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Section 1: 8-K (FORM 8-K)

Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 8-K
_____________________________________________
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 28, 2019
SOUND FINANCIAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
001-35633
 
45-5188530
(State or other jurisdiction of incorporation)
 
(Commission File No.)
 
(IRS 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
 
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicated by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
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






Items to be Included in this Report

Item 2.02.    Results of Operations and Financial Condition.

On January 28, 2019, Sound Financial Bancorp, Inc. (the "Company") issued a press release announcing financial results for the quarter and year ended December 31, 2018 and the declaration of a regular quarterly cash dividend on the Company's common stock of $0.14 per share. The cash dividend is payable on February 22, 2019 to stockholders of record as of the close of business on February 8, 2019. A copy of the press release is attached hereto as Exhibits 99.1 and is incorporated herein by reference.


Item 8.01. Other Events.        

On January 28, 2019, the Company announced that its Board of Directors has authorized a stock repurchase program. Under this repurchase program, the Company may repurchase up to $1,750,000 of the Company’s outstanding shares, in the open market, based on prevailing market prices, or in privately negotiated transactions, over a period beginning on January 31, 2019, continuing until the earlier of the completion of the repurchase or the next six (6) months, depending upon market conditions.

The Company’s Board of Directors also authorized management to enter into a trading plan with Keefe, Bruyette & Woods, Inc. in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Act”), to facilitate repurchases of its common stock pursuant to the above mentioned stock repurchase program. A copy of the press release is attached to this Current Report as Exhibit 99.2 and is incorporated herein by reference.


Item 9.01.    Financial Statements and Exhibits.

(d)
Exhibits
99.1

99.2







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 
SOUND FINANCIAL BANCORP, INC.
 
 
 
 
 
Date: January 28, 2019
By:
/s/ Laura Lee Stewart
 
 
 
Laura Lee Stewart
 
 
 
President and CEO
 



(Back To Top)

Section 2: EX-99.1 (PRESS RELEASE - EARNIGNS AND DIVIDEND)

Exhibit




396507181_companylogo.jpg
Sound Financial Bancorp, Inc. Announces 2018 Fourth Quarter and Year End Financial Results
Board announces Quarterly Cash Dividend of $0.14 per share

Seattle, Wash., January 28, 2019 -- Sound Financial Bancorp, Inc. (Nasdaq: SFBC), the holding company (the "Company") for Sound Community Bank (the "Bank"), today reported net income of $7.0 million for the year ended December 31, 2018, or diluted earnings per share of $2.74, as compared to net income of $5.1 million for the year ended December 31, 2017, or diluted earnings per share of $2.00. Net income for the fourth quarter of 2018 was $1.6 million, or $0.64 per diluted share, compared to $1.2 million, or $0.46 per diluted share, for the quarter ended December 31, 2017. Net income for the fourth quarters and years ended 2018 and 2017 was impacted by one-time tax adjustments related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act ("Tax Act"). The 2018 quarter and year end periods were positively impacted by a $275,000 and $1.2 million tax benefit related to tax rate changes, while the 2017 quarter and year end periods were negatively impacted by $309,000 in tax expense related to an adjustment to the Company's deferred tax asset.

The Company also announced today that the Board of Directors has declared a cash dividend on Company common stock of $0.14 per share, payable on February 22, 2019 to stockholders of record as of the close of business on February 8, 2019.

"We had a year of excellent balance sheet growth with success both in loan originations and deposits. We continued to achieve significant loan growth, in our higher yielding commercial and multifamily and floating home loan portfolios," said Laurie Stewart, President and CEO of the Company and the Bank. "We also continue to maintain our strong net interest margin despite a rising interest rate environment as our noninterest-bearing deposits continue to grow," concluded Ms. Stewart.

Full Year 2018 Performance Highlights:

Loans held-for-portfolio increased 12.9% to $619.5 million at December 31, 2018, from $548.6 million at December 31, 2017, with commercial and multifamily loans increasing $41.4 million, or 19.6%;
Total deposits increased 7.6% to $553.6 million at December 31, 2018, from $514.4 million at December 31, 2017, with non-interest bearing deposits increasing $23.9 million, or 33.2%;
Total assets increased 11.1% to $716.7 million at December 31, 2018, from $645.2 million at December 31, 2017;
Net interest income increased 14.6% to $27.6 million for the year ended December 31, 2018, from $24.1 million for the year ended December 31, 2017;
Net interest margin ("NIM") decreased to 4.25% for the year ended December 31, 2018, compared to 4.35% for the year ended December 31, 2017;
The provision for loan losses was $525,000 for the year ended December 31, 2018, compared to $500,000 for the year ended December 31, 2017;
The provision for income taxes was $1.7 million for the year ended December 31, 2018, compared to $3.1 million for the year ended December 31, 2017; and
Return on average assets and return on average equity improved to 1.03% and 10.24%, respectively, for the year ended December 31, 2018, compared to 0.87% and 8.13%, respectively, for the year ended December 31, 2017.

Fourth Quarter 2018 Performance Highlights:

Net interest income was $7.3 million for the quarter ended December 31, 2018, an increase of 5.6% compared to $6.9 million for the quarter ended September 30, 2018, and an increase of 14.8% compared to $6.3 million for the quarter ended December 31, 2017;

1



Annualized NIM increased slightly to 4.25% for the quarter ended December 31, 2018, compared to 4.24% for the quarter ended September 30, 2018, and decreased 12 basis point, compared to 4.37% for the quarter ended December 31, 2017;
Noninterest income decreased 44.8% to $827,000 for the quarter ended December 31, 2018, from $1.5 million for the quarter ended September 30, 2018, and decreased 21.5%, from $1.1 million for the quarter ended December 31, 2017;
Loans held for portfolio increased 0.4% to $619.5 million at December 31, 2018, from $617.2 million at September 30, 2018;
Total deposits increased 2.6% to $553.6 million at December 31, 2018, from $539.8 million at September 30, 2018;
Return on average assets (annualized) was 0.91% for the quarter ended December 31, 2018, compared to 1.04% and 0.77% for the quarters ended September 30, 2018 and December 31, 2017, respectively; and
Return on average equity (annualized) was 9.21% for the quarter ended December 31, 2018, compared to 10.52% and 7.36% for the quarters ended September 30, 2018 and December 31, 2017, respectively.



The Bank continued to maintain capital levels in excess of the regulatory requirements and was categorized as "well-capitalized" at December 31, 2018.


2



Operating Results

Net interest income increased $3.5 million, or 14.6%, to $27.6 million during the year ended December 31, 2018, compared to $24.1 million during the year ended December 31, 2017. The increase was primarily a result of increased interest income on loans due to both higher average balances and loan yields, partially offset by increased interest expense.

Interest income increased $5.5 million, or 20.0%, to $32.9 million during the year ended December 31, 2018, compared to $27.4 million during the year ended December 31, 2017. Interest income on loans increased $5.0 million, or 18.5%, to $31.7 million during the year ended December 31, 2018, compared to the prior year, due to higher average loan balances and yields. The average loans held-for-portfolio balance was $588.4 million for the year ended December 31, 2018, compared to $508.5 million for the year ended December 31, 2017. The average yield on loans held-for-portfolio was 5.37% for the year ended December 31, 2018, compared to 5.25% for the year ended December 31, 2017. Interest income on the investment portfolio increased $544,000, or 73.3%, to $1.3 million during the year ended December 31, 2018, compared to $742,000 during the year ended December 31, 2017, due to the rise in market interest rates in 2018.

Interest expense increased $2.0 million, or 59.1%, to $5.4 million during the year ended December 31, 2018, compared to $3.4 million during the year ended December 31, 2017, due to increases in average balances and costs of deposits and Federal Home Loan Bank ("FHLB") borrowings. Interest expense on FHLB borrowings increased $1.2 million, or 338.3%, to $1.5 million for the year ended December 31, 2018, compared to the prior year, due to a $40.1 million, or 134.6% increase in the average balance of FHLB borrowings to $69.9 million and a 102 basis point increase in the average rate paid on FHLB borrowings to 2.18% for the year ended December 31, 2018. Interest expense on deposits increased $818,000, or 27.1%, to $3.8 million for the year ended December 31, 2018, compared to the prior year, driven by an increase of $23.9 million, or 5.7% in the average balance of interest-bearing deposits to $446.2 million and a 10 basis point increase in the average rate paid on interest-bearing deposits to 0.71% for the year ended December 31, 2018. The rise in the cost of interest-bearing liabilities resulted from the increase in the targeted federal funds rate over the past year.

Net interest margin decreased to 4.25% for the year ended December 31, 2018, compared to 4.35% for the year ended December 31, 2017. The decrease was primarily due to higher funding costs as interest rates paid on interest-bearing liabilities increased more rapidly than yields earned on interest-earning assets.

We recorded a provision for loan losses of $525,000 for the year ended December 31, 2018, compared to $500,000 for the year ended December 31, 2017. The increase in the provision for the year was primarily a result of the growth in loans held-for-portfolio, which increased 12.9% from a year ago.

Noninterest income increased $647,000, or 16.8%, to $4.5 million for the year ended December 31, 2018, compared to $3.9 million for the year December 31, 2017. The increase from one year ago was primarily due to one-time proceeds of $490,000 from the gain on sale of certain securities, included in other noninterest income, and a $187,000 increase in gain on sale of loans, partially offset by a decrease in service charges and fees income.

Noninterest expense increased $3.6 million, or 18.6%, to $22.8 million for the year ended December 31, 2018, from $19.2 million for the year ended December 31, 2017. The increase from the year ended December 31, 2017 was primarily due to higher expense for salaries and benefits, operations and occupancy. Salaries and benefits expense increased $2.0 million compared to a year ago, primarily due to higher medical expenses, and an increase in the number of full-time equivalent employees ("FTE's") as a result of the addition of our University Place branch and loan production office in Sequim in 2017, as well as addition of our new Belltown branch in 2018. In addition, the percent of incentive bonuses paid out quarterly increased starting in January 2018, which also contributed to the year-over-year increase. Operations expense increased $1.0 million from a year ago, primarily due to an increase in audit fees, professional fees and loan related expenses. For the year ended December 31, 2018, compared to the prior year, occupancy expense increased $250,000, or 13.2%, due to a one-time adjustment to recognize straight-line rent expense over the life of a lease.

The efficiency ratio for the year ended December 31, 2018 was 71.12%, compared to 68.89% for the year ended December 31, 2017. The decline in the efficiency ratio in 2018 compared to the prior year was primarily due to the increase in noninterest expense outpacing the smaller increase in net interest income and noninterest income.

The provision for income taxes decreased $1.4 million, or 44.4%, to $1.7 million for the year ended December 31, 2018, compared to $3.1 million for the year December 31, 2017. The decrease was primarily a result of the Tax Act, which impacted the Company positively in 2018 by reducing its statutory federal corporate income tax rate from 35% to 21%, and negatively in 2017 by requiring the Company to revalue its net deferred tax assets, resulting in a $309,000 adjustment through income tax expense in 2017.


3



Balance Sheet Review, Capital Management and Credit Quality

Total assets at December 31, 2018 were $716.7 million, compared to $645.2 million at December 31, 2017. The increase from one year ago was primarily a result of an increase in loans held-for-portfolio. In addition, FHLB stock increased $1.0 million to $4.1 million at December 31, 2018, from $3.1 million at December 31, 2017, as a result of utilizing additional FHLB advances to fund loan growth.

Cash and cash equivalents increased $1.1 million, or 1.9%, to $61.8 million at December 31, 2018, compared to $60.7 million at December 31, 2017.

Investment securities available-for-sale (AFS) totaled $5.0 million at December 31, 2018, compared to $5.4 million at December 31, 2017. The decrease was due to normal principal pay downs on the investments.

Loans held-for-portfolio totaled $619.5 million at December 31, 2018, compared to $548.6 million at December 31, 2017. All loan categories experienced an increase compared to the prior year, other than commercial business and home equity. The largest increases in the loan portfolio compared to the prior year were in commercial and multifamily real estate, one-to-four family, and consumer loan portfolios. The commercial and multifamily real estate loan portfolio increased $41.4 million, or 19.6%, to $252.6 million, the one-to-four family loan portfolio increased $12.4 million, or 7.9%, to $169.8 million, and the consumer loan portfolio increased $16.4 million, or 32.2%, to $67.6 million, with the largest increase in consumer loans coming from floating homes loans, which increased $11.7 million, or 40.1%, to $40.8 million. At December 31, 2018, commercial and multifamily real estate loans accounted for approximately 40.6% of total loans and one-to-four family loans, including home equity loans accounted for approximately 31.8% of total loans. Consumer loans, consisting of manufactured homes, floating homes, and other consumer loans accounted for approximately 10.9% of total loans at that date. Construction and land loans accounted for approximately 10.5% of total loans and commercial business loans accounted for approximately 6.2% of total loans at December 31, 2018.

Deposits increased $39.2 million, or 7.6%, to $553.6 million at December 31, 2018, compared to $514.4 million at December 31, 2017. The increase in deposits was the result of organic growth. FHLB borrowings increased to $84.0 million at December 31, 2018, compared to $59.0 million at December 31, 2017. We utilize borrowings to supplement our deposits to support loan growth.

Nonperforming assets ("NPAs"), which are comprised of non-accrual loans, nonperforming troubled debt restructurings ("TDRs"), other real estate owned ("OREO") and other repossessed assets increased $349,000 to $3.2 million at December 31, 2018, from $2.9 million at December 31, 2017. NPAs to total assets remained unchanged at 0.45% for both the years ended December 31, 2018 and December 31, 2017, respectively.


The following table summarizes our NPAs (dollars in thousands, unaudited):

 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
 
Balance
 
% of Total
 
Balance
 
% of Total
Nonperforming Loans:
 
 
 
 
 
 
 
 
One-to-four family
 
$
1,120

 
34.5
%
 
$
837

 
28.9
%
Home equity loans
 
359

 
11.1

 
722

 
25.0

Commercial and multifamily
 
534

 
16.5

 
201

 
6.9

Construction and land
 
123

 
3.8

 
92

 
3.2

Manufactured homes
 
214

 
6.6

 
206

 
7.1

Commercial business
 
317

 
9.8

 
217

 
7.5

Other consumer
 

 

 
8

 
0.3

Total nonperforming loans
 
2,667

 
82.3
%
 
2,283

 
78.9

OREO and Other Repossessed Assets:
 
 
 
 
 
 
 
 
Commercial and multifamily
 
575

 
17.7

 
600

 
20.7

Manufactured homes
 

 

 
10

 
0.4

Total OREO and repossessed assets
 
575

 
17.7

 
610

 
21.1

Total nonperforming assets
 
$
3,242

 
100.0
%
 
$
2,893

 
100.0
%


4





The following table summarizes the allowance for loan losses (dollars in thousands, unaudited):
 
 
Year Ended:
 
 
Dec. 31, 2018
 
Dec. 31, 2017
Allowance for Loan Losses
 
 
 
 
Balance at beginning of period
 
$
5,241

 
$
4,822

Provision for loan losses during the period
 
525

 
500

Net recoveries (charge-offs) during the period
 
8

 
(81
)
Balance at end of period
 
$
5,774

 
$
5,241

Allowance for loan losses to total loans
 
0.93
%
 
0.96
%
Allowance for loan losses to total nonperforming loans
 
216.48
%
 
229.57
%

The increase in the allowance for loan losses at December 31, 2018, compared a year ago was due to an increase in the balance of the loans held-for-portfolio. Total loans held-for-portfolio at December 31, 2018, increased $70.9 million, or 12.9% compared to one year ago. Net recoveries totaled $8,000 for the year ended December 31, 2018, compared to net charge-offs of $81,000 for the year ended December 31, 2017.

The allowance for loan losses to total loans held-for-portfolio decreased to 0.93% for the year ended December 31, 2018, compared to 0.96% for the year ended December 31, 2017. The decline in the ratio from a year ago was primarily a result of loan growth. The allowance for loan losses as a percentage of nonperforming loans decreased to 216.5% at December 31, 2018, compared to 229.6% December 31, 2017.

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, Port Ludlow, and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with two Loan Production Offices, one located in the Madison Park neighborhood of Seattle and one located in Sequim, Washington. For more information, please visit www.soundcb.com.


5



Forward Looking Statement Disclaimer

When used in filings by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.

Factors which could cause actual results to differ materially, include, but are not limited to: changes in general and local economic conditions; legislative changes; changes in policies by regulatory agencies; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans; results of examinations of the Company or its wholly owned bank subsidiary by their regulators; competition; changes in management's business strategies; changes in the regulatory and tax environments in which the Company operates; and other factors 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 at www.soundcb.com and on the SEC's website at www.sec.gov.

The Company does not undertake - and specifically declines any obligation - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.


6


KEY FINANCIAL RATIOS
(unaudited)

 
 
Quarter Ended
 
 
 
 
 
 
Dec. 31, 2018
 
Sept. 30, 2018
 
Dec. 31, 2017
 
Sequential Quarter % Change
 
Year over Year
% Change
Annualized return on average assets
 
0.91
%
 
1.04
%
 
0.77
%
 
(12.5
)%
 
18.2
 %
Annualized return on average equity
 
9.21

 
10.52

 
7.36

 
(12.5
)
 
25.1

Annualized net interest margin
 
4.25

 
4.24

 
4.37

 
0.24

 
(2.75
)
Annualized efficiency ratio
 
75.43
%
 
69.92
%
 
66.16
%
 
7.9
 %
 
14.0
 %



 
 
Year Ended
 
 
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
Year over Year
% Change
Return on average assets
 
1.03
%
 
0.87
%
 
18.4
 %
Return on average equity
 
10.24

 
8.13

 
26.0

Net interest margin
 
4.25

 
4.35

 
(2.30
)
Efficiency ratio
 
71.12
%
 
68.89
%
 
3.2
 %




PER COMMON SHARE DATA
(Shares in thousands, unaudited)
 
 
At or For the Quarter Ended
 
 
 
 
 
 
Dec. 31, 2018
 
Sept. 30, 2018
 
Dec. 31, 2017
 
Sequential Quarter
% Change
 
Year over Year
% Change
Basic earnings per share
 
$
0.66

 
$
0.73

 
$
0.47

 
(9.6
)%
 
40.4
 %
Diluted earnings per share
 
0.64

 
0.71

 
0.46

 
(9.9
)
 
39.1

Weighted-average basic shares outstanding
 
2,506

 
2,503

 
2,510

 
0.1

 
(0.2
)
Weighted-average diluted shares outstanding
 
2,566

 
2,570

 
2,572

 
(0.2
)
 
(0.2
)
Common shares outstanding at period-end
 
2,544

 
2,540

 
2,511

 
0.2

 
1.3

Book value per share
 
$
28.15

 
$
27.61

 
$
25.95

 
2.0
 %
 
8.5
 %



 
 
Year Ended
 
 
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
Year over Year
% Change
Basic earnings per share
 
$
2.82

 
$
2.05

 
37.6
 %
Diluted earnings per share
 
2.74

 
2.00

 
37.0

Weighted-average basic shares outstanding
 
2,498

 
2,504

 
(0.2
)
Weighted-average diluted shares outstanding
 
2,567

 
2,568

 

Common shares outstanding at period-end
 
2,544

 
2,511

 
1.3

Book value per share
 
$
28.15

 
$
25.95

 
8.5
 %


7



CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)
 
 
For the Quarter Ended:
 
 
 
 
 
 
Dec. 31,
2018
 
Sept. 30,
2018
 
Dec. 31,
2017
 
Sequential Quarter
% Change
 
Year over Year
% Change
Interest income
 
$
8,981

 
$
8,310

 
$
7,275

 
8.1
 %
 
23.5
 %
Interest expense
 
1,701

 
1,413

 
931

 
20.4

 
82.7

Net interest income
 
7,280

 
6,897

 
6,344

 
5.6

 
14.8

Provision for loan losses
 
25

 
250

 
250

 
(90.0
)
 
(90.0
)
Net interest income after provision for loan losses
 
7,255

 
6,647

 
6,094

 
9.1

 
19.1

Noninterest income:
 
 
 
 
 
 
 
 
 
 
Service charges and fee income
 
450

 
504

 
453

 
(10.7
)
 
(0.7
)
Earnings on cash surrender value of bank-owned life insurance
 
11

 
149

 
82

 
(92.6
)
 
(86.6
)
Mortgage servicing income
 
115

 
22

 
166

 
422.7

 
(30.7
)
Net gain on sale of loans
 
251

 
333

 
352

 
(24.6
)
 
(28.7
)
Other income
 

 
490

 

 
nm

 
nm

Total noninterest income
 
827

 
1,498

 
1,053

 
(44.8
)
 
(21.5
)
Noninterest expense:
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
 
3,252

 
3,327

 
2,602

 
(2.2
)
 
25.0

Operations
 
1,653

 
1,280

 
1,296

 
29.1

 
27.5

Regulatory assessments
 
104

 
136

 
91

 
(23.5
)
 
14.3

Occupancy
 
503

 
588

 
474

 
(14.5
)
 
6.1

Data processing
 
579

 
528

 
443

 
9.6

 
30.7

Net loss and expenses on OREO and repossessed assets
 
24

 
11

 
(12
)
 
118.1

 
(300.0
)
Total noninterest expense
 
6,115

 
5,870

 
4,894

 
4.2

 
24.9

Income before provision for income taxes
 
1,967

 
2,275

 
2,253

 
(13.5
)
 
(12.7
)
Provision for income taxes
 
325

 
445

 
1,067

 
(27.0
)
 
(69.5
)
Net income
 
$
1,642

 
$
1,830

 
$
1,186

 
(10.3
)%
 
38.4
 %

nm = not meaningful
  

8



CONSOLIDATED INCOME STATEMENT
(Dollars in thousands, unaudited)
 
 
Year Ended
 
 
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
Year over Year
% Change
Interest income
 
$
32,947

 
$
27,449

 
20.0
 %
Interest expense
 
5,360

 
3,368

 
59.1

Net interest income
 
27,587

 
24,081

 
14.6

Provision for loan losses
 
525

 
500

 
5.0

Net interest income after provision for loan losses
 
27,062

 
23,581

 
14.8

Noninterest income:
 
 
 
 
 
 
Service charges and fee income
 
1,876

 
1,895

 
(1.0
)
Earnings on cash surrender value of bank-owned life insurance
 
320

 
327

 
(2.1
)
Mortgage servicing income
 
562

 
566

 
(0.7
)
Net gain on sale of loans
 
1,258

 
1,071

 
17.5

Other income
 
490

 

 
nm

Total noninterest income
 
4,506

 
3,859

 
16.8

Noninterest expense:
 
 
 
 
 
 
Salaries and benefits
 
12,775

 
10,733

 
19.0

Operations
 
5,370

 
4,348

 
23.5

Regulatory assessments
 
432

 
431

 
0.2

Occupancy
 
2,139

 
1,889

 
13.2

Data processing
 
2,021

 
1,736

 
16.4

Net loss and expenses on OREO and repossessed assets
 
86

 
110

 
(21.8
)
Total noninterest expense
 
22,823

 
19,247

 
18.6

Income before provision for income taxes
 
8,745

 
8,193

 
6.7

Provision for income taxes
 
1,706

 
3,068

 
(44.4
)
Net income
 
$
7,039

 
$
5,125

 
37.3
 %

nm = not meaningful


9



CONSOLIDATED BALANCE SHEET
(Dollars in thousands, unaudited)
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
Year over Year
% Change
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
61,810

 
$
60,680

 
1.9
 %
Available-for-sale securities, at fair value
 
4,957

 
5,435

 
(8.8
)
Loans held-for-sale
 
1,172

 
1,777

 
(34.0
)
Loans held-for-portfolio
 
619,543

 
548,595

 
12.9

Allowance for loan losses
 
(5,774
)
 
(5,241
)
 
10.2

Total loans held-for-portfolio, net
 
613,769

 
543,354

 
13.0

Accrued interest receivable
 
2,287

 
1,977

 
15.7

Bank-owned life insurance, net
 
13,365

 
12,750

 
4.8

Other real estate owned ("OREO") and other repossessed assets, net
 
575

 
610

 
(5.7
)
Mortgage servicing rights, at fair value
 
3,414

 
3,426

 
(0.4
)
Federal Home Loan Bank ("FHLB") stock, at cost
 
4,134

 
3,065

 
34.9

Premises and equipment, net
 
7,044

 
7,392

 
(4.7
)
Other assets
 
4,208

 
4,778

 
(11.9
)
TOTAL ASSETS
 
$
716,735

 
$
645,244

 
11.1

LIABILITIES
 
 
 
 
 
 
Interest-bearing deposits
 
$
457,535

 
$
442,277

 
3.4

Noninterest-bearing deposits
 
96,066

 
72,123

 
33.2

Total deposits
 
553,601

 
514,400

 
7.6

Borrowings
 
84,000

 
59,000

 
42.4

Accrued interest payable
 
137

 
77

 
77.9

Other liabilities
 
6,681

 
5,972

 
11.9

Advance payments from borrowers for taxes and insurance
 
689

 
635

 
8.5

TOTAL LIABILITIES
 
645,108

 
580,084

 
11.2

STOCKHOLDERS' EQUITY:
 
 
 
 
 
 
Common stock
 
25

 
25

 

Additional paid-in capital
 
25,663

 
24,986

 
2.7

Unearned shares – Employee Stock Ownership Plan ("ESOP")
 
(340
)
 
(453
)
 
(24.9
)
Retained earnings
 
46,165

 
40,493

 
14.0

Accumulated other comprehensive income, net of tax
 
114

 
109

 
4.6

TOTAL STOCKHOLDERS' EQUITY
 
71,627

 
65,160

 
10.0

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
716,735

 
$
645,244

 
11.1
 %


10



LOANS
(Dollars in thousands, unaudited)
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
Year over Year
% Change
Real estate loans:
 
 
 
 
 
 
One-to-four family
 
$
169,831

 
$
157,417

 
7.9
 %
Home equity
 
27,655

 
28,379

 
(2.6
)
Commercial and multifamily
 
252,644

 
211,269

 
19.6

Construction and land
 
65,259

 
61,482

 
6.1

Total real estate loans
 
515,389

 
458,547

 
12.4

Consumer Loans:
 
 
 
 
 
 
Manufactured homes
 
20,145

 
17,111

 
17.7

Floating homes
 
40,806

 
29,120

 
40.1

Other consumer
 
6,628

 
4,902

 
35.2

Total consumer loans
 
67,579

 
51,133

 
32.2

Commercial business loans
 
38,803

 
40,829

 
(5.0
)
Total loans
 
621,771

 
550,509

 
12.9

Less:
 
 
 
 
 
 
Deferred fees
 
(2,228
)
 
(1,914
)
 
16.4

Allowance for loan losses
 
(5,774
)
 
(5,241
)
 
10.2

Total loans held for portfolio, net
 
$
613,769

 
$
543,354

 
13.0
 %



DEPOSITS
(Dollars in thousands, unaudited)
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
Year over Year
% Change
Noninterest-bearing
 
$
96,066

 
$
72,123

 
33.2
 %
Interest-bearing
 
164,919

 
173,413

 
(4.9
)
Savings
 
54,102

 
49,450

 
9.4

Money market
 
46,661

 
54,860

 
(14.9
)
Certificates
 
191,853

 
164,554

 
16.6

Total deposits
 
$
553,601

 
$
514,400

 
7.6
 %


11



CREDIT QUALITY DATA
(Dollars in thousands, unaudited)
 
 
 
At or For the Year Ended:
 
 
 
 
Dec. 31,
2018
 
Dec. 31,
2017
 
Year over Year
% Change
Nonaccrual loans
 
$
2,541

 
$
2,150

 
18.2
 %
Nonperforming TDRs
 
126

 
133

 
(5.3
)
Total nonperforming loans
 
2,667

 
2,283

 
16.8

OREO and other repossessed assets
 
575

 
610

 
(5.7
)
Total nonperforming assets
 
$
3,242

 
$
2,893

 
12.1

Performing TDRs on accrual
 
$
2,140

 
$
3,269

 
(34.5
)
Net recoveries (charge-offs) during the year
 
8

 
(81
)
 
109.9

Provision for loan losses during the year
 
525

 
500

 
5.0

Allowance for loan losses
 
5,774

 
5,241

 
10.2

Allowance for loan losses to total loans
 
0.93
%
 
0.96
%
 
(3.1
)
Allowance for loan losses to total nonperforming loans
 
216.48
%
 
229.57
%
 
(5.7
)
Nonperforming loans to total loans
 
0.43
%
 
0.42
%
 
2.4

Nonperforming assets to total assets
 
0.45
%
 
0.45
%
 
 %


OTHER STATISTICS
(Dollars in thousands, unaudited)
 
 
At or For the Year Ended:
 
 
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
Year over Year
% Change
Sound Community Bank:
 
 
 
 
 
 
Loan to deposit ratio
 
112.12
%
 
105.63
%
 
6.1
%
Noninterest-bearing deposits / total deposits
 
17.35
%
 
14.02
%
 
23.8
%
Sound Financial Bancorp, Inc.:
 
 
 
 
 
 
Average total assets for the quarter
 
$
718,227

 
$
592,090

 
21.3
%
Average total equity for the quarter
 
$
71,287

 
$
63,004

 
13.1
%


12



Media:
 
Financial:
 
Laurie Stewart
 
Daphne Kelley
 
President/CEO
 
SVP/CFO
 
(206) 448-0884 x306
 
(206) 448-0884 x305
 


13
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Section 3: EX-99.2 (PRESS RELEASE - STOCK REPURCHASE PROGRAM)

Exhibit


396507181_companylogoa01.jpg
SOUND FINANCIAL BANCORP, INC. ANNOUNCES
STOCK REPURCHASE PROGRAM

SEATTLE, Washington, January 28, 2019 -- Sound Financial Bancorp, Inc. (NASDAQ:SFBC) (the “Company”), headquartered in Seattle, WA, the holding company parent of Sound Community Bank, today announced that its Board of Directors has adopted a stock repurchase program. Under this repurchase program, the Company may repurchase up to $1,750,000 of the Company’s outstanding shares, in the open market, based on prevailing market prices, or in privately negotiated transactions, over a period beginning on January 31, 2019, continuing until the earlier of the completion of the repurchase or the next six (6) months, depending upon market conditions.

The Board of Directors of the Company also authorized management to enter into a trading plan with Keefe, Bruyette & Woods, Inc. in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Act”), to facilitate repurchases of its common stock pursuant to the above mentioned stock repurchase program (the “Rule 10b5-1 plan”). The Rule 10b5-1 plan would allow the Company to execute trades during periods when it would ordinarily not be permitted to do so because it may be in possession of material non-public information, because of insider trading laws or self-imposed trading blackout periods. Under the Rule 10b5-1 plan, Keefe, Bruyette & Woods, Inc. would have the authority, under the prices, terms and limitations set forth in the Rule 10b5-1 plan, including compliance with Rule 10b-18 of the Act, to repurchase shares on the Company’s behalf.

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, Port Ludlow, and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with two Loan Production Offices, one located in the Madison Park neighborhood of Seattle and one located in Sequim, Washington. For more information, please visit www.soundcb.com.

Forward Looking Statement Disclaimer

When used in filings by Sound Financial Bancorp, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”), in the Company’s press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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 to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.


For additional information:
Media Contact:
Laurie Stewart, President & CEO
206.436.1495




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