During October 2012, Sound Community Bank filed an application to convert from a federally chartered savings bank to a Washington state-chartered commercial bank. As a federally chartered savings bank, the Bank’s regulators are the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp. (FDIC). As a Washington commercial bank, the Bank’s regulators would be the Washington State Department of Financial Institutions (WDFI) and the FDIC. The Fed would remain as the primary federal regulator for the Company. While the proposed conversion requires regulatory approval, the Bank expects the new charter to become effective in December 2012. The change is intended to reduce regulatory examination costs and to move oversight of the Bank to the WDFI which is focused on the local community banks and financial institutions. The charter conversion will not affect customers in any way, and they will continue to receive the same protection on deposits through the FDIC.

  As of
9/30/2012  

6/30/2012
 

9/30/2011

Selected Consolidated Financial Condition Data:
Total assets $ 366,498

 

$

355,072
$ 339,623
Total loans, net 304,665 301,945 298,939
Loans held for sale 2,089 1,053 1,129
Available-for-sale securities, at fair value 20,891 9,033 3,138
Federal Home Loan Bank stock, at cost 2,422 2,444 2,444
Bank-owned life insurance 7,160 7,099 6,918
Other real estate owned and repossessed assets 2,548 2,839 3,191
Total deposits 313,043 313,729 299,846
Borrowings 8,024 8,185 8,667
Total stockholders’ equity 42,296 30,042 28,177
 
Quarter Ended
9/30/2012

6/30/2012

9/30/2011

Selected Consolidated Operating Data:
Total interest income $ 4,542

 

$

4,598
$ 4,613
Total interest expense   596   588     681  
Net interest income 3,946 4,010 3,932
Provision for loan losses   1,075   1,100     1,300  
Net interest income after provision for loan losses 2,871 2,910 2,632
Service charges and fee income 574 513 516
Mortgage servicing income 148 21 127
Fair value adjustment on mortgage servicing rights (211 ) (76 ) (491 )
Other than temporary impairment on securities (32 ) (32 ) (56 )
Gain on sale of loans 668 308 126
Other noninterest income   60   52     44  
Total noninterest income 1,207 786 266
Total noninterest expense   3,185   2,828     2,674  
Income before provision for income taxes 893 868 224
Provision for income taxes   281   275     43  
Net income $ 612  

 

$

593
  $ 181  
 
Quarter Ended
9/30/2012

6/30/2012

9/30/2011

Selected Financial Ratios and Other Data:
Performance ratios (1) :
Return on average assets 0.67 % 0.68 % 0.21

%
Return on average equity 6.86 % 7.90 % 2.53

%
Net interest margin (2) 4.91 % 5.24 % 5.22

%
Noninterest income to operating revenue (3) 23.42 % 16.39 % 6.34

%
Noninterest expense to average total assets 3.48 % 3.23 % 3.17

%
Average interest-earning assets to average interest-bearing liabilities 111.48 % 107.03 % 98.61

%
Efficiency ratio (4) 57.67 % 58.51 % 63.70

%

(1)  Performance ratios for the three months ended September 30, 2012 and 2011 and June 30, 2012 are annualized, as appropriate.

(2)  Net interest income divided by average interest earning assets.

(3)  Noninterest income divided by the sum of noninterest income and net interest income.

(4)  Noninterest expense, excluding other real estate owned and repossessed property expense, as a percentage of net interest income and total noninterest income, excluding net securities transactions.
 

 

Quarter Ended

 

9/30/2012

6/30/2012
9/30/2011
Asset quality ratios:
Nonperforming assets to total assets 1.88

%

2.70

%
2.84

%
Nonperforming loans to gross loans 1.41

%

2.20

%
2.13

%
Allowance for loan losses to nonperforming loans 99.75

%

65.86

%
62.10

%
Allowance for loan losses to gross loans 1.40

%

1.45

%
1.32

%
Net charge-offs to average loans outstanding 1.55

%

1.35

%
2.22

%

  Nine Months Ended
9/30/2012   9/30/2011

Selected Consolidated Operating Data:
Total interest income $ 13,703 $ 13,963
Total interest expense   1,784     2,116  
Net interest income 11,919 11,847
Provision for loan losses   3,675     3,350  
Net interest income after provision for loan losses 8,244 8,497
Fees and service charges 1,638 1,514
Gain on sale of loans 1,226 263
Loss on sale of securities - (33 )
Mortgage servicing income 346 318
Other than temporary impairment on securities (156 ) (96 )
Fair value adjustment on mortgage servicing rights 97 (235 )
Other non-interest income   179     109  
Total non-interest income 3,330 1,840
Total non-interest expense   9,022     8,743  
Income before provision for income taxes 2,552 1,594
Provision for income taxes   800     463  
Net income $ 1,752   $ 1,131  
 
 

Nine Months Ended
9/30/2012 9/30/2011

Selected Financial Ratios and Other Data:
Performance ratios (1) :
Return on average assets 0.66 % 0.45 %
Return on average equity 7.36 % 5.39 %
Net interest margin (2) 5.12 % 5.25 %
Non-interest income to operating revenue (3) 21.84 % 13.45 %
Non-interest expense to average total assets 3.41 % 2.63 %
Average interest-earning assets to average interest-bearing liabilities 109.00 %

100.10
%
Efficiency ratio (4) 54.20 % 63.87 %

(1)  Performance ratios for the nine months ended September 30, 2012 and 2011 are annualized, as appropriate.

(2)  Net interest income divided by average interest earning assets.

(3)  Noninterest income divided by the sum of noninterest income and net interest income.

(4)  Noninterest expense, excluding other real estate owned and repossessed property expense, as a percentage of net interest income and total noninterest income, excluding net securities transactions.

Regulatory Capital Ratios of Sound Community Bank at September 30, 2012
     

 
Actual Minimum Capital

Requirements
Minimum Required to

Be Well-Capitalized

Under Prompt

Corrective

Action Provisions

Amount
 

Ratio

Amount
 

Ratio

Amount
 

Ratio
(Dollars in thousands)
 
 
 
Core capital (to total adjusted assets) $ 37,568 10.27 % $14,636 4.0 % $ 18,295 5.0 %
Core capital (to risk-weighted assets) 37,568 13.76 % 10,921 4.0 % 16,382 6.0 %
Risked-based capital (to risk-weighted assets) 40,992 15.01 % 21,842 8.0 % 27,303 10.0 %

Sound Financial, Inc. is the holding company for Sound Community Bank, a full-service bank, providing personal and business banking services in communities across the greater Puget Sound region. The Seattle-based company operates five full-service banking offices in King, Pierce, Snohomish and Clallam Counties, and is on the web at www.soundcb.com.

Forward-Looking Statements

“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains statements that are not historical or current fact and constitute forward-looking statements. In some cases, you can identify these statements by words such as "may", "might", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential", or "continue", the negative of these terms and other comparable terminology. 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 there are or may be important factors that could cause our actual results for 2012 and beyond to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this press release.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially, include, but are not limited to, general and local economic conditions, changes in interest rates, deposit flows, demand for mortgage, consumer and other loans, real estate values, competition, changes in accounting principles, policies or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services.

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