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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File No. 001-41597

First Seacoast Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland		92-0334805
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

633 Central Avenue, Dover, New Hampshire		03820
(Address of Principal Executive Offices)		(Zip Code)

(603)742-4680

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common stock, $0.01 par value per share

    FSEA

    The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 30, 2024, there were 4,695,184 outstanding shares of the Registrant's common stock.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Consolidated Financial Statements	2
	Consolidated Balance Sheets at September 30, 2024 (unaudited) and December 31, 2023	2
	Consolidated Statements of Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	53
PART II.	OTHER INFORMATION	54
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	55
	Signatures	56

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FIRST SEACOAST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED Balance Sheets


(Dollars in thousands)	(Unaudited) September 30, 2024			December 31, 2023
ASSETS
Cash and due from banks	$	16,517		$	6,069
Securities available-for-sale, at fair value		133,004			121,854
Federal Home Loan Bank stock		2,498			2,986
Total loans		437,991			430,031
Less allowance for credit losses on loans		(3,445	)		(3,390	)
Net loans		434,546			426,641
Land, building and equipment, net		667			4,072
Bank-owned life insurance		4,749			4,663
Accrued interest receivable		2,351			2,294
Other assets		7,447			2,456
Total assets	$	601,779		$	571,035
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits	$	69,341		$	65,845
Interest bearing deposits		378,345			338,953
Total deposits		447,686			404,798
Advances from Federal Home Loan Bank		52,268			73,007
Advances from Federal Reserve Bank		20,000			20,000
Mortgagors’ tax escrow		1,996			640
Deferred compensation liability		2,365			2,071
Lease liabilities		7,242			587
Other liabilities		4,433			3,314
Total liabilities		535,990			504,417
Stockholders' Equity:
Preferred Stock, $.01 par value, 10,000,000 shares authorized, none issued		—			—
Common Stock, $.01 par value, 90,000,000 shares authorized; 5,192,612 issued and 4,718,462 outstanding at September 30, 2024; and 5,192,612 issued and 5,077,164 outstanding at December 31, 2023		52			52
Additional paid-in capital		52,816			52,642
Retained earnings		26,492			25,597
Accumulated other comprehensive loss		(4,975	)		(5,944	)
Treasury stock, at cost: 474,150 shares outstanding as of September 30, 2024 and 115,448 shares outstanding as of December 31, 2023		(4,669	)		(1,381	)
Unearned stock compensation		(3,927	)		(4,348	)
Total stockholders' equity		65,789			66,618
Total liabilities and stockholders' equity	$	601,779		$	571,035

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2024			2023			2024			2023
Interest and dividend income:
Interest and fees on loans	$	5,101		$	4,281		$	14,646		$	12,215
Interest on debt securities:
Taxable		955			385			2,746			1,087
Non-taxable		441			443			1,322			1,305
Total interest on debt securities		1,396			828			4,068			2,392
Dividends		53			54			184			185
Total interest and dividend income		6,550			5,163			18,898			14,792
Interest expense:
Interest on deposits		2,711			1,668			6,932			3,454
Interest on borrowings		857			928			3,069			2,593
Total interest expense		3,568			2,596			10,001			6,047
Net interest and dividend income		2,982			2,567			8,897			8,745
Provision (release) for credit losses		16			120			(20	)		170
Net interest and dividend income after provision (release) for credit losses		2,966			2,447			8,917			8,575
Non-interest income:
Customer service fees		181			177			543			582
Gain on sale of loans		12			—			20			—
Gain on sale of land and buildings		—			—			2,522			—
Gain on termination of interest rate swaps		—			—			—			849
Income from bank-owned life insurance		45			41			86			81
Loan servicing fee income		7			9			31			47
Investment services fees		106			65			319			220
Other income		13			22			33			42
Total non-interest income		364			314			3,554			1,821
Non-interest expense:
Salaries and employee benefits		2,317			2,486			6,894			7,328
Director compensation		114			46			295			234
Occupancy expense		319			205			691			584
Equipment expense		73			115			275			342
Marketing		103			174			289			378
Data processing		344			404			1,039			1,192
Deposit insurance fees		82			62			302			194
Professional fees and assessments		246			196			898			726
Debit card fees		35			58			94			157
Employee travel and education expenses		41			42			119			136
Other expense		252			311			856			779
Total non-interest expense		3,926			4,099			11,752			12,050
(Loss) income before income tax benefit		(596	)		(1,338	)		719			(1,654	)
Income tax benefit		(640	)		(427	)		(176	)		(667	)
Net income (loss)	$	44		$	(911	)	$	895		$	(987	)

Income (loss) per share:
Basic	$	0.01		$	(0.20	)	$	0.20		$	(0.21	)
Diluted (1)	$	0.01		$	(0.20	)	$	0.19		$	(0.21	)
Weighted Average Shares:
Basic		4,101,543			4,638,225			4,447,432			4,648,651
Diluted (1)		4,342,755			4,638,225			4,684,892			4,648,651

(1) Not adjusted for potentially dilutive shares for periods where a net loss was recognized. The three and nine months ended September 30, 2023 excludes 32,393 of stock-based awards that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the periods presented.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED Statements of COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2024			2023			2024			2023
Net income (loss)	$	44		$	(911	)	$	895		$	(987	)
Other comprehensive income (loss), net of income taxes:
Securities available-for-sale:
Unrealized holding gains (losses) on securities available-for-sale arising during the period, net of income taxes of $804, $(1,873), $282 and $(1,788), respectively		2,182			(5,023	)		765			(4,876	)
Reclassification adjustment for net amortization of bond premiums included in net income (loss), net of income taxes of $39, $60, $116 and $191, respectively		107			162			315			521
Total unrealized gain (loss) on securities available-for-sale		2,289			(4,861	)		1,080			(4,355	)
Derivatives:
Change in interest rate swaps, net of income taxes of $(35), $-0-, $(35) and $(30), respectively		(96	)		—			(96	)		(82	)
Reclassification adjustment for gains and net interest expense on swaps included in net income (loss), net of income taxes of $(6), $-0-, $(6) and $(230), respectively		(15	)		—			(15	)		(619	)
Total change in interest rate swaps		(111	)		—			(111	)		(701	)
Other comprehensive income (loss)		2,178			(4,861	)		969			(5,056	)
Comprehensive income (loss)	$	2,222		$	(5,772	)	$	1,864		$	(6,043	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED Statements of Changes in STOCKHOLDERS’ EQUITY (UNAUDITED)


(Dollars in thousands)	Shares of Common Stock			Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Unearned Stock Compensation			Total Stockholders' Equity
Balance June 30, 2024		4,841,445		$	52		$	52,757		$	26,448		$	(7,153	)	$	(3,537	)	$	(4,067	)	$	64,500
Net income		—			—			—			44			—			—			—			44
Other comprehensive income		—			—			—			—			2,178			—			—			2,178
Treasury stock activity		(122,983	)		—			—			—			—			(1,132	)		—			(1,132	)
Amortization of unearned stock compensation		—			—			62			—			—			—			102			164
ESOP shares earned - 3,839 shares		—			—			(3	)		—			—			—			38			35
Balance September 30, 2024		4,718,462		$	52		$	52,816		$	26,492		$	(4,975	)	$	(4,669	)	$	(3,927	)	$	65,789

Balance December 31, 2023		5,077,164		$	52		$	52,642		$	25,597		$	(5,944	)	$	(1,381	)	$	(4,348	)	$	66,618
Net income		—			—			—			895			—			—			—			895
Other comprehensive income		—			—			—			—			969			—			—			969
Treasury stock activity		(358,702	)		—			—			—			—			(3,288	)		—			(3,288	)
Amortization of unearned stock compensation		—			—			186			—			—			—			306			492
ESOP shares earned - 11,517 shares		—			—			(12	)		—			—			—			115			103
Balance September 30, 2024		4,718,462		$	52		$	52,816		$	26,492		$	(4,975	)	$	(4,669	)	$	(3,927	)	$	65,789

Balance June 30, 2023		5,077,616		$	52		$	52,534		$	36,177		$	(9,922	)	$	(1,377	)	$	(4,628	)	$	72,836
Net loss		—			—			—			(911	)		—						—			(911	)
Other comprehensive loss		—			—			—			—			(4,861	)					—			(4,861	)
Amortization of unearned stock compensation		—			—			67			—			—			—			102			169
ESOP shares earned - 3,839 shares		—			—			(9	)		—			—						38			29
Balance September 30, 2023		5,077,616		$	52		$	52,592		$	35,266		$	(14,783	)	$	(1,377	)	$	(4,488	)	$	67,262

Balance December 31, 2022(1)		5,068,540		$	62		$	26,768		$	36,248		$	(9,727	)	$	(1,377	)	$	(2,637	)	$	49,337
Net loss		—			—			—			(987	)		—			—			—			(987	)
Other comprehensive loss		—			—			—			—			(5,056	)		—			—			(5,056	)
Cumulative adjustment for change in accounting principle (ASU 2016-13)		—			—			—			5			—			—			—			5
Reorganization: Conversion of First Seacoast Bancorp, Inc. (net of costs of $2.4 million)		6,598			(10	)		25,732			—			—			—			—			25,722
Purchase of 224,400 shares of common stock by the ESOP		—			—			—			—			—			—			(2,244	)		(2,244	)
Issuance of stock compensation		2,478			—			20			—			—			—			(20	)		—
Amortization of unearned stock compensation		—			—			88			—			—			—			298			386
ESOP shares earned - 11,517 shares		—			—			(16	)		—			—			—			115			99
Balance September 30, 2023		5,077,616		$	52		$	52,592		$	35,266		$	(14,783	)	$	(1,377	)	$	(4,488	)	$	67,262

(1) Adjusted for conversion of First Seacoast Bancorp, Inc.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended September 30,
(Dollars in thousands)	2024			2023
Cash flows from operating activities:
Net income (loss)	$	895		$	(987	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Cumulative change in accounting principle (ASU 2016-13)		—			5
ESOP expense		103			99
Stock based compensation		492			386
Depreciation and amortization		299			364
Net amortization of bond premium		431			712
(Release) provision for credit losses		(20	)		170
Gain on sale of loans		(20	)		—
(Gain) loss on sale of land, building and equipment		(2,522	)		2
Gain on termination of interest rate swaps		—			(849	)
Proceeds from loans sold		406			—
Origination of loans sold		(386	)		—
Increase in bank-owned life insurance		(86	)		(81	)
Increase in deferred costs on loans		(115	)		(231	)
Deferred tax benefit		(353	)		(720	)
Increase in accrued interest receivable		(57	)		(142	)
(Increase) decrease in other assets		(6,538	)		794
Increase in deferred compensation liability		294			160
Increase in lease liabilities		5,132			—
Increase (decrease) in other liabilities		863			(99	)
Net cash used by operating activities		(1,182	)		(417	)
Cash flows from investing activities:
Proceeds from sales, maturities and principal payments received on securities available-for-sale		8,055			3,661
Purchase of securities available-for-sale		(18,107	)		(6,754	)
Purchase of property and equipment		(204	)		(323	)
Loan purchases		(1,774	)		(1,221	)
Loan originations and principal collections, net		(5,938	)		(23,975	)
Net loan charge offs		(25	)		(2	)
Net redemption of Federal Home Loan Bank stock		488			1,530
Proceeds from sales of interest bearing time deposits with other banks		—			747
Proceeds from sale of land, building and equipment		7,395			—
Proceeds from termination of interest rate swaps		—			849
Net cash used by investing activities		(10,110	)		(25,488	)
Cash flows from financing activities:
Net increase in NOW, demand deposits, money market and savings accounts		6,193			6,404
Net increase in time deposits		36,695			23,018
Increase in mortgagors’ escrow accounts		1,356			1,443
Proceeds of finance lease		1,539			—
Principal payments on finance lease		(16	)		—
Proceeds from sale of common stock, net		—			25,622
Common stock purchased by ESOP		—			(2,244	)
Return of capital from conversion of First Seacoast Bancorp, Inc.		—			100
Treasury stock purchases		(3,288	)		—
Proceeds from advances from Federal Reserve Bank		—			25,000
Proceeds from long-term FHLB advances		25,401			—
Net payments on short-term FHLB advances		(20,340	)		(39,520	)
Payments on long-term FHLB advances		(25,800	)		(15,000	)
Net cash provided by financing activities		21,740			24,823
Net change in cash and cash equivalents		10,448			(1,082	)
Cash and cash equivalents at beginning of period		6,069			8,250
Cash and cash equivalents at end of period	$	16,517		$	7,168

Supplemental disclosure of cash flow information:
Cash activities:
Cash paid for interest	$	9,148		$	5,633
Cash paid for income taxes		29			41
Noncash activities:
Effect of change in fair value of securities available-for-sale:
Securities available-for-sale		1,478			(5,929	)
Deferred taxes		(398	)		1,574
Other comprehensive income (loss)		1,080			(4,355	)
Effect of change in fair value of interest rate swaps:
Interest rate swaps		(152	)		(961	)
Deferred taxes		41			260
Other comprehensive loss		(111	)		(701	)
Cumulative fair value hedging adjustment - loans		156			447
Cumulative fair value hedging adjustment - securities available-for-sale		52			—
Effect of the adoption of ASU 2016-13:
Allowance for credit losses on loans		—			(295	)
Other liabilities		—			290

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements include the accounts of First Seacoast Bancorp, Inc. (the “Company”), its wholly-owned subsidiary, First Seacoast Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, FSB Service Corporation, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim consolidated financial information, general practices within the banking industry and with instructions for Form 10-Q and Regulation S-X. Accordingly, these interim financial statements do not include all the information or footnotes required by U.S. GAAP for annual financial statements. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of these consolidated financial statements have been included. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results which may be expected for the entire year. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 29, 2024.

Corporate Structure

On January 19, 2023, the conversion of First Seacoast Bancorp, MHC from mutual to stock form and the related stock offering by First Seacoast Bancorp, Inc., the new holding company for First Seacoast Bank, was completed. As a result, both First Seacoast Bancorp, MHC and First Seacoast Bancorp ceased to exist. First Seacoast Bancorp, Inc.’s common stock began trading on the Nasdaq Capital Market under the trading symbol “FSEA” on January 20, 2023. As a result of the subscription offering, the community offering and the syndicated community offering, First Seacoast Bancorp, Inc. sold a total of 2,805,000 shares of its common stock at a price of $10.00 per share, which includes 224,400 shares sold to First Seacoast Bank’s Employee Stock Ownership Plan. As part of the conversion transaction, each outstanding share of First Seacoast Bancorp (a federal corporation) common stock owned by the public stockholders of First Seacoast Bancorp (a federal corporation) (stockholders other than First Seacoast Bancorp, MHC) as of the closing date was converted into shares of First Seacoast Bancorp, Inc. common stock based on an exchange ratio of 0.8358 shares of First Seacoast Bancorp, Inc. common stock for each share of First Seacoast Bancorp (a federal corporation) common stock.

The Bank offers a full range of banking and wealth management services to its customers. The Bank focuses on four core services that center around customer needs. The core services include residential lending, commercial banking, personal banking and wealth management. The Bank offers a full range of commercial and consumer banking services through its network of five full-service branch locations.

The Bank is engaged principally in the business of attracting deposits from the public and investing those funds in various types of loans, including residential and commercial real estate loans, and a variety of commercial and consumer loans. The Bank also invests its deposits and borrowed funds in investment securities. Deposits at the Bank are insured by the Federal Deposit Insurance Corporation (“FDIC”) for the maximum amount permitted by law.

The Company has one reportable segment, “Banking Services.” All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others. For example, lending is dependent upon the ability of the Company to fund itself with deposits and other borrowings and manage interest rate and credit risk. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment or unit.

Investment management services are offered through FSB Wealth Management. FSB Wealth Management is a division of First Seacoast Bank. The division currently consists of two financial advisors who are located in Dover, New Hampshire. FSB Wealth Management provides access to non-FDIC insured products that include retirement planning, portfolio management, investment and insurance strategies, business retirement plans and college planning to individuals throughout our primary market area. These investments and services are offered through a third-party registered broker-dealer and investment advisor. FSB Wealth Management receives fees from advisory services and commissions on individual investment and insurance products purchased by clients. The assets held for wealth management customers are not assets of the Company and, accordingly, are not reflected in the Company’s consolidated balance sheets.

On August 17, 2021, the Bank entered into a definitive agreement with an investment advisory and wealth management firm (the “seller”) to purchase certain of its client accounts and client relationships for a final adjusted purchase price of $324,000. The client accounts purchased are recorded as a customer list intangible asset. Identifiable intangible assets that are subject to amortization will be reviewed for impairment, at least annually, based on their fair value. Any impairment will be recognized as a charge to earnings and the adjusted carrying amount of the intangible asset will become its new accounting basis. The remaining useful life of the intangible asset will also be evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. The Company is amortizing the customer list intangible on a straight-line basis over a ten-year period. During the three months ended September 30, 2024 and 2023, $8,000 of amortization expense was recorded in other expense. During the nine months ended September 30, 2024 and 2023, $24,000 and $22,000 of amortization expense was recorded in other expense, respectively. Customer list intangible balances included in other assets are $223,000 and $247,000 as of September 30, 2024 and December 31, 2023, respectively.

Recent Accounting Pronouncements Yet To Be Adopted

As an “emerging growth company,” as defined in Title 1 of Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As a result, the Company’s consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards without an extended transition period. As of September 30, 2024, there was no significant difference in the comparability of the Company’s consolidated financial statements as a result of this extended transition period. The Company’s status as an “emerging growth company” will end on the earlier of: (i) the last day of the fiscal year of the Company during which it had total annual gross revenues of $1.235 billion (as adjusted for inflation) or more; (ii) the last day of the fiscal year of the Company following the fifth anniversary of the effective date of the Company’s initial public offering (which will be December 31, 2024 for the Company); (iii) the date on which the Company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which the Company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).

The Company considers the applicability and impact of all Accounting Standards Updates ("ASUs"). ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial statements.

In March 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-02, “Codification Improvements,” which amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective January 1, 2025 and is not expected to have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes- Improvements to Income Tax Disclosures", which will require enhancements and further transparency to various income tax disclosures, most notably the tax rate reconciliation and income taxes paid. ASU 2023-09 becomes effective for annual periods beginning after December 15, 2024 on a prospective basis. Retrospective application for all periods presented is permitted. Early adoption is also permitted. We are currently evaluating the effect this standard will have on our disclosures.

Securities Available-for-Sale

The amortized cost and fair value of securities available-for-sale, and the corresponding amounts of gross unrealized gains and losses for which an allowance for credit losses has not been recorded, are as follows as of September 30, 2024 and December 31, 2023:


	September 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
U.S. Government-sponsored enterprises ("GSE") obligations	$	1,648	$	—	$	(216	)	$	1,432
U.S. Government agency small business administration pools guaranteed by SBA		14,537		33		(708	)		13,862
Collateralized mortgage obligations issued by the FHLMC, FNMA and GNMA		15,594		110		(441	)		15,263
Residential mortgage-backed GSE securities		42,166		857		(3,249	)		39,774
Municipal bonds		56,894		957		(3,274	)		54,577
Corporate debt		500		—		(13	)		487
Corporate subordinated debt		8,321		105		(817	)		7,609
	$	139,660	$	2,062	$	(8,718	)	$	133,004

	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
U.S. Government-sponsored enterprises ("GSE") obligations	$	1,668	$	—	$	(270	)	$	1,398
U.S. Government agency small business administration pools guaranteed by SBA		16,410		36		(863	)		15,583
Collateralized mortgage obligations issued by the FHLMC, FNMA and GNMA		2,958		—		(484	)		2,474
Residential mortgage-backed GSE securities		41,186		653		(3,618	)		38,221
Municipal bonds		57,192		1,087		(3,587	)		54,692
Corporate debt		500		—		(8	)		492
Corporate subordinated debt		10,074		3		(1,083	)		8,994
	$	129,988	$	1,779	$	(9,913	)	$	121,854

The amortized cost and fair values of securities available-for-sale at September 30, 2024 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2024
	Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	—	$	—
Due after one year through five years		500		487
Due after five years through ten years		10,917		9,938
Due after ten years		55,946		53,680
Total U.S. Government-sponsored enterprises obligations ("GSE"), municipal bonds, corporate debt and corporate subordinated debt		67,363		64,105
U.S. Government agency small business pools guaranteed by SBA(1)		14,537		13,862
Collateralized mortgage obligations issued by the FHLMC, FNMA, and GNMA(1)		15,594		15,263
Residential mortgage-backed GSE securities(1)		42,166		39,774
Total	$	139,660	$	133,004

(1) Actual maturities for these debt securities are dependent upon the interest rate environment and prepayments on the underlying loans.

The following is a summary of gross unrealized losses and fair value for those investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, at September 30, 2024 and December 31, 2023.


	Less than 12 Months							More than 12 Months							Total
	Number of Securities		Fair Value		Unrealized Losses			Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
September 30, 2024
U.S. Government sponsored enterprises ("GSE") obligations		—	$	—	$	—			3	$	1,433	$	(216	)	$	1,433	$	(216	)
U.S. Government agency small business administration pools guaranteed by SBA		3		2,681		(39	)		5		3,827		(669	)		6,508		(708	)
Collateralized mortgage obligations issued by the FHLMC, FNMA and GNMA		2		6,500		(35	)		4		2,385		(406	)		8,885		(441	)
Residential mortgage backed GSE securities		5		3,647		(84	)		24		16,048		(3,165	)		19,695		(3,249	)
Municipal bonds		1		645		(6	)		50		32,631		(3,268	)		33,276		(3,274	)
Corporate debt		—		—		—			1		487		(13	)		487		(13	)
Corporate subordinated debt		—		—		—			5		4,700		(817	)		4,700		(817	)
		11	$	13,473	$	(164	)		92	$	61,511	$	(8,554	)	$	74,984	$	(8,718	)
December 31, 2023
U.S. Government sponsored enterprises ("GSE") obligations		—	$	—	$	—			3	$	1,398	$	(270	)	$	1,398	$	(270	)
U.S. Government agency small business administration pools guaranteed by SBA		8		8,432		(75	)		5		3,899		(788	)		12,331		(863	)
Collateralized mortgage obligations issued by the FHLMC, FNMA and GNMA		—		—		—			4		2,474		(484	)		2,474		(484	)
Residential mortgage backed GSE securities		5		4,806		(53	)		23		15,347		(3,565	)		20,153		(3,618	)
Municipal bonds		1		1,941		(10	)		49		30,729		(3,577	)		32,670		(3,587	)
Corporate debt		—		—		—			1		492		(8	)		492		(8	)
Corporate subordinated debt		4		4,080		(82	)		4		4,029		(1,001	)		8,109		(1,083	)
		18	$	19,259	$	(220	)		89	$	58,368	$	(9,693	)	$	77,627	$	(9,913	)

Management evaluates securities available-for-sale in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value. At September 30, 2024, the Company had 103 securities available-for-sale in an unrealized loss position without an allowance for credit losses. Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of September 30, 2024, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore the Company carried no allowance for credit losses on securities available-for-sale as of September 30, 2024.

Proceeds from maturities and principal payments received on securities available-for-sale were $5,352 and $1,450 for the three months ended September 30, 2024 and 2023, respectively, and $8,055 and $3,661 for the nine months ended September 30, 2024 and 2023, respectively. There were no gross realized gains or losses on securities available-for-sale for the three and nine months ended September 30, 2024 and 2023.

At September 30, 2024 and December 31, 2023, $73.0 million and $74.1 million of securities available-for-sale were pledged as collateral for the Company's Bank Term Funding Program and Borrower-In-Custody secured credit facilities, respectively (see Note 6 Borrowings for more information). As of September 30, 2024 and December 31, 2023, there were no holdings of securities of any issuer, other than the SBA, FHLMC, GNMA and FNMA, whose aggregate carrying value exceeded 10% of stockholders’ equity.

Loans and Allowance for Credit Losses on Loans

The Company's lending activities are primarily conducted in and around Dover, New Hampshire, and in the areas surrounding its branches. The Company originates commercial real estate loans, multifamily 5+ dwelling unit loans, commercial and industrial loans, acquisition, development and land loans, 1–4 family residential loans, home equity line of credit loans and consumer loans. Most loans are collateralized by real estate. The ability and willingness of real estate, commercial and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate sector in the borrowers’ geographic area and the general economy.

Loans consisted of the following at September 30, 2024 and December 31, 2023:


	2024			2023
	(Dollars in thousands)
Commercial real estate (CRE)	$	85,696		$	86,566
Multifamily (MF)		5,824			7,582
Commercial and industrial (C+I)		24,096			25,511
Acquisition, development, and land (ADL)		13,599			17,520
1-4 family residential (RES)		279,832			268,943
Home equity line of credit (HELOC)		16,678			14,093
Consumer (CON)		12,266			9,816
Total loans		437,991			430,031
Allowance for credit losses on loans		(3,445	)		(3,390	)
Total loans, net	$	434,546		$	426,641

Allowance for Credit Losses on Loans ("ACL")

Effective January 1, 2023, the Company adopted the new accounting standard for credit losses, ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended ("ASU 2016-13"). This new accounting standard, commonly referred to as "CECL," significantly changed the methodology for accounting for reserves on loans and unfunded off-balance sheet ("OBS") credit exposures, including certain unfunded loan commitments and standby guarantees. ASU 2016-13 replaced the "incurred loss" methodology used to establish an allowance on loans and off-balance sheet credit exposures, with an "expected loss" approach. Under CECL, the ACL at each reporting period serves as a best estimate of projected credit losses over the contractual life of certain assets, adjusted for expected prepayments, given an expectation of economic conditions and forecasts as of the valuation date. Upon adoption of CECL, the Company made the following elections regarding accrued interest receivable: (i) present accrued interest receivable balances separately on the balance sheet on the consolidated statements of condition; (ii) exclude accrued interest from the measurement of the ACL, including investments and loans; and (iii) continue to write-off accrued interest receivable by reversing interest income. The Company has a policy in place to write-off accrued interest when a loan is placed on non-accrual. Accrued interest is written-off by reversing previously recorded interest income. For loans, write-off typically occurs when a loan has been in default for 90 days or more. An immaterial amount of accrued interest on non-accrual loans was written off during the three and nine months ended September 30, 2024 and 2023, by reversing interest income. Historically, the Company has not experienced uncollectible accrued interest receivable on its securities available-for-sale.

The ACL is the sum of various components including the following: (a) historical loss experience, (b) a reasonable and supportable forecast, (c) loans evaluated individually, and (d) changes in relevant environmental factors. The historical loss component is segmented by loan type and serves as the core of the ACL adequacy methodology. The Company has selected the Weighted Average Remaining Maturity Model (“WARM”), 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.

CECL may create more volatility in the ACL, specifically the ACL on loans and ACL on off-balance sheet credit exposures. Under CECL, the ACL may increase or decrease period to period based on many factors, including, but not limited to: (i)

macroeconomic forecasts and conditions; (ii) forecast period and reversion speed; (iii) prepayment speed assumption; (iv) loan portfolio volumes and changes in mix; (v) credit quality; and (vi) various qualitative factors outlined in ASU 2016-13.

The significant key assumptions used with the ACL calculation at September 30, 2024 and December 31, 2023 using the CECL methodology, included:

•Macroeconomic factors (loss drivers): Monitoring and assessing local and national unemployment, changes in national GDP and other macroeconomic factors which may be the most predictive indicator of losses within the loan portfolio. The macroeconomic factors considered in determining the ACL may change from time to time.

•Forecast Period and Reversion speed: ASU 2016-13 requires a company to use a reasonable and supportable forecast period in developing the ACL, which represents the time period that management believes it can reasonably forecast the identified loss drivers. Generally, the forecast period management believes to be reasonable and supportable will be set annually and validated through an assessment of economic leading indicators. In periods of greater volatility and uncertainty, such as the current interest rate environment, management will likely use a shorter forecast period, whereas when markets, economies, interest rate environment, political matters, and other factors are considered to be more stable and certain, a longer forecast period may be used. Also, in times of greater uncertainty, management may consider a range of possible forecasts and evaluate the probability of each scenario. Generally, the forecasted period is expected to range from one to three years. Once the reasonable and supportable forecast period is determined, ASU 2016-13 requires a company to revert its loss expectations to the long-run historical mean for the remainder of the contract life of the asset, adjusted for prepayments. In determining the length of time over which the reversion will take place (i.e. "reversion speed"), factors such as, historical credit loss experience over previous economic cycles, as well as where the Company believes it is within the current economic cycle, will be considered. The Company has chosen a forecast period of four quarters which will be similar to the historical loss period between January 2014 and December 2016 and then reverting to the long-term average over the following two quarters using the straight-line reversion method. The Company believes this historical forecast period to be representative of potential economic conditions over the next eighteen months.

•Prepayment speeds: Prepayment speeds are determined for each loan segment utilizing the Company's historical loan data, as well as consideration of current environmental factors. The prepayment speed assumption is utilized with the WARM method to forecast expected cash flows over the contractual life of the loan, adjusted for expected prepayments. A higher prepayment speed assumption will drive a lower ACL, and vice versa.

•Qualitative factors: As within previous accounting guidance used for the "incurred loss" model, ASU 2016-13 requires companies to consider various qualitative factors that may impact expected credit losses. The Company continues to consider qualitative factors in determining and arriving at an ACL at each reporting period such as: (i) actual or expected changes in economic trends and conditions, (ii) changes in the value of underlying collateral for loans, (iii) changes to lending policies, underwriting standards and/or management personnel performing such functions, (iv) delinquency and other credit quality trends, (v) credit risk concentrations, if any, (vi) changes to the nature of the Company's business impacting the loan portfolio, (vii) and other external factors, that may include, but are not limited to, results of internal loan reviews and examinations by bank regulatory agencies.

Certain loans which may not share similar risk characteristics with other loans in the portfolio may be tested individually for estimated credit losses, including (i) loans classified as special mention, substandard or doubtful and are on non-accrual status, (ii) a loan modified for a borrower experiencing financial difficulty or (iii) loans that have other unique characteristics. Factors considered in measuring the extent of the expected credit loss for these loans may include payment status, collateral value, borrower's financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.

January 1, 2023 CECL Transition (Day 1) Impact

The CECL methodology reflects the Company's view of the state of the economy and forecasted macroeconomic conditions and their impact on the Company's loan portfolio as of the adoption date.

The following table illustrates the impact of the adoption of ASU 2016-13:


	January 1, 2023
	As reported under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
	(Dollars in thousands)
ASSETS
Allowance for credit losses on loans:
Commercial real estate (CRE)	$	788	$	942	$	(154	)
Multifamily (MF)		55		54		1
Commercial and industrial (C+I)		273		184		89
Acquisition, development, and land (ADL)		120		138		(18	)
1-4 family residential (RES)		1,847		2,048		(201	)
Home equity line of credit (HELOC)		88		81		7
Consumer (CON)		114		100		14
Unallocated		1		34		(33	)
Allowance for credit losses on loans	$	3,286	$	3,581		(295	)
LIABILITIES
Allowance for credit losses on OBS credit exposures	$	308	$	18	$	290
STOCKHOLDERS' EQUITY
Retained earnings	$	36,253	$	36,248	$	5

Changes in the ACL for the three and nine months ended September 30, 2024 and 2023, under the CECL model, by portfolio segment, are summarized as follows:


(Dollars in thousands)	CRE			MF			C+I		ADL			RES		HELOC		CON			Unallocated			Total
Balance, June 30, 2024	$	745		$	107		$	234	$	70		$	1,608	$	171	$	442		$	74		$	3,451
(Release) provision for credit losses on loans		(25	)		(47	)		3		8			44		3		61			(27	)		20
Charge-offs		—			—			—		—			—		—		(27	)		—			(27	)
Recoveries		—			—			—		—			—		—		1			—			1
Balance, September 30, 2024	$	720		$	60		$	237	$	78		$	1,652	$	174	$	477		$	47		$	3,445

Balance, December 31, 2023	$	830		$	76		$	236	$	105		$	1,601	$	156	$	357		$	29		$	3,390
(Release) provision for credit losses on loans		(110	)		(16	)		1		(27	)		51		18		145			18			80
Charge-offs		—			—			—		—			—		—		(27	)		—			(27	)
Recoveries		—			—			—		—			—		—		2			—			2
Balance, September 30, 2024	$	720		$	60		$	237	$	78		$	1,652	$	174	$	477		$	47		$	3,445

Balance, June 30, 2023	$	806		$	49		$	277	$	70		$	1,910	$	85	$	109		$	13		$	3,319
(Release) provision for credit losses on loans		(18	)		22			11		31

First Seacoast Bancorp, Inc. 10-Q