10-K: First Seacoast Bancorp Reports Increased Loss, Higher NPLs

First Seacoast Bancorp reported an increased net loss for fiscal year 2025, alongside a rise in non-performing loans and a breach of interest rate risk policy limits.

Summary

• First Seacoast Bancorp, Inc. reported a net loss of $845,000 for the fiscal year ended December 31, 2025, an increase from the $513,000 net loss in 2024.
• Total assets increased by 3.2% to $599.3 million, while net loans decreased by 4.5% to $416.0 million.
• Total deposits grew by 3.7% to $470.8 million, primarily driven by an increase in time deposits.
• Net interest and dividend income increased by 15.0% to $13.7 million, with the net interest margin improving to 2.33% from 2.09%.
• Non-interest income decreased significantly by 55.1% to $1.8 million, largely due to a one-time $2.5 million gain on the sale of land and buildings in 2024.
• Non-performing loans increased to $478,000, representing 0.11% of total loans, compared to $0 in the prior year.
• The company's economic value of equity (EVE) analysis indicated a 22.8% decrease in EVE with an instantaneous 200 basis point increase in interest rates, exceeding the policy limit of 20.0%.
• The company repurchased 494,379 shares under its stock repurchase program, with 242,186 shares remaining available for repurchase as of December 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing with a negative sentiment due to the increased net loss, deteriorating asset quality metrics (rise in non-performing loans), and the breach of interest rate risk policy limits, despite some improvements in net interest income and margin.

Positives

• Total assets increased by $18.5 million, or 3.2%, to $599.3 million at December 31, 2025.
• Total deposits increased by $16.6 million, or 3.7%, to $470.8 million, indicating growth in funding sources.
• Net interest and dividend income increased by $1.8 million, or 15.0%, to $13.7 million, driven by higher yields on interest-earning assets.
• Interest rate spread improved to 1.72% in 2025 from 1.42% in 2024.
• Net interest margin increased to 2.33% in 2025 from 2.09% in 2024.
• Book value per share increased to $13.54 in 2025 from $12.97 in 2024.
• The company received an 'Outstanding' rating in its most recent Community Reinvestment Act federal evaluation.
• The Bank maintained a 'well capitalized' status, exceeding all regulatory capital requirements at December 31, 2025.

Negatives

• Net loss increased to $845,000 in 2025 from $513,000 in 2024.
• Return on average assets worsened to (0.14)% in 2025 from (0.09)% in 2024.
• Return on average equity worsened to (1.37)% in 2025 from (0.79)% in 2024.
• Non-interest income decreased significantly by $2.2 million, or 55.1%, primarily due to the absence of a one-time $2.5 million gain from a property sale in 2024.
• Non-interest expense increased by $1.1 million, or 6.7%, to $16.9 million, driven by higher salaries, equity compensation, and occupancy costs.
• Non-performing loans increased to $478,000 (0.11% of total loans) in 2025 from $0 in 2024, indicating a deterioration in asset quality.
• The efficiency ratio worsened to 109.61% in 2025 from 100.37% in 2024, reflecting decreased operating efficiency.
• The allowance for credit losses on loans as a percent of non-performing loans decreased significantly to 716.95% in 2025 from 2,404.26% in 2024, suggesting a higher proportion of non-performing loans relative to the allowance.

Risks

• General economic conditions, nationally or in market areas, that are worse than expected.
• Changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses.
• Ability to access cost-effective funding.
• Fluctuations in real estate values and both residential and commercial real estate market conditions.
• Demand for loans and deposits in the market area.
• Ability to implement and change business strategies.
• Competition among depository and other financial institutions, with larger competitors having greater resources.
• Inflation and changes in the interest rate environment that reduce margins and yields, mortgage banking revenues, fair value of financial instruments, or loan originations/prepayments.
• Adverse changes in the securities or secondary mortgage markets.
• Changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements and insurance premiums.
• Changes in the quality or composition of loan or investment portfolios.
• Technological changes that may be more difficult or expensive than expected.
• Inability of third-party providers to perform as expected.
• Ability to manage market risk, credit risk, and operational risk, including cybersecurity risks and artificial intelligence (AI) risks.
• Ability to enter new markets successfully and capitalize on growth opportunities.
• Ability to successfully integrate any acquired assets, liabilities, customers, systems, and management personnel.
• Changes in consumer spending, borrowing, and savings habits.
• Changes in accounting policies and practices.
• Ability to retain key employees.
• Compensation expense associated with equity allocated or awarded to employees.
• Changes in the financial condition, results of operations, or future prospects of issuers of securities owned.
• Commercial and multi-family real estate loans generally have higher balances and entail greater credit risks compared to oneto four-family residential real estate loans.
• Construction loans generally involve greater credit risk than financing improved real estate due to uncertain value before completion and potential for inaccurate cost/value estimates.
• Land development loans generally involve greater credit risk due to dependence on approvals, uncertain value, and reliance on property sales.
• Commercial and industrial loans have greater credit risk than oneto four-family residential real estate loans, with repayment dependent on business success and the general economic environment.
• Future increases in market interest rates are likely to result in additional unrealized losses on available-for-sale securities, which would reduce stockholders' equity.
• In a rising interest rate environment, rates on deposits and borrowings may reprice upwards faster than rates on long-term loans and investments, compressing the interest rate spread.
• Increases in interest rates may adversely affect the ability of borrowers to make loan repayments on adjustable-rate loans.
• Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, leading to reinvestment risk at lower yields.
• The estimated decrease in economic value of equity (EVE) of 22.8% for an instantaneous 200 basis point increase in interest rates exceeded the policy limit of 20.0% at December 31, 2025.
• Regulatory authorities may require adjustments to the Allowance for Credit Losses, which could adversely affect financial condition and results of operations.
• The FDIC has authority to increase insurance assessments, which would have an adverse effect on operating expenses.

Future Outlook

The company intends to continue its business strategy of growing its balance sheet organically, leveraging existing infrastructure, and improving profitability and operating efficiency. It plans to increase its focus on originating higher-yielding commercial real estate and commercial and industrial loans while maintaining strong asset quality. The company also aims to increase core deposits and reduce reliance on higher-cost borrowings. While opportunistic acquisitions or de novo branching are considered, there are no current plans for such expansion. Management acknowledges the challenges and uncertainties of the current environment and plans to execute these strategies as market conditions allow. The company expects future increases in market interest rates to result in additional unrealized losses on available-for-sale securities, which would reduce stockholders' equity.

Management Comments

• Management believes the company is well-positioned to grow without a proportional increase in overhead expense or operating risk, given its existing infrastructure and capabilities.
• Management believes it can compete effectively as a result of local market knowledge, local decision making, and awareness of customer needs.
• Management believes that the unrealized losses on available-for-sale securities are primarily due to market interest rate fluctuations and not changes in credit quality, and does not intend to sell them before recovery of their amortized cost.
• Management believes that the current facilities are adequate to meet present and foreseeable needs, subject to possible future expansion.
• Management believes the risk of incurring credit losses on derivative contracts with institutional counterparties is remote.
• Management is not aware of any conditions or events that would change First Seacoast Bank's categorization as well-capitalized.

Industry Context

StockSavvy.ai notes that First Seacoast Bancorp operates in a highly competitive financial services industry, particularly in the New Hampshire and southern Maine Seacoast regions. The company's strategy to increase commercial real estate and commercial and industrial lending aligns with a broader trend among community banks seeking higher yields and portfolio diversification. However, the increase in non-performing loans and the breach of interest rate risk policy limits highlight the challenges faced by smaller institutions in managing credit quality and market risk amidst fluctuating economic conditions and intense competition from larger, more resourced financial institutions.

Comparison to Industry Standards

• First Seacoast Bancorp's efficiency ratio of 109.61% is significantly higher than the industry average for community banks, which typically aim for an efficiency ratio below 60% to be considered highly efficient. This suggests the company is less efficient in converting revenue into profit compared to peers like Eastern Bankshares (NASDAQ: EBTC) or Independent Bank Corp (NASDAQ: INDB), which often report efficiency ratios in the 50-70% range.
• The increase in non-performing loans to 0.11% of total loans, while still relatively low, marks a deterioration from 0.00% in the prior year. This trend warrants close monitoring, especially when compared to larger regional banks that typically maintain NPL ratios below 0.5% even in challenging environments, such as Citizens Financial Group (NYSE: CFG) or Webster Financial Corporation (NYSE: WBS).
• The company's economic value of equity (EVE) sensitivity, showing a 22.8% decrease for a 200 basis point rate increase, exceeded its internal policy limit of 20.0%. This indicates a higher-than-desired exposure to interest rate risk compared to global benchmarks for well-managed financial institutions, which typically strive to keep such sensitivities within tighter bounds to protect capital.
• The net interest margin (NIM) of 2.33% shows an improvement but remains below the average for many U.S. community banks, which often range from 3.0% to 4.0%, reflecting ongoing pressure on lending yields and deposit costs in the current rate environment.

Management Changes

Corporate Governance

Legal Proceedings

• No pending legal proceedings that are believed to have a material adverse effect on consolidated financial condition, results of operations, or cash flows as of December 31, 2025.

Related Party Transactions

• Loans outstanding to certain directors, executive officers, and entities with significant ownership interests totaled $3.6 million at December 31, 2025, down from $4.3 million in 2024.
• Deposits from related parties totaled approximately $10.9 million at December 31, 2025, down from $11.6 million in 2024.
• The company maintains nonqualified supplemental executive benefit agreements with certain directors and its current and former Presidents and certain officers.
• The company has a supplemental retirement plan for eligible directors, which was hard-frozen as of January 1, 2022, and amended on February 10, 2022, to fix annual benefits and change-in-control benefits.

Stakeholder Impact

• Shareholders: Experienced an increased net loss and diluted loss per share, but book value per share increased. The stock repurchase program aims to return value to shareholders.
• Employees: The company emphasizes employee well-being, career goals, competitive wages, and benefits, including participation in the Employee Stock Ownership Plan (ESOP) and equity incentive plans, aligning employee and stockholder interests.
• Customers: The company continues to offer a full range of banking and investment management services, focusing on local market needs and personalized service. The CDARS and ICS programs provide enhanced FDIC insurance for larger deposits.
• Regulators: The Bank remains 'well capitalized' and in compliance with all applicable regulatory capital requirements, including the capital conservation buffer, and received an 'Outstanding' CRA rating.
• Creditors: The company's liquidity position is monitored daily, with access to FHLB advances and other credit facilities, indicating a commitment to meeting financial obligations.

Next Steps

• Continue efforts to increase core deposits and reduce reliance on higher-cost borrowings.
• Continue to focus on originating higher-yielding commercial real estate and commercial and industrial loans.
• Monitor and manage exposure to movements in interest rates to mitigate negative impacts.
• Evaluate the effect of new accounting standards (ASU 2025-08 and ASU 2024-03) on consolidated financial statements and disclosures.
• Hold the Annual Meeting of Stockholders on May 28, 2026.
• Continue stock repurchase program until its extended expiration date of June 3, 2026, or until suspended/discontinued.

Key Dates

Recommendation

While First Seacoast Bancorp demonstrated improvements in net interest income and margin, the increased net loss, deterioration in asset quality (rise in non-performing loans), and the breach of interest rate risk policy limits present significant concerns. The decline in non-interest income, largely due to the absence of a one-time gain, also impacts overall profitability. The stock repurchase program and increased book value per share offer some support, but the underlying operational and credit quality challenges warrant a cautious approach. A 'hold' recommendation is appropriate as investors should monitor the company's ability to reverse the negative trends in profitability and asset quality, and effectively manage its interest rate risk exposure in the coming periods.

Keywords

Community Bank, Regional Bank, Financial Services, Banking, Commercial Real Estate, Residential Mortgages, Deposits, Loans, SEC Filing, 10-K, New Hampshire, Maine, Wealth Management, Stock Repurchase, Interest Rate Risk, Non-Performing Loans