First Seacoast Bancorp (Form: 10-Q, Received: 11/14/2019 16:35:38)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38985

First Seacoast Bancorp

(Exact Name of Registrant as Specified in Its Charter)


United States of America		84-2404519
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

633 Central Avenue, Dover, New Hampshire		03820
(Address of Principal Executive Offices)		(Zip Code)

(603) 742-4680

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common stock, $0.01 par value per share

FSEA

The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

6,083,500 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of November 14, 2019, of which 3,345,925 shares were owned by First Seacoast Bancorp, MHC.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION		2
Item 1.	Consolidated Financial Statements		2
	Consolidated Balance Sheets at September 30, 2019 (unaudited) and December 31, 2018		2
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)		3
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)		4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)		5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (unaudited)		6
	Notes to Consolidated Financial Statements (unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		41
PART II.	OTHER INFORMATION		42
Item 1.	Legal Proceedings		42
Item 1A.	Risk Factors		42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		42
Item 3.	Defaults Upon Senior Securities		42
Item 4.	Mine Safety Disclosures		42
Item 5.	Other Information		42
Item 6.	Exhibits		43
	Signatures		44

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FIRST SEACOAST BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in thousands)	(Unaudited) September 30, 2019			December 31, 2018
ASSETS
Cash and due from banks	$	6,505		$	5,889
Interest bearing time deposits with other banks		2,735			6,461
Securities available-for-sale, at fair value		40,367			39,443
Federal Home Loan Bank stock		2,445			3,718
Loans		338,245			321,422
Less allowance for loan losses		2,799			2,806

Net loans		335,446			318,616
Land, building and equipment, net		5,413			5,581
Bank-owned life insurance		4,238			4,156
Accrued interest receivable		1,271			1,164
Other assets		1,894			2,086

Total assets	$	400,314		$	387,114

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing deposits	$	53,845		$	42,262
Interest bearing deposits		232,290			232,184

Total deposits		286,135			274,446
Advances from Federal Home Loan Bank		50,927			75,737
Mortgagors’ tax escrow		1,928			761
Deferred compensation liability		1,559			1,547
Other liabilities		2,776			1,896

Total liabilities		343,325			354,387
Stockholders’ Equity:
Preferred Stock, $.01 par value, 10,000,000 and -0- shares authorized as of September 30, 2019 and December 31, 2018, respectively; none issued and outstanding as of September 30, 2019 and December 31, 2018		—			—
Common Stock, $.01 par value, 90,000,000 and -0- shares authorized as of September 30, 2019 and December 31, 2018, respectively; 6,083,500 and -0- shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		61			—
Additional paid-in capital		25,641			—
Equity capital		32,970			33,192
Accumulated other comprehensive income (loss)		642			(465	)
Unearned compensation - ESOP 232,511 and -0- shares unallocated at September 30, 2019 and December 31, 2018, respectively		(2,325	)		—

Total stockholders’ equity		56,989			32,727

Total liabilities and stockholders’ equity	$	400,314		$	387,114

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands, except per share data)	2019			2018			2019			2018
Interest and dividend income:
Interest and fees on loans	$	3,557		$	3,265		$	10,422		$	9,569
Interest on debt securities:
Taxable		155			201			572			561
Non-taxable		174			78			425			196

Total interest on debt securities		329			279			997			757
Dividends		35			61			154			164

Total interest and dividend income		3,921			3,605			11,573			10,490

Interest expense:
Interest on deposits		616			442			1,692			1,181
Interest on Federal Home Loan Bank advances		275			388			1,295			1,034

Total interest expense		891			830			2,987			2,215

Net interest and dividend income		3,030			2,775			8,586			8,275
Provision for loan losses		—			30			25			100

Net interest income after provision for loan losses		3,030			2,745			8,561			8,175

Noninterest income:
Customer service fees		263			267			736			753
Gain on sale of loans		51			9			86			32
Securities gains (losses), net		50			(1	)		40			(1	)
Income from bank-owned life insurance		23			32			82			90
Loan servicing fee income (loss)		—			13			(25	)		87
Investment services fees		43			42			148			120
Other income		14			11			38			33

Total noninterest income		444			373			1,105			1,114

Noninterest expense:
Salaries and employee benefits		1,919			1,606			5,444			4,785
Director compensation		72			57			228			166
Occupancy expense		167			157			507			533
Equipment expense		132			135			397			408
Marketing		536			133			783			383
Data processing		220			207			524			707
Deposit insurance fees (credit)		(15	)		66			105			181
Professional fees and assessments		194			139			437			411
Debit card fees		41			56			116			122
Employee travel and education expenses		62			61			181			186
Charitable Foundation expense		758			—			758			—
Other expense		221			166			618			495

Total noninterest expense		4,307			2,783			10,098			8,377

(Loss) income before income tax (benefit) expense		(833	)		335			(432	)		912
Income tax (benefit) expense		(220	)		62			(210	)		163

Net (loss) income	$	(613	)	$	273		$	(222	)	$	749

Earnings per share:
Basic	$	(0.13	)		N/A		$	(0.14	)		N/A
Diluted	$	(0.13	)		N/A		$	(0.14	)		N/A
Weighted Average Shares:
Basic		4,833,426			N/A			1,628,847			N/A
Diluted		4,833,426			N/A			1,628,847			N/A

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2019			2018			2019			2018
Net (loss) income	$	(613	)	$	273		$	(222	)	$	749
Other comprehensive income (loss), net of income taxes:
Unrealized holding gains (losses) on securities available-for-sale arising during the period net of income taxes of $90, $(106), $409 and $(309), respectively		243			(283	)		1,093			(824	)
Reclassification adjustment for gains and losses and net amortization or accretion on securities available-for-sale included in net income net of income taxes of $(8), $6, $5 and $23, respectively		(23	)		17			14			62

Other comprehensive income (loss)		220			(266	)		1,107			(762	)

Comprehensive (loss) income	$	(393	)	$	7		$	885		$	(13	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)


(dollars in thousands)	Shares of Common Stock		Common Stock		Additional Paid-in Capital			Equity Capital			Accumulated Other Comprehensive Income (Loss)			Unearned Compensation - ESOP			Total Equity Capital
Balance June 30, 2018		—	$	—	$	—		$	32,588		$	(710	)	$	—		$	31,878
Net income		—		—		—			273			—			—			273
Other comprehensive loss		—		—		—			—			(266	)		—			(266	)

Balance September 30, 2018		—	$	—	$	—		$	32,861		$	(976	)	$	—		$	31,885

Balance June 30, 2019		—	$	—	$	—		$	33,583		$	422		$	—		$	34,005
Net loss		—		—		—			(613	)		—			—			(613	)
Other comprehensive income		—		—		—			—			220			—			220
Issuance of 3,345,925 shares to the mutual holding company		3,345,925		33		—			—			—			—			33
Issuance of 2,676,740 shares in the initial public offering, net of expenses of $1,568,397		2,676,740		27		25,039			—			—			—			25,066
Issuance and contribution of 60,835 shares to the First Seacoast Community Foundation, Inc.		60,835		1		608			—			—			—			609
Purchase of 238,473 shares of common stock by the ESOP		—		—		—			—			—			(2,385	)		(2,385	)
ESOP shares earned - 5,962 shares		—		—		(6	)		—			—			60			54

Balance September 30, 2019		6,083,500	$	61	$	25,641		$	32,970		$	642		$	(2,325	)	$	56,989

Balance December 31, 2017		—	$	—	$	—		$	32,112		$	(214	)	$	—		$	31,898
Net income		—		—		—			749			—			—			749
Other comprehensive loss		—		—		—			—			(762	)		—			(762	)

Balance September 30, 2018		—	$	—	$	—		$	32,861		$	(976	)	$	—		$	31,885

Balance December 31, 2018		—	$	—	$	—		$	33,192		$	(465	)	$	—		$	32,727
Net loss		—		—		—			(222	)		—			—			(222	)
Other comprehensive income		—		—		—			—			1,107			—			1,107
Issuance of 3,345,925 shares to the mutual holding company		3,345,925		33		—			—			—			—			33
Issuance of 2,676,740 shares in the initial public offering, net of expenses of $1,568,397		2,676,740		27		25,039			—			—			—			25,066
Issuance and contribution of 60,835 shares to the First Seacoast Community Foundation, Inc.		60,835		1		608			—			—			—			609
Purchase of 238,473 shares of common stock by the ESOP		—		—		—			—			—			(2,385	)		(2,385	)
ESOP shares earned - 5,962 shares		—		—		(6	)		—			—			60			54

Balance September 30, 2019		6,083,500	$	61	$	25,641		$	32,970		$	642		$	(2,325	)	$	56,989

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended September 30,
(in thousands)	2019			2018
Cash flows from operating activities:
Net (loss) income	$	(222	)	$	749
Adjustments to reconcile net (loss) income to net cash provided (used) by operating activities:
ESOP expense		54			—
Depreciation		397			408
Net amortization of bond premium		59			85
Contribution of stock to charitable foundation		608			—
Provision for loan losses		25			100
Gain on sale of loans		(86	)		(32	)
Securities (gains) losses, net		(40	)		1
Proceeds from loans held for sale		5,269			3,409
Origination of loans held for sale		(5,183	)		(3,377	)
Increase in bank-owned life insurance		(82	)		(90	)
Increase in deferred fees on loans		(91	)		(24	)
Deferred tax benefit		(296	)		(19	)
Increase in accrued interest receivable		(107	)		(144	)
Decrease (increase) in other assets		74			(293	)
Increase (decrease) in deferred compensation liability		12			(295	)
Increase (decrease) in other liabilities		882			(870	)

Net cash provided (used) by operating activities		1,273			(392	)

Cash flows from investing activities:
Proceeds from sales and maturities of securities available-for-sale		14,954			1,848
Purchase of securities available-for-sale		(14,376	)		(9,665	)
Purchase of property and equipment		(229	)		(125	)
Loan originations and principal collections, net		(16,765	)		(12,064	)
Net redemption (purchase) of Federal Home Loan Bank stock		1,273			(422	)
Proceeds from sales of interest bearing time deposits with other banks		3,726			—
Purchase of interest bearing time deposits with other banks		—			(1,492	)

Net cash used by investing activities		(11,417	)		(21,920	)

Cash flows from financing activities:
Net increase in NOW, demand deposits, money market and savings accounts		9,225			24,203
Net increase in certificates of deposit		2,464			2,177
Increase in mortgagors’ escrow accounts		1,167			1,283
Proceeds from sale of common stock, net		25,099			—
Common stock purchased by ESOP		(2,385	)		—
Proceeds from short-term FHLB advances		191,845			192,090
Payments on short-term FHLB advances		(216,655	)		(178,070	)
Payments on long-term FHLB advances		—			(12,000	)
Decrease in repurchase agreements		—			(6,137	)

Net cash provided by financing activities		10,760			23,546

Net change in cash and cash equivalents		616			1,234
Cash and cash equivalents at beginning of period		5,889			5,650

Cash and cash equivalents at end of period	$	6,505		$	6,884

Supplemental disclosure of cash flow information:
Cash activities:
Cash paid for interest	$	3,012		$	2,210
Cash paid for income taxes		75			—
Noncash activities:
Effect of change in fair value of investments available for sale:
Investment securities available-for-sale		1,521			(1,047	)
Deferred taxes		(414	)		285
Other comprehensive income (loss)		1,107			(762	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

FIRST SEACOAST BANCORP AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of First Seacoast Bancorp (the “Company”) were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim consolidated financial information, general practices within the banking industry and with instructions for Form 10-Q and Regulation S-X. Accordingly, these interim financial statements do not include all of the information or footnotes required by GAAP for annual financial statements. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of these consolidated financial statements have been included. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results which may be expected for the entire year. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2018 and 2017, included in the definitive prospectus dated May 14, 2019 (the “Prospectus”), of the Company as filed with the U.S. Securities and Exchange Commission (“SEC”) on May 23, 2019 relating to the Company’s initial public offering. Financial data at December 31, 2018 and for the three and nine months ended September 30, 2018 relate to First Seacoast Bank (the “Bank”) only.

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, the Bank, and the Bank’s wholly owned subsidiary, FSB Service Corporation, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Corporate Structure

The Company is the holding company for the Bank (formerly named Federal Savings Bank). Effective July 16, 2019, pursuant to a Plan of Reorganization from Mutual Savings Bank to Mutual Holding Company and Stock Issuance Plan (the “Plan of Reorganization”), the Bank reorganized into the mutual holding company structure and the Company completed a concurrent stock offering (collectively, the “Reorganization:”). In the stock offering the Company sold a total of 2,676,740 shares of common stock, which included 238,473 shares sold to the First Seacoast Bank Employee Stock Ownership Plan (the “ESOP”), at a price of $10.00 per share. In addition, as part of the Reorganization, the Company issued 3,345,925 shares of common stock to First Seacoast Bancorp, MHC (the “MHC”), the Bank’s parent mutual holding company, and 60,835 shares of common stock and $150,000 in cash to First Seacoast Community Foundation, Inc. (the “Foundation”), a charitable foundation formed in connection with the reorganization and dedicated to supporting charitable organizations operating in the Bank’s local community. The Company’s common stock began trading on the NASDAQ Capital Market under the symbol “FSEA” on July 17, 2019. Pursuant to the Plan of Reorganization, the Bank adopted an employee stock ownership plan (“ESOP”), which purchased 238,473 shares of common stock in the stock offering with the proceeds of a loan from the Company. As a result of the Reorganization, a total of 6,083,500 shares of common stock of the Company are issued and outstanding, of which 55% are issued to the MHC, 44% were sold to the Bank’s eligible members, the ESOP, and certain other persons in the stock offering, and 1% were contributed to the Foundation. Expenses incurred related to the offering were $1.6 million, and were deducted from the stock offering proceeds.

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations.

Accounting Standards Adopted in 2019

As an “emerging growth company,” as defined in Title 1 of Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As a result, the Company’s consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of September 30, 2019, there is no significant difference in the comparability of the Company’s consolidated financial statements as a result of this extended transition period. The Company’s status as an “emerging growth company” will end on the earlier of: (i) the last day of the fiscal year of the Company during which it had total annual gross revenues of $1.07 billion (as adjusted for inflation) or more; (ii) the last day of the fiscal year of the Company following the fifth anniversary of the effective date of the Company’s initial public offering; (iii) the date on which the Company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which the Company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).

In May 2014, the Financial Accounting Standards Board (“FASB”) issued amendments to Accounting Standards Codification (“ASC”) section 606, “Revenue from Contracts with Customers,” through issuance of Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers.” The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606).” The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for non-public business entities by one year to annual reporting periods beginning after December 15, 2018.

The Company adopted this ASU as of January 1, 2019 utilizing the modified retrospective approach with no cumulative effect adjustment to opening equity capital deemed to be necessary. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. This ASU did not materially impact the Company’s consolidated financial statements.

The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, letters of credit, investment securities, as well as revenue related to our mortgage servicing activities. Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our consolidated statements of income as components of non-interest income, are as follows:

•

Customer service fees—these represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer, debit card transaction or ATM withdrawal). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

•

Investment service fees—these represent fees for investment advisory services which are generally based on the market values of assets under management. Assets under management totaled approximately $47.7 million and $39.1 million at September 30, 2019 (unaudited) and December 31, 2018, respectively. Our wealth management group, FSB Wealth Management, assists individuals and families in building and preserving their wealth by providing investment services. The investment management group manages portfolios utilizing a variety of investment products. This group also provides a full-service brokerage offering equities, mutual funds, life insurance, and annuity products.

In January 2016 the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments and makes targeted improvements to GAAP as follows:

Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; however, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.

Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

Require an entity to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

Require separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.

Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

The amendments of this ASU were adopted on January 1, 2019 and did not materially impact the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This ASU provides guidance on the classification of certain cash receipts and cash payments for presentation in the statement of cash flows and is effective for non-public business entities for fiscal year’s beginning after December 15, 2018. This ASU was adopted on January 1, 2019 and did not materially impact the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for non-public business entities for fiscal year’s beginning after December 15, 2018. This ASU was adopted on January 1, 2019 and did not materially impact the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU is meant to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments in this ASU require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately. The amendments in the ASU are effective for non-public business entities for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted. The adoption of this guidance on January 1, 2019 did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. On July 17, 2019 the FASB approved a proposal to delay the implementation of this standard by one year for smaller reporting companies to years beginning after December 15, 2020. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases,” which seeks to clarify ASU 2016-02 with respect to certain aspects of the update and ASU 2018-11, “Leases (Topic 842) – Targeted Improvements,” which provides transition relief on comparative reporting upon adoption of the ASU. The Company currently has no leases with terms longer than 12 months. The Company does not expect these ASUs to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. The ASU requires financial assets measured at amortized cost (including loans and held-to-maturity debt securities) to be presented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) and subsequent changes in the allowance for credit losses are recorded in the statement of income as the amounts expected to be collected change. The ASU was originally to be effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” extending the implementation date by one year for nonpublic business entities and clarifying that operating lease receivables are outside the scope of Accounting Standards Codification Topic 326. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” to increase stakeholders’ awareness of the amendments and to expedite improvements to the Codification. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments—Credit Losses, Topic 326.” This ASU addresses certain stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement

methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. On October 16, 2019 the FASB approved a proposal to delay the implementation of this standard for smaller reporting companies to years beginning after December 15, 2022. Early adoption is permitted. Upon adoption, however, the Company will apply the standard’s provisions as a cumulative effect adjustment to equity capital as of the first reporting period in which the guidance is effective. Upon adoption, the Company expects a change in the processes and procedures to calculate the allowance for loan losses, including changes in the assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company is reviewing the requirements of ASU 2016-13 and is developing and implementing processes and procedures to ensure it is fully compliant with the amendments at the adoption date. At this time, the Company anticipates the allowance for loan losses will increase as a result of the implementation of this ASU; however, until its evaluation is complete, the magnitude of the increase will be unknown.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The purpose of this ASU is to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2019. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The amendments removed the disclosure requirements for transfers between Levels 1 and 2 of the fair value hierarchy, the policy for timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. Additionally, the amendments modified the disclosure requirements for investments in certain entities that calculate net asset value and measurement uncertainty. Finally, the amendments added disclosure requirements for the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20).” The purpose of this ASU is to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. The amendments in this ASU are effective for non-public business entities for fiscal years ending after December 15, 2021. Early adoption is permitted. The amendments modified the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments in this ASU should be applied retrospectively to all periods presented. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

2.	Securities Available-for-Sale

The amortized cost and fair value of securities available-for-sale, and the corresponding amounts of gross unrealized gains and losses, are as follows as of September 30, 2019 (unaudited) and December 31, 2018 (in thousands):


	September 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government-sponsored enterprises obligations	$	13,198	$	34	$	(5	)	$	13,227
Residential mortgage backed securities		1,327		—		(2	)		1,325
Municipal bonds		24,962		858		(5	)		25,815

	$	39,487	$	892	$	(12	)	$	40,367


	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government-sponsored enterprises obligations	$	24,219	$	8	$	(500	)	$	23,727
Residential mortgage backed securities		1,374		—		(47	)		1,327
Municipal bonds		14,490		39		(140	)		14,389

	$	40,083	$	47	$	(687	)	$	39,443

The amortized cost and fair values of available-for-sale securities at September 30, 2019 (unaudited) by contractual maturity are shown below (in thousands). Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Fair Value
September 30, 2019
Due after one year through five years	$	10,710	$	10,711
Due after five years through ten years		2,990		3,019
Due after ten years		24,460		25,312

Total U.S. Government-sponsored enterprises obligations and municipal bonds		38,160		39,042
Mortgage-backed securities		1,327		1,325

	$	39,487	$	40,367

The following is a summary of gross unrealized losses and fair value for those investments with unrealized losses, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, at September 30, 2019 (unaudited) and December 31, 2018 (dollars in thousands):


	Less than 12 Months							More than 12 Months							Total
	Number of Securities		Fair Value		Unrealized Losses			Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2019
U.S. Government-sponsored enterprises obligations		—	$	—	$	—			2	$	3,995	$	(5	)	$	3,995	$	(5	)
Residential mortgage backed securities		—		—		—			1		1,325		(2	)		1,325		(2	)
Municipal bonds		1		625		(5	)		—		—		—			625		(5	)

		1	$	625	$	(5	)		3	$	5,320	$	(7	)	$	5,945	$	(12	)

December 31, 2018
U.S. Government-sponsored enterprises obligations		4	$	4,937	$	(32	)		15	$	16,781	$	(468	)	$	21,718	$	(500	)
Residential mortgage backed securities		1		1,327		(47	)		—		—		—			1,327		(47	)
Municipal bonds		13		6,014		(63	)		9		4,051		(77	)		10,065		(140	)

		18	$	12,278	$	(142	)		24	$	20,832	$	(545	)	$	33,110	$	(687	)

In evaluating whether the investments have suffered an other-than-temporary decline, management evaluated the amount of the decline compared to cost, the length of time and extent to which fair value has been less than cost, the underlying creditworthiness of the issuer, the fair values exhibited during the year and estimated future fair values. In general, management concluded the declines are due to coupon rates compared to market rates and current economic conditions. The Company does not intend to sell investments with unrealized losses and it is more likely than not that the Company will not be required to sell these investments before recovery of their amortized cost basis. Based on evaluations of the underlying issuers’ financial condition, current trends and economic conditions, management does not believe any securities suffered an other-than-temporary decline in value as of September 30, 2019 (unaudited) or December 31, 2018.

Gross realized gains were $52,000 and $6,000 and gross realized losses were $2,000 and $7,000 for the three months ended September 30, 2019 and 2018 (unaudited), respectively. Proceeds related to these gains and losses totaled $9.9 million and $1.6 million for the three months ended September 30, 2019 and 2018 (unaudited), respectively. Gross realized gains were $62,000 and $6,000 and gross realized losses were $22,000 and $7,000 for the nine months ended September 30, 2019 and 2018 (unaudited), respectively. Proceeds related to these gains and losses totaled $15.0 million and $1.8 million for the nine months ended September 30, 2019 and 2018 (unaudited), respectively.

As of September 30, 2019 (unaudited) or December 31, 2018, there were no holdings that were issued by a single state or political subdivision which comprised more than 10% of the total fair value of the Company’s available-for-sale securities.

Loans

The Company’s lending activities are primarily conducted in and around Dover, New Hampshire, and in the areas surrounding its branches. The Company grants commercial real estate loans, multifamily 5+ dwelling unit loans, commercial and industrial loans, acquisition, development and land loans, 1–4 family residential loans, home equity line of credit loans and consumer loans. Most loans are collateralized by real estate. The ability and willingness of real estate, commercial and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate sector in the borrowers’ geographic area and the general economy.

Loans consisted of the following at September 30, 2019 (unaudited) and December 31, 2018 (in thousands):


	September 30, 2019			December 31, 2018
Commercial real estate (CRE)	$	65,651		$	63,853
Multifamily (MF)		4,689			4,928
Commercial and industrial (C+I)		25,327			21,990
Acquisition, development, and land (ADL)		17,977			15,580
1-4 family residential (RES)		211,405			201,759
Home equity line of credit (HELOC)		10,319			11,151
Consumer (CON)		1,920			1,295

Total loans		337,288			320,556
Net deferred loan costs		957			866
Allowance for loan losses		(2,799	)		(2,806	)

Total loans, net	$	335,446		$	318,616

Changes in the allowance for loan losses (“ALL”) for the three and nine months ended September 30, 2019 and 2018 (unaudited) by portfolio segment are summarized as follows (in thousands):


	CRE			MF			C+I			ADL			RES			HELOC			CON			Unallocated			Total
Balance, June 30, 2019	$	721		$	22		$	216		$	82		$	1,728		$	54		$	9		$	—		$	2,832
Provision for loan losses		(2	)		—			190			52			(272	)		—			25			7			—
Charge-offs		—			—			(35	)		—			—			—			(17	)		—			(52	)
Recoveries		—			—			—			—			18			—			1			—			19

Balance, September 30, 2019		719			22			371			134			1,474			54			18			7			2,799

Balance, June 30, 2018		462			24			167			349			1,564			66			12			230			2,874
Provision for loan losses		3			(3	)		(14	)		(57	)		42			(3	)		(1	)		63			30
Charge-offs		—			—			—			—			—			—			—			—			—
Recoveries		—			—			—			—			—			—			1			—			1

Balance, September 30, 2018	$	465		$	21		$	153		$	292		$	1,606		$	63		$	12		$	293		$	2,905

Balance, December 31, 2018	$	559		$	22		$	232		$	88		$	1,593		$	69		$	7		$	236		$	2,806
Provision for loan losses		160			—			174			46			(137	)		(15	)		26			(229	)		25
Charge-offs		—			—			(35	)		—			—			—			(17	)		—			(52	)
Recoveries		—			—			—			—			18			—			2			—			20

Balance, September 30, 2019		719			22			371			134			1,474			54			18			7			2,799

Balance, December 31, 2017		367			30			169			303			1,629			70			11			224			2,803
Provision for loan losses		98			(9	)		(16	)		(11	)		(23	)		(7	)		(1	)		69			100
Charge-offs		—			—			—			—			—			—			—			—			—
Recoveries		—			—			—			—			—			—			2			—			2

Balance, September 30, 2018	$	465		$	21		$	153		$	292		$	1,606		$	63		$	12		$	293		$	2,905

As of September 30, 2019 (unaudited) and December 31, 2018, information about loans and the ALL by portfolio segment are summarized below (in thousands):


	CRE		MF		C+I		ADL		RES		HELOC		CON		Unallocated		Total
September 30, 2019 Loan Balances
Individually evaluated for impairment	$	111	$	—	$	1,140	$	—	$	66	$	—	$	—	$	—	$	1,317
Collectively evaluated for impairment		65,540		4,689		24,187		17,977		211,339		10,319		1,920		—		335,971

Total	$	65,651	$	4,689	$	25,327	$	17,977	$	211,405	$	10,319	$	1,920	$	—	$	337,288

ALL related to the loans
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		719		22		371		134		1,474		54		18		7		2,799

Total	$	719	$	22	$	371	$	134	$	1,474	$	54	$	18	$	7	$	2,799

December 31, 2018 Loan Balances
Individually evaluated for impairment	$	244	$	—	$	1,267	$	—	$	68	$	—	$	—	$	—	$	1,579
Collectively evaluated for impairment		63,609		4,928		20,723		15,580		201,691		11,151		1,295		—		318,977

Total	$	63,853	$	4,928	$	21,990	$	15,580	$	201,759	$	11,151	$	1,295	$	—	$	320,556

ALL related to the loans
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		559		22		232		88		1,593		69		7		236		2,806

Total	$	559	$	22	$	232	$	88	$	1,593	$	69	$	7	$	236	$	2,806

The following is an aged analysis of past due loans by portfolio segment as of September 30, 2019 (unaudited) (in thousands):


	30-59 Days		60-89 Days		90 + Days		Total Past Due		Current		Total Loans		Non-Accrual Loans
CRE	$	—	$	—	$	—	$	—	$	65,651	$	65,651	$	—
MF		—		—		—		—		4,689		4,689		—
C+I		—		—		—		—		25,327		25,327		1,055
ADL		—		—		—		—		17,977		17,977		—
RES		204		—		—		204		211,201		211,405		66
HELOC		—		—		—		—		10,319		10,319		—
CON		—		—		—		—		1,920		1,920		—

	$	204	$	—	$	—	$	204	$	337,084	$	337,288	$	1,121

The following is an aged analysis of past due loans by portfolio segment as of December 31, 2018 (in thousands):


	30-59 Days		60-89 Days		90 + Days		Total Past Due		Current		Total Loans		Non-Accrual Loans
CRE	$	93	$	—	$	—	$	93	$	63,760	$	63,853	$	—
MF		—		—		—		—		4,928		4,928		—
C+I		—		—		—		—		21,990		21,990		—
ADL		—		—		—		—		15,580		15,580		—
RES		256		—		68		324		201,435		201,759		68
HELOC		99		—		—		99		11,052		11,151		—
CON		—		—		—		—		1,295		1,295		—

	$	448	$	—	$	68	$	516	$	320,040	$	320,556	$	68

There were no loans collateralized by residential real estate property in the process of foreclosure at September 30, 2019 (unaudited) and December 31, 2018.

The following table provides information on impaired loans as of September 30, 2019 (unaudited) and December 31, 2018 (in thousands):


	Recorded Carrying Value		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
September 30, 2019
With no related allowance recorded:
CRE	$	—	$	—	$	—	$	—	$	—
MF		—		—		—		—		—
C+I		1,055		1,095		—		109		—
ADL		—		—		—		—		—
RES		66		66		—		275		43
HELOC		—		—		—		—		—
CON		—		—		—		—		—

Total impaired loans	$	1,121	$	1,161	$	—	$	384	$	43

December 31, 2018
With no related allowance recorded:
CRE	$	—	$	—	$	—	$	112	$	—
MF		—		—		—		—		—
C+I		—		—		—		—		—
ADL		—		—		—		470		—
RES		68		68		—		34		3
HELOC		—		—		—		—		—
CON		—		—		—		—		—

Total impaired loans	$	68	$	68	$	—	$	616	$	3

Credit Quality Information

The Company utilizes a ten-grade internal loan rating system for its commercial real estate, multifamily, commercial and industrial and acquisition, development and land loans. Residential real estate, home equity line of credit and consumer loans are considered “pass” rated loans until they become delinquent. Once delinquent, loans can be rated an 8, 9 or 10 as applicable.

Loans rated 1 through 6: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 7: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 8: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 9: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 10: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted and should be charged off.

On an annual basis, or more often if needed, the Company formally reviews the ratings on its commercial and industrial, commercial real estate, and multifamily loans. On a periodic basis, the Company engages an independent third party to review a significant portion of loans within these segments and to assess the credit risk management practices of its commercial lending department. Management uses the results of these reviews as part of its annual review process and overall credit risk administration.

On a quarterly basis, the Company formally reviews the ratings on its applicable residential real estate and home equity loans if they have become classified as non-accrual. Criteria used to determine ratings consist of loan-to-value ratios and days delinquent.

The following presents the internal risk rating of loans by portfolio segment as of September 30, 2019 (unaudited) (in thousands):


	Pass		Special Mention		Substandard		Total
CRE	$	64,828	$	712	$	111	$	65,651
MF		4,689		—		—		4,689
C+I		21,699		2,488		1,140		25,327
ADL		17,977		—		—		17,977
RES		211,339		—		66		211,405
HELOC		10,319		—		—		10,319
CON		1,920		—		—		1,920

Total	$	332,771	$	3,200	$	1,317	$	337,288

The following presents the internal risk rating of loans by portfolio segment as of December 31, 2018 (in thousands):


	Pass		Special Mention		Substandard		Total
CRE	$	62,873	$	736	$	244	$	63,853
MF		4,928		—		—		4,928
C+I		20,700		23		1,267		21,990
ADL		15,580		—		—		15,580
RES		201,435		256		68		201,759
HELOC		11,151		—		—		11,151
CON		1,295		—		—		1,295

Total	$	317,962	$	1,015	$	1,579	$	320,556

Certain directors and executive officers of the Company and companies in which they have significant ownership interests were customers of the Company. Loans outstanding to these persons and entities at September 30, 2019 (unaudited) and December 31, 2018 were $6.2 million and $5.5 million, respectively.

4.	Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of such loans were $48.8 million and $49.2 million at September 30, 2019 (unaudited) and December 31, 2018, respectively. Substantially all of these loans were originated by the Company and sold to third parties on a non-recourse basis with servicing rights retained. These retained servicing rights are recorded as a servicing asset and are initially recorded at fair value (see Note 10, Fair Value of Assets and Liabilities, for more information). Changes to the balance of mortgage servicing rights are recorded in loan servicing fee (loss) income in the Company’s consolidated statements of income.

The Company’s mortgage servicing activities include collecting principal, interest, and escrow payments from borrowers; making tax and insurance payments on behalf of borrowers; monitoring delinquencies and executing foreclosure proceedings; and accounting for and remitting principal and interest payments to investors. Loan servicing fee (loss) income, including late and ancillary fees, was $-0- and $13 (in thousands) for the three months ended September 30, 2019 and 2018 (unaudited), respectively and $(25) and $87 (in thousands) for the nine months ended September 30, 2019 and 2018 (unaudited), respectively. The Company’s residential mortgage investor loan servicing portfolio is primarily comprised of fixed rate loans concentrated in the Company’s market areas.

The following summarizes activity in mortgage servicing rights for the three and nine months ended September 30, 2019 and 2018 (unaudited) (in thousands):


	2019			2018
Balance, June 30	$	394		$	482
Change in fair value due to change in assumptions		(32	)		(17	)

Balance, September 30		362			465

Balance, December 31		479			473
Change in fair value due to change in assumptions		(117	)		(8	)

Balance, September 30	$	362		$	465

Fair value at September 30, 2019 (unaudited) was determined using a discount rate of 9.50%, prepayment speed of 15.44% and a weighted average default rate of 3.12%. Fair value at September 30, 2018 (unaudited) was determined using a discount rate of 9.50%, prepayment speed of 8.94% and a weighted average default rate of 2.84%. Mortgage servicing rights are included in other assets on the accompanying consolidated balance sheets.

5.	Deposits

Deposits consisted of the following at September 30, 2019 (unaudited) and December 31, 2018 (in thousands):


	September 30, 2019		December 31, 2018
NOW and demand deposits	$	117,307	$	109,580
Money market deposits		63,199		60,952
Regular and other savings deposits		40,545		41,294
Time deposits of $250,000 and greater		16,191		13,325
Time deposits less than $250,000		48,893		49,295

	$	286,135	$	274,446

At September 30, 2019 (unaudited), the scheduled maturities of time deposits were as follows (in thousands):


2019	$	46,419
2020		12,965
2021		4,595
2022		660
2023		445

	$	65,084

There were no brokered deposits included in time deposits at September 30, 2019 (unaudited) and December 31, 2018.

6.	Borrowings

Federal Home Loan Bank (FHLB)

A summary of borrowings from the FHLB is as follows (dollars in thousands):


September 30, 2019 (unaudited)
Principal Amounts		Maturity Dates	Interest Rates
$	28,665	2019	2.12% to 2.32 % – fixed
	20,000	2020	2.11% to 2.19% – fixed
	2,262	2022	0.00% to 0.00 % – fixed

$	50,927


December 31, 2018
Principal Amounts		Maturity Dates	Interest Rates
$	73,475	2019	2.54% to 2.68% – fixed
	2,262	2022	0.00% to 0.00% – fixed

$	75,737

All borrowings from the FHLB are secured by a blanket security agreement on qualified collateral, principally residential mortgage loans and certain U.S. government sponsored mortgage-backed securities in an aggregate amount equal to outstanding advances. The Company’s unused remaining available borrowing capacity at the FHLB was approximately $95.0 million and $72.1 million at September 30, 2019 (unaudited) and December 31, 2018, respectively. At September 30, 2019 (unaudited) and December 31, 2018, the Company had sufficient collateral at the FHLB to support its obligations and was in compliance with the FHLB’s collateral pledging program.

The Company has an overnight line of credit with the FHLB that may be drawn up to $3.0 million. Additionally, the Company has a total of $5.0 million of unsecured Fed Funds borrowing lines of credit with two correspondent banks. The entire balance of all these credit facilities was available at September 30, 2019 (unaudited).

7.	Employee Benefits

Employee Stock Ownership Plan

As part of the stock offering, the Company established the First Seacoast Bank Employee Stock Ownership Plan (“ESOP”) to provide eligible employees of the Company the opportunity to own Company stock. The ESOP is a tax-qualified retirement plan for the benefit of Company employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal limits. The number of shares committed to be released per year through 2038 is 11,924.

The ESOP funded its purchase of 238,473 shares through a loan from the Company equal to 100% of the aggregate purchase price of the common stock. The ESOP trustee will repay the loan principally through the Bank’s contributions to the ESOP over the remaining loan term of 19.8 years. At September 30, 2019, the remaining principal balance on the ESOP debt was $2.4 million.

Under applicable accounting requirements, the Company records compensation expense for the ESOP equal to fair market value of shares when they are committed to be released from the suspense account to participants’ accounts under the plan. Total compensation expense recognized in connection with the ESOP for the three and nine months ended September 30, 2019 was $54,000.


	September 30, 2019
Shares held by the ESOP include the following:
Allocated		—
Committed to be allocated		5,962
Unallocated		232,511

Total		238,473

The fair value of unallocated shares was approximately $2.2 million at September 30, 2019.

401(k) Plan

During the year ended December 31, 2018, the Company sponsored two 401(k) defined contribution plans for substantially all employees pursuant to which employees of the Bank could elect to make contributions to the plans subject to Internal Revenue Service limits. The Company also made matching and profit-sharing contributions to eligible participants in accordance with the plans’ provisions. As of December 31, 2018, these plans were combined into one defined contribution plan. The Company’s contributions for the three months ended September 30, 2019 and 2018 (unaudited) were $44 and $27 (in thousands), respectively, and $123 and $91 (in thousands) for the nine months ended September 30, 2019 and 2018 (unaudited), respectively.

Pension Plan

The Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (The Pentegra DB Plan), a tax-qualified defined benefit pension plan. The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. There are no collective bargaining agreements in place that require contributions to the Pentegra DB Plan. The Pentegra DB Plan is a single plan under Internal Revenue Code Section 413 (c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra DB Plan, contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

The funded status (fair value of plan assets divided by funding target) as of July 1, 2019 is as follows:


2019 Valuation Report			92.61	%(1)

⁽¹⁾	Fair value of plan assets reflects any contributions received through June 30, 2019.

Based upon the funded status of the Pentegra DB Plan as of July 1, 2019, no funding improvement plan or rehabilitation plan has been implemented or is pending as of September 30, 2019 (unaudited).

Total pension plan expense for the three months ended September 30, 2019 and 2018 (unaudited) was $87 and $68 (in thousands), respectively, and $260 and $272 (in thousands) for the nine months ended September 30, 2019 and 2018 (unaudited), respectively, and is included in salaries and employee benefits expense in the accompanying consolidated financial statements. The Company did not pay a surcharge to the Pentegra DB Plan during the three or nine months ended September 30, 2019 (unaudited). The Company enacted a “hard freeze” for the Pentegra DB Plan as of December 31, 2018, eliminating all future service-related accruals for participants. Prior to this enactment the Company maintained a “soft freeze” status that continued service-related accruals for its active participants with no new participants permitted into the Pentegra DB Plan. The Bank estimates a contribution amount of approximately $346 (in thousands) for the year ending December 31, 2019.

Supplemental Executive Retirement Plans

Salary Continuation Plan

The Company maintains a nonqualified supplemental retirement plan for its current and former President. The plan provides supplemental retirement benefits payable in installments over a period of years upon retirement or death. The recorded liability at September 30, 2019 (unaudited) and December 31, 2018 relating to this supplemental retirement plan was $545 and $565 (in thousands), respectively. The discount rate used to determine the Company’s obligation was 5.00%. The projected rate of salary increase for its current President was 5%. The expense of this salary retirement plan was $22 and $36 (in thousands) for the three months ended September 30, 2019 and 2018 (unaudited), respectively and $68 and $72 (in thousands) for the nine months ended September 30, 2019 and 2018 (unaudited), respectively.

The Company maintained a nonqualified supplemental retirement plan for its former President. The plan was terminated in May 2018 with the balance paid out in full upon the former President’s retirement. The recorded liability at September 30, 2019 (unaudited) and December 31, 2018 relating to this supplemental retirement plan was $-0-. The expense of this salary retirement plan was $-0- for the three months ended September 30, 2019 and 2018 (unaudited), and $-0- and $25 (in thousands) for the nine months ended September 30, 2019 and 2018 (unaudited), respectively.

Executive Supplemental Retirement Plan

The recorded liability at September 30, 2019 (unaudited) and December 31, 2018 relating to the supplemental retirement plan for the Bank’s former President was $207 (in thousands). The discount rate used to determine the Company’s obligation was 6.25% at September 30, 2019 (unaudited) and December 31, 2018.

Endorsement Method Split Dollar Plan

The Company has an endorsement method split dollar plan for a former President/Director. The recorded liability at September 30, 2019 (unaudited) and December 31, 2018 relating to this supplemental executive benefit agreement was $39 and $58 (in thousands), respectively. The expense of this supplemental plan was $(6) and $(5) (in thousands) for the three months ended September 30, 2019 and 2018 (unaudited), respectively and $(19) and $(15) (in thousands) for the nine months ended September 30, 2019 and 2018 (unaudited), respectively.

Deferred Directors Supplemental Retirement Plan

The Company has a supplemental retirement plan for eligible directors that provides for monthly benefits based upon years of service to the Company, subject to certain limitations as set forth in the agreements. The present value of these future payments is being accrued over the estimated period of service. The estimated liability at September 30, 2019 (unaudited) and December 31, 2018 relating to this plan was $564 and $562 (in thousands), respectively. The discount rate used to determine the Company’s obligation was 6.25% at September 30, 2019 (unaudited) and December 31, 2018. Total supplemental retirement plan expense amounted to $20 and $13 (in thousands) for the three months ended September 30, 2019 and 2018 (unaudited), respectively and $71 and $41 (in thousands) for the nine months ended September 30, 2019 and 2018 (unaudited), respectively.

Additionally, the Company has a deferred director’s fee plan which allows members of the board of directors to defer the receipt of fees that otherwise would be paid to them. At September 30, 2019 (unaudited) and December 31, 2018, the total deferred director’s fees amounted to $204 and $154 (in thousands), respectively.

8.	Other Comprehensive Income (Loss)

The Company reports certain items as “other comprehensive income (loss)” and reflects total comprehensive income in the consolidated financial statements for all periods containing elements of other comprehensive income (loss).

A summary of the reclassification adjustments out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2018 (unaudited) are as follows (in thousands):


Reclassification Adjustment	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Affected Line Item in Statements of Income
(Gains) losses on securities available for sale	$	(50	)	$	1		Securities gains (losses), net
Tax effect		13			—		Income tax (benefit) expense

	$	(37	)	$	1		Net (loss) income

Net amortization of premium on securities	$	19		$	22		Interest on debt securities
Tax effect		(5	)		(6	)	Income tax (benefit) expense

	$	14		$	16		Net (loss) income

	Nine Months Ended September 30, 2019			Nine Months Ended September 30, 2018
(Gains) losses on securities available for sale	$	(40	)	$	1		Securities gains (losses), net
Tax effect		11			—		Income tax (benefit) expense

	$	(29	)	$	1		Net (loss) income

Net amortization of premium on securities	$	59		$	85		Interest on debt securities
Tax effect		(16	)		(24	)	Income tax (benefit) expense

	$	43		$	61		Net (loss) income

9.	Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below). Management believes that, as of September 30, 2019 (unaudited) and December 31, 2018, the Bank met all capital adequacy requirements to which it is subject, including the capital conservation buffer, at those dates.

As fully phased in on January 1, 2019, the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III Capital Rules”) require the Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of Total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%) and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average quarterly assets. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets below the effective minimum will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

The following table presents actual and required capital ratios as of September 30, 2019 (unaudited) and December 31, 2018 for the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of September 30, 2019 (unaudited) and December 31, 2018 based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules were fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.


	Actual					Minimum Capital Requirement					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Fully Phased-In
	Amount		Ratio			Amount		Ratio			Amount		Ratio
(dollars in thousands)
As of September 30, 2019
Total Capital (to risk-weighted assets)	$	49,006		18.89	%	$	20,749		8.0	%	$	27,233		10.5	%
Tier I Capital (to risk-weighted assets)		46,153		17.79			15,562		6.0			22,046		8.5
Tier I Capital (to average assets)		46,153		11.56			15,967		4.0			15,967		4.0
Common Equity Tier 1 (to risk-weighted assets)		46,153		17.79			11,671		4.5			18,155		7.0


	Actual					Minimum Capital Requirement					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
(dollars in thousands)
As of December 31, 2018
Total Capital (to risk-weighted assets)	$	36,044		14.41	%	$	20,011		8.0	%	$	25,012		10.0	%
Tier I Capital (to risk-weighted assets)		33,192		13.27			15,008		6.0			20,009		8.0
Tier I Capital (to average assets)		33,192		8.68			15,296		4.0			19,118		5.0
Common Equity Tier 1 (to risk-weighted assets)		33,192		13.27			11,256		4.5			16,258		6.5


	Actual					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Basel III Phase-In Schedule					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Fully Phased-In
	Amount		Ratio			Amount		Ratio			Amount		Ratio
(dollars in thousands)
As of December 31, 2018
Total Capital (to risk-weighted assets)	$	36,044		14.41	%	$	24,701		9.875	%	$	26,264		10.5	%
Tier I Capital (to risk-weighted assets)		33,192		13.27			19,698		7.875			21,261		8.5
Tier I Capital (to average assets)		33,192		8.68			15,296		4.000			15,296		4.0
Common Equity Tier 1 (to risk-weighted assets)		33,192		13.27			15,946		6.375			17,509		7.0

10.

Fair Values of Assets and Liabilities

Determination of Fair Value

The fair value of an asset or liability is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from one level to another. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value of cash flows or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability and reliability of the assumptions used to determine fair value.

Level 1—Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2—Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3—Level 3 inputs are unobservable inputs for the asset or liability.

For assets and liabilities, fair value is based upon the lowest level of observable input that is significant to the fair value measurement.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon models that primarily use, as inputs, observable market-based parameters. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value for September 30, 2019 (unaudited) and December 31, 2018. There were no significant transfers between levels of the fair value hierarchy during the three or nine months ended September 30, 2019 and 2018 (unaudited).

Financial Assets and Financial Liabilities: Financial assets and financial liabilities measured at fair value on a recurring basis include the following:

Securities Available-for-Sale: The Company’s investment in U.S. Government-sponsored entities bonds, mortgage-backed securities and municipal bonds are generally classified within Level 2 of the fair value hierarchy. For these securities, the Company obtains fair value measurements from independent pricing services. The fair value measurements consider observable data that may include reported trades, dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.

Mortgage Servicing Rights: Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (see Note 4, Loan Servicing, for more information).

The following table summarizes financial assets measured at fair value on a recurring basis as of September 30, 2019 (unaudited) and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):


	Total		Level 1		Level 2		Level 3
September 30, 2019
Mortgage servicing rights	$	362	$	—	$	—	$	362
Securities available-for-sale:
U.S. Government-sponsored enterprises obligations		13,227		—		13,227		—
Mortgage-backed securities		1,325		—		1,325		—
Municipal bonds		25,815		—		25,815		—

	$	40,729	$	—	$	40,367	$	362


	Total		Level 1		Level 2		Level 3
December 31, 2018
Mortgage servicing rights	$	479	$	—	$	—	$	479
Securities available-for-sale:
U.S. Government-sponsored enterprises obligations		23,727		—		23,727		—
Mortgage-backed securities		1,327		—		1,327		—
Municipal bonds		14,389		—		14,389		—

	$	39,922	$	—	$	39,443	$	479

See Note 4, Loan Servicing, for a rollforward of our Level 3 item and related inputs and assumptions used to determine fair value at September 30, 2019 (unaudited).

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis during the reported periods may include certain impaired loans reported at the fair value of the underlying collateral. Fair value is measured using appraised values of collateral and adjusted as necessary by management based on unobservable inputs for specific properties. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, real estate collateral related nonrecurring fair value measurement adjustments have generally been classified as Level 3.

Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Financial assets measured at fair value on a non-recurring basis during the reported periods also include loans held for sale. Residential mortgage loans held for sale are recorded at the lower of cost or fair value and are therefore measured at fair value on a non-recurring basis. The fair values for loans held for sale are estimated based on commitments in effect from investors or prevailing market prices for loans with similar terms to borrowers of similar credit quality and are included in Level 3.

At September 30, 2019, the Company’s only asset measured at fair value on a nonrecurring basis is a loan identified as impaired for which a partial write-off has been recorded. This impaired loan is reported at the fair value of the underlying collateral, less estimated selling costs. The Company classifies impaired loans as Level 3 in the fair value hierarchy. Collateral values are estimated using Level 2 inputs based upon appraisals of similar properties obtained from a third party, but can be adjusted and therefore classified as Level 3. There were no impaired loans that were remeasured and reported at fair value through either a charge off or a specific valuation allowance based upon the fair value of the underlying collateral at December 31, 2018.

The following summarizes assets measured at fair value on a nonrecurring basis at September 30, 2019 and December 31, 2018:


	Fair Value Measurements at Reporting Date Using:
(In thousands)	Total		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
September 30, 2019
Impaired Loans	$	1,055	$	—	$	—	$	1,055
December 31, 2018
Impaired Loans	$	—	$	—	$	—	$	—

The following is a summary of the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis at September 30, 2019 and December 31, 2018:

(In thousands)

Fair Value

Valuation Technique

Unobservable Input

September 30, 2019

Impaired Loans

1,055

Market Approach
Appraisal of Collateral

Selling Costs
Provision

December 31, 2018

Impaired Loans

—

Non-Financial Assets and Non-Financial Liabilities: The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Non-financial assets measured at fair value on a non-recurring basis generally include certain foreclosed assets which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for loan losses and certain foreclosed assets which, subsequent to their initial recognition, are remeasured at fair value through a write-down included in other non-interest expense. There were no foreclosed assets at September 30, 2019 (unaudited) and December 31, 2018.

ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The estimated fair value approximates carrying value for cash and due from banks, interest bearing time deposits with other banks, Federal Home Loan Bank stock, bank owned life insurance, accrued interest receivable and mortgagors’ tax escrow accounts. ASU 2016-01 requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The exit price notion is a market-based measurement of fair value that is represented by the price to sell an asset or transfer a liability in the principal market (or most advantageous market in the absence of a principal market) on the measurement date. For September 30, 2019, fair values of loans are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors. This is not comparable with the fair values disclosed for December 31, 2018, which were based on an entrance price basis.

Summary of Fair Values of Financial Instruments not Carried at Fair Value

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments at September 30, 2019 (unaudited) and December 31, 2018 are as follows:


	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
(in thousands)
September 30, 2019
Financial Assets:
Cash and due from banks	$	6,505	$	6,505	$	6,505	$	—	$	—
Interest-bearing time deposits with other banks		2,735		2,735		—		2,735		—
Federal Home Loan Bank stock		2,445		2,445		—		2,445		—
Bank-owned life insurance		4,238		4,238		—		4,238		—
Loans, net		335,446		329,164		—		—		329,164
Accrued interest receivable		1,271		1,271		1,271		—		—
Financial Liabilities:
Deposits	$	286,135	$	286,187	$	221,051	$	65,136	$	—
Advances from Federal Home Loan Bank		50,927		50,852		—		50,852		—
Mortgagors’ tax escrow		1,928		1,928		—		1,928		—
December 31, 2018
Financial Assets:
Cash and due from banks	$	5,889	$	5,889	$	5,889	$	—	$	—
Interest-bearing time deposits with other banks		6,461		6,461		—		6,461		—
Federal Home Loan Bank stock		3,718		3,718		—		3,718		—
Bank-owned life insurance		4,156		4,156		—		4,156		—
Loans, net		318,615		307,582		—		—		307,582
Accrued interest receivable		1,164		1,164		1,164		—		—
Financial Liabilities:
Deposits	$	274,446	$	258,446	$	196,481	$	61,965	$	—
Advances from Federal Home Loan Bank		75,737		75,541		—		75,541		—
Mortgagors’ tax escrow		761		761		—		761		—

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the Company’s consolidated financial condition at September 30, 2019 and consolidated results of operations for the three and nine months ended September 30, 2019 and 2018. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

•

statements of our goals, intentions and expectations;

•

statements regarding our business plans, prospects, growth and operating strategies;

•

statements regarding the quality of our loan and investment portfolios; and

•

estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•

general economic conditions, either nationally or in our market areas, that are worse than expected;

•

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

•

our ability to access cost-effective funding;

•

fluctuations in real estate values and both residential and commercial real estate market conditions;

•

demand for loans and deposits in our market area;

•

our ability to implement and change our business strategies;

•

competition among depository and other financial institutions;

•

inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

•

adverse changes in the securities or secondary mortgage markets;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;

•

the impact of the Dodd-Frank Act and implementing regulations;

•

changes in the quality or composition of our loan or investment portfolios;

•

technological changes that may be more difficult or expensive than expected;

•

the inability of third-party providers to perform as expected;

•

our ability to manage market risk, credit risk and operational risk in the current economic environment;

•

our ability to enter new markets successfully and capitalize on growth opportunities;

•

system failures or breaches of our network security;

•

electronic fraudulent activity within the financial services industry;

•

our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

•

changes in consumer spending, borrowing and savings habits;

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

•

our ability to retain key employees;

•

our compensation expense associated with equity allocated or awarded to our employees; and

•

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Additional factors that may affect our results are discussed in the Prospectus under the heading “Risk Factors.”

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with generally accepted accounting principles used in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

Our critical accounting policies involve the calculation of the allowance for loan losses and the measurement of the fair value of financial instruments. On January 1, 2019 the Company adopted the amendments of ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities” which addressed certain aspects of recognition, measurement, presentation, and disclosure of financial instruments and included the requirement that public business entities use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The adoption of this ASU did not materially impact the Company’s consolidated financial statements. A detailed description of these critical accounting policies can be found in Notes 1 and 15, respectively, to our consolidated financial statements beginning on page F-1 of the Prospectus.

Comparison of Financial Condition at September 30, 2019 (unaudited) and December 31, 2018

Total Assets. Total assets were $400.3 million as of September 30, 2019, an increase of $13.2 million, or 3.4%, when compared to total assets of $387.1 million at December 31, 2018. The increase was due primarily to an increase in net loans, offset by a decrease in interest bearing time deposits with other banks.

Cash and Due From Banks. Cash and due from banks increased $0.6 million, or 10.5%, to $6.5 million at September 30, 2019 from $5.9 million at December 31, 2018. This increase was primarily resulted from the proceeds from the stock offering and an increase in deposits, offset by a decrease in advances from Federal Home Loan Bank and an increase in loans at September 30, 2019.

Available-for-Sale Securities. Available-for-sale securities increased by $1.0 million, or 2.3%, to $40.4 million at September 30, 2019 from $39.4 million at December 31, 2018. This increase was due to purchases totaling $14.4 million and a $1.5 million decrease in unrealized holding losses within the portfolio, offset by sales totaling $14.9 million, during the nine months ended September 30, 2019.

Net Loans. Net loans increased $16.8 million, or 5.3%, to $335.4 million at September 30, 2019 from $318.6 million at December 31, 2018. During the nine months ended September 30, 2019, we originated $93.7 million of loans, including $44.5 million of one- to four-family residential mortgage loans, $10.6 million of commercial real estate mortgage loans, $23.6 million of acquisition, development and land loans, $8.0 million of commercial and industrial loans, $2.5 million of multi-family loans, and $4.5 million of consumer and home equity loans and lines of credit. During the nine months ended September 30, 2019, we had $76.9 million in loan principal repayments.

The largest increases in our loan portfolio were in the one- to four-family residential mortgage loan and the commercial and industrial loan portfolios. The increase in these loan portfolios reflects our strategy to grow the balance sheet through originations of one- to four-family residential mortgage loans while also diversifying into higher yielding commercial and industrial loans to improve net margins and manage interest rate risk. We continue to consider selling selected, conforming 15-year and 30-year fixed rate mortgage loans to the secondary market on a servicing retained basis, providing us a recurring source of revenue from loan servicing income and gains on the sale of such loans.

One- to four-family residential mortgage loans increased $9.6 million, or 4.8%, to $211.4 million at September 30, 2019 from $201.8 million at December 31, 2018. Commercial real estate mortgage loans increased $1.8 million, or 2.8%, to $65.7 million from $63.9 million at December 31, 2018. Multi-family loans decreased $0.2 million, or 4.8%, to $4.7 million from $4.9 million at December 31, 2018. Commercial and industrial loans increased $3.3 million, or 15.2%, to $25.3 million from $22.0 million at December 31, 2018. Acquisition, development and land loans increased $2.4 million, or 15.4%, to $18.0 million from $15.6 million at December 31, 2018. Home equity loans and lines of credit decreased $0.9 million, or 7.4%, to $10.3 million from $11.2 million at December 31, 2018. Consumer loans increased $0.6 million, or 48.3%, to $1.9 million from $1.3 million at December 31, 2018.

Deposits. Deposits increased $11.7 million, or 4.3%, to $286.1 million at September 30, 2019 from $274.4 million at December 31, 2018 primarily as a result of an increase in commercial deposits. Core deposits (defined as deposits other than time deposits) increased $9.2 million, or 4.3%, to $221.0 million from $211.8 million at December 31, 2018. The increase was due to an increase in NOW accounts and demand deposits of $7.7 and an increase in money market deposits of $2.2 million offset by a decrease in regular and other savings of $0.7 million. Time deposits increased $2.5 million, or 4.0%, to $65.1 million from $62.6 million at December 31, 2018. There were no brokered deposits included in time deposits at September 30, 2019 (unaudited) and December 31, 2018.

Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank decreased $24.8 million, or 32.8%, to $50.9 million at September 30, 2019 from $75.7 million at December 31, 2018. The decrease in advances from Federal Home Loan Bank is a result of the funds received from the stock offering.

Total Stockholders’ Equity. Total stockholders’ equity increased $24.3 million, or 74.1%, to $57.0 million at September 30, 2019 from $32.7 million at December 31, 2018. This increase was due primarily to $25.7 million in funds received from the stock offering and other comprehensive income of $1.1 million related to net changes in unrealized holding gains/losses in the available-for-sale securities portfolio offset by a net operating loss of $222,000 for the nine months ended September 30, 2019 and $2.4 million for the purchase of 238,473 shares of common stock by the ESOP.

Nonperforming Assets. Non-performing assets include loans that are 90 or more days past due or on non-accrual status, including troubled debt restructurings on non-accrual status, and real estate and other loan collateral acquired through foreclosure and repossession. Troubled debt restructurings 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.

Management determines that a loan is impaired or nonperforming 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. 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. 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.

We generally cease accruing interest on our loans when contractual payments of principal or interest have become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. Interest received on non-accrual loans generally is applied against principal, or applied to interest on a cash basis. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for at least six consecutive months and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Nonperforming loans were $1.1 million and $68,000, or 0.33% and 0.02% of total loans, at September 30, 2019 (unaudited) and December 31, 2018, respectively. At September 30, 2019 (unaudited) and December 31, 2018 we had no troubled debt restructurings or foreclosed assets.

Comparison of Operating Results for the Three Months Ended September 30, 2019 and 2018 (unaudited)

Net Income. Net loss was $613,000 for the three months ended September 30, 2019, compared to net income of $273,000 for the three months ended September 30, 2018, a decrease of $886,000, or 324.5%. The decrease was related primarily to the $758,000 funding of the new charitable foundation, an increase in salaries and employee benefits of $313,000 and an increase in marketing expenses of $403,000 for expenses incurred for the Bank rebranding, partially offset by a $89,000 increase in non-interest income, a $285,000 increase in net interest income after provision for loan losses and a $282,000 decrease in the provision for income taxes during the three months ended September 30, 2019.

Interest and Dividend Income. Interest and dividend income increased $316,000, or 8.8%, to $3.9 million for the three months ended September 30, 2019 from $3.6 million for the three months ended September 30, 2018. This increase was due to a $292,000 increase in interest and fees on loans, primarily due to an increase of $17.9 million in the average balance of the loan portfolio to $334.8 million for the three months ended September 30, 2019 from $317.0 million for the three months ended September 30, 2018, and a $24,000 increase in interest and dividend income on investments, or 7.1%, to $364,000 for the three months ended September 30, 2019 from $340,000 for the three months ended September 30, 2018. The weighted average annualized yield for the loan portfolio increased to 4.25% for the three months ended September 30, 2019 from 4.12% for the three months ended September 30, 2018. The weighted average annualized yield for the investment portfolio increased to 2.78% for the three months ended September 30, 2019 from 2.60% for the three months ended September 30, 2018.

Average interest-earning assets increased $20.7 million, to $387.7 million for the three months ended September 30, 2019 from $366.9 million for the three months ended September 30, 2018. The annualized yield on interest earning-assets increased 12 basis points to 4.05% for the three months ended September 30, 2019 from 3.93% for the three months ended September 30, 2018.

Interest Expense. Total interest expense increased $61,000, or 7.3%, to $891,000 for the three months ended September 30, 2019 from $830,000 for the three months ended September 30, 2018. Interest expense on deposit accounts increased $174,000, or 39.4%, to $616,000 for the three months ended September 30, 2019 from $442,000 for the three months ended September 30, 2018. The increase was primarily due to an increase in the average balance of interest-bearing deposits to $230.7 million for the three months ended September 30, 2019 from $213.9 million for the three months ended September 30, 2018, an increase of $16.8 million, or 7.9%, and an increase in the weighted average annualized rate paid on deposits to 1.07% for the three months ended September 30, 2019 from 0.83% for the three months ended September 30, 2018.

Interest expense on Federal Home Loan Bank advances decreased $113,000, or 29.1%, to $275,000 for the three months ended September 30, 2019 from $388,000 for the three months ended September 30, 2018. The average balance decreased $23.2 million, or 31.9%, to $49.6 million for the three months ended September 30, 2019 from $72.8 million for the three months ended September 30, 2018. The decrease in the average balance of Federal Home Loan Bank advances is due primarily to the use of funds received in the stock offering to paydown advances. The weighted average annualized rate of borrowings increased to 2.22% for the three months ended September 30, 2019 from 2.13% for the three months ended September 30, 2018.

Net Interest Income. Net interest income increased $255,000, or 9.2%, to $3.0 million for the three months ended September 30, 2019 from $2.8 million for the three months ended September 30, 2018. This increase was due to an increase in the balance of interest-earning assets during the three months ended September 30, 2019 and an increase in the annualized net interest margin to 3.13% for the three months ended September 30, 2019 from 3.03% for the three months ended September 30, 2018.

Provision for Loan Losses. Based on management’s analysis of the allowance for loan losses, we recorded a $-0- provision for loan losses for the three months ended September 30, 2019, compared to $30,000 for the three months ended September 30, 2018.

Non-Interest Income. Non-interest income increased $89,000, or 23.8%, to $462,000 for the three months ended September 30, 2019 compared to $373,000 for the three months ended September 30, 2018. The increase in non-interest income during the three months ended September 30, 2019 was due primarily to a $42,000 increase in gain on sale of loans and a $69,000 increase in securities gains (losses), net, partially offset by a $13,000 decrease in loan servicing fee income, reflecting a decrease in the fair value of our mortgage servicing intangible asset during the three months ended September 30, 2019.

Non-Interest Expense. Non-interest expense increased $1.5 million, or 55.4%, to $4.3 million for the three months ended September 30, 2019 from $2.8 million for the three months ended September 30, 2018. The largest increase was related to the $758,000 funding of the Bank’s new charitable foundation. Additionally, salaries and employee benefits increased $313,000, or 19.5%, marketing expenses related to the Bank’s rebranding efforts increased $403,000, or 303.0%, and an increase in professional fees and assessments of $55,000, 39.6%, partially offset by decrease of $81,000, or 122.7%, in deposit insurance premiums. The increase in salaries and benefits during the three months ended September 30, 2019 was due to filling vacant positions, normal salary increases and the compensation expense recognized in connection with the ESOP.

Income Taxes. An income tax benefit of $220,000 was recorded for the three months ended September 30, 2019 compared to a provision of $62,000 for the three months ended September 30, 2018. The benefit recognized during the three months ended September 30, 2019 resulted primarily from the tax benefit recognized for the $758,000 donation to the charitable foundation. Our effective tax rates for the periods are less than statutory federal and state rates due primarily to tax-exempt income related to investments in bank owned life insurance and municipal securities, as well as the impact of a state tax credit and a state net operating loss carryforward.

Average Balance Sheets

The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances only. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Loan balances exclude loans held for sale.


	For the Three Months Ended September 30, 2019
	Average Outstanding Balance			Interest		Average Yield/Rate
(dollars in thousands)
Interest-earning assets:
Loans	$	334,806		$	3,557		4.25	%
Securities		42,398			295		2.78	%
Other		10,460			69		2.64	%

Total interest-earning assets		387,664			3,921		4.05	%
Non-interest-earning assets		11,646

Total assets	$	399,310

Interest-bearing liabilities:
NOW and demand deposits	$	57,861		$	21		0.15	%
Money market deposits		48,429			167		1.38	%
Retail and commercial savings deposits		52,806			74		0.56	%
Certificates of deposit		71,588			354		1.98	%

Total interest-bearing deposits		230,684			616		1.07	%
Borrowings		49,564			275		2.22	%
Other		1,529			—		—

Total interest-bearing liabilities		281,777			891		1.26	%

Non-interest-bearing liabilities		72,620

Total liabilities		354,397
Total equity		44,913

Total liabilities and equity	$	399,310

Net interest income				$	3,030

Net interest rate spread (1)							2.78	%
Net interest-earning assets (2)	$	105,887

Net interest margin (3)							3.13	%
Average interest-earning assets to interest-bearing liabilities		137.58	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.


	For the Three Months Ended September 30, 2018
	Average Outstanding Balance			Interest		Average Yield/Rate
(dollars in thousands)
Interest-earning assets:
Loans	$	316,954		$	3,265		4.12	%
Securities		35,205			229		2.60	%
Other		14,771			111		3.01	%

Total interest-earning assets		366,930			3,605		3.93	%
Non-interest-earning assets		11,506

Total assets	$	378,436

Interest-bearing liabilities:
NOW and demand deposits	$	59,009		$	12		0.08	%
Money market deposits		54,851			175		1.28	%
Retail and commercial savings deposits		42,559			29		0.27	%
Certificates of deposit		57,518			226		1.57	%

Total interest-bearing deposits		213,937			442		0.83	%
Borrowings		72,842			388		2.13	%
Other		2,061			—		—

Total interest-bearing liabilities		288,840			830		1.15	%

Non-interest-bearing liabilities		57,538

Total liabilities		346,378
Total equity		32,058

Total liabilities and equity	$	378,436

Net interest income				$	2,775

Net interest rate spread (1)							2.78	%
Net interest-earning assets (2)	$	78,090

Net interest margin (3)							3.03	%
Average interest-earning assets to interest-bearing liabilities		127.04	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.


	Three Months Ended September 30, 2019 vs. 2018
	Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)
(in thousands)
Interest-earning assets:
Loans	$	188		$	104		$	292
Securities		49			17			66
Other		(30	)		(12	)		(42	)

Total interest-earning assets		207			109			316

Interest-bearing liabilities:
Savings, NOW and money market accounts		4			42			46
Certificates of deposit		62			66			128

Total interest-bearing deposits		66			108			174
Borrowings		(130	)		17			(113	)

Total interest-bearing liabilities		(64	)		125			61

Change in net interest income	$	271		$	(16	)	$	255

Comparison of Operating Results for the Nine Months Ended September 30, 2019 and 2018 (unaudited)

Net Income. Net loss was $222,000 for the nine months ended September 30, 2019, compared to net income of $749,000 for the nine months ended September 30, 2018, a decrease of $971,000, or 129.6%. The decrease was related primarily to the $758,000 funding of the new charitable foundation, an increase in salaries and employee benefits of $659,000 and an increase in marketing expenses of $400,000 for expenses incurred for the Bank rebranding, partially offset by a $386,000 increase in net interest income after provision for loan losses and a $373,000 decrease in the provision for income taxes during the nine months ended September 30, 2019.

Interest and Dividend Income. Interest and dividend income increased $1.1 million, or 10.3%, to $11.6 million for the nine months ended September 30, 2019 from $10.5 million for the nine months ended September 30, 2018. This increase was due to a $853,000 increase in interest and fees on loans, primarily due to an increase of $16.8 million in the average balance of the loan portfolio to $330.1 million for the nine months ended September 30, 2019 from $313.3 million for the nine months ended September 30, 2018, and a $230,000 increase in interest and dividend income on investments, or 25.0%, to $1.2 million for the nine months ended September 30, 2019 from $921,000 for the nine months ended September 30, 2018. The weighted average annualized yield for the loan portfolio increased to 4.21% for the nine months ended September 30, 2019 from 4.07% for the nine months ended September 30, 2018. The weighted average annualized yield for the investment portfolio increased to 2.76% for the nine months ended September 30, 2019 from 2.49% for the nine months ended September 30, 2018.

Average interest-earning assets increased $24.1 million, to $384.8 million for the nine months ended September 30, 2019 from $360.7 million for the nine months ended September 30, 2018. The annualized yield on interest earning-assets increased 13 basis points to 4.01% for the nine months ended September 30, 2019 from 3.88% for the nine months ended September 30, 2018.

Interest Expense. Total interest expense increased $772,000, or 34.9%, to $3.0 million for the nine months ended September 30, 2019 from $2.2 million for the nine months ended September 30, 2018. Interest expense on deposit accounts increased $511,000, or 43.3%, to $1.7 million for the nine months ended September 30, 2019 from $1.2 million for the nine months ended September 30, 2018. The increase was primarily due to an increase in the average balance of interest-bearing deposits to $225.0 million for the nine months ended September 30, 2019 from $209.7 million for the nine months ended September 30, 2018, an increase of $15.3 million, or 7.3%, and an increase in the weighted average annualized rate to 1.00% for the nine months ended September 30, 2019 from 0.75% for the nine months ended September 30, 2018.

Interest expense on Federal Home Loan Bank advances increased $261,000, or 25.2%, to $1.3 million for the nine months ended September 30, 2019 from $1.0 million for the nine months ended September 30, 2018. The average balance decreased $4.9 million, or 6.5%, to $69.4 million for the nine months ended September 30, 2019 from $74.3 million for the nine months ended September 30, 2018. The decrease in the average balance of Federal Home Loan Bank advances is due primarily to the use of funds received in the stock offering to paydown advances. The weighted average annualized rate of borrowings increased to 2.49% for the nine months ended September 30, 2019 from 1.86% for the nine months ended September 30, 2018.

Net Interest Income. Net interest income increased $311,000, or 3.8%, to $8.6 million for the nine months ended September 30, 2019 from $8.3 million for the nine months ended September 30, 2018. This increase was due to an increase in the balance of interest-earning assets during the nine months ended September 30, 2019, offset by a decrease in the annualized net interest margin to 2.97% for the nine months ended September 30, 2019 from 3.06% for the nine months ended September 30, 2018.

Provision for Loan Losses. Based on management’s analysis of the allowance for loan losses, we recorded a $25,000 provision for loan losses for the nine months ended September 30, 2019, compared to $100,000 for the nine months ended September 30, 2018.

Non-Interest Income. Non-interest income increased $9,000, or 0.8%, to $1.1 million for the nine months ended September 30, 2019. The increase in non-interest income during the nine months ended September 30, 2019 was due primarily to a $54,000 increase in gain on sale of loans and a $59,000 increase in securities gains (losses), net, offset by a $112,000 decrease in loan servicing fee income, reflecting a decrease in the fair value of our mortgage servicing intangible asset during the nine months ended September 30, 2019.

Non-Interest Expense. Non-interest expense increased $1.7 million, or 20.8%, to $10.1 million for the nine months ended September 30, 2019 from $8.4 million for the nine months ended September 30, 2018. The largest increase was related to the $758,000 funding of the Bank’s new charitable foundation. Additionally, salaries and employee benefits increased $659,000, or 13.8%, and marketing expenses related to the Bank’s rebranding efforts increased $400,000, or 104.4%, partially offset by decreases of $76,000, or 42.0%, in deposit insurance premiums and $183,000, or 25.9%, in data processing costs. The increase in salaries and benefits during the nine months ended September 30, 2019 was due to filling vacant positions, normal salary increases and the compensation expense recognized in connection with the ESOP.

Income Taxes. An income tax benefit of $210,000 was recorded for the nine months ended September 30, 2019 compared to a provision of $163,000 for the nine months ended September 30, 2018. The benefit recognized during the nine months ended September 30, 2019 resulted primarily from the tax benefit recognized for the $758,000 donation to the charitable foundation. Our effective tax rates for the periods are less than statutory federal and state rates due primarily to tax-exempt income related to investments in bank owned life insurance and municipal securities, as well as the impact of a state tax credit and a state net operating loss carryforward.

Average Balance Sheets

The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances only. The yields set forth below include the effect of deferred fees, discounts, and premiums that arc amortized or accreted to interest income or interest expense. Loan balances exclude loans held for sale.


	For the Nine Months Ended September 30, 2019
	Average Outstanding Balance			Interest		Average Yield/Rate
(dollars in thousands)
Interest-earning assets:
Loans	$	330,137		$	10,422		4.21	%
Securities		42,385			878		2.76	%
Other		12,317			273		2.96	%

Total interest-earning assets		384,839			11,573		4.01	%
Non-interest-earning assets		12,006

Total assets	$	396,845

Interest-bearing liabilities:
NOW and demand deposits	$	57,120		$	75		0.18	%
Money market deposits		50,156			511		1.36	%
Retail and commercial savings deposits		49,993			151		0.40	%
Certificates of deposit		67,722			955		1.88	%

Total interest-bearing deposits		224,991			1,692		1.00	%
Borrowings		69,436			1,295		2.49	%
Other		1,590			—		—

Total interest-bearing liabilities		296,017			2,987		1.35	%

Non-interest-bearing liabilities		63,539

Total liabilities		359,556
Total equity		37,289

Total liabilities and equity	$	396,845

Net interest income				$	8,586

Net interest rate spread (1)							2.66	%
Net interest-earning assets (2)	$	88,822

Net interest margin (3)							2.97	%
Average interest-earning assets to interest-bearing liabilities		130.01	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.


	For the Nine Months Ended September 30, 2018
	Average Outstanding Balance			Interest		Average Yield/Rate
(dollars in thousands)
Interest-earning assets:
Loans	$	313,339		$	9,569		4.07	%
Securities		33,442			625		2.49	%
Other		13,968			296		2.83	%

Total interest-earning assets		360,749			10,490		3.88	%
Non-interest-earning assets		11,509

Total assets	$	372,258

Interest-bearing liabilities:
NOW and demand deposits	$	60,054		$	43		0.10	%
Money market deposits		52,932			470		1.18	%
Retail and commercial savings deposits		40,603			55		0.18	%
Certificates of deposit		56,067			613		1.46	%

Total interest-bearing deposits		209,656			1,181		0.75	%
Borrowings		74,276			1,034		1.86	%
Other		2,062			—		—

Total interest-bearing liabilities		285,994			2,215		1.03	%

Non-interest-bearing liabilities		54,362

Total liabilities		340,356
Total equity		31,902

Total liabilities and equity	$	372,258

Net interest income				$	8,275

Net interest rate spread (1)							2.84	%
Net interest-earning assets (2)	$	74,755

Net interest margin (3)							3.06	%
Average interest-earning assets to interest-bearing liabilities		126.14	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.

Rate/Volume Analysis


	Nine Months Ended September 30, 2019 vs. 2018
	Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)
(in thousands)
Interest-earning assets:
Loans	$	524		$	329		$	853
Securities		180			73			253
Other		(38	)		15			(23	)

Total interest-earning assets		666			417			1,083

Interest-bearing liabilities:
Savings, NOW and money market accounts		14			155			169
Certificates of deposit		143			199			342

Total interest-bearing deposits		157			354			511
Borrowings		(62	)		323			261

Total interest-bearing liabilities		95			677			772

Change in net interest income	$	571		$	(260	)	$	311

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also rely on borrowings from the Federal Home Loan Bank of Boston as supplemental sources of funds. At September 30, 2019 and December 31, 2018, we had $50.9 million and $75.7 million outstanding in advances from the Federal Home Loan Bank of Boston, respectively, and the ability to borrow an additional $95.0 million and $72.1 million, respectively. Additionally, at September 30, 2019 and December 31, 2018, we had an overnight line of credit with the Federal Home Loan Bank of Boston for up to $3.0 million and unsecured Fed Funds borrowing lines of credit with two correspondent banks for up to $5.0 million. At September 30, 2019 and December 31, 2018, there were no outstanding balances under any of these additional credit facilities.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents and available-for-sale investment securities. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided (used) by operating activities was $1.3 million and $(0.4) million for the nine months ended September 30, 2019 and 2018, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities, offset by principal collections on loans, proceeds from the sale of loans and the sale of securities and proceeds from maturing securities and pay downs on securities, was $(11.4) million and $(21.9) million for the nine months ended September 30, 2019 and 2018, respectively. Net cash provided by financing activities, consisting of activity in deposit accounts and Federal Home Loan Bank advances, was $10.8 million and $23.5 million for the nine months ended September 30, 2019 and 2018, respectively. Net cash provided by financing activities for the nine months ended September 30, 2019 included $25.1 million of net proceeds from the sale of common stock.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our current strategy to increase core deposits and the continued use of Federal Home Loan Bank of Boston advances, as well as brokered certificates of deposit as needed, to fund loan growth. The net proceeds from the stock offering significantly increased our liquidity and capital resources. Over time, the initial level of liquidity is expected to be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of loans. However, due to the increase in equity resulting from the net proceeds raised in the stock offering, as well as other factors associated with the stock offering, our return on equity was adversely affected as a result of the stock offering and could continue to be adversely affected in the future.

First Seacoast Bancorp is a separate legal entity from First Seacoast Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company is governed by applicable bank regulations. At September 30, 2019, the Company (on an unconsolidated basis) had liquid assets of $10.0 million.

At September 30, 2019 and December 31, 2018, the Company exceeded all of its regulatory capital requirements. See Note 9 of the unaudited consolidated financial statements appearing under Item 1 of this quarterly report.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, the board of directors established a management-level Asset/Liability Management Committee (the “ALCO”), which takes responsibility for overseeing the asset/liability management process and related procedures. The ALCO meets on at least a quarterly basis and reviews asset/liability strategies, liquidity positions, alternative funding sources, interest rate risk measurement reports, capital levels and economic trends at both national and local levels. Our interest rate risk position is also monitored quarterly by the board of directors.

We try to manage our interest rate risk to minimize the exposure of our earnings and capital to changes in market interest rates. We have implemented the following strategies to manage our interest rate risk: originating loans with adjustable interest rates; promoting core deposit products; selling a portion of fixed-rate one- to four-family residential real estate loans; maintaining investments as available-for-sale; diversifying our loan portfolio; and strengthening our capital position. By following these strategies, we believe that we are better positioned to react to changes in market interest rates.

Net Portfolio Value Simulation. We analyze our sensitivity to changes in interest rates through a net portfolio value of equity (“NPV”) model. NPV represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet contracts. The NPV ratio represents the dollar amount of our NPV divided by the present value of our total assets for a given interest rate scenario. NPV attempts to quantify our economic value using a discounted cash flow methodology while the NPV ratio reflects that value as a form of capital ratio. We estimate what our NPV would be at a specific date. We then calculate what the NPV would be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate NPV under the assumptions that interest rates increase 100, 200, 300 and 400 basis points from current market rates and that interest rates decrease 100 basis points from current market rates.

The following table presents the estimated changes in our net portfolio value that would result from changes in market interest rates at September 30, 2019. All estimated changes presented in the table are within the policy limits approved by the board of directors.


(dollars in thousands)	Net Portfolio Value (“NPV”)								NPV as Percent of Portfolio Value of Assets
Basis Point (“bp”) Change in Interest Rates	Dollar Amount		Dollar Change			Percent Change			NPV Ratio			Change
400 bp	$	37	$	(11	)		(22.4	)%		10.80	%		(130	)
300 bp		41		(7	)		(15.7	)		11.40			(77	)
200 bp		44		(4	)		(9.2	)		11.80			(32	)
100 bp		47		(1	)		(3.0	)		12.20			3
0		48		—			—			12.10			—
(100) bp		45		(3	)		(6.4	)		11.10			(105	)

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve

regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.

Item 4.

Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2019. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2019.

During the quarter ended September 30, 2019, there were no changes in the Company’s internal controls over financial reporting that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

We are not involved in any pending legal proceedings as a plaintiff or a defendant other than routine legal proceedings occurring in the ordinary course of business. At September 30, 2019, we were not involved in any legal proceedings the outcome of which we believe would be material to our consolidated financial condition or results of operations.

Item 1A.

Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under the heading “Risk Factors” contained in the Prospectus. The Company believes that the risk factors applicable to it has not changed materially from those disclosed in the Prospectus.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

In connection with the mutual holding company reorganization of the Bank, the Company completed its initial public stock offering on July 16, 2019. The Company sold 2,676,740 shares of common stock at $10.00 per share in its subscription offering, pursuant to a Registration Statement on Form S-1 (SEC File No. 333-230242), which was declared effective by the SEC on May 14, 2019. The Company registered 2,737,575 shares pursuant to the Registration Statement. The offering resulted in gross proceeds of approximately $26.8 million. The net proceeds of the offering were approximately $25.2 million. Of the net proceeds of the offering, the Company used $2.4 million to fund a loan to the Bank’s employee stock ownership (which in turn used those funds to purchase 238,473 shares in the offering), contributed $150,000 to First Seacoast Community Foundation, Inc., invested $12.6 million in the Bank as additional capital, and retained $10.0 million for general corporate purposes. Keefe, Bruyette & Woods, Inc. served as marketing agent for the offering.

In connection with the reorganization, the Company also issued 3,345,925 shares of common stock to First Seacoast Bancorp, MHC, its federally chartered mutual holding company, and contributed 60,835 shares of common stock to First Seacoast Community Foundation, Inc., its newly formed charitable foundation.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits


Exhibit Number		Description

3.1		Charter of First Seacoast Bancorp

3.2		Bylaws of First Seacoast Bancorp

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials for the quarter ended September 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity Capital, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						FIRST SEACOAST BANCORP

Date: November 14, 2019						/s/ James R. Brannen
						James R. Brannen
						President and Chief Executive Officer

Date: November 14, 2019						/s/ Richard M. Donovan
						Richard M. Donovan
						Senior Vice President and Chief Financial Officer

Exhibit 3.1

FIRST SEACOAST BANCORP

STOCK HOLDING COMPANY CHARTER

Section 1. Corporate title. The full corporate title of the mutual holding company subsidiary holding company is First Seacoast Bancorp (the “Company”).

Section 2. Domicile. The domicile of the Company shall be in Strafford County, New Hampshire.

Section 3. Duration. The duration of the Company is perpetual.

Section 4. Purpose and powers. The purpose of the Company is to pursue any or all of the lawful objectives of a federal mutual holding company chartered under Section 10(o) of the Home Owners’ Loan Act, 12 U.S.C. §1467a(o), and to exercise all of the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Board of Governors of the Federal Reserve System (the “FRB”).

Section 5. Capital stock. The total number of shares of all classes of the capital stock that the Company has the authority to issue is 100,000,000, of which 90,000,000 shares shall be common stock, par value $0.01 per share, and of which 10,000,000 shares shall be serial preferred stock, par value $0.01 per share. The shares may be issued from time to time as authorized by the board of directors without the approval of its shareholders, except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par or stated value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Company. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted to the Company), labor, or services actually performed for the Company, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the board of directors of the Company, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the retained earnings of the Company that is transferred to common stock or paid-in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance.

Except for shares issued in the initial organization of the Company, no shares of capital stock (including shares issuable upon conversion, exchange, or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons (except for shares issued to the parent mutual holding company) of the Company other than as part of a general public offering or as qualifying shares to a director, unless the issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting.

Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share, and there shall be no cumulation of votes for the election of directors; provided, that this restriction on voting separately by class or series shall not apply:

(i)

To any provision which would authorize the holders of preferred stock, voting as a class or series, to elect some members of the board of directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock;

(ii)

To any provision which would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Company with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Company if the preferred stock is exchanged for securities of such other corporation; provided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the FRB or the Federal Deposit Insurance Corporation; or

(iii)

To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving company in a merger or consolidation for the Company, shall not be considered to be such an adverse change.

A description of the different classes and series of the Company’s capital stock and a statement of the designations, and the relative rights, preferences and limitations of the shares of each class of and series of capital stock are as follows:

A. Common stock. Except as provided in this Section 5 (or in any supplementary sections thereto) the holders of common stock shall exclusively possess all voting power. Each holder of shares of common stock shall be entitled to one vote for each share held by such holder and there shall be no cumulation of votes for the election of directors.

Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to payment of dividends, the full amount of dividends and of sinking fund, retirement fund or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends.

In the event of any liquidation, dissolution, or winding up of the Company, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Company available for distribution remaining after: (i) payment or provision for payment of the Company’s debts and liabilities; (ii) distributions or provision for distributions in settlement of its liquidation account; and (iii) distributions or provisions for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Company. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock.

B. Preferred stock. The Company may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in a supplementary section to the charter. All shares of the same class shall be identical, except as to the following relative rights and preferences, as to which there may be variations between different series:

(a)

The distinctive serial designation and the number of shares constituting such series;

(b)

The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s), the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends;

(c)

The voting powers, full or limited, if any, of shares of such series;

(d)

Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed;

(e)

The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company;

(f)

Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund;

(g)

Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Company and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

(h)

The price or other consideration for which the shares of such series shall be issued; and

(i)

Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock.

Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series.

The board of directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series and, within the limitations set forth in this section and the remainder of this charter, fix and determine the relative rights and preferences of the shares of any series so established.

Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the board of directors, the Company shall file with the appropriate Reserve Bank a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof.

Section 6. Beneficial ownership limitation. No person other than First Seacoast Bancorp, MHC may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10 percent of the outstanding stock of any class of voting stock of the Company held by persons other than First Seacoast Bancorp, MHC. This limitation expires on July 16, 2024 and does not apply to a transaction in which an underwriter purchases stock in connection with a public offering, or the purchase of stock by an employee stock ownership plan or other tax-qualified employee stock benefit plan that is exempt from the approval requirements under the FRB’s Regulations.

In the event a person acquires stock in violation of this Section 6, all stock beneficially owned by such person in excess of 10 percent of the stock held by shareholders other than First Seacoast Bancorp, MHC shall be considered “excess shares” and shall not be counted as stock entitled to vote and shall not be voted by any person or counted as voting stock in connection with any matters submitted to the shareholders for a vote.

For purposes of this section 6, the following definitions apply:

(1) The term “person” includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the subsidiary holding company.

(2) The term “offer” includes every offer to buy or otherwise acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security or interest in a security for value.

(3) The term “acquire” includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise.

(4) The term “acting in concert” means (a) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (b) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangements, whether written or otherwise.

Section 7. Preemptive rights. Holders of the capital stock of the Company shall not be entitled to preemptive rights with respect to any shares of the Company which may be issued.

Section 8. Directors. The Company shall be under the direction of a board of directors. The authorized number of directors, as stated in the Company’s bylaws, shall not be fewer than five nor more than fifteen except when a greater or lesser number is approved by the FRB, or its delegate.

Section 9. Amendment of charter. Except as provided in Section 5, no amendment, addition, alteration, change or repeal of this charter shall be made, unless such is proposed by the board of directors of the Company, approved by the shareholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise required, and approved or preapproved by the FRB.


FIRST SEACOAST BANCORP

ATTEST:		/s/ Michael J. Bolduc
		Michael J. Bolduc
		Corporate Secretary

BY:		/s/ James R. Brannen
		James R. Brannen
		President and Chief Executive Officer

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

BY:		/s/ Margaret M. Shanks
		Acting Secretary of Board of Governors of the Federal Reserve System

Effective Date: July 16, 2019

Exhibit 3.2

FIRST SEACOAST BANCORP

BYLAWS

Article I – Home Office

The home office of First Seacoast Bancorp (the “Company”) shall be at 633 Central Avenue, Dover, in the County of Strafford, in the State of New Hampshire.

Article II – Shareholders

Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at the home office of the Company or at such other convenient place as the board of directors may determine.

Section 2. Annual Meeting. A meeting of the shareholders of the Company for the election of directors and for the transaction of any other business of the Company shall be held annually within 150 days after the end of the Company’s fiscal year on the last Thursday of May of each calendar year if not a legal holiday, and if a legal holiday, at 11:00 a.m., then on the next day following which is not a legal holiday, or at such other date and time within such 150-day period as the board of directors may determine.

Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Board of Governors of the Federal Reserve System (the “FRB”), may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the Company entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the Company addressed to the chairman of the board, the president, or the secretary.

Section 4. Conduct of Meetings. Annual and special meetings shall be conducted in accordance with written procedures established by the board of directors, unless otherwise prescribed by regulations of the FRB or these bylaws. The board of directors shall designate, when present, either the chairman of the board or president to preside at such meetings.

Section 5. Notice of Meetings. Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Company as of the record date prescribed in section 6 of this Article II with postage prepaid. When any shareholders’ meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.

Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment.

Section 7. Voting Lists. At least 20 days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the Company shall make a complete list of the shareholders of record entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the Company and shall be subject to inspection by any shareholder of record or the shareholder’s agent at any time during usual business hours for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder’s agent during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the board of directors may elect to follow the procedures prescribed in § 239.26(d) of the FRB’s regulations as now or hereafter in effect.

Section 8. Quorum. A majority of the outstanding shares of the Company entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If a quorum is present at a meeting of shareholders and the withdrawal of shareholders results in the presence of less than a quorum, the shareholders present may continue to transact business until adjournment. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter. Directors, however, are elected by a plurality of the votes cast at an election of directors.

Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the shareholder. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the board of directors. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest.

Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the Company to the contrary, at any meeting of the shareholders of the Company any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may be voted by the Company if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Neither treasury shares of its own stock held by the Company nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Company, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

Section 12. Cumulative Voting. Shareholders may not cumulate their votes for election of directors.

Section 13. Inspectors of Election. In advance of any meeting of shareholders, the board of directors may appoint any individual other than nominees for office as inspectors of election to act at such meeting or any adjournment. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any individual appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting or at the meeting by the chairman of the board or the president. Unless otherwise prescribed by regulations of the FRB, the duties of such inspectors shall include: determining the number of shares and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders.

Section 14. Nominating Committee. The board of directors shall act as a nominating committee for selecting the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Company. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Company at least five days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Company. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon.

Section 15. New Business. Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary of the Company at least five days before the date of the annual meeting, and all business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting. Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least five days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of the shareholders taking place 30 days or more thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors, and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.

Section 16. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter.

Article III – Board of Directors

Section 1. General Powers. The business and affairs of the Company shall be under the direction of its board of directors. The board of directors shall annually elect a chairman of the board from among its members and shall designate, when present, the chairman of the board to preside at its meetings.

Section 2. Number and Term. The board of directors shall consist of ten (10) members, and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually.

Section 3. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of a conference telephone or similar communications device through which all individuals participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes.

Section 4. Director Qualification. Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the Company unless the Company is a wholly owned subsidiary of a holding company.

Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president, or one-third of the directors. The persons authorized to call special meetings of the board of directors may fix any place, within the Company’s normal lending territory, as the place for holding any special meeting of the board of directors called by such persons. Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person for all purposes.

Section 6. Notice. Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram, or when the Company receives notice of delivery if electronically transmitted. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice of waiver of notice of such meeting.

Section 7. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 5 of this Article III.

Section 8. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the FRB or by these bylaws.

Section 9. Action Without a Meeting. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.

Section 10. Resignation. Any director may resign at any time by sending a written notice of such resignation to the home office of the Company addressed to the chairman of the board or the president. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board or the president. More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors.

Section 11. Vacancies. Any vacancy occurring on the board of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the shareholders. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders.

Section 12. Compensation. Directors, as such, may receive a stated salary for their services. By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board of directors. Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the board of directors may determine.

Section 13. Presumption of Assent. A director of the Company who is present at a meeting of the board of directors at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the individual acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Company within five days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 14. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.

For purposes of this section, removal for cause includes, as defined in 12 CFR §163.39, or any successor regulation, “personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, [or a] willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order.”

Section 15. Director Qualifications. A person is not qualified to serve as a director if he or she: (i) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, (ii) a person against whom a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and subject to appeal, or (iii) has found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (1) breached a fiduciary duty involving personal profit or (2) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency.

Section 16. Age Limitation. No individual seventy (70) years of age shall be eligible for election, reelection, appointment, or reappointment to the board of directors of the Company. No director shall serve as such beyond December 31^st of the year in which he or she becomes seventy (70) years of age. This age limitation does not apply to an advisory director.

Article IV – Executive and Other Committees

Section 1. Appointment. The board of directors, by resolution adopted by a majority of the full board, may designate the chairman of the board and two or more of the other directors to constitute an executive committee. The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the board of directors, or any director, of any responsibility imposed by law or regulation.

Section 2. Authority. The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to: the declaration of dividends; the amendment of the charter or bylaws of the Company, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the Company otherwise than in the usual and regular course of its business; a voluntary dissolution of the Company; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest.

Section 3. Tenure. Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until a successor is designated as a member of the executive committee.

Section 4. Meetings. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day’s notice stating the place, date, and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

Section 5. Quorum. A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

Section 6. Action Without a Meeting. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee.

Section 7. Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.

Section 8. Resignations and Removal. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the Company. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective. No notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

Section 9. Procedure. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure, which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting held next after the proceedings shall have occurred.

Section 10. Other Committees. The board of directors may by resolution establish an audit, loan, or other committee composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Company and may prescribe the duties, constitution, and procedures thereof.

Article V – Officers

Section 1. Positions. The officers of the Company shall be a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the board of directors. The board of directors may also designate the chairman of the board as an officer. The offices of the secretary and treasurer or comptroller may be held by the same individual and a vice president may also be either the secretary or the treasurer or comptroller. The board of directors may designate one or more vice presidents as executive vice president or senior vice president. The board of directors may also elect or authorize the appointment of such other officers as the business of the Company may require. The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine. In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.

Section 2. Election and Term of Office. The officers of the Company shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible. Each officer shall hold office until a successor has been duly elected and qualified or until the officer’s death, resignation, or removal in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The board of directors may authorize the Company to enter into an employment contract with any officer in accordance with regulations of the FRB; but no such contract shall impair the right of the board of directors to remove any officer at any time in accordance with Section 3 of this Article V.

Section 3. Removal. Any officer may be removed by the board of directors whenever in its judgment the best interests of the Company will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the officer so removed.

Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the board of directors for the unexpired portion of the term.

Section 5. Remuneration. The remuneration of the officers shall be fixed from time to time by the board of directors.

Article VI – Contracts, Loans, Checks, and Deposits

Section 1. Contracts. To the extent permitted by regulations of the FRB, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the Company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Company. Such authority may be general or confined to specific instances.

Section 2. Loans. No loans shall be contracted on behalf of the Company and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors. Such authority may be general or confined to specific instances.

Section 3. Checks; Drafts, etc. All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Company shall be signed by one or more officers, employees or agents of the Company in such manner as shall from time to time be determined by the board of directors.

Section 4. Deposits. All funds of the Company not otherwise employed shall be deposited from time to time to the credit of the Company in any duly authorized depositories as the board of directors may select.

Article VII – Certificates for Shares and Their Transfer

Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Company shall be in such form as shall be determined by the board of directors and approved by the FRB. The Company is also authorized to issue uncertificated shares of capital stock. Such certificates shall be signed by the chief executive officer or by any other officer of the Company authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the Company itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. Upon the issuance of uncertificated shares of capital stock, the Company shall send the shareholder a written statement of the same information required above with respect to stock certificates. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Company. All certificates surrendered to the Company for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and canceled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Company as the board of directors may prescribe.

Section 2. Transfer of Shares. Transfer of shares of capital stock of the Company shall be made only on its stock transfer books. Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the Company. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name shares of capital stock stand on the books of the Company shall be deemed by the Company to be the owner for all purposes.

Article VIII – Fiscal Year

The fiscal year of the Company shall end on the last day of December each year. The appointment of accountants shall be subject to annual ratification by the shareholders.

Article IX – Dividends

Subject to the terms of the Company’s charter and the regulations and orders of the FRB, the board of directors may, from time to time, declare, and the Company may pay, dividends on its outstanding shares of capital stock.

Article X – Corporate Seal

The board of directors shall provide a Company seal, which shall be two concentric circles between which shall be the name of the Company. The year of incorporation or an emblem may appear in the center.

Article XI – Indemnification

Section 1. Legal Action.

(a) The Company may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he or she is or was a director, officer, employee or agent of the Company against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that his or her conduct was unlawful.

(b) The Company may indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Company against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company, provided that no indemnification shall be made with respect to any claim, issue, or matter as to which such person has been adjudged to have been liable to the Company unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.

Section 2. Successful Defense. To the extent that a present or former director, officer, employee, or agent of the Company has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in this Article XI or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, if the person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company.

Section 3. Proper Determination. Any indemnification under Sections 1 and 2 of this Article XI shall be made by the Company only as authorized in the specific case, upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in this Article XI. Such determination shall be made: (1) by the Board of Directors by a majority vote of a quorum consisting of directors who are not parties to such action, (2) by independent counsel, or (3) by the stockholders of the Company.

Section 4. Indemnification Not Exclusive. The indemnification and advancement of expenses provided by or granted under this Article XI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.

Section 5. Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of this Article XI.

Section 6. Continuation of Indemnification. The indemnification and advancement of expenses provided by or granted under this Article XI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, or agent of the Company and shall inure to the benefit of the heirs, executors, and administrators of that person.

Section 7. Applicable Law. Notwithstanding any other provision of this Article XI, no indemnification or purchase of insurance may be promised or made unless in compliance with applicable laws, rules or regulations, including 12 CFR §239.40, 12 USC §1828(k) and 12 CFR Part 359.

Article XII – Amendments

These bylaws may be amended in a manner consistent with regulations of the FRB and shall be effective after: (i) approval of the amendment by a majority vote of the authorized board of directors, or by a majority vote of the votes cast by the shareholders of the Company at any legal meeting, and (ii) receipt of any applicable regulatory approval. When a Company fails to meet its quorum requirements solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws.

Effective: July 16, 2019

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James R. Brannen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Seacoast Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard M. Donovan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Seacoast Bancorp;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, James R. Brannen, Chief Executive Officer and Chief Financial Officer of First Seacoast Bancorp (the “Company”), hereby certify in my capacity as an executive officer of the Company that I have reviewed the Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (the “Report”) and that, to the best of my knowledge:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Richard M. Donovan, Senior Vice President and Chief Financial Officer of First Seacoast Bancorp (the “Company”), hereby certify in my capacity as an executive officer of the Company that I have reviewed the Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (the “Report”) and that, to the best of my knowledge:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.