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Sound Financial Bancorp, Inc. Earns $1.1 Million For The Second Quarter Of 2013, Posting Its Fourteenth Consecutive Quarter Of Profitability

Operating Results

Net interest income increased by $332,000 or 8.3% to $4.3 million in the second quarter of 2013, compared to $4.0 million in the second quarter a year ago, primarily due to higher average loan balances and lower cost of funds. Net interest income for the first quarter of 2013 was $4.1 million.

The net interest margin was 4.68% for the second quarter of 2013, compared to 5.24% for the second quarter of 2012, and 4.55% for the first quarter of 2013. The decline in the net interest margin in the second quarter of 2013 as compared to a year ago was primarily due to lower loan yields due to the continued low interest rate environment.

The provision for loan losses in the second quarter of 2013 was $450,000, compared to $1.1 million for the second quarter a year ago and $250,000 for the first quarter of 2013. The decline in the second quarter of 2013 as compared to a year ago was primarily due to lower charge-offs and lower average balances of nonperforming loans which was partially offset by higher average loan balances and changes in the asset mix of our loan portfolio.

Noninterest income increased by $572,000, or 72.8% to $1.4 million in the second quarter of 2013, compared to $786,000 in the second quarter a year ago, primarily due to an increase in mortgage servicing income and a $250,000 increase in the fair value of mortgage servicing rights. Noninterest income for the first quarter of 2013 was $1.4 million. The gain on sale of loans declined during the second quarter as compared to the prior quarter due to reduced refinancing activity, which may continue, due to the increase in mortgage interest rates during the second quarter.

Total noninterest expense for the second quarter of 2013 was $3.6 million, up 26.2% compared to $2.8 million for the second quarter of 2012 and down 11.1% compared to $4.0 million for the first quarter of 2013. The increase in noninterest expense from a year ago was primarily due to increased compensation expenses paid to commission-based employees as a result of increased loan demand and operations expense related to losses and potential losses on loans serviced for Fannie Mae.

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