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First Seacoast Bancorp, Inc.
−Removed: (together with its bank subsidiary, unless the context otherwise requires, the “Company”) is the savings and loan holding company for First Seacoast Bank (the “Bank”).
+Added: (together with its bank subsidiary, unless the context otherwise requires, the “Company”) is the savings and loan holding company for First Seacoast Bank (the “Bank”).
The Company conducts its operations primarily through its wholly-owned subsidiary, First Seacoast Bank.
1 unchanged sentence
Effective January 19, 2023, the Company succeeded First Seacoast Bancorp (a federal corporation) as the holding company for First Seacoast Bank in connection with the conversion of First Seacoast Bancorp, MHC, the former federal mutual holding company for First Seacoast Bank, from mutual to stock form.
−Removed: Accordingly, the financial information contained in this report relates to First Seacoast Bancorp (a federal corporation).
−Removed: At December 31, 2022, the Company had total consolidated assets of $537.4 million, loans of $402.5 million, deposits of $382.4 million and stockholders’
−Removed: equity of $49.3 million.
−Removed: The Company’s executive offices are located at 633 Central Avenue, Dover, New Hampshire 03820, and the telephone number is (603) 742-4680.
+Added: At December 31, 2023, the Company had total consolidated assets of $571.0 million, loans of $430.0 million, deposits of $404.8 million and stockholders’ equity of $66.6 million.
+Added: The Company’s executive offices are located at 633 Central Avenue, Dover, New Hampshire 03820, and the telephone number is (603) 742-4680.
Our website address is www.firstseacoastbank.com .
Information on our website is not and should not be considered a part of this annual report.
−Removed: The Company is subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).
+Added: The Company is subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).
First Seacoast Bank
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Our results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings, and non-interest income largely from customer service fees.
−Removed: The results of operations are also affected by the level of operating expenses, the provision for loan losses, the impact of federal and state income taxes, the relative levels of interest rates and local and national economic activity.
+Added: The results of operations are also affected by the level of operating expenses, the provision for credit losses, the impact of federal and state income taxes, the relative levels of interest rates and local and national economic activity.
Investment management services are offered through FSB Wealth Management.
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FSB Wealth Management receives fees from advisory services and commissions on individual investment and insurance products purchased by clients.
−Removed: The assets held for wealth management customers are not assets of the Company and, accordingly, are not reflected in the Company’s consolidated balance sheets.
+Added: The assets held for wealth management customers are not assets of the Company and, accordingly, are not reflected in the Company’s consolidated balance sheets.
Assets under management totaled approximately $123.5 million and $96.0 million at December 31, 2023 and 2022, respectively.
−Removed: On August 17, 2021, the Bank entered into a definitive agreement with an investment advisory and wealth management firm (the “seller”) to purchase certain of its client accounts and client relationships for a purchase price of $347,000 (included in other assets at December 31, 2022 and 2021, net of amortization), of which $172,000 was paid at closing.
−Removed: Each client account has been assigned a value, and as each client transfers to the Bank, 85% of this value will be paid to the seller.
−Removed: By December 31, 2023, or upon mutual agreement that the transition of client accounts is complete, whichever is earlier, the balance of the purchase price will be paid to the seller.
−Removed: As of December 31, 2022 and 2021, approximately $23.0 million and $17.4 million, respectively, of purchased client accounts are included in total assets under management.
+Added: On August 17, 2021, the Bank entered into a definitive agreement with an investment advisory and wealth management firm (the “seller”) to purchase certain of its client accounts and client relationships for a final adjusted purchase price of $324,000 (included in other assets at December 31, 2023 and 2022, net of amortization), of which $172,000 was paid at closing.
+Added: Each client account was assigned a value, and as each client transferred to the Bank, 85% of this value was paid to the seller.
+Added: During June 2023, the transition of client accounts was completed and the balance of the purchase price was paid to the seller.
+Added: As of December 31, 2023 and 2022, approximately $25.7 million and $23.0 million of purchased client accounts are included in total assets under management, respectively.
The client accounts purchased are recorded as a customer list intangible asset.
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The Bank makes investments in community development lending and investments in low-income housing, all of which strive to improve the communities we serve.
−Removed: In 2019, First Seacoast Bancorp (a federal corporation) established First Seacoast Community Foundation, Inc., a charitable foundation dedicated to supporting charitable organizations operating in the Bank’s local community.
+Added: In 2019, First Seacoast Bancorp (a federal corporation) established First Seacoast Community Foundation, Inc., a charitable foundation dedicated to supporting charitable organizations operating in the Bank’s local community.
First Seacoast Bank is subject to comprehensive regulation and examination by its primary federal regulator, the Office of the Comptroller of the Currency.
Available Information
−Removed: Securities and Exchange Commission (“SEC”) maintains an Internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
+Added: Securities and Exchange Commission (“SEC”) maintains an Internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Our Internet website is www.firstseacoastbank.com .
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We consider our primary lending market area to be Strafford and Rockingham Counties in New Hampshire and York County in southern Maine.
−Removed: The New Hampshire and southern Maine Seacoast region’s economy is fairly diversified, with employment in education, healthcare, government, services, retail and manufacturing sectors.
+Added: The New Hampshire and southern Maine Seacoast region’s economy is fairly diversified, with employment in education, healthcare, government, services, retail and manufacturing sectors.
Our Strafford County branches are located in the cities of Dover, Durham, Barrington and Rochester, New Hampshire.
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Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.
−Removed: Some of the Company’s non-banking competitors have fewer regulatory constraints and may have lower cost structures.
−Removed: In addition, some of the Company’s competitors have assets, capital and lending limits greater than that of the Company, greater access to capital markets and offer a broader range of products and services than the Company.
+Added: Some of the Company’s non-banking competitors have fewer regulatory constraints and may have lower cost structures.
+Added: In addition, some of the Company’s competitors have assets, capital and lending limits greater than that of the Company, greater access to capital markets and offer a broader range of products and services than the Company.
These institutions may have the ability to finance wide-ranging advertising campaigns and may also be able to offer lower rates on loans and higher rates on deposits than the Company can offer.
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Home equity loans and lines of credit
−Removed: Net deferred loan costs
−Removed: Allowance for loan losses
+Added: Allowance for credit losses on loans
Loan Portfolio Maturities.
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Purchased loans are secured by properties located in the greater Boston market in a contiguous state.
−Removed: Our one- to four-family residential real estate loans have terms of up to 30 years and are generally underwritten according to Federal Home Loan Mortgage Corporation (“FHLMC”
−Removed: or “Freddie Mac”) guidelines in amounts up to the maximum conforming loan limits as established by Freddie Mac.
−Removed: We refer to loans that conform to such guidelines as “conforming loans.”
−Removed: To a lesser extent, we also originate loans above the conforming limits, which are referred to as “jumbo loans.”
−Removed: We generally underwrite jumbo loans in a manner similar to conforming loans.
+Added: Our one- to four-family residential real estate loans have terms of up to 30 years and are generally underwritten according to Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”) guidelines in amounts up to the maximum conforming loan limits as established by Freddie Mac.
+Added: We refer to loans that conform to such guidelines as “conforming loans.” We also originate loans above the conforming limits, which are referred to as “jumbo loans.” We generally underwrite jumbo loans in a manner similar to conforming loans.
At December 31, 2023, 96.1% of our one- to four-family residential real estate loans were fixed-rate loans.
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Loans where the borrower obtains private mortgage insurance may be made in excess of this limit, pursuant to requirements set by the insurance provider.
−Removed: We do not offer “interest only”
−Removed: mortgage loans on permanent one- to four-family residential real estate loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan).
−Removed: We also do not offer loans that provide for negative amortization of principal, such as “Option ARM”
−Removed: loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.
−Removed: We do not have a “subprime lending”
−Removed: program for one- to four-family residential real estate loans (i.e.
−Removed: loans that generally target borrowers with weakened credit histories).
−Removed: Generally, residential mortgage loans that we originate include “due-on-sale”
−Removed: clauses, which give us the right to declare a loan immediately due and payable if, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid.
+Added: We do not offer “interest only” mortgage loans on permanent one- to four-family residential real estate loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan).
+Added: We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.
+Added: We do not have a “subprime lending” program for one- to four-family residential real estate loans (i.e., loans that generally target borrowers with weakened credit histories).
+Added: Generally, residential mortgage loans that we originate include “due-on-sale” clauses, which give us the right to declare a loan immediately due and payable if, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid.
All borrowers are required to obtain title insurance for the benefit of First Seacoast Bank.
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The repayment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service.
−Removed: Changes in economic conditions, such as the economic uncertainties of COVID-19, that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property.
+Added: Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property.
Additionally, any decline in real estate values may be more pronounced for commercial and multi-family real estate than residential properties.
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We consider a number of factors in originating commercial and multi-family real estate loans.
−Removed: In addition to the debt-service coverage ratio, we evaluate the loan purpose, the quality of collateral and the borrower’s qualifications, experience, credit history, cash flows and financial statements and sources of repayment.
+Added: In addition to the debt-service coverage ratio, we evaluate the loan purpose, the quality of collateral and the borrower’s qualifications, experience, credit history, cash flows and financial statements and sources of repayment.
Personal guarantees are generally obtained from the principals of closely-held companies.
We gather information on environmental risks associated with commercial properties and also require appropriate insurance coverage on properties securing real estate loans.
−Removed: In addition, the borrower’s and guarantor’s financial information is monitored on an ongoing basis by requiring periodic financial statement updates.
+Added: In addition, the borrower’s and guarantor’s financial information is monitored on an ongoing basis by requiring periodic financial statement updates.
We also purchase and participate in commercial and multi-family real estate loans from other financial institutions.
Such loans are subject to the same underwriting criteria and loan approval requirements applied to loans originated by First Seacoast Bank.
−Removed: At December 31, 2022, the average loan balance outstanding in the commercial real estate loans portfolio was $421,000, and the largest individual commercial real estate loan outstanding was a $3.5 million participation loan secured by a commercial building.
+Added: At December 31, 2023, the average loan balance outstanding in the commercial real estate loans portfolio was $471,000, and the largest individual commercial real estate loan outstanding was a $4.8 million loan secured by two commercial properties.
This loan was performing in accordance with its original repayment terms at December 31, 2023.
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The interest rate may be fixed or adjustable.
−Removed: At December 31, 2022, our largest individual residential construction loan outstanding was $1.7 million and it was performing in accordance with its original repayment terms.
+Added: At December 31, 2023, our largest individual residential construction loan outstanding was $774,000 and it was performing in accordance with its original repayment terms.
We also originate loans to finance the construction of commercial properties, primarily owner-occupied properties located in our market area.
2 unchanged sentences
Commercial real estate construction loans are generally structured as interest-only for up to 18 months, with a loan-to-value of 80% of the appraised value on a completed basis or a loan-to-cost of completion ratio of up to 85%.
−Removed: We also originate commercial constructions loans with an initial loan-to-value ratio of 90% when coupled with the U.S.
+Added: We may also originate commercial constructions loans with an initial loan-to-value ratio of 90% when coupled with the U.S.
Small Business Administration 504 Loan program.
−Removed: During the year ended December 31, 2022, we originated one construction loan secured by an owner-occupied property under the Small Business Administration 504 Loan program, with an original principal balance of $454,000.
We work with a third-party construction management firm that reviews each project before we approve the loan and continues to monitor and inspect the project during the construction phase, as disbursements are made.
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Risk of loss on a construction loan also depends upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions.
−Removed: Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio.
+Added: Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to accurately evaluate the total funds required to complete a project and the
+Added: related loan-to-value ratio.
If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property.
3 unchanged sentences
Land development loans are generally secured by vacant land located in our primary market and in process of improvement.
−Removed: At December 31, 2022, land development loan balances were $945,000, or 0.2%, of our total loan portfolio.
+Added: At December 31, 2023, land development loan balances were $1.2 million, or 0.3%, of our total loan portfolio.
We generally originate commercial land development loans with loan-to-value ratios of up to 70% where all approvals and permits for improvements are already in place and up to 50% where approvals and permits are not yet in place.
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At December 31, 2023, we had $25.5 million of commercial and industrial loans representing 5.9% of our total loan portfolio.
−Removed: During the years ended December 31, 2022 and 2021 the Bank originated -0- and 134 Paycheck Protection Program ("PPP") loans, respectively, with aggregate principal balances of $-0- and $13.1 million, respectively.
−Removed: At December 31, 2022 and 2021, our commercial and industrial loans included -0- and 52 PPP loans, respectively, with aggregate outstanding principal balances of $-0- and $5.5 million, respectively.
+Added: At December 31, 2023, the average loan balance outstanding in the commercial and industrial loans portfolio was $201,000, and the largest individual commercial and industrial loan outstanding was $2.5 million secured by marketable securities.
+Added: This loan was performing in accordance with its original repayment terms at December 31, 2023.
We originate commercial and industrial loans, including equipment loans and business acquisition loans, and lines of credit to businesses operating in our local market area.
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When originating commercial and industrial loans, we consider the financial history of the borrower, the debt service capabilities and cash flows of the borrower and other guarantors and the value of the underlying collateral.
−Removed: We generally require personal guarantees by the principals, as well as other appropriate guarantors, when personal assets are in joint names or a principal’s net worth is not sufficient to support the loan.
+Added: We generally require personal guarantees by the principals, as well as other appropriate guarantors, when personal assets are in joint names or a principal’s net worth is not sufficient to support the loan.
Commercial and industrial loans can have a loan-to-value ratio of up to 80% of the value of the collateral securing the loan.
1 unchanged sentence
Typically, a 7(a) loan includes a 75% guarantee and an Express loan includes a 50% guarantee from the U.S.
−Removed: At December 31, 2022, we had five loans outstanding with an aggregate principal balance of $1.6 million with Small Business Administration 7(a) guarantees totaling $1.2 million and five Small Business Administration Express loans with an aggregate principal balance of $156,000 with guarantees totaling $66,000.
−Removed: We intend to expand our commercial and industrial lending activities in order to diversify our loan portfolio, increase our yield and offer a full range of products to our commercial customers.
+Added: At December 31, 2023, we had five loans outstanding with an aggregate principal balance of $2.2 million with Small Business Administration 7(a) guarantees totaling $1.7 million and three Small Business Administration Express loans with an aggregate principal balance of $75,000 with guarantees totaling $38,000.
+Added: During 2023, we purchased $2.0 million of participation interests in two commercial and industrial loans through our membership in a national community bank loan program.
+Added: Loans are typically provided to middle market businesses with approximately $10-$75 million in EBITDA.
+Added: Senior credit facilities typically range in size from $25-$250 million, primarily
+Added: secured by substantially all of the assets of the business.
+Added: These loans generally have five to seven-year terms and variable interest rates.
+Added: At December 31, 2023 and 2022, we had outstanding participation interests in these commercial and industrial loans totaling $2.0 million and $-0-, respectively.
+Added: We continue to expand our commercial and industrial lending activities in order to diversify our loan portfolio, increase our yield and offer a full range of products to our commercial customers.
However, these loans have greater credit risk than one- to four-family residential real estate loans.
−Removed: Our commercial and industrial loans are made based primarily on historical and projected cash flows of the borrower, the borrower’s experience and stability and the value and marketability of the underlying collateral provided by the borrower.
+Added: Our commercial and industrial loans are made based primarily on historical and projected cash flows of the borrower, the borrower’s experience and stability and the value and marketability of the underlying collateral provided by the borrower.
The cash flows of borrowers, however, may not materialize as forecasted, and collateral securing loans may fluctuate in value because of economic or individual performance factors.
2 unchanged sentences
Accordingly, financial information is obtained from the borrowers to evaluate cash flow sufficiency and is periodically updated during the life of the loan.
−Removed: At December 31, 2022, the average loan balance outstanding in the commercial and industrial loans portfolio was $238,000, and the largest individual commercial and industrial loan outstanding was $2.9 million secured by marketable securities.
−Removed: This loan was performing in accordance with its original repayment terms at December 31, 2022.
Home Equity Loans and Lines of Credit.
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We consider our balance sheet, as well as market conditions, on an ongoing basis in making decisions as to whether to hold one- to four-family residential real estate loans we originate in our portfolio for investment or to sell such loans to investors, based on profitability and risk management considerations.
−Removed: We sell selected conforming, 15-year and 30-year fixed-rate one- to four-family residential real estate loans that we originate, on a servicing-retained basis, when we are able to, and strategically retain non-eligible fixed-rate and adjustable-rate one- to four-family residential real estate loans in order to manage the duration and time to repricing of our one- to four-family residential loan portfolio.
−Removed: For the years ended December 31, 2022 and 2021, we sold $637,000 and $6.2 million, respectively, of our one- to four-family residential real estate loans.
−Removed: In addition to purchasing consumer loans secured by manufactured housing properties, as discussed above under “Consumer Loans,”
−Removed: we purchase one- to four-family jumbo residential real estate loans to supplement our own origination efforts.
−Removed: During 2022 and 2021, we purchased $1.3 million and $14.1 million, respectively, of one- to four-family jumbo residential real estate loans secured by properties located in the greater Boston market.
+Added: We sell selected conforming, 15-year and 30-year fixed-rate one- to four-family residential real estate loans that we originate, on a servicing-retained basis, when we are able
+Added: to, and strategically retain non-eligible fixed-rate and adjustable-rate one- to four-family residential real estate loans in order to manage the duration and time to repricing of our one- to four-family residential loan portfolio.
+Added: For the years ended December 31, 2023 and 2022, we sold $417,000 and $637,000, respectively, of our one- to four-family residential real estate loans.
+Added: In addition to purchasing consumer loans secured by manufactured housing properties, as discussed above under “Consumer Loans,” we purchase one- to four-family jumbo residential real estate loans to supplement our own origination efforts.
+Added: During 2023 and 2022, we purchased $780,000 and $1.3 million, respectively, of one- to four-family jumbo residential real estate loans secured by properties located in the greater Boston market.
As of December 31, 2023, the portfolio of purchased residential real estate loans had outstanding principal balances of $24.7 million and were performing in accordance with their original repayment terms.
3 unchanged sentences
The properties are independently appraised and subject to field inspections by our loan officers.
+Added: As noted above, during 2023, we also purchased $2.0 million of participation interests in two commercial and industrial loans through our membership in a national community bank loan program.
+Added: Loans are typically provided to middle market businesses with approximately $10-$75 million in EBITDA.
+Added: Senior credit facilities typically range in size from $25-$250 million, primarily secured by substantially all of the assets of the business.
+Added: These loans generally have five to seven-year terms and variable interest rates.
Loan Approval Procedures and Authority
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Our board of directors has established a Loan Officers Review Committee to oversee loan approvals.
−Removed: The voting members of the Loan Officers Review Committee consist of our President and Chief Executive Officer, Senior Vice President –
−Removed: Chief Financial Officer, Senior Vice President –
−Removed: Senior Commercial Loan Officer, Senior Vice President –
−Removed: Senior Retail Loan Officer, Senior Vice President –
−Removed: Bank Administration and Risk Management Officer.
+Added: The voting members of the Loan Officers Review Committee consist of our President and Chief Executive Officer, Executive Vice President – Chief Financial Officer, Senior Vice President – Senior Commercial Loan Officer, Senior Vice President – Senior Retail Loan Officer, Senior Vice President – Bank Administration and Risk Management Officer and Vice President – Retail Loan Production Officer.
The board of directors has granted loan approval authority to certain officers up to prescribed limits, depending on the seniority of the officer, the type of loan and underlying security.
1 unchanged sentence
Individual loan officers generally can approve secured commercial loans of up to $100,000 and residential real estate loans of up to $650,000.
−Removed: Loans in excess of individual officers’
−Removed: lending limits generally can be approved by a second loan officer who is a voting member of our Loan Officers Review Committee, up to additional prescribed limits of $500,000 for secured commercial loans and $1.0 million for residential real estate loans.
+Added: Loans in excess of individual officers’ lending limits generally can be approved by a second loan officer who is a voting member of our Loan Officers Review Committee, up to additional prescribed limits of $500,000 for secured commercial loans and $1.0 million for residential real estate loans.
Loans in excess of such additional limits require approval of the full Loan Officers Review Committee.
5 unchanged sentences
Loans-to-One Borrower
−Removed: Pursuant to federal law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of our unimpaired capital and surplus (25% if the amount in excess of 15% is secured by “readily marketable collateral”
−Removed: or 30% for certain residential development loans).
+Added: Pursuant to federal law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of our unimpaired capital and surplus (25% if the amount in excess of 15% is secured by “readily marketable collateral” or 30% for certain residential development loans).
At December 31, 2023, based on the 15% limitation, our loans-to-one-borrower limit was approximately $8.4 million.
At December 31, 2023, our largest loan relationship with one borrower was for $6.7 million.
−Removed: These loans are secured primarily by owner-occupied commercial real estate properties which were performing in accordance with their original repayment terms.
+Added: These loans are secured primarily by commercial real estate which were performing in accordance with their original repayment terms.
Delinquent Loans and Non-Performing Assets
3 unchanged sentences
Alternating telephone attempts and additional letters continue until a loan becomes 90 days past due, at which point we would place the loan on non-accrual status and generally refer the loan for foreclosure proceedings, unless management determines that it is in the best interest of First Seacoast Bank to work further with the borrower to arrange a workout plan.
−Removed: The foreclosure process generally would begin when a loan becomes 120 days delinquent.
+Added: The foreclosure process generally would begin
+Added: when a loan becomes 120 days delinquent.
We do not pursue multiple collections processes, such as considering modifications or workouts, while proceeding with foreclosure.
15 unchanged sentences
Non-performing Assets.
−Removed: Non-performing assets include loans that are 90 or more days past due or on non-accrual status, including loans categorized as a troubled debt restructuring ("TDR") on non-accrual status, and real estate and other loan collateral acquired through foreclosure and repossession.
−Removed: TDRs include loans for which either a portion of interest or principal has been forgiven or loans modified at interest rates materially less than current market rates.
−Removed: At December 31, 2022, our one TDR was accruing.
−Removed: At December 31, 2021, this TDR was non-accruing.
+Added: Non-performing assets include loans that are 90 or more days past due or on non-accrual status, and real estate and other loan collateral acquired through foreclosure and repossession.
The following table sets forth information regarding our non-performing assets at the dates indicated.
19 unchanged sentences
Loans are reviewed on a regular basis.
−Removed: Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral-dependent.
−Removed: When a loan is determined to be impaired, the measurement of the loan in the allowance for loan losses is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral.
+Added: Management determines that a loan is non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral-dependent.
+Added: When a loan is determined to be non-performing, the measurement of the loan in the allowance for credit losses ("ACL") is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for non-performance based on the fair value of the collateral.
Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis.
3 unchanged sentences
Non-performing loans were $141,000, or 0.03% of total loans, at December 31, 2023, compared to $89,000, or 0.02% of total loans, at December 31, 2022.
−Removed: At December 31, 2022, non-performing loans consist primarily of a residential mortgage loan to a deceased borrower which had an outstanding balance of $84,000.
−Removed: The property has an estimated market value of approximately $420,000.
−Removed: At December 31, 2021, non-performing loans consisted primarily of a residential mortgage loan and HELOC to deceased borrowers which had outstanding balances totaling $602,000.
−Removed: The property had an estimated market value of approximately $1.2 million.
−Removed: The property securing both credit facilities was sold in July 2022 and all outstanding balances were paid.
−Removed: Additionally, our one non-accruing TDR, a non-performing residential mortgage loan that was repurchased from Freddie Mac and restructured in 2021 was returned to performing status during June 2022.
−Removed: The outstanding balance of this now accruing TDR was $189,000 and $195,000 at December 31, 2022 and 2021, respectively.
−Removed: Troubled Debt Restructurings.
−Removed: Loans are considered TDRs when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and First Seacoast Bank grants a concession to the borrower that it would not otherwise consider.
−Removed: These concessions include a modification of terms, such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than current market rate for a new loan with similar risk or some combination thereof to facilitate payment.
−Removed: TDRs are considered impaired loans.
−Removed: Loans on non-accrual status at the date of modification are initially classified as a non-accrual TDR.
−Removed: Our policy provides that TDR loans are returned to accrual status after a period of satisfactory and reasonable future payment performance under the terms of the restructuring.
−Removed: Satisfactory payment performance is generally no less than six consecutive months of timely payments.
−Removed: As noted above, at December 31, 2022, we had one accruing TDR.
−Removed: At December 31, 2021, this loan was a non-accruing TDR.
−Removed: This residential mortgage loan was originated during 2010 with Federal Housing Administration (“FHA”) insurance and sold to an investor with servicing retained by the Bank.
−Removed: The FHA insurance lapsed and the loan was repurchased from the investor and a modification agreement was executed directly with the borrowers.
+Added: At December 31, 2023, non-performing loans consist of a residential mortgage loan and an associated home equity loan with outstanding balances totaling $141,000 and an estimated market value of $216,000.
+Added: At December 31, 2022, non-performing loans consisted primarily of a residential mortgage loan to a deceased borrower which had an outstanding balance of $84,000 and was secured by real estate with an appraised value of $420,000.
+Added: The property was sold in April 2023 and the loan repaid.
+Added: Modifications Made to Borrowers Experiencing Financial Difficulty.
+Added: In March 2022, the FASB issued ASU 2022-2 ,“Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures,” (“ASU 2022-2”) which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted Topic 326, “Financial Instruments – Credit Losses.” Due to the removal of the TDR accounting model, all loan modifications are accounted for under the general loan modification guidance in Subtopic 310-20.
+Added: In addition, on a prospective basis, entities are subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty.
+Added: Public business entities within the scope of the Topic 326 vintage disclosure requirements also are required to prospectively disclose current-period gross write-off information by vintage (that is, year of origination).
+Added: ASU 2022-2 became effective on January 1, 2023.
+Added: There were no loans modified for borrowers experiencing financial difficulty during the year ended December 31, 2023.
+Added: Under previous accounting guidance and prior to the adoption ASU 2022-2, loans were considered TDRs when a borrower was experiencing financial difficulties that led to a restructuring of the loan, and First Seacoast Bank grants a concession to the borrower that it would not otherwise consider.
+Added: These concessions included a modification of terms, such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than current market rate for a new loan with similar risk or some combination thereof to facilitate payment.
+Added: TDRs were considered impaired loans.
+Added: Loans on non-accrual status at the date of modification were initially classified as a non-accrual TDR.
+Added: Our policy provided that TDR loans were returned to accrual status after a period of satisfactory and reasonable future payment performance under the terms of the restructuring.
+Added: Satisfactory payment performance was generally no less than six consecutive months of timely payments.
+Added: At December 31, 2022, we had one accruing TDR.
+Added: This residential mortgage loan was originated during 2010 with Federal Housing Administration (“FHA”) insurance and sold to Freddie Mac with servicing retained by the Bank.
+Added: The FHA insurance lapsed and the loan was repurchased from Freddie Mac and a modification agreement was executed directly with the borrowers.
The modification agreement defers delinquent interest and escrow payments to the end of the loan.
The loan was determined to be a TDR as it did not meet the qualifications of Section 4013 of the CARES Act.
+Added: At December 31, 2023 and 2022, this loan had an outstanding balance of $182,000 and $189,000, respectively.
At December 31, 2023 and 2022, this loan had a fair value of $184,000 and $191,000, respectively, which was determined through a calculation of the present value of estimated future cash flows.
−Removed: The allowance for loan losses includes a specific reserve for this TDR of $-0- as of December 31, 2022 and 2021.
+Added: The allowance for credit losses on loans and allowance for loan losses included a specific reserve for this loan of $-0- as of December 31, 2023 and 2022.
+Added: This loan was returned to performing status during June 2022.
There are no commitments to lend additional funds to these borrowers.
8 unchanged sentences
Classified Assets .
−Removed: Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the Office of the Comptroller of the Currency to be of lesser quality, as “substandard,”
−Removed: “doubtful”
−Removed: or “loss.”
−Removed: An asset is considered “substandard”
−Removed: if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.
−Removed: “Substandard”
−Removed: assets include those characterized by the “distinct possibility”
−Removed: that the insured institution will sustain “some loss”
−Removed: if the deficiencies are not corrected.
−Removed: Assets classified as “doubtful”
−Removed: have all of the weaknesses inherent in those classified “substandard,”
−Removed: with the added characteristic that the weaknesses present make “collection or liquidation in full,”
−Removed: on the basis of currently existing facts, conditions and values, “highly questionable and improbable.”
−Removed: Assets classified as “loss”
−Removed: are those considered “uncollectible”
−Removed: and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
−Removed: Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention”
−Removed: by our management.
+Added: Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the Office of the Comptroller of the Currency to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.
+Added: “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected.
+Added: Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
+Added: Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.
When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses in the loan portfolio.
General allowances represent loss allowances, which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets.
−Removed: When an insured institution classifies problem assets as “loss,”
−Removed: it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount.
−Removed: An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific loss allowances.
+Added: When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount.
+Added: An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific loss allowances.
In accordance with our loan policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations.
−Removed: Loans are listed on the “watch list”
−Removed: initially because of emerging financial weaknesses even though the loan is currently performing as agreed or if the loan possesses weaknesses although currently performing.
−Removed: If a loan deteriorates in asset quality, the classification is changed to “special mention,”
−Removed: “substandard,”
−Removed: “doubtful”
−Removed: or “loss”
−Removed: depending on the circumstances and the evaluation.
−Removed: Generally, loans 90 days or more past due are placed on non-accrual status and classified “substandard.”
−Removed: Management reviews the status of each impaired loan on our watch list on a quarterly basis.
+Added: Loans are listed on the “watch list” initially because of emerging financial weaknesses even though the loan is currently performing as agreed or if the loan possesses weaknesses although currently performing.
+Added: If a loan deteriorates in asset quality, the classification is changed to “special mention,” “substandard,” “doubtful” or “loss” depending on the circumstances and the evaluation.
+Added: Generally, loans 90 days or more past due are placed on non-accrual status and classified “substandard.” Management reviews the status of each individually evaluated loan on our watch list on a quarterly basis.
On the basis of this review of our assets, our classified assets (including commercial, residential and consumer loans) at the dates indicated were as follows:
5 unchanged sentences
Special mention assets
−Removed: Allowance for Loan Losses
−Removed: The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb probable credit losses inherent in the loan portfolio.
−Removed: The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, potential problem loans and economic conditions.
+Added: Allowance for Credit Losses ("ACL")
+Added: Effective January 1, 2023, the Company adopted the new accounting standard for credit losses, ASU No.
+Added: 2016-13 , Financial Instruments - Credit Losses (Topic 326):
+Added: Measurement of Credit Losses on Financial Instruments, as amended ("ASU 2016-13" or “ASC 326”).
+Added: This new accounting standard, commonly referred to as "CECL," significantly changed the methodology for accounting for reserves on loans and unfunded off-balance sheet credit exposures, including certain unfunded loan commitments and standby guarantees.
+Added: ASU 2016-13 replaced the "incurred loss" methodology used to establish an allowance on loans and off-balance sheet credit exposures, with an "expected loss" approach.
+Added: Under CECL, the ACL at each reporting period serves as a best estimate of projected credit losses over the contractual life of certain assets, adjusted for expected prepayments, given an expectation of economic conditions and forecasts as of the valuation date.
+Added: Upon adoption of CECL, the Company made the following elections regarding accrued interest receivable:
+Added: (i) present accrued interest receivable balances separately on the balance sheet on the consolidated statements of condition;
+Added: (ii) exclude accrued interest from the measurement of the ACL, including investments and loans;
+Added: and (iii) continue to write-off accrued interest receivable by reversing interest income.
+Added: The Company has a policy in place to write-off accrued interest when a loan is placed on non-accrual.
+Added: Accrued interest is written-off by reversing previously recorded interest income.
+Added: For loans, write-off typically occurs when a loan has been in default for 90 days or more.
+Added: An immaterial amount of accrued interest on non-accrual loans was written off during the year ended December 31, 2023, by reversing interest income.
+Added: Historically, the Company has not experienced uncollectible accrued interest receivable on its securities available-for-sale.
+Added: The ACL is the sum of various components including the following:
+Added: (a) historical loss experience, (b) a reasonable and supportable forecast, (c) loans evaluated individually, and (d) changes in relevant environmental factors.
+Added: The historical loss component is segmented by loan type and serves as the core of the ACL adequacy methodology.
+Added: The Company has selected the Weighted Average Remaining Maturity Model (“WARM”), for the loss calculation of each of the Bank’s loan pools utilizing a third-party software application.
+Added: The WARM uses a quarterly loss rate and future expectations of loan balances to calculate an ACL.
+Added: A loss rate is applied to pool balances over time.
+Added: CECL may create more volatility in the ACL, specifically the ACL on loans and ACL on off-balance sheet credit exposures.
+Added: Under CECL, the ACL may increase or decrease period to period based on many factors, including, but not limited to:
+Added: (i) macroeconomic forecasts and conditions;
+Added: (ii) forecast period and reversion speed;
+Added: (iii) prepayment speed assumption;
+Added: (iv) loan portfolio volumes and changes in mix;
+Added: (v) credit quality;
+Added: and (vi) various qualitative factors outlined in ASU 2016-13.
+Added: The significant key assumptions used with the ACL calculation at December 31, 2023 using the CECL methodology, included:
+Added: Macroeconomic factors (loss drivers) :
+Added: Monitoring and assessing local and national unemployment, changes in national GDP and other macroeconomic factors which may be the most predictive indicator of losses within the loan portfolio.
+Added: The macroeconomic factors considered in determining the ACL may change from time to time.
+Added: Forecast Period and Reversion speed :
+Added: ASU 2016-13 requires a company to use a reasonable and supportable forecast period in developing the ACL, which represents the time period that management believes it can reasonably forecast the identified loss drivers.
+Added: Generally, the forecast period management believes to be reasonable and supportable will be set annually and validated through an assessment of economic leading indicators.
+Added: In periods of greater volatility and uncertainty,
+Added: such as the current interest rate environment, management will likely use a shorter forecast period, whereas when markets, economies, interest rate environment, political matters, and other factors are considered to be more stable and certain, a longer forecast period may be used.
+Added: Also, in times of greater uncertainty, management may consider a range of possible forecasts and evaluate the probability of each scenario.
+Added: Generally, the forecasted period is expected to range from one to three years.
+Added: Once the reasonable and supportable forecast period is determined, ASU 2016-13 requires a company to revert its loss expectations to the long-run historical mean for the remainder of the contract life of the asset, adjusted for prepayments.
+Added: In determining the length of time over which the reversion will take place (i.e., "reversion speed"), factors such as, historical credit loss experience over previous economic cycles, as well as where the Company believes it is within the current economic cycle, will be considered.
+Added: The Company has chosen a forecast period of one year with a loss history similar to historical losses occurring during January 2014 and December 2016 and then reverting to the long-term average over the following two quarters using the straight-line reversion method.
+Added: The Company believes this historical forecast period to be representative of potential economic conditions over the next eighteen months.
+Added: Prepayment speeds :
+Added: Prepayment speeds are determined for each loan segment utilizing the Company's historical loan data, as well as consideration of current environmental factors.
+Added: The prepayment speed assumption is utilized with the WARM method to forecast expected cash flows over the contractual life of the loan, adjusted for expected prepayments.
+Added: A higher prepayment speed assumption will drive a lower ACL, and vice versa.
+Added: Qualitative factors :
+Added: As within previous accounting guidance used for the "incurred loss" model, ASU 2016-13 requires companies to consider various qualitative factors that may impact expected credit losses.
+Added: The Company continues to consider qualitative factors in determining and arriving at an ACL at each reporting period such as:
+Added: (i) actual or expected changes in economic trends and conditions, (ii) changes in the value of underlying collateral for loans, (iii) changes to lending policies, underwriting standards and/or management personnel performing such functions, (iv) delinquency and other credit quality trends, (v) credit risk concentrations, if any, (vi) changes to the nature of the Company's business impacting the loan portfolio, (vii) and other external factors, that may include, but are not limited to, results of internal loan reviews and examinations by bank regulatory agencies.
+Added: Certain loans which may not share similar risk characteristics with other loans in the portfolio may be tested individually for estimated credit losses, including (i) loans classified as special mention, substandard or doubtful and are on non-accrual, (ii) a loan modified for a borrower experiencing financial difficulty or (iii) loans that have other unique characteristics.
+Added: Factors considered in measuring the extent of the expected credit loss for these loans may include payment status, collateral value, borrower's financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.
+Added: As an integral part of their examination process, the Office of the Comptroller of the Currency will periodically review our ACL, and as a result of such reviews, we may have to adjust our ACL.
+Added: However, regulatory agencies are not directly involved in the process for establishing the ACL as the process is our responsibility and any increase or decrease in the ACL is the responsibility of management.
+Added: Allowance for Loan Losses (“ALL”)
+Added: Prior to the adoption of ASU 2016-13, the ALL was maintained at a level which, in management’s judgment, was adequate to absorb probable credit losses inherent in the loan portfolio.
+Added: The amount of the ALL was based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, potential problem loans and economic conditions.
Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows.
−Removed: Because of uncertainties associated with regional economic conditions, collateral values and future cash flows on impaired loans, it is reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term.
−Removed: The allowance is increased by a provision for loan losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries.
−Removed: Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses.
−Removed: Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.
−Removed: As an integral part of their examination process, the Office of the Comptroller of the Currency will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses.
−Removed: However, regulatory agencies are not directly involved in the process for establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.
−Removed: Allowance for Loan Losses .
−Removed: The following table sets forth activity in our allowance for loan losses for the years indicated.
+Added: Because of uncertainties associated with regional economic conditions, collateral values and future cash flows on impaired loans, it was reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related ALL would change materially in the near-term.
+Added: The ALL was increased by a provision for loan losses, which was charged to expense and reduced by full and partial charge-offs, net of recoveries.
+Added: Changes in the ALL relating to impaired loans were charged or credited to the provision for loan losses.
+Added: Management’s periodic evaluation of the adequacy of the ALL was based on various factors, including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which would affect potential credit losses.
+Added: Allowance for Credit Losses on Loans .
+Added: The following table sets forth activity in our ACL and ALL for the years 2023 and 2022, respectively.
At or for the Years Ended December 31,
1 unchanged sentence
Allowance at beginning of the year
−Removed: Provision for loan losses
+Added: Provision for credit losses on loans
+Added: Impact of ASC 326 Adoption
One- to four-family residential real estate
10 unchanged sentences
Total recoveries
−Removed: Net (charge-offs) recoveries
+Added: Net charge-offs
Allowance at end of year
11 unchanged sentences
outstanding during the year
−Removed: Allocation of Allowance for Loan Losses.
−Removed: The following table sets forth the allowance for loan losses allocated by loan category, the total loan balances by category and the percent of loans in each category to total loans at the dates indicated.
−Removed: The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
+Added: Allocation of Allowance for Credit Losses on Loans.
+Added: The following table sets forth the ACL and ALL allocated by loan category, the total loan balances by category and the percent of loans in each category to total loans at the dates indicated.
+Added: The ACL and ALL allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
At December 31,
+Added: for Credit Losses on Loans
in Category to
9 unchanged sentences
Total allocated allowance
−Removed: The Company measures and records its allowance for loan losses based upon an incurred loss model.
−Removed: Under this approach, loan loss is recognized when it is probable that a loss event was incurred.
−Removed: This approach also considers qualitative adjustments to the quantitative baseline determined by the model.
−Removed: The Company considers the impact of current environmental factors at the reporting date that did not exist over the period from which historical experience was used.
−Removed: Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower and industry), economic trends and conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies and the level of criticized loans.
−Removed: The Company made relevant adjustments to its qualitative factors in the measurement of its allowance for loan losses at December 31, 2022 and 2021 that balanced the need to recognize an allowance while adhering to an incurred loss recognition and measurement principle which prohibits the recognition of future or lifetime losses.
−Removed: Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
−Removed: Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result.
−Removed: Furthermore, our regulators, in reviewing our loan portfolio, may require us to increase our allowance for loan losses.
−Removed: Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.
−Removed: See Note 6 to the notes to our consolidated financial statements included in this annual report for a complete discussion of our allowance for loan losses.
+Added: The Company measures and records its ACL based upon an expected loss model.
+Added: Under this approach, the ACL at each reporting period serves as a best estimate of projected credit losses over the contractual life of certain assets, adjusted for expected prepayments, given an expectation of economic conditions and forecasts as of the valuation date.
+Added: As noted above and within previous accounting guidance used for the "incurred loss" model, ASU 2016-13 requires companies to consider various qualitative factors that may impact expected credit losses.
+Added: The Company made relevant adjustments to its qualitative factors in the measurement of its ACL at December 31, 2023.
+Added: Although we believe that we use the best information available to establish the ACL, future adjustments to the ACL may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
+Added: Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing ACL may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result.
+Added: Furthermore, our regulators, in reviewing our loan portfolio, may require us to increase our ACL.
+Added: Any material increase in the ACL may adversely affect our financial condition and results of operations.
+Added: See Note 6 to the notes to our consolidated financial statements included in this annual report for a complete discussion of our ACL.
Investment Activities
1 unchanged sentence
Our board of directors is responsible for adopting and reviewing annually our investment policy.
−Removed: Our Asset/Liability Management Committee (“ALCO”) is responsible for implementing our investment policy.
+Added: Our Asset/Liability Management Committee (“ALCO”) is responsible for implementing our investment policy.
Authority to make investments under the approved investment policy guidelines is delegated to our President and Chief Executive Officer, Chief Financial Officer and Finance Officer.
3 unchanged sentences
Treasury obligations, securities of various government-sponsored enterprises and municipal governments, deposits at the Federal Home Loan Bank, time deposits of federally insured institutions, investment grade corporate bonds, corporate subordinated debt and investment grade marketable equity securities.
−Removed: We also are required to maintain an investment in Federal Home Loan Bank stock.
+Added: We are also required to maintain an investment in Federal Home Loan Bank stock.
While we have the authority under applicable law to invest in derivative securities, we have no investments in derivative securities.
−Removed: Accumulated Other Comprehensive Income/(Loss) and Available-for-Sale Securities.
−Removed: Generally accepted accounting principles in the United States require that unrealized gains and losses on available-for-sale securities be reported as a separate component of stockholders’
−Removed: equity as a component of accumulated other comprehensive income.
+Added: Accumulated Other Comprehensive Loss and Available-for-Sale Securities.
+Added: Generally accepted accounting principles in the United States require that unrealized gains and losses on available-for-sale securities be reported as a separate component of stockholders’ equity as a component of accumulated other comprehensive loss.
Our available-for-sale securities consist of debt securities that we intend to hold for an indefinite period of time, but not necessarily to maturity, and are carried at fair value.
−Removed: Generally, when market interest rates rise, the fair value of available-for-sale securities decreases, resulting in unrealized losses, net of tax, and when market interest rates decrease, the fair value of those securities increases, resulting in unrealized gains, net of tax.
+Added: Generally, when market interest rates rise, the fair value of available-for-sale securities decreases,
+Added: resulting in unrealized losses, net of tax, and when market interest rates decrease, the fair value of those securities increases, resulting in unrealized gains, net of tax.
+Added: On November 28, 2023, we executed a balance sheet repositioning strategy related to our available-for-sale investment securities portfolio.
+Added: We sold $40.6 million in book value of lower-yielding investment securities for an after-tax realized loss of $3.1 million and purchased $40.6 million of higher-yielding investment securities which were classified as available-for-sale upon purchase.
During the year ended December 31, 2022, market interest rates increased significantly, which resulted in unrealized losses, net of tax, resulting from the decrease in the fair value of our available-for-sale securities.
−Removed: At December 31, 2022, our consolidated stockholders’
−Removed: equity of $49.3 million had been reduced by $10.4 million related to these unrealized losses.
−Removed: Future increases in market interest rates are likely to result in additional unrealized losses on available-for-sale securities, which would reduce our stockholders’
−Removed: However, because the Bank made a permitted election to opt-out from the inclusion of accumulated other comprehensive income/(loss) in the calculation of its regulatory capital, accumulated other comprehensive income/loss does not affect our regulatory capital levels.
+Added: At December 31, 2022, our consolidated stockholders’ equity of $49.3 million had been reduced by $10.4 million related to these unrealized losses.
+Added: Future increases in market interest rates are likely to result in additional unrealized losses on available-for-sale securities, which would reduce our stockholders’ equity.
+Added: However, because the Bank made a permitted election to opt-out from the inclusion of accumulated other comprehensive loss in the calculation of its regulatory capital, accumulated other comprehensive loss does not affect our regulatory capital levels.
Each quarter, or more often if a potential loss triggering event occurs, we assess our available-for-sale securities.
−Removed: We consider the extent and duration of any unrealized losses and the financial condition and near term prospects of the issuers.
+Added: We consider the extent of any unrealized losses and the financial condition and near term prospects of the issuers.
At December 31, 2023, we do not intend to sell our available-for-sale securities and it was unlikely that we would have had to sell them before recovery of their amortized cost, which may be at maturity, and we believed that the unrealized losses were primarily due to market interest rate fluctuations and not changes in credit quality.
4 unchanged sentences
Government Agency Small Business Administration Pools.
−Removed: At December 31, 2022, we had government-sponsored small business investment company (“SBIC”) pools issued and guaranteed by the SBA totaling $8.4 million, which constituted 7.9% of our securities portfolio.
+Added: At December 31, 2023, we had government-sponsored small business investment company (“SBIC”) pools issued and guaranteed by the SBA totaling $15.6 million, which constituted 12.8% of our securities portfolio.
An SBIC is a privately owned and managed investment fund licensed and regulated by the SBA.
6 unchanged sentences
Government-Sponsored Mortgage-Backed Securities.
−Removed: At December 31, 2022, we had government-sponsored mortgage-backed securities and collateralized mortgage obligations issued by the FHLMC, FNMA and Government National Mortgage Association (“GNMA”) totaling $28.0 million, which constituted 26.4% of our securities portfolio.
+Added: At December 31, 2023, we had government-sponsored mortgage-backed securities and collateralized mortgage obligations issued by the FHLMC, FNMA and Government National Mortgage Association (“GNMA”) totaling $38.2 million, which constituted 31.4% of our securities portfolio.
Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages.
−Removed: Certain types of mortgage-backed securities are commonly referred to as “pass-through”
−Removed: certificates because the principal and interest of the underlying loans is “passed through”
−Removed: to investors, net of certain costs, including servicing and guarantee fees.
+Added: Certain types of mortgage-backed securities are commonly referred to as “pass-through” certificates because the principal and interest of the underlying loans is “passed through” to investors, net of certain costs, including servicing and guarantee fees.
We invest primarily in mortgage-backed securities backed by one- to four-family residential mortgages.
15 unchanged sentences
We generally require commercial business borrowers to maintain their primary deposit accounts with us.
+Added: At December 31, 2023, there were $23.6 million of brokered deposits included in time deposits.
+Added: The purchase of brokered deposits offered a lower cost alternative to advances from the Federal Home Loan Bank of a similar duration.
+Added: Additionally, there were $20.9 million and $-0- of brokered deposits included in savings deposits at December 31, 2023 and 2022, respectively.
At December 31, 2023, our deposits totaled $404.8 million.
+Added: For customers requiring full FDIC insurance on certificates of deposit in excess of $250,000, we began offering in late 2023 the CDARS® program, which allows the Bank to place the certificates of deposit with other participating banks to maximize the customers’ FDIC insurance.
+Added: We receive a like amount of deposits from other participating financial institutions.
+Added: In addition, we offer the ICS program, an insured deposit “sweep” program for demand deposits which is a product offered by IntraFi Network, LLC, which is also the provider of the CDARS® program.
+Added: Similarly to the certificates of deposit’s discussed above, the Bank receives a like amount of deposits from other financial institutions and all customer deposits are insured by the FDIC.
+Added: These “reciprocal” CDARS® and ICS deposits are classified as “brokered” deposits in regulatory reports.
+Added: The Bank considers these deposits to be “core” in nature.
+Added: At December 31, 2023, our “reciprocal” CDARS® and ICS deposits were $-0- and $1.1 million, respectively.
Deposit account terms vary according to the minimum balance required, the time period that funds must remain on deposit and the interest rate, among other factors.
9 unchanged sentences
Our liquidity position is monitored daily and we believe we have a strong contingency liquidity plan should deposit balances fluctuate.
−Removed: The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers’
+Added: The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers’ demands.
Our ability to gather deposits is impacted by the competitive market in which we operate, which includes numerous financial institutions of varying sizes offering a wide range of products.
8 unchanged sentences
Time deposits
−Removed: As of December 31, 2022 and 2021, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, was $82.0 million and $88.3 million, respectively.
+Added: As of December 31, 2023 and 2022, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, was estimated to be $102.5 million, or 25.3% of total deposits, and $82.0 million, or 21.4% of total deposits, respectively.
At December 31, 2023 and 2022, uninsured time deposits totaled $7.4 million and $2.8 million, respectively.
7 unchanged sentences
Borrowed Funds.
−Removed: We may obtain advances from the Federal Home Loan Bank upon the security of our capital stock in the Federal Home Loan Bank and certain of our mortgage loans.
+Added: We may obtain advances from the Federal Home Loan Bank (“FHLB”) upon the security of our capital stock in the FHLB and certain of our mortgage loans.
Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities.
We use such advances to provide short-term funding as a supplement to our deposits.
−Removed: At December 31, 2022, we had $99.4 million in advances from the Federal Home Loan Bank and $36.5 million of additional borrowing capacity.
−Removed: During November and December 2021, the Bank retired a total of $20.0 million of long-term borrowings from the Federal Home Loan Bank in advance of their scheduled maturities.
−Removed: The interest rates on these borrowings were above current market rates and were scheduled to mature in 2024 and 2025.
−Removed: We were able to retire these borrowings without incurring prepayment penalties.
−Removed: Interest expense, calculated as the present value of the total interest to be paid over the original scheduled maturity period, amounted to $281,000.
−Removed: The Bank has an overnight line of credit with the Federal Home Loan Bank that may be drawn up to $3.0 million.
−Removed: We may access additional advances if we purchase additional Federal Home Loan Bank capital stock.
+Added: At December 31, 2023, we had $73.0 million in advances from the FHLB and $71.8 million of additional borrowing capacity.
+Added: The Bank has established two secured credit facilities with the Federal Reserve Bank of Boston (“FRB”) – Bank Term Funding Program (“BTFP”) and Borrower-In-Custody of Collateral Program (“BIC”).
+Added: As of December 31, 2023, a $20.0 million BTFP advance is outstanding and collateralized by eligible collateral consisting primarily of government-sponsored enterprise obligations, mortgage-backed securities and collateralized mortgage obligations issued by various U.S.
+Added: Government agencies, owned as of March 12, 2023 and December 31, 2023.
+Added: At December 31, 2023, the Bank’s remaining borrowing capacity is $3.5 million under the BTFP.
+Added: At December 31, 2023, the Bank’s borrowing capacity is $50.6 million under the BIC and is based upon eligible collateral - principally general obligation municipal bonds.
+Added: The entire balance of this credit facility was available at December 31, 2023.
+Added: The Bank has an overnight line of credit with the FHLB that may be drawn up to $3.0 million.
+Added: We may access additional advances if we purchase additional FHLB capital stock.
Additionally, at December 31, 2023, we had $5.0 million of unsecured Fed funds borrowing lines of credit with two correspondent banks.
3 unchanged sentences
We encourage and support the development of our employees and, whenever possible, strive to fill vacancies from within.
−Removed: As of December 31, 2022, we had 81 total employees and 80 full-time equivalent employees.
+Added: As of December 31, 2023, we had 76 total/full-time equivalent employees.
Our employees are not represented by any collective bargaining group.
3 unchanged sentences
Through teamwork and the adaptability of our management and staff, we were able to transition many of our employees to effectively work from remote locations and ensured a safe working environment for employees performing customer facing activities at our branch locations.
−Removed: All employees are required to stay at home when they experience signs or symptoms of a possible COVID-19 illness and are provided paid time off during such absences.
+Added: All employees are encouraged to stay at home when they experience signs or symptoms of a possible COVID-19 illness and are provided paid time off during such absences.
Employee retention helps us operate efficiently and achieve our business objectives.
−Removed: We believe our commitment to prioritizing concern for our employees’
−Removed: well-being, supporting their career goals, offering competitive wages and providing valuable fringe benefits contributes to the retention of our top-performing employees.
+Added: We believe our commitment to prioritizing concern for our employees’ well-being, supporting their career goals, offering competitive wages and providing valuable fringe benefits contributes to the retention of our top-performing employees.
In addition, all eligible employees are stockholders of the Company through participation in our Employee Stock Ownership Plan, which aligns employee and stockholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our employees.
3 unchanged sentences
As a federal savings bank, First Seacoast Bank is subject to examination, supervision and regulation, primarily by the Office of the Comptroller of the Currency, and, secondarily, by the FDIC as deposits insurer.
−Removed: The federal system of regulation and supervision establishes a comprehensive framework of activities in which First Seacoast Bank may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund.
+Added: The federal system of regulation and supervision establishes a comprehensive framework of activities in which First Seacoast Bank may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including the classification of assets and the establishment of loan loss reserves for regulatory purposes.
−Removed: First Seacoast Bank is also regulated to a lesser extent by the Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,”
−Removed: which governs the reserves to be maintained against deposits and other matters.
+Added: First Seacoast Bank is also regulated to a lesser extent by the Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” which governs the reserves to be maintained against deposits and other matters.
In addition, First Seacoast Bank is a member of and owns stock in the Federal Home Loan Bank, which is one of the 11 regional banks in the Federal Home Loan Bank System.
−Removed: First Seacoast Bank’s relationship with its depositors and borrowers is also regulated to a great extent by federal law and, to a lesser extent, state law, including in matters concerning the ownership of deposit accounts and the form and content of First Seacoast Bank’s loan documents.
+Added: First Seacoast Bank’s relationship with its depositors and borrowers is also regulated to a great extent by federal law and, to a lesser extent, state law, including in matters concerning the ownership of deposit accounts and the form and content of First Seacoast Bank’s loan documents.
As a savings and loan holding company, First Seacoast Bancorp, Inc.
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Business Activities.
−Removed: A federal savings association derives its lending and investment powers from the Home Owners’
−Removed: Loan Act, as amended, and applicable federal regulations.
+Added: A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and applicable federal regulations.
Under these laws and regulations, First Seacoast Bank may invest in mortgage loans secured by residential and commercial real estate, commercial and industrial and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits.
4 unchanged sentences
First Seacoast Bank is required to file reports with and is subject to periodic examination by the Office of the Comptroller of the Currency.
−Removed: First Seacoast Bank is required to pay assessments to the Office of the Comptroller of the Currency to fund the agency’s operations.
+Added: First Seacoast Bank is required to pay assessments to the Office of the Comptroller of the Currency to fund the agency’s operations.
Capital Requirements.
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a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio.
−Removed: In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer”
−Removed: consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
+Added: In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and Total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively.
The regulations also establish a minimum required leverage ratio of at least 4% of Tier 1 capital.
−Removed: Common equity Tier 1 capital is generally defined as common stockholders’
−Removed: equity and retained earnings.
+Added: Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.
Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital.
2 unchanged sentences
Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.
−Removed: Also included in Tier 2 capital is the allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised a one-time opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
+Added: Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised a one-time opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”).
Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities).
1 unchanged sentence
Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
−Removed: In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset.
+Added: In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset.
Higher levels of capital are required for asset categories believed to present greater risk.
1 unchanged sentence
government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
−Removed: Federal legislation required federal banking agencies, including the Office of the Comptroller of the Currency, to establish for institutions with consolidated total assets of less than $10 billion a "community bank leverage ratio" (“CBLR”).
−Removed: The CBLR is an alternative framework that can be used to calculate a bank’s capital ratio.
+Added: Federal legislation required federal banking agencies, including the Office of the Comptroller of the Currency, to establish for institutions with consolidated total assets of less than $10 billion a "community bank leverage ratio" (“CBLR”).
+Added: The CBLR is an alternative framework that can be used to calculate a bank’s capital ratio.
Qualifying banking organizations may opt in or opt out quarterly of using the community bank leverage framework which significantly simplifies the calculation of the capital ratio by relying on total average assets and therefore eliminating the need to calculate risk-based assets.
3 unchanged sentences
Throughout 2023, the Bank did not make an election to use the CBLR.
−Removed: At December 31, 2022, First Seacoast Bank’s capital exceeded all applicable requirements including the applicable capital conservation buffer.
+Added: At December 31, 2023, First Seacoast Bank’s capital exceeded all applicable requirements including the applicable capital conservation buffer.
Loans-to-One Borrower.
Generally, a federal savings bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.
−Removed: An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by “readily marketable collateral,”
−Removed: which generally includes certain financial instruments (but not real estate).
+Added: An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by “readily marketable collateral,” which generally includes certain financial instruments (but not real estate).
As of December 31, 2023, First Seacoast Bank complied with the loans-to-one borrower limitations.
6 unchanged sentences
Prompt Corrective Action .
−Removed: Under the federal Prompt Corrective Action statute, the Office of the Comptroller of the Currency is required to take supervisory actions against undercapitalized institutions under its jurisdiction, the severity of which depends upon the institution’s level of capital.
−Removed: An institution that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4% is considered to be “undercapitalized.”
−Removed: A savings institution that has total risk-based capital of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be “significantly undercapitalized.”
−Removed: A savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be “critically undercapitalized.”
−Removed: Generally, the Office of the Comptroller of the Currency is required to appoint a receiver or conservator for a federal savings association that becomes “critically undercapitalized”
−Removed: within specific time frames.
−Removed: The regulations also provide that a capital restoration plan must be filed with the Office of the Comptroller of the Currency within 45 days of the date that a federal savings association is deemed to have received notice that it is “undercapitalized,”
−Removed: “significantly undercapitalized”
−Removed: or “critically undercapitalized.”
−Removed: Any holding company of a federal savings association that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5.0% of the savings association’s assets at the time it was deemed to be undercapitalized by the Office of the Comptroller of the Currency or the amount necessary to restore the savings association to adequately capitalized status.
+Added: Under the federal Prompt Corrective Action statute, the Office of the Comptroller of the Currency is required to take supervisory actions against undercapitalized institutions under its jurisdiction, the severity of which depends upon the institution’s level of capital.
+Added: An institution that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4% is considered to be “undercapitalized.” A savings institution that has total risk-based capital of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be “significantly undercapitalized.” A savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be “critically undercapitalized.”
+Added: Generally, the Office of the Comptroller of the Currency is required to appoint a receiver or conservator for a federal savings association that becomes “critically undercapitalized” within specific time frames.
+Added: The regulations also provide that a capital restoration plan must be filed with the Office of the Comptroller of the Currency within 45 days of the date that a federal savings association is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company of a federal savings association that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5.0% of the savings association’s assets at the time it was deemed to be undercapitalized by the Office of the Comptroller of the Currency or the amount necessary to restore the savings association to adequately capitalized status.
This guarantee remains in place until the Office of the Comptroller of the Currency notifies the savings association that it has maintained adequately capitalized status for each of four consecutive calendar quarters.
1 unchanged sentence
The Office of the Comptroller of the Currency may also take any one of a number of discretionary supervisory actions against undercapitalized federal savings associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.
−Removed: At December 31, 2022, First Seacoast Bank met the criteria for being considered “well capitalized,”
−Removed: which means that its total risk-based capital ratio exceeded 10%, its Tier 1 risk-based ratio exceeded 8.0%, its common equity Tier 1 ratio exceeded 6.5% and its leverage ratio exceeded 5.0%.
+Added: At December 31, 2023, First Seacoast Bank met the criteria for being considered “well capitalized,” which means that its total risk-based capital ratio exceeded 10%, its Tier 1 risk-based ratio exceeded 8.0%, its common equity Tier 1 ratio exceeded 6.5% and its leverage ratio exceeded 5.0%.
Qualified Thrift Lender Test.
−Removed: As a federal savings association, First Seacoast Bank must satisfy the qualified thrift lender, or “QTL,”
−Removed: Under the QTL test, First Seacoast Bank must maintain at least 65% of its “portfolio assets”
−Removed: in “qualified thrift investments”
−Removed: (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of every 12-month period.
−Removed: “Portfolio assets”
−Removed: generally means total assets of a savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets and the value of property used in the conduct of the savings association’s business.
−Removed: Alternatively, First Seacoast Bank may satisfy the QTL test by qualifying as a “domestic building and loan association”
−Removed: as defined in the Internal Revenue Code.
−Removed: A savings association that fails the QTL test must operate under specified restrictions set forth in the Home Owners’
+Added: As a federal savings association, First Seacoast Bank must satisfy the qualified thrift lender, or “QTL,” test.
+Added: Under the QTL test, First Seacoast Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of every 12-month period.
+Added: “Portfolio assets” generally means total assets of a savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets and the value of property used in the conduct of the savings association’s business.
+Added: Alternatively, First Seacoast Bank may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code.
+Added: A savings association that fails the QTL test must operate under specified restrictions set forth in the Home Owners’ Loan Act.
The Dodd-Frank Act made noncompliance with the QTL test subject to agency enforcement action for a violation of law.
1 unchanged sentence
Capital Distributions.
−Removed: Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account.
+Added: Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account.
A federal savings association must file an application with the Office of the Comptroller of the Currency for approval of a capital distribution if:
−Removed: the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus the savings association’s retained net income for the preceding two years;
+Added: • the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus the savings association’s retained net income for the preceding two years;
• the savings association would not be at least adequately capitalized following the distribution;
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All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers.
−Removed: In connection with its examination of a federal savings association, the Office of the Comptroller of the Currency is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act.
−Removed: A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications, such as branches or mergers or in restrictions on its activities.
+Added: In connection with its examination of a federal savings association, the Office of the Comptroller of the Currency is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act.
+Added: A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications, such as branches or mergers or in restrictions on its activities.
In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes.
1 unchanged sentence
The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating.
−Removed: First Seacoast Bank received an “Outstanding”
−Removed: rating in its most recent Community Reinvestment Act federal evaluation.
+Added: First Seacoast Bank received an “Outstanding” rating in its most recent Community Reinvestment Act federal evaluation.
Transactions with Related Parties.
−Removed: A federal savings association’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation.
+Added: A federal savings association’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation.
An affiliate is generally a company that controls or is under common control with an insured depository institution such as First Seacoast Bank.
4 unchanged sentences
Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets from an affiliate and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.
−Removed: First Seacoast Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.
+Added: First Seacoast Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.
Among other things, these provisions generally require that extensions of credit to insiders:
• be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features;
−Removed: not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of First Seacoast Bank’s capital.
−Removed: In addition, extensions of credit in excess of certain limits must be approved by First Seacoast Bank’s board of directors.
+Added: • not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of First Seacoast Bank’s capital.
+Added: In addition, extensions of credit in excess of certain limits must be approved by First Seacoast Bank’s board of directors.
Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.
−Removed: The Office of the Comptroller of the Currency has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all “institution-affiliated parties,”
−Removed: including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association.
+Added: The Office of the Comptroller of the Currency has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association.
Formal enforcement action by the Office of the Comptroller of the Currency may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution to the appointment of a receiver or conservator.
5 unchanged sentences
Deposit accounts in First Seacoast Bank are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts.
+Added: For customers requiring full FDIC insurance on certificates of deposit in excess of $250,000, we began offering in late 2023 the CDARS® program, which allows the Bank to place the certificates of deposit with other participating banks to maximize the customers’ FDIC insurance.
+Added: We receive a like amount of deposits from other participating financial institutions.
+Added: In addition, we offer the ICS program, an insured deposit “sweep” program for demand deposits which is a product offered by IntraFi Network, LLC, which is also the provider of the CDARS® program.
+Added: Similarly to the certificates of deposit’s discussed above, the Bank receives a like amount of deposits from other financial institutions and all customer deposits are insured by the FDIC.
+Added: These “reciprocal” CDARS® and ICS deposits are classified as “brokered” deposits in regulatory reports.
+Added: The Bank considers these deposits to be “core” in nature.
+Added: At December 31, 2023, our “reciprocal” CDARS® and ICS deposits were $-0- and $1.1 million, respectively.
The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.
12 unchanged sentences
The Dodd-Frank Act created the Consumer Financial Protection Bureau, which has broad powers to supervise and enforce consumer protection laws.
−Removed: The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as First Seacoast Bank, including the authority to prohibit “unfair, deceptive or abusive”
−Removed: acts and practices.
+Added: The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as First Seacoast Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices.
The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets.
2 unchanged sentences
In addition to creating the Consumer Financial Protection Bureau, the Dodd-Frank Act, among other things, directed changes in the way that institutions are assessed for deposit insurance, mandated the imposition of tougher consolidated capital requirements on holding companies, required the issuance of regulations requiring originators of securitized loans to retain a percentage of the risk for the transferred loans, imposed regulatory rate-setting for certain debit card interchange fees, repealed restrictions on the payment of interest on commercial demand deposits and contained a number of reforms related to mortgage originations.
−Removed: Many provisions of the Dodd-Frank Act involve delayed effective dates and/or require implementing regulations.
+Added: Many provisions of the Dodd-Frank Act involve delayed effective dates and/or require implementation of regulations.
The implementation of the legislation is an ongoing process.
2 unchanged sentences
Interest and other charges collected or contracted for by First Seacoast Bank are subject to state usury laws and federal laws concerning interest rates.
−Removed: First Seacoast Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:
+Added: First Seacoast Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:
• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
7 unchanged sentences
• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;
−Removed: Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’
−Removed: rights and liabilities arising from the use of automated teller machines and other electronic banking services;
−Removed: Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,”
−Removed: such as digital check images and copies made from that image, the same legal standing as the original paper check;
+Added: • Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;
+Added: • Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;
• The USA PATRIOT Act, which requires savings associations to, among other things, establish broadened anti-money laundering compliance programs and due diligence policies and controls to ensure the detection and reporting of money laundering.
1 unchanged sentence
• The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.
−Removed: Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out”
−Removed: of the sharing of certain personal financial information with unaffiliated third parties.
+Added: Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.
Holding Company Regulation
−Removed: The Company is a savings and loan holding company within the meaning of the Home Owners’
+Added: The Company is a savings and loan holding company within the meaning of the Home Owners’ Loan Act.
As such, it is registered with the Federal Reserve Board and subject to the regulation, examination, supervision and reporting requirements applicable to savings and loan holding companies.
5 unchanged sentences
A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to regulatory approval, and certain additional activities authorized by federal regulations.
−Removed: First Seacoast Bancorp, Inc.has not elected financial holding company status.
+Added: First Seacoast Bancorp, Inc.
+Added: has not elected financial holding company status.
Federal law prohibits a savings and loan holding company, including the Company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings association or savings and loan holding company, without prior Federal Reserve Board approval.
7 unchanged sentences
Source of Strength.
−Removed: The Dodd-Frank Act extended the “source of strength”
−Removed: doctrine to savings and loan holding companies.
+Added: The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies.
By law, all savings and loan holding companies must serve as a source of financial and managerial strength to their subsidiary depository institutions.
Dividends and Stock Repurchases.
−Removed: The Federal Reserve Board has issued a policy statement regarding the payment of dividends by holding companies.
−Removed: In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition.
−Removed: Separate regulatory guidance provides for prior consultation with Federal Reserve Bank staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition.
+Added: The Federal Reserve Board has issued a policy statement regarding the payment of dividends and other capital distributions by holding companies.
+Added: In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition.
+Added: Separate regulatory guidance provides for prior consultation with Federal Reserve Bank staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition.
The ability of a savings and loan holding company to pay dividends may be restricted if a subsidiary savings association becomes undercapitalized.
3 unchanged sentences
The Federal Reserve Bank of Boston did not object to our repurchase plan.
−Removed: Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control”
−Removed: of a savings and loan holding company.
−Removed: Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company.
−Removed: A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock.
+Added: Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company.
+Added: Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company.
+Added: A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock.
Under the Change in Bank Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.
15 unchanged sentences
Charitable Contribution Carryovers.
−Removed: A financial institution’s deduction for charitable contributions is limited to 10% of its federal taxable income with the excess carried forward to the succeeding five taxable years.
+Added: A financial institution’s deduction for charitable contributions is limited to 10% of its federal taxable income with the excess carried forward to the succeeding five taxable years.
Any contributions remaining after the five-year carryover period that has not been deducted is no longer deductible.
10 unchanged sentences
First Seacoast Bank is subject to New Hampshire income tax at the rate of 7.5% on its taxable income, before net operating loss deductions and special deductions for federal income tax purposes.
−Removed: For this purpose, “taxable income”
−Removed: generally means federal taxable income, subject to certain adjustments.
+Added: For this purpose, “taxable income” generally means federal taxable income, subject to certain adjustments.
+Added: Net Operating Loss Carryovers.
+Added: A financial institution may carry New Hampshire net operating losses forward for ten years but is limited to 80% of each subsequent year's taxable income.
+Added: At December 31, 2023, the Bank had $8.4 million of New Hampshire net operating loss carryovers.
Ri sk Factors
−Removed: Not applicable, as the Company is a “smaller reporting company.”
+Added: Not applicable, as the Company is a “smaller reporting company.”
Unresolv ed Staff Comments
+Added: Cybersecurity
+Added: Risk Management and Strategy
+Added: Our risk management program is designed to identify, assess, and mitigate risk across various aspects of our company, including financial, operational, regulatory, reputational, and legal.
+Added: Cybersecurity is a critical component of this program, given the increasing reliance on technology and potential of cyber threats.
+Added: Our Senior Technology/Cybersecurity Officer is primarily responsible for this cybersecurity component and is a key member of the Company's Information Technology Governance, along with our Chief Finance/Information Security Officer, including the Enterprise Risk Management Committee ("ERM"), the Information Technology Steering Committee ("ITSC") and the Information Technology Advisory Committee ("ITAC"), reporting directly to the Chief Information Officer.
+Added: Our Senior Technology/Cybersecurity Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management, including 30 years of cybersecurity experience, 5 of which was spent at the Company.
+Added: The ITAC and ERM are board level committees with the ITSC consisting of members of management.
+Added: Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information.
+Added: The structure of our information security program is designed around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance, and other industry standards.
+Added: In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness.
+Added: Our Chief Finance/Information Security Officer and our Chief Information Officer, report directly to our Chief Executive Officer, and along with key members of their teams, regularly collaborate with peer banks, industry groups, and policymakers to discuss
+Added: cybersecurity trends and issues and identify best practices.
+Added: The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions.
+Added: The Company employs an in-depth, layered, defensive strategy that embraces a “secure by design” philosophy when designing new products, services, and technology.
+Added: We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls.
+Added: We also employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats.
+Added: We have established processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees, preparedness simulations and tabletop exercises, and recovery and resilience tests.
+Added: We engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party specialists.
+Added: We also maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and our supply chain.
+Added: We also actively monitor our email gateways for malicious phishing email campaigns and monitor remote connections as a portion of our workforce
+Added: has the option to work remotely.
+Added: We leverage internal auditors to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program.
+Added: We maintain an Incident Response Plan ("IRP") that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below.
+Added: The IRP is coordinated through the Chief Finance/Information Security Officer, Senior Technology/Cybersecurity Officer and key members of management are embedded into the IRP by its design.
+Added: The IRP facilitates coordination across multiple parts of our organization and is evaluated at least annually.
+Added: Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe.
+Added: Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our company.
+Added: Our Chief Finance/Information Security Officer has oversight of information security across the organization, with the Senior Technology/Cybersecurity Officer independently accountable for managing our enterprise information security department and delivering our information security program.
+Added: The responsibility of this role includes cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience.
+Added: The foregoing responsibilities are covered on a day-to-day basis by a first and second line of defense functions.
+Added: The second line of defense function is separated from the first line of defense function through organizational structure and ultimately reports directly to the Chief Information Officer.
+Added: The department consists of information security professionals with varying degrees of education and experience.
+Added: Individuals within the department are generally subject to professional education and certification requirements.
+Added: Our Senior Technology/Cybersecurity Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management.
+Added: Our board of directors has approved management committees including the ITAC, which focuses on technology impact, and ERM, which focuses on business impact while the ITSC is an internal management committee providing direction and priorities to information technology strategies.
+Added: These committees provide oversight and governance of the technology program and the information security program.
+Added: The ITAC and ERM are chaired by certain members of the board of directors with senior management participation including the Chief Finance/Information Security Officer, Chief Information Officer, Senior Technology/Cybersecurity Officer as well as other key departmental managers from throughout the organization.
+Added: These committees meet periodically to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks.
+Added: More frequent meetings occur from time to time in accordance with the IRP in order to facilitate timely informing and monitoring efforts.
+Added: The Senior Technology/Cybersecurity Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, discussed at committee meetings and the actions taken to the ITAC on a quarterly basis (or more frequently as may be required by the IRP).
+Added: The ITAC is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
+Added: Our Chief Finance/Information Security Officer, Senior Technology/Cybersecurity Officer and our Chief Information Officer provide quarterly reports to the ITAC and ERM regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes.
+Added: The ITAC reviews and approves our information security and technology budgets and strategies annually.
+Added: Additionally, the ERM reviews our cyber security risk profile on a quarterly basis.
+Added: The ITAC and ERM provide a report of their activities to the board of directors regularly.
As of December 31, 2023, the net book value of our land, building and equipment was $4.1 million.
5 unchanged sentences
(In thousands)
+Added: Main Office and Annex:
633/629 Central Avenue
10 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.