First Seacoast Bank Completes Sale-Leaseback Transaction with MountainSeed Real Estate Services, LLC

Rhea-AI Summary

First Seacoast Bank (FSEA) has completed its sale-leaseback transaction with MountainSeed Real Estate Services as of June 11, 2024. The bank sold four office properties in Dover, NH to MountainSeed for approximately $7.5 million and entered into a 15-year leaseback agreement with an option to extend for an additional 15 years. This transaction aims to convert non-earning assets into cash for investment, enhancing shareholder value and providing balance sheet flexibility. Despite the sale, First Seacoast Bank will continue to operate from these properties and maintain its market presence.

Positive

• Sale of properties generated approximately $7.5 million.
• Converts non-earning assets into cash available for investment.
• Provides balance sheet flexibility.
• Initial 15-year lease term with an option to extend for another 15 years.
• Bank continues to operate from the same locations, maintaining market presence.

Negative

• Potential long-term lease obligations under the new agreement.
• Dependency on leasing properties that were previously owned.
• Possible future cost implications due to leasing instead of owning.

Insights

Financial Analyst

First Seacoast Bank's sale-leaseback transaction signifies a strategic move to convert non-earning assets into liquid cash. This approach can provide the institution with greater financial flexibility and immediate capital, potentially aiding in various investment and growth opportunities. By selling their properties for $7.5 million and leasing them back, the bank unlocks capital that was previously tied up in real estate.

The 15-year lease agreement, with an option to extend for another 15 years, ensures stability in their operations without any immediate risk of having to relocate. This long-term lease also suggests a commitment to maintaining their current operational footprint, alleviating concerns about potential disruptions in service or market presence.

The direct infusion of cash can be strategically redeployed into higher-yielding investments or to strengthen the bank's balance sheet. This is particularly relevant in the current financial landscape where liquidity and balance sheet management are critical. From an investor's perspective, this transaction indicates a proactive approach by the management to enhance shareholder value.

However, it's important to consider the ongoing lease obligations that will now appear on the bank's financial statements as operating expenses. This shift could impact the bank's cost structure and profitability metrics, which retail investors should monitor closely over the coming quarters.

Real Estate Analyst

The sale-leaseback strategy employed by First Seacoast Bank taps into the real estate market to bolster liquidity without losing control over their physical operations. This financial maneuver allows the bank to retain use of its office locations while transferring the ownership risk to MountainSeed Real Estate Services.

Such transactions are particularly advantageous in a robust real estate market where properties can fetch high values. By selling four properties for $7.5 million, First Seacoast Bank capitalizes on current market conditions, potentially achieving a valuation that reflects the high demand for commercial properties.

For investors, this move underscores an innovative use of real estate assets to support the bank's strategic goals. However, the long-term financial implications, including lease payment obligations and potential market value fluctuations, need to be balanced against the immediate liquidity benefits.

This decision may also reflect a broader trend among banks to leverage their real estate holdings as a financial tool, turning fixed assets into flexible capital—a concept that aligns well with modern financial strategies.

DOVER, N.H. & ATLANTA--(BUSINESS WIRE)-- Effective June 11, 2024, First Seacoast Bank, the wholly-owned subsidiary of First Seacoast Bancorp, Inc. (Nasdaq: "FSEA"), completed its previously announced sale-leaseback transaction with MountainSeed Real Estate Services, LLC, a Georgia limited liability company ("MountainSeed"). Under the terms of the deal, First Seacoast Bank sold to MountainSeed four properties owned and operated by First Seacoast Bank as bank office locations (the “Properties”) for an aggregate purchase price of approximately $7.5 million, including customary closing adjustments. The Properties are located in the immediate vicinity of Dover, New Hampshire, where First Seacoast Bank is headquartered.

In tandem with the sale of the Properties to MountainSeed, First Seacoast Bank also entered into a master lease agreement (the "Lease Agreement") with MountainSeed under which First Seacoast Bank will lease all four Properties. The Lease Agreement has an initial term of 15 years with a bank-option for an additional 15-year term. First Seacoast Bank’s obligations under the Lease Agreement are guaranteed by First Seacoast Bancorp, Inc. First Seacoast Bank continues to operate as usual and has not closed any offices or exited any markets as part of the sale-leaseback transaction.

“This sale-leaseback transaction is a unique opportunity to enhance shareholder value as we convert non-earning assets to cash available for investment and provides balance sheet flexibility in support of our long-term strategic objectives,” noted James R. Brannen, President and Chief Executive Officer at First Seacoast Bancorp, Inc.

About MountainSeed: MountainSeed acts as a beacon of trust and innovation in the real estate and banking industries, serving as a partner to over 600 community banks and credit unions across 50 states. MountainSeed has become the most active acquirer of bank branches through sale-leaseback transactions. In addition, the company processes over $5 Billion commercial real estate transactions monthly, offering expertise to clients in the commercial real estate and lending industries. Their tech-enabled business provides clients access to a marketplace of products, services, and real estate data.

About First Seacoast Bancorp, Inc.: First Seacoast Bancorp, Inc. operates as the holding company for First Seacoast Bank that provides commercial and consumer banking services for individuals and businesses. First Seacoast Bank is a federally-chartered stock savings bank serving the financial needs of residents of the Seacoast region of New Hampshire. Founded in 1980, the Bank operates four full-service offices in Strafford County, New Hampshire, and one full-service office in Rockingham County, New Hampshire.

Forward-Looking Statements

This press release contains certain forward-looking statements. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include changes in economic conditions, changes in market interest rates, among other factors.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240617802060/en/

For further information or inquiries, please contact:

Patrick Roberts, Chief Revenue Officer, MountainSeed

- Email: proberts@mountainseed.com

- Phone: (404) 710-9642

James R. Brannen, President and Chief Executive Officer, First Seacoast Bancorp, Inc.

- Email: jbrannen@firstseacoastbank.com

- Phone: (603) 742-4680

Source: First Seacoast Bank

FAQ

What is the significance of First Seacoast Bank's sale-leaseback transaction?

The transaction allows First Seacoast Bank to convert non-earning assets into cash, enhancing shareholder value and providing balance sheet flexibility.

How much did First Seacoast Bank sell its properties for?

First Seacoast Bank sold its properties for approximately $7.5 million.

What are the terms of the leaseback agreement between First Seacoast Bank and MountainSeed?

The leaseback agreement has an initial 15-year term with an option to extend for an additional 15 years.

Will First Seacoast Bank close any offices as part of the sale-leaseback transaction?

No, First Seacoast Bank will continue to operate from the same locations and has not closed any offices.

What is the impact of the sale-leaseback transaction on First Seacoast Bank's operations?

The bank will maintain its market presence while converting non-earning assets into cash, which provides balance sheet flexibility.