walker, Executive Vice President of the Company and Chief Executive Officer and President of the Bank, passed away. On *April 9, 2026,*Stephen G. Lear, President and Chief Executive Officer of the Company, was appointed Chief Executive Officer and President of the Bank. Due to the passing of Mr. Walker, stock options to purchase 51,000 shares of the Company's common stock and 20,400 shares of restricted stock previously awarded to Mr. Walker under the *2023* Equity Plan vested during the quarter ending *June 30, 2026,*pursuant to the terms of the *2023* Equity Plan. The early vesting of the stock options and restricted stock awards will result in an additional expense of $134,000 and $141,000, respectively, during the quarter ending *June 30, 2026. *\n\n \n\nAs previously disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission, on *May 12, 2026,*the Company and Brookfield Bancshares, Inc. (“Brookfield”), a Delaware corporation and registered bank holding company, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which (*1*) the Company will merge with and into a newly formed Delaware corporation and wholly owned subsidiary of Brookfield, BRKD Merger Sub Inc., with the Company as the surviving corporation (the “Merger”) and (*2*) immediately following the Merger, the Company will be merged with and into Brookfield, with Brookfield surviving the merger (the “Second Merger”). Following the Second Merger, the Bank will become a wholly-owned subsidiary of Brookfield, and will continue to operate under its existing name and federal savings association charter as a subsidiary of Brookfield.\n\n \n\nUnder the terms of the Merger Agreement, each share of common stock, par value $0.01 per share, of the Company (“Company Stock”) that is issued and outstanding at the effective time of the Merger (the “Effective Time”), will be converted into the right to receive cash in an aggregate amount equal to $73.662 million (the “Merger Consideration”), or approximately $14.28 per share of outstanding Company Stock.  In addition, all shares of restricted stock of the Company granted under the *2023* Equity Plan, whether or *not* vested, will vest at the Effective Time and be entitled to receive the Merger Consideration. All stock options granted under the *2023* Equity Plan, whether or *not* vested, will vest at the Effective Time and be entitled to receive a cash payment equal to the difference between the option’s exercise price and the per share Merger Consideration, to be paid out of the aggregate Merger Consideration.\n\n \n\nThe Merger is expected to close in the *fourth* quarter of *2026,* subject to certain conditions, including, among others, approval of the Merger and the Merger Agreement by the Company’s stockholders, the receipt of all required regulatory approvals and expiration of applicable waiting periods, accuracy of specified representations and warranties of each party, the performance in all material respects by each party of its obligations under the Merger Agreement, and the absence of any injunctions or other legal restraints.\n\n \n\n*25*\n\n[Table of Contents](#toc)\n\n \n\n \n\n \n\n**ITEM** **2. MANAGEMENT**’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**\n\n \n\nThis section is intended to assist in the understanding of our financial performance through a discussion of our financial condition as of March 31, 2026 and as compared to our financial condition as of December 31, 2025, and our results of operations for the three months ended March 31, 2026 and 2025. 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.\n\n \n\n**Forward-Looking Statements**\n\n \n\nThis 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:\n\n \n\n \n\n●\n\nstatements of our goals, intentions and expectations;\n\n \n\n \n\n●\n\nstatements regarding our business plans, prospects, growth and operating strategies;\n\n \n\n \n\n●\n\nstatements regarding the quality of our loan and investment portfolios; and\n\n \n\n \n\n●\n\nestimates of our risks and future costs and benefits.\n\n \n\nThese 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.\n\n \n\n26\n\n[Table of Contents](#toc)\n\n \n\nThe following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:\n\n \n\n \n\n●\n\ngeneral economic conditions, either nationally or in our market areas, that are different than expected;\n\n \n\n \n\n●\n\nchanges in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;\n\n \n\n \n\n●\n\nfluctuations in real estate values and both residential and commercial real estate market conditions;\n\n \n\n \n\n●\n\ninflation 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;\n\n \n\n \n\n●\n\nour ability to manage our liquidity and to access cost-effective funding, including significant fluctuations in our deposit accounts;\n\n \n\n \n\n●\n\nmajor 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;\n\n \n\n \n\n●\n\nfurther data processing and other technological changes that may be more difficult or expensive than expected;\n\n \n\n \n\n●\n\nsuccess or consummation of new business initiatives may be more difficult or expensive than expected;\n\n \n\n \n\n●\n\ninterruptions involving information technology and communications systems of service providers; \n\n \n\n \n\n●\n\nbreaches or failures of information security controls or cyber-related incidents; \n\n \n\n \n\n●\n\ndemand for loans and deposits in our market area;\n\n \n\n \n\n●\n\nour ability to continue to implement our business strategies;\n\n \n\n \n\n●\n\ncompetition among depository and other financial institutions;\n\n \n\n \n\n●\n\nadverse changes in the securities markets;\n\n \n\n \n\n●\n\nchanges in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;\n\n \n\n \n\n●\n\nour ability to manage market risk, credit risk and operational risk in the current economic conditions;\n\n \n\n \n\n●\n\nour ability to enter new markets successfully and capitalize on growth opportunities;\n\n \n\n \n\n●\n\nour 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;\n\n \n\n \n\n●\n\nchanges in consumer spending, borrowing and savings habits;\n\n \n\n \n\n●\n\nchanges 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;\n\n \n\n \n\n●\n\nour ability to hire and retain key employees and our reliance on our executive officers; and\n\n \n\n \n\n●\n\nour compensation expense associated with equity allocated or awarded to our employees.\n\n \n\nBecause 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. \n\n \n\n27\n\n[Table of Contents](#toc)\n\n \n\n**General**\n\n \n\nOn 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.”\n\n \n\n**NSTS Bancorp,** **Inc.**\n\n \n\nNSTS 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.\n\n \n\nThe 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, 2025. \n\n \n\n**North Shore Trust and Savings**\n\n \n\nNorth 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. 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”).\n\n \n\n**Our Business and Franchise**\n\n \n\nFor 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.\n\n \n\nNorth 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\nBank 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.\n\n \n\nOur 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,\nIllinois. 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. \n\n \n\n**Critical Accounting Policies and Estimates**\n\n \n\nOur discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated unaudited interim financial statements for the three months ended March 31, 2026 and 2025, 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.\n\n \n\nOf 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, 2025. \n\n \n\n28\n\n[Table of Contents](#toc)\n\n \n\n**Overview**\n\n \n\nThis 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.\n\n \n\nOur 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.\n\n \n\n**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.\n\n \n\n29\n\n[Table of Contents](#toc)\n\n \n\n \n \n\n**For the Three Months Ended March 31,**\n\n \n\n \n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**Average**\n\n \n \n \n \n** **\n \n \n \n** **\n \n\n**Average**\n\n \n \n \n \n** **\n \n \n \n** **\n\n \n \n\n**Outstanding**\n\n \n \n \n \n** **\n \n\n**Average Yield/**\n\n \n \n\n**Outstanding**\n\n \n \n \n \n** **\n \n\n**Average Yield/**\n\n \n\n \n \n\n**Balance**\n\n \n \n\n**Interest**\n\n \n \n\n**Rate**\n\n \n \n\n**Balance**\n\n \n \n\n**Interest**\n\n \n \n\n**Rate**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\n**Interest-earning assets:**\n\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n\nLoans, net\n\n \n$\n133,174\n \n \n$\n1,818\n \n \n \n5.46\n%\n \n$\n133,903\n \n \n$\n1,800\n \n \n \n5.38\n%\n\nFederal funds sold and interest-bearing deposits in other banks\n\n \n \n35,809\n \n \n \n285\n \n \n \n3.18\n%\n \n \n53,040\n \n \n \n508\n \n \n \n3.83\n%\n\nTime deposits with other financial institutions\n\n \n \n1,051\n \n \n \n11\n \n \n \n4.19\n%\n \n \n1,494\n \n \n \n18\n \n \n \n4.82\n%\n\nSecurities available for sale\n\n \n \n78,238\n \n \n \n465\n \n \n \n2.38\n%\n \n \n70,897\n \n \n \n415\n \n \n \n2.34\n%\n\nFHLB stock\n\n \n \n605\n \n \n \n6\n \n \n \n3.97\n%\n \n \n585\n \n \n \n9\n \n \n \n6.15\n%\n\nTotal interest-earning assets\n\n \n \n248,877\n \n \n$\n2,585\n \n \n \n4.15\n%\n \n \n259,919\n \n \n$\n2,750\n \n \n \n4.23\n%\n\nNoninterest-earning assets\n\n \n \n18,973\n \n \n \n \n \n \n \n \n \n \n \n20,191\n \n \n \n \n \n \n \n \n \n\nTotal assets\n\n \n$\n267,850\n \n \n \n \n \n \n \n \n \n \n$\n280,110\n \n \n \n \n \n \n \n \n \n\n**Interest-bearing liabilities:**\n\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n \n \n \n** **\n\nInterest-bearing demand\n\n \n$\n13,901\n \n \n$\n2\n \n \n \n0.06\n%\n \n$\n16,699\n \n \n$\n2\n \n \n \n0.05\n%\n\nMoney market\n\n \n \n26,798\n \n \n \n42\n \n \n \n0.63\n%\n \n \n28,924\n \n \n \n45\n \n \n \n0.62\n%\n\nSavings\n\n \n \n37,152\n \n \n \n14\n \n \n \n0.15\n%\n \n \n41,903\n \n \n \n15\n \n \n \n0.14\n%\n\nTime deposits\n\n \n \n89,952\n \n \n \n670\n \n \n \n2.98\n%\n \n \n91,599\n \n \n \n797\n \n \n \n3.48\n%\n\nTotal interest-bearing deposits\n\n \n$\n167,803\n \n \n$\n728\n \n \n \n1.74\n%\n \n$\n179,125\n \n \n$\n859\n \n \n \n1.92\n%\n\nOther borrowings\n\n \n \n—\n \n \n \n—\n \n \n \nN/A\n \n \n \n5,000\n \n \n \n60\n \n \n \n4.80\n%\n\nTotal interest-bearing liabilities\n\n \n \n167,803\n \n \n$\n728\n \n \n \n1.74\n%\n \n \n184,125\n \n \n$\n919\n \n \n \n2.00\n%\n\nNoninterest-bearing liabilities\n\n \n \n19,819\n \n \n \n \n \n \n \n \n \n \n \n19,386\n \n \n \n \n \n \n \n \n \n\nTotal liabilities\n\n \n$\n187,622\n \n \n \n \n \n \n \n \n \n \n$\n203,511\n \n \n \n \n \n \n \n \n \n\nEquity\n\n \n \n80,228\n \n \n \n \n \n \n \n \n \n \n \n76,599\n \n \n \n \n \n \n \n \n \n\nTotal liabilities and equity\n\n \n$\n267,850\n \n \n \n \n \n \n \n \n \n \n$\n280,110\n \n \n \n \n \n \n \n \n \n\nNet interest income\n\n \n \n \n \n \n$\n1,857\n \n \n \n \n \n \n \n \n \n \n$\n1,831\n \n \n \n \n \n\nInterest rate spread(1)\n\n \n \n \n \n \n \n \n \n \n \n2.42\n%\n \n \n \n \n \n \n \n \n \n \n2.23\n%\n\nNet interest-earning assets(2)\n\n \n$\n81,074\n \n \n \n \n \n \n \n \n \n \n$\n75,794\n \n \n \n \n \n \n \n \n \n\nNet interest margin(3)\n\n \n \n \n \n \n \n \n \n \n \n2.98\n%\n \n \n \n \n \n \n \n \n \n \n2.82\n%\n\nAverage interest-earning assets to average interest-bearing liabilities\n\n \n \n148.31\n%\n \n \n \n \n \n \n \n \n \n \n141.16\n%\n \n \n \n \n \n \n \n \n\n \n\n(1)\n\nEquals the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.\n\n(2)\n\nEquals total interest-earning assets less total interest-bearing liabilities.\n\n(3)\n\nEquals net interest income divided by average interest-earning assets.\n\n \n\n30\n\n[Table of Contents](#toc)\n\n \n\n**COMPARISON OF OPERATING RESULTS FOR THE three months ended March 31, 2026 and 2025**\n\n \n\n**General.** For the quarter ended March 31, 2026, we had a net loss of $39,000, compared to a net loss of $328,000 for the quarter ended March 31, 2025. The change is due to an increase in noninterest income primarily stemming from an increase in the gain on loans held for sale. \n\n \n\n**Net Interest Income. **Net interest income increased $26,000, to $1.9 million for quarter ended March 31, 2026. Our interest rate spread increased to 2.42% for the quarter ended March 31, 2026 from 2.23% for the quarter ended March 31, 2025. Our net interest margin increased to 2.98% for the quarter ended March 31, 2026 compared to 2.82% for the quarter ended March 31, 2025. The increase in interest rate spread and margin is driven by a reduction of higher cost other borrowings. \n\n \n\nAverage interest-earning assets of $248.9 million for the quarter ended March 31, 2026 decreased $11.0 million compared to $259.9 million for the quarter ended March 31, 2025. The decrease in average earning assets was driven by a decrease in interest-bearing deposits at other banks, resulting from a decrease in average deposit balances during the period. The average outstanding balance of loans, net remained relatively flat, going from $133.9 million for the quarter ended March 31, 2025 to $133.2 million for the quarter ended March 31, 2026. The average yield earned on those loans outstanding increased 8 basis points to 5.46% for the quarter ended March 31, 2026. This increase is a result of an increased loan demand for specialty portfolio products which are originated at higher interest rates and with additional origination fees.\n\n \n\nThe cost of interest-bearing liabilities decreased 26 basis points for the quarter ended March 31, 2026 compared to the quarter ended March 31, 2025. This shift is primarily attributable to higher rates offered on time deposits that ran through 2024 and into 2025. Many of the matured time deposits originated during this period were renewed at lower offering rates. \n\n \n\n**Provision for Credit Losses.** During the quarter ended March 31, 2026, we recorded a reversal of provision for credit losses of $26,000 comprised of a $33,000 reversal of provision for credit losses on loans and $7,000 of provision for credit losses related to unfunded commitments. During the quarter ended March 31, 2025, we recorded a reversal of provision for credit losses of $37,000, comprised of a $45,000 reversal of provision for credit losses on loans and $8,000 in provision for credit losses related to unfunded commitments, including loans committed for origination. \n\n \n\nWe will continue to assess and evaluate the estimated future credit loss impact of current market conditions in subsequent reporting periods, which will be highly dependent on credit quality, macroeconomic forecasts and conditions, as well as the composition of our loan and available-for-sale securities portfolios.\n\n \n\n31\n\n[Table of Contents](#toc)\n\n \n\n**Noninterest Income.**The following table shows the components of noninterest income for the periods presented.\n\n \n\n \n \n\n**Three months ended March 31,**\n\n \n\n**Noninterest income:**\n\n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\nGain on sale of mortgage loans\n\n \n$\n475\n \n \n$\n189\n \n\nRental income on office building\n\n \n \n16\n \n \n \n16\n \n\nService charges on deposits\n\n \n \n59\n \n \n \n59\n \n\nIncrease in cash surrender value of BOLI\n\n \n \n60\n \n \n \n56\n \n\nOther\n\n \n \n45\n \n \n \n14\n \n\nTotal noninterest income\n\n \n$\n655\n \n \n$\n334\n \n\n \n\nFor the quarter ended March 31, 2026 compared to the same period ended March 31, 2025, noninterest income increased $321,000 to $655,000. The increase was driven by an increase in the gain on sale of mortgage loans during the quarter ended March 31, 2026. The increase in gain on sale of mortgages was primarily the result of an overall increase in total mortgage loans originated for sale during the period. During the quarter ended March 31, 2026, we sold 63 loans totaling $23.2 million for a gain on sale of $475,000. During the quarter ended March 31, 2025, we sold 31 loans totaling $9.9 million for a gain on sale of $189,000. The increase in other noninterest income is driven by the increase in subserviced loans. During the fourth quarter of 2025, the Bank began subservicing approximately 200 additional loans, resulting in subservicing fees totaling $36,000 during the first quarter of 2026. \n\n \n\n**Noninterest Expense.** The following table shows the components of noninterest expense for the periods presented.\n\n \n\n \n \n\n**Three months ended March 31,**\n\n \n\n**Noninterest expense:**\n\n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\nSalaries and employee benefits\n\n \n$\n1,611\n \n \n$\n1,533\n \n\nEquipment and occupancy\n\n \n \n238\n \n \n \n224\n \n\nData processing\n\n \n \n258\n \n \n \n222\n \n\nProfessional services\n\n \n \n89\n \n \n \n136\n \n\nAdvertising\n\n \n \n24\n \n \n \n42\n \n\nSupervisory fees and assessments\n\n \n \n33\n \n \n \n38\n \n\nLoan expenses\n\n \n \n67\n \n \n \n92\n \n\nDeposit expenses\n\n \n \n58\n \n \n \n68\n \n\nDirector fees\n\n \n \n56\n \n \n \n48\n \n\nOther\n\n \n \n143\n \n \n \n127\n \n\nTotal noninterest expense\n\n \n$\n2,577\n \n \n$\n2,530\n \n\n \n\nNoninterest expenses increased $47,000 for the quarter ended March 31, 2026, compared to the quarter ended March 31, 2025. The increase in noninterest expenses was primarily driven by increases in salaries and employee benefits and data processing related expenses, partially offset by a decrease in professional services. Salaries and employee benefits increased approximately 5.1%, driven by general cost of living and merit increases for our employees and increases in employee health and wellness costs. The increase in data processing costs was driven by system upgrades. The reduction in professional services expenses was driven by a $40,000 reduction in legal costs during the first quarter of 2026 compared to 2025. Additional legal billings were incurred during the first quarter of 2025 associated with the passing of Director Bond. \n\n \n\n**Provision for Income Tax Expense.**There was no provision for income tax expense recorded during the three months ended March 31, 2026 and 2025. Management estimates a taxable net loss for the year ended December 31, 2026 due to non-taxable income, such as income on tax exempt municipal securities and BOLI.\n\n \n\nDuring the quarter ended March 31, 2026, management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing net operating losses. A significant piece of objective negative evidence evaluated is the cumulative taxable loss incurred over the three-year period ended March 31, 2026. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of March 31, 2026, management maintained the valuation allowance against the federal net operating losses and net deferred tax assets to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted.\n\n \n\n32\n\n[Table of Contents](#toc)\n\n \n\n**COMPARISON OF FINANCIAL CONDITION AT March 31, 2026 and December 31, 2025**\n\n \n\n \n \n\n**At March 31,**\n\n \n \n\n**At December 31,**\n\n \n\n \n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\n**Selected Consolidated Financial Condition Data:**\n\n \n \n \n** **\n \n \n \n** **\n\nCash and cash equivalents\n\n \n$\n43,390\n \n \n$\n34,042\n \n\nSecurities available for sale\n\n \n \n76,717\n \n \n \n78,719\n \n\nFHLB stock\n\n \n \n605\n \n \n \n605\n \n\nLoans held for sale\n\n \n \n1,759\n \n \n \n4,459\n \n\nLoans, net\n\n \n \n127,647\n \n \n \n128,635\n \n\nTotal assets\n\n \n \n270,318\n \n \n \n266,648\n \n\nTotal deposits\n\n \n \n183,873\n \n \n \n181,472\n \n\nEscrow deposits\n\n \n \n2,662\n \n \n \n1,599\n \n\nTotal equity\n\n \n$\n79,974\n \n \n$\n79,974\n \n\n \n\n**Total Assets***.* Total assets increased $3.7 million to $270.3 as of March 31, 2026 compared to $266.6 million at December 31, 2025. The increase was driven by an increase in cash and cash equivalents as a result of an increase in deposits and escrow deposits. \n\n \n\n**Cash and cash equivalents.** Cash and cash equivalents increased $9.4 million to $43.4 million as of March 31, 2026, from $34.0 million at December 31, 2025. The increase was driven by an increase in total deposits and escrow deposits during the period and a reduction in loans held for sale and securities available for sale. Management continues to actively monitor our liquidity position on a daily basis and maintain levels of liquid assets deemed adequate.\n\n \n\n**Securities Available for Sale**. Securities available-for-sale decreased to $76.7 million as of March 31, 2026, compared to $78.7 million at December 31, 2025. There were no purchases or sales of securities available for sale during the period. During the three months ended March 31, 2026, the Bank received principal payments of $1.6 million, had net premium amortization and discount accretion of $108,000 and had an increase in the unrealized loss on the portfolio of $279,000. \n\n \n\nAs of March 31, 2026, the securities available for sale portfolio included an unrealized loss position of $8.3 million, or 9.8% 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.\n\n \n\n**Loans held for sale.**Our loans held for sale decreased $2.7 million to $1.8 million at March 31, 2026 compared to $4.5 million at December 31, 2025. The change in loans held for sale is the result of timing of originations and sales of loans. On average, the Bank holds loans held for sale less than 30 days. \n\n \n\n**Loans, net**. Our loans, net, decreased by $988,000 to $127.6 million at March 31, 2026 compared to $128.6 million at December 31, 2025. The Bank originated $7.7 million in loans to be held in the portfolio during the three months ended March 31, 2026, transferred $2.5 million of loans to held for sale, and had loan principal payments and payoffs of $6.2 million. \n\n \n\nAs of March 31, 2026, the allowance for credit losses on loans (“ACL”) totaled $1.1 million, with a net change of approximately $33,000 during the three months ended March 31, 2026. There was minimal change in the ACL as a percentage of total loans. As of March 31, 2026, there were three loans individually assessed, of which none had credit losses identified. The Bank actively monitors the loan portfolio for signs of weakening credit quality, noting as of March 31, 2026 the portfolio remains of high quality with limited credit concerns.\n\n \n\n**Deposits**. Total deposits increased $2.4 million to $183.9 million at March 31, 2026 compared to $181.5 million at December 31, 2025. The increase was driven by an increase in time deposits. The Bank continues to run a 13 month time deposit special to assist in retaining the previous time deposit specials as those mature. Management continues to actively monitor the deposit balances and interest rates offered to maintain an adequate level of liquidity.\n\n \n\n**Escrow deposits**. Escrow deposits increased $1.1 million to $2.7 million at March 31, 2026 compared to $1.6 million at December 31, 2025. The increase in escrow deposits is due to timing of escrow receipts and disbursements. Cook County, Illinois, one of the Bank's primary lending areas, had property taxes due in December 2025, resulting in a large escrow disbursement at the end of 2025. \n\n \n\n**Total Equity**. Total equity remained flat. The increase in the unrealized loss position of the securities available for sale portfolio was offset by an increase in additional paid in capital and a decrease in the unallocated common shares held by the ESOP. The changes in the additional paid in capital and unallocated common shares held by the ESOP were related to benefit plan expenses and commitments of allocations within the ESOP. \n\n \n\n33\n\n[Table of Contents](#toc)\n\n \n\n***Asset Quality***\n\n \n\nThe following table sets forth certain information with respect to our nonperforming assets. \n\n \n\n \n \n\n**At March 31,**\n\n \n \n\n**At December 31,**\n\n \n\n \n \n\n**2026**\n\n \n \n\n**2025**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\nNonaccrual loans\n\n \n$\n283\n \n \n$\n284\n \n\nLoans 90+ days past due and accruing\n\n \n \n—\n \n \n \n—\n \n\nTotal non-performing loans\n\n \n \n283\n \n \n \n284\n \n\nOther real estate owned, net\n\n \n \n—\n \n \n \n—\n \n\nTotal non-performing assets\n\n \n$\n283\n \n \n$\n284\n \n\n \n \n \n \n \n \n \n \n \n\n**Asset Quality Ratios: (1)**\n\n \n \n \n** **\n \n \n \n** **\n\nNon-accrual loans as a percent of total loans outstanding\n\n \n \n0.22\n%\n \n \n0.22\n%\n\nNon-performing assets as a percent of total assets\n\n \n \n0.10\n%\n \n \n0.11\n%\n\nAllowance for credit losses on loans as a percent of total loans outstanding\n\n \n \n0.85\n%\n \n \n0.87\n%\n\nAllowance for credit losses on loans as a percent of non-performing loans(2)\n\n \n \n386.93\n%\n \n \n397.18\n%\n\nNet charge-offs (recoveries) to average loans receivable\n\n \n \n—\n%\n \n \n(0.74\n)%\n\n \n\n(1)\n\nAsset quality ratios and capital ratios are end of period ratios, except for net charge-offs to average loans receivable.\n\n(2)\n\nNon-performing loans consist of non-accrual loans and loans that are 90 or more days past due and still accruing.\n\n \n\nThe allowance for credit losses on loans as a percentage of total loans was 0.85% and 0.87% as of March 31, 2026 and December 31, 2025, respectively.  \n\n \n\n34\n\n[Table of Contents](#toc)\n\n \n\n**Liquidity and Capital Resources**\n\n \n\nThe 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.\n\n \n\nLiquidity 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 uncommitted, unsecured line of credit with BMO Harris Bank. At March 31, 2026, we had the capacity to borrow approximately $74.5 million from the FHLB of Chicago. At March 31, 2026, we had no outstanding borrowings.\n\n \n\nWhile 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.\n\n \n\nOur cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities was $5.5 million and $(2.7) million for the three months ended March 31, 2026 and 2025, respectively. The change was driven by a transfer of loans to loans held for sale and subsequently sold in the first quarter of 2026, resulting in additional cash provided by operating activities. Net cash provided by investing activities, which consists primarily of net change in loans receivable and net change in investment securities, was $351,000 and $2.4 million for the three months ended March 31, 2026 and 2025, respectively, with the decrease in cash provided in 2026 driven by increased cash used for the loan portfolio. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts was $3.5 million and $4.2 million for the three months ended March 31, 2026 and 2025, respectively. \n\n \n\nWe 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 March 31, 2026, totaled $69.2 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. \n\n \n\nAs of March 31, 2026, 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 24.93% and 24.32% at March 31, 2026 and December 31, 2025, respectively. \n\n \n\n**Commitments**. At March 31, 2026, we had $2.6 million of outstanding commitments to originate loans. Our total letters and lines of credit and unused lines of credit totaled $6.5 million at March 31, 2026. The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at March 31, 2026.\n\n \n\n \n \n\n**Total Amounts Committed at**\n\n \n \n\n**Amount of Commitment Expiration – Per Period**\n\n \n\n \n \n\n**March 31, 2026**\n\n \n \n\n**To 1 Year**\n\n \n \n\n**1-3 Years**\n\n \n \n\n**4-5 Years**\n\n \n \n\n**After 5 Years**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\nUnused line of credit\n\n \n$\n6,545\n \n \n$\n445\n \n \n$\n379\n \n \n$\n277\n \n \n$\n5,444\n \n\nCommitments to originate loans\n\n \n \n2,624\n \n \n \n2,624\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\nTotal commitments\n\n \n$\n9,169\n \n \n$\n3,069\n \n \n$\n379\n \n \n$\n277\n \n \n$\n5,444\n \n\n \n\n**Cash Obligations**. The following table summarizes our cash obligations at March 31, 2026.\n\n \n\n \n \n\n**Total at**\n\n \n \n\n**Payments Due By Period**\n\n \n\n \n \n\n**March 31, 2026**\n\n \n \n\n**To 1 Year**\n\n \n \n\n**1-3 Years**\n\n \n \n\n**4-5 Years**\n\n \n \n\n**After 5 Years**\n\n \n\n \n \n\n**(Dollars in thousands)**\n\n \n\nTime deposits\n\n \n$\n92,129\n \n \n$\n69,213\n \n \n$\n17,284\n \n \n$\n5,632\n \n \n$\n—\n \n\nTotal contractual obligations\n\n \n$\n92,129\n \n \n$\n69,213\n \n \n$\n17,284\n \n \n$\n5,632\n \n \n$\n—\n \n\n  \n\n35\n\n[Table of Contents](#toc)\n\n \n\n**Impact of Inflation and Changing Prices**\n\n \n\nThe 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.\n\n \n\n**Changes in Accounting Principles**\n\n \n\nIn 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.\n\n \n\n**ITEM** **3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**\n\n \n\nNot required for smaller reporting companies.\n\n \n\n36\n\n[Table of Contents](#toc)\n\n \n\n**ITEM** **4. CONTROLS AND PROCEDURES**\n\n \n\nWe 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 March 31, 2026, 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. \n\n \n\nThere were no changes in our internal control over financial reporting during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.\n\n \n\n**PART** **II. OTHER INFORMATION**\n\n \n\n**ITEM** **1. LEGAL PROCEEDINGS**\n\n \n\nWe 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.\n\n \n\n**ITEM** **1A. RISK FACTORS**\n\n \n\nNot required for smaller reporting companies.\n\n \n\n**ITEM** **2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**\n\n \n\n**Issuer Purchases of Equity Securities**\n\n \n\nThere were no purchases of equity securities during the quarter ended March 31, 2026. \n\n \n\n**ITEM** **3. DEFAULTS UPON SENIOR SECURITIES**\n\n \n\nNot Applicable.\n\n \n\n**ITEM** **4. MINE SAFETY DISCLOSURES**\n\n \n\nNot Applicable.\n\n \n\n**ITEM** **5. OTHER INFORMATION**\n\n \n\nNone.\n\n \n\n \n\n37\n\n[Table of Contents](#toc)\n\n  \n\n**ITEM** **6. EXHIBITS**\n\n \n\n31.1\n\n \n\n[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.](ex_940751.htm)\n\n31.2\n\n \n\n[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.](ex_940752.htm)\n\n32.1\n\n \n\n[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*](ex_940753.htm)\n\n101.INS\n\n \nInline 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)\n\n101.SCH\n \n\nInline XBRL Taxonomy Extension Schema Document\n\n101.CAL\n \nInline XBRL Taxonomy Extension Calculation Linkbase Document\n\n101.DEF\n \nInline XBRL Taxonomy Extension Definition Linkbase Document\n\n101.LAB\n \nInline XBRL Taxonomy Extension Label Linkbase Document\n\n101.PRE\n \nInline XBRL Taxonomy Extension Presentation Linkbase Document\n\n104\n\n \n\nCover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)\n\n \n\n*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.\n\n \n\n38\n\n[Table of Contents](#toc)\n\n \n\n**SIGNATURES**\n\n \n\nPursuant 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.\n\n \n\n \n \n\n**NSTS BANCORP, INC.**\n\n \n \n \n\nDated: May 14, 2026\n\n \n\nBy:\n\n/s/ Stephen G. Lear\n\n \n\n \n \n\nStephen G. Lear\n\n \n \n\nPresident and Chief Executive Officer\n\n \n \n\n(Principal Executive Officer)\n\n \n \n \n\nDated: May 14, 2026\n\n \n\nBy:\n\n/s/ Carissa H. Schoolcraft\n\n \n\n \n \n\nCarissa H. Schoolcraft\n\n \n \n\nChief Financial Officer\n\n \n \n\n(Principal Financial and Accounting Officer)\n\n \n\n39"}