First Seacoast Bancorp, Inc.

First Seacoast Bancorp, Inc. (the "Company") operates as a savings and loan holding company, conducting its primary operations through its wholly-owned subsidiary, First Seacoast Bank (the "Bank"). The Bank, headquartered in Dover, New Hampshire, has been serving the Seacoast area of New Hampshire since 1890. Its business model primarily involves attracting deposits from the general public and investing these funds, along with capital from operations and Federal Home Loan Bank borrowings, into various loan types and investment securities. The Company's results are largely driven by net interest income, which is the spread between interest earned on assets and interest paid on liabilities, supplemented by non-interest income from customer service fees. The Company also offers investment management services through FSB Wealth Management, a division of First Seacoast Bank, which provides access to non-FDIC insured products like retirement planning, portfolio management, and investment/insurance strategies through a third-party broker-dealer and investment advisor.

The Company generates revenue through a mix of interest income from its loan and securities portfolios and non-interest income. Interest income on loans and securities forms the core, while interest expense on deposits and borrowings is a significant cost. Non-interest income is largely derived from customer service fees, gains on loan sales, and investment services fees from FSB Wealth Management. The primary customer segments are individuals and businesses within its market area, encompassing Strafford and Rockingham Counties in New Hampshire and York County in southern Maine. The Company emphasizes developing comprehensive banking relationships, particularly with commercial borrowers, by requiring them to maintain primary deposit accounts with the Bank.

The Bank's lending activities are diversified, though historically focused on one- to four-family residential real estate loans. At December 31, 2025, one- to four-family residential real estate loans constituted $265.2 million ⁴ or 63.2% ⁵ of the total loan portfolio. Commercial real estate and multi-family real estate loans totaled $85.4 million ⁶ (20.4% ⁷ of the portfolio), with $56.8 million ⁸ in owner-occupied commercial real estate, $23.8 million ⁹ in non-owner-occupied commercial real estate, and $4.8 million ¹⁰ in multi-family real estate loans. Acquisition, development, and land loans were $12.9 million ¹¹ (3.1% ¹²), and commercial and industrial loans were $22.5 million ¹³ (5.4% ¹⁴). Home equity loans and lines of credit amounted to $20.7 million ¹⁵ (4.9% ¹⁶), and consumer loans were $12.7 million ¹⁷ (3.0% ¹⁸). The Company aims to diversify its loan portfolio towards higher-yielding commercial real estate and commercial and industrial loans.

Investment activities are guided by a policy focused on liquidity, interest rate and market risk mitigation, asset diversification, and generating a reasonable return. All investment securities are classified as available-for-sale. At December 31, 2025, the securities portfolio of $152.4 million ¹⁹ included U.S. Government-sponsored enterprises obligations of $1.5 million ²⁰ (1.0% ²¹ of the portfolio), U.S. Government agency small business administration pools of $10.6 million ²² (6.9% ²³), municipal bonds of $29.3 million ²⁴ (19.2% ²⁵), U.S. Government-sponsored mortgage-backed securities of $99.2 million ²⁶ (65.1% ²⁷), corporate debt of $6.2 million ²⁸ (4.1% ²⁹), and corporate subordinated debt of $5.7 million ³⁰ (3.7% ³¹).

For the year ended December 31, 2025, the Company reported a net loss of $845,000 ³², an increase from the net loss of $513,000 ³³ in 2024. Total assets increased by $18.5 million ³⁴ to $599.3 million ³⁵ at December 31, 2025, from $580.8 million ³⁶ at December 31, 2024. Total loans decreased by $19.4 million ³⁷ to $419.5 million ³⁸ from $439.0 million ³⁹. Total deposits increased by $16.6 million ⁴⁰ to $470.8 million ⁴¹ from $454.2 million ⁴². Total borrowings remained stable at $52.3 million ⁴³ for both periods. Stockholders' equity increased by $1.5 million ⁴⁴ to $63.5 million ⁴⁵ from $62.1 million ⁴⁶. Basic and diluted loss per share were both $(0.23) ⁴⁷ for 2025, compared to $(0.12) ⁴⁸ for 2024.

Year-over-year, net interest and dividend income increased by $1.8 million ⁴⁹, or 15.0% ⁵⁰, to $13.7 million ⁵¹ in 2025 from $11.9 million ⁵² in 2024. This was driven by a $1.6 million ⁵³ increase in interest and dividend income, partially offset by a $234,000 ⁵⁴ decrease in interest expense. Non-interest income decreased significantly by $2.2 million ⁵⁵, or 55.1% ⁵⁶, to $1.8 million ⁵⁷ in 2025 from $3.9 million ⁵⁸ in 2024, primarily due to a one-time $2.5 million ⁵⁹ gain on the sale of land and buildings in 2024. Non-interest expense increased by $1.1 million ⁶⁰, or 6.7% ⁶¹, to $16.9 million ⁶² in 2025 from $15.9 million ⁶³ in 2024. The Company recorded an income tax benefit of $638,000 ⁶⁴ in 2025, a substantial change from the $527,000 ⁶⁵ income tax expense in 2024.

Significant operational developments during the period include the completion of a balance sheet repositioning strategy on December 11, 2024, involving the sale of $23.5 million ⁶⁶ in lower-yielding investment securities for an after-tax realized gain of $5,000 ⁶⁷ and the purchase of $16.6 million ⁶⁸ of higher-yielding investment securities. On November 28, 2023, a similar strategy involved selling $40.6 million ⁶⁹ in investment securities for an after-tax realized loss of $3.1 million ⁷⁰ and purchasing $40.6 million ⁷¹ of higher-yielding securities. The Bank also completed a sale-leaseback transaction on June 11, 2024, for four properties, generating a pre-tax gain of $2.5 million ⁷². The Company purchased $3.6 million ⁷³ and $1.9 million ⁷⁴ of participation interests in commercial and industrial loans and consumer loans secured by manufactured housing properties, respectively, during 2025.

The Company's business strategy remains consistent, focusing on growing its balance sheet, leveraging existing infrastructure, and improving profitability and operating efficiency without a proportional increase in overhead or operating risk. Management believes it is well-positioned for growth due to an experienced team and established departments for marketing, IT, audit, and compliance, alongside investments in Internet and mobile banking.

A key growth area is the expansion of the loan portfolio, particularly in higher-yielding commercial real estate and commercial and industrial loans. While maintaining its role as a residential mortgage lender, the Company intends to increase its focus on these commercial segments to improve net margins and manage interest rate risk. The increased legal lending limit supports originating larger loans for its portfolio, reducing the need for participations with other lenders.

The Company also plans to increase core deposits and reduce reliance on higher-cost borrowings. Core deposits, defined as all deposits excluding time deposits, represented 67.7% ⁷⁵ of total deposits at December 31, 2025. The strategy involves expanding core deposits by leveraging business development officers and commercial lending and retail relationships. At December 31, 2025, the ratio of net loans to deposits was 88.4% ⁷⁶, and borrowings from supplemental funding sources totaled $52.3 million ⁷⁷.

Operationally, the Company aims to maintain strong asset quality and manage credit risk, attributing its historical credit quality to a conservative credit culture, effective credit risk management, experienced credit professionals, well-defined policies, conservative underwriting, and active credit monitoring. The ratio of non-performing assets as a percent of total assets was 0.08% ⁷⁸ at December 31, 2025.

The Company's capital allocation plans include using its capital to increase lending and investment capacity, primarily through organic growth. It may also consider opportunistic expansion through acquisitions or de novo branching in its market area or contiguous markets to enhance franchise value and stockholder returns, though no current plans for such expansion are in place. The board of directors authorized a stock repurchase program on April 11, 2024, for up to 507,707 ⁷⁹ shares, with an additional authorization of up to 228,858 ⁸⁰ shares on December 12, 2024. As of December 31, 2025, 494,379 ⁸¹ shares have been repurchased under this program, which was extended to June 3, 2026 ⁸².

The Company faces several material risks. General economic conditions, both nationally and in its market areas, can be worse than expected, impacting loan delinquencies, write-offs, and the adequacy of the allowance for credit losses. Fluctuations in real estate values and market conditions for both residential and commercial properties pose a risk. The Company's ability to access cost-effective funding is crucial, and competition from various financial institutions, including those with greater resources and broader product offerings, is substantial. Inflation and changes in the interest rate environment can reduce margins and yields, mortgage banking revenues, the fair value of financial instruments, or the level of loan originations or prepayments. Adverse changes in the securities or secondary mortgage markets are also a concern. Regulatory changes, including those affecting fees, capital requirements, and insurance premiums, could negatively impact operations. Technological changes may be more difficult or expensive than anticipated, and the inability of third-party providers to perform as expected is a risk. The Company must effectively manage market risk, credit risk, and operational risk, including cybersecurity risks and artificial intelligence (AI) risks. Its economic value of equity analysis as of December 31, 2025, estimated that an instantaneous 200 basis point increase in interest rates would result in a 22.8% ⁸³ decrease in economic value of equity, which was above the policy limit of 20.0% ⁸⁴.

Management's message to shareholders emphasizes a commitment to a safe and sound, service-oriented business strategy aimed at producing increasing earnings that can be reinvested in the business and communities. Key strategic priorities include growing the balance sheet, leveraging existing infrastructure, and improving profitability and operating efficiency. Management intends to grow the loan portfolio by increasing commercial real estate and commercial and industrial lending, while maintaining strong asset quality and managing credit risk. Another priority is to increase core deposits and reduce reliance on higher-cost borrowings. The Company also plans for organic growth and may consider opportunistic acquisitions or de novo branching. The board of directors authorized a stock repurchase program for up to 507,707 ⁸⁵ shares on April 11, 2024, with an additional authorization of up to 228,858 ⁸⁶ shares on December 12, 2024, and the program's expiration date was extended to June 3, 2026 ⁸⁷.