Sound Financial Bancorp(SFBC) - 2025 Q3 - Quarterly Report

Financial Position - Total assets increased by $66.5 million, or 6.7%, to $1.06 billion at September 30, 2025, from $993.6 million at December 31, 2024[102] - Stockholders' equity stood at $107.5 million as of September 30, 2025[98] - Total stockholders' equity increased by $3.8 million, or 3.7%, to $107.5 million at September 30, 2025, from $103.7 million at December 31, 2024[121] - Total deposits rose by $61.1 million, or 7.3%, to $898.9 million at September 30, 2025, compared to $837.8 million at December 31, 2024[117] - Uninsured deposits totaled $168.6 million at September 30, 2025, representing 18.8% of total deposits, compared to $167.3 million, or 20.0% of total deposits as of December 31, 2024[119] Loan Portfolio - Loans held-for-portfolio increased by $9.5 million, or 1.1%, to $901.2 million at September 30, 2025, with commercial and multifamily loans up by $37.3 million, or 10.0%[105] - Home equity loans increased by $3.2 million, or 12.1%, reflecting high demand for liquidity among homeowners[105] - Construction and land loans declined by $20.3 million, or 27.8%, due to project completions and a slowdown in new financing activities[106] - At September 30, 2025, commercial and multifamily real estate loans accounted for 44.8% of total loans, while one-to-four family loans accounted for 31.5%[107] - Loans held-for-sale decreased to $271 thousand at September 30, 2025, from $487 thousand at December 31, 2024, due to timing of mortgage originations and sales[108] Income and Expenses - Net income for Q3 2025 increased by $541 thousand, or 46.9%, to $1.7 million, compared to $1.2 million in Q3 2024, driven by strong growth in net interest income[128] - For the nine months ended September 30, 2025, net income rose by $2.2 million, or 80.7%, to $4.9 million, primarily due to higher net interest income[129] - Total interest income for Q3 2025 decreased by $186 thousand, or 1.3%, to $14.7 million, primarily due to a decline in cash and cash equivalents[130] - Total interest income increased by $635 thousand, or 1.5%, to $43.3 million for the nine months ended September 30, 2025, driven by a higher average loan balance and a 33 basis points increase in average yield on loans[134] - Total noninterest income decreased by $354 thousand, or 28.7%, to $881 thousand for the three months ended September 30, 2025, compared to $1.2 million for the same period in 2024[150] Interest and Yield - Interest income from loans increased by $636 thousand, or 4.9%, to $13.5 million in Q3 2025, with an average yield on loans rising to 5.89%[131] - The average yield on investments increased to 3.92% in Q3 2025, despite a decrease in the average balance of investments[132] - The net interest rate spread improved to 2.91% in Q3 2025, compared to 2.34% in Q3 2024[127] - Interest income on loans increased by $2.4 million, or 6.3%, to $39.8 million for the nine months ended September 30, 2025, primarily due to a 33 basis point increase in average yield on loans[135] Credit Quality - Nonperforming assets decreased by $4.4 million, or 59.1%, to $3.1 million, representing 0.29% of total assets at September 30, 2025, down from $7.5 million, or 0.75% of total assets at December 31, 2024[113] - The allowance for credit losses on loans increased slightly by $65 thousand, or 0.8%, to $8.564 million[105] - The ratio of net charge-offs during the period to average loans outstanding was (0.02)% for the three months ended September 30, 2025[112] - Total nonaccrual loans decreased by $4.8 million, or 63.7%, to $2.7 million at September 30, 2025, from $7.5 million at December 31, 2024[114] Operational Efficiency - The efficiency ratio improved to 78.16% for the quarter ended September 30, 2025, compared to 84.31% for the same quarter in 2024, primarily due to higher net interest income[156] - Noninterest expenses remained relatively flat, contributing positively to the overall increase in net income[128] - Total noninterest expense remained relatively unchanged at $7.676 million for the three months ended September 30, 2025, compared to $7.679 million for the same period in 2024[153] Dividends and Shareholder Returns - Cash dividends of $0.57 per common share were paid during the nine months ended September 30, 2025, resulting in a dividend payout ratio of 29.75%[162] - The company expects to continue paying quarterly cash dividends, subject to the Board of Directors' discretion[162] Liquidity and Capital Resources - As of September 30, 2025, the company had $108.8 million in cash and cash equivalents, with an additional $271 thousand in loans held-for-sale[169] - The company had the ability to borrow $158.9 million in FHLB advances and $19.5 million through the Federal Reserve's discount window, with $25.0 million in outstanding advances from the FHLB[169] - The company is not aware of any events likely to materially affect its liquidity, capital resources, or operations as of September 30, 2025[169] - The company has commitments to extend credit totaling $54.381 million, which may not represent future cash requirements as many are expected to expire without being drawn upon[173] Regulatory Compliance - The company implemented the CECL model starting January 1, 2023, and is phasing in the full effect of CECL on regulatory capital over a three-year transition period[178] - The company's Community Bank Leverage Ratios (CBLR) were 10.71% for the Bank and 10.14% for the Company, exceeding the minimum requirement of 9%[177] - There have been no material changes in the company's market risk since the 2024 Form 10-K[180]