NSTS Bancorp, Inc. Fair Value Disclosure
Note 14: Fair Value of Financial Instruments
Financial instruments are classified within the fair value hierarchy using the methodologies described in Note 13 – Fair Value Measurements. Fair value estimates, methods and assumptions for the Company’s financial instruments that are not recorded at fair value on a recurring or non-recurring basis are set forth below.
Loans, net: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential mortgage and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories. Estimated fair value of loans is determined using a discounted cash flow model that employs an exit discount rate that reflects the current market pricing for loans with similar characteristics and remaining maturity, adjusted for estimated credit losses inherent in the portfolio at the balance sheet date.
Interest-bearing deposits: The fair value of interest-bearing deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using rates for currently offered deposits of similar remaining maturities.
Other borrowings: The fair value of borrowings is based on securities dealers’ estimated fair values, when available, or estimated using discounted cash flow analysis. The discount rates used approximate the rates offered for similar borrowings of similar remaining terms.
The carrying amounts and estimated fair values by fair value hierarchy of certain financial instruments are as follows:
| Carrying | Estimated | |||||||||||||||||||
| Amount | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Loans, net | $ | 128,635 | $ | — | $ | — | $ | 122,290 | $ | 122,290 | ||||||||||
| Loans held for sale | 4,459 | — | 4,548 | — | 4,548 | |||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Interest-bearing deposits | 168,166 | — | 168,431 | — | 168,431 | |||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Loans, net | $ | 130,356 | $ | — | $ | — | $ | 124,084 | $ | 124,084 | ||||||||||
| Loans held for sale | 1,218 | — | 1,242 | — | 1,242 | |||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Interest-bearing deposits | 178,260 | — | 178,872 | — | 178,872 | |||||||||||||||
| Other borrowings | 5,000 | — | 4,999 | — | 4,999 | |||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 28, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 22, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.