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Sound Financial Bancorp, Inc.
2400 3rd Avenue
Suite 150
Seattle, WA 98121
(206) 448-0884

Transfer Agent
Broadridge Corporate Issuer Solutions, Inc.
1717 Arch Street, Suite 1300
Philadelphia, PA 19103

Shareholder Inquiries:
1-877-830-4936
Fax: (215) 553-5402
E-mail: shareholder@broadridge.com

Sound Financial Bancorp, Inc. Reports Net income of $1.0 million for First Quarter 2020

Board Declares Quarterly Cash Dividend of $0.15 per share

Company Release - 4/27/2020 4:15 PM ET

SEATTLE, April 27, 2020 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (Nasdaq: SFBC), the holding company (the "Company") for Sound Community Bank (the "Bank"), today reported net income of $1.0 million for the quarter ended March 31, 2020, or $0.38 diluted earnings per share, as compared to net income of $1.9 million, or $0.72 diluted earnings per share for the quarter ended December 31, 2019 and $1.4 million, or $0.56 diluted earnings per share for the quarter ended March 31, 2019.

The Company also announced today that the Board of Directors has declared a cash dividend on Company common stock of $0.15 per share, payable on May 22, 2020 to stockholders of record as of the close of business on May 8, 2020.

"I wish to thank our employees across the Company for their unyielding dedication during this difficult time. The economic impacts of the COVID-19 pandemic cause financial hardship for many in this country. During the first quarter, Sound Community Bank actively engaged in response to the COVID-19 pandemic. All branches remain open to serve clients and communities with reduced lobby hours, and extended drive-up hours in select markets. Clients also significantly increased use of electronic services with an Online Banking sign-in increase of 20% and an online deposit increase of 12% compared to the first quarter of last year. The initiatives we implemented for our community, clients and employees are summarized below. We manage this company with long-term success in mind, supported by our strong balance sheet, diverse book of businesses, and culture. I have no doubt we will emerge stronger on the other side of the pandemic, remaining a reliable partner to clients in helping them achieve their financial goals." Laurie Stewart, President and CEO, Sound Community Bancorp, Inc. & Sound Community Bank.

 
Q1 2020 | COVID-19 Response Spotlight
Community Businesses Consumers Employees
Affirmed Q1 philanthropic commitments during pandemic & continued funding sponsorship &
donation requests from the nonprofit community
 Made 32 commercial loans Q1 2020 totaling $46MM supporting local businesses Branches remained open during COVID-19 pandemic, with reduced lobby hours and social distancing queues in place; some drive up hours extended All back-office, non-frontline staff were set up to work remotely during pandemic
       
Upheld Employee Charitable Match Program Made SBA Paycheck Protection Program loans: 300+ processed applications totaling $49M, $6M of which went to nonprofits, saving 4,453 jobs; 200+ applications remain in pipeline Promoted transactions via mobile & digital channels including transactions at Interactive Teller Machines Made up to $350 special payment to eligible employees
       
Quickly implemented enhanced technology allowing & promoting electronic applications & transactions, respecting social distancing mandates Assisted clients and non-clients alike, illustrating our ability to remain nimble & assist the business community when other banks could not Waived or reduced certain fees Employees were not furloughed; extended expanded time off benefits for COVID-19 related issues
       
Held employee-led, Bank-matched fundraising for area’s largest hunger relief program - Food Lifeline   Continued lending responsibly to qualified consumers Deployed multitude of employee resources to cope with COVID-19 pandemic
       
    Created unique email address and telephone hotline for clients to obtain loan assistance Reduced lobby hours and traffic to mitigate associated health risks
       

Highlights for the quarter ended March 31, 2020 include:

  • Loans held-for-portfolio increased 0.9% to $625.4 million at March 31, 2020, from $619.9 million at December 31, 2019 and increased 7.0% from $584.5 million at March 31, 2019.
  • Total deposits increased 2.9% to $634.6 million at March 31, 2020, from $616.7 million at December 31, 2019 and increased 8.7% from $583.7 million at March 31, 2019. Noninterest-bearing deposits increased $12.8 million, or 13.2% compared to December 31, 2019 and increased $11.5 million, or 11.6% compared to March 31, 2019;
  • Total borrowings remained unchanged at March 31, 2020, from $7.5 million at December 31, 2019, and decreased $17.5 million, or 70.0% from $25.0 million at March 31, 2019.
  • Total assets increased $17.7 million, or 2.5% to $737.6 million at March 31, 2020, from $719.9 million at December 31, 2019, and increased $40.0 million or, 5.7% from $697.6 million at March 31, 2019.
  • Net interest income decreased 5.3% to $6.7 million for the quarter ended March 31, 2020, from $7.1 million for the quarter ended December 31, 2019 and decreased 3.7%, from $7.0 million for the quarter ended March 31, 2019.
  • Net interest margin (NIM) was 3.96% for the quarter ended March 31, 2020, compared to 4.11% for the quarter ended December 31, 2019 and 4.13% for the quarter ended March 31, 2019.
  • Provision for loan losses was $250,000 for the quarter ended March 31, 2020, compared to $25,000 for the quarter ended December 31, 2019 and a recapture from the allowance for loan losses of $200,000 for the quarter ended March 31, 2019.

The Bank continued to maintain capital levels in excess of the regulatory requirements and was categorized as "well-capitalized" at March 31, 2020.

Operating Results

Net interest income decreased $377,000, or 5.3%, to $6.7 million during the quarter ended March 31, 2020, compared to $7.1 million during the quarter ended December 31, 2019 and decreased $261,000, or 3.7%, from $7.0 million during the quarter ended March 31, 2019. The decrease from the prior quarter was primarily a result of a lower average balance of and yield earned on loans. The decrease from the comparable period one year ago was primarily a result of an increase in interest expense due to higher average balances of and rates paid on deposits and a decrease in interest income on investments due to lower yields, partially offset by increased interest income on loans and decreased interest expense paid on borrowings. Net interest income has been significantly impacted by decreases in the targeted Federal Funds Rate since July 2019, including the 150 basis point decrease in March 2020 in response to the COVID-19 pandemic.

Interest income decreased $484,000, or 5.3%, to $8.6 million during the quarter ended March 31, 2020, compared to $9.1 million during the quarter ended December 31, 2019 and decreased $127,000, or 1.4%, compared to $8.8 million during the quarter ended March 31, 2019. Interest income on loans decreased $451,000, or 5.1%, to $8.4 million for the quarter ended March 31, 2020, compared to $8.9 million for the quarter ended December 31, 2019, due to lower average loan balances and yields. Interest income on loans increased $49,000, or 0.6%, compared to $8.4 million for the quarter ended March 31, 2019, due to higher average loan balances. The average loans held-for-portfolio balance was $621.8 million for the quarter ended March 31, 2020, compared to $623.1 million for the quarter ended December 31, 2019 and $612.1 million for the quarter ended March 31, 2019. The average yield on loans held-for-portfolio was 5.43% for the quarter ended March 31, 2020, compared to 5.64% for the quarter ended December 31, 2019 and 5.54% for the quarter ended March 31, 2019. Interest income on the investment portfolio decreased $33,000, or 12.2%, to $238,000 during the quarter ended March 31, 2020, compared to $271,000 during the quarter ended December 31, 2019, and decreased $176,000, or 42.5%, compared to $414,000 during the quarter ended March 31, 2019. The decrease in the interest income on investment securities compared to the prior quarter was due to lower average yields. The decrease compared to the same quarter one year ago was due to lower average investment balance and yields compared to March 31, 2019.

Interest expense decreased $107,000, or 5.3%, to $1.9 million for the quarter ended March 31, 2020, compared to $2.0 million for the quarter ended December 31, 2019 and increased $134,000, or 7.5%, compared to $1.8 million for the quarter ended March 31, 2019. The decrease from the prior quarter was a result of lower weighted-average cost of deposits and borrowings. The weighted average cost of deposit decreased to 1.20% for the quarter ended March 31, 2020, down four basis points from 1.24% for the quarter ended December 31, 2019, reflecting in part the increase in noninterest-bearing deposits. Interest expense increased from the comparable period a year ago was as a result of both a higher weighted-average cost and balance of deposits, partially offset by a decrease in the average balance of Federal Home Loan Bank ("FHLB") borrowings. Interest expense on deposits increased $393,000, or 26.8%, to $1.9 million for the quarter ended March 31, 2020, compared to a year ago, driven by an increase of $39.8 million, or 8.3%, in the average balance of interest-bearing deposits to $519.3 million, and a 18 basis point increase in the weighted average rate paid on interest-bearing deposits to 1.20% for the quarter ended March 31, 2020, from 1.02% for the quarter ended March 31, 2019. Interest expense on FHLB borrowings decreased $259,000, or 81.4%, to $59,000 for the quarter ended March 31, 2020, compared to the prior year, due to a $46.3 million, or 85.6% decrease in the average balance of FHLB borrowings to $7.8 million, from $54.1 million for the quarter ended March 31, 2019.

Net interest margin was 3.96% for the quarter ended March 31, 2020, compared to 4.11% for the quarter ended December 31, 2019 and 4.13% for the quarter ended March 31, 2019. The decrease compared to a year ago period was primarily due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities.

The Company recorded a provision for loan losses of $250,000 for the quarter ended March 31, 2020, compared to a provision for loan losses of $25,000 for the quarter ended December 31, 2019 and a recapture from the allowance for loan losses of $200,000 for the quarter ended March 31, 2019. The increase in the provision is related to uncertainty as a result of the COVID-19 pandemic.

Noninterest income decreased $149,000, or 17.4%, to $709,000 for the quarter ended March 31, 2020, compared to $858,000 for the quarter ended December 31, 2019 and decreased $299,000, or 29.7%, from $1.0 million for the quarter ended March 31, 2019. The decrease from the sequential quarter was primarily due to a decrease in the mark-to-market adjustment on fair value of mortgage servicing rights, partially offset by an increase in gain on sale of loans reflecting increased refinancing activity as a result of the lower interest rate environment. The decrease from the same period a year ago was primarily due to decrease in gain on sale of loans.

Noninterest expense increased $307,000, or 5.4%, to $5.9 million for the quarter ended March 31, 2020, compared to $5.6 million for the quarter ended December 31, 2019 and decreased $449,000, or 7.0%, from $6.4 million for the quarter ended March 31, 2019. The increase from the quarter ended December 31, 2019 was primarily a result of increases in salaries and benefits expense of $201,000 and regulatory assessment expense of $149,000 during the quarter. The increase in salaries and benefits was primarily attributed to higher stock compensation expense related to the vesting of stock awards during the quarter ended March 31, 2020 and an adjustment of 2019 bonuses due to an under accrual in 2019. Regulatory assessments increased to normal levels as the Bank utilized all of its remaining regulatory assessment credits last quarter and due to state examination expense paid during the quarter ended March 31, 2020.

The $449,000 decrease in noninterest expense compared to the quarter ended March 31, 2019 was primarily due to decreases of $404,000 in salaries and benefits and $240,000 operations expense, partially offset by a $137,000 increase in regulatory assessments expense. Salaries and benefits expense decreased due to higher deferred salaries and lower medical expenses. Operations expense decreased due to a $216,000 decrease in professional and consulting fees and $100,000 of operational losses from wire fraud recognized in the quarter ended March 31, 2019.

The efficiency ratio for the quarter ended March 31, 2020 was 79.95%, compared to 70.82% for the quarter ended December 31, 2019 and 79.97% for the year ended March 31, 2019. The weakening of the efficiency ratio compared to the prior quarter was primarily due to lower interest income and noninterest income, combined with higher noninterest expense.

Balance Sheet Review, Capital Management and Credit Quality

Total assets at March 31, 2020 were $737.6 million, compared to $719.9 million at December 31, 2019 and $697.6 million at March 31, 2019. The increase in assets from the sequential quarter was primarily due to a higher balances of loans held-for-portfolio and held-for-sale, cash and cash equivalents, and available-for-sale securities. The increase from one year ago was primarily a result of a higher balances in loans held-for-portfolio and held-for-sale, and available-for-sale securities, partially offset by a decrease in cash and cash equivalents.

Cash and cash equivalents increased $6.2 million, or 11.2%, to $62.0 million at March 31, 2020, compared to $55.8 million at December 31, 2019, and decreased $10.5 million, or 14.5%, compared to $72.5 million at March 31, 2019. The decrease from a year ago, combined with our deposit growth was primarily utilized to fund higher loan originations, purchases of available-for-sale securities and reduce FHLB borrowings.

Available-for-sale securities totaled $11.2 million at March 31, 2020, compared to $9.3 million at December 31, 2019, and $5.0 million at March 31, 2019.

Loans held-for-portfolio increased to $625.4 million at March 31, 2020, compared to $619.9 million at December 31, 2019 and increased from $584.5 million at March 31, 2019. The largest increases in the loan portfolio compared to the prior quarter were in commercial and multifamily real estate loans and in consumer loans, consisting of manufactured homes, floating homes, and other consumer loans, partially offset by decreases in one-to-four family, home equity, construction and land, and commercial business loans. Commercial and multifamily real estate loans increased $18.8 million, or 7.2%, to $280.0 million, and consumer loans increased $4.4 million, or 6.1%, to $77.1 million, with the largest increase in consumer loans coming from loans for floating homes, which increased $3.0 million, or 6.9%, to $46.8 million. These increases were partially offset by decreases of $8.9 million in one-to-four family loans, $2.9 million in home equity loans, $3.7 million in construction and land loans and $2.4 million in commercial business loans. The largest increases in the loan portfolio compared to the year ago quarter were in commercial and multifamily real estate, consumer, construction and land, and commercial business loans. Commercial and multifamily real estate loans increased $34.5 million, or 14.1%, to $280.0 million, construction and land loans increased $5.6 million, or 8.5%, to $72.0 million, commercial business loans increased $4.5 million, or 14.1%, to $36.6 million, and consumer loans increased $10.5 million, or 15.7%, to $77.1 million, with the largest increase in consumer loans coming from loans for floating homes, which increased $7.8 million, or 20.0%. These year-over-year increases were partially offset by decreases in one-to-four family loans, which decreased $10.9 million, or 7.2%, to $140.5 million and home equity loans, which decreased $3.5 million, or 14.2%, to $21.0 million. At March 31, 2020, commercial and multifamily real estate loans accounted for approximately 44.6% of total loans, one-to-four family loans, including home equity loans accounted for approximately 25.7% of total loans, and consumer loans accounted for approximately 12.3% of total loans. Construction and land loans accounted for approximately 11.5% of total loans and commercial business loans accounted for approximately 5.8% of total loans at March 31, 2020.

Deposits increased $17.8 million, or 2.9%, to $634.6 million at March 31, 2020, compared to $616.7 million at December 31, 2019 and increased $50.9 million, or 8.7%, compared to $583.7 million at March 31, 2019. The increase in deposits compared to the prior quarter and a year ago was due primarily to increases in all deposit products other than certificates of deposit, as a result of our effort to grow retail non-time deposits. Certificates of deposits decreased $7.2 million, or 2.9% to $244.2 million at March 31, 2020, from $251.4 million at December 31, 2019 and increased $16.9 million, or 7.4% from $227.3 million at March 31, 2019. We continue our efforts to increase noninterest-bearing deposits, which increased $12.8 million, or 13.2% to $110.1 million at March 31, 2020, compared to $97.3 million at December 31, 2019 and increased $11.5 million, or 11.6% from $98.6 million at March 31, 2019. FHLB borrowings remained unchanged at March 31, 2020, from $7.5 million at December 31, 2019, and decreased $17.5 million, or 70.0% compared to $25.0 million at March 31, 2019.

Nonperforming assets ("NPAs"), which are comprised of nonaccrual loans, nonperforming troubled debt restructurings ("TDRs"), other real estate owned ("OREO") and other repossessed assets decreased $403,000, or 7.7%, to $4.8 million at March 31, 2020, from $5.2 million at December 31, 2019 and increased $1.2 million, or 32.2% from $3.7 million at March 31, 2019. NPAs to total assets were 0.65%, 0.73% and 0.52% at March 31, 2020, December 31, 2019 and March 31, 2019, respectively.

In response to the current global situation surrounding the COVID-19 pandemic, the Company is offering a variety of relief options designed to support our clients and communities, including participating in the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”).  As of April 20, 2020, we had approved PPP applications totaling $49.0 million to approximately 300 borrowers.

Many of the PPP applications have been from our existing clients but we are also serving those in our community who have not had a banking relationship with us in the past.

In addition, we have received and continue to receive numerous inquiries and requests from borrowers for some type of payment relief. We are providing payment relief for both consumer and business clients. As of quarter end at March 31, 2020, 27 consumer loans including first mortgages were modified predominantly with payment deferrals for 90 days. In addition, we began modifications with 25 commercial borrowers, most of which involve interest only or payment deferrals for 90 days. None of these commercial modifications were completed as of the quarter ended March 31, 2020. We believe the steps we are taking are necessary to effectively manage our portfolio and assist our clients through the ongoing uncertainty surrounding the duration, impact and government response to the COVID-19 pandemic.

The following table summarizes our NPAs (dollars in thousands, unaudited):

 March 31, 2020 December 31, 2019 March 31, 2019
 Balance % of Total Balance % of Total Balance % of Total
Nonperforming Loans:           
One-to-four family$524  10.9% $2,090  39.9% $1,041  28.5%
Home equity loans384  7.9  261  5.0  321  8.8 
Commercial and multifamily2,072  42.9  353  6.7  353  9.7 
Construction and land285  5.9  1,177  22.5  83  2.3 
Manufactured homes353  7.3  226  4.3  231  6.3 
Floating homes435  9.0  290  5.5     
Commercial business201  4.2  260  5.0  555  15.2 
Total nonperforming loans4,254  88.1  4,657  89.0  2,584  70.8 
OREO and Other Repossessed Assets:           
One-to-four family        494  13.5 
Commercial and multifamily575  11.9  575  11.0  575  15.7 
Total OREO and repossessed assets575  11.9  575  11.0  1,069  29.2 
Total nonperforming assets$4,829  100% $5,232  100.0% $3,653  100%
                     

The following table summarizes the allowance for loan losses (dollars in thousands, unaudited):

 For the Quarter Ended:
 March 31, 2020 December 31, 2019 March 31, 2019
Allowance for Loan Losses     
Balance at beginning of period$5,640  $5,618   $5,774  
Provision (recapture) for loan losses during the period250  25   (200) 
Net recoveries (charge-offs) during the period3  (3)  3  
Balance at end of period$5,893  $5,640   $5,577  
Allowance for loan losses to total loans0.93% 0.91 % 0.95 %
Allowance for loan losses to total nonperforming loans138.53% 118.69 % 215.83 %
           

The increase in the allowance for loan losses for the current quarter ended March 31, 2020, compared to the prior quarter and the comparable quarter a year ago is related to uncertainty as a result of the COVID-19 pandemic and increases in the loan portfolio. The hospitality industry is one area of the economy that is being extremely hard hit during this pandemic. Our direct exposure to the hospitality industry, which includes food and beverage, lodging and recreation, was comprised of 16 loans to unrelated borrowers totaling $7.6 million and indirect exposure was $12.0 million at March 31, 2020. All these loans are secured by the underlying collateral and were originated with loan-to-values ratios of 78% or less, except for one unsecured loan totaling $10,000. Seven of these borrowers with loans totaling $4.8 million received PPP loans from the Bank totaling $793,000, which are 100% federally guaranteed. Added pressures on asset quality in future quarters may require additional increases to the allowance for loan losses, the amount of which will depend on a number of factors, including, but not limited to the extent and duration of the impact of the pandemic on public health and the economy. Net loan recoveries during the first quarter of 2020 totaled $3,000 compared to $3,000 net loan charge-offs for the fourth quarter of 2019 and net loan recoveries of $3,000 for the first quarter of 2019.

Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, and is headquartered in Seattle, Washington with full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with one Loan Production Office located in the Madison Park neighborhood of Seattle, Washington. For more information, please visit www.soundcb.com.

Forward Looking Statement Disclaimer

When used in filings by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events, and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated below or because of other important factors that we cannot foresee that could cause our actual results to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.

Factors which could cause actual results to differ materially, include, but are not limited to: the effect of the COVID-19 pandemic, including on the Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; legislative changes; changes in policies by regulatory agencies; fluctuations in interest rates; the risks of lending and investing activities, including 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; the Company's 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 the Company's market area; secondary market conditions for loans; results of examinations of the Company or its wholly owned bank subsidiary by their regulators; competition; changes in management's business strategies; changes in the regulatory and tax environments in which the Company operates; and other factors described in the Company's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – which are available at www.soundcb.com and on the SEC's website at www.sec.gov.

The Company does not undertake - and specifically declines any obligation - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

       
KEY FINANCIAL RATIOS
(unaudited)
      
       
  For the Quarter Ended    
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
Annualized return on average assets 0.54% 1.02% 0.81% (47.1)% (33.3)%
Annualized return on average equity 5.02  9.58  7.92  (47.6)  (36.6) 
Annualized net interest margin 3.96  4.11  4.13  (3.6)  (4.1) 
Annualized efficiency ratio 79.95% 70.82% 79.97% 12.9 %  %
                  


       
PER COMMON SHARE DATA
(Shares in thousands, unaudited)
      
       
  At or For the Quarter Ended    
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
Basic earnings per share $0.38  $0.74  $0.57  (48.6)% (33.3)%
Diluted earnings per share $0.38  $0.72  $0.56  (47.2)  (32.1) 
Weighted-average basic shares outstanding 2,543  2,533  2,507  0.4   1.4  
Weighted-average diluted shares outstanding 2,588  2,590  2,566  (0.1)  0.9  
Common shares outstanding at period-end 2,592  2,567  2,550  1.0   1.6  
Book value per share $30.19  $30.27  $28.59  (0.3)% 5.6 %
                     


       
CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)
      
       
  For the Quarter Ended:    
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
Interest income $8,646   $9,130   $8,773   (5.3)% (1.4)%
Interest expense 1,918   2,025   1,784   (5.3)  7.5  
Net interest income 6,728   7,105   6,989   (5.3)  (3.7) 
Provision (recapture) for loan losses 250   25   (200)  900.0   225.0  
Net interest income after provision (recapture) for loan losses 6,478   7,080   7,189   (8.5)  (9.9) 
Noninterest income:          
Service charges and fee income 494   517   447   (4.4)  10.5  
Earnings on cash surrender value of bank-owned life insurance 15   113   108   (86.7)  (86.1) 
Mortgage servicing income 244   246   242   (0.8)  0.8  
Fair value adjustment on mortgage servicing rights (362)  (184)  (324)  96.7   11.7  
Net gain on sale of loans 318   166   535   91.6   (40.6) 
Total noninterest income 709   858   1,008   (17.4)  (29.7) 
Noninterest expense:          
Salaries and benefits 3,235   3,034   3,639   6.6   (11.1) 
Operations 1,394   1,423   1,634   (2.0)  (14.7) 
Regulatory assessments 250   101   113   147.5   121.2  
Occupancy 497   500   506   (0.6)  (1.8) 
Data processing 570   557   500   2.3   14.0  
Net loss and expenses on OREO and repossessed assets    24   3   nm   nm  
Total noninterest expense 5,946   5,639   6,395   5.4   (7.0) 
Income before provision for income taxes 1,241   2,299   1,802   (46.0)  (31.1) 
Provision for income taxes 260   429   358   (39.4)  (27.4) 
Net income $981   $1,870   $1,444   (47.5)% (32.1)%
                        
nm = not meaningful                       
                        


           
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, unaudited)
          
           
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
ASSETS          
Cash and cash equivalents $61,996   $55,770   $72,536   11.2 % (14.5)%
Available-for-sale securities, at fair value 11,236   9,306   4,955   20.7   126.8  
Loans held-for-sale 5,923   1,063   490   457.2   1,108.8  
Loans held-for-portfolio 625,375   619,887   584,501   0.9   7.0  
Allowance for loan losses (5,893)  (5,640)  (5,577)  4.5   5.7  
Total loans held-for-portfolio, net 619,482   614,247   578,924   0.9   7.0  
Accrued interest receivable 2,205   2,206   2,228      (1.0) 
Bank-owned life insurance, net 14,147   14,183   13,625   (0.3)  3.8  
Other real estate owned ("OREO") and other repossessed assets, net 575   575   1,069      (46.2) 
Mortgage servicing rights, at fair value 2,996   3,239   3,286   (7.5)  (8.8) 
Federal Home Loan Bank ("FHLB") stock, at cost 1,164   1,160   1,860   0.3   (37.4) 
Premises and equipment, net 6,877   6,767   6,833   1.6   0.6  
Right-of-use assets 7,384   7,641   8,136   (3.4)  (9.2) 
Other assets 3,651   3,696   3,687   (1.2)  (1.0) 
TOTAL ASSETS $737,636   $719,853   $697,629   2.5   5.7  
LIABILITIES          
Interest-bearing deposits $524,439   $519,434   $485,033   1.0   8.1  
Noninterest-bearing deposits 110,119   97,284   98,648   13.2   11.6  
Total deposits 634,558   616,718   583,681   2.9   8.7  
Borrowings 7,500   7,500   25,000      (70.0) 
Accrued interest payable 224   226   201   (0.9)  11.4  
Lease liabilities 7,766   8,010   8,408   (3.0)  (7.6) 
Other liabilities 7,490   8,368   6,089   (10.5)  23.0  
Advance payments from borrowers for taxes and insurance 1,851   1,305   1,327   41.8   39.5  
TOTAL LIABILITIES 659,389   642,127   624,706   2.7   5.6  
STOCKHOLDERS' EQUITY:          
Common stock 25   25   25        
Additional paid-in capital 26,776   26,343   25,802   1.6   3.8  
Unearned shares – Employee Stock Ownership Plan ("ESOP") (198)  (227)  (312)  (12.8)  (36.5) 
Retained earnings 51,488   51,410   47,252   0.2   9.0  
Accumulated other comprehensive income, net of tax 156   175   156   (10.9)    
TOTAL STOCKHOLDERS' EQUITY 78,247   77,726   72,923   0.7   7.3  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $737,636   $719,853   $697,629   2.5 % 5.7 %
                        
nm = not meaningful                       
                        


           
LOANS
(Dollars in thousands, unaudited)
          
           
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
Real estate loans:          
One-to-four family $140,525   $149,393   $151,422   (5.9)% (7.2)%
Home equity 20,981   23,845   24,466   (12.0)  (14.2) 
Commercial and multifamily 280,001   261,216   245,488   7.2   14.1  
Construction and land 72,011   75,756   66,400   (4.9)  8.5  
Total real estate loans 513,518   510,210   487,776   0.6   5.3  
Consumer Loans:          
Manufactured homes 21,054   20,613   20,533   2.1   2.5  
Floating homes 46,834   43,799   39,016   6.9   20.0  
Other consumer 9,259   8,302   7,126   11.5   29.9  
Total consumer loans 77,147   72,714   66,675   6.1   15.7  
Commercial business loans 36,559   38,931   32,046   (6.1)  14.1  
Total loans 627,224   621,855   586,497   0.9   6.9  
Less:          
Deferred fees, net (1,849)  (1,968)  (1,996)  (6.0)  (7.4) 
Allowance for loan losses (5,893)  (5,640)  (5,577)  4.5   5.7  
Total loans held for portfolio, net $619,482   $614,247   $578,924   0.9 % 7.0 %
                        


           
DEPOSITS
(Dollars in thousands, unaudited)
          
           
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
Noninterest-bearing $110,119  $97,284  $98,648  13.2 % 11.6%
Interest-bearing 164,306  159,774  153,607  2.8   7.0 
Savings 64,442  57,936  54,950  11.2   17.3 
Money market 51,470  50,337  49,162  2.3   4.7 
Certificates 244,221  251,387  227,314  (2.9)  7.4 
Total deposits $634,558  $616,718  $583,681  2.9 % 8.7%
                    


       
CREDIT QUALITY DATA
(Dollars in thousands, unaudited)
      
       
  At or For the Quarter Ended:    
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
Nonaccrual loans $3,517  $4,069   $2,364   (13.6)% 48.8 %
Nonperforming TDRs 737  588   220   25.3   235.0  
Total nonperforming loans 4,254  4,657   2,584   (8.7)  64.6  
OREO and other repossessed assets 575  575   1,069      (46.2) 
Total nonperforming assets $4,829  $5,232   $3,653   (7.7)  32.2  
Net recoveries (charge-offs) during the quarter 3  (3)  3   200.0     
Provision (recapture) for loan losses during the quarter 250  25   (200)  900.0   225.0  
Allowance for loan losses 5,893  5,640   5,577   4.5   5.7  
Allowance for loan losses to total loans 0.93% 0.91 % 0.95 % 2.2 % (2.1) 
Allowance for loan losses to total nonperforming loans 138.53% 118.69 % 215.83 % 16.7 % (35.8) 
Nonperforming loans to total loans 0.67% 0.75 % 0.44 % (10.7)% 52.3  
Nonperforming assets to total assets 0.65% 0.73 % 0.52 % (11.0)% 25.0 %
                    


       
OTHER STATISTICS
(Dollars in thousands, unaudited)
      
       
  At or For the Quarter Ended:    
  Mar. 31,
2020
 Dec. 31,
2019
 Mar. 31,
2019
 Sequential Quarter
% Change
 Year over Year
% Change
Sound Community Bank:          
Total loans to total deposits 99.49% 100.69% 100.22% (1.2)% (0.7)%
Noninterest-bearing deposits to total deposits 17.35% 15.45% 16.90% 12.3 % 2.7 %
Sound Financial Bancorp, Inc.:          
Average total assets for the quarter $724,600  $725,693  $716,997  (0.2)% 1.1 %
Average total equity for the quarter $78,637  $77,427  $72,942  1.6 % 7.8 %
                     


Media: Financial:
Laurie Stewart Daphne Kelley
President/CEO EVP/CFO
(206) 448-0884 x306 (206) 448-0884 x305

Sound Financial Bancorp logo

Source: Sound Financial Bancorp, Inc.