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| 8-K - FORM 8-K - Sound Financial Bancorp, Inc. | form-8kearningsrelease.htm |
Sound Financial Bancorp, Inc. Announces 2019 Fourth Quarter and Year End Financial Results
Seattle, Wash., January 28, 2020 -- Sound Financial Bancorp, Inc. (Nasdaq: SFBC), the holding company (the "Company") for Sound Community Bank (the "Bank"), today reported net income of $6.7 million for the year ended December 31, 2019, or diluted earnings per share of $2.58, as compared to net income of $7.0 million for the year ended December 31, 2018, or diluted earnings per share of $2.74. Net income for the fourth quarter of 2019 was $1.9 million, or $0.72 diluted earnings per share, as compared to net income of $1.6 million, or $0.64 diluted earnings per share for the quarter ended December 31, 2018.
"Our financial performance year over year was consistent. We continued to achieve solid growth in our construction and land, commercial and multifamily, and consumer loan portfolios, including floating home loans," said Laurie Stewart, President and CEO of the Company and the Bank. "We also achieved significant deposit growth during the year and stabilized our cost of funds. This had a positive impact on our loan to deposit ratio," concluded Ms. Stewart.
Full Year 2019 Performance Highlights:
•Loans held-for-portfolio totaled $619.9 million at December 31, 2019, compared to $619.5 million at December 31, 2018; Growth in commercial and multifamily real estate loans and construction and land loans totaling $19.1 million or 6.0% and in consumer loans totaling $5.1 million or 7.6% was offset by a $24.2 million or 12.3% decline in one- to four-family and home equity loans, which included the sale of $16.2 million of residential loan during the first quarter of 2019.
•Total deposits increased 11.4% to $616.7 million at December 31, 2019, from $553.6 million at December 31, 2018, including $8.0 million brokered deposits.
•Total borrowings decreased $76.5 million, or 91.1%, to $7.5 million at December 31, 2019, from $84.0 million at December 31, 2018.
•Net interest income decreased 3.5% to $26.5 million for the year ended December 31, 2019, from $27.4 million for the year ended December 31, 2018.
•Net interest margin ("NIM") decreased to 3.98% for the year ended December 31, 2019, compared to 4.22% for the year ended December 31, 2018.
•Allowance for loan losses to total loans remained relatively unchanged at 0.91% at December 31, 2019, compared to 0.93% at December 31, 2018, while the allowance to loans losses to total nonperforming loans declined to 118.7% at December 31, 2019 compared to 216.5% at December 31, 2018.
•Recapture from the allowance for loan losses was $125,000 for the year ended December 31, 2019, compared to a provision for loan losses of $525,000 for the year ended December 31, 2018.
•Return on average assets and return on average equity decreased to 0.95% and 8.90%, respectively, for the year ended December 31, 2019, compared to 1.03% and 10.24%, respectively, for the year ended December 31, 2018.
Fourth Quarter 2019 Performance Highlights:
•Loans held-for-portfolio increased 1.1% to $619.9 million at December 31, 2019, from $612.9 million at September 30, 2019 and increased 0.1% from $619.5 million at December 31, 2018.
•Total deposits increased 1.2% to $616.7 million at December 31, 2019, from $609.6 million at September 30, 2019 and increased 11.4% from $553.6 million at December 31, 2018.
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•Total borrowings decreased $5.0 million, or 39.8% to $7.5 million at December 31, 2019, from $12.5 million at September 30, 2019, and decreased $76.5 million, or 91.1% from $84.0 million at December 31, 2018.
•Total assets increased $4.6 million, or 0.6% to $719.9 million at December 31, 2019, from $715.3 million at September 30, 2019, and increased $3.1 million or, 0.4% from $716.7 million at December 31, 2018.
•Net interest income increased 1.3% to $6.6 million for the quarter ended December 31, 2019, from $6.5 million for the quarter ended September 30, 2019 and decreased 9.0%, from $7.2 million for the quarter ended December 31, 2018.
•Annualized NIM was 3.82% for the quarter ended December 31, 2019, compared to 3.95% for the quarter ended September 30, 2019 and 4.19% for the quarter ended December 31, 2018.
•Return on average assets (annualized) was 1.02% for the quarter ended December 31, 2019, compared to 0.88% and 0.91% for the quarters ended September 30, 2019 and December 31, 2018, respectively.
•Return on average equity (annualized) was 9.58% for the quarter ended December 31, 2019, compared to 8.11% and 9.14% for the quarters ended September 30, 2019 and December 31, 2018, respectively.
•Provision for loan losses was $25,000 for the quarter ended December 31, 2019, compared to a provision for loan losses of $250,000 for the quarter ended September 30, 2019 and a provision for loan losses of $25,000 for the quarter ended December 31, 2018.
The Bank continued to maintain capital levels in excess of the regulatory requirements and was categorized as "well-capitalized" at December 31, 2019.
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Operating Results
Net interest income decreased $971,000, or 3.5%, to $26.5 million during the year ended December 31, 2019, compared to $27.4 million during the year ended December 31, 2018. The decrease was primarily a result of an increase in net interest expense due to higher rates paid on deposits and higher average deposit balances, partially offset by increased interest income on loans and investments and decreased interest expense paid on borrowings.
Interest income increased $1.3 million, or 3.9%, to $34.1 million for the year ended December 31, 2019, compared to $32.8 million for the year ended December 31, 2018. Interest income on loans increased $1.1 million, or 3.5%, to $32.6 million for the year ended December 31, 2019, compared to $31.5 million for the year ended December 31, 2018, due to higher average loan balances and yields. The average loans held-for-portfolio balance was $599.2 million for the year ended December 31, 2019, compared to $588.4 million for the year ended December 31, 2018. The average yield on loans held-for-portfolio was 5.43% for the year ended December 31, 2019, compared to 5.35% for the year ended December 31, 2018. Interest income on the investment portfolio increased $205,000, or 15.9%, to $1.5 million during the year ended December 31, 2019, compared to $1.3 million during the year ended December 31, 2018, due to higher average investment balance and yields in 2019.
Interest expense increased $2.2 million, or 42.0%, to $7.6 million during the year ended December 31, 2019, compared to $5.4 million during the year ended December 31, 2018, 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 $3.0 million, or 78.8%, to $6.9 million for the year ended December 31, 2019, compared to the prior year, driven by an increase of $47.4 million, or 10.6%, in the average balance of interest-bearing deposits to $493.6 million, and a 45 basis point increase in the weighted average rate paid on interest-bearing deposits to 1.16% for the year ended December 31, 2019, from 0.71% for the year ended December 31, 2018. Interest expense on FHLB borrowings decreased $769,000, or 50.6%, to $752,000 for the year ended December 31, 2019, compared to the prior year, due to a $45.5 million, or 65.1% decrease in the average balance of FHLB borrowings to $24.4 million, from $69.9 million for the year ended December 31, 2018.
Net interest margin decreased to 3.98% for the year ended December 31, 2019, compared to 4.22% for the year ended December 31, 2018. The decrease was primarily due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities.
We recorded a recapture from the allowance for loan losses of $125,000 for the year ended December 31, 2019, compared to a provision for loan losses of $525,000 for the year ended December 31, 2018. The recapture in the current year was due to changes in the composition of our loan portfolio during the year.
Noninterest income decreased $132,000, or 2.8%, to $4.5 million for the year ended December 31, 2019, compared to
$4.7 million for the year ended December 31, 2018. The decrease was primarily due to a $247,000 decrease in the mark-to-market adjustment on fair value of mortgage servicing rights during the year combined with one-time proceeds of $490,000 recognized in other noninterest income from the sale of Visa B Shares during the year ended December 31, 2018. The decrease was partially offset by a $539,000 increase in the net gain on sale of loans.
Noninterest expense remained relatively flat, decreasing $38,000, or 0.2%, to $22.8 million for the year ended December 31, 2019, from the year ended December 31, 2018. Salaries and benefits decreased $373,000 due to lower commissions on loan originations paid during the year and, regulatory assessments decreased $153,000 as a result of a small bank credit awarded by the Federal Deposit Insurance Corporation("FDIC"). The decreases were partially offset by a $433,000 increase in operations expense and $185,000 increase in data processing expense. Operations expense increased due to increases in marketing and adverting expense of $133,000, wire fraud expense of $114,000, travel and conference expense of $88,000, charitable contribution of $81,000 and consulting expense of $37,000.
The efficiency ratio for the year ended December 31, 2019 was 73.52%, compared to 71.12% for the year ended December 31, 2018. The increase in the efficiency ratio compared to the prior year was primarily due to higher interest expense on deposits.
3
Balance Sheet Review, Capital Management and Credit Quality
Total assets at December 31, 2019 were $719.9 million, compared to $716.7 million at December 31, 2018. The increase from a year ago was primarily a result of the capitalization of right of use assets of $7.6 million, combined with a higher balance in available for sale securities, which increased $4.3 million, partially offset by decreases in cash and cash equivalents and FHLB stock. FHLB stock decreased $3.0 million to $1.2 million at December 31, 2019, from $4.1 million at December 31, 2018, as a result of reduced borrowing needs due to deposit growth. The adoption of accounting guidance for leases (“ASU 2016-02”) in 2019 required the Company to recognize right of use lease assets and corresponding lease liabilities on the balance sheet.
Cash and cash equivalents decreased $6.0 million, or 9.8%, to $55.8 million at December 31, 2019, compared to $61.8 million at December 31, 2018. The decrease in total cash and cash equivalents, combined with our deposit growth was primarily utilized to fund loan originations, purchases of investment securities and reduce FHLB borrowings during the year.
Investment securities available-for-sale (AFS) totaled $9.3 million at December 31, 2019, compared to $5.0 million at December 31, 2018.
Loans held-for-portfolio increased slightly to $619.9 million at December 31, 2019, compared to $619.5 million at December 31, 2018, with increases in the construction and land, commercial and multifamily and consumer loan portfolios being offset by decreases in the one-to-four family and home equity loan portfolios. The construction and land portfolio increased $10.5 million, or 16.1%, to $75.8 million, the commercial and multifamily real estate loan portfolio increased $8.6 million, or 3.4%, to $261.2 million, and the consumer loan portfolio increased $5.1 million, or 7.6%, to $72.7 million, with the largest increase in consumer loans coming from floating homes loans, which increased $3.0 million, or 7.3%, to $43.8 million. These increases were offset by decreases in the one-to-four family loan portfolio, which decreased $20.4 million, or 12.0%, to $149.4 million as a result of the sale of $16.2 million of residential loans during the first quarter of 2019, and the home equity loan portfolio, which decreased $3.8 million, or 13.8%, to $23.8 million. At December 31, 2019, commercial and multifamily real estate loans accounted for approximately 42.0% of total loans and one-to-four family loans, including home equity loans accounted for approximately 27.9% of total loans and consumer loans, consisting of manufactured homes, floating homes, and other consumer loans accounted for approximately 11.7% of total loans. Construction and land loans accounted for approximately 12.2% of total loans and commercial business loans accounted for approximately 6.3% of total loans at December 31, 2019.
Deposits increased $63.1 million, or 11.4%, to $616.7 million at December 31, 2019, compared to $553.6 million at December 31, 2018. The increase in deposits was due primarily to increases in certificates of deposit, savings and money market deposits, partially offset by a $3.1 million, or 1.9% decrease in interest bearing demand deposits. The certificates of deposits increased $59.6 million, or 31.1%, to $251.4 million, savings increased $3.8 million, or 7.1%, to $57.9 million, and money market deposits increased $3.6 million, or 7.8%, to $50.3 million at December 31, 2019, as a result of our effort to grow deposits, Deposit growth allowed us to reduce our reliance on higher cost FHLB borrowings during the year. FHLB borrowings decreased to $7.5 million at December 31, 2019, compared to and $84.0 million at December 31, 2018 as we utilized our increase in deposits for funding needs.
Nonperforming assets ("NPAs"), which are comprised of non-accrual loans, nonperforming troubled debt restructurings ("TDRs"), other real estate owned ("OREO") and other repossessed assets increased $2.1 million, or 64.3%, to $5.3 million at December 31, 2019, from $3.2 million at December 31, 2018. NPAs to total assets were 0.74% at December 31, 2019, compared to 0.45% at December 31, 2018.
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The following table summarizes our NPAs (dollars in thousands, unaudited):
| December 31, 2019 | December 31, 2018 | ||||||||||||||||||||||
| Balance | % of Total | Balance | % of Total | ||||||||||||||||||||
| Nonperforming Loans: | |||||||||||||||||||||||
| One-to-four family | $ | 2,090 | 39.3 | % | $ | 1,120 | 34.5 | % | |||||||||||||||
| Home equity loans | 356 | 6.7 | 359 | 11.1 | |||||||||||||||||||
| Commercial and multifamily | 363 | 6.8 | 534 | 16.5 | |||||||||||||||||||
| Construction and land | 1,177 | 22.1 | 123 | 3.8 | |||||||||||||||||||
| Manufactured homes | 226 | 4.2 | 214 | 6.6 | |||||||||||||||||||
| Floating homes | 290 | 5.4 | — | — | |||||||||||||||||||
| Commercial business | 250 | 4.7 | 317 | 9.8 | |||||||||||||||||||
| Total nonperforming loans | 4,752 | 89.2 | 2,667 | 82.3 | |||||||||||||||||||
| OREO and Other Repossessed Assets: | |||||||||||||||||||||||
| Commercial and multifamily | 575 | 10.8 | 575 | 17.7 | |||||||||||||||||||
| Total OREO and repossessed assets | 575 | 10.8 | 575 | 17.7 | |||||||||||||||||||
| Total nonperforming assets | $ | 5,327 | 100 | % | $ | 3,242 | 100 | % | |||||||||||||||
The following table summarizes the allowance for loan losses (dollars in thousands, unaudited):
| Year Ended: | |||||||||||
| December 31, 2019 | December 31, 2018 | ||||||||||
| Allowance for Loan Losses | |||||||||||
| Balance at beginning of period | $ | 5,774 | $ | 5,241 | |||||||
| (Recapture) provision for loan losses during the period | (125) | 525 | |||||||||
| Net (charge-offs) recoveries during the period | (9) | 8 | |||||||||
| Balance at end of period | $ | 5,640 | $ | 5,774 | |||||||
| Allowance for loan losses to total loans | 0.91 | % | 0.93 | % | |||||||
| Allowance for loan losses to total nonperforming loans | 118.69 | % | 216.48 | % | |||||||
The decrease in the allowance for loan losses at December 31, 2019, compared to a year ago was primarily due to a recapture
from the allowance for loan losses of $125,000 during the year ended December 31, 2019. The recapture in the current year was due to changes in the composition of our loan portfolio during the year.
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 two Loan Production Offices, one located in the Madison Park neighborhood of Seattle and one located in Sequim, Washington. For more information, please visit www.soundcb.com.
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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: changes in general and local economic conditions; 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.
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KEY FINANCIAL RATIOS
(unaudited)
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| Dec. 31, 2019 | Sept. 30, 2019 | Dec. 31, 2018 | Sequential Quarter % Change | Year over Year % Change | ||||||||||||||||||||||||||||
| Annualized return on average assets | 1.02 | % | 0.88 | % | 0.91 | % | 15.9 | % | 12.1 | % | ||||||||||||||||||||||
| Annualized return on average equity | 9.58 | 8.11 | 9.14 | 18.1 | 4.8 | |||||||||||||||||||||||||||
| Annualized net interest margin | 3.82 | 3.95 | 4.19 | (3.3) | (8.8) | |||||||||||||||||||||||||||
| Annualized efficiency ratio | 70.82 | % | 71.57 | % | 75.43 | % | (1.0) | % | (6.1) | % | ||||||||||||||||||||||
| For the Year Ended | ||||||||||||||||||||
| Dec. 31, 2019 | Dec. 31, 2018 | Year over Year % Change | ||||||||||||||||||
| Return on average assets | 0.95 | % | 1.03 | % | (7.8) | % | ||||||||||||||
| Return on average equity | 8.90 | 10.24 | (13.1) | |||||||||||||||||
| Net interest margin | 3.98 | 4.22 | (5.7) | |||||||||||||||||
| Efficiency ratio | 73.52 | % | 71.12 | % | 3.4 | % | ||||||||||||||
PER COMMON SHARE DATA
(Shares in thousands, unaudited)
| At or For the Quarter Ended | ||||||||||||||||||||||||||||||||
| Dec. 31, 2019 | Sept. 30, 2019 | Dec. 31, 2018 | Sequential Quarter % Change | Year over Year % Change | ||||||||||||||||||||||||||||
| Basic earnings per share | $ | 0.74 | $ | 0.61 | $ | 0.66 | 21.3 | % | 12.1 | % | ||||||||||||||||||||||
| Diluted earnings per share | $ | 0.72 | $ | 0.60 | $ | 0.64 | 20.0 | 12.5 | ||||||||||||||||||||||||
| Weighted-average basic shares outstanding | 2,533 | 2,526 | 2,506 | 0.3 | 1.1 | |||||||||||||||||||||||||||
| Weighted-average diluted shares outstanding | 2,590 | 2,578 | 2,566 | 0.5 | 0.9 | |||||||||||||||||||||||||||
| Common shares outstanding at period-end | 2,567 | 2,568 | 2,544 | — | 0.9 | |||||||||||||||||||||||||||
| Book value per share | $ | 30.27 | $ | 29.60 | $ | 28.15 | 2.3 | % | 7.5 | % | ||||||||||||||||||||||
| Year Ended | ||||||||||||||||||||
| Dec. 31, 2019 | Dec. 31, 2018 | Year over Year % Change | ||||||||||||||||||
| Basic earnings per share | $ | 2.64 | $ | 2.82 | (6.3) | % | ||||||||||||||
| Diluted earnings per share | $ | 2.58 | $ | 2.74 | (5.8) | |||||||||||||||
| Weighted-average basic shares outstanding | 2,527 | 2,498 | 1.2 | |||||||||||||||||
| Weighted-average diluted shares outstanding | 2,583 | 2,567 | 0.6 | |||||||||||||||||
| Common shares outstanding at period-end | 2,567 | 2,544 | 0.9 | |||||||||||||||||
| Book value per share | $ | 30.27 | $ | 28.15 | 7.5 | % | ||||||||||||||
7
CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)
| For the Quarter Ended: | ||||||||||||||||||||||||||||||||
| Dec. 31, 2019 | Sept. 30, 2019 | Dec. 31, 2018 | Sequential Quarter % Change | Year over Year % Change | ||||||||||||||||||||||||||||
| Interest income | $ | 8,623 | $ | 8,441 | $ | 8,948 | 2.2 | % | (3.6) | % | ||||||||||||||||||||||
| Interest expense | 2,025 | 1,930 | 1,701 | 4.9 | 19.0 | |||||||||||||||||||||||||||
| Net interest income | 6,598 | 6,511 | 7,247 | 1.3 | (9.0) | |||||||||||||||||||||||||||
| Provision for loan losses | 25 | 250 | 25 | 90.0 | — | |||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 6,573 | 6,261 | 7,222 | 5.0 | (9.0) | |||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||
| Service charges and fee income | 517 | 512 | 450 | 1.0 | 14.9 | |||||||||||||||||||||||||||
| Earnings on cash surrender value of bank-owned life insurance | 113 | 81 | 11 | 39.5 | 927.3 | |||||||||||||||||||||||||||
| Mortgage servicing income | 246 | 259 | 247 | (5.0) | (0.4) | |||||||||||||||||||||||||||
| Fair value adjustment on mortgage servicing rights | (184) | (90) | (132) | (104.4) | (39.4) | |||||||||||||||||||||||||||
| Net gain on sale of loans | 673 | 440 | 284 | 53.0 | 137.0 | |||||||||||||||||||||||||||
| Total noninterest income | 1,365 | 1,202 | 860 | 13.6 | 58.7 | |||||||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||||||||
| Salaries and benefits | 3,034 | 3,075 | 3,252 | (1.3) | (6.7) | |||||||||||||||||||||||||||
| Operations | 1,423 | 1,397 | 1,680 | 1.9 | (15.3) | |||||||||||||||||||||||||||
| Regulatory assessments | 101 | (49) | 104 | (306.1) | (2.9) | |||||||||||||||||||||||||||
| Occupancy | 500 | 509 | 503 | (1.8) | (0.6) | |||||||||||||||||||||||||||
| Data processing | 557 | 587 | 552 | (5.1) | 0.9 | |||||||||||||||||||||||||||
| Net loss and expenses on OREO and repossessed assets | 24 | 1 | 24 | nm | — | |||||||||||||||||||||||||||
| Total noninterest expense | 5,639 | 5,520 | 6,115 | 2.2 | (7.8) | |||||||||||||||||||||||||||
| Income before provision for income taxes | 2,299 | 1,943 | 1,967 | 18.3 | 16.9 | |||||||||||||||||||||||||||
| Provision for income taxes | 429 | 395 | 325 | 8.6 | 32.0 | |||||||||||||||||||||||||||
| Net income | $ | 1,870 | $ | 1,548 | $ | 1,642 | 20.8 | % | 13.9 | % | ||||||||||||||||||||||
nm = not meaningful
8
| Year Ended | ||||||||||||||||||||
| December 31, 2019 | December 31, 2018 | Year over Year % Change | ||||||||||||||||||
| Interest income | $ | 34,074 | $ | 32,788 | 3.9 | % | ||||||||||||||
| Interest expense | 7,617 | 5,360 | 42.0 | |||||||||||||||||
| Net interest income | 26,457 | 27,428 | (3.5) | |||||||||||||||||
| (Recapture) provision for loan losses | (125) | 525 | (123.8) | |||||||||||||||||
| Net interest income after (recapture) provision for loan losses | 26,582 | 26,903 | (1.2) | |||||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Service charges and fee income | 1,954 | 1,876 | 4.2 | |||||||||||||||||
| Earnings on cash surrender value of bank-owned life insurance | 381 | 320 | 19.1 | |||||||||||||||||
| Mortgage servicing income | 1,002 | 1,075 | (6.8) | |||||||||||||||||
| Fair value adjustment on mortgage servicing rights | (760) | (513) | (48.1) | |||||||||||||||||
| Net gain on sale of loans | 1,956 | 1,417 | 38.0 | |||||||||||||||||
| Other income | — | 490 | nm | |||||||||||||||||
| Total noninterest income | 4,533 | 4,665 | (2.8) | |||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Salaries and benefits | 12,402 | 12,775 | (2.9) | |||||||||||||||||
| Operations | 5,905 | 5,472 | 7.9 | |||||||||||||||||
| Regulatory assessments | 279 | 432 | (35.4) | |||||||||||||||||
| Occupancy | 2,060 | 2,139 | (3.7) | |||||||||||||||||
| Data processing | 2,104 | 1,919 | 9.6 | |||||||||||||||||
| Net loss and expenses on OREO and repossessed assets | 35 | 86 | (59.3) | |||||||||||||||||
| Total noninterest expense | 22,785 | 22,823 | (0.2) | |||||||||||||||||
| Income before provision for income taxes | 8,330 | 8,745 | (4.7) | |||||||||||||||||
| Provision for income taxes | 1,651 | 1,706 | (3.2) | |||||||||||||||||
| Net income | $ | 6,679 | $ | 7,039 | (5.1) | % | ||||||||||||||
nm = not meaningful
9
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, unaudited)
| Dec. 31, 2019 | Dec. 31, 2018 | Year over Year % Change | ||||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Cash and cash equivalents | $ | 55,770 | $ | 61,810 | (9.8) | % | ||||||||||||||
| Available-for-sale securities, at fair value | 9,306 | 4,957 | 87.7 | |||||||||||||||||
| Loans held-for-sale | 1,063 | 1,172 | (9.3) | |||||||||||||||||
| Loans held-for-portfolio | 619,887 | 619,543 | 0.1 | |||||||||||||||||
| Allowance for loan losses | (5,640) | (5,774) | (2.3) | |||||||||||||||||
| Total loans held-for-portfolio, net | 614,247 | 613,769 | 0.1 | |||||||||||||||||
| Accrued interest receivable | 2,206 | 2,287 | (3.5) | |||||||||||||||||
| Bank-owned life insurance, net | 14,183 | 13,365 | 6.1 | |||||||||||||||||
| Other real estate owned ("OREO") and other repossessed assets, net | 575 | 575 | — | |||||||||||||||||
| Mortgage servicing rights, at fair value | 3,239 | 3,414 | (5.1) | |||||||||||||||||
| Federal Home Loan Bank ("FHLB") stock, at cost | 1,160 | 4,134 | (71.9) | |||||||||||||||||
| Premises and equipment, net | 6,767 | 7,044 | (3.9) | |||||||||||||||||
| Right-of-use assets | 7,641 | — | nm | |||||||||||||||||
| Other assets | 3,696 | 4,208 | (12.2) | |||||||||||||||||
| TOTAL ASSETS | $ | 719,853 | $ | 716,735 | 0.4 | |||||||||||||||
| LIABILITIES | ||||||||||||||||||||
| Interest-bearing deposits | $ | 521,434 | $ | 457,535 | 14.0 | |||||||||||||||
| Noninterest-bearing deposits | 95,284 | 96,066 | (0.8) | |||||||||||||||||
| Total deposits | 616,718 | 553,601 | 11.4 | |||||||||||||||||
| Borrowings | 7,500 | 84,000 | (91.1) | |||||||||||||||||
| Accrued interest payable | 226 | 137 | 65.0 | |||||||||||||||||
| Lease liabilities | 8,010 | — | nm | |||||||||||||||||
| Other liabilities | 8,368 | 6,681 | 25.3 | |||||||||||||||||
| Advance payments from borrowers for taxes and insurance | 1,305 | 689 | 89.4 | |||||||||||||||||
| TOTAL LIABILITIES | 642,127 | 645,108 | (0.5) | |||||||||||||||||
| STOCKHOLDERS' EQUITY: | ||||||||||||||||||||
| Common stock | 25 | 25 | — | |||||||||||||||||
| Additional paid-in capital | 26,343 | 25,663 | 2.6 | |||||||||||||||||
| Unearned shares – Employee Stock Ownership Plan ("ESOP") | (227) | (340) | (33.2) | |||||||||||||||||
| Retained earnings | 51,410 | 46,165 | 11.4 | |||||||||||||||||
| Accumulated other comprehensive income, net of tax | 175 | 114 | 53.5 | |||||||||||||||||
| TOTAL STOCKHOLDERS' EQUITY | 77,726 | 71,627 | 8.5 | |||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 719,853 | $ | 716,735 | 0.4 | % | ||||||||||||||
nm = not meaningful
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LOANS
(Dollars in thousands, unaudited)
| Dec. 31, 2019 | Dec. 31, 2018 | Year over Year % Change | ||||||||||||||||||
| Real estate loans: | ||||||||||||||||||||
| One-to-four family | $ | 149,393 | $ | 169,830 | (12.0) | % | ||||||||||||||
| Home equity | 23,845 | 27,655 | (13.8) | |||||||||||||||||
| Commercial and multifamily | 261,216 | 252,644 | 3.4 | |||||||||||||||||
| Construction and land | 75,756 | 65,259 | 16.1 | |||||||||||||||||
| Total real estate loans | 510,210 | 515,388 | (1.0) | |||||||||||||||||
| Consumer Loans: | ||||||||||||||||||||
| Manufactured homes | 20,613 | 20,145 | 2.3 | |||||||||||||||||
| Floating homes | 43,799 | 40,806 | 7.3 | |||||||||||||||||
| Other consumer | 8,302 | 6,628 | 25.3 | |||||||||||||||||
| Total consumer loans | 72,714 | 67,579 | 7.6 | |||||||||||||||||
| Commercial business loans | 38,931 | 38,804 | 0.3 | |||||||||||||||||
| Total loans | 621,855 | 621,771 | — | |||||||||||||||||
| Less: | ||||||||||||||||||||
| Deferred fees, net | (1,968) | (2,228) | (11.7) | |||||||||||||||||
| Allowance for loan losses | (5,640) | (5,774) | (2.3) | |||||||||||||||||
| Total loans held for portfolio, net | $ | 614,247 | $ | 613,769 | 0.1 | % | ||||||||||||||
DEPOSITS
(Dollars in thousands, unaudited)
| Dec. 31, 2019 | Dec. 31, 2018 | Year over Year % Change | ||||||||||||||||||
| Noninterest-bearing | $ | 95,284 | $ | 96,066 | (0.8) | % | ||||||||||||||
| Interest-bearing | 161,774 | 164,919 | (1.9) | |||||||||||||||||
| Savings | 57,936 | 54,102 | 7.1 | |||||||||||||||||
| Money market | 50,337 | 46,689 | 7.8 | |||||||||||||||||
| Certificates | 251,387 | 191,825 | 31.1 | |||||||||||||||||
| Total deposits | $ | 616,718 | $ | 553,601 | 11.4 | % | ||||||||||||||
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CREDIT QUALITY DATA
(Dollars in thousands, unaudited)
| At or For the Year Ended: | ||||||||||||||||||||
| Dec. 31, 2019 | Dec. 31, 2018 | Year over Year % Change | ||||||||||||||||||
| Nonaccrual loans | $ | 4,164 | $ | 2,541 | 63.9 | % | ||||||||||||||
| Nonperforming TDRs | 588 | 126 | 366.7 | |||||||||||||||||
| Total nonperforming loans | 4,752 | 2,667 | 78.2 | |||||||||||||||||
| OREO and other repossessed assets | 575 | 575 | — | |||||||||||||||||
| Total nonperforming assets | $ | 5,327 | $ | 3,242 | 64.3 | |||||||||||||||
| Net (charge-offs) recoveries during the year | (9) | 8 | (212.5) | |||||||||||||||||
| (Recapture) provision for loan losses during the year | (125) | 525 | (123.8) | |||||||||||||||||
| Allowance for loan losses | 5,640 | 5,774 | (2.3) | |||||||||||||||||
| Allowance for loan losses to total loans | 0.91 | % | 0.93 | % | (2.2) | |||||||||||||||
| Allowance for loan losses to total nonperforming loans | 118.69 | % | 216.48 | % | (45.2) | |||||||||||||||
| Nonperforming loans to total loans | 0.77 | % | 0.43 | % | 79.1 | |||||||||||||||
| Nonperforming assets to total assets | 0.74 | % | 0.45 | % | 64.4 | % | ||||||||||||||
OTHER STATISTICS
(Dollars in thousands, unaudited)
| At or For the Year Ended: | ||||||||||||||||||||
| Dec. 31, 2019 | Dec. 31, 2018 | Year over Year % Change | ||||||||||||||||||
| Sound Community Bank: | ||||||||||||||||||||
| Total loans to total deposits | 100.69 | % | 112.12 | % | (10.2) | % | ||||||||||||||
| Noninterest-bearing deposits to total deposits | 15.45 | % | 17.35 | % | (11.0) | % | ||||||||||||||
| Sound Financial Bancorp, Inc.: | ||||||||||||||||||||
| Average total assets for the year | $ | 725,693 | $ | 718,227 | 1.0 | % | ||||||||||||||
| Average total equity for the year | $ | 77,427 | $ | 71,287 | 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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