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Sound Financial Bancorp (SFBC)

Filed: 24 Jul 20, 5:03pm


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1


Operating Results

Net interest income increased $168,000, or 2.5%, to $6.9 million during the quarter ended June 30, 2020, compared to $6.7 million during the quarter ended March 31, 2020 and increased $434,000, or 6.7%, from $6.5 million during the quarter ended June 30, 2019. The increase from the prior quarter and the same quarter one year ago was primarily a result of higher interest income, combined with lower interest expense.

Interest income increased $62,000, or 0.7%, to $8.7 million during the quarter ended June 30, 2020, compared to $8.6 million during the quarter ended March 31, 2020 and increased $368,000, or 4.4%, compared to $8.3 million during the quarter ended June 30, 2019. Interest income on loans increased $223,000, or 2.7%, to $8.6 million for the quarter ended June 30, 2020, compared to $8.4 million for the quarter ended March 31, 2020, and increased $715,000, or 9.0%, compared to $7.9 million for the quarter ended June 30, 2019, due to higher average loan balances resulting primarily from loans made by the Bank through its participation in the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”). The average balance of loans held-for-portfolio was $683.6 million for the quarter ended June 30, 2020, compared to $621.8 million for the quarter ended March 31, 2020 and $575.9 million for the quarter ended June 30, 2019. The average yield on loans held-for-portfolio was 5.07% for the quarter ended June 30, 2020, compared to 5.43% for the quarter ended March 31, 2020 and 5.51% or the quarter ended June 30, 2019. Interest income on the investment portfolio decreased $161,000, or 67.6%, to $77,000 during the quarter ended June 30, 2020, compared to $238,000 during the quarter ended March 31, 2020, and decreased $347,000, or 81.8%, compared to $424,000 during the quarter ended June 30, 2019. The decrease in the interest income on investment securities compared to the prior quarter and the same quarter one year ago was due to lower average yields.

Interest expense decreased $106,000, or 5.5%, to $1.8 million for the quarter ended June 30, 2020, compared to $1.9 million for the quarter ended March 31, 2020 and decreased $66,000, or 3.5%, compared to $1.9 million for the quarter ended June 30, 2019. The decrease from the prior quarter was a result of lower weighted-average cost of deposits following the emergency cuts in the targeted federal funds rate totaling 150 basis points during March 2020 in response to the COVID-19 pandemic, as well as a higher percentage of noninterest bearing deposits to total deposits. The decrease from the comparable period a year ago was a result of lower weighted-average balance and cost of borrowings. The weighted average cost of deposit decreased to 1.03% for the quarter ended June 30, 2020, down 17 basis points from 1.20% for the quarter ended March 31, 2020, and down 11 basis points from 1.14% for the quarter ended June 30, 2019, reflecting in part the increase in noninterest-bearing deposits resulting primarily from borrowers depositing their PPP loan proceeds into deposit accounts at the Bank.

Net interest margin was 3.69% for the quarter ended June 30, 2020, compared to 3.96% for the quarter ended March 31, 2020 and 4.03% for the quarter ended June 30, 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 average yield on PPP loans was 2.83%, including the recognition of the net deferred fees, resulting in a negative impact to the net interest margin of 6 basis points during the quarter ended June 30, 2020.

The Company recorded a provision for loan losses of $400,000 for the quarter ended June 30, 2020, compared to a provision for loan losses of $250,000 for the quarter ended March 31, 2020 and a recapture from the allowance for loan losses of $200,000 for the quarter ended June 30, 2019. The increase in the provision primarily reflects probable credit deterioration as a result of the COVID-19 pandemic.

Noninterest income increased $870,000, or 122.7%, to $1.6 million for the quarter ended June 30, 2020, compared to
$709,000 for the quarter ended March 31, 2020 and increased $724,000, or 84.7%, from $855,000 for the quarter ended June 30, 2019. The increase from the sequential quarter and the same period a year ago was primarily due to an increase in gain on sale of loans, partially offset by a decrease in the mark-to-market adjustment on fair value of mortgage servicing rights. Loans sold during the quarter ended June 30, 2020, totaled $57.3 million, compared to $14.1 million and $9.4 million during the quarters ended March 31, 2020 and June 30, 2019, respectively as the volume of loans originated for sale increased significantly due to refinance activity increasing as a result of the recent reductions in market interest rates.

Noninterest expense decreased $540,000, or 9.1%, to $5.4 million for the quarter ended June 30, 2020, compared to $5.9 million for the quarter ended March 31, 2020 and increased $174,000, or 3.3%, from $5.2 million for the quarter ended June 30, 2019. The decrease from the quarter ended March 31, 2020 was primarily a result of decreases in salaries and benefits expense of $417,000 and regulatory assessment expense of $130,000 during the quarter. Salaries and benefits expense decreased due to an increase in deferred commissions payable in connection with loan originations. Regulatory assessments decreased from prior quarter due to state examination expense not accrued but paid during the quarter ended March 31, 2020.

2


The increase in noninterest expense compared to the quarter ended June 30, 2019 was primarily due to increases of $185,000 in data processing and $164,000 in salaries and benefits expense, partially offset by a $124,000 decrease in operations expense. Data processing expense increased due to recording of systems expenses to data processing upon renewal of existing agreements and technology investments made in 2020. Salaries and benefits expense increased due to increase in employee headcount compared to a year ago. Operations expense decreased due to a lower professional and consulting fees and lower travel and conference expenses compared to the same quarter a year ago.

The efficiency ratio for the quarter ended June 30, 2020 was 63.79%, compared to 79.95% for the quarter ended March 31, 2020 and 71.50% for the year ended June 30, 2019. The improvement in the efficiency ratio for the current quarter compared to the prior quarter and the comparable quarter in 2019 was primarily due to higher interest income and noninterest income, and for the prior quarter, lower noninterest expense.
3


Balance Sheet Review, Capital Management and Credit Quality

Total assets at June 30, 2020 were $871.7 million, compared to $737.6 million at March 31, 2020 and $686.0 million at June 30, 2019. The increase in assets from the sequential quarter was primarily due to a higher balances of loans held-for-portfolio, loans held-for-sale and cash and cash equivalents, partially offset by a decrease in available-for-sale securities. The increase from a year ago was primarily a result of a higher balances in loans held-for-portfolio and loans held-for-sale, cash and cash equivalents and available-for-sale securities.

Cash and cash equivalents increased $68.5 million, or 110.6%, to $130.5 million at June 30, 2020, compared to $62.0 million at March 31, 2020, and increased $50.1 million, or 62.3%, compared to $80.4 million at June 30, 2019. The increase from prior quarter and a year ago was due to increase in cash from borrowing through the Paycheck Protection Program Lending Facility (PPPLF). Under the PPPLF, the Bank pledged PPP loans at face value as collateral to obtain Federal Reserve Bank non-recourse loans. PPPLF loans are risk-weighted at zero percent and have no impact on our leverage ratio and the Bank also receives a favorable borrowing rate of 35 basis points.

Available-for-sale securities totaled $10.2 million at June 30, 2020, compared to $11.2 million at March 31, 2020, and $5.0 million at June 30, 2019. Increase in available for sale securities from a year ago was due to purchase of investment securities.

Loans held-for-portfolio increased to $690.7 million at June 30, 2020, compared to $625.4 million at March 31, 2020 and increased from $565.4 million at June 30, 2019, primarily driven by our origination of PPP loans. At June 30, 2020, compared to the prior quarter, commercial business loans increased $73.2 million, or 200.1%, to $109.7 million, primarily due to the origination of 782 PPP loans totaling $73.1 million. Construction and land loans increased $4.1 million, or 5.7%, to $76.1 million and consumer loans increased $921,000, or 1.2%, to $78.1 million, with the largest increase in consumer loans coming from other consumer, which increased $1.3 million, or 14.3%, compared to prior quarter. These increases were partially offset by decreases of $2.5 million in one-to-four family loans, $1.7 million in home equity loans and $7.0 million in commercial and multifamily loans. At June 30, 2020, compared to the comparable quarter in 2019, commercial business loans increased $76.2 million, or 227.4%, to $109.7 million primarily due to $73.1 million in PPP loans, commercial and multifamily real estate loans increased $46.8 million, or 20.7%, to $273.0 million, construction and land loans increased $5.9 million, or 8.4%, to $76.1 million, and consumer loans increased $9.6 million, or 13.9%, to $78.1 million, with the largest increase in consumer loans coming from loans for floating homes, which increased $6.0 million, or 14.9%. These increases were partially offset by decreases in one-to-four family loans, which decreased $7.6 million, or 5.2%, to $138.0 million and home equity loans, which decreased $3.8 million, or 16.5%, to $19.3 million. At June 30, 2020, commercial and multifamily real estate loans accounted for approximately 39.3% of total loans, one-to-four family loans, including home equity loans accounted for approximately 22.7% of total loans, and commercial business loans accounted for approximately 15.8% of total loans. Consumer loans accounted for approximately 11.2% of total loans and construction and land loans accounted for approximately 11.0% of total loans and loans at June 30, 2020.

Deposits increased $59.8 million, or 9.4%, to $694.3 million at June 30, 2020, compared to $634.6 million at March 31, 2020 and increased $114.8 million, or 19.8%, compared to $579.5 million at June 30, 2019. The increase in deposits compared to the prior quarter was due primarily to disbursements of PPP loan funds into borrowers’ deposit accounts as well as reduced withdrawals reflecting changes in customer spending habits due to the COVID-19 pandemic. The increase in deposits compared to year ago was due to increases in the balance of all deposit products. We continue our efforts to increase noninterest-bearing deposits, which increased $32.4 million, or 29.4% to $142.5 million at June 30, 2020, compared to $110.1 million at March 31, 2020 and increased $46.3 million, or 48.1% from $96.2 million at June 30, 2019.

Total borrowings consisting of PPPLF and FHLB advances increased $72.3 million, to $79.8 million at June 30, 2020, from $7.5 million at March 31, 2020, and increased $63.6 million, or 391.3% compared to $16.3 million at June 30, 2019. The increase in borrowing is attributable entirely to borrowings from the PPPLF.

Nonperforming assets ("NPAs"), which are comprised of nonaccrual loans, nonperforming troubled debt restructurings ("TDRs"), other real estate owned ("OREO") and other repossessed assets decreased $774,000, or 16.0%, to $4.1 million at June 30, 2020, from $4.8 million at March 31, 2020 and decreased $50,000, or 1.2% from June 30, 2019. NPAs to total assets were 0.47%, 0.65% and 0.60% at June 30, 2020, March 31, 2020 and June 30, 2019, respectively. The allowance for loan losses totaled $6.0 million, or 0.87% of total loans outstanding, at June 30, 2020, compared to $5.9 million, or 0.93% of total loans outstanding, at March 31, 2020, and $5.4 million, or 0.95% of total loans outstanding, at June 30, 2019. Excluding PPP loans of $73.1 million which are 100% guaranteed by the SBA, the allowance for loan losses totaled 0.97% of total loans outstanding at June 30, 2020. Net loan charge-offs during the second quarter of 2020 totaled $262,000 compared to net loan recoveries of $3,000 for the first quarter 2020 and net loan charge-offs of $7,000 for the second quarter of 2019.
4


The increase in provision for loan losses in the current quarter not only reflects probable credit losses based upon the conditions that existed as of June 30, 2020, but also gives consideration to the potential effects from future impacts of the COVID-19 pandemic related to the industries in the loan portfolio that the Company believes may suffer the most losses as a result of the COVID-19 pandemic, such as the hospitality industry, which includes food and beverage, lodging and recreation. Our direct exposure to the hospitality industry included 14 loans, totaling $5.6 million at June 30, 2020. Seven of these borrowers were approved for PPP loans. One loan, totaling $10,000 is unsecured.

We are also providing payment relief for both consumer and business clients. As of quarter end at June 30, 2020, a total of 51 loans totaling $34.0 million have been modified, most of which involve interest only or payment deferrals that range from 90 to 180 days. All of these loan modification have been made in response to the COVID-19 pandemic and are not classified as troubled debt restructurings. 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):
 June 30, 2020March 31, 2020June 30, 2019
 Balance% of TotalBalance% of TotalBalance% of Total
Nonperforming Loans:      
One-to-four family$1,670  41.2 %$1,820  42.9 %$980  23.9 %
Home equity loans222  5.4  285  6.6  557  13.6  
Commercial and multifamily352  8.7  353  8.3  649  15.8  
Construction and land—  —  386  9.1  82  2.0  
Manufactured homes117  2.9  162  3.8  240  5.8  
Floating homes282  7.0  282  6.6  —  —  
Commercial business837  20.6  384  9.0  528  12.9  
Total nonperforming loans3,480  85.8  3,672  86.5  3,036  73.9  
OREO and Other Repossessed Assets:
One-to-four family—  —  —  —  494  12.0  
Commercial and multifamily575  14.2  575  13.5  575  14.0  
Total OREO and repossessed assets575  14.2  575  13.5  1,069  26.0  
Total nonperforming assets$4,055  100 %$4,247  100.0 %$4,105  100 %

The following table summarizes the allowance for loan losses (dollars in thousands, unaudited):
 For the Quarter Ended:
June 30, 2020March 31, 2020June 30, 2019
Allowance for Loan Losses   
Balance at beginning of period$5,893  $5,640  $5,577  
Provision (recapture) for loan losses during the period400  250  (200) 
Net (charge-offs) recoveries during the period(262)  (7) 
Balance at end of period$6,031  $5,893  $5,370  
Allowance for loan losses to total loans0.97 %0.93 %0.95 %
Allowance for loan losses to total nonperforming loans173.30 %138.53 %176.88 %


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.
5


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.

6


KEY FINANCIAL RATIOS
(unaudited)

 For the Quarter Ended  
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
Annualized return on average assets1.08 %0.54 %1.07 %100.0 %0.9 %
Annualized return on average equity10.65  5.02  9.85  112.2  8.1  
Annualized net interest margin3.69  3.96  4.03  (6.8) (8.4) 
Annualized efficiency ratio63.79 %79.95 %71.50 %(20.2)%(10.8)%



PER COMMON SHARE DATA
(Shares in thousands, unaudited)
 At or For the Quarter Ended
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
Basic earnings per share$0.83  $0.38  $0.72  118.4 %15.3 %
Diluted earnings per share$0.82  $0.38  $0.71  115.8  15.5  
Weighted-average basic shares outstanding2,560  2,543  2,522  0.7  1.5  
Weighted-average diluted shares outstanding2,580  2,588  2,572  (0.3) 0.3  
Common shares outstanding at period-end2,595  2,592  2,563  0.1  1.2  
Book value per share$30.92  $30.19  $29.09  2.4 %6.3 %



7


CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)
 For the Quarter Ended:  
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
Interest income$8,708  $8,646  $8,340  0.7 %4.4 %
Interest expense1,812  1,918  1,878  (5.5) (3.5) 
Net interest income6,896  6,728  6,462  2.5  6.7  
Provision (recapture) for loan losses400  250  (200) 60.0  100.0  
Net interest income after provision (recapture) for loan losses6,496  6,478  6,662  0.3  (2.5) 
Noninterest income:
Service charges and fee income429  494  479  (13.2) (10.4) 
Earnings on cash surrender value of bank-owned life insurance90  15  78  500.0  15.4  
Mortgage servicing income235  244  256  (3.7) (8.2) 
Fair value adjustment on mortgage servicing rights(437) (362) (162) 20.7  169.8  
Net gain on sale of loans1,262  318  204  296.9  518.6  
Total noninterest income1,579  709  855  122.7  84.7  
Noninterest expense:
Salaries and benefits2,818  3,235  2,654  (12.9) 6.2  
Operations1,326  1,394  1,450  (4.9) (8.6) 
Regulatory assessments120  250  115  (52.0) 4.3  
Occupancy497  497  546  —  (9.0) 
Data processing645  570  460  13.2  40.2  
Net loss and expenses on OREO and repossessed assets—  —   nmnm
Total noninterest expense5,406  5,946  5,232  (9.1) 3.3  
Income before provision for income taxes2,669  1,241  2,285  115.1  16.8  
Provision for income taxes541  260  468  108.1  15.6  
Net income$2,128  $981  $1,817  116.9 %17.1 %
nm = not meaningful

8


Six Months Ended 
June 30, 2020June 30, 2019
Year over Year
% Change
Interest income$17,354  $17,157  1.1 %
Interest expense3,730  3,662  1.9  
Net interest income13,624  13,495  1.0  
Provision (recapture) for loan losses650  (400) 62.5  
Net interest income after provision (recapture) for loan losses12,974  13,895  (6.6) 
Noninterest income:
Service charges and fee income923  925  (0.2) 
Earnings on cash surrender value of bank-owned life insurance105  186  (43.5) 
Mortgage servicing income479  498  (3.8) 
Fair value adjustment on mortgage servicing rights(800) (486) (64.6) 
Net gain on sale of loans1,581  695  127.5  
Total noninterest income2,288  1,818  25.9  
Noninterest expense:
Salaries and benefits6,053  6,293  (3.8) 
Operations2,720  3,084  (11.8) 
Regulatory assessments369  228  61.8  
Occupancy995  1,052  (5.4) 
Data processing1,215  960  26.6  
Net loss and expenses on OREO and repossessed assets—   (100.0) 
Total noninterest expense11,352  11,626  (2.4) 
Income before provision for income taxes3,910  4,087  (4.3) 
Provision for income taxes802  826  (2.9) 
Net income$3,108  $3,261  (4.7)%


9


CONSOLIDATED BALANCE SHEET
(Dollars in thousands, unaudited)
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
ASSETS     
Cash and cash equivalents$130,537  $61,996  $80,422  110.6 %62.3 %
Available-for-sale securities, at fair value10,198  11,236  4,964  (9.2) 105.4  
Loans held-for-sale7,364  5,923  738  24.3  897.8  
Loans held-for-portfolio690,703  625,375  565,351  10.4  22.2  
Allowance for loan losses(6,031) (5,893) (5,370) 2.3  12.3  
Total loans held-for-portfolio, net684,672  619,482  559,981  10.5  22.3  
Accrued interest receivable2,346  2,205  2,108  6.4  11.3  
Bank-owned life insurance, net14,281  14,147  13,750  0.9  3.9  
Other real estate owned ("OREO") and other repossessed assets, net575  575  1,069  —  (46.2) 
Mortgage servicing rights, at fair value3,113  2,996  3,205  3.9  (2.9) 
Federal Home Loan Bank ("FHLB") stock, at cost1,164  1,164  1,510  —  (22.9) 
Premises and equipment, net6,675  6,877  6,683  (2.9) (0.1) 
Right-of-use assets7,166  7,384  7,883  (3.0) (9.1) 
Other assets3,570  3,651  3,643  (2.2) (2.0) 
TOTAL ASSETS$871,661  $737,636  $685,956  18.2  27.1  
LIABILITIES
Interest-bearing deposits$551,841  $524,439  $483,310  5.2  14.2  
Noninterest-bearing deposits142,481  110,119  96,192  29.4  48.1  
Total deposits694,322  634,558  579,502  9.4  19.8  
Borrowings79,841  7,500  16,250  964.5  391.3  
Accrued interest payable204  224  195  (8.9) 4.6  
Lease liabilities7,561  7,766  8,226  (2.6) (8.1) 
Other liabilities8,335  7,490  6,549  11.3  27.3  
Advance payments from borrowers for taxes and insurance1,163  1,851  669  (37.2) 73.8  
TOTAL LIABILITIES791,426  659,389  611,391  20.0  29.4  
STOCKHOLDERS' EQUITY:
Common stock25  25  25  —  —  
Additional paid-in capital26,894  26,776  25,926  0.4  3.7  
Unearned shares – Employee Stock Ownership Plan ("ESOP")(170) (198) (283) (14.1) (39.9) 
Retained earnings53,224  51,488  48,710  3.4  9.3  
Accumulated other comprehensive income, net of tax262  156  187  67.9  40.1  
TOTAL STOCKHOLDERS' EQUITY80,235  78,247  74,565  2.5  7.6  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$871,661  $737,636  $685,956  18.2 %27.1 %


10


LOANS
(Dollars in thousands, unaudited)
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
Real estate loans:     
One-to-four family$137,988  $140,525  $145,593  (1.8)%(5.2)%
Home equity19,286  20,981  23,095  (8.1) (16.5) 
Commercial and multifamily273,046  280,046  226,235  (2.5) 20.7  
Construction and land76,089  72,011  70,205  5.7  8.4  
Total real estate loans506,409  513,563  465,128  (1.4) 8.9  
Consumer Loans:
Manufactured homes21,227  21,054  20,685  0.8  2.6  
Floating homes46,256  46,834  40,247  (1.2) 14.9  
Other consumer10,585  9,259  7,583  14.3  39.6  
Total consumer loans78,068  77,147  68,515  1.2  13.9  
Commercial business loans109,719  36,559  33,509  200.1  227.4  
Total loans694,196  627,269  567,152  10.7  22.4  
Less:
Deferred fees, net(3,493) (1,894) (1,801) 84.4  93.9  
Allowance for loan losses(6,031) (5,893) (5,370) 2.3  12.3  
Total loans held for portfolio, net$684,672  $619,482  $559,981  10.5 %22.3 %



DEPOSITS
(Dollars in thousands, unaudited)
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
Noninterest-bearing$142,481  $110,119  $96,192  29.4 %48.1 %
Interest-bearing185,640  164,306  151,279  13.0  22.7  
Savings73,027  64,442  55,177  13.3  32.4  
Money market54,332  51,470  45,791  5.6  18.7  
Certificates238,842  244,221  231,063  (2.2) 3.4  
Total deposits$694,322  $634,558  $579,502  9.4 %19.8 %

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CREDIT QUALITY DATA
(Dollars in thousands, unaudited)
 
 At or For the Quarter Ended: 
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
Nonaccrual loans$3,207  $3,672  $2,817  (12.7)%13.8 %
Nonperforming TDRs273  582  219  (53.1) 24.7  
Total nonperforming loans3,480  4,254  3,036  (18.2) 14.6  
OREO and other repossessed assets575  575  1,069  —  (46.2) 
Total nonperforming assets$4,055  $4,829  $4,105  (16.0) (1.2) 
Net (charge-offs) recoveries during the quarter(262)  (7) 8,633.3  3,642.9  
Provision (recapture) for loan losses during the quarter400  250  (200) 60.0  300.0  
Allowance for loan losses6,031  5,893  5,370  2.3  12.3  
Allowance for loan losses to total loans0.97 %0.93 %0.95 %4.3 %2.1  
Allowance for loan losses to total nonperforming loans173.30 %138.53 %176.88 %25.1 %(2.0) 
Nonperforming loans to total loans0.50 %0.67 %0.54 %(25.4)%(7.4) 
Nonperforming assets to total assets0.47 %0.65 %0.60 %(27.7)%(21.7)%


OTHER STATISTICS
(Dollars in thousands, unaudited)
At or For the Quarter Ended:
 Jun. 30,
2020
Mar. 31,
2020
Jun. 30,
2019
Sequential Quarter
% Change
Year over Year
% Change
Sound Community Bank:     
Total loans to total deposits100.54 %99.49 %97.69 %1.1 %2.9 %
Noninterest-bearing deposits to total deposits20.52 %17.35 %16.60 %18.3 %23.6 %
Sound Financial Bancorp, Inc.:
Average total assets for the quarter$791,545  $724,600  $683,207  9.2 %15.9 %
Average total equity for the quarter$80,381  $78,637  $74,020  2.2 %8.6 %



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

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