Sound Financial Bancorp(SFBC) - 2023 Q3 - Quarterly Report

Financial Position - Total assets increased by $53.8 million, or 5.5%, to $1.03 billion at September 30, 2023, from $976.4 million at December 31, 2022[131] - Cash and cash equivalents rose by $44.1 million, or 76.2%, to $101.9 million at September 30, 2023, compared to $57.8 million at December 31, 2022[132] - Stockholders' equity stood at $100.2 million as of September 30, 2023[127] - Total stockholders' equity increased by $2.5 million, or 2.6%, to $100.2 million at September 30, 2023, from $97.7 million at December 31, 2022[147] - The Community Bank Leverage Ratio (CBLR) for the Bank was 11.23% as of September 30, 2023, exceeding the minimum requirement of 9%[195] Loan Portfolio - Loans held-for-portfolio increased by $8.6 million, or 1.0%, to $867.0 million at September 30, 2023, from $858.4 million at December 31, 2022[133] - One-to-four family loans increased by $5.9 million, or 2.2%, to $280.6 million at September 30, 2023[133] - Home equity loans rose by $1.8 million, or 9.0%, to $21.3 million at September 30, 2023[133] - Commercial and multifamily loans decreased by $9.1 million, or 2.9%, to $304.3 million at September 30, 2023[133] - Manufactured home loans increased by $7.7 million, or 28.6%, to $34.7 million at September 30, 2023[133] - The company’s loan portfolio remained well-diversified, with commercial and multifamily real estate loans accounting for 34.7% of total loans[134] - Total loan commitments decreased to $66.871 million as of September 30, 2023, from $101.324 million at December 31, 2022[192] Credit Quality - The allowance for credit losses on loans increased by $839 thousand, or 11.0%, to $8.4 million at September 30, 2023, from $7.6 million at December 31, 2022[136] - The ratio of allowance for credit losses on loans as a percentage of total loans outstanding increased to 0.96% at September 30, 2023, from 0.88% at December 31, 2022[137] - Nonperforming assets decreased by $1.3 million, or 35.4%, to $2.3 million at September 30, 2023, from $3.6 million at December 31, 2022[139] - The total nonaccrual loans decreased to $1.762 million at September 30, 2023, from $2.959 million at December 31, 2022, representing a 40.4% decline[140] - Net charge-offs for the nine months ended September 30, 2023 totaled $148 thousand, compared to net recoveries of $82 thousand for the same period in 2022[171] - The provision for credit losses on loans was $224 thousand for the three months ended September 30, 2023, compared to $375 thousand for the same period in 2022[171] Deposits - Total deposits rose by $52.1 million, or 6.4%, to $860.9 million at September 30, 2023, compared to $808.8 million at December 31, 2022[143] - Noninterest-bearing deposits decreased by $19.3 million, or 11.1%, to $153.9 million at September 30, 2023, compared to $173.2 million at December 31, 2022[143] - The aggregate amount of time deposits in denominations of more than $250,000 increased to $87.4 million at September 30, 2023, from $56.1 million at December 31, 2022[145] Income Statement - Net income for Q3 2023 decreased by $1.4 million, or 54.1%, to $1.2 million, compared to $2.5 million in Q3 2022[154] - For the nine months ended September 30, 2023, net income increased by $347 thousand, or 5.9%, to $6.2 million[155] - Interest income increased by $1.9 million, or 17.7%, to $12.7 million for Q3 2023, driven by a 38 basis point increase in average loan yield[156] - Interest income for the nine months ended September 30, 2023, rose by $9.3 million, or 33.2%, to $37.3 million, primarily due to higher average loan balances[160] - Net interest income increased by $676 thousand, or 2.6%, to $26.3 million for the nine months ended September 30, 2023, compared to $25.6 million for the same period in 2022[169] - Noninterest income increased by $55 thousand in Q3 2023, partially offsetting the decrease in net interest income[154] - Noninterest income increased by $376 thousand, or 10.5%, to $3.9 million for the nine months ended September 30, 2023, compared to $3.6 million for the same period in 2022[174] Expenses - Noninterest expense increased by $645 thousand, or 9.1%, to $7.7 million during the three months ended September 30, 2023, compared to $7.1 million during the same period in 2022[175] - Noninterest expense increased by $2.1 million, or 10.4%, to $22.8 million for the nine months ended September 30, 2023, compared to $20.7 million for the same period in 2022[177] - Salaries and benefits rose by $1.152 million, or 9.5%, to $13.333 million during the nine months ended September 30, 2023, driven by higher wages and hiring for strategic initiatives[177] Tax and Dividends - Income tax expense for Q3 2023 was $295 thousand, with an effective tax rate of 20.15%, compared to $666 thousand and 20.73% in Q3 2022[178] - The company paid regular quarterly dividends of $0.55 per common share during the nine months ended September 30, 2023, with a dividend payout ratio of 22.88%[181] Investments - As of September 30, 2023, the company had $112.0 million in cash and cash equivalents and available-for-sale investment securities[187] - The average yield on investments and cash equivalents increased to 4.86% in Q3 2023, compared to 2.01% in Q3 2022[158] - Interest income on investments and cash and cash equivalents increased by $2.0 million, or 223.7%, to $2.8 million for the nine months ended September 30, 2023, compared to $876 thousand for the same period in 2022[162] - The average yield on investments and cash and cash equivalents increased by 365 basis points to 4.51% for the nine months ended September 30, 2023, compared to 0.86% for the same period in 2022[162] Interest Expense - Interest expense increased by $8.6 million, or 364.1%, to $11.0 million for the nine months ended September 30, 2023, from $2.4 million for the same period in 2022[165] - Interest expense on deposits increased by $7.4 million, or 470.7%, to $9.0 million for the nine months ended September 30, 2023, compared to $1.6 million for the same period in 2022[165] - The average cost of total deposits increased by 119 basis points to 1.45% for the nine months ended September 30, 2023, from 0.26% for the same period in 2022[165] Efficiency - The efficiency ratio for Q3 2023 was 83.36%, up from 66.51% in Q3 2022, primarily due to lower net interest income and increased noninterest expense[176]