First Seacoast Bancorp, Inc. (NASDAQ: FSEA) is a community bank headquartered in Dover, New Hampshire, serving customers throughout Strafford and Rockingham Counties in New Hampshire and York County in Southern Maine. With a history dating back to 1890, the bank has evolved over the decades to meet the changing needs of its local communities, weathering economic cycles and adapting to industry transformations.
Business Overview and History First Seacoast Bancorp traces its origins to 1890, when it was founded as a mutual savings bank to serve the financial needs of the local community. Over the next century, the bank steadily grew its asset base and expanded its branch network, transitioning to a state-chartered stock institution in 1998. In 1982, First Seacoast Bancorp was formed as a federal corporation. The bank underwent a significant transformation in 2023 when it completed a conversion from mutual to stock form, raising $25.7 million in capital through a successful stock offering. This conversion involved the dissolution of First Seacoast Bancorp, MHC and the original First Seacoast Bancorp, with the new First Seacoast Bancorp, Inc. emerging as the holding company for First Seacoast Bank. The bank's common stock began trading on the Nasdaq Capital Market under the symbol FSEA on January 20, 2023.
Today, First Seacoast Bank operates five full-service branch locations, offering a comprehensive suite of commercial and consumer banking products and services. The bank's core services are centered around four main areas: residential lending, commercial banking, personal banking, and wealth management. The bank's lending activities are primarily focused on commercial real estate, commercial and industrial, residential mortgages, and consumer loans. On the deposit side, the bank attracts a diverse mix of checking, savings, money market, and time deposit accounts from both retail and commercial customers.
In 2021, the bank expanded its wealth management capabilities by acquiring certain client accounts and relationships from an investment advisory and wealth management firm. This strategic move allowed First Seacoast Bank to enhance its wealth management services and offerings to customers. The acquired client accounts were recorded as a customer list intangible asset, which is being amortized over a ten-year period.
Financial Performance and Ratios
Financials As of September 30, 2024, First Seacoast Bancorp reported total assets of $601.8 million, up 5.4% from $571.0 million at the end of 2023. The bank's loan portfolio stood at $434.5 million, growing 1.9% year-over-year, with one- to four-family residential mortgages comprising the largest component at $279.8 million. Total deposits increased 10.6% to $447.7 million, driven by a $42.9 million rise in both commercial and retail deposits.
The bank's net interest margin decreased to 2.10% for the nine months ended September 30, 2024, compared to 2.21% in the prior-year period, as the weighted average rate on interest-bearing liabilities rose more quickly than the yield on interest-earning assets amid the rising interest rate environment. The bank's efficiency ratio, a measure of non-interest expense as a percentage of revenue, improved to 79.6% from 82.4% over the same timeframe.
For the most recent quarter (Q3 2024), First Seacoast Bancorp reported revenue of $3,311,000, net income of $44,000, operating cash flow of $289,000, and free cash flow of $264,000. The company's performance in these metrics compared to the prior year quarter was not provided.
Liquidity First Seacoast Bancorp's capital ratios remained strong, with a total risk-based capital ratio of 15.66% and a tier 1 leverage ratio of 9.05% as of September 30, 2024, well above regulatory "well-capitalized" thresholds. The bank's non-performing assets ratio was 0.00% at the end of the third quarter of 2024, down from 0.02% at the end of 2023, reflecting stable asset quality.
As of September 30, 2024, the company had a debt-to-equity ratio of 0.9046. The bank's liquidity position was robust, with $16.52 million in cash and due from banks. Additionally, First Seacoast Bancorp had access to various credit facilities, including a $3 million overnight line of credit with the FHLB, $2 million in unsecured Fed Funds borrowing lines of credit with correspondent banks, a $20 million Bank Term Funding Program (BTFP) advance, and access to a $50.6 million Borrower-In-Custody of Collateral Program (BIC) with the Federal Reserve Bank. These credit facilities were fully available, providing significant liquidity support for the bank's operations and potential growth initiatives.
Strategic Initiatives and Outlook In recent years, First Seacoast Bank has strategically shifted its focus towards higher-yielding commercial real estate and commercial and industrial lending, while maintaining a diversified loan portfolio. This approach has helped the bank navigate the historically low-interest-rate environment and position itself for growth as rates rise.
The bank's June 2024 sale-leaseback transaction, which generated a pre-tax gain of $2.5 million, further strengthened its financial position and provided additional liquidity to support future initiatives. Looking ahead, the bank remains focused on expanding its commercial banking capabilities, enhancing its digital banking offerings, and prudently managing interest rate risk in the current economic climate.
While the rising interest rate environment presents both opportunities and challenges, First Seacoast Bancorp is well-positioned to capitalize on the shift. The bank's experienced management team, strong capital levels, and disciplined approach to risk management provide a solid foundation for navigating the evolving market landscape and delivering value to its shareholders.
Business Segments First Seacoast Bancorp's business consists primarily of two main segments: Banking Services and Wealth Management.
The Banking Services segment is the core business, involving deposit-taking and lending activities. As of September 30, 2024, the total loan portfolio was $438 million, reflecting a 1.9% increase from December 31, 2023. This growth was driven by increases in one- to four-family residential mortgage loans (up 4.0%), home equity loans and lines of credit (up 18.3%), and consumer loans (up 25.0%). These increases offset decreases in commercial real estate (down 1.0%), multi-family (down 23.2%), commercial and industrial (down 5.6%), and acquisition, development, and land loans (down 22.4%).
The Wealth Management segment, operating as FSB Wealth Management, offers investment advisory, retirement planning, and other wealth management services. This division consists of two financial advisors located in Dover, New Hampshire, providing non-FDIC insured investment and insurance products to individuals throughout the bank's primary market area. While the assets held for wealth management customers are not reflected on the consolidated balance sheet, this segment contributes to the company's fee-based revenue stream.
Risks and Challenges Like all financial institutions, First Seacoast Bancorp is subject to various risks, including interest rate risk, credit risk, liquidity risk, and operational risk. The bank's performance is closely tied to the economic conditions in its primary market area, and any prolonged downturn or disruptions in the local economy could adversely impact its financial results.
Additionally, the highly competitive nature of the banking industry in the New England region, as well as the ongoing technological changes and evolving customer preferences, pose continued challenges for the bank. Effective execution of its strategic initiatives, maintenance of asset quality, and successful adaptation to industry trends will be crucial for First Seacoast Bancorp's long-term success.
Conclusion First Seacoast Bancorp has a rich history of serving the financial needs of its local communities in New Hampshire and Maine. Despite the industry's constantly shifting landscape, the bank has demonstrated resilience and adaptability, navigating economic cycles and evolving customer demands. With its strong capital position, diversified loan portfolio, and experienced management team, First Seacoast Bancorp appears well-positioned to capitalize on the current interest rate environment and continue its growth trajectory, while managing the risks and challenges inherent to the banking industry. As the company continues to execute its strategic initiatives, investors will closely monitor its ability to maintain solid financial performance and deliver sustainable shareholder value.