First Seacoast Bancorp Inc

Previous wording

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the Company’s consolidated financial condition at June 30, 2024 and consolidated results of operations for the three and six months ended June 30, 2024 and 2023. It should be read in conjunction with our unaudited consolidated financial statements and accompanying notes presented elsewhere in this report and with the Company’s audited consolidated financial statements and accompanying notes presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on March 29, 2024 with the Securities and Exchange Commission. Certain prior year amounts have been reclassified to conform to the current year presentation.

Current wording

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the Company’s consolidated financial condition at September 30, 2024 and consolidated results of operations for the three and nine months ended September 30, 2024 and 2023. It should be read in conjunction with our unaudited consolidated financial statements and accompanying notes presented elsewhere in this report and with the Company’s audited consolidated financial statements and accompanying notes presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on March 29, 2024 with the Securities and Exchange Commission. Certain prior year amounts have been reclassified to conform to the current year presentation.

Previous wording

Total Assets. Total assets were $601.7 million as of June 30, 2024, an increase of $30.7 million, or 5.4%, compared to total assets of $571.0 million at December 31, 2023. The increase was due primarily to a $19.3 million increase in cash and due from banks, a $5.5 million increase in net loans, a $4.1 million increase in securities available-for-sale, and a $5.4 million increase in other assets offset by a $3.4 million decrease in land, building and equipment, net. The increase in other assets and decrease in land, building and equipment, net was due primarily to accounting for the sale-leaseback transaction encompassing the Bank's main office and branches which was completed on June 11, 2024.

Current wording

Total Assets. Total assets were $601.8 million as of September 30, 2024, an increase of $30.7 million, or 5.4%, compared to total assets of $571.0 million at December 31, 2023. The increase was due primarily to a $10.4 million increase in cash and due from banks, a $7.9 million increase in net loans, a $11.2 million increase in securities available-for-sale, and a $5.0 million increase in other assets, offset by a $3.4 million decrease in land, building and equipment, net. The increase in other assets and decrease in land, building and equipment, net, was due primarily to accounting for the sale-leaseback transaction encompassing the Bank's main office and branches which was completed on June 11, 2024.

Previous wording

Cash and Due From Banks. Cash and due from banks increased $19.3 million, or 318.1%, to $25.4 million at June 30, 2024 from $6.1 million at December 31, 2023. This increase primarily resulted from a $46.9 million increase in total deposits and $7.4 million of net proceeds from the sale of land and building, offset by a $20.7 million decrease in borrowings, a $5.5 million increase in net loans, a $4.1 million increase in securities available-for-sale, and $2.2 million of common stock repurchases during the six months ended June 30, 2024.

Current wording

Cash and Due From Banks. Cash and due from banks increased $10.4 million, or 172.2%, to $16.5 million at September 30, 2024 from $6.1 million at December 31, 2023. This increase primarily resulted from a $42.9 million increase in total deposits and $7.4 million of net proceeds from the sale of land and building, offset by a $20.7 million decrease in borrowings, a $7.9 million increase in net loans, a $11.2 million increase in securities available-for-sale, and $3.3 million of common stock repurchases during the nine months ended September 30, 2024.

Previous wording

Available-for-Sale Securities. Available-for-sale securities increased by $4.1 million, or 3.4%, to $125.9 million at June 30, 2024 from $121.9 million at December 31, 2023. This increase was primarily due to investment purchases totaling $8.9 million, offset by $2.7 million of proceeds from principal payments and a $1.7 million increase in net unrealized losses within the portfolio during the six months ended June 30, 2024. The unrealized losses within the portfolio are due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore we recorded no allowance for credit losses on available-for-sale debt securities as of June 30, 2024.

Current wording

Available-for-Sale Securities. Available-for-sale securities increased by $11.2 million, or 9.2%, to $133.0 million at September 30, 2024 from $121.9 million at December 31, 2023. This increase was primarily due to investment purchases totaling $18.1 million and a $1.5 million decrease in net unrealized losses within the portfolio, offset by $8.1 million of proceeds from maturities and principal payments during the nine months ended September 30, 2024. The unrealized losses within the portfolio are due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore we recorded no allowance for credit losses on available-for-sale debt securities as of September 30, 2024.

Previous wording

Net Loans. Net loans increased $5.5 million, or 1.3%, to $432.1 million at June 30, 2024 from $426.6 million at December 31, 2023. During the six months ended June 30, 2024, we originated $5.5 million of loans, net of principal collections, and purchased a $774,000 participation interest in a commercial and industrial loan through our membership in a national community bank loan program. As of June 30, 2024 and December 31, 2023, the portfolio of purchased loans had outstanding principal balances of $33.8 million and $33.3 million, respectively, and were performing in accordance with their original repayment terms.

Current wording

Net Loans. Net loans increased $7.9 million, or 1.9%, to $434.5 million at September 30, 2024 from $426.6 million at December 31, 2023. During the nine months ended September 30, 2024, we originated $5.9 million of loans, net of principal collections, and purchased $1.8 million of participation interests in commercial and industrial loans through our membership in a national community bank loan program. As of September 30, 2024 and December 31, 2023, the portfolio of purchased loans had an outstanding principal balance of $34.1 million and $33.3 million, respectively, and were performing in accordance with their original repayment terms.

Previous wording

One- to four-family residential mortgage loans increased $5.7 million, or 2.1%, to $274.7 million at June 30, 2024 from $268.9 million at December 31, 2023. Commercial real estate mortgage loans decreased $533,000, or 0.6%, to $86.0 million at June 30, 2024 from $86.6 million at December 31, 2023. Multi-family loans increased $2.7 million, or 35.3%, to $10.3 million at June 30, 2024 from $7.6 million at December 31, 2023. Commercial and industrial loans decreased $2.0 million, or 7.8%, to $23.5 million at June 30, 2024 from $25.5 million at December 31, 2023. Acquisition, development, and land loans decreased $4.2 million, or 24.1%, to $13.3 million at June 30, 2024 from $17.5 million at December 31, 2023. Home equity loans and lines of credit increased $2.4 million, or 16.7%, to $16.5 million at June 30, 2024 from $14.1 million at December 31, 2023. Consumer loans increased $1.5 million, or 15.5%, to $11.3 million at June 30, 2024 from $9.8 million at December 31, 2023.

Current wording

One- to four-family residential mortgage loans increased $10.9 million, or 4.0%, to $279.8 million at September 30, 2024 from $268.9 million at December 31, 2023. Commercial real estate mortgage loans decreased $870,000, or 1.0%, to $85.7 million at September 30, 2024 from $86.6 million at December 31, 2023. Multi-family loans decreased $1.8 million, or 23.2%, to $5.8 million at September 30, 2024 from $7.6 million at December 31, 2023. Commercial and industrial loans decreased $1.4 million, or 5.6%, to $24.1 million at September 30, 2024 from $25.5 million at December 31, 2023. Acquisition, development, and land loans decreased $3.9 million, or 22.4%, to $13.6 million at September 30, 2024 from $17.5 million at December 31, 2023. Home equity loans and lines of credit increased $2.6 million, or 18.3%, to $16.7 million at September 30, 2024 from $14.1 million at December 31, 2023. Consumer loans increased $2.5 million, or 25.0%, to $12.3 million at September 30, 2024 from $9.8 million at December 31, 2023.

Previous wording

Our strategy to grow the balance sheet continues to be through originations and, to a lesser extent, purchases of one- to four-family residential mortgage loans and consumer loans secured by manufactured housing properties, while also diversifying into higher yielding commercial real estate mortgage loans and commercial and industrial loans to improve net margins and manage interest rate risk. We also continue to consider selling selected, conforming 15-year and 30-year residential fixed rate mortgage loans to the secondary market on a servicing retained basis as market conditions allow, providing us a recurring source of revenue from loan servicing income and gains on the sale of such loans.

Current wording

Our strategy to grow the balance sheet continues to be through originations and, to a lesser extent, purchases of one- to four-family residential mortgage loans, commercial and industrial loans, and consumer loans secured by manufactured housing properties, while also diversifying into higher yielding commercial real estate mortgage loans and commercial and industrial loans to improve net margins and manage interest rate risk. We also continue to consider selling selected, conforming 15-year and 30-year residential fixed rate mortgage loans to the secondary market on a servicing retained basis as market conditions allow, providing us a recurring source of revenue from loan servicing income and gains on the sale of such loans.

Previous wording

Our ACL on loans increased $61,000 to $3.5 million at June 30, 2024 from $3.4 million at December 31, 2023. The Company measures and records it ACL based upon ASC Topic 326 and its credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. ASC Topic 326 requires financial assets measured at amortized cost, including loans, to be presented at the net amount expected to be collected, through an ACL that are expected to occur over the remaining life of the asset, rather than incurred losses. ASC Topic 326 requires the measurement of all expected credit losses for loans held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASC Topic 326 requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied at prior reporting dates are still permitted, though the inputs to those techniques have changed to reflect the full amount of expected credit losses. The Bank has selected the Weighted Average Remaining Maturity Model (“WARM” or "CECL model"), for the loss calculation of each of the Bank’s loan pools utilizing a third-party software application. The WARM uses a quarterly loss rate and future expectations of loan balances to calculate an ACL. A loss rate is applied to pool balances over time.

Current wording

Our ACL on loans was $3.4 million at September 30, 2024 and December 31, 2023. The Company measures and records it ACL based upon ASC Topic 326 and its credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. ASC Topic 326 requires financial assets measured at amortized cost, including loans, to be presented at the net amount expected to be collected, through an ACL that are expected to occur over the remaining life of the asset, rather than incurred losses. ASC Topic 326 requires the measurement of all expected credit losses for loans held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASC Topic 326 requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied at prior reporting dates are still permitted, though the inputs to those techniques have changed to reflect the full amount of expected credit losses. The Bank has selected the Weighted Average Remaining Maturity Model (“WARM” or "CECL model"), for the loss calculation of each of the Bank’s loan pools utilizing a third-party software application. The WARM uses a quarterly loss rate and future expectations of loan balances to calculate an ACL. A loss rate is applied to pool balances over time.

Previous wording

Deposits. Our deposits are generated primarily from residents within our primary market area. We offer a selection of deposit accounts, including non-interest-bearing and interest-bearing checking accounts, savings accounts, money market accounts and time deposits, for both individuals and businesses. As of June 30, 2024 and December 31, 2023, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, was estimated not to exceed $120.0 million, or 26.6% of total deposits, and $102.5 million, or 25.3% of total deposits, respectively.

Current wording

Deposits. Our deposits are generated primarily from residents within our primary market area. We offer a selection of deposit accounts, including non-interest-bearing and interest-bearing checking accounts, savings accounts, money market accounts and time deposits, for both individuals and businesses. As of September 30, 2024 and December 31, 2023, the aggregate amount of uninsured deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, was estimated not to exceed $110.3 million, or 24.7% of total deposits, and $102.5 million, or 25.3% of total deposits, respectively.

Previous wording

For customers requiring full FDIC insurance on certificates of deposit in excess of $250,000, we began offering in late 2023 the CDARS® program, which allows us to place the certificates of deposit with other participating banks to maximize the customers’ FDIC insurance. We receive a like amount of deposits from other participating financial institutions. In addition, we offer the ICS™ program, an insured deposit “sweep” program for demand deposits which is a product offered by IntraFi Network, LLC, which is also the provider of the CDARS® program. Similarly to the certificates of deposit’s discussed above, we receive a like amount of deposits from other financial institutions and all customer deposits are insured by the FDIC. These “reciprocal” CDARS® and ICS deposits are classified as “brokered” deposits in regulatory reports and "core" deposits in our consolidated balance sheet. At June 30, 2024 our “reciprocal” CDARS® and ICS deposits were $-0- and $729,000, respectively. At December 31, 2023, our “reciprocal” CDARS® and ICS deposits were $-0- and $1.1 million, respectively.

Current wording

For customers requiring full FDIC insurance on certificates of deposit in excess of $250,000, we began offering in late 2023 the CDARS® program, which allows us to place the certificates of deposit with other participating banks to maximize the customers’ FDIC insurance coverage. We receive a like amount of deposits from other participating financial institutions. In addition, we offer the ICS™ program, an insured deposit “sweep” program for demand deposits which is a product offered by IntraFi Network, LLC, which is also the provider of the CDARS® program. Similarly to the certificates of deposit’s discussed above, we receive a like amount of deposits from other financial institutions and all customer deposits are insured by the FDIC. These “reciprocal” CDARS® and ICS deposits are classified as “brokered” deposits in regulatory reports and "core" deposits in our consolidated balance sheet. At September 30, 2024 our “reciprocal” CDARS® and ICS deposits were $-0- and $6.4 million, respectively. At December 31, 2023, our “reciprocal” CDARS® and ICS deposits were $-0- and $1.1 million, respectively.

Previous wording

Deposits increased $46.9 million, or 11.6%, to $451.7 million at June 30, 2024 from $404.8 million at December 31, 2023 primarily as a result of an $16.7 million increase in commercial deposits and a $28.0 million increase in retail deposits. Core deposits (defined as deposits other than time deposits) increased $10.2 million, or 3.3%, to $323.7 million at June 30, 2024 from $313.5 million at December 31, 2023. As of June 30, 2024, savings deposits increased $14.0 million, money market deposits decreased $9.0 million, NOW and demand deposit accounts increased $5.3 million and time deposits increased $36.7 million. There were $56.7 million and $23.6 million of brokered deposits included in time deposits at June 30, 2024 and December 31, 2023, respectively.

Current wording

Deposits increased $42.9 million, or 10.6%, to $447.7 million at September 30, 2024 from $404.8 million at December 31, 2023 primarily as a result of an $14.9 million increase in commercial deposits and a $28.0 million increase in retail deposits. Core deposits (defined as deposits other than time deposits) increased $6.2 million, or 2.0%, to $319.7 million at September 30, 2024 from $313.5 million at December 31, 2023. As of September 30, 2024, savings deposits increased $16.3 million, money market deposits decreased $12.5 million, NOW and demand deposit accounts increased $2.4 million and time deposits increased $36.7 million. There were $56.7 million and $23.6 million of brokered deposits included in time deposits at September 30, 2024 and December 31, 2023, respectively. Additionally, there were $21.8 million and $20.9 million of brokered deposits included in savings deposits at September 30, 2024 and December 31, 2023, respectively. Deposits from related parties totaled $12.1 million and $10.7 million at of September 30, 2024 and December 31, 2023, respectively.

Previous wording

Borrowings. Total borrowings decreased $20.7 million, or 22.3%, to $72.3 million at June 30, 2024 from $93.0 million at December 31, 2023. Advances from FHLB decreased $20.7 million, or 28.4%, to $52.3 million at June 30, 2024 from $73.0 million at December 31, 2023 due primarily to a $46.9 million increase in total deposits offset by borrowings required in support of the Company’s investment and loan growth initiatives.

Current wording

Borrowings. Total borrowings decreased $20.7 million, or 22.3%, to $72.3 million at September 30, 2024 from $93.0 million at December 31, 2023. Advances from FHLB decreased $20.7 million, or 28.4%, to $52.3 million at September 30, 2024 from $73.0 million at December 31, 2023 due primarily to a $42.9 million increase in total deposits offset by borrowings required in support of the Company’s investment and loan growth initiatives.

Previous wording

Total Stockholders’ Equity. Total stockholders’ equity decreased $2.1 million, or 3.2%, to $64.5 million at June 30, 2024 from $66.6 million at December 31, 2023. This decrease was due primarily to an other comprehensive loss of $1.2 million related to net changes in unrealized holding losses in the available-for-sale securities portfolio as a result of changes in market interest rates during the six months ended June 30, 2024 and $2.2 million of common stock repurchases offset by net income of $851,000 for the six months ended June 30, 2024 and the recognition of $281,000 of previously unearned compensation.

Current wording

Total Stockholders’ Equity. Total stockholders’ equity decreased $829,000, or 1.2%, to $65.8 million at September 30, 2024 from $66.6 million at December 31, 2023. This decrease was due primarily to $3.3 million of common stock repurchases offset by other comprehensive income of $969,000 related to net changes in unrealized holding losses in the available-for-sale securities portfolio as a result of decreases in market interest rates during the nine months ended September 30, 2024, net income of $895,000 for the nine months ended September 30, 2024, and the recognition of $421,000 of previously unearned compensation.

Previous wording

Non-performing loans were $141,000 at June 30, 2024 and December 31, 2023. At June 30, 2024 and December 31, 2023, non-performing loans consist of a residential mortgage loan and an associated home equity loan with outstanding balances totaling $141,000 and an estimated market value of $216,000. The property was sold on July 19, 2024 and all outstanding balances were repaid. At June 30, 2024 and December 31, 2023, we had no foreclosed assets.

Current wording

Non-performing loans were $-0- and $141,000 at September 30, 2024 and December 31, 2023, respectively. At December 31, 2023, non-performing loans consisted of a residential mortgage loan and an associated home equity loan with outstanding balances totaling $141,000 and an estimated collateral market value of $216,000. The property was sold on July 19, 2024 and all outstanding balances were repaid. At September 30, 2024 and December 31, 2023, we had no foreclosed assets.

Previous wording

Net Income (Loss). Net income was $2.0 million for the three months ended June 30, 2024, compared to a net loss of $540,000 for the three months ended June 30, 2023, an increase of $2.5 million, or 470.9%. The increase was due primarily to an increase in non-interest income of $2.5 million, as a result of the one-time recognized gain on the sale of land and buildings, and a decrease in non-interest expenses of $300,000 offset by an increase in income tax expense of $382,000 during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Net Income (Loss). Net income was $44,000 for the three months ended September 30, 2024, compared to a net loss of $911,000 for the three months ended September 30, 2023, an increase of $955,000, or 104.8%. The increase was due primarily to a $415,000 increase in net interest and dividend income, a $104,000 decrease in provision for credit losses, a decrease in non-interest expenses of $173,000, and a $213,000 increase in income tax benefit during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous wording

Interest and Dividend Income. Total interest and dividend income increased $1.3 million, or 25.7%, to $6.3 million for the three months ended June 30, 2024 compared to $5.0 million for the three months ended June 30, 2023. This increase was due to a $576,000 increase in interest and dividend income on investments and a $709,000 increase in interest and fees on loans.

Current wording

Interest and Dividend Income. Total interest and dividend income increased $1.4 million, or 26.9%, to $6.6 million for the three months ended September 30, 2024 compared to $5.2 million for the three months ended September 30, 2023. This increase was due to a $567,000 increase in interest and dividend income on investments and a $820,000 increase in interest and fees on loans.

Previous wording

Average interest-earning assets increased $34.9 million, to $564.4 million for the three months ended June 30, 2024 from $529.4 million for the three months ended June 30, 2023. The weighted average annualized yield on interest earning-assets increased to 4.45% for the three months ended June 30, 2024 from 3.77% for the three months ended June 30, 2023 primarily due to an increase in market interest rates. The weighted average annualized yield for the loan portfolio increased to 4.48% for the three months ended June 30, 2024 from 4.02% for the three months ended June 30, 2023 due primarily to an increase in market interest rates. The weighted average annualized yield for all other interest-earning assets increased to 4.35% for the three months ended June 30, 2024 from 2.91% for the three months ended June 30, 2023 due primarily to an increase in market interest rates.

Current wording

Average interest-earning assets increased $38.4 million, to $574.6 million for the three months ended September 30, 2024 from $536.2 million for the three months ended September 30, 2023. The weighted average annualized yield on interest earning-assets increased to 4.56% for the three months ended September 30, 2024 from 3.85% for the three months ended September 30, 2023 primarily due to an increase in market interest rates. The weighted average annualized yield for the loan portfolio increased to 4.67% for the three months ended September 30, 2024 from 4.09% for the three months ended September 30, 2023 due primarily to an increase in market interest rates. The weighted average annualized yield for all other interest-earning assets increased to 4.22% for the three months ended September 30, 2024 from 3.00% for the three months ended September 30, 2023 due primarily to an increase in market interest rates.

Previous wording

Interest Expense. Total interest expense increased $1.2 million, or 61.8%, to $3.3 million for the three months ended June 30, 2024 from $2.0 million for the three months ended June 30, 2023. Interest expense on deposits increased $991,000, or 82.6%, to $2.2 million for the three months ended June 30, 2024 from $1.2 million for the three months ended June 30, 2023. The average balance of interest-bearing deposits increased $34.3 million, or 10.9%, to $347.7 million for the three months ended June 30, 2024 from $313.5 million for the three months ended June 30, 2023 primarily as a result of an increase in the average balance of money market and time deposits offset by a decrease in the average balances of savings and NOW and demand deposits. The weighted average annualized rate of interest-bearing deposits increased to 2.52% for the three months ended June 30, 2024 from 1.51% for the three months ended June 30, 2023 primarily as a result of an increase in market interest rates.

Current wording

Interest Expense. Total interest expense increased $972,000, or 37.4%, to $3.6 million for the three months ended September 30, 2024 from $2.6 million for the three months ended September 30, 2023. Interest expense on deposits increased $1.0 million, or 62.5%, to $2.7 million for the three months ended September 30, 2024 from $1.7 million for the three months ended September 30, 2023. The average balance of interest-bearing deposits increased $47.3 million, or 14.4%, to $375.8 million for the three months ended September 30, 2024 from $328.5 million for the three months ended September 30, 2023 primarily as a result of an increase in the average balance of savings and time deposits offset by a decrease in the average balances of money market deposits and NOW and demand deposits. The weighted average annualized rate of interest-bearing deposits increased to 2.88% for the three months ended September 30, 2024 from 2.03% for the three months ended September 30, 2023 primarily as a result of an increase in market interest rates.

Previous wording

Net Interest and Dividend Income. Net interest and dividend income increased $42,000, or 1.4%, to $3.0 million for the three months ended June 30, 2024 and June 30, 2023. This increase was due to an increase of $34.9 million, or 6.6%, in the average balance of interest-earning assets, consisting primarily of increases in the average balances of loans and taxable debt securities offset by a decrease in the average balances of non-taxable debt securities, during the three months ended June 30, 2024, offset by a $53.6 million, or 13.9%, increase in the average balance of interest-bearing liabilities, consisting primarily of increases in the average balances of borrowings and money market and time deposits, offset by decreases in the average balances of savings and NOW and demand deposits. Annualized net interest margin decreased to 2.14% for the three months ended June 30, 2024 from 2.25% for the three months ended June 30, 2023 due primarily to an increase in the average rate of interest-bearing deposits and borrowings offset by an increase in the average yield on interest-earning assets.

Current wording

Net Interest and Dividend Income. Net interest and dividend income increased $415,000, or 16.2%, to $3.0 million for the three months ended September 30, 2024 from $2.6 million for the three months ended September 30, 2023. This increase was due to an increase of $38.4 million, or 7.2%, in the average balance of interest-earning assets, consisting primarily of increases in the average balances of loans, taxable debt securities, and interest-bearing deposits with other banks offset by a decrease in the average balances of non-taxable debt securities and Federal Home Loan Bank stock, during the three months ended September 30, 2024, offset by a $41.6 million, or 10.2%, increase in the average balance of interest-bearing liabilities, consisting primarily of increases in the average balances of savings and time deposits, offset by decreases in the average balances of borrowings, money market deposits and NOW and demand deposits. Annualized net interest margin increased to 2.08% for the three months ended September 30, 2024 from 1.92% for the three months ended September 30, 2023 due primarily to an increase in the average yield on interest-earning assets offset by an increase in the average rate of interest-bearing deposits and borrowings.

Previous wording

(Release) Provision for Credit Losses. Based on management’s analysis of the ACL, a $(16,000) release of credit losses was recorded for the three months ended June 30, 2024, compared to a $20,000 provision for credit losses expense for the three months ended June 30, 2023. The release of credit losses for the three months ended June 30, 2024 consisted of a $30,000 provision for credit losses on loans and a $(46,000) release of credit losses for off-balance sheet credit exposures. The provision for credit losses expense for the three months ended June 30, 2023 consisted of a $35,000 provision for credit losses on loans and a $(15,000) release of credit losses for off-balance sheet credit exposures.

Current wording

Provision (Release) for Credit Losses. Based on management’s analysis of the ACL, a $16,000 provision for credit losses was recorded for the three months ended September 30, 2024, compared to a $120,000 provision for credit losses for the three months ended September 30, 2023. The provision for credit losses for the three months ended September 30, 2024 consisted of a $20,000 provision for credit losses on loans and a $(4,000) release of credit losses for off-balance sheet credit exposures. The provision for credit losses for the three months ended September 30, 2023 consisted of a $30,000 provision for credit losses on loans and a $90,000 provision for credit losses for off-balance sheet credit exposures.

Previous wording

Non-Interest Income. Non-interest income increased $2.5 million, or 736.1%, to $2.9 million for the three months ended June 30, 2024 compared to $346,000 for the three months ended June 30, 2023. The increase in non-interest income during the three months ended June 30, 2024 was due to a one-time $2.5 million gain on the sale of land and buildings recognized during the three months ended June 30, 2024.

Current wording

Non-Interest Income. Non-interest income increased $50,000, or 15.9%, to $364,000 for the three months ended September 30, 2024 compared to $314,000 for the three months ended September 30, 2023. The increase in non-interest income during the three months ended September 30, 2024 was due primarily to a $41,000 increase in investment service fees.

Previous wording

Non-Interest Expense. Non-interest expense decreased $300,000, or 7.3%, to $3.8 million for the three months ended June 30, 2024 from $4.1 million for the three months ended June 30, 2023. The decrease was primarily due to a $215,000, or 8.7%, decrease in salaries and employee benefits, a $55,000, or 17.3%, decrease in professional fees and assessments and a $37,000, or 9.3%, decrease in data processing. The decrease in salaries and employee benefits during the three months ended June 30, 2024 was due to the adjustment of staffing levels in late 2023 reflecting the expected reduction in 2024 residential mortgage and commercial lending activity offset by normal salary increases.

Current wording

Non-Interest Expense. Non-interest expense decreased $173,000, or 4.2%, to $3.9 million for the three months ended September 30, 2024 from $4.1 million for the three months ended September 30, 2023. The decrease was primarily due to a $169,000, or 6.8%, decrease in salaries and employee benefits, a $71,000, or 40.8%, decrease in marketing, a $42,000, or 36.5%, decrease in equipment expense and a $60,000, or 14.9%, decrease in data processing offset by a $114,000, or 55.6%, increase in occupancy expense and a $50,000, or 25.5%, increase in professional fees and assessments. The decrease in salaries and employee benefits during the three months ended September 30, 2024 was due to the adjustment of staffing levels in late 2023 reflecting the expected reduction in 2024 residential mortgage and commercial lending activity offset by normal salary increases. The increase in occupancy expense was due primarily to the increase in lease expense associated with the sale-leaseback transaction completed on June 11, 2024.

Previous wording

Income Taxes. Income tax expense increased $382,000, or 136.4%, to an expense of $102,000 for the three months ended June 30, 2024 from a benefit of $280,000 for the three months ended June 30, 2023. The effective tax rate was 4.8% and (34.1)% for the three months ended June 30, 2024 and 2023, respectively. The increase in income tax expense and the effective tax rate for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was due primarily to a $2.9 million increase in income before income tax expense (benefit) for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The income tax expense and effective tax rate for the three months ended June 30, 2024 was less than statutory federal and state rates due primarily to the utilization of certain Federal and New Hampshire net operating loss carryforward deferred tax assets and the release of the associated valuation allowances established at December 31, 2023 for these deferred tax assets.

Current wording

Income Taxes. Income tax benefit increased $213,000, or 49.9%, to $640,000 for the three months ended September 30, 2024 from $427,000 for the three months ended September 30, 2023. The effective tax rate was (107.4)% and (31.9)% for the three months ended September 30, 2024 and 2023, respectively. The income tax benefit and effective tax rate for the three months ended September 30, 2024 was greater than statutory federal and state rates due primarily to the reduction of $802,000 of the deferred tax asset valuation allowance as of June 30, 2024 resulting from the change in accumulated other comprehensive income during the three months ended September 30, 2024, offset by a $742,000 decrease in loss before income tax benefit.

Previous wording

Net deferred fee expense included in loan interest totaled $120,000 and $87,000 for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Net deferred fee expense included in loan interest totaled $153,000 and $103,000 for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Comparison of Operating Results for the Six Months Ended June 30, 2024 and June 30, 2023

Current wording

Comparison of Operating Results for the Nine Months Ended September 30, 2024 and September 30, 2023

Previous wording

Net Income (Loss). Net income was $851,000 for the six months ended June 30, 2024, compared to net loss of $76,000 for the six months ended June 30, 2023, an increase of $927,000. The increase was due primarily to an increase in non-interest income of $1.7 million and a decrease in non-interest expenses of $125,000 offset by a decrease in net interest and dividend income after (release) provision for credit losses of $177,000 and an increase in income tax expense of $704,000 during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

Net Income (Loss). Net income was $895,000 for the nine months ended September 30, 2024, compared to a net loss of $987,000 for the nine months ended September 30, 2023, an increase of $1.9 million. The increase was due primarily to an increase in non-interest income of $1.7 million, a $152,000 increase in net interest and dividend income, a $190,000 decrease in provision for credit losses, and a decrease in non-interest expenses of $298,000 offset by a decrease in income tax benefit of $491,000 during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

Interest and Dividend Income. Total interest and dividend income increased $2.7 million, or 28.2%, to $12.3 million for the six months ended June 30, 2024 compared to $9.6 million for the six months ended June 30, 2023. This increase was due to a $1.1 million increase in interest and dividend income on investments and a $1.6 million increase in interest and fees on loans.

Current wording

Interest and Dividend Income. Total interest and dividend income increased $4.1 million, or 27.8%, to $18.9 million for the nine months ended September 30, 2024 compared to $14.8 million for the nine months ended September 30, 2023. The increase was due to a $1.7 million increase in interest and dividend income on investments and a $2.4 million increase in interest and fees on loans.

Previous wording

Average interest-earning assets increased $37.3 million, to $561.7 million for the six months ended June 30, 2024 from $524.4 million for the six months ended June 30, 2023. The weighted average annualized yield on interest earning-assets increased to 4.40% for the six months ended June 30, 2024 from 3.67% for the six months ended June 30, 2023 primarily due to an increase in market interest rates. The weighted average annualized yield for the loan portfolio increased to 4.44% for the six months ended June 30, 2024 from 3.91% for the six months ended June 30, 2023 due primarily to an increase in market interest rates. The weighted average annualized yield for all other interest-earning assets increased to 4.26% for the six months ended June 30, 2024 from 2.86% for the six months ended June 30, 2023 due primarily to an increase in market interest rates.

Current wording

Average interest-earning assets increased $37.5 million, to $566.1 million for the nine months ended September 30, 2024 from $528.5 million for the nine months ended September 30, 2023. The weighted average annualized yield on interest earning-assets increased to 4.45% for the nine months ended September 30, 2024 from 3.73% for the nine months ended September 30, 2023 primarily due to an increase in market interest rates. The weighted average annualized yield for the loan portfolio increased to 4.52% for the nine months ended September 30, 2024 from 3.96% for the nine months ended September 30, 2023 due primarily to an increase in market interest rates. The weighted average annualized yield for all other interest-earning assets increased to 4.25% for the nine months ended September 30, 2024 from 2.92% for the nine months ended September 30, 2023 due primarily to an increase in market interest rates.

Previous wording

Interest Expense. Total interest expense increased $3.0 million, or 86.4%, to $6.4 million for the six months ended June 30, 2024 from $3.5 million for the six months ended June 30, 2023. Interest expense on deposits increased $2.5 million, or 140.4%, to $4.2 million for the six months ended June 30, 2024 from $1.8 million for the six months ended June 30, 2023. The average balance of interest-bearing deposits increased $41.1 million, or 13.6%, to $343.3 million for the six months ended June 30, 2024 from $302.2 million for the six months ended June 30, 2023 primarily as a result of an increase in the average balance of money market and time deposits offset by a decrease in the average balances of NOW and demand deposits. The weighted average annualized rate of interest-bearing deposits increased to 2.46% for the six months ended June 30, 2024 from 1.16% for the six months ended June 30, 2023 primarily as a result of an increase in market interest rates.

Current wording

Interest Expense. Total interest expense increased $4.0 million, or 65.4%, to $10.0 million for the nine months ended September 30, 2024 from $6.0 million for the nine months ended September 30, 2023. Interest expense on deposits increased $3.5 million, or 100.7%, to $6.9 million for the nine months ended September 30, 2024 from $3.4 million for the nine months ended September 30, 2023. The average balance of interest-bearing deposits increased $42.2 million, or 13.5%, to $354.2 million for the nine months ended September 30, 2024 from $312.0 million for the nine months ended September 30, 2023 primarily as a result of an increase in the average balance of money market, savings and time deposits offset by a decrease in the average balances of NOW and demand deposits. The weighted average annualized rate of interest-bearing deposits increased to 2.61% for the nine months ended September 30, 2024 from 1.46% for the nine months ended September 30, 2023 primarily as a result of an increase in market interest rates.

Previous wording

Interest expense on borrowings increased $547,000, or 32.9%, to $2.2 million for the six months ended June 30, 2024 from $1.7 million for the six months ended June 30, 2023 primarily due to an increase in the average balance of borrowings and an increase in market interest rates. The average balance of borrowings increased $14.4 million, or 18.1%, to $93.6 million for the six months ended June 30, 2024 from $79.2 million for the six months ended June 30, 2023. The weighted average annualized rate of borrowings increased to 4.73% for the six months ended June 30, 2024 from 4.20% for the six months ended June 30, 2023 due to an increase in market interest rates.

Current wording

Interest expense on borrowings increased $476,000, or 18.4%, to $3.1 million for the nine months ended September 30, 2024 from $2.6 million for the nine months ended September 30, 2023 primarily due to an increase in the average balance of borrowings and an increase in market interest rates. The average balance of borrowings increased $8.4 million, or 10.8%, to $86.5 million for the nine months ended September 30, 2024 from $78.0 million for the nine months ended September 30, 2023. The weighted average annualized rate of borrowings increased to 4.73% for the nine months ended September 30, 2024 from 4.43% for the nine months ended September 30, 2023 due to an increase in market interest rates.

Previous wording

Net Interest and Dividend Income. Net interest and dividend income decreased $263,000, or 4.3%, to $5.9 million for the six months ended June 30, 2024 from $6.2 million for the six months ended June 30, 2023. This decrease was due to an increase of $55.3 million, or 14.4%, in the average balance of interest-bearing liabilities, consisting primarily of an increase in the average balance of borrowings and time deposits, during the six months ended June 30, 2024 offset by a $37.3 million, or 7.1%, increase in the average balance of interest-earning assets, consisting primarily of increases in the average balances of loans and taxable debt securities. Annualized net interest margin decreased to 2.11% for the six months ended June 30, 2024 from 2.36% for the six months ended June 30, 2023 due primarily to an increase in the average rate of interest-bearing deposits and borrowings offset by an increase in the average yield on interest-earning assets.

Current wording

Net Interest and Dividend Income. Net interest and dividend income increased $152,000, or 1.7%, to $8.9 million for the nine months ended September 30, 2024 from $8.7 million for the nine months ended September 30, 2023. The increase was due to a $37.5 million, or 7.1%, increase in the average balance of interest-earning assets, consisting primarily of increases in the average balances of loans and taxable debt securities, offset by a $50.4 million, or 12.9%, increase in the average balance of interest-bearing liabilities, consisting primarily of an increase in the average balance of borrowings, money market, savings and time deposits, during the nine months ended September 30, 2024. Annualized net interest margin decreased to 2.10% for the nine months ended September 30, 2024 from 2.21% for the nine months ended September 30, 2023 due primarily to an increase in the average rate of interest-bearing deposits and borrowings offset by an increase in the average yield on interest-earning assets.

Previous wording

(Release) Provision for Credit Losses. Based on management’s analysis of the ACL, a $(36,000) release of credit losses was recorded for the six months ended June 30, 2024, compared to a $50,000 provision for credit losses expense for the six months ended June 30, 2023. The release of credit losses for the six months ended June 30, 2024 consisted of a $60,000 provision for credit losses on loans and a $(96,000) release of credit losses for off-balance sheet credit exposures. The provision for credit losses expense for the six months ended June 30, 2023 consisted of a $35,000 provision for credit losses on loans and a $15,000 provision for credit losses for off-balance sheet credit exposures.

Current wording

Provision (Release) for Credit Losses. Based on management’s analysis of the ACL, a $(20,000) release of credit losses was recorded for the nine months ended September 30, 2024, compared to a $170,000 provision for credit losses expense for the nine months ended September 30, 2023. The release of credit losses for the nine months ended September 30, 2024 consisted of an $80,000 provision for credit losses on loans and a $(100,000) release of credit losses for off-balance sheet credit exposures. The provision for credit losses expense for the nine months ended September 30, 2023 consisted of a $65,000 provision for credit losses on loans and a $105,000 provision for credit losses for off-balance sheet credit exposures.

Previous wording

Non-Interest Income. Non-interest income increased $1.7 million, or 111.7%, to $3.2 million for the six months ended June 30, 2024 compared to $1.5 million for the six months ended June 30, 2023. The increase in non-interest income during the six months ended June 30, 2024 was due primarily to a one-time $2.5 million gain on the sale of land and buildings recognized during the six months ended June 30, 2024 as compared to an $849,000 gain on termination of interest rate swaps recognized during the six months ended June 30, 2023.

Current wording

Non-Interest Income. Non-interest income increased $1.7 million, or 95.2%, to $3.6 million for the nine months ended September 30, 2024 compared to $1.8 million for the nine months ended September 30, 2023. The increase in non-interest income during the nine months ended September 30, 2024 was due primarily to a one-time $2.5 million gain on the sale of land and buildings recognized during the nine months ended September 30, 2024 as compared to an $849,000 gain on termination of interest rate swaps recognized during the nine months ended September 30, 2023.

Previous wording

Non-Interest Expense. Non-interest expense decreased $125,000, or 1.6%, to $7.8 million for the six months ended June 30, 2024 from $8.0 million for the six months ended June 30, 2023. The decrease was primarily due to a $265,000, or 5.5%, decrease in salaries and employee benefits and a $93,000, or 11.8%, decrease in data processing offset by a $88,000, or 66.7%, increase in deposit insurance fees and a $122,000, or 23.0%, increase in professional fees and assessments. The decrease in salaries and employee benefits during the six months ended June 30, 2024 was due to the adjustment of staffing levels in late 2023 reflecting the expected reduction in 2024 residential mortgage and commercial lending activity offset by normal salary increases.

Current wording

Non-Interest Expense. Non-interest expense decreased $298,000, or 2.5%, to $11.8 million for the nine months ended September 30, 2024 from $12.1 million for the nine months ended September 30, 2023. The decrease was primarily due to a $434,000, or 5.9%, decrease in salaries and employee benefits, a $89,000, or 23.5%, decrease in marketing, a $67,000, or 19.6%, decrease in equipment expense and a $153,000, or 12.8%, decrease in data processing offset by a $107,000, or 18.3%, increase in occupancy expense, a $108,000, or 55.7%, increase in deposit insurance fees and a $172,000, or 23.7%, increase in professional fees and assessments. The decrease in salaries and employee benefits during the nine months ended September 30, 2024 was due to the adjustment of staffing levels in late 2023 reflecting the expected reduction in 2024 residential mortgage and commercial lending activity offset by normal salary increases. The increase in occupancy expense was due primarily to the increase in lease expense associated with the sale-leaseback transaction completed on June 11, 2024.

Previous wording

Income Taxes. Income tax expense increased $704,000, or 293.3%, to an expense of $464,000 for the six months ended June 30, 2024 from a benefit of $240,000 for the six months ended June 30, 2023. The effective tax rate was 35.3% and (75.9)% for the six months ended June 30, 2024 and 2023, respectively. The increase in income tax expense and the effective tax rate for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was due primarily to a $1.6 million increase in income before income tax expense (benefit) for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Income Taxes. Income tax benefit decreased $491,000, or 73.6%, to a benefit of $176,000 for the nine months ended September 30, 2024 from a benefit of $667,000 for the nine months ended September 30, 2023. The effective tax rate was (24.4)% and (40.3)% for the nine months ended September 30, 2024 and 2023, respectively. The decrease in income tax benefit and the effective tax rate for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was due primarily to a $2.4 million increase in income before income tax benefit offset by the release of $398,000 of the deferred tax asset valuation allowance established at December 31, 2023 resulting from the decrease in net unrealized losses of the securities available-for-sale portfolio during the nine months ended September 30, 2024.

Previous wording

Net deferred fee expense included in loan interest totaled $201,000 and $173,000 for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Net deferred fee expense included in loan interest totaled $354,000 and $276,000 for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Liquidity 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. As of June 30, 2024 and December 31, 2023, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, had an estimated value not exceeding $120.0 million, or 26.6% of total deposits, and $102.5 million, or 25.3% of total deposits, respectively. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans and proceeds from sales and maturities of securities. We also rely on borrowings from the FHLB and FRB as supplemental sources of funds. At June 30, 2024 and December 31, 2023, we had $52.3 million and $73.0 million outstanding in advances from the FHLB, respectively, and the ability to borrow an additional $93.1 million and $71.8 million, respectively. Additionally, at June 30, 2024 and December 31, 2023, we had an overnight line of credit with the FHLB for up to $3.0 million and unsecured Fed Funds borrowing lines of credit with two correspondent banks for up to $5.0 million. At June 30, 2024 and December 31, 2023, there were no outstanding balances under any of these additional credit facilities.

Current wording

Liquidity 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. As of September 30, 2024 and December 31, 2023, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, had an estimated value not exceeding $110.3 million, or 24.7% of total deposits, and $102.5 million, or 25.3% of total deposits, respectively. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans and proceeds from sales and maturities of securities. We also rely on borrowings from the FHLB and FRB as supplemental sources of funds. At September 30, 2024 and December 31, 2023, we had $52.3 million and $73.0 million outstanding in advances from the FHLB, respectively, and the ability to borrow an additional $94.0 million and $71.8 million, respectively, as well as an overnight line of credit for up to $3.0 million. Additionally, at September 30, 2024 and December 31, 2023, the Bank had a total of $2.0 million and $5.0 million, respectively, of unsecured Fed Funds borrowing lines of credit with correspondent banks. At September 30, 2024 and December 31, 2023, there were no outstanding balances under any of these additional credit facilities.

Previous wording

The Bank has established two secured credit facilities with the FRB – Bank Term Funding Program (“BTFP”) and Borrower-In-Custody of Collateral Program (“BIC”). The BTFP ceased extending new loans on March 11, 2024. At June 30, 2024 and December 31, 2023, we had $20.0 million outstanding in advances from the FRB secured by government-sponsored enterprise obligations, mortgage-backed securities and collateralized mortgage obligations issued by various U.S. Government agencies, owned as of March 12, 2023, December 31, 2023 and June 30, 2024. The interest rate is the one-year overnight index swap rate plus 10 basis points and fixed for the term of the advance – up to one year - on the day the advance is made. The advance matures on December 13, 2024 at a fixed annual interest rate of 4.89%. At June 30, 2024 and December 31, 2023, the Bank’s borrowing capacity is $49.5 million and $50.6 million, respectively, under the BIC and is based upon eligible collateral -principally general obligation municipal bonds. The entire balance of this credit facility was available at June 30, 2024 and December 31, 2023. No further advances can be requested under the BTFP after March 11, 2024.

Current wording

The Bank has established two secured credit facilities with the FRB – Bank Term Funding Program (“BTFP”) and Borrower-In-Custody of Collateral Program (“BIC”). The BTFP ceased extending new loans on March 11, 2024. At September 30, 2024 and December 31, 2023, we had $20.0 million outstanding in advances from the FRB secured by government-sponsored enterprise obligations, mortgage-backed securities and collateralized mortgage obligations issued by various U.S. Government agencies, owned as of March 12, 2023, December 31, 2023 and September 30, 2024. The interest rate is the one-year overnight index swap rate plus 10 basis points and fixed for the term of the advance – up to one year - on the day the advance is made. The advance matures on December 13, 2024 at a fixed annual interest rate of 4.89%. At September 30, 2024 and December 31, 2023, the Bank’s borrowing capacity is $50.6 million under the BIC and is based upon eligible collateral -principally general obligation municipal bonds. The entire balance of this credit facility was available at September 30, 2024 and December 31, 2023. No further advances can be requested under the BTFP after March 11, 2024.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities and financing activities. Net cash used by operating activities was $1.5 million and $724,000 for the six months ended June 30, 2024 and 2023, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and purchases, and the purchase of securities available-for-sale, offset by proceeds from the sale of land and building and unwinding of interest rate swaps, principal collections on loans and proceeds from the sale, maturity and principal payments on securities available-for-sale, was $4.8 million and $17.1 million for the six months ended June 30, 2024 and 2023, respectively. Net cash provided by financing activities, consisting primarily of proceeds from the sale of common stock, treasury stock purchases, activity in deposit accounts and FHLB advances, was $25.6 million and $16.2 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities and financing activities. Net cash used by operating activities was $1.2 million and $417,000 for the nine months ended September 30, 2024 and 2023, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and purchases, and the purchase of securities available-for-sale, offset by proceeds from the sale of land and building and unwinding of interest rate swaps, principal collections on loans and proceeds from the sale, maturity and principal payments on securities available-for-sale, was $10.1 million and $25.5 million for the nine months ended September 30, 2024 and 2023, respectively. Net cash provided by financing activities, consisting primarily of proceeds from the sale of common stock, treasury stock purchases, activity in deposit accounts and FHLB advances, was $21.7 million and $24.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

First Seacoast Bancorp, Inc. is a separate legal entity from First Seacoast Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations and to fund repurchases of shares of common stock. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company is governed by applicable bank regulations. At June 30, 2024, the Company (on an unconsolidated basis) had liquid assets of $18.2 million.

Current wording

First Seacoast Bancorp, Inc. is a separate legal entity from First Seacoast Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations and to fund repurchases of shares of common stock. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company is governed by applicable bank regulations. At September 30, 2024, the Company (on an unconsolidated basis) had liquid assets of $17.1 million.