SEATTLE, July 28, 2015 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (Nasdaq:SFBC), the holding company (the "Company") for Sound Community Bank (the "Bank"), today reported net income of $1.2 million for the quarter ended June 30, 2015, or diluted earnings per share of $0.48, as compared to net income of $1.2 million, or diluted earnings per share of $0.46, for the quarter ended March 31, 2015 and $1.2 million, or diluted earnings per share of $0.47, for the quarter ended June 30, 2014.

"For the first time in the bank's history we exceeded $500 million in total assets at quarter end," said Laurie Stewart, President and CEO of both Sound Financial Bancorp, Inc. and Sound Community Bank, "We are also pleased with our year to date return on assets of 1.00% and our annualized loan losses of just 5 basis points.  The economies in the markets we serve continue to prosper and allow us to further develop relationships with both businesses and consumers."

Highlights for the quarter include:
  • Total assets increased 2.4% to $503.4 million at June 30, 2015, from $491.7 million at March 31, 2015 and increased 7.4% from $468.9 million at June 30, 2014;
  • Net loans increased 2.7% to $430.0 million at June 30, 2015, from $418.7 million at March 31, 2015 and increased 7.6% from $399.7 million at June 30, 2014;
  • Deposits increased 0.6% to $418.6 million at June 30, 2015, from $416.2 million at March 31, 2015 and increased 12.0% from $373.9 million at June 30, 2014;
  • The gain on the sale of loans was $390,000 for the three months ended June 30, 2015 compared to $396,000 for the three months ended March 31, 2015.
  • The mortgage servicing asset increased in value by $381,000, or 13.2%, to $3.3 million at June 30, 2015, from $3.0 million at March 31, 2015 and increased in value by $278,000, or 9.3%, from $3.0 million at June 30, 2014;

Capital ratios exceeded regulatory requirements for a well-capitalized financial institution at June 30, 2015.

Operating Results

Net interest income increased $42,000, or 0.9%, to $4.7 million during the quarter ended June 30, 2015, compared to $4.7 million during the quarter ended March 31, 2015 and increased $86,000, or 1.9%, from $4.6 million during the quarter ended June 30, 2014.  The change from the prior quarter was primarily a result of higher loan balances and lower average outstanding borrowings.  The change from the comparable period a year ago was primarily a result of higher average loan balances and lower average outstanding borrowings partially offset by higher balances of interest-bearing deposits.

Interest expense on deposits was $661,000 for both the current and prior quarter and increased $109,000, or 19.7%, from $552,000 during the quarter ended June 30, 2014.  The increase from 2014 was primarily the result of amortization of the deposit premium from deposits acquired in the third quarter of 2014. The total cost of borrowings decreased $9,000, or 32.1%, to $19,000 during the quarter ended June 30, 2015, from $28,000 during the quarter ended March 31, 2015 and decreased $25,000, or 56.8%, from $44,000 for the quarter ended June 30, 2014.  This decrease is primarily due to lower average outstanding borrowings and a larger percentage of short-term borrowings compared to prior periods.

The net interest margin was 4.11% for the quarter ended June 30, 2015, compared to 4.06% for the quarter ended March 31, 2015 and 4.40% for the quarter ended June 30, 2014.  The decline from the year ago period is primarily a result of lower loan yields.

The provision for loan losses in the quarter ended June 30, 2015 was $200,000, compared to $100,000 for the quarter ended March 31, 2015 and $200,000 for the quarter ended June 30, 2014.  The increase from the prior quarter was primarily due to an increase to the loan portfolio during the current quarter.

Noninterest income increased $535,000, or 45.7%, to $1.7 million for the quarter ended June 30, 2015, compared to $1.2 million for the quarter ended March 31, 2015.  Noninterest income increased $586,000, or 52.3%, from $1.1 for the quarter ended June 30, 2014.  This increase was primarily the result of an appreciation in the market value of mortgage servicing rights for the linked quarter and an increase in the value of mortgage servicing rights and gain on sale of loans for the year ago period.

Noninterest expense increased $376,000, or 9.3%, to $4.4 million for the quarter ended June 30, 2015, compared to $4.0 million for the quarter ended March 31, 2015.  The increase was primarily a result of increased operations, regulatory and occupancy expenses during the current period.  Noninterest expense increased $625,000, or 16.6% for the quarter ended June 30, 2015, compared to $3.8 million for the quarter ended June 30, 2014, primarily from higher salaries and benefits, regulatory, occupancy and data processing expenses.

The efficiency ratio for the quarter ended June 30, 2015 was 68.21%, compared to 67.45% for the quarter ended March 31, 2015 and 63.60% for the quarter ended June 30, 2014.  The increase in the efficiency ratio compared to the prior quarter was primarily due to higher operations, regulatory and occupancy expense, partially offset by higher noninterest income.  The increase in the efficiency ratio compared to the year ago quarter was primarily due to higher salaries and benefits, operations, regulatory and occupancy expense, partially offset by higher net interest and noninterest income.

Balance Sheet Review, Capital Management and Credit Quality

The Company's total assets as of June 30, 2015 were $503.4 million, compared to $491.7 million at March 31, 2015 and $468.9 million as of June 30, 2014.  The increase from the prior quarter was primarily a result of higher gross loan balances, partially offset by lower investment balances cash balances.  This increase from a year ago was primarily a result of higher gross loan and cash balances which increased $30.7 million and $5.2 million, respectively, from June 30, 2014. 

Investment securities available-for-sale totaled $7.9 million at June 30, 2015, compared to $8.7 million at March 31, 2015 and $14.1 million at June 30, 2014.  The quarter over quarter decrease was a result of normal principal pay downs. The year over year decrease was due to normal principal paydowns and the sale of $1.7 million of non-agency mortgage-backed securities in the first quarter of 2015.

Gross loans totaled $434.6 million at June 30, 2015, compared to $423.1 million at March 31, 2015 and $403.9 million at June 30, 2014.  At June 30, 2015, commercial and multifamily real estate loans accounted for 40.2% of the gross loan portfolio and residential real estate loans accounted for 30.2% of the portfolio.  Home equity, manufactured, and other consumer loans accounted for 14.5% of the portfolio.  Construction and land loans accounted for 10.2% of the portfolio and commercial and industrial loans accounted for the remaining 4.9% of the portfolio.

The weighted average yield on the loan portfolio was 5.01% for the quarter ended June 30, 2015, compared to 4.94% for the quarter ended March 31, 2015 and 5.17% for the quarter ended June 30, 2014.

Nonperforming assets ("NPAs"), which includes non-accrual loans, accruing loans 90 days and more delinquent, nonperforming troubled debt restructurings ("TDRs"), other real estate owned ("OREO") and other repossessed assets decreased to $2.6 million, or 0.52% of total assets, at June 30, 2015 compared to $4.0 million, or 0.81% of total assets at March 31, 2015 and increased from $2.5 million, or 0.52% of total assets at June 30, 2014. 

The following table summarizes our NPAs:
             
Nonperforming Loans:   At June 30, 2015   At March 31, 2015   At June 30, 2014
(in $000s, unaudited)   Balance   % of Total   Balance   % of Total   Balance   % of Total
One- to four- family   $   1,294       49.5 %   $   1,247       31.4 %   $   934       38.0 %
Home equity loans     503       19.2       445       11.2       401       16.3  
Commercial and multifamily     249       9.5       1,621       40.8       764       31.0  
Construction and land     41       1.6       82       2.0       -       -  
Manufactured homes     54       2.1       80       2.0       39       1.6  
Other consumer     91       3.5       2       0.1       4       0.2  
Total nonperforming loans     2,232       85.4       3,477       87.5       2,142       87.1  
OREO and Other Repossessed Assets:                        
One- to four- family     325       12.4       433       10.9       232       9.4  
Manufactured homes     57       2.2       66       1.6       87       3.5  
Total OREO and repossessed assets     382       14.6       499       12.5       319       12.9  
Total nonperforming assets   $   2,614       100.0 %   $   3,976       100.0 %   $ 2,461       100.0 %

The following table summarizes the allowance for loan losses:

     
    For the Quarter Ended:
Allowance for Loan Losses   June 30,   March 31,   June 30,
(in $000s, unaudited)     2015       2015       2014  
Balance at beginning of period   $   4,436     $   4,387     $ 4,176  
Provision for loan losses during the period     200       100       200  
Net charge-offs during the period     (64 )     (51 )     (185 )
Balance at end of period   $   4,572     $   4,436     $ 4,191  
             
Allowance for loan losses to total loans     1.05 %     1.05 %     1.04 %
Allowance for loan losses to total nonperforming loans     204.75 %     138.24 %     195.66 %

The allowance for loan losses to total loans remained at 1.05% for the quarter ended June 30, 2015, compared to the prior quarter and increased from 1.04% for the quarter ended June 30, 2014.  Net charge-offs totaled $64,000 for the quarter ended June 30, 2015, compared to net charge-offs of $51,000 for the quarter ended March 31, 2015 and $185,000 for the quarter ended June 30, 2014.

Deposits increased to $418.6 million at June 30, 2015, compared to $416.2 million at March 31, 2015 and $373.9 million at June 30, 2014.  FHLB borrowings increased to $26.3 million at June 30, 2015, compared to $18.4 million at March 31, 2015 and decreased from $39.9 million at June 30, 2014.  An increase in total loans during the quarter ended June 30, 2015 led to the increase in borrowings.

Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, and is headquartered in Seattle, Washington with full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles and Port Ludlow. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with an additional Loan Production Office in the Madison Park neighborhood of Seattle, Washington. For more information, please visit www.soundcb.com.

Forward Looking Statement Disclaimer

"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 may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated below or because of other important factors that we cannot foresee that could cause our actual results for 2015 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 described in the Company's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission - which are available on our website at www.soundcb.com and on the SEC's website at www.sec.gov .
             
CONSOLIDATED INCOME STATEMENTS   Quarter Ended   Sequential Quarter % Change   Year over Year % Change
(in $000s, unaudited)   June 30, 2015   March 31, 2015   June 30, 2014    
Interest income   $   5,410     $   5,377     $   5,240       0.6 %     3.2 %
Interest expense     680       689       596       (1.3 )     14.1  
Net interest income     4,730       4,688       4,644       0.9       1.9  
Provision for loan losses     200       100       200       100.0       0.0  
Net interest income after provision for loan losses     4,530       4,588       4,444       (1.3 )     1.9  
Noninterest income:                    
Service charges and fee income     671       645       700       4.0       (4.1 )
Increase in cash surrender value of life insurance     84       84       86       0.0       (2.3 )
Mortgage servicing income     214       255       80       (16.1 )     167.5  
Fair value adjustment on mortgage servicing rights     347       (178 )     144        (294.9 )     141.0  
Loss on sale of securities     -       (31 )     -       (100.0 )          nm
Gain on sale of loans     390       396       110       (1.5 )     254.5  
Total noninterest income     1,706       1,171       1,120       45.7       52.3  
Noninterest expense:                    
Salaries and benefits     2,205       2,255       1,958       (2.2 )     12.6  
Operations expense     1,053       903       1,009       16.6       4.4  
Data processing     454       403       328       12.7       38.4  
Net loss on OREO and repossessed assets     10       72       78       (86.1 )     (87.2 )
Other noninterest expense     678       391       402       73.4       38.4  
Total noninterest expense     4,400       4,024       3,775       9.3       16.6  
Income before provision for income taxes     1,836       1,735       1,789       5.8       2.6  
Provision for income taxes     589       527       573       11.8       2.8  
Net income   $   1,247     $   1,208     $   1,216       3.2 %     2.5 %

___

Nm = not meaningful

    Quarter Ended   Sequential Quarter % Change   Year over Year % Change
    June 30, 2015   March 31, 2015   June 30, 2014    
KEY FINANCIAL RATIOS (in $000s, unaudited)                    
Annualized return on average assets     1.01 %     0.98 %     1.09 %     3.1 %     (7.3 )%
Annualized return on average equity     9.56       9.31       10.22       2.7       (6.5 )
Annualized net interest margin     4.11       4.06       4.40       1.2       (6.6 )
Annualized efficiency ratio     68.21 %     67.45 %     63.60 %     1.1 %     7.2 %

             
PER COMMON SHARE DATA   Quarter Ended   Sequential Quarter % Change   Year over Year % Change
(in 000s, except per share data, unaudited)   June 30, 2015   March 31, 2015   June 30, 2014    
Basic earnings per share   $   0.50     $  0.48     $    0.48       4.2 %     4.2 %
Diluted earnings per share   $   0.48     $  0.46     $    0.47       4.3       2.1  
Weighted average basic shares outstanding     2,511       2,525       2,510       (1.5 )     (0.9 )
Weighted average diluted shares outstanding     2,602       2,602         2,601       (1.4 )     (1.4 )
Common shares outstanding at period-end     2,466       2,526         2,516         (2.4 )       (2.0 )
Book value per share   $   21.02     $   20.48     $   19.15       2.6 %     9.8 %

                     
CONSOLIDATED BALANCE SHEET               Sequential Quarter % Change   Year over Year % Change
(in $000's, unaudited)   June 30, 2015   March 31, 2015   June 30, 2014    
ASSETS                    
Cash and cash equivalents   $ 34,087     $   35,223     $   28,866       (3.2 )%     18.1 %
Securities available-for-sale, at fair value     7,901       8,717       14,082       (9.4 )     (43.9 )
Loans held-for-sale     3,061       1,426       1,921       114.7       59.3  
Total loans, gross     434,597       423,100       403,938       2.7       7.6  
Allowance for loan losses     (4,572 )     (4,436 )     (4,191 )     3.1       9.1  
Loans, net     430,025       418,664       399,747       2.7       7.6  
Accrued interest receivable     1,494       1,448       1,391       3.2       7.4  
Bank-owned life insurance, net     11,576       11,492       11,235       0.7       3.0  
OREO and other repossessed assets, net     382       499       319       (23.4 )     19.7  
Mortgage servicing rights, at fair value     3,271       2,890       2,993       13.2       9.3  
FHLB stock, at cost     1,645       2,200       2,270       (25.2 )     (27.5 )
Premises and equipment, net     5,739       5,604       2,006       2.4       186.1  
Other assets     4,266       3,545       4,110       20.3       3.8  
Total assets     503,447       491,708       468,940       2.4 %     7.4 %
LIABILITIES AND SHAREHOLDERS' EQUITY                    
Liabilities:                    
Interest-bearing deposits     367,172       368,431       328,984       (0.3 )%     11.6 %
Noninterest-bearing deposits     51,457       47,789       44,928       7.7       14.5  
Total deposits     418,629       416,220       373,912       0.6       12.0  
Accrued interest payable and other liabilities     6,730       5,296       6,942       27.1       (3.1 )
Borrowings     26,256       18,417       39,899       42.6       (34.2 )
Total liabilities     451,615       439,933       420,753       2.7 %     7.3 %
Shareholders' Equity:                    
Common stock     25       25       25       0.0 %     0.0 %
Paid-in capital     23,715       23,618       23,169       0.4       2.4  
Unearned shares - ESOP     (1,140 )     (1,140 )     (1,369 )     0.0       (16.7 )
Retained earnings     29,046       29,107       26,239       (0.2 )     10.7  
Accumulated other comprehensive gain     186       165       123       12.7       51.2  
Total shareholders' equity     51,832       51,775       48,187       0.1       7.6  
Total liabilities and shareholders' equity   $   503,447     $   491,708     $   468,940       2.4 %     7.4 %

                     
CREDIT QUALITY DATA (in $000's, unaudited)   June 30, 2015   March 31, 2015   June 30, 2014   Sequential Quarter % Change   Year over year % Change
Nonaccrual loans   $ 1,422     $ 1,223     $ 678       16.3 %     109.7 %
Loans 90+ days past due and still accruing     -       -       122           nm     (100.0 )
Nonperforming TDRs     811       1,987       1,342       (59.2 )     (39.6 )
Total nonperforming loans     2,233       3,210       2,142       (30.4 )     4.2  
OREO and other repossessed assets     382       499       319       (29.5 )     19.7  
Total nonperforming assets     2,615       3,709       2,461       (34.2 )     6.3  
Performing TDRs on accrual     5,981       4,868       4,905       22.9       21.9  
Net charge-offs during the quarter     64       51       185       25.5       (65.4 )
Provision for loan losses during the quarter     200       100       200       100.0       0.0  
Allowance for loan losses     4,572       4,436       4,191       3.1       9.1  
Allowance for loan losses to total loans     1.05 %     1.05 %     1.04 %     0.0       1.0  
Allowance for loan losses to total nonperforming loans     204.75 %     138.24 %     195.66 %     48.1       4.6  
Nonperforming loans to total loans     0.51 %     0.82 %     0.53 %     (37.8 )     (3.8 )
Nonperforming assets to total assets     0.52 %     0.81 %     0.52 %     (35.8 )%     0.0 %
                     
OTHER PERIOD-END STATISTICS                    
(unaudited)                    
Sound Community Bank:                    
Loan to deposit ratio     102.72 %     100.59 %     106.91 %     2.1 %     (3.9 )%
Noninterest-bearing deposits / total deposits     12.29       11.48       12.02       7.1       2.2  
Leverage ratio     10.21       9.87       10.37       3.4       (1.5 )
Common Equity Tier 1 risk-based capital ratio (1)     12.41       12.87              n/a     (3.5 )        nm
Tier 1 risk-based capital ratio     12.41       12.87       12.99       (3.5 )     (4.4 )
Total risk-based capital ratio     13.54 %     14.04 %     14.17 %     (3.5 )     (4.4 )
Total risk-weighted assets     404,861       376,311       355,284       7.6 %     13.9 %
Sound Financial Bancorp, Inc.:                    
Average total assets for the quarter     492,846       492,472       448,034       0.1 %     10.0 %
Average total equity for the quarter     52,151       51,875       47,575       0.5 %     9.6 %

_________________(1)  The Common Equity Tier 1 (CET1) ratio is a new regulatory capital ratio required beginning for the quarter ended March 31, 2015.  Under BASEL III, the regulatory capital requirements to be considered well capitalized are 5% for Leverage-based capital, 6.5% for CET1, 8% for Tier 1 risk-based capital and 10% for total risk-based capital.

Media:Laurie StewartPresident/CEO(206) 448-0884 x306Financial:Matt DeinesEVP/CFO(206) 448-0884 x305

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