$0.00
$4.83
bear $0.00
base $1.02
bull $4.83
margin of safety $2.00
market price* $14.26
Business condition attached to the margin of safety
The bank shows a sustained turn to profitability: at least four consecutive quarters of positive cash earnings (operating cash flow excluding swings in mortgage loans held for sale, after stock and ESOP compensation and maintenance capital spending), running at roughly $0.20 per share a year or better.
NSTS Bancorp is the holding company for North Shore Trust and Savings, a small community savings bank in Waukegan, Illinois, founded in 1922. It gathers about $181 million of deposits from northern Illinois households, lends about $130 million (mostly residential mortgages), holds about $79 million of securities and $34 million of cash, and originates mortgages for sale to others. The company converted from mutual ownership in January 2022. Equity is about $80 million, roughly 30% of the $267 million balance sheet, an unusually heavy capital cushion, and it carries no borrowings at year-end 2025 (it repaid $5 million during the year). Because this is a bank, interest paid is an ordinary operating cost and no debt is deducted from any case. What the business actually earns. We measure earnings as the cash the business generates, less swings in mortgage loans held for sale and other working capital, less stock and ESOP compensation (a real cost), less the maintenance part of capital spending. On that basis the stored per-share results are $0.37 in 2022, $(0.18) in 2023, $(0.09) in 2024 and $0.21 in 2025. Reported net losses were $(0.4) million in 2025 and $(0.8) million in 2024, and the bank's own earning power is thin: net interest income was $7.5 million in 2025 against roughly $8 million of operating costs, with $2.3 million of fee income, mostly mortgage sale gains, making up the difference. Compensation from the 2023 equity plan and the ESOP (about $0.9 million a year, larger than the whole 2025 cash earnings) is a large drag. We use all four years, which gives a normal level of about $0.06 per share a year. 2022 has no equity-plan cost and 2023 carried a $1.8 million securities-sale loss, but both are treated as they stand and neither changes the median much. 2025 owner earnings rose from a negative base, so a growth rate cannot be stated as a percentage; the base case starts flat at the normal level, not above the recent improvement, so nothing needs to be explained away. Base case: about $1.02 per share. Earnings hold at roughly $0.06 per share indefinitely, discounted at 6%. The deposit franchise dating from 1922, steady net interest income of about $7 to $7.5 million and mortgage banking that has run every year keep this going. No growth is credited: there are no signed contracts, no branch build-out under way and no repeatable acquisition record. The business is worth about $1.02 per share and owes nothing, so the difference is the same $1.02. Bull case: about $4.83 per share. Earnings settle near $0.29 per share, the average of the two positive years already reported (2022 and 2025), and stay there. The evidence is the company's own recent record: net interest income rose $0.4 million in 2025 as deposit costs stabilised, mortgage sale gains rose from $1.2 million to $1.6 million, and first-half 2026 fee income was $2.1 million, double the prior-year period, with the net loss narrowing to $0.2 million from $0.6 million. The business is worth about $4.83 per share and owes nothing. Bear case: about $0. Interest income is shrinking (first-half 2026 $5.1 million versus $5.5 million a year earlier), deposits fell 5% during 2025 to $181 million, and stock and ESOP compensation remains above the bank's cash earnings, so cash earnings stay around the 2023 and 2024 levels, slightly negative. Nothing named and evidenced produces value in that story, so the business is worth about $0 on its earnings. It owes nothing beyond deposits, which are its raw material, and the losses would be absorbed by the large capital cushion rather than creating a claim ahead of shareholders. The difference is therefore $0, though losses would gradually shrink equity. What to keep in mind. Our figures value earning power, not the $80 million of balance-sheet equity (about $14 per outstanding share). The cash and securities already earn interest that is included in the earnings above, so counting them again would double count. The gap between book value and our base value reflects a bank whose costs currently absorb almost all its revenue; if management cut costs, repurchased stock (it bought 93,732 shares for $970,000 in 2025) or was acquired, the shares could be worth far more than our base case, but none of those steps has yet happened and we do not credit them. The figures would be wrong on the upside if mortgage banking and the interest margin convert into sustained profit, and on the downside if deposit and loan balances keep shrinking. Interest paid and mortgage-sale cash flows swing widely from year to year, so cash flow was separated from these timing effects; cash flow from operations in the first half of 2026 was $8.4 million, mostly reflecting mortgage-loan timing, and was not used as a run rate.