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Section 1: 10-Q (10-Q)

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

                                                                                                                                                                                                      
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to

COMMISSION FILE NUMBER 001-35633

Sound Financial Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)

Maryland
 
45-5188530
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
2400 3rd Avenue, Suite 150, Seattle, Washington
 
98121
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code:  (206) 448-0884

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES    NO

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES    NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
 
 
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
 
 
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES     NO
 
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date.

As of August 7, 2018, there were 2,539,814 shares of the registrant's common stock outstanding. 


SOUND FINANCIAL BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
 
 
Page Number
PART I    FINANCIAL INFORMATION
 
 
 
Item 1.      Financial Statements
 
 
 
Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 (unaudited)
3
 
 
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)
4
 
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)
5
 
 
Condensed Consolidated Statements of Stockholders' Equity for the Six Months Ended June 30, 2018 and 2017 (unaudited)
6
 
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 (unaudited)
7
 
 
Notes to Condensed Consolidated Financial Statements (unaudited)
8
 
 
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
26
 
 
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
35
 
 
Item 4.    Controls and Procedures
35
 
 
PART II   OTHER INFORMATION
 
 
 
Item 1.    Legal Proceedings
36
 
 
Item 1A. Risk Factors
36
 
 
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
36
 
 
Item 3.    Defaults Upon Senior Securities
36
 
 
Item 4.    Mine Safety Disclosures
36
 
 
Item 5.    Other Information
36
 
 
Item 6.    Exhibits
37
 
 
SIGNATURES
38
 
 
EXHIBITS
 
 

Table of Contents
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share and per share amounts)
 
 
 
June 30,
2018
   
December 31,
2017
 
ASSETS
           
Cash and cash equivalents
 
$
59,434
   
$
60,680
 
Available-for-sale securities, at fair value
   
5,118
     
5,435
 
Loans held-for-sale
   
721
     
1,777
 
Loans
   
590,756
     
548,595
 
Allowance for loan losses
   
(5,503
)
   
(5,241
)
Total loans, net
   
585,253
     
543,354
 
Accrued interest receivable
   
2,224
     
1,977
 
Bank-owned life insurance ("BOLI"), net
   
13,155
     
12,750
 
Other real estate owned ("OREO") and repossessed assets, net
   
610
     
610
 
Mortgage servicing rights, at fair value
   
3,582
     
3,426
 
Federal Home Loan Bank ("FHLB") stock, at cost
   
3,614
     
3,065
 
Premises and equipment, net
   
7,474
     
7,392
 
Other assets
   
5,038
     
4,778
 
Total assets
 
$
686,223
   
$
645,244
 
LIABILITIES
               
Deposits
               
Interest-bearing
 
$
454,703
   
$
442,277
 
Noninterest-bearing demand
   
84,713
     
72,123
 
Total deposits
   
539,416
     
514,400
 
Borrowings
   
71,000
     
59,000
 
Accrued interest payable
   
82
     
77
 
Other liabilities
   
6,766
     
5,972
 
Advance payments from borrowers for taxes and insurance
   
476
     
635
 
Total liabilities
   
617,740
     
580,084
 
COMMITMENTS AND CONTINGENCIES (NOTE 7)
   
     
 
STOCKHOLDERS' EQUITY
               
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding
   
     
 
Common stock, $0.01 par value, 40,000,000 shares authorized, 2,539,814 and 2,511,127 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
   
25
     
25
 
Additional paid-in capital
   
25,371
     
24,986
 
Unearned shares - Employee Stock Ownership Plan ("ESOP")
   
(397
)
   
(453
)
Retained earnings
   
43,405
     
40,493
 
Accumulated other comprehensive income, net of tax
   
79
     
109
 
Total stockholders' equity
   
68,483
     
65,160
 
Total liabilities and stockholders' equity
 
$
686,223
   
$
645,244
 
 
See notes to condensed consolidated financial statements

3

Table of Contents
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (unaudited)
(In thousands, except share and per share amounts)
 
 
 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
INTEREST INCOME
                       
Loans, including fees
 
$
7,899
   
$
6,358
   
$
15,145
   
$
12,798
 
Interest and dividends on investments, cash and cash equivalents
   
264
     
159
     
510
     
310
 
Total interest income
   
8,163
     
6,517
     
15,655
     
13,108
 
INTEREST EXPENSE
                               
Deposits
   
881
     
688
     
1,691
     
1,391
 
Borrowings
   
341
     
75
     
554
     
166
 
Total interest expense
   
1,222
     
763
     
2,245
     
1,557
 
Net interest income
   
6,941
     
5,754
     
13,410
     
11,551
 
PROVISION FOR LOAN LOSSES
   
150
     
     
250
     
 
Net interest income after provision for loan losses
   
6,791
     
5,754
     
13,160
     
11,551
 
NONINTEREST INCOME
                               
Service charges and fee income
   
461
     
492
     
921
     
1,003
 
Earnings on cash surrender value of bank-owned life insurance
   
80
     
82
     
159
     
163
 
Mortgage servicing income
   
206
     
148
     
426
     
381
 
Net gain on sale of loans
   
343
     
261
     
675
     
433
 
Total noninterest income
   
1,090
     
983
     
2,181
     
1,980
 
NONINTEREST EXPENSE
                               
Salaries and benefits
   
3,055
     
2,662
     
6,196
     
5,353
 
Operations
   
1,198
     
1,029
     
2,437
     
2,050
 
Regulatory assessments
   
91
     
136
     
192
     
260
 
Occupancy
   
573
     
522
     
1,047
     
895
 
Data processing
   
461
     
438
     
914
     
845
 
Net loss on OREO and repossessed assets
   
25
     
11
     
52
     
14
 
Total noninterest expense
   
5,403
     
4,798
     
10,838
     
9,417
 
Income before provision for income taxes
   
2,478
     
1,939
     
4,503
     
4,114
 
Provision for income taxes
   
512
     
636
     
935
     
1,397
 
Net income
 
$
1,966
   
$
1,303
   
$
3,568
   
$
2,717
 
 
                               
Earnings per common share:
                               
Basic
 
$
0.79
   
$
0.52
   
$
1.44
   
$
1.09
 
Diluted
 
$
0.77
   
$
0.50
   
$
1.39
   
$
1.04
 
Weighted-average number of common shares outstanding:
                               
Basic
   
2,489,294
     
2,500,752
     
2,484,708
     
2,500,131
 
Diluted
   
2,561,247
     
2,596,791
     
2,560,823
     
2,600,564
 
 
See notes to condensed consolidated financial statements 

4

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SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(In thousands)
 
 
 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
Net income
 
$
1,966
   
$
1,303
   
$
3,568
   
$
2,717
 
Available for sale securities:
                               
Unrealized gains/(loss) arising during the period
   
1
     
36
     
(38
)
   
88
 
Income tax benefit/(expense) related to unrealized gains/losses
   
     
(12
)
   
8
     
(30
)
Other comprehensive income/(loss), net of tax
   
1
     
24
     
(30
)
   
58
 
Comprehensive income
 
$
1,967
   
$
1,327
   
$
3,538
   
$
2,775
 
 
See notes to condensed consolidated financial statements

5

Table of Contents
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders' Equity
For the Six Months Ended June 30, 2018 and 2017 (unaudited)
(In thousands, except share and per share amounts)
 
 
 
Shares
   
Common
Stock
   
Additional Paid
-in Capital
   
Unearned
ESOP Shares
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income, net of
tax
   
Total
Stockholders'
Equity
 
Balances at December 31, 2016
   
2,498,804
   
$
25,000
   
$
23,979,000
   
$
(683,000
)
 
$
36,873,000
   
$
81,000
   
$
60,275,000
 
Net income
                                   
2,717,000
             
2,717,000
 
Other comprehensive income, net of tax
                                           
58,000
     
58,000
 
Share-based compensation
                   
288,000
                             
288,000
 
Cash dividends paid on common stock ($0.20 per share)
                                   
(501,000
)
           
(501,000
)
Restricted stock awards issued
   
576
                                             
 
Exercise of options
   
2,135
             
33,000
                             
33,000
 
Balances at June 30, 2017
   
2,501,515
   
$
25,000
   
$
24,300,000
   
$
(683,000
)
 
$
39,089,000
   
$
139,000
   
$
62,870,000
 
 
 
 
Shares
   
Common
Stock
   
Additional Paid-
in Capital
   
Unearned
ESOP Shares
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income, net of
tax
   
Total
Stockholders'
Equity
 
Balances at December 31, 2017
   
2,511,127
   
$
25,000
   
$
24,986,000
   
$
(453,000
)
 
$
40,493,000
   
$
109,000
   
$
65,160,000
 
Net income
                                   
3,568,000
             
3,568,000
 
Other comprehensive loss, net of tax
                                           
(30,000
)
   
(30,000
)
Share-based compensation
                   
134,000
                             
134,000
 
Cash dividends paid on common stock ($0.26 per share)
                                   
(656,000
)
           
(656,000
)
Restricted shares forfeited
   
(343
)
                                           
 
Common stock repurchased
   
(15,390
)
                                           
 
Exercise of options
   
44,420
             
102,000
                             
102,000
 
Allocation of ESOP shares
                   
149,000
     
56,000
                     
205,000
 
Balances at June 30, 2018
   
2,539,814
   
$
25,000
   
$
25,371,000
   
$
(397,000
)
 
$
43,405,000
   
$
79,000
   
$
68,483,000
 
 
See notes to condensed consolidated financial statements
 
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SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
 
 
 
Six Months Ended June 30,
 
 
 
2018
   
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
 
$
3,568
   
$
2,717
 
Adjustments to reconcile net income to net cash from operating activities:
               
Amortization of net premiums on investments
   
28
     
27
 
Provision for loan losses
   
250
     
 
Depreciation and amortization
   
489
     
455
 
Compensation expense related to stock options and restricted stock
   
134
     
288
 
Change in fair value of mortgage servicing rights
   
121
     
111
 
Increase in cash surrender value of BOLI
   
(159
)
   
(163
)
Net change in advances from borrowers for taxes and insurance
   
(159
)
   
(90
)
Net gain on sale of loans
   
(675
)
   
(433
)
Proceeds from sale of loans held-for-sale
   
29,805
     
22,170
 
Originations of loans held-for-sale
   
(28,260
)
   
(21,424
)
Net loss on OREO and repossessed assets
   
52
     
14
 
Change in operating assets and liabilities:
               
Accrued interest receivable
   
(247
)
   
139
 
Other assets
   
(260
)
   
(535
)
Accrued interest payable
   
5
     
5
 
Other liabilities
   
794
     
1,137
 
Net cash provided by operating activities
   
5,486
     
4,418
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from principal payments, maturities and sales of available-for-sale securities
   
289
     
463
 
Net (increase)/decrease in loans
   
(42,161
)
   
6,118
 
Purchase of BOLI
   
(246
)
   
(184
)
Purchases of premises and equipment, net
   
(571
)
   
(2,373
)
Net cash received from branch acquisition
   
     
13,671
 
Net cash (used)/provided by investing activities
   
(42,689
)
   
17,695
 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net increase in deposits
   
25,016
     
12,342
 
Proceeds from borrowings
   
28,000
     
70,500
 
Repayment of borrowings
   
(16,000
)
   
(100,292
)
FHLB stock (purchased)/redeemed
   
(549
)
   
1,135
 
Dividends received on FHLB stock
   
44
     
44
 
Dividends paid on common stock
   
(656
)
   
(501
)
Proceeds from stock option exercises
   
102
     
33
 
Net cash provided/(used) by financing activities
   
35,957
     
(16,739
)
Net change in cash and cash equivalents
   
(1,246
)
   
5,374
 
Cash and cash equivalents, beginning of period
   
60,680
     
54,582
 
Cash and cash equivalents, end of period
 
$
59,434
   
$
59,956
 
 
               
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Cash paid for income taxes
 
$
1,500
   
$
1,310
 
Interest paid on deposits and borrowings
   
2,240
     
1,552
 
Assets acquired in acquisition of branch
   
     
14,474
 
 
See notes to condensed consolidated financial statements
 
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SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 

Note 1 – Basis of Presentation

The accompanying financial information is unaudited and has been prepared from the consolidated financial statements of Sound Financial Bancorp, Inc., and its wholly owned subsidiary, Sound Community Bank.  References in this document to Sound Financial Bancorp refer to Sound Financial Bancorp, Inc. and references to the "Bank" refer to Sound Community Bank. References to "we," "us," and "our" or the "Company" refers to Sound Financial Bancorp and its wholly-owned subsidiary, Sound Community Bank, unless the context otherwise requires.
 
These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC").  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.  Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.  These unaudited financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on March 27, 2018 ("2017 Form 10-K").  The results for the interim periods are not necessarily indicative of results for a full year.   

Certain amounts in the prior period's consolidated financial statements have been reclassified to conform to the current presentation.  These classifications do not have an impact on previously reported consolidated net income, retained earnings, stockholders' equity or earnings per share.

Note 2 – Accounting Pronouncements Recently Issued or Adopted

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) which postponed the effective date of 2014-09. Subsequently, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. This amendment clarifies that an entity should determine if it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The core principle of Topic 606 is that an entity must recognize revenue when it has satisfied a performance obligation of transferring promised goods or services to a customer. These standards were effective for interim and annual periods beginning after December 15, 2017. The Company has analyzed its revenue sources of noninterest income to determine when the satisfaction of the performance obligation occurs and the appropriate recognition of revenue. For further information, see Note 11 - Revenue from Contracts with Customers of this report.  The adoption of these ASUs did not have a material impact on the Company's consolidated financial statements, other than the additional disclosures included in Note 11 of this report.
 
In January 2016, FASB issued ASU No. 2016-01, Financial Instruments - Overall, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. In addition, the amendments in this ASU require an entity to disclose the fair value of financial instruments using the exit price notion. Exit price is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The methods of determining the fair value of assets and liabilities are consistent with our methodologies disclosed in Note 11 - Fair Value Measurements of the Company's 2017 Form 10-K, except for the valuation of loans held-for-investment and time deposits which were impacted by the adoption of ASU 2016-01. Prior to adopting the amendments included in the standard, the Company was allowed to measure fair value under an entry price notion. The entry price notion previously applied by the Company used a discounted cash flows technique to calculate the present value of expected future cash flows for a financial instrument. The exit price notion uses the same approach, but also incorporates other factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. As of June 30, 2018, the technique used by the Company to estimate the exit price of the loan portfolio consists of similar procedures to those used as of December 31, 2017, but with added emphasis on both illiquidity risk and credit risk not captured by the previously applied entry price notion. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company's loan portfolio is initially fair valued using a pooled approach, using the eight categories as disclosed in Note 4 - Loans. Loans are considered a Level 3 classification.  This ASU also eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.  The amendments in this ASU were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company has used the exit price notion in the fair value disclosure of financial instruments in Note 5 of this report. The adoption of ASU 2016-01 did not have a material impact on the Company's consolidated financial statements.
 
In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-02 requires lessees to recognize, on the balance sheet, the assets and liabilities arising from operating leases. A lessee should recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. A lessee should include payments to be made in an optional period only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. For a finance lease, interest payments should be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income. For operating leases, the lease cost should be allocated over the lease term on a generally straight-line basis. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in the ASU is permitted. Although an estimate of the impact of the new leasing standard has not yet been determined, once adopted, we expect to report higher assets and liabilities as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain equipment under noncancelable operating lease agreements.
 
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SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the existing incurred loss impairment methodology that recognizes credit losses when a probable loss has been incurred with new methodology where loss estimates are based upon lifetime expected credit losses. The amendments in this ASU require a financial asset that is measured at amortized cost to be presented at the net amount expected to be collected. The income statement would then reflect the measurement of credit losses for newly recognized financial assets as well as changes to the expected credit losses that have taken place during the reporting period. The measurement of expected credit losses will be based on historical information, current conditions, and reasonable and supportable forecasts that impact the collectability of the reported amount. Available-for-sale securities will bifurcate the fair value mark and establish an allowance for credit losses through the income statement for the credit portion of that mark. The interest portion will continue to be recognized through accumulated other comprehensive income or loss. The change in allowance recognized as a result of adoption will occur through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the ASU is adopted. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 with early adoption permitted after December 15, 2018.  While the Company has not quantified the impact of this ASU, it does expect changing from the current incurred loss model to an expected loss model will result in an earlier recognition of losses. The Company also expects that once adopted the allowance for loan losses will increase, however, until its evaluation is complete the magnitude of the increase will be unknown.
 
In August 2016, FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  This ASU addresses the appropriate classification of eight specific cash flow issues on the cash flow statement. Debt prepayment costs should be classified as an outflow for financing activities. Settlement of zero-coupon debt instruments divides the interest portion as an outflow for operating activities and the principal portion as an outflow for financing activities. Contingent consideration payments made after a business combination should be classified as outflows for financing and operating activities. Proceeds from the settlement of bank-owned life insurance policies should be classified as inflows from investing activities. Other specific areas are identified in the ASU as to the appropriate classification of the cash inflows or outflows.  The amendments in this ASU were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not currently have items on its cash flow statement that were impacted by adoption of this ASU and therefore adoption of ASU 2016-15 did not have a material impact on the Company's consolidated financial statements.
 
In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20). ASU 2017-08 is intended to amend the amortization period for certain purchased callable debt securities held at a premium. Under ASU 2017-08, the FASB is shortening the amortization period for the premium to the earliest call date. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. ASU 2017-08 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company is reviewing its securities portfolio to assess the impact the adoption of this ASU will have on the Company's consolidated financial statements but does not expect this ASU to have a material impact on the Company's consolidated financial statements.
 
In May 2017, the FASB issued ASU No. 2017-09, Compensation--Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU was issued to provide clarity as to when to apply modification accounting when there is a change in the terms or conditions of a share-based payment award. According to this ASU, an entity should account for the effects of a modification unless the fair value, vesting conditions, and balance sheet classification of the award is the same after the modification as compared to the original award prior to the modification. The standard was effective for reporting periods beginning after December 15, 2017. The Company has not had any modifications on share-based payment awards and therefore the adoption of ASU No. 2017-09 did not have a material impact on the Company's consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting recognition and presentation requirements in ASC 815 to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity's risk management activities by better aligning the entity's financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The amendments in this ASU permit hedge accounting for hedging relationships involving nonfinancial risk and interest rate risk by removing certain limitations in cash flow and fair value hedging relationships. In addition, the ASU requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The adoption of ASU No. 2017-12 is not expected to have a material impact on the Company's consolidated financial statements.

In February 2018, FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). This ASU was issued to allow a reclassification from accumulated other comprehensive income to retained earnings from stranded tax effects resulting from the revaluation of the Company's net deferred tax asset ("DTA") to the new corporate tax rate of 21% as a result of the Tax Cuts and Jobs Act of 2017 ("Tax Act"). The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. The adoption of ASU No. 2018-02 is not expected to have a material impact on the Company's consolidated financial statements.

In March 2018, FASB issued ASU No. 2018-05, Income Taxes (Topic 740). This ASU was issued to provide guidance on the income tax accounting implications of the Tax Act and allows for entities to report provisional amounts for specific income tax effects of the Act for which the accounting under Topic 740 was not yet complete, but a reasonable estimate could be determined. A measurement period of one-year is allowed to complete the accounting effects under Topic 740 and revise any previous estimates reported. Any provisional amounts or subsequent adjustments included in an entity's financial statements during the measurement period should be included in income from continuing operations as an adjustment to tax expense in the reporting period the amounts are determined. The Company adopted this ASU with the provisional adjustments as reported in the Consolidated Financial Statements on Form 10-K as of December 31, 2017. As of June 30, 2018, the Company did not incur any adjustments to the provisional recognition.

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SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 
Note 3 – Investments

The amortized cost and fair value of our available-for-sale ("AFS") securities and the corresponding amounts of gross unrealized gains and losses at the dates indicated were as follows (in thousands):
 
 
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Estimated
Fair Value
 
June 30, 2018
                       
Municipal bonds
 
$
3,229
   
$
135
   
$
(25
)
 
$
3,339
 
Agency mortgage-backed securities
   
1,761
     
18
     
     
1,779
 
Total
 
$
4,990
   
$
153
   
$
(25
)
 
$
5,118
 
 
                               
December 31, 2017
                               
Municipal bonds
 
$
3,240
   
$
155
   
$
(26
)
 
$
3,369
 
Agency mortgage-backed securities
   
2,030
     
36
     
     
2,066
 
Total
 
$
5,270
   
$
191
   
$
(26
)
 
$
5,435
 

The amortized cost and fair value of AFS securities at June 30, 2018, by contractual maturity, are shown below (in thousands).  Expected maturities of AFS securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Investments not due at a single maturity date, primarily mortgage-backed investments, are shown separately.
 
 
 
June 30, 2018
 
 
 
Amortized
Cost
   
Fair
Value
 
Due after one year through five years
 
$
1,577
   
$
1,559
 
Due after five years through ten years
   
153
     
161
 
Due after ten years
   
1,499
     
1,619
 
Mortgage-backed securities
   
1,761
     
1,779
 
Total
 
$
4,990
   
$
5,118
 

There were no pledged securities at June 30, 2018 and December 31, 2017.
 
There were no sales of AFS securities during the three and six months ended June 30, 2018 and 2017.

The following tables summarize the aggregate fair value and gross unrealized loss by length of time of those investments that have been in a continuous unrealized loss position at the dates indicated (in thousands):
 
 
 
June 30, 2018
 
 
 
Less Than 12 Months
   
12 Months or Longer
   
Total
 
 
 
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
 
Municipal bonds
 
$
   
$
   
$
1,292
   
$
(25
)
 
$
1,292
   
$
(25
)
Total
 
$
   
$
   
$
1,292
   
$
(25
)
 
$
1,292
   
$
(25
)
 
 
 
December 31, 2017
 
 
 
Less Than 12 Months
   
12 Months or Longer
   
Total
 
 
 
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
 
Municipal bonds
 
$
   
$
   
$
1,302
   
$
(26
)
 
$
1,302
   
$
(26
)
Total
 
$
   
$
   
$
1,302
   
$
(26
)
 
$
1,302
   
$
(26
)

There were no credit losses recognized in earnings during the three and six months ended June 30, 2018 or 2017 relating to the Company's securities.
 
At June 30, 2018, there were no securities in an unrealized loss position for less than 12 months and there were three municipal securities in an unrealized loss position for over 12 months.  At December 31, 2017, there were no securities in an unrealized loss position for less than 12 months and there were three municipal securities in an unrealized loss position for more than 12 months.  The unrealized losses were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities, and not related to the underlying credit of the issuers or the underlying collateral.  It is expected that these securities will not be settled at a price less than the amortized cost of each investment.  Because the decline in fair value is attributable to changes in interest rates or widening market spreads and not credit quality, and because we do not intend to sell the securities in this class and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis, which may include holding each security until contractual maturity, the unrealized losses on these investments are not considered an other-than-temporary impairment ("OTTI") during the three and six months ended June 30, 2018 and 2017.

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SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 
Note 4 – Loans

The composition of the loan portfolio at the dates indicated, excluding loans held-for-sale, was as follows (in thousands):
 
 
 
June 30,
2018
   
December 31,
2017
 
Real estate loans:
           
One- to four- family
 
$
166,390
   
$
157,417
 
Home equity
   
25,954
     
28,379
 
Commercial and multifamily
   
236,915
     
211,269
 
Construction and land
   
62,704
     
61,482
 
Total real estate loans
 
$
491,963
   
$
458,547
 
Consumer loans:
               
Manufactured homes
   
18,295
     
17,111
 
Floating homes
   
33,643
     
29,120
 
Other consumer
   
5,642
     
4,902
 
Total consumer loans
   
57,580
     
51,133
 
Commercial business loans
   
43,119
     
40,829
 
Total loans
   
592,662
     
550,509
 
Deferred fees
   
(1,906
)
   
(1,914
)
Total loans, gross
   
590,756
     
548,595
 
Allowance for loan losses
   
(5,503
)
   
(5,241
)
Total loans, net
 
$
585,253
   
$
543,354
 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2018 (in thousands):
 
 
 
One- to
four-
family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Floating
homes
   
Other
consumer
   
Commercial
business
   
Unallocated
   
Total
 
Allowance for loan losses:
                                                           
Individually evaluated for impairment
 
$
633
   
$
58
   
$
9
   
$
12
   
$
221
   
$
   
$
76
   
$
307
   
$
   
$
1,316
 
Collectively evaluated for impairment
   
946
     
153
     
1,392
     
373
     
105
     
195
     
40
     
246
     
737
     
4,187
 
Ending balance
 
$
1,579
   
$
211
   
$
1,401
   
$
385
   
$
326
   
$
195
   
$
116
   
$
553
   
$
737
   
$
5,503
 
Loans receivable:
                                                                               
Individually evaluated for impairment
 
$
4,719
   
$
791
   
$
3,134
   
$
126
   
$
346
   
$
   
$
162
   
$
1,793
   
$
   
$
11,071
 
Collectively evaluated for impairment
   
161,671
     
25,163
     
233,781
     
62,578
     
17,949
     
33,643
     
5,480
     
41,326
     
     
581,591
 
Ending balance
 
$
166,390
   
$
25,954
   
$
236,915
   
$
62,704
   
$
18,295
   
$
33,643
   
$
5,642
   
$
43,119
   
$
   
$
592,662
 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2017 (in thousands):

 
 
One- to
four-
family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Floating
homes
   
Other
consumer
   
Commercial
business
   
Unallocated
   
Total
 
Allowance for loan losses:
                                                           
Individually evaluated for impairment
 
$
555
   
$
120
   
$
   
$
13
   
$
258
   
$
   
$
43
   
$
135
   
$
   
$
1,124
 
Collectively evaluated for impairment
   
881
     
173
     
1,250
     
365
     
97
     
169
     
37
     
237
     
908
     
4,117
 
Ending balance
 
$
1,436
   
$
293
   
$
1,250
   
$
378
   
$
355
   
$
169
   
$
80
   
$
372
   
$
908
   
$
5,241
 
Loans receivable:
                                                                               
Individually evaluated for impairment
 
$
6,256
   
$
1,028
   
$
1,699
   
$
141
   
$
385
   
$
   
$
194
   
$
1,000
   
$
   
$
10,703
 
Collectively evaluated for impairment
   
151,161
     
27,351
     
209,570
     
61,341
     
16,726
     
29,120
     
4,708
     
39,829
     
     
539,806
 
Ending balance
 
$
157,417
   
$
28,379
   
$
211,269
   
$
61,482
   
$
17,111
   
$
29,120
   
$
4,902
   
$
40,829
   
$
   
$
550,509
 

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SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 
The following table summarizes the activity in the allowance for loan losses for the three months ended June 30, 2018 (in thousands):

 
 
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One- to four- family
 
$
1,514
   
$
   
$
1
   
$
64
   
$
1,579
 
Home equity
   
276
     
     
35
     
(100
)
   
211
 
Commercial and multifamily
   
1,295
     
     
     
106
     
1,401
 
Construction and land
   
375
     
     
     
10
     
385
 
Manufactured homes
   
434
     
(12
)
   
     
(96
)
   
326
 
Floating homes
   
169
     
     
     
26
     
195
 
Other consumer
   
86
     
     
1
     
29
     
116
 
Commercial business
   
533
     
     
     
20
     
553
 
Unallocated
   
646
     
     
     
91
     
737
 
Total
 
$
5,328
   
$
(12
)
 
$
37
   
$
150
   
$
5,503
 
 
The following table summarizes the activity in the allowance for loan losses for the six months ended June 30, 2018 (in thousands):
 
 
 
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One- to four- family
 
$
1,436
   
$
   
$
1
   
$
142
   
$
1,579
 
Home equity
   
293
     
(7
)
   
38
     
(113
)
   
211
 
Commercial and multifamily
   
1,250
     
     
     
151
     
1,401
 
Construction and land
   
378
     
     
     
7
     
385
 
Manufactured homes
   
355
     
(12
)
   
     
(17
)
   
326
 
Floating homes
   
169
     
     
     
26
     
195
 
Other consumer
   
80
     
(13
)
   
5
     
44
     
116
 
Commercial business
   
372
     
     
     
181
     
553
 
Unallocated
   
908
     
     
     
(171
)
   
737
 
Total
 
$
5,241
   
$
(32
)
 
$
44
   
$
250
   
$
5,503
 
 
The following table summarizes the activity in the allowance for loan losses for the three months ended June 30, 2017 (in thousands):
 
 
 
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One- to four- family
 
$
1,535
   
$
   
$
   
$
(233
)
 
$
1,302
 
Home equity
   
248
     
     
2
     
181
     
431
 
Commercial and multifamily
   
1,113
     
     
     
40
     
1,153
 
Construction and land
   
413
     
     
     
(61
)
   
352
 
Manufactured homes
   
148
     
(6
)
   
1
     
35
     
178
 
Floating homes
   
137
     
     
2
     
7
     
146
 
Other consumer
   
98
     
(2
)
   
     
2
     
98
 
Commercial business
   
154
     
     
     
210
     
364
 
Unallocated
   
992
     
     
     
(181
)
   
811
 
Total
 
$
4,838
   
$
(8
)
 
$
5
   
$
   
$
4,835
 
 
The following table summarizes the activity in the allowance for loan losses for the six months ended June 30, 2017 (in thousands):
 
 
 
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One- to four- family
 
$
1,542
   
$
   
$
   
$
(240
)
 
$
1,302
 
Home equity
   
378
     
     
28
     
25
     
431
 
Commercial and multifamily
   
1,144
     
(24
)
   
1
     
32
     
1,153
 
Construction and land
   
459
     
     
     
(107
)
   
352
 
Manufactured homes
   
168
     
(5
)
   
3
     
12
     
178
 
Floating homes
   
132
     
     
     
14
     
146
 
Other consumer
   
112
     
(7
)
   
17
     
(24
)
   
98
 
Commercial business
   
175
     
     
     
189
     
364
 
Unallocated
   
712
     
     
     
99
     
811
 
Total
 
$
4,822
   
$
(36
)
 
$
49
   
$
   
$
4,835
 

12

Table of Contents
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 
Credit Quality Indicators.  Federal regulations provide for the classification of lower quality loans as substandard, doubtful or loss.  An asset is considered substandard if it is inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged.  Substandard assets include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.  Assets classified as doubtful have all the weaknesses inherent in assets classified substandard with the added characteristic that the weaknesses make collection or liquidation of the assets in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.  Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without establishment of a specific loss reserve is not warranted.
 
When we classify problem loans as either substandard or doubtful, we may establish a specific allowance in an amount we deem prudent to address the risk specifically (if the loan is impaired) or we may allow the loss to be addressed in the general allowance (if the loan is not impaired).  General allowances represent loss reserves which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been specifically allocated to particular problem loans.  When the Company classifies problem loans as a loss, we charge-off such assets in the period in which they are deemed uncollectible.  Assets that do not currently expose us to sufficient risk to warrant classification as substandard, doubtful or loss, but possess identified weaknesses, are classified as either watch or special mention assets.  Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the Federal Deposit Insurance Corporation ("FDIC"), the Bank's federal regulator, and the Washington Department of Financial Institutions ("WDFI"), the Bank's state banking regulator, both which can order the establishment of additional loss allowances.  Pass rated loans are loans that are not otherwise classified or criticized.

The following table represents the internally assigned grades as of June 30, 2018, by type of loan (in thousands):
 
 
 
One- to
four- family
   
Home
equity
   
Commercial
and multifamily
   
Construction
and land
   
Manufactured
homes
   
Floating
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Grade:
                                                     
Pass
 
$
164,518
   
$
25,401
   
$
229,881
   
$
62,625
   
$
18,043
   
$
33,643
   
$
5,586
   
$
40,651
   
$
580,348
 
Watch
   
     
     
3,901
     
     
57
     
     
     
758
     
4,716
 
Special Mention
   
     
     
1,469
     
     
     
     
     
478
     
1,947
 
Substandard
   
1,872
     
553
     
1,664
     
79
     
195
     
     
56
     
1,232
     
5,651
 
Doubtful
   
     
     
     
     
     
     
     
     
 
Loss
   
     
     
     
     
     
     
     
     
 
Total
 
$
166,390
   
$
25,954
   
$
236,915
   
$
62,704
   
$
18,295
   
$
33,643
   
$
5,642
   
$
43,119
   
$
592,662
 
 
The Bank had $3.3 million in performing loans identified as TDRs at June 30, 2018, that were not classified as special mention or substandard.

The following table represents the internally assigned grades as of December 31, 2017, by type of loan (in thousands):
 
 
 
One- to
four- family
   
Home
equity
   
Commercial
and multifamily
   
Construction
and land
   
Manufactured
homes
   
Floating
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Grade:
                                                     
Pass
 
$
153,793
   
$
27,493
   
$
199,887
   
$
61,390
   
$
16,877
   
$
29,120
   
$
4,708
   
$
39,089
   
$
532,357
 
Watch
   
244
     
     
9,683
     
     
     
     
     
827
     
10,754
 
Special Mention
   
137
     
     
357
     
     
     
     
     
784
     
1,278
 
Substandard
   
3,243
     
886
     
1,342
     
92
     
234
     
     
194
     
129
     
6,120
 
Doubtful
   
     
     
     
     
     
     
     
     
 
Loss
   
     
     
     
     
     
     
     
     
 
Total
 
$
157,417
   
$
28,379
   
$
211,269
   
$
61,482
   
$
17,111
   
$
29,120
   
$
4,902
   
$
40,829
   
$
550,509
 

13

Table of Contents
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 
Nonaccrual and Past Due Loans.  Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are automatically placed on nonaccrual once the loan is 90 days past due or sooner if, in management's opinion, the borrower may be unable to meet payment of obligations as they become due, as well as when required by regulatory authorities.

The following table presents the recorded investment in nonaccrual loans as of June 30, 2018, and December 31, 2017, by type of loan (in thousands):
 
 
 
June 30,
2018
   
December 31,
2017
 
One- to four- family
 
$
940
   
$
791
 
Home equity
   
391
     
722
 
Commercial and multifamily
   
192
     
201
 
Construction and land
   
79
     
92
 
Manufactured homes
   
160
     
206
 
Floating homes
   
     
 
Other consumer
   
     
8
 
Commercial business
   
120
     
129
 
Total
 
$
1,882
   
$
2,149
 

The following table represents the aging of the recorded investment in past due loans as of June 30, 2018, by type of loan (in thousands):
 
 
 
30-59 Days
Past Due
   
60-89 Days
Past Due
   
90 Days
and Greater
Past Due
   
Total Past
Due
   
Current
   
Total Loans
 
One- to four- family
 
$
   
$
125
   
$
940
   
$
1,065
   
$
165,325
   
$
166,390
 
Home equity
   
373
     
     
391
     
764
     
25,190
     
25,954
 
Commercial and multifamily
   
150
     
     
192
     
342
     
236,573
     
236,915
 
Construction and land
   
     
     
79
     
79
     
62,625
     
62,704
 
Manufactured homes
   
3
     
     
160
     
163
     
18,132
     
18,295
 
Floating homes
   
     
     
     
     
33,643
     
33,643
 
Other consumer
   
9
     
11
     
     
20
     
5,622
     
5,642
 
Commercial business
   
     
97
     
120
     
217
     
42,902
     
43,119
 
Total
 
$
535
   
$
233
   
$
1,882
   
$
2,650
   
$
590,012
   
$
592,662
 
 
The following table represents the aging of the recorded investment in past due loans as of December 31, 2017, by type of loan (in thousands):
 
 
 
30-59 Days
Past Due
   
60-89 Days
Past Due
   
90 Days
and Greater
Past Due
   
Total Past
Due
   
Current
   
Total Loans
 
One- to four- family
 
$
2,092
   
$
1,819
   
$
727
   
$
4,638
   
$
152,779
   
$
157,417
 
Home equity
   
521
     
5
     
633
     
1,159
     
27,220
     
28,379
 
Commercial and multifamily
   
313
     
     
     
313
     
210,956
     
211,269
 
Construction and land
   
51
     
     
92
     
143
     
61,339
     
61,482
 
Manufactured homes
   
185
     
50
     
197
     
432
     
16,679
     
17,111
 
Floating homes
   
     
     
     
     
29,120
     
29,120
 
Other consumer
   
15
     
     
     
15
     
4,887
     
4,902
 
Commercial business
   
400
     
     
     
400
     
40,429
     
40,829
 
Total
 
$
3,577
   
$
1,874
   
$
1,649
   
$
7,100
   
$
543,409
   
$
550,509
 

14

Table of Contents
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited) 
Nonperforming Loans.  Loans are considered nonperforming when they are placed on nonaccrual and/or when they are considered to be nonperforming troubled debt restructurings ("TDRs") and/or when they are 90 days or greater past due and still accruing interest.  A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company has granted the borrower a concession of some kind.  Nonperforming TDRs include TDRs that do not have sufficient payment history (typically greater than six months) to be considered performing.

The following table represents the credit risk profile of our loan portfolio based on payment activity as of June 30, 2018, by type of loan (in thousands):
 
 
 
One- to
four-
family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Floating
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Performing
 
$
165,404
   
$
25,563
   
$
236,723
   
$
62,625
   
$
18,113
   
$
33,643
   
$
5,642
   
$
42,915
   
$
590,628
 
Nonperforming
   
986
     
391
     
192
     
79
     
182
     
     
     
204
     
2,034
 
Total
 
$
166,390
   
$
25,954
   
$
236,915
   
$
62,704
   
$
18,295
   
$
33,643
   
$
5,642
   
$
43,119
   
$
592,662
 
 
The following table represents the credit risk profile of our loan portfolio based on payment activity as of December 31, 2017, by type of loan (in thousands):
 
 
 
One- to
four-
family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Floating
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Performing
 
$
156,580
   
$
27,657
   
$
211,068
   
$
61,390
   
$
16,905
   
$
29,120
   
$
4,894
   
$
40,612
   
$
548,226
 
Nonperforming
   
837