First Seacoast Bancorp, Inc. (NASDAQ:FSEA) is a leading financial institution that has been serving the communities of New Hampshire and Southern Maine for over a century. With a rich history and a commitment to growth, the company has weathered various economic storms and emerged as a resilient banking powerhouse.
Business Overview Founded in 1985 as a community bank, First Seacoast Bancorp, Inc. has its roots in serving the Strafford and Rockingham counties in New Hampshire. The company started with a single branch location in Dover, New Hampshire, and has since expanded to a network of five full-service banking offices throughout the region. In its early years, the bank focused on offering traditional banking products and services to individuals and small businesses in its local market area, including taking deposits, making residential and commercial loans, and providing basic banking services.
The bank's growth trajectory took a significant turn in the 2000s when it began to diversify its business. In 2007, First Seacoast Bancorp established its FSB Wealth Management division, allowing the bank to offer investment management, retirement planning, and other financial advisory services to customers. This period also saw an increased emphasis on commercial and industrial lending to small and medium-sized businesses, broadening the bank's portfolio beyond its traditional offerings.
Like many community banks, First Seacoast Bancorp faced challenges during the financial crisis and recession of the late 2000s and early 2010s. The bank experienced an increase in problem loans and had to navigate through credit issues. However, demonstrating its resilience, the bank successfully weathered this period, maintaining its profitability and soundness.
A significant milestone in the bank's history occurred in 2023 when First Seacoast Bancorp completed a conversion from a mutual holding company structure to a stock holding company structure. This conversion involved a public stock offering that raised additional capital for the company and resulted in the company's common stock beginning to trade on the Nasdaq Capital Market under the ticker symbol FSEA.
Financial Performance First Seacoast Bancorp's financial performance has been a mix of both challenges and successes. For the fiscal year ended December 31, 2023, the company reported net income of -$10.66 million, a significant decline from the previous year's net income of -$565,000. This decrease was primarily driven by a rise in interest expense and non-interest expenses, which outpaced the growth in net interest income and non-interest income.
However, the company's balance sheet remains strong, with total assets of $571.03 million as of December 31, 2023, up from $537.42 million the previous year. This growth can be attributed to a 10.6% increase in total deposits, which reached $404.80 million, as well as a 1.9% increase in net loans to $426.64 million.
For the most recent quarter ended September 30, 2024, First Seacoast Bancorp reported revenue of $6,550,000 and net income of $44,000. The company's operating cash flow (OCF) for the quarter was $289,000, while free cash flow (FCF) stood at $264,000.
Liquidity The company's liquidity position remains robust, with cash and cash equivalents totaling $6.07 million as of December 31, 2023. As of September 30, 2024, the company had $16.52 million in cash and due from banks. First Seacoast Bancorp has the ability to borrow an additional $94 million from the Federal Home Loan Bank (FHLB) and has established two secured credit facilities with the Federal Reserve Bank - a $20 million advance under the Bank Term Funding Program and $50.6 million borrowing capacity under the Borrower-In-Custody of Collateral Program, which was entirely available as of September 30, 2024. Additionally, the Bank has a total of $2 million in unsecured Fed Funds borrowing lines of credit with correspondent banks, which were entirely available as of the same date.
The company's debt-to-equity ratio stands at 0.79, indicating a relatively conservative capital structure. The current ratio and quick ratio are both 76.09, suggesting strong short-term liquidity.
Challenges and Adaptations First Seacoast Bancorp, like many financial institutions, has faced its share of challenges in recent years. The low-interest-rate environment and increased competition in the banking industry have put pressure on the company's net interest margins. Additionally, the COVID-19 pandemic had a significant impact on the bank's operations, necessitating adaptations to ensure the safety of its employees and customers.
In response to these challenges, the company has implemented various strategies to maintain its competitive edge. This includes a focus on diversifying its loan portfolio, with a greater emphasis on commercial real estate and commercial and industrial loans, as well as enhancing its digital banking capabilities to better serve its customers.
Furthermore, the company has demonstrated its agility and resilience by successfully navigating the COVID-19 pandemic. This includes the implementation of remote work arrangements, the deployment of enhanced cleaning protocols, and the utilization of digital channels to continue serving its customers during periods of social distancing.
Looking Ahead As First Seacoast Bancorp continues to navigate the evolving banking landscape, the company remains committed to its strategic priorities. This includes a focus on organic growth, both in terms of loan originations and deposit gathering, as well as the exploration of potential acquisition opportunities that could further expand the company's reach and capabilities.
The company's management team has also expressed cautious optimism about the future, citing the strength of the local economies in which it operates and the bank's ability to adapt to changing market conditions. However, they acknowledge the ongoing challenges posed by the interest rate environment, competition, and potential economic headwinds.
Product Segments First Seacoast Bancorp's business primarily consists of the following product segments:
Lending FSEA originates a variety of loan products, including one- to four-family residential mortgage loans, commercial real estate loans, multi-family loans, commercial and industrial loans, acquisition, development and land loans, home equity loans and lines of credit, and consumer loans. As of September 30, 2024, the loan portfolio had a total balance of $437.99 million, with one- to four-family residential mortgage loans comprising the largest portion at $279.83 million, followed by commercial real estate loans at $85.70 million, commercial and industrial loans at $24.10 million, and acquisition, development, and land loans at $13.60 million. The Bank focuses on originating higher-yielding commercial real estate and commercial and industrial loans, while also diversifying into these segments to improve net margins and manage interest rate risk. The Company measures and records its Allowance for Credit Losses (ACL) on loans based on the CECL model, which resulted in an ACL of $3.44 million as of September 30, 2024.
Deposits FSEA's primary funding source is deposits, which totaled $447.69 million as of September 30, 2024, an increase of $42.89 million, or 10.6%, from December 31, 2023. This growth was driven by a $14.90 million increase in commercial deposits and a $28.00 million increase in retail deposits. Core deposits, defined as deposits other than time deposits, increased by $6.20 million, or 2.0%, to $319.70 million as of September 30, 2024. The Bank has also utilized brokered deposits, which were $56.70 million and $21.80 million in time deposits and savings deposits, respectively, as of September 30, 2024.
Borrowings To supplement its deposit funding, FSEA utilizes borrowings, primarily from the Federal Home Loan Bank (FHLB) and the Federal Reserve Bank (FRB). As of September 30, 2024, the Bank had $52.27 million in FHLB advances and $20.00 million in FRB advances, a decrease of $20.70 million, or 22.3%, from December 31, 2023.
Investments FSEA maintains a portfolio of available-for-sale securities, which increased by $11.15 million, or 9.2%, to $133.00 million as of September 30, 2024. The portfolio consists primarily of U.S. Government-sponsored enterprise obligations, U.S. Government agency small business administration pools, collateralized mortgage obligations, residential mortgage-backed securities, municipal bonds, and corporate debt and subordinated debt securities. The Bank did not record any allowance for credit losses on the available-for-sale securities portfolio as of September 30, 2024, as the unrealized losses were deemed to be due to non-credit-related factors.
Geographic Markets First Seacoast Bancorp operates exclusively in the United States, with its core markets primarily in Strafford County, New Hampshire and York County, Southern Maine.
Conclusion First Seacoast Bancorp, Inc. (NASDAQ:FSEA) is a well-established banking institution with a rich history and a proven track record of adaptability. While the company has faced its share of challenges in recent years, it has demonstrated resilience and a steadfast commitment to serving its local communities.
With a strong balance sheet, a diversified loan portfolio, and a focus on strategic growth, First Seacoast Bancorp is well-positioned to navigate the evolving banking landscape and continue delivering value to its shareholders. The company's business model focuses on traditional community banking activities, with an emphasis on commercial lending, deposit gathering, and prudent investment management. As the company looks to the future, investors will be closely watching its ability to navigate the current economic climate, manage interest rate risk, and capitalize on emerging opportunities in its core markets of New Hampshire and Southern Maine.