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Sound Financial Bancorp, Inc. Q4 2024 Results

/EIN News/ -- SEATTLE, Jan. 29, 2025 (GLOBE NEWSWIRE) --  Sound Financial Bancorp, Inc. (the "Company") (Nasdaq: SFBC), the holding company for Sound Community Bank (the "Bank"), today reported net income of $1.9 million for the quarter ended December 31, 2024, or $0.74 diluted earnings per share, as compared to net income of $1.2 million, or $0.45 diluted earnings per share, for the quarter ended September 30, 2024, and $1.2 million, or $0.47 diluted earnings per share, for the quarter ended December 31, 2023. The Company also announced today that its Board of Directors declared a cash dividend on the Company's common stock of $0.19 per share, payable on February 26, 2025 to stockholders of record as of the close of business on February 12, 2025.

Comments from the President and Chief Executive Officer  
 
“The Bank ended the year with many positives, including a 15-basis-point increase in net interest margin compared to the third quarter of 2024. This was largely due to our significant progress in reducing deposit costs, which fell by 16 basis points,” remarked Laurie Stewart, President and Chief Executive Officer. “Additionally, nonperforming loans decreased by 11.8% from the third quarter, and for the first time in more than a decade, we have no OREO," concluded Ms. Stewart.

"Notable progress was made in reducing funding costs during the quarter and in controlling expenses throughout the entire year. We hope to continue this momentum in 2025. Our staff across the company played an important role in these accomplishments by focusing on client relationships and increasing efficiencies through technological improvements," explained Wes Ochs, Executive Vice President and Chief Financial Officer.

Mr. Ochs continued, "We ended the year with the same balance sheet strategy that we used to close out 2023, which helped reduce the Bank’s asset size below $1 billion. This strategy is intended to provide the Bank with additional operational flexibility and continued cost savings in 2025."
Q4 2024 Financial Performance
Total assets decreased $107.3 million or 9.7% to $993.6 million at December 31, 2024, from $1.10 billion at September 30, 2024, and decreased $1.6 million or 0.2% from $995.2 million at December 31, 2023.
    Net interest income increased $347 thousand or 4.4% to $8.2 million for the quarter ended December 31, 2024, from $7.9 million for the quarter ended September 30, 2024, and increased $653 thousand or 8.6% from $7.6 million for the quarter ended December 31, 2023.


   
    Net interest margin ("NIM"), annualized, was 3.13% for the quarter ended December 31, 2024, compared to 2.98% for the quarter ended September 30, 2024 and 3.04% for the quarter ended December 31, 2023.


Loans held-for-portfolio decreased $1.6 million or 0.2% to $900.2 million at December 31, 2024, compared to $901.7 million at September 30, 2024, and increased $5.7 million or 0.6% from $894.5 million at December 31, 2023.

   
    A $14 thousand provision for credit losses was recorded for the quarter ended December 31, 2024, compared to an $8 thousand provision and a $27 thousand release of provision for credit losses for the quarters ended September 30, 2024 and December 31, 2023, respectively. At December 31, 2024, the allowance for credit losses on loans to total loans outstanding was 0.94%, compared to 0.95% at September 30, 2024 and 0.98% December 31, 2023.


Total deposits decreased $92.4 million or 9.9% to $837.8 million at December 31, 2024, from $930.2 million at September 30, 2024, and increased $11.3 million or 1.4% from $826.5 million at December 31, 2023. Noninterest-bearing deposits increased $2.8 million or 2.2% to $132.5 million at December 31, 2024 compared to $129.7 million at September 30, 2024, and increased $5.8 million or 4.6% compared to $126.7 million at December 31, 2023.

   
    Total noninterest income decreased $75 thousand or 6.1% to $1.2 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and increased $94 thousand or 8.8% compared to the quarter ended December 31, 2023.


The loans-to-deposits ratio was 108% at December 31, 2024, compared to 97% at September 30, 2024 and 108% at December 31, 2023.

   
    Total noninterest expense decreased $621 thousand or 8.1% to $7.1 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and decreased $248 thousand or 3.4% compared to the quarter ended December 31, 2023.


Total nonperforming loans decreased $998 thousand or 11.8% to $7.5 million at December 31, 2024, from $8.5 million at September 30, 2024, and increased $3.9 million or 110.7% from $3.6 million at December 31, 2023. Nonperforming loans to total loans was 0.83% and the allowance for credit losses on loans to total nonperforming loans was 113.46% at December 31, 2024.

   
    The Bank continued to maintain capital levels in excess of regulatory requirements and was categorized as "well-capitalized" at December 31, 2024.

       

Operating Results

Net interest income increased $347 thousand, or 4.4%, to $8.2 million for the quarter ended December 31, 2024, compared to $7.9 million for the quarter ended September 30, 2024, and increased $653 thousand, or 8.6%, from $7.6 million for the quarter ended December 31, 2023.The increase from the prior quarter was primarily the result of lower funding costs and an increase in average yield on loans receivable and investments, partially offset by a decrease in the average balance and yield on interest-bearing cash. The increase in net interest income compared to the same quarter one year ago was primarily due to a higher average yield on interest-earning assets, particularly loans receivable and investments, and an increase in the average balances of both loans receivable and interest-bearing cash, partially offset by a lower average yield on interest-bearing cash and higher funding costs.

Interest income decreased $102 thousand, or 0.7%, to $14.7 million for the quarter ended December 31, 2024, compared to $14.8 million for the quarter ended September 30, 2024, and increased $1.4 million, or 10.5%, from $13.3 million for the quarter ended December 31, 2023. The decrease from the prior quarter was primarily due to a lower average balance of interest-bearing cash, and a 59 basis point decline in the average yield on interest-bearing cash, offset by a seven basis point increase in the average loan yield and a 16 basis point increase in the average yield on investments. The increase in interest income compared to the same quarter last year was due primarily to higher average balances of loans and interest-bearing cash, a 37 basis point increase in the average yield on loans, and a 43 basis point increase in the average yield on investments, partially offset by a decline in the average balance of investments and a 59 basis point decline in the average yield on interest-bearing cash.

Interest income on loans increased $194 thousand, or 1.5%, to $13.1 million for the quarter ended December 31, 2024, compared to $12.9 million for the quarter ended September 30, 2024, and increased $1.0 million, or 8.6%, from $12.0 million for the quarter ended December 31, 2023. The average balance of total loans was $900.8 million for the quarter ended December 31, 2024, up from $898.6 million for the quarter ended September 30, 2024 and $884.7 million for the quarter ended December 31, 2023. The average yield on total loans was 5.77% for the quarter ended December 31, 2024, up from 5.70% for the quarter ended September 30, 2024 and 5.40% for the quarter ended December 31, 2023. The increase in the average loan yield during the current quarter, compared to both the prior quarter and the fourth quarter of 2023, was primarily due to the origination of new loans at higher interest rates. Additionally, variable-rate loans resetting to higher rates contributed to the increase in average yield compared to the prior quarters. The increase in the average balance during the current quarter compared to the prior quarter was primarily due to growth in commercial and multifamily loans, manufactured housing loans and floating home loans. This was partially offset by a decline in construction and land loans and commercial business loans. The average balances for one-to-four family loans, home equity loans, and other consumer loans remained relatively flat from the third quarter of 2024. The increase in the average balance of loans during the current quarter compared to the fourth quarter of 2023 was primarily due to loan growth across all categories, except for one-to-four family loans, construction and land loans, commercial business loans, and other consumer loans, with the largest decrease being in construction and land loans.

Interest income on investments was $132 thousand for both the quarters ended December 31, 2024 and September 30, 2024, and $129 thousand for the quarter ended December 31, 2023. Interest income on interest-bearing cash decreased $296 thousand to $1.5 million for the quarter ended December 31, 2024, compared to $1.8 million for the quarter ended September 30, 2024, and increased $359 thousand from $1.2 million for the quarter ended December 31, 2023. The decrease from the prior quarter was due to decreases in the average yield and average balance of interest-bearing cash. The increase from the same quarter in the prior year was a result of a higher average balance, partially offset by a lower average yield.

Interest expense decreased $449 thousand, or 6.4%, to $6.5 million for the quarter ended December 31, 2024, from $7.0 million for the quarter ended September 30, 2024, and increased $746 thousand, or 12.9%, from $5.8 million for the quarter ended December 31, 2023. The decrease in interest expense during the current quarter from the prior quarter was primarily the result of average balance decreases of $3.8 million in demand and NOW accounts, $2.3 million in certificate accounts and $9.5 million in FHLB advances, as well as lower average rates paid on all categories of interest-bearing deposits, partially offset by a $10.2 million increase in the average balance of savings and money market accounts. The increase in interest expense during the current quarter from the same quarter a year ago was primarily the result of a $91.9 million increase in the average balance of savings and money market accounts and a $1.3 million increase in the average balance of certificate accounts, as well as higher average rates paid on savings and money market accounts. This was partially offset by a $25.3 million decrease in the average balance of demand and NOW accounts and a $9.6 million decrease in the average balance of FHLB advances. The average cost of deposits was 2.58% for the quarter ended December 31, 2024, down from 2.74% for the quarter ended September 30, 2024 and up from 2.38% for the quarter ended December 31, 2023. The average cost of FHLB advances was 4.31% for the quarter ended December 31, 2024, down from 4.32% for the quarter ended September 30, 2024, and up from 4.26% for the quarter ended December 31, 2023.

NIM (annualized) was 3.13% for the quarter ended December 31, 2024, up from 2.98% for the quarter ended September 30, 2024 and 3.04% for the quarter ended December 31, 2023. The increase in NIM from the prior quarter was the result of lower cost of funding, partially offset by a decrease in interest income on interest-earning assets. The increase in NIM from the quarter one year ago was primarily due to an increase in interest income on interest-earning assets, driven by the higher average balance in loans and interest-bearing cash and a higher yield earned on loans and investments, partially offset by a higher average balance of and cost of savings and money market accounts.

A provision for credit losses of $14 thousand was recorded for the quarter ended December 31, 2024, consisting of a release of provision for credit losses on loans of $73 thousand and a provision for credit losses on unfunded loan commitments of $87 thousand. This compared to a provision for credit losses of $8 thousand for the quarter ended September 30, 2024, consisting of a provision for credit losses on loans of $106 thousand and a release of provision for credit losses on unfunded loan commitments of $98 thousand, and a release of provision for credit losses of $27 thousand for the quarter ended December 31, 2023, consisting of a provision for credit losses on loans of $337 thousand and a release of the provision for credit losses on unfunded loan commitments of $364 thousand. The increase in the provision for credit losses for the quarter ended December 31, 2024 compared to the quarter ended September 30, 2024 resulted primarily from an additional qualitative adjustment related to our loan review, additional enhancements to the loss model related to how we adjust for the qualitative component, including the utilization of a scorecard to drive managements analysis, and growth in our unfunded construction loan portfolio, which has a higher loss rate than our other loan portfolios. These increases were offset by lower reserves in both our floating home sub-segment of other consumer loans within our quantitative analysis and in our qualitative analysis related to market conditions and value of underlying collateral, as economic conditions have improved. Expected loss estimates consider various factors, such as market conditions, borrower-specific information, projected delinquencies, and the impact of economic conditions on borrowers' ability to repay.

Noninterest income decreased $75 thousand, or 6.1%, to $1.2 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and increased $94 thousand, or 8.8%, compared to the quarter ended December 31, 2023. The decrease from the prior quarter was primarily related to a $24 thousand downward adjustment in fair value of mortgage servicing rights and a $59 thousand decrease in earnings from bank-owned life insurance (“BOLI”), both influenced by fluctuating market interest rates. These decreases were partially offset by an increase of $13 thousand in net gain on sale of loans due to higher sales volume in the fourth quarter of 2024, and a $7 thousand increase in gain on disposal of assets due to insurance claims exceeding the book value on the replacement of stolen laptops in the second quarter of 2024. The increase in noninterest income from the same quarter of 2023 was primarily due an $43 thousand increase in service charges and fee income primarily due to increases in late fees on loans, higher interchange income and income related to a new, multi-year agreement with our credit card provider that was effective in 2024, a late fee on one commercial loan and higher specialty deposit fees due to fewer reversals of fees in 2024, a $173 thousand increase in the fair value adjustment on mortgage servicing rights due to changes in prepayment speeds, servicing costs, and discount rate, and a $7 thousand increase in gain on disposal of assets as noted above. These increases were partially offset by a $95 thousand decrease in earnings on BOLI due to market rate fluctuations, and a $23 thousand decrease in net gain on sale of loans due to fewer loans sold, and an $11 thousand decrease in mortgage servicing income as a result of the portfolio paying down at a faster rate than we are replacing the loans. Loans sold during the quarter ended December 31, 2024, totaled $3.5 million, compared to $2.4 million and $4.5 million of loans sold during the quarters ended September 30, 2024 and December 31, 2023, respectively.

Noninterest expense decreased $621 thousand, or 8.1%, to $7.1 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and decreased $248 thousand, or 3.4%, from the quarter ended December 31, 2023. The decrease from the quarter ended September 30, 2024 was primarily a result of lower salaries and benefits and operations expenses, partially offset by higher data processing expense. Salaries and benefits decreased $549 thousand primarily due to lower incentive compensation, lower retirement plan expense due to fluctuating market rates, lower medical expense due to higher medical costs during the third quarter of 2024, and lower salaries expense, as well as higher deferred salaries due to higher loan production. Operations expense decreased $211 thousand primarily due to a reversal of state and local tax expense related to higher estimated tax payments made than actual tax due, and lower operational losses in the current quarter as the prior quarter included the charge-off of a fraudulently obtained loan. This was partially offset by an $165 thousand increase in data processing expenses, reflecting new technology implementation costs. Compared to same quarter in 2023, the decrease in noninterest expense was primarily due to lower operations expenses, occupancy expenses and data processing expenses, which were partially offset by a $118 thousand increase in salaries and benefits costs. Operations expenses decreased due to reduction in loan originations costs, office expenses, operational losses, charitable contributions and state and local taxes, partially offset by higher professional fees primarily related to costs for future FDIC Improvement Act implementation. Data processing expenses decreased due to lower costs related to our core processor, while occupancy expenses decreased primarily due to fully amortized leasehold improvements. The increase in salaries and benefits compared to the same quarter last year reflected higher incentive compensation, lower deferred salaries, higher medical expenses due primarily to a change in insurance providers, and a higher contribution to our employee stock ownership plan due to the increase in value of our stock in 2024. This was partially offset by lower retirement plan expenses due to fluctuating market rates and lower salaries from a restructuring of positions at the end of 2023.

Balance Sheet Review, Capital Management and Credit Quality

Assets at December 31, 2024 totaled $993.6 million, down from $1.10 billion at September 30, 2024 and $995.22 million at December 31, 2023. The decrease in total assets from September 30, 2024 was primarily due to decreases in cash and cash equivalents and loans held-for-portfolio. The decrease from one year ago was primarily a result of lower balances of cash and cash equivalents and investment securities, offset by an increase in loans held-for-portfolio.

Cash and cash equivalents decreased $105.3 million, or 70.7%, to $43.6 million at December 31, 2024, compared to $148.9 million at September 30, 2024, and decreased $6.0 million, or 12.2%, from $49.7 million at December 31, 2023. The decrease from the prior quarter was primarily due to higher deposit withdrawals, as well as the strategic decision to sell reciprocal deposits at the end of the year. Cash and cash equivalents decreased from one year ago primarily due to the increase in loans held-for-portfolio and the payoff of one FHLB borrowing, partially offset by an increase in deposits.

Investment securities decreased $251 thousand, or 2.5%, to $9.9 million at December 31, 2024, compared to $10.2 million at September 30, 2024, and decreased $533 thousand, or 5.1%, from $10.5 million at December 31, 2023. Held-to-maturity securities totaled $2.1 million at both December 31, 2024 and September 30, 2024, and totaled $2.2 million at December 31, 2023. Available-for-sale securities totaled $7.8 million at December 31, 2024, compared to $8.0 million at September 30, 2024 and $8.3 million at December 31, 2023.

Loans held-for-portfolio were $900.2 million at December 31, 2024, compared to $901.7 million at September 30, 2024 and $894.5 million at December 31, 2023.

Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, decreased $1.1 million, or 12.9%, to $7.5 million at December 31, 2024, from $8.6 million at September 30, 2024 and increased $3.4 million, or 81.3%, from $4.1 million at December 31, 2023. The decrease in NPAs from September 30, 2024 was primarily due to the payoff of seven loans totaling $1.2 million, one loan totaling $76 thousand returning to accrual status, and sale of one other real estate owned property for $115 thousand for a small net gain on sale, partially offset by the addition of seven loans totaling $326 thousand to nonaccrual. The increase in NPAs from one year ago was primarily due to the placement of an additional $9.3 million of loans on nonaccrual status, which included a $3.7 million matured commercial real estate loan where the borrower is in the process of securing financing from another lender, and a $2.4 million floating home loan, all of which are well secured. These additions were partially offset by payoffs totaling $4.2 million, the return of $784 thousand of loans to accrual status, charge-offs of $142 thousand, the sale of two other real estate owned properties for $685 thousand, and normal loan payments.

NPAs to total assets were 0.75%, 0.78% and 0.42% at December 31, 2024, September 30, 2024 and December 31, 2023, respectively. The allowance for credit losses on loans to total loans outstanding was 0.94% at December 31, 2024, compared to 0.95% at September 30, 2024 and 0.98% at December 31, 2023. Net loan charge-offs for the fourth quarter of 2024 totaled $13 thousand, compared to $14 thousand for the third quarter of 2024, and $15 thousand for the fourth quarter of 2023.

The following table summarizes our NPAs at the dates indicated (dollars in thousands):

  December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
Nonperforming Loans:                  
One-to-four family $ 537     $ 745     $ 822     $ 835     $ 1,108  
Home equity loans   298       338       342       83       84  
Commercial and multifamily   3,734       4,719       5,161       4,747        
Construction and land   24       25       28       29        
Manufactured homes   521       230       136       166       228  
Floating homes   2,363       2,377       2,417       3,192        
Commercial business   11       23                   2,135  
Other consumer   3       32       3       1       1  
Total nonperforming loans   7,491       8,489       8,909       9,053       3,556  
OREO and Other Repossessed Assets:                  
Commercial and multifamily                     575       575  
Manufactured homes         115       115       115        
Total OREO and repossessed assets         115       115       690       575  
Total NPAs $ 7,491     $ 8,604     $ 9,024     $ 9,743     $ 4,131  
                   
Percentage of Nonperforming Loans:                  
One-to-four family   7.3 %     8.7 %     9.1 %     8.5 %     26.9 %
Home equity loans   4.0       3.9       3.8       0.9       2.0  
Commercial and multifamily   49.8       54.8       57.2       48.7        
Construction and land   0.3       0.3       0.3       0.3        
Manufactured homes   7.0       2.7       1.5       1.7       5.5  
Floating homes   31.5       27.6       26.8       32.8        
Commercial business   0.1       0.3                   51.7  
Other consumer         0.4                    
Total nonperforming loans   100.0       98.7       98.7       92.9       86.1  
Percentage of OREO and Other Repossessed Assets:                  
Commercial and multifamily                     5.9       13.9  
Manufactured homes         1.3       1.3       1.2        
Total OREO and repossessed assets         1.3       1.3       7.1       13.9  
Total NPAs   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %

The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited):

  At or For the Quarter Ended:
  December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
Allowance for Credit Losses on Loans                  
Balance at beginning of period $ 8,585     $ 8,493     $ 8,598     $ 8,760     $ 8,438  
(Release of) provision for credit losses during the period   (73 )     106       (88 )     (106 )     337  
Net charge-offs during the period   (13 )     (14 )     (17 )     (56 )     (15 )
Balance at end of period $ 8,499     $ 8,585     $ 8,493     $ 8,598     $ 8,760  
Allowance for Credit Losses on Unfunded Loan Commitments                  
Balance at beginning of period $ 147     $ 245     $ 266     $ 193     $ 557  
Provision for (release of) provision for credit losses during the period   87       (98 )     (21 )     73       (364 )
Balance at end of period   234       147       245       266       193  
Allowance for Credit Losses $ 8,733     $ 8,732     $ 8,738     $ 8,864     $ 8,953  
Allowance for credit losses on loans to total loans   0.94 %     0.95 %     0.96 %     0.96 %     0.98 %
Allowance for credit losses to total loans   0.97 %     0.97 %     0.98 %     0.99 %     1.00 %
Allowance for credit losses on loans to total nonperforming loans   113.46 %     101.13 %     95.33 %     94.97 %     246.34 %
Allowance for credit losses to total nonperforming loans   116.58 %     102.86 %     98.08 %     97.91 %     251.77 %

Total deposits decreased $92.4 million, or 9.9%, to $837.8 million at December 31, 2024, from $930.2 million at September 30, 2024 and increased $11.3 million, or 1.4%, from $826.5 million at December 31, 2023. The decrease in total deposits compared to the prior quarter-end was primarily a result of the movement of reciprocal deposits off balance sheet for strategic objectives at year-end, followed by the return of those deposits to our balance sheet in the first quarter of 2025, and a decrease in one high cost money market depositor relationship as part of our strategic decision to decrease our overall cost of funds. Noninterest-bearing deposits increased $2.8 million, or 2.2%, to $132.5 million at December 31, 2024, compared to $129.7 million at September 30, 2024 and increased $5.8 million, or 4.6%, from $126.7 million at December 31, 2023. Noninterest-bearing deposits represented 15.8%, 14.0% and 15.3% of total deposits at December 31, 2024, September 30, 2024 and December 31, 2023, respectively.

FHLB advances totaled $25.0 million at December 31, 2024, compared to $40.0 million at both September 30, 2024, and December 31, 2023. The decrease from both prior dated was due to the repayment of a $15.0 million FHLB advance that matured in November 2024. FHLB advances are primarily used to support organic loan growth and to maintain liquidity ratios in line with our asset/liability objectives. FHLB advances outstanding at December 31, 2024 had maturities ranging from early 2026 through early 2028. Subordinated notes, net totaled $11.8 million at each of December 31, 2024, September 30, 2024 and December 31, 2023.

Stockholders’ equity totaled $103.7 million at December 31, 2024, an increase of $1.4 million, or 1.4%, from $102.2 million at September 30, 2024, and an increase of $3.0 million, or 3.0%, from $100.7 million at December 31, 2023. The increase in stockholders’ equity from September 30, 2024 was primarily the result of $1.9 million of net income earned during the current quarter, $98 thousand in share-based compensation, and $19 thousand in common stock options exercised, partially offset by a $122 thousand increase in accumulated other comprehensive loss, net of tax and the payment of $486 thousand in cash dividends to the Company's stockholders.

Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, which is headquartered in Seattle, Washington and has 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. For more information, please visit www.soundcb.com.

Forward-Looking Statements Disclaimer

When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's other 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 listed below or because of other factors that we cannot foresee that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made.

Factors which could cause actual results to differ materially, include, but are not limited to:adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation or deflation, a recession or slowed economic growth, as well as supply chain disruptions; changes in the interest rate environment, including increases and decreases in the Board of Governors of the Federal Reserve System (the Federal Reserve) benchmark rate and the duration at which such interest rate levels are maintained, which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity; the impact of inflation and the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; changes in consumer spending, borrowing and savings habits; 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 credit 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;expectations regarding key growth initiatives and strategic priorities; environmental, social and governance goals and targets; results of examinations of the Company or the Bank by their regulators; increased competition; changes in management's business strategies; legislative changes; changes in the regulatory and tax environments in which the Company operates; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on our third-party vendors; the potential imposition of new tariffs or changes to existing trade policies that could affect economic activity or specific industry sector; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest and other external events on our business; and other factors described in the Company's latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other documents filed with or furnished to the SEC, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The risks inherent in these factors could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company and could negatively affect the Company's operating and stock performance.

The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement.


CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)
    For the Quarter Ended
    December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
Interest income   $ 14,736     $ 14,838   $ 14,039     $ 13,760     $ 13,337  
Interest expense     6,516       6,965     6,591       6,300       5,770  
Net interest income     8,220       7,873     7,448       7,460       7,567  
Provision for (release of) credit losses     14       8     (109 )     (33 )     (27 )
Net interest income after provision for (release of) credit losses     8,206       7,865     7,557       7,493       7,594  
Noninterest income:                    
Service charges and fee income     619       628     761       612       576  
Earnings on bank-owned life insurance     127       186     134       177       222  
Mortgage servicing income     277       280     279       282       288  
Fair value adjustment on mortgage servicing rights     77       101     (116 )     (65 )     (96 )
Net gain on sale of loans     53       40     74       90       76  
Other income     7           30              
Total noninterest income     1,160       1,235     1,162       1,096       1,066  
Noninterest expense:                    
Salaries and benefits     3,920       4,469     4,658       4,543       3,802  
Operations     1,329       1,540     1,569       1,457       1,537  
Regulatory assessments     189       189     220       189       198  
Occupancy     409       414     397       444       458  
Data processing     1,232       1,067     910       1,017       1,311  
Net (gain) loss on OREO and repossessed assets     (21 )         (17 )     6        
Total noninterest expense     7,058       7,679     7,737       7,656       7,306  
Income before provision for income taxes     2,308       1,421     982       933       1,354  
Provision for income taxes     389       267     187       163       143  
Net income   $ 1,919     $ 1,154   $ 795     $ 770     $ 1,211  


CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)
     
    For theYear Ended December 31
      2024       2023  
Interest income   $ 57,374     $ 50,609  
Interest expense     26,372       16,759  
Net interest income     31,002       33,850  
(Release of) provision for credit losses     (120 )     (273 )
Net interest income after (release of) provision for credit losses     31,122       34,123  
Noninterest income:        
Service charges and fee income     2,620       2,527  
Earnings on bank-owned life insurance     625       1,179  
Mortgage servicing income     1,118       1,179  
Fair value adjustment on mortgage servicing rights     (4 )     (219 )
Net gain on sale of loans     258       340  
Other income     38        
Total noninterest income     4,655       5,006  
Noninterest expense:        
Salaries and benefits     17,590       17,135  
Operations     5,894       6,095  
Regulatory assessments     787       688  
Occupancy     1,665       1,810  
Data processing     4,226       4,388  
Net (gain) loss on OREO and repossessed assets     (31 )     13  
Total noninterest expense     30,131       30,129  
Income before provision for income taxes     5,646       9,000  
Provision for income taxes     1,006       1,561  
Net income   $ 4,640     $ 7,439  


CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, unaudited)




    December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
ASSETS                    
Cash and cash equivalents   $ 43,641     $ 148,930     $ 135,111     $ 137,977     $ 49,690  
Available-for-sale securities, at fair value     7,790       8,032       7,996       8,115       8,287  
Held-to-maturity securities, at amortized cost     2,130       2,139       2,147       2,157       2,166  
Loans held-for-sale     487       65       257       351       603  
Loans held-for-portfolio     900,171       901,733       889,274       897,877       894,478  
Allowance for credit losses - loans     (8,499 )     (8,585 )     (8,493 )     (8,598 )     (8,760 )
Total loans held-for-portfolio, net     891,672       893,148       880,781       889,279       885,718  
Accrued interest receivable     3,471       3,705       3,413       3,617       3,452  
Bank-owned life insurance, net     22,490       22,363       22,172       22,037       21,860  
Other real estate owned ("OREO") and other repossessed assets, net           115       115       690       575  
Mortgage servicing rights, at fair value     4,769       4,665       4,540       4,612       4,632  
Federal Home Loan Bank ("FHLB") stock, at cost     1,730       2,405       2,406       2,406       2,396  
Premises and equipment, net     4,697       4,807       4,906       6,685       5,240  
Right-of-use assets     3,725       3,779       4,020       4,259       4,496  
Other assets     7,031       6,777       6,995       4,500       6,106  
TOTAL ASSETS   $ 993,633     $ 1,100,930     $ 1,074,859     $ 1,086,685     $ 995,221  
LIABILITIES                    
Interest-bearing deposits   $ 705,267     $ 800,480     $ 781,854     $ 788,217     $ 699,813  
Noninterest-bearing deposits     132,532       129,717       124,915       128,666       126,726  
Total deposits     837,799       930,197       906,769       916,883       826,539  
Borrowings     25,000       40,000       40,000       40,000       40,000  
Accrued interest payable     765       908       760       719       817  
Lease liabilities     4,013       4,079       4,328       4,576       4,821  
Other liabilities     9,371       9,711       9,105       9,578       9,563  
Advance payments from borrowers for taxes and insurance     1,260       2,047       812       2,209       1,110  
Subordinated notes, net     11,759       11,749       11,738       11,728       11,717  
TOTAL LIABILITIES     889,967       998,691       973,512       985,693       894,567  
STOCKHOLDERS' EQUITY:                    
Common stock     25       25       25       25       25  
Additional paid-in capital     28,413       28,296       28,198       28,110       27,990  
Retained earnings     76,272       74,840       74,173       73,907       73,627  
Accumulated other comprehensive loss, net of tax     (1,044 )     (922 )     (1,049 )     (1,050 )     (988 )
TOTAL STOCKHOLDERS' EQUITY     103,666       102,239       101,347       100,992       100,654  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 993,633     $ 1,100,930     $ 1,074,859     $ 1,086,685     $ 995,221  


KEY FINANCIAL RATIOS
(unaudited)
    For the Quarter Ended
    December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
Annualized return on average assets   0.70 %   0.42 %   0.30 %   0.29 %   0.46 %
Annualized return on average equity   7.40 %   4.50 %   3.17 %   3.06 %   4.78 %
Annualized net interest margin(1)   3.13 %   2.98 %   2.92 %   2.95 %   3.04 %
Annualized efficiency ratio(2)   75.25 %   84.31 %   89.86 %   89.48 %   84.63 %

(1)   Net interest income divided by average interest earning assets.
(2)   Noninterest expense divided by total revenue (net interest income and noninterest income).


PER COMMON SHARE DATA
(unaudited)
    At or For the Quarter Ended
    December 31, 2024   September 30, 2024   June 30, 2024   March 31, 2024   December 31, 2023
Basic earnings per share   $ 0.75   $ 0.45   $ 0.31   $ 0.30   $ 0.47
Diluted earnings per share   $ 0.74   $ 0.45   $ 0.31   $ 0.30   $ 0.47
Weighted-average basic shares outstanding     2,547,210     2,544,233     2,540,538     2,539,213     2,542,175
Weighted-average diluted shares outstanding     2,578,771     2,569,368     2,559,015     2,556,958     2,560,656
Common shares outstanding at period-end     2,564,907     2,564,095     2,557,284     2,558,546     2,549,427
Book value per share   $ 40.42   $ 39.87   $ 39.63   $ 39.47   $ 39.48


AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID
(Dollars in thousands, unaudited)

The following tables present, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Income and yields on tax-exempt obligations have not been computed on a tax equivalent basis. All average balances are daily average balances. Nonaccrual loans have been included in the table as loans carrying a zero yield for the period they have been on nonaccrual (dollars in thousands).

  Three Months Ended
  December 31, 2024   September 30, 2024   December 31, 2023
  Average Outstanding Balance   Interest Earned/
Paid
  Yield/
Rate
  Average Outstanding Balance   Interest Earned/
Paid
  Yield/
Rate
  Average Outstanding Balance   Interest Earned/
Paid
  Yield/
Rate
Interest-Earning Assets:                                  
Loans receivable $ 900,832     $ 13,070   5.77 %   $ 898,570     $ 12,876   5.70 %   $ 884,677     $ 12,033   5.40 %
Interest-earning cash   130,412       1,534   4.68 %     138,240       1,830   5.27 %     88,401       1,175   5.27 %
Investments   13,263       132   3.96 %     13,806       132   3.80 %     14,479       129   3.53 %
Total interest-earning assets $ 1,044,507       14,736   5.61 %     1,050,616     $ 14,838   5.62 %   $ 987,557       13,337   5.36 %
Interest-Bearing Liabilities:                                  
Savings and money market accounts $ 350,495       2,476   2.81 %   $ 340,281       2,688   3.14 %   $ 258,583       1,586   2.43 %
Demand and NOW accounts   144,470       128   0.35 %     148,252       151   0.41 %     169,816       149   0.35 %
Certificate accounts   301,293       3,413   4.51 %     303,632       3,524   4.62 %     300,042       3,436   4.54 %
Subordinated notes   11,756       168   5.69 %     11,745       168   5.69 %     11,714       168   5.69 %
Borrowings   30,546       331   4.31 %     40,000       434   4.32 %     40,109       431   4.26 %
Total interest-bearing liabilities $ 838,560       6,516   3.09 %   $ 843,910       6,965   3.28 %   $ 780,264       5,770   2.93 %
Net interest income/spread     $ 8,220   2.52 %       $ 7,873   2.34 %       $ 7,567   2.42 %
Net interest margin         3.13 %           2.98 %           3.04 %
                                   
Ratio of interest-earning assets to interest-bearing liabilities   125 %             124 %             127 %        
Noninterest-bearing deposits $ 130,476             $ 132,762             $ 134,857          
Total deposits   926,734     $ 6,017   2.58 %     924,927     $ 6,363   2.74 %     863,298     $ 5,171   2.38 %
Total funding(1)   969,036       6,516   2.68 %     976,672       6,965   2.84 %     915,121       5,770   2.50 %

(1)   Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

  Year Ended
  December 31, 2024   December 31, 2023
  Average
Outstanding Balance
  Interest Earned/Paid   Yield/Rate   Average
Outstanding Balance
  Interest Earned/Paid   Yield/Rate
Interest-Earning Assets:                      
Loans receivable $ 896,690     $ 50,499   5.63 %   $ 870,227     $ 46,470   5.34 %
Interest-earning cash   124,259       6,367   5.12 %     74,708       3,621   4.85 %
Investments   12,468       508   4.07 %     13,661       518   3.79 %
Total interest-earning assets $ 1,033,417       57,374   5.55 %   $ 958,596       50,609   5.28 %
Interest-Bearing Liabilities:                      
Savings and money market accounts $ 319,314       9,145   2.86 %   $ 194,810       2,783   1.43 %
Demand and NOW accounts   151,528       568   0.37 %     204,922       736   0.36 %
Certificate accounts   309,441       14,363   4.64 %     280,238       10,617   3.79 %
Subordinated notes   11,740       672   5.72 %     11,698       672   5.74 %
Borrowings   37,623       1,624   4.32 %     43,977       1,951   4.44 %
Total interest-bearing liabilities $ 829,646       26,372   3.18 %   $ 735,645       16,759   2.28 %
Net interest income/spread     $ 31,002   2.37 %       $ 33,850   3.00 %
Net interest margin         3.00 %           3.53 %
                       
Ratio of interest-earning assets to interest-bearing liabilities   125 %             130 %        
Noninterest-bearing deposits $ 131,141             $ 154,448          
Total deposits   911,424     $ 24,076   2.64 %     834,418     $ 14,136   1.69 %
Total funding(1)   960,787       26,372   2.74 %     890,093       16,759   1.88 %

(1)   Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.


LOANS
(Dollars in thousands, unaudited)



    December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
Real estate loans:                    
One-to-four family   $ 269,684     $ 271,702     $ 268,488     $ 279,213     $ 279,448  
Home equity     26,686       25,199       26,185       24,380       23,073  
Commercial and multifamily     371,516       358,587       342,632       324,483       315,280  
Construction and land     73,077       85,724       96,962       111,726       126,758  
Total real estate loans     740,963       741,212       734,267       739,802       744,559  
Consumer Loans:                    
Manufactured homes     41,128       40,371       38,953       37,583       36,193  
Floating homes     86,411       86,155       81,622       84,237       75,108  
Other consumer     17,720       18,266       18,422       18,847       19,612  
Total consumer loans     145,259       144,792       138,997       140,667       130,913  
Commercial business loans     15,605       17,481       17,860       19,075       20,688  
Total loans     901,827       903,485       891,124       899,544       896,160  
Less:                    
Premiums     718       736       754       808       829  
Deferred fees, net     (2,374 )     (2,488 )     (2,604 )     (2,475 )     (2,511 )
Allowance for credit losses - loans     (8,499 )     (8,585 )     (8,493 )     (8,598 )     (8,760 )
Total loans held-for-portfolio, net   $ 891,672     $ 893,148     $ 880,781     $ 889,279     $ 885,718  


DEPOSITS
(Dollars in thousands, unaudited)



    December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
Noninterest-bearing demand   $ 132,532   $ 129,717   $ 124,915   $ 128,666   $ 126,726
Interest-bearing demand     142,126     148,740     152,829     159,178     168,346
Savings     61,252     61,455     63,368     65,723     69,461
Money market(1)     206,067     285,655     253,873     241,976     154,044
Certificates     295,822     304,630     311,784     321,340     307,962
Total deposits   $ 837,799   $ 930,197   $ 906,769   $ 916,883   $ 826,539

(1)   Includes $5.0 million of brokered deposits at December 31, 2023. 


CREDIT QUALITY DATA
(Dollars in thousands, unaudited)
    At or For the Quarter Ended
    December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
Total nonperforming loans   $ 7,491     $ 8,489     $ 8,909     $ 9,053     $ 3,556  
OREO and other repossessed assets           115       115       690       575  
Total nonperforming assets   $ 7,491     $ 8,604     $ 9,024     $ 9,743     $ 4,131  
Net charge-offs during the quarter   $ (13 )   $ (14 )   $ (17 )   $ (56 )   $ (15 )
Provision for (release of) credit losses during the quarter     14       8       (109 )     (33 )     (27 )
Allowance for credit losses - loans     8,499       8,585       8,493       8,598       8,760  
Allowance for credit losses - loans to total loans     0.94 %     0.95 %     0.96 %     0.96 %     0.98 %
Allowance for credit losses - loans to total nonperforming loans     113.46 %     101.13 %     95.33 %     94.97 %     246.34 %
Nonperforming loans to total loans     0.83 %     0.94 %     1.00 %     1.01 %     0.40 %
Nonperforming assets to total assets     0.75 %     0.78 %     0.84 %     0.90 %     0.42 %


OTHER STATISTICS
(Dollars in thousands, unaudited)
    At or For the Quarter Ended
    December 31,
2024
  September 30,
2024
  June 30,
2024
  March 31,
2024
  December 31,
2023
                     
Total loans to total deposits     107.64 %     97.13 %     98.27 %     98.11 %     108.42 %
Noninterest-bearing deposits to total deposits     15.82 %     13.95 %     13.78 %     14.03 %     15.33 %
                     
Average total assets for the quarter   $ 1,089,067     $ 1,095,404     $ 1,070,579     $ 1,062,036     $ 1,033,985  
Average total equity for the quarter   $ 103,181     $ 102,059     $ 100,961     $ 101,292     $ 100,612  

Contact

Financial:    
Wes Ochs      
Executive Vice President/CFO    
(206) 436-8587      
       
Media:    
Laurie Stewart      
President/CEO    
(206) 436-1495      
       

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