10-Q: First Seacoast Bancorp Reports Q3 Profit, YTD Loss Amid Rate Shifts

Sentiment:

Quarterly Report 14 November 2025 8:31 AM

📋All filings for First Seacoast Bancorp, INC

First Seacoast Bancorp reported a net income of $390,000 for Q3 2025, reversing a year-to-date net loss of $758,000, driven by improved net interest income and non-interest income growth.

Worse than expectedThe company reported a net loss of $758,000 for the nine months ended September 30, 2025, compared to a net income of $895,000 in the prior year period.The significant decline in year-to-date net income is primarily due to the absence of a one-time $2.5 million gain on the sale of land and buildings recognized in the prior year.Non-performing loans increased from $0 to $194,000, indicating a deterioration in asset quality.The company's Net Portfolio Value (NPV) sensitivity to rising interest rates exceeded its internal policy limits at +200, +300, and +400 basis points changes, signaling increased interest rate risk exposure.

Summary

Net income for the three months ended September 30, 2025, was $390,000, a significant increase from $44,000 in the same period of 2024.
The company recorded a net loss of $758,000 for the nine months ended September 30, 2025, compared to a net income of $895,000 for the prior year, primarily due to a one-time gain on sale of land and buildings in 2024.
Total assets increased by $28.8 million (5.0%) to $609.6 million as of September 30, 2025, from $580.8 million at December 31, 2024.
Net loans decreased by $5.5 million (1.3%) to $430.0 million, while securities available-for-sale increased by $22.3 million (18.6%) to $142.5 million.
Total deposits grew by $25.8 million (5.7%) to $480.0 million, with a notable $21.2 million increase in time deposits.
Net interest and dividend income rose by $465,000 (15.6%) for the three-month period and $1.2 million (13.0%) for the nine-month period.
Non-performing loans increased to $194,000 as of September 30, 2025, from $0 at December 31, 2024.
The company's Net Portfolio Value (NPV) sensitivity to rising interest rates exceeded policy limits at +200, +300, and +400 basis points changes.

Sentiment

Score: 4

Explanation: While the company showed a quarterly profit and improved net interest margin, the year-to-date net loss, the increase in non-performing loans, and the breach of interest rate risk policy limits indicate underlying challenges and increased risk exposure. The positive quarterly performance is overshadowed by the larger year-to-date loss and heightened market risk.

Positives

Net income for the three months ended September 30, 2025, significantly increased to $390,000 from $44,000 in the prior year period.
Net interest and dividend income increased by $465,000 (15.6%) for the three-month period and $1.2 million (13.0%) for the nine-month period.
Annualized net interest margin improved to 2.32% for the three months and 2.30% for the nine months ended September 30, 2025, compared to 2.08% and 2.10% respectively in the prior year.
Total assets grew by 5.0% to $609.6 million, driven by increases in cash and securities available-for-sale.
Total deposits increased by 5.7% to $480.0 million, indicating strong funding growth.
Non-interest income increased by $180,000 (49.5%) for the three-month period, primarily due to higher customer service fees and gains on loan sales.
The Bank remains well-capitalized, exceeding all regulatory capital requirements as of September 30, 2025.

Negatives

The company reported a net loss of $758,000 for the nine months ended September 30, 2025, a decrease of $1.7 million compared to a net income of $895,000 in the prior year period, largely due to the absence of a one-time gain from land and building sales in 2024.
Non-performing loans increased to $194,000 at September 30, 2025, from $0 at December 31, 2024, indicating a deterioration in credit quality.
Total non-interest expense increased by $268,000 (6.8%) for the three-month period and $969,000 (8.3%) for the nine-month period, driven by higher salaries, equity compensation, occupancy, and data processing costs.
The weighted average annualized rate of interest-bearing deposits decreased to 2.72% for the three months ended September 30, 2025, from 2.88% in the prior year, potentially impacting deposit retention in a rising rate environment.
Acquisition, development, and land (ADL) loans decreased by 19.3% and multifamily (MF) loans decreased by 18.3%, indicating a contraction in these segments.

Risks

Interest rate risk: The company's Net Portfolio Value (NPV) sensitivity to rising interest rates exceeded policy limits at +200 bp (-20.9%), +300 bp (-32.2%), and +400 bp (-43.8%) changes, indicating vulnerability to significant interest rate increases.
Deposit migration risk: Continued migration of deposits from less interest-sensitive products (NOW and demand deposits) to more interest-sensitive products (money market and time deposits) could further compress interest rate margins and increase funding costs.
Credit risk: An increase in non-performing loans from $0 to $194,000 suggests a potential deterioration in asset quality, which could lead to higher credit loss provisions in the future.
Economic conditions: General economic conditions, both nationally and in the company's market areas, worse than expected could impact loan delinquencies, real estate values, and demand for banking services.
Regulatory changes: Changes in laws, government regulations, or policies affecting financial institutions, including capital requirements and insurance premiums, could adversely affect operations.
Technological changes: Difficulty or higher-than-expected costs in adapting to technological changes could impact competitiveness and operational efficiency.
Key employee retention: The ability to retain key employees is crucial for sustained operations and growth.

Future Outlook

The company anticipates having sufficient funds to meet current funding commitments and plans to increase core deposits and utilize FHLB advances and brokered deposits to fund loan growth. Management expects to continue diversifying into higher-yielding commercial real estate and commercial and industrial loans to improve net interest margin and manage interest rate risk. The company also plans to sell selected conforming residential fixed-rate mortgage loans to the secondary market on a servicing-retained basis as market conditions permit.

Management Comments

Management believes that the unrealized losses within the available-for-sale securities portfolio are due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore no allowance for credit losses was recorded on these securities.
Our strategy to grow the balance sheet continues to be through originations and, to a lesser extent, purchases of commercial loan participations, oneto four-family residential mortgage loans and consumer loans secured by manufactured housing properties, while also diversifying into higher yielding commercial real estate mortgage loans and commercial and industrial loans to improve net interest margin and manage interest rate risk.
We also continue to sell selected, conforming 15-year and 30-year residential fixed rate mortgage loans to the secondary market on a servicing retained basis as market conditions allow, providing us a recurring source of revenue from loan servicing income and gains on the sale of such loans.
Management believes that, as of September 30, 2025 and December 31, 2024, the Bank met all capital adequacy requirements to which it was subject, including the capital conservation buffer, at those dates.
Management is not aware of any conditions or events that would change First Seacoast Bank's categorization as well-capitalized.

Industry Context

The banking industry continues to navigate a dynamic interest rate environment. First Seacoast Bancorp's improved net interest margin and increased interest income reflect a general trend where banks can benefit from higher rates on assets, though this is often offset by increased funding costs. The observed migration of deposits from non-interest-bearing to interest-bearing accounts is a common industry challenge, forcing banks to manage their cost of funds more actively. The company's strategy to diversify into higher-yielding commercial loans and utilize derivative instruments aligns with broader industry efforts to optimize asset portfolios and manage interest rate risk. However, the breach of NPV policy limits in rising rate scenarios highlights a common vulnerability for banks with longer-duration assets.

Comparison to Industry Standards

The company's Net Portfolio Value (NPV) sensitivity to rising interest rates (+200 bp, +300 bp, +400 bp changes) exceeded its internal policy limits of -20.0%, -30.0%, and -40.0% respectively. This indicates a higher-than-desired exposure to interest rate increases compared to its own established benchmarks, which could be a concern for regulators and investors.
The increase in non-performing loans from $0 to $194,000, while still a small absolute amount, represents a significant percentage increase and warrants close monitoring, especially in comparison to peer banks' asset quality trends in the current economic cycle.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Executive Compensation Policy Amendment	Amendment to the nonqualified supplemental retirement plan for the current Chief Executive Officer, limiting the annual benefit to $64,817 if separation from service is for reasons other than a change of control. This fixes the benefit and prevents future increases outside of a change in control scenario.	March 5, 2025	Reduces variable and increasing costs associated with the CEO's retirement plan, making future costs more predictable.
Director Retirement Plan Freeze and Amendment	Hard freeze enacted for the Directors Deferred Supplemental Retirement Plan as of January 1, 2022. Amendments on February 10, 2022, eliminated the variable formula for normal annual retirement benefit (previously 70% of Final Base Fee) and replaced it with a fixed annual benefit of $20,000. The change of control benefit was also fixed at the present value of $200,000. No new directors will enter into similar agreements.	January 1, 2022 (freeze), February 10, 2022 (amendments)	Eliminates variable and increasing costs, making future costs more predictable for director retirement benefits. Limits future obligations by not offering similar agreements to new directors.

Legal Proceedings

The company is periodically involved in claims and lawsuits incident to its business, such as claims to enforce liens, condemnation proceedings, and claims involving loan making and servicing.
As of September 30, 2025, the company was not a party to any pending legal proceedings that management believes would have a material adverse effect on its consolidated financial condition, results of operations, or cash flows.

Related Party Transactions

Loans outstanding to directors, executive officers, and entities in which they have significant ownership interests totaled $3.8 million at September 30, 2025, down from $4.3 million at December 31, 2024.
Deposits from related parties totaled $12.6 million at September 30, 2025, up from $11.6 million at December 31, 2024.

Stakeholder Impact

Shareholders: The net loss for the nine-month period and the increase in non-performing loans could negatively impact shareholder confidence and stock performance. However, the quarterly profit and improved net interest margin offer some positive signs. The ongoing stock repurchase program could provide some support to share price.
Employees: Normal salary increases and increased equity compensation expense indicate continued investment in employee benefits. The ESOP provides an opportunity for employees to own company stock.
Customers: Increased deposits suggest continued customer trust and engagement. The offering of CDARS and ICS programs provides enhanced FDIC insurance coverage for larger depositors. The focus on diversifying loan products aims to meet varied customer financing needs.
Creditors: The decrease in FHLB borrowings and increased available borrowing capacity from FHLB and FRB indicate a strong liquidity position, which is favorable for creditors. The Bank's well-capitalized status also provides assurance.
Regulators: The Bank continues to meet all regulatory capital requirements and is categorized as well-capitalized. However, exceeding NPV policy limits for interest rate risk may draw regulatory scrutiny and require proactive management.

Next Steps

Continue to increase core deposits and utilize FHLB advances and brokered deposits to fund loan growth.
Further diversify into higher-yielding commercial real estate and commercial and industrial loans to improve net interest margin and manage interest rate risk.
Sell selected, conforming 15-year and 30-year residential fixed-rate mortgage loans to the secondary market on a servicing-retained basis as market conditions allow.
Monitor and implement strategies to mitigate the negative impact of movements in interest rates, particularly given the current exceedance of NPV policy limits.
Evaluate the effect of ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures) on future financial statements and disclosures.

Key Dates

Date	Description
November 18, 2021	98,850 restricted stock awards granted to directors and management at $11.95 per share.
January 1, 2022	Hard freeze enacted for the Directors Deferred Supplemental Retirement Plan.
February 10, 2022	Amendments to Supplemental Director Retirement Agreements, fixing annual benefit to $20,000 and change of control benefit to $200,000 present value.
May 19, 2023	Company entered into an interest rate swap with a commercial loan borrower.
May 25, 2023	249,144 incentive and non-statutory stock options granted to directors and management under the 2021 Equity Incentive Plan.
June 1, 2023	2,478 restricted stock awards granted to a certain member of management at $7.99 per share.
June 2023	Company entered into a three-year $25 million notional amount interest rate contract designated as a fair value hedge.
November 2023	Company entered into a second three-year $25 million notional amount interest rate contract designated as a fair value hedge.
December 2023	Company entered into a three-year $10 million notional amount interest rate contract designated as a fair value hedge for municipal bonds.
January 1, 2024	Company adopted Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280).
April 11, 2024	Board of directors authorized a stock repurchase program for up to 507,707 shares.
May 14, 2024	Stock repurchase program became effective.
May 30, 2024	Company adopted the First Seacoast Bancorp, Inc. 2024 Equity Incentive Plan.
June 11, 2024	Bank completed sale-leaseback of four properties, resulting in a $2.5 million pre-tax gain.
July 12, 2024	Company entered into a two-year interest rate contract designated as a cash flow hedge.
November 1, 2024	Company terminated a $25 million notional amount interest rate swap (fair value hedge), resulting in a $398,000 termination fee.
December 2, 2024	280,500 incentive and non-statutory stock options granted under the 2024 Plan to directors and management.
December 2, 2024	112,200 restricted stock awards granted under the 2024 Plan to directors and management at $9.29 per share.
December 12, 2024	Board of directors authorized additional stock repurchases of up to 228,858 shares.
December 15, 2024	ASU 2023-09, 'Income TaxesImprovements to Income Tax Disclosures,' becomes effective for annual periods beginning after this date.
December 19, 2024	Company terminated a $10 million notional amount interest rate swap for municipal bonds, resulting in a $32,000 termination fee.
December 31, 2024	Fiscal year end for which the Annual Report on Form 10-K was filed on March 21, 2025.
January 1, 2025	ASU 2024-02, Codification Improvements, became effective.
January 7, 2025	Bank completed eligibility process for FRB Borrower-In-Custody of Collateral Program, pledging $65.0 million of commercial real estate loans.
February 7, 2025	Expiration date of the stock repurchase program extended to December 3, 2025.
March 5, 2025	Amendment to CEO's nonqualified supplemental retirement plan, limiting annual benefit to $64,817 if separation is not due to change of control.
May 2025	Leveraged investment transaction completed using new brokered deposits to fund securities available-for-sale purchases.
June 6, 2025	Company terminated a $25 million notional amount interest rate swap (fair value hedge) due to it no longer meeting risk management strategy aims.
June 23, 2025	Company entered into an 18-month $25 million notional amount interest rate contract designated as a fair value hedge.
September 10, 2025	Company entered into a 12-month $25 million notional amount interest rate contract designated as a fair value hedge.
September 30, 2025	End of the quarterly period covered by this report.
October 29, 2025	FHLB callable date for a $25.0 million long-term advance (and quarterly thereafter).
November 3, 2025	Number of outstanding common shares was 4,696,767.
November 14, 2025	Date of signing for the Quarterly Report on Form 10-Q by CEO and President/CFO.
December 8, 2025	FHLB callable date for a $25.0 million long-term advance (and quarterly thereafter).
December 15, 2026	ASU 2024-03, 'Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures,' becomes effective for annual reporting periods beginning after this date.
December 31, 2047	Maturity date for the ESOP loan from the Company.

Recommendation

hold

The filing presents a mixed financial picture. While the company achieved a net income for the quarter and improved its net interest margin, the year-to-date net loss and the increase in non-performing loans are concerning. Critically, the company's Net Portfolio Value (NPV) sensitivity to rising interest rates exceeded its internal policy limits, indicating heightened interest rate risk. The growth in deposits and assets is positive, but the underlying vulnerabilities to market rate changes and a slight deterioration in asset quality suggest caution. A 'hold' recommendation is appropriate as investors should monitor how the company addresses its interest rate risk exposure and manages asset quality in the coming quarters before considering a stronger position.

Keywords

Community Banking, Financial Services, SEC Filing, 10-Q, Quarterly Report, Net Interest Margin, Loan Portfolio, Deposits, Interest Rate Risk, Non-Performing Loans, Stock Repurchase, New Hampshire Banking, Wealth Management

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