FSEA 10-K & 10-Q changes, risk factors and insider trading

Our ACL as a percent of total loans was 0.82% at December 31, 2025 and 0.79% at December 31, 2024 and 2023,2024, which primarily reflects the impact of calculated loss rates based upon remaining life measurements and our consideration of the current economic conditions that affect the qualitative adjustments used in the determination of the ACL as they have evolved over the year from the impact of inflationary pressures and geopolitical concerns, among other considerations. While we consider a number of variables in our evaluation of the adequacy of the ACL, one of the more significant variables is the use of a reasonable and supportable forecast period in the calculation of a historical loss rate. As noted above, the Company has chosen a forecast period of one year which will be similar to the historical loss period between January 2014 and December 2016 and then reverting to the long-term average over the following two quarters using the straight-line reversion method. This time period was one of relatively stagnant expansion in the U.S. with GDP growth rates in the 1.6% - 2.6% range. Economic indicators during this period were mixed and appear similar to the current economy. Additionally, because historical loss experience may not fully reflect our expectations about the future, management has adjusted the historical loss rate through a qualitative adjustment to reflect current economic conditions not already reflected in the historical loss information. If a pre-recessionary period such as the period between March 2007 and September 2009 was chosen as the reasonable and supportable forecast period with a similar qualitative adjustment consideration, the ACL would increasedecrease by $99,000$300,000 to $3.6$3.2 million. Alternatively, if the qualitative adjustment to reflect current economic conditions not already reflected in the historical loss information were removed from the chosen forecast period used in the calculation of the ACL, the ACL would decrease by $1.1$1.4 million to $2.4$2.0 million.

Total Assets. Total assets were $580.8$599.3 million as of December 31, 2024,2025, an increase of $9.7$18.5 million, or 1.7%,3.2%, when compared to total assets of $571.0$580.8 million at December 31, 2023.2024. The increase was due primarily to increases in net loans and other assets offset by decreases in securities available-for-sale and in land, buildingcash and equipment,due net.from Thebanks increaseoffset inby other assets anda decrease in land,net building and equipment, net, was due primarily to accounting for the sale-leaseback transaction involving the Bank's main office and branches which was completed on June 11, 2024.loans.

Cash and Due From Banks. Cash and due from banks increased $1.0$6.3 million, or 17.0%,88.9%, to $13.4 million at December 31, 2025 from $7.1 million at December 31, 2024 from $6.1 million at December 31, 2023.2024. The increase was due primarily to a $49.4$16.6 million increase in total deposits and $7.4 million of proceeds from the sale of land, building and equipment, offset by an $8.8 million increase in net loans, a $40.7$19.4 million decrease in borrowingsnet andloans $3.7offset by $29.6 million of commonnet stockpurchases repurchasesof securities available-for-sale during the year ended December 31, 2024.2025.

Available-for-Sale Securities. Available-for-sale securities decreasedincreased by $1.6$32.2 million, or 1.3%,26.8%, to $152.4 million at December 31, 2025 from $120.2 million at December 31, 2024 from $121.9 million at December 31, 2023.2024. This decreaseincrease was due to $36.2investment purchases totaling $50.7 million and a $3.0 million decrease in net unrealized losses within the portfolio offset by $21.1 million of proceeds from sales, maturities and principal payments received on securities available-for-sale and $547,000$387,000 of net amortization of bond premiums,premiums. offset by investment purchases totaling $36.7 million and a $1.5 million increase in netThe unrealized losses within the portfolio.portfolio Onare due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore we recorded no allowance for credit losses on available-for-sale debt securities as of December 11,31, 2024, we executed a balance sheet repositioning strategy related to our available-for-sale investment securities portfolio. We sold $23.5 million in book value of lower-yielding investment securities for an after-tax realized gain of $5,000 and purchased $16.6 million of higher-yielding investment securities which were classified as available-for-sale upon purchase.2025.

Net Loans. Net loans increaseddecreased $8.8$19.4 million, or 2.1%,4.5%, to $416.0 million at December 31, 2025 from $435.5 million at December 31, 2024 from $426.6 million at December 31, 2023.2024. During the year ended December 31, 2024,2025, we originatedcollected $58.2$25.3 million of loansloan principal, net of new loan originations, and purchased $2.7$3.6 million of participation interests in commercial and industrial loans and $1.8$1.9 million of consumer loans secured by manufactured housing properties. As of December 31, 20242025 and 2023,2024, the portfolios of purchased loans had outstanding principal balances of $34.3$37.0 million and $33.3$34.3 million, respectively, and were performing in accordance with their original repayment terms. Net deferred loan costs increased $136,000,$124,000, or 5.2%,4.5%, to $2.9 million at December 31, 2025 from $2.8 million at December 31, 2024 from $2.6 million at December 31, 2023 due primarily to the increase in deferred costs on consumer loans offset by a decrease in deferred costs on one- to four-family residential mortgage loans. Our ACL on loans increaseddecreased $96,000$59,000 to $3.4 million at December 31, 2025 from $3.5 million at December 31, 2024 from $3.4 million at December 31, 2023, and consisted of a $120,000$60,000 provisionrelease forof loancredit losses on loans offset by $24,000$1,000 of netconsumer loan charge-offs.recoveries.

One- to four-family residential mortgage loans increaseddecreased $6.3$10.0 million, or 2.3%,3.6%, to $265.2 million at December 31, 2025 from $275.2 million at December 31, 2024 from $268.9 million at December 31, 2023.2024. Commercial real estate mortgage loans decreased $546,000,$5.4 million, or 0.6%,6.3%, to $80.6 million at December 31, 2025 from $86.0 million at December 31, 2024 from $86.6 million at December 31, 2023.2024. Acquisition, development and land loans decreased $2.6$2.1 million, or 14.7%,13.9%, to $12.9 million at December 31, 2025 from $14.9 million at December 31, 2024 from $17.5 million at December 31, 2023.2024. Commercial and industrial loans decreased $1.8$1.2 million, or 7.1%,4.9%, to $22.5 million at December 31, 2025 from $23.7 million at December 31, 2024 from $25.5 million at December 31, 2023.2024. Home equity loans and lines of credit increaseddecreased $6.8 million,$256,000, or 48.4%,1.2%, to $20.7 million at December 31, 2025 from $20.9 million at December 31, 2024 from $14.1 million at December 31, 2023.2024. Multi-family real estate loans decreased $1.8 million,$913,000, or 24.1%,15.9%, to $4.8 million at December 31, 2025 from $5.8 million at December 31, 20242024. fromConsumer $7.6loans increased $335,000, or 2.7%, to $12.7 million at December 31, 2023.2025 Consumer loans increased by $2.6 million, or 26.3%, tofrom $12.4 million at December 31, 2024 from $9.8 million at December 31, 2023.2024.

Deposits increased $49.4$16.6 million, or 12.2%,3.7%, to $470.8 million at December 31, 2025 from $454.2 million at December 31, 2024 fromdue $404.8 million at December 31, 2023 dueprimarily to an increase in both time and core deposits. Core deposits (defined as all deposits other than time deposits) increased $5.0 million,$361,000, or 1.6%,0.1%, to $318.8 million at December 31, 2025 from $318.5 million at December 31, 2024 from $313.5 million at December 31, 2023.2024. The increase in core deposits was due to a $20.7$7.5 million, or 31.9%,4.6%, increase in savingsNOW deposits,and demand deposits offset by a decrease in NOW and demandsavings deposits of $1.5$1.9 million, or 0.9%,2.2%, and a decrease in money market deposits of $14.3$5.3 million, or 16.7%.7.4%. Time deposits increased $44.4$16.2 million, or 48.7%,11.9%, to $151.9 million at December 31, 2025 from $135.7 million at December 31, 2024 from $91.3 million at December 31, 2023.2024. At December 31, 20242025 and 2023,2024, there were $63.1$69.1 million and $23.6$63.1 million of brokered deposits included in time deposits, respectively, and $22.1$21.9 million and $20.9$22.1 million of brokered deposits included in savings deposits, respectively. The purchase of brokered deposits offered a lower cost alternative to advances of similar duration from the Federal Home Loan Bank.

Total Stockholders’ Equity. Total stockholders’ equity decreasedincreased $4.6$1.5 million, or 6.9%,2.4%, to $63.5 million at December 31, 2025 from $62.1 million at December 31, 2024 from $66.6 million at December 31, 2023.2024. This decreaseincrease was due primarily to $3.7$2.2 million of common stock repurchases, an other comprehensive loss of $1.1 millionincome related primarily to net changes in unrealized holding losses in the available-for-sale securities portfolio as a result of increasesdecreases in market interest rates during the year ended December 31, 20242025 and the recognition of $1.1 million of stock-based compensation offset by a net loss of $513,000$845,000 for the year ended December 31, 2024,2025 offsetand by the recognition$981,000 of $786,000common ofstock stock-based compensation.repurchases.

Net Loss. Net loss was $845,000 for the year ended December 31, 2025, compared to a net loss of $513,000 for the year ended December 31, 2024, comparedan to a net lossincrease of $10.7 million for the year ended December 31, 2023, a decrease of $10.1 million.$332,000. The decreaseincrease was due primarily to ana increasedecrease in non-interest income of $5.9$2.2 million,million and a decrease$1.1 million increase in incomenon-interest taxexpenses, expenseoffset of $3.4 million,by a $388,000$1.8 million increase in net interest and dividend income,income and a $260,000$1.2 million decrease in (release)income provisiontax for credit losses and a decrease in non-interest expenses of $167,000expense during the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024.

Interest and Dividend Income. Interest and dividend income increased $4.8$1.6 million, or 23.5%,6.1%, to $27.0 million for the year ended December 31, 2025 from $25.4 million for the year ended December 31, 2024 from $20.6 million for the year ended December 31, 2023.2024. This increase was due to a $2.7 million,$583,000, or 16.2%,3.0%, increase in interest and fees on loans and a $2.1 million,$972,000, or 57.0%,16.8%, increase in interest and dividend income on investments.

Interest Expense. Total interest expense increaseddecreased $4.5 million,$234,000, or 49.0%,1.7%, to $13.3 million for the year ended December 31, 2025 from $13.5 million for the year ended December 31, 20242024. fromInterest $9.1expense on deposits increased $1.1 million, or 10.9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The average balance of interest-bearing deposits increased $42.6 million, or 11.8%, to $404.2 million for the year ended December 31, 2023.2025 Interest expense on deposits increased $4.3 million, or 79.9%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The average balance of interest-bearing deposits increased $42.4 million, or 13.3%, tofrom $361.6 million for the year ended December 31, 2024 from $319.2 million for the year ended December 31, 2023 primarily as a result of an increase in the average balance of time, savingstime and money marketsavings deposits offset by a decrease in the average balances of NOWmoney and demandmarket deposits. The weighted average rate of interest-bearing deposits increaseddecreased to 2.65% for the year ended December 31, 2025 from 2.67% for the year ended December 31, 2024 from 1.67% for the year ended December 31, 2023 due primarily to an increase in market interest rates and to respond to deposit pricing by competitors.2024.

Interest expense on borrowings consistsdecreased of$1.3 interestmillion, onor advances33.3%, fromto $2.6 million for the Federalyear Homeended LoanDecember Bank31, and2025 the Federal Reserve Bank. Interest expense on borrowings increased $164,000, or 4.4%, tofrom $3.9 million for the year ended December 31, 2024 from $3.7 million for the year ended December 31, 2023 primarily due to ana increasedecrease in the average balance of borrowings. The average balance of borrowings increaseddecreased $3.0$26.3 million, or 3.9%,32.1%, to $55.6 million for the year ended December 31, 2025 from $81.9 million for the year ended December 31, 20242024. fromThe $78.8weighted millionaverage rate of borrowings decreased to 4.64% for the year ended December 31, 2023.2025 The weighted average rate of borrowings increased tofrom 4.73% for the year ended December 31, 2024 fromdue 4.70%to fora thedecrease yearin endedmarket Decemberinterest 31, 2023.rates.

Net Interest and Dividend Income. Net interest and dividend income increased $388,000,$1.8 million, or 3.4%,15.0%, to $13.7 million for the year ended December 31, 2025 from $11.9 million for the year ended December 31, 2024 from $11.5 million for the year ended December 31, 2023.2024. This increase was due to a $36.9$16.5 million, or 6.9%,2.9%, increase in the average balance of interest-earning assets,assets consistingoffset by an increase of $16.5 million, or 3.7%, in the average balance of interest-bearing liabilities. The increase in the average balance of interest-earning assets consisted primarily of increasesan increase in the average balances of loanstaxable anddebt securities offset by a decrease in taxable debt securities during the year ended December 31, 20242025. offset by anThe increase of $45.3 million, or 11.3%, in the average balance of interest-bearing liabilities,liabilities consistingconsisted primarily of an increase in the average balance of time and savings deposits.deposits offset by a decrease in the average balance of money market deposits and borrowings. Net interest rate spread decreasedincreased to 1.72% for the year ended December 31, 2025 from 1.42% for the year ended December 31, 2024 from 1.59% for the year ended December 31, 2023 due primarily to an increase in the average rate of interest-bearing deposits offset by an increase in the average yield on interest-earning assets.assets and a decrease in the average rate of interest-bearing liabilities.

(Release) Provision forof Credit Losses. Based upon management’s analysis of the ACL, a $(72,0001,000) release of credit losses was recorded for the year ended December 31, 20242025 compared to a $188,000$(72,000) provisionrelease forof credit losses for the year ended December 31, 2023.2024. The release of credit losses for the year ended December 31, 20242025 consisted of a $120,000$(60,000) provisionrelease forof credit losses on loans and a $(192,000)$59,000 releaseprovision offor credit losses on off-balance sheet credit exposures.

Non-Interest Expense. Non-interest expense decreasedincreased $167,000,$1.1 million, or 1.0%,6.7%, to $16.9 million for the year ended December 31, 2025 from $15.9 million for the year ended December 31, 2024 from $16.0 million for the year ended December 31, 2023.2024. The decreaseincrease in non-interest expense was due primarily to a $427,000,$368,000, or 4.4%,4.3%, decreaseincrease in salaries and employee benefits, a $111,000,$296,000, or 20.9%,45.6%, decreaseincrease in marketing,equity compensation expense, a $104,000,$414,000, or 22.8%,42.6%, increase in occupancy expense and a $135,000, or 9.0%, increase in data processing offset by a $67,000, or 19.0%, decrease in equipment expense and a $94,000,$96,000, or 5.9%,8.2%, decrease in data processing offset by a $214,000, or 28.2%, increase in occupancy expense, a $160,000, or 15.8%, increase in professional fees and assessments and a $142,000, or 55.3%, increase in deposit insurance fees during the year ended December 31, 2024.2025. The decreaseincrease in salaries and benefits during the year ended December 31, 20242025 was due to normal salary increases. The increase in equity compensation expense was due to the adjustmentincentive ofand staffingnon-statutory levelsstock options granted in lateDecember 2023 reflecting the expected reduction in 2024 residential mortgage and commercial lending activity offset by normal salary increases.2024. The increase in occupancy expense was due primarily to the increase in lease expense associated with the sale-leaseback transaction completed on June 11, 2024.

Income Taxes. Income tax expensebenefit decreasedincreased $3.4$1.2 millionmillion, or 221.1%, to $527,000a benefit of $638,000 for the year ended December 31, 20242025 compared to $3.9a million$527,000 income tax expense for the year ended December 31, 2023.2024. The effective tax rate was 3,764.3%(43.0)% and 58.8%3,764.3% for the years ended December 31, 20242025 and 2023,2024, respectively. Income(Loss) (loss)income before income tax (benefit) expense was $14,000 for the year ended December 31, 2024 as compared to $(6.71.5) million for the year ended December 31, 2023.2025 as compared to $14,000 for the year ended December 31, 2024. The increaseincome intax thebenefit and effective tax rate for 2024the year ended December 31, 2025 was greater than statutory federal and state rates due primarily to an $812,000 reduction of the deferred tax asset valuation allowance as comparedof toDecember 202331, 2025 resulting from the change in accumulated other comprehensive income during the year ended December 31, 2025. The income tax expense and effective tax rate for the year ended December 31, 2024 was greater than statutory federal and state rates due primarily to the increase in the valuation allowance for all deferred tax assets during the year ended December 31, 2024.

The percent changes to NPV in the +100, +200, +300 and +400 bp changes in interest rates was -10.2%, -22.8%, -34.9% and -46.6%, respectively, at December 31, 2025 versus policy limits of -10.0%, -20.0%, -30.0% and -40.0%, respectively. The percent changes to NPV in the +100, +200, +300 and +400 bp changes in interest rates was -9.8%, -21.2%, -32.0% and -43.6%, respectively, at December 31, 2024 versus policy limits of -20.0%, -30.0% and -40.0%, respectively. The percent changes to NPV in the +200, +300 and +400 bp changes in interest rates was -21.5%, -32.5% and -43.3%, respectively, at December 31, 2023 versus policy limits of-10.0%, -20.0%, -30.0% and -40.0%, respectively. These percent changes were due primarily to the migration of deposits during 20242025 and 20232024 from less interest-sensitive products such as NOW and interest-bearing demand deposits to products with greater interest rate sensitivity, i.e., money market deposits and time deposits. We monitor our exposure to movements in interest rates regularly and discuss the implementation of strategies we believe will mitigate the negative impact of such movements.

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. As of December 31, 20242025 and 2023,2024, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, had an estimated value not exceeding $112.2$107.7 million, or 24.7%22.9% of total deposits, and $102.5$112.2 million, or 25.3%24.7% of total deposits, respectively. For customers requiring full FDIC insurance on certificates of deposit in excess of $250,000, we began offering in late 2023offer the CDARS® program, which allows the Bank to place the certificates of deposit with other participating banks to maximize the customers’ FDIC insurance. We receive a like amount of deposits from other participating financial institutions. In addition, we offer the ICS™ program, an insured deposit “sweep” program for demand deposits which is a product offered by IntraFi Network, LLC, which is also the provider of the CDARS® program. Similarly to the certificates of deposit’s discussed above, the Bank receives a like amount of deposits from other financial institutions and all customer deposits are insured by the FDIC. These “reciprocal” CDARS® and ICS deposits are classified as “brokered” deposits in regulatory reports. The Bank considers these deposits to be “core” in nature. At December 31, 2025, our “reciprocal” CDARS® and ICS deposits were $-0- and $9.1 million, respectively. At December 31, 2024, our “reciprocal” CDARS® and ICS deposits were $-0- and $6.0 million, respectively. At December 31, 2023, our “reciprocal” CDARS® and ICS deposits were $-0- and $1.1 million, respectively.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans and proceeds from sales and maturities of securities. We also rely on borrowings from the FHLB as supplemental sources of funds. At December 31, 20242025 and 2023,2024, we had $52.3 million and $73.0 million outstanding in advances from the FHLB, respectively,FHLB and the ability to borrow an additional $94.0$96.6 million and $71.8$94.0 million, respectively. At December 31, 2024 and 2023, we had an overnight line of credit with the FHLB for up to $3.0 million. Additionally, at December 31, 2024 and 2023, the Bank had a total of $2.0 million and $5.0 million, respectively, of unsecured Fed Funds borrowing lines of credit with correspondent banks. At December 31, 2024 and 2023, there were no outstanding balances under any of these additional credit facilities.

Advances under the BIC, if any, are collateralized by eligible collateral. During December 2024, the Bank unpledged the collateral previously pledged to the BIC - principally general obligation municipal bonds – with the intention of pledging commercial real estate loans. On January 7, 2025, the Bank completed the collateral eligibility process with the FRB whereby the FHLB agreed to subordinate their interest in our commercial real estate loans up to a maximum of $65 million allowing these loans to be pledged to the BIC. The Bank subsequently pledged $65.0 million of its commercial real estate loans to the BIC resulting in $38.5 million of borrowing capacity under this credit facility as of January 16, 2025. AtOn DecemberSeptember 31,9, 2023,2025, the Bank’sFHLB borrowingagreed capacityto wasincrease $50.6the subordination of their interest in our commercial real estate loans up to a maximum of $71.7 million underallowing these loans to be pledged to the BIC and was based upon eligible collateral -principally general obligation municipal bonds. The entire balance of this credit facility was available at December 31, 2023.BIC.

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 $2.9 million$449,000 and $1.9$(2.9) million for the years ended December 31, 20242025 and 2023,2024, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and loan purchases and the purchase of securities available-for-sale, offset by principal collections on loans, proceeds from sales, maturities and principal payments received on securities available-for-sale, was $2.5$9.9 million and $39.5$2.5 million for the years ended December 31, 20242025 and 2023,2024, respectively. Net cash provided by financing activities, consisting primarily of proceeds from the sale of common stock, activity in deposit accounts,accounts and FHLB and FRB advances,advances was $6.5$15.7 million and $39.2$6.5 million for the years ended December 31, 20242025 and 2023,2024, respectively.

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 MarchJune 31,30, 2026 and consolidated results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025. It should be read in conjunction with our unaudited consolidated financial statements and accompanying notes presented elsewhere in this report and with the Company’s audited consolidated financial statements and accompanying notes presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed on March 20, 2026 with the Securities and Exchange Commission (the "SEC") and as amended by the Form 10-K/A filed with the SEC on April 30, 2026. Certain prior year amounts have been reclassified to conform to the current year presentation.

Our critical accounting policies involve the calculation of the allowance for credit losses ("ACL") and the measurement of the fair value of financial instruments. A detailed description of these critical accounting policies can be found in Note 2 of the Company’s consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.2025, as amended.

Comparison of Financial Condition at MarchJune 31,30, 2026 (unaudited) and December 31, 2025

Total Assets. Total assets were $588.8$576.1 million as of MarchJune 31,30, 2026, a decrease of $10.5$23.2 million, or 1.8%,3.9%, compared to total assets of $599.3 million at December 31, 2025. The decrease was due primarily to aan $1.1 million decrease in net loans and a $9.7$18.6 million decrease in securities available-for-sale.available-for-sale and a $7.9 million decrease in cash and due from banks.

Cash and Due From Banks. Cash and due from banks decreased $626,000,$7.9 million, or 4.7%,59.0%, to $12.8$5.5 million at MarchJune 31,30, 2026 from $13.4 million at December 31, 2025. This decrease primarily resulted from ana $11.8$16.6 million decrease in total deposits offset bydeposits, a $1.1$7.5 million decrease in nettotal loansborrowings from the FHLB and a $9.7$2.4 million increase in net loans offset by an $18.6 million decrease in securities available-for-sale and a $1.2 million increase in mortgagors' tax escrow during the threesix months ended MarchJune 31,30, 2026.

Available-for-Sale Securities. Available-for-sale securities decreased by $9.7$18.6 million, or 6.4%,12.2%, to $142.7$133.8 million at MarchJune 31,30, 2026 from $152.4 million at December 31, 2025. This decrease was primarily due primarily to a $1.0$18.4 million increase in net unrealized losses within the portfolio andof proceeds from maturities and principal payments totalingand $8.6 millionmaturities during the threesix months ended MarchJune 31,30, 2026. Management believes that theThe unrealized losses within the portfolio are due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore we recorded no allowance for credit losses on available-for-sale debt securities as of MarchJune 31,30, 2026.

Net Loans. Net loans decreasedincreased $1.1$2.4 million, or 0.3%,0.6%, to $415.0$418.4 million at MarchJune 31,30, 2026 from $416.0 million at December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, we collectedoriginated $1.5$2.1 million of loan principal payments,loans, net of loanprincipal originations,collections, and purchased $297,000 of consumer loans secured by manufactured housing properties. As of MarchJune 31,30, 2026 and December 31, 2025, the portfolio of purchased loans had an outstanding principal balancebalances of $38.3$36.4 million and $37.0 million, respectively, and such loans were performing in accordance with their original repayment terms.terms at each date.

One- to four-family residential mortgage loans decreased $2.4 million,$887,000, or 0.9%,0.3%, to $262.8$264.4 million at MarchJune 31,30, 2026 from $265.2 million at December 31, 2025. Commercial real estate mortgage loans increaseddecreased $211,000,$5.2 million, or 0.3%,6.4%, to $80.8$75.4 million at MarchJune 31,30, 2026 from $80.6 million at December 31, 2025. Multi-family loans decreased $67,000,$619,000, or 1.4%,12.8%, to $4.2 million at June 30, 2026 from $4.8 million at March 31, 2026 and December 31, 2025. Commercial and industrial loans decreasedincreased $1.3$4.3 million, or 5.6%,18.9%, to $21.3$26.8 million at MarchJune 31,30, 2026 from $22.5 million at December 31, 2025. Acquisition, development, and land loans increased $1.6$2.9 million, or 12.2%,22.8%, to $14.4$15.8 million at MarchJune 31,30, 2026 from $12.9 million at December 31, 2025. Home equity loans and lines of credit increased $1.1$2.9 million, or 5.4%,14.1%, to $21.8$23.6 million at MarchJune 31,30, 2026 from $20.7 million at December 31, 2025. Consumer loans decreased $222,000,$1.0 million, or 1.7%,8.1%, to $12.5$11.7 million at MarchJune 31,30, 2026 from $12.7 million at December 31, 2025.

Our strategy to grow the balance sheet continues to be through originations and, to a lesser extent, purchases of commercial loan participations, one- to four-family residential mortgage loans and consumer loans secured by manufactured housing properties, while also diversifying into higher yielding commercial real estate mortgage loans and commercial and industrial loans,loans to improve net interest margin and manage interest rate risk. We also continue to sell selected, conforming 15-year and 30-year residential fixed rate mortgage loans to the secondary market on a servicing retained basis as market conditions allow, providing us a recurring source of revenue from loan servicing income and gains on the sale of such loans.

Our ACL on loans was $3.4 million at MarchJune 31,30, 2026 and December 31, 2025 based upon ASU 2016-13 and its 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, to be presented at the net amount expected to be collected, through an ACL that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires the measurement of all expected credit losses for loans held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, the ASU requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied at prior reporting dates are still permitted, though the inputs to those techniques have changed to reflect the full amount of expected credit losses. We have selected the Weighted Average Remaining Maturity Model (“WARM” or "CECL model"), for the loss calculation of each of our loan pools utilizing a third-party software application. The WARM uses a quarterly loss rate and future expectations of loan balances to calculate an ACL. A loss rate is applied to pool balances over time.

Deposits. Our deposits are generated primarily from residents within our primary market area. We offer a selection of deposit accounts, including non-interest-bearing and interest-bearing checking accounts, savings accounts, money market accounts and time deposits, for both individuals and businesses. As of MarchJune 31,30, 2026 and December 31, 2025, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, was estimated not to exceed $110.0$121.4 million, or 24.0%26.7% of total deposits, and $107.7 million, or 22.9% of total deposits, respectively.

For customers requiring full FDIC insurance on certificates of deposit in excess of $250,000, we offer the CDARS® program, which allows us to place the certificates of deposit with other participating banks to maximize the customers’ FDIC insurance coverage. We receive a like amount of deposits from other participating financial institutions. In addition, we offer the ICS™ program, an insured deposit “sweep” program for demand deposits which is a product offered by IntraFi Network, LLC, which is also the provider of the CDARS® program. Similarly to the certificates of deposit’s discussed above, we receive a like amount of deposits from other financial institutions and all customer deposits are insured by the FDIC. These “reciprocal” CDARS® and ICS deposits are classified as “brokered” deposits in regulatory reports and "core" deposits in our consolidated balance sheet. At MarchJune 31,30, 2026 our “reciprocal” CDARS® and ICS deposits were $-0- and $11.6$10.0 million, respectively. At December 31, 2025, our “reciprocal” CDARS® and ICS deposits were $-0- and $9.1 million, respectively.

Deposits decreased $11.8$16.6 millionmillion, or 3.5%, to $459.0$454.2 million at MarchJune 31,30, 2026 from $470.8 million at December 31, 2025 primarily as a result of a $16.3$26.6 million decrease in retail deposits offset by a $4.5$1.8 million increase in commercial deposits. Core deposits (defined as deposits other than time deposits, including CDARS® and ICS deposits) increased $10.3$6.6 million, or 3.2%,2.1%, to $329.1$325.5 million at MarchJune 31,30, 2026 from $318.8 million at December 31, 2025. As of MarchJune 31,30, 2026, savings deposits decreased $180,000,$2.5 million, money market deposits increased $3.4$9.4 million, NOW and demand depositsdeposit increasedaccounts $7.1decreased million$199,000 and time deposits decreased $22.0$23.2 million. There were $58.7$56.9 million and $69.1 million of brokered deposits included in time deposits at MarchJune 31,30, 2026 and December 31, 2025, respectively, and $21.9$20.2 million of brokered deposits included in savings deposits. The purchase of brokered deposits offered a lower cost alternative to advances of similar duration from the Federal Home Loan Bank. Deposits from related parties totaled $11.0$12.7 million and $10.9 million at MarchJune 31,30, 2026 and December 31, 2025, respectively.

Borrowings. Total borrowings from the FHLB wasdecreased $7.5 million, or 14.3%, to $44.8 million at June 30, 2026 from $52.3 million at March 31, 2026 and December 31, 2025.

Total Stockholders’ Equity. Total stockholders’ equity decreasedincreased $937,000,$263,000, or 1.5%,0.4%, to $62.6$63.8 million at MarchJune 31,30, 2026 from $63.5 million at December 31, 2025. This decreaseincrease was due to primarily to the recognition of $533,000 of previously unearned compensation offset by a net loss of $508,000$259,000 for the threesix months ended MarchJune 31,30, 2026 and $715,000 other comprehensive loss related to net changes in unrealized holding losses in the available-for-sale securities portfolio as a result of decreases in market interest rates during the three months ended March 31, 2026, partially offset by the recognition of $286,000 of previously unearned compensation.2026.

Comparison of Operating Results for the Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

Net Loss.Income (Loss). Net lossincome was $508,000$249,000 for the three months ended MarchJune 31,30, 2026, compared to a net loss of $603,000$545,000 for the three months ended MarchJune 31,30, 2025, aan decreaseincrease of $95,000,$794,000, or 15.8%.145.8%. The decreaseincrease was due primarily to ana $256,000 increase in net interest and dividend incomeincome, aftera release$242,000 ofdecrease creditin lossesnon-interest of $343,000expense and ana increase$239,000 in total non-interest income of $61,000 offset by an increasedecrease in income tax expense of $302,000 during the three months ended MarchJune 31,30, 2026 compared to the three months ended March 31, 2025.2026.

Interest and Dividend Income. Total interest and dividend income increaseddecreased $35,000,$304,000, or 0.5%, to $6.5 million for the three months ended March 31, 2026 compared4.5%, to $6.4 million for the three months ended MarchJune 31,30, 2026 compared to $6.7 million for the three months ended June 30, 2025. This increasedecrease was due to a $199,000$58,000 increasedecrease in interest and dividend income on investments offset byand a $164,000$246,000 decrease in interest and fees on loans.

Average interest-earning assets increaseddecreased $3.7$21.7 million,million to $574.7$562.0 million for the three months ended MarchJune 31,30, 2026 from $571.0$583.8 million for the three months ended MarchJune 31,30, 2025. The weighted average annualized yield on interest earning-assets decreased to 4.50%4.57% for the three months ended MarchJune 31,30, 2026 from 4.51%4.61% for the three months ended MarchJune 31,30, 2025. The weighted average annualized yield for the loan portfolio increased to 4.66%4.71% for the three months ended MarchJune 31,30, 2026 from 4.57%4.68% for the three months ended MarchJune 31,30, 2025 due primarily to an increase in market loan interest rates.2025. The weighted average annualized yield for all other interest-earning assets decreased to 4.09%4.17% for the three months ended MarchJune 31,30, 2026 from 4.28%4.38% for the three months ended MarchJune 31,30, 2025 due primarily to a decrease in market investment interest rates.

Interest Expense. Total interest expense decreased $300,000,$560,000, or 9.2%,17.0%, to $3.0$2.7 million for the three months ended MarchJune 31,30, 2026 from $3.3 million for the three months ended MarchJune 31,30, 2025. Interest expense on deposits decreased $255,000,$381,000, or 9.8%,14.7%, to $2.3$2.2 million for the three months ended MarchJune 31,30, 2026 from $2.6 million for the three months ended MarchJune 31,30, 2025. The average balance of interest-bearing deposits decreased $992,000,$17.9 million, or 0.3%,4.5%, to $391.4$381.7 million for the three months ended MarchJune 31,30, 2026 from $392.4$399.6 million for the three months ended MarchJune 31,30, 2025 primarily as a result of a decrease in the average balancesbalance of money market deposits, savings deposits and time deposits offset by an increase in the average balances of NOW and demand and money market deposits. The weighted average annualized rate of interest-bearing deposits decreased to 2.39%2.32% for the three months ended MarchJune 31,30, 2026 from 2.65%2.60% for the three months ended MarchJune 31,30, 2025 primarily as a result of a decrease in market interest rates.

Interest expense on borrowings decreased $45,000,$179,000 to $518,000, or 6.9%, to $609,00025.7%, for the three months ended MarchJune 31,30, 2026 from $654,000$697,000 for the three months ended MarchJune 31,30, 2025.2025 primarily due to a decrease in the average balance of borrowings and a decrease in market interest rates. The average balance of borrowings decreased $3.2$12.3 million, or 5.6%,20.5%, to $53.8$47.8 million for the three months ended MarchJune 31,30, 2026 from $57.0$60.2 million for the three months ended MarchJune 31,30, 2025. The weighted average annualized rate of borrowings decreased to 4.53%4.33% for the three months ended MarchJune 31,30, 2026 from 4.59%4.64% for the three months ended MarchJune 31,30, 2025 as a result of a decrease in market interest rates.2025.

Net Interest and Dividend Income. Net interest and dividend income increased $335,000,$256,000, or 10.5%,7.5%, to $3.5$3.7 million for the three months ended MarchJune 31,30, 2026 from $3.2$3.4 million for the three months ended MarchJune 31,30, 2025. This increase was due to ana increasedecrease of $3.7$30.3 million, or 0.6%, in the average balance of interest-earning assets, consisting primarily of an increase in the average balance of taxable debt securities offset by a decrease in the average balance of interest-earning loans, during the three months ended March 31, 2026 and a $4.1 million, or 0.9%, decrease6.6%, in the average balance of interest-bearing liabilities, consisting primarily of decreases in the average balances of interest-bearing deposits and borrowings.borrowings offset by a decrease of $21.7 million, or 3.7%, in the average balance of interest-earning assets during the three months ended June 30, 2026. The decrease in the average balance of interest-earning assets consisted primarily of a decrease in the average balance of loans offset by an increase in the average balances of taxable and non-taxable debt securities. Annualized net interest margin increased to 2.45%2.62% for the three months ended MarchJune 31,30, 2026 from 2.23%2.35% for the three months ended MarchJune 31,30, 2025 due primarily to an increase in net interest income.income and a decrease in the average balance of interest-earning assets.

Provision (Release) offor Credit Losses. Based on management’s analysis of the ACL, ana $(8,0006,000) release of credit losses was recorded for the three months ended MarchJune 31,30, 2026, compared to a $-0-$47,000 releaseprovision offor credit losses for the three months ended MarchJune 31,30, 2025. The release of credit losses for the three months ended MarchJune 31,30, 2026 consisted of a $-0- provision for credit losses on loans and an $(8,000) release of credit losses on off-balance sheet credit exposures. The release of credit losses for the three months ended March 31, 2025 consisted of $30,000 provision for credit losses on loans and a $(30,0006,000) release of credit losses onfor off-balance sheet credit exposures. The provision for credit losses for the three months ended June 30, 2025 consisted of a $-0- provision for credit losses on loans and a $47,000 provision for credit losses for off-balance sheet credit exposures.

Non-Interest Income. Non-interest income increased $61,000,$4,000, or 17.4%,0.89%, to $412,000$455,000 for the three months ended MarchJune 31,30, 2026 compared to $351,000$451,000 for the three months ended MarchJune 31,30, 2025. The increase in non-interest income during the three months ended March 31, 2026 was due primarily to an increase in customer service fees.

Non-Interest Expense. Non-interest expense increaseddecreased $7,000,$242,000, or 0.2%,5.6%, to $4.2$4.1 million for the three months ended MarchJune 31,30, 2026 andfrom March$4.4 31,million for the three months ended June 30, 2025. The increasedecrease was primarily due to a $73,000$97,000 decrease in professional fees and assessments, an $83,000 decrease in data processing, a $48,000 decrease in equity compensation expense and a $30,000 decrease in marketing offset by a $57,000 increase in salaries and employee benefits and a $57,000 increase in occupancy expense offset by a $19,000 decrease in director compensation, a $28,000 decrease in employee travel and education expenses and a $55,000 decrease in professional fees and assessment.benefits. The increase in salaries and employee benefits was due to normal salary increases.

Income Taxes. Income tax (benefit) expense increaseddecreased $302,000$239,000 to an income tax expense of $273,000 for the three months ended March 31, 2026 from an income tax benefit of $(29,000227,000) for the three months ended MarchJune 31,30, 2025.2026 Thefrom effective tax rate was (116.2)% and 4.6%$12,000 for the three months ended MarchJune 31,30, 20262025. andIncome 2025,(loss) respectively. Lossincome before income tax expense (benefit) expense was $22,000 for the three months ended June 30, 2026 as compared to $(235,000533,000) for the three months ended MarchJune 31,30, 20262025. asThe comparedincome totax $(632,000)benefit for the three months ended MarchJune 31, 2025. The income tax expense and effective tax rate for the three months ended March 31,30, 2026 was greater than statutory federal and state rates due primarily to a $392,000decrease in the deferred tax asset valuation allowance during the three months ended June 30, 2026. The income tax expense for the three months ended June 30, 2025 was less than statutory federal and state rates due primarily to an increase in the deferred tax asset valuation allowance during the three months ended MarchJune 31, 2026. The income tax benefit and effective tax rate for the three months ended March 31, 2025 was less than statutory federal and state rates due primarily to a $120,000 increase in the deferred tax asset valuation allowance during the three months ended March 31,30, 2025. Net deferred tax assets of $7.1$6.9 million and $7.0$7.2 million as of MarchJune 31,30, 2026 and 2025, respectively, were reduced by a 100% valuation allowance because management believes that it is more likely than not that the benefit of these deferred tax assets will not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of future taxable income. The valuation allowance for these net deferred tax assets may be adjusted in the future if estimates of taxable income during the carryforward period are increased.

(4) Net deferred fee expense included in loan interest totaled $(122,000)$157,000 and $(141,000)$100,000 for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

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. As of MarchJune 31,30, 2026 and December 31, 2025, the aggregate amount of uninsured total deposit balances, which is the portion exceeding the $250,000 FDIC insurance limit, washad an estimated value not exceeding $110.0$121.4 million, or 24.0%26.7% of total deposits, and $107.7 million, or 22.9% of total deposits, respectively. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loanssecurities and proceeds from sales and maturities of securities. We also rely on borrowings from the FHLB and FRB as supplemental sources of funds. At MarchJune 31,30, 2026 and December 31, 2025, we had $44.8 million and $52.3 million outstanding in advances from the FHLBFHLB, respectively, and the ability to borrow an additional $94.4$98.2 million and $96.6 million, respectively.

At MarchJune 31,30, 2026 and December 31, 2025, the Bank had an overnight line of credit with the FHLB for up to $3.0 million. The Bank has a secured credit facility with the FRB – BIC Program. The Bank’s unused available borrowing capacity at the FRB was $37.3$36.7 million and $34.1 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. Additionally, at MarchJune 31,30, 2026 and December 31, 2025, the Bank had a $2.0 million unsecured Fed Funds borrowing line of credit with a correspondent bank. At MarchJune 31,30, 2026 and December 31, 2025, there were no outstanding balances under any of these additional credit facilities.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities and financing activities. Net cash provided by operating activities was $547,000$332,000 and $573,000$422,000 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Net cash provided (used) by investing activities, which consists primarily of loan principal collections, net of disbursements for loan originations,originations and purchases and the purchase of securities available-for-sale, offset by principal collections on loans and proceeds from the sale, maturity and principal payments on securities available-for-sale, net of securities available-for-sale purchases, was $9.4$16.1 million and $(13.3$24.7) million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Net cash (used) provided by financing activities, consisting primarily of activity in deposit accounts and FHLB advances offset by treasury stock purchases, was $(10.624.3) million and $11.8$23.9 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily. We anticipate that we will have sufficient funds to meet our current funding commitments. We have no material commitments for capital expenditures as of MarchJune 31,30, 2026. Our current strategy is to increase core deposits and utilize FHLB advances, as well as brokered deposits,advances to fund loan growth.

First Seacoast Bancorp, Inc. 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 and to fund repurchases of shares of common stock. 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 MarchJune 31,30, 2026, the Company (on an unconsolidated basis) had liquid assets of $16.5$16.4 million.

At MarchJune 31,30, 2026, First Seacoast Bank exceeded all its regulatory capital requirements. See Note 12 of the unaudited consolidated financial statements appearing under Item 1 of this quarterly report. Management is not aware of any conditions or events that would change First Seacoast Bank’s categorization as well-capitalized.