SEATTLE, July 30, 2013 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (Nasdaq:SFBC), the holding company (the "Company") for Sound Community Bank (the "Bank"), today reported net income of $1.1 million for the second quarter of 2013, or $0.43 per diluted common share. The increase was primarily a result of a $650,000 decrease in the provision for loan losses as a result of a significant reduction in nonperforming loans and higher net interest income. By comparison, net income for the second quarter of 2012 was $593,000, or $0.23 per average diluted common share.
"We are pleased to report another strong quarter in terms of earnings as well as continued improvement on asset quality," said, President and CEO, Laurie Stewart. "We are working diligently to increase revenues and improve efficiency. We accomplished both of these goals this quarter and we are developing quality relationships in all of our markets to foster additional business every day."
Second Quarter 2013 Highlights
- Net income increased 91% to $1.1 million for the second quarter of 2013, from $593,000 a year ago and $797,000 for the first quarter of 2013.
- Net interest income increased 8.3% to $4.3 million for the second quarter of 2013, from $4.0 million a year ago and $4.1 million for the first quarter of 2013.
- Deposits increased 1.8% at June 30, 2013, compared to June 30, 2012, and increased 2.4% from December 31, 2012.
- The cost of deposits declined seven basis points to 0.62% for the second quarter of 2013, compared to 0.69% for the second quarter of 2012, and declined two basis point from 0.64% for the first quarter of 2013.
- Loans (excluding loans-held-for-sale) increased 17.1% to $358.7 million at June 30, 2013, compared to $306.4 million at June 30, 2012, and increased 9.8% from $326.7 million at December 31, 2012.
- Nonperforming assets decreased 66.9% and 50.3% to $3.2 million at June 30, 2013, compared to $9.6 million at June 30, 2012 and $6.4 million at December 31, 2012, respectively.
- Net charge-offs totaled $367,000 for the second quarter of 2013, compared to net charge-offs of $1.0 million for the second quarter of 2012, and $452,000 for the first quarter of 2013.
- The provision for loan losses was $450,000 for the second quarter of 2013, compared to a $1.1 million provision for loan losses for the second quarter of 2012, and $250,000 for the first quarter of 2013.
- The allowance for loan losses ("ALLL") declined 7.2% to $4.1 million at June 30, 2013, from $4.4 million at June 30, 2012, and declined 2.8% from $4.2 million at December 31, 2012. The ALLL was 1.15% of total loans at June 30, 2013, compared to 1.45% at June 30, 2012, and 1.30% at December 31, 2012.
Capital ratios exceeded regulatory requirements for a well-capitalized financial institution on a holding company and bank level at June 30, 2013.
Operating Results
Net interest income increased by $332,000 or 8.3% to $4.3 million in the second quarter of 2013, compared to $4.0 million in the second quarter a year ago, primarily due to higher average loan balances and lower cost of funds. Net interest income for the first quarter of 2013 was $4.1 million.
The net interest margin was 4.68% for the second quarter of 2013, compared to 5.24% for the second quarter of 2012, and 4.55% for the first quarter of 2013. The decline in the net interest margin in the second quarter of 2013 as compared to a year ago was primarily due to lower loan yields due to the continued low interest rate environment.
The provision for loan losses in the second quarter of 2013 was $450,000, compared to $1.1 million for the second quarter a year ago and $250,000 for the first quarter of 2013. The decline in the second quarter of 2013 as compared to a year ago was primarily due to lower charge-offs and lower average balances of nonperforming loans which was partially offset by higher average loan balances and changes in the asset mix of our loan portfolio.
Noninterest income increased by $572,000, or 72.8% to $1.4 million in the second quarter of 2013, compared to $786,000 in the second quarter a year ago, primarily due to an increase in mortgage servicing income and a $250,000 increase in the fair value of mortgage servicing rights. Noninterest income for the first quarter of 2013 was $1.4 million. The gain on sale of loans declined during the second quarter as compared to the prior quarter due to reduced refinancing activity, which may continue, due to the increase in mortgage interest rates during the second quarter.
Total noninterest expense for the second quarter of 2013 was $3.6 million, up 26.2% compared to $2.8 million for the second quarter of 2012 and down 11.1% compared to $4.0 million for the first quarter of 2013. The increase in noninterest expense from a year ago was primarily due to increased compensation expenses paid to commission-based employees as a result of increased loan demand and operations expense related to losses and potential losses on loans serviced for Fannie Mae.
The efficiency ratio for the second quarter of 2013 was 59.74%, compared to 58.51% for the second quarter of 2012, and 61.49% for the first quarter of 2013. The increase in the efficiency ratio in the second quarter of 2013 compared to a year ago was primarily due to higher salary, benefits and loan expenses associated with higher loan demand.
Balance Sheet Review, Capital Management and Credit Quality
The Company's total assets increased 15.3% to $409.6 million at June 30, 2013, from $355.1 million a year ago, and increased 7.5% from $381.0 million at December 31, 2012. This increase was primarily a result of higher loan balances which increased $52.6 million from a year ago and $32.0 million from the end of 2012, primarily due to a $15.5 million increase in commercial and multifamily loans in 2013. In addition, construction and land loans increased $13.0 million year over year reflecting the improvement in the housing market in the communities we serve.
The investment securities available-for-sale portfolio totaled $17.0 million at June 30, 2013, compared to $9.0 million at June 30, 2012, and $22.9 million at December 31, 2012. At June 30, 2013, the securities available-for-sale portfolio was comprised of $14.3 million agency mortgage-backed securities (all issued by U.S. Government sponsored entities) and $2.7 million in private-label mortgage-backed securities.
Loans, excluding loans held-for-sale, totaled $358.7 million at June 30, 2013, an increase of 17.1% from $306.4 million at June 30, 2012, and an increase of 9.8% from $326.7 million at December 31, 2012. The loan portfolio remains well-diversified with commercial real estate loans accounting for 41.5% of the portfolio, of which 25.4% were owner-occupied. Residential real estate loans accounted for 28.2% of the portfolio. Home equity, manufactured and other consumer loans accounted for 16.4% of the portfolio. Construction and land accounted for 10.7% of the portfolio and commercial and industrial loans accounted for the remaining 3.3% of total loans at June 30, 2013.
The weighted average yield on the loan portfolio was 5.66% for the second quarter of 2013, compared to 5.89% for the same period in 2012, and 5.37% for the first quarter of 2013.
Nonperforming assets ("NPAs"), which include non-accrual loans, accruing loans 90 days and more delinquent, and foreclosed assets, totaled $3.2 million, or 0.78% of total assets, at June 30, 2013, compared to $9.5 million, or 2.71% of total assets, a year ago. NPAs were $6.4 million, or 1.68% of total assets at December 31, 2012.
The following table summarizes our NPAs at June 30, 2013 and December 31, 2012:
| June 30, 2013 | December 31, 2012 | |||
| Balance | % of Total | Balance | % of Total | |
| Nonperforming loans: | ||||
| One- to four- family | $ 858 | 26.9% | $ 1,143 | 17.8% |
| Home equity loans | 718 | 22.5% | 717 | 11.2% |
| Commercial and multifamily | 396 | 12.4% | 1,347 | 21.0% |
| Construction and land loans | -- | NM | 471 | 7.3% |
| Manufactured | 24 | 0.8% | 29 | 0.5% |
| Other consumer | -- | NM | 8 | 0.1% |
| Commercial business | -- | NM | 197 | 3.1% |
| Total nonperforming loans | $ 1 996 | 37.4% | $ 3,912 | 61.0% |
| OREO and repossessed assets: | ||||
| One- to four- family | $ 1,131 | 35.5% | 1,318 | 20.5% |
| Commercial and multifamily | -- | NM | 1,073 | 16.7% |
| Manufactured | 59 | 1.9% | 112 | 1.7% |
| Total OREO and repossessed assets | 1,190 | 37.4% | 2,503 | 39.0% |
| Total nonperforming assets | $ 3,186 | 100.0% | $6,415 | 100.0% |
The following table summarizes the allowance for loan losses:
| For the Quarter Ended: | |||
|
June 30, |
March 31, |
June 30, |
|
| 2013 | 2013 | 2012 | |
| ALLOWANCE FOR LOAN LOSSES | |||
| (in $000's, unaudited) | |||
| Balance at beginning of quarter | $ 4,046 | $ 4,248 | $ 4,350 |
| Provision for loan losses during the quarter | 450 | 250 | 1,100 |
| Net charge-offs during the quarter | (367) | (452) | (1,001) |
| Balance at end of quarter | $ 4,129 | $ 4,046 | $ 4,449 |
| Total loans | $358,659 | $ 338,866 | $ 306,394 |
| Total nonperforming loans | $ 1,996 | $ 2,295 | $ 6,777 |
| Allowance for loan losses to total loans | 1.15% | 1.19% | 1.45% |
| Allowance for loan losses to total nonperforming loans | 206.86% | 176.30% | 65.65% |
The decrease in the allowance for loan losses at June 30, 2013, compared to June 30, 2012, was primarily due to improved credit metrics of our loan portfolio, as well as a decrease in net charge-offs. Net charge-offs totaled $379,000 for the second quarter of 2013, compared to net charge-offs of $1.0 million for the second quarter of 2012, and net charge-offs of $452,000 for the first quarter of 2013.
Deposits totaled $319.5 million at June 30, 2013, compared to $313.7 million at June 30, 2012, and $312.1 million at December 31, 2012. Borrowings from the FHLB of Seattle increased to $40.5 million at June 30, 2013, compared to $8.2 million at June 30, 2012 and $21.9 million at December 31, 2012.
The total cost of deposits decreased 7 basis points to 0.62% during the second quarter of 2013, from 0.69% during the second quarter of 2012, and decreased 2 basis points from 0.64% during the first quarter of 2013. The total cost of borrowings decreased 218 basis points to 0.59% during the second quarter of 2013, from 2.77% during the second quarter of 2012, and decreased 34 basis points from 0.93% during the first quarter of 2013.
Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. Sound Financial Bancorp, Inc. believes that certain non-GAAP financial measures provide investors with information useful in understanding Umpqua's financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.
Management believes tangible common equity and the tangible common equity ratio are meaningful measures of capital adequacy. Tangible common equity is calculated as total shareholders' equity less goodwill and other intangible assets, net (excluding mortgage servicing rights). Tangible assets are total assets less goodwill and other intangible assets, net (excluding mortgage servicing rights). The tangible common equity ratio is calculated as tangible common shareholders' equity divided by tangible assets.
The following table provides reconciliations of ending shareholders' equity (GAAP) to ending tangible common equity (non-GAAP), and ending assets (GAAP) to ending tangible assets (non-GAAP).
| (Dollars in thousands, except per share data) |
Jun 30, 2013 |
Dec 31, 2012 |
Jun 30, 2012 |
| Total shareholders' equity | $ 45,497 | $ 43,457 | $ 30,042 |
| Subtract: | |||
| Goodwill and other intangible assets, net | 692 | 722 | 814 |
| Tangible common shareholders' equity | $ 44,805 | $ 42,704 | $ 29,228 |
| Total assets | $ 409,565 | $ 381,044 | $ 355,072 |
| Subtract: | |||
| Goodwill and other intangible assets, net | 692 | 722 | 814 |
| Tangible assets | $ 408,873 | $ 380,291 | $ 354,258 |
| Common shares outstanding at period end | 2,587,544 | 2,587,544 | 2,587,760 |
| Tangible common equity ratio | 10.96% | 11.23% | 8.25% |
| Tangible book value per common share | $ 17.31 | $ 16.50 | $ 11.29 |
Sound Financial Bancorp, Inc., a bank holding company established in August 2012, is the parent company of Sound Community Bank, established in 1953 and headquartered in Seattle, Washington with full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim and Port Angeles. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with an additional Loan Production Office in 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 there are or may be important factors that could cause our actual results for 2013 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.
| For the Quarter Ended: | Percent Change From: | ||||
| CONSOLIDATED INCOME STATEMENTS |
June 30, |
March 31, |
June 30, |
March 31, |
June 30, |
| (in $000's, unaudited) | 2013 | 2013 | 2012 | 2013 | 2012 |
| Interest income | $ 4,886 | $ 4,636 | $ 4,598 | 5.4% | 6.3% |
| Interest expense | 544 | 569 | 588 | -4.4% | -7.5% |
| Net interest income before provision for loan losses | 4,342 | 4,067 | 4,010 | 6.8% | 8.3% |
| Provision for loan losses | 450 | 250 | 1,100 | 80.0% | -59.1% |
| Net interest income after provision for loan losses | 3,892 | 4,067 | 2,910 | 2.0% | 33.7% |
| Noninterest income: | |||||
| Service charges and fee income | 551 | 598 | 513 | -7.9% | 19.8% |
| Increase in cash surrender value of life insurance | 74 | 78 | 52 | -5.1% | 42.3% |
| Mortgage servicing income | 184 | 127 | 21 | 44.9% | 776.2% |
| Gain on sale of loans | 310 | 447 | 308 | -30.6% | 0.6% |
| Other noninterest income | 239 | 116 | (108) | 106.0% | -321.3% |
| Total noninterest income | 1,358 | 1,366 | 786 | -0.6% | 72.8% |
| Noninterest expense: | |||||
| Salaries and employee benefits | 1,705 | 1,687 | 1,423 | 1.1% | 19.8% |
| Operations expense | 991 | 967 | 728 | 2.5% | 36.1% |
| Data processing | 318 | 288 | 262 | 10.4% | 21.4% |
| Losses and expenses related to OREO | 164 | 675 | 22 | -75.7 | 645.5% |
| Other noninterest expense | 391 | 399 | 393 | -2.0% | -0.5% |
| Total noninterest expense | 3,569 | 4,016 | 2,828 | -11.1% | 26.2% |
| Income before income taxes | 1,681 | 1,167 | 868 | 44.0% | 93.7% |
| Income tax expense | 539 | 370 | 275 | 45.7% | 96.0% |
| Net income | $ 1,142 | $ 797 | $ 593 | 43.3% | 92.6% |
| PER COMMON SHARE DATA | |||||
| (unaudited) | |||||
| Basic earnings per share | $ 0.44 | $ 0.31 | $ 0.23 | 41.9% | 100.0% |
| Diluted earnings per share | $ 0.43 | $ 0.30 | $ 0.23 | 43.3% | 95.5% |
| Common shares outstanding at period-end | 2,587,544 | 2,587,544 | 2,587,760 | 0.0% | 0.0% |
| Book value per share | $ 17.58 | $ 17.13 | $ 11.61 | 2.6% | 51.4% |
| Tangible book value per share | $ 17.31 | $ 16.85 | $ 11.29 | 2.7% | 53.3% |
| KEY FINANCIAL RATIOS | |||||
| (unaudited) | |||||
| Annualized return on average equity | 10.11% | 7.24% | 7.90% | 39.6% | 28.0% |
| Annualized return on average tangible equity | 10.28% | 7.36% | 8.12% | 39.7% | 26.6% |
| Annualized return on average assets | 1.14% | 0.81% | 0.68% | 40.7% | 67.6% |
| Net interest margin | 4.68% | 4.55% | 5.24% | 0.0% | -13.2% |
| Efficiency ratio | 59.74% | 61.49% | 58.51% | -2.8% | 2.1% |
| Quarter Ended: | Percent Change From: | ||||||
| CONSOLIDATED BALANCE SHEETS |
June 30, |
December 31, |
June 30, |
December 31, |
June 30, |
||
| (in $000's, unaudited) | 2013 | 2012 | 2012 | 2012 | 2012 | ||
| ASSETS | |||||||
| Cash and cash equivalents | $ 11,760 | $ 12,727 | $ 19,400 | -7.6% | -39.4% | ||
| Securities available-for-sale, at fair value | 16,965 | 22,900 | 9,033 | -25.9% | 87.8% | ||
| FHLB stock, at cost | 2,357 | 2,401 | 2,444 | -1.8% | -3.6% | ||
| Loans held-for-sale | 2,078 | 1,725 | 1,053 | -0.2% | 97.3% | ||
| Loans: | |||||||
| One- to four- family residential | 101,406 | 94,059 | 94,604 | 7.8% | 7.2% | ||
| Home equity | 35,055 | 35,364 | 38,175 | -0.9% | -8.2% | ||
| Commercial and multifamily | 149,157 | 133,620 | 111,804 | 11.6% | 33.4% | ||
| Construction and land | 38,409 | 25,458 | 20,564 | 50.9% | 86.8% | ||
| Manufactured homes | 14,682 | 16,232 | 17,463 | -9.5% | -15.9% | ||
| Other consumer | 9,265 | 8,650 | 9,861 | 7.1% | -6.0% | ||
| Commercial business | 11,802 | 14,193 | 14,556 | -16.8% | -18.9% | ||
| Total loans | 359,776 | 327,576 | 307,027 | 9.8% | 17.2% | ||
| Deferred loan (fees) costs, net | (1,117) | (832) | (633) | 34.3% | 76.5% | ||
| Total loans, including deferred fees and costs | 358,659 | 326,744 | 306,394 | 9.8% | 17.1% | ||
| Allowance for loan losses | (4,129) | (4,248) | (4,449) | -2.8% | -7.2% | ||
| Loans, net | 354,530 | 322,496 | 301,945 | 9.9% | 17.4% | ||
| Accrued interest receivable | 1,333 | 1,280 | 1,234 | 4.1% | 8.0% | ||
| Bank-owned life insurance | 10,872 | 7,220 | 7,099 | 50.6% | 53.1% | ||
| OREO and ORA, net | 1,190 | 2,503 | 2,839 | -52.5% | -58.1% | ||
| Mortgage servicing rights, at fair value | 2,670 | 2,306 | 2,558 | 15.8% | 4.4% | ||
| Premises and equipment, net | 2,233 | 2,256 | 2,233 | -1.0% | 0.0% | ||
| Other assets | 3,577 | 3,230 | 5,234 | 10.7% | -31.7% | ||
| Total assets | $ 409,565 | $ 381,044 | $ 355,072 | 7.5% | 15.3% | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Liabilities: | |||||||
| Demand deposit, noninterest-bearing | $ 33,970 | $ 35,234 | $ 36,123 | -3.6% | -6.0% | ||
| Demand deposit, interest-bearing | 27,966 | 28,540 | 25,765 | -2.0% | 8.4% | ||
| Savings and money market | 113,388 | 113,323 | 114,797 | 0.1% | -1.2% | ||
| Time deposits | 144,190 | 134,986 | 137,044 | 6.8% | 5.2% | ||
| Total deposits | 319,514 | 312,083 | 313,729 | 2.4% | 1.8% | ||
| Borrowings | 40,542 | 21,864 | 8,185 | 85.4 | 395.3% | ||
| Accrued interest payable and other liabilities | 4,012 | 3,640 | 3,116 | 10.2% | 28.8% | ||
| Total liabilities | 364,068 | 337,587 | 325,030 | 7.8% | 12.0% | ||
|
|
|||||||
| Shareholders' Equity: | |||||||
| Common stock | 26 | 26 | 30 | 0.0% | -13.3% | ||
| Paid-in capital | 24,745 | 24,789 | 12,005 | -0.2% | 106.1% | ||
| Unearned shared – ESOP | (1,598) | (1,598) | (693) | 0.0% | 130.6% | ||
| Retained earnings | 22,675 | 20,736 | 19,235 | 5.3% | 17.9% | ||
| Accumulated other comprehensive loss | (351) | (496) | (535) | -22.3% | -34.4% | ||
| Total shareholders' equity | 45,497 | 43,457 | 30,042 | 2.6% | 51.4% | ||
| Total liabilities and shareholders' equity | $ 409,565 | $ 381,044 | $ 355,072 | 4.8% | 15.3% | ||
| Quarter Ended: | Percent Change From: | ||||||
|
June 30, |
December 31, |
June 30, |
December 31, |
June 30, |
|||
| 2013 | 2012 | 2012 | 2012 | 2012 | |||
| CREDIT QUALITY DATA | |||||||
| (in $000's, unaudited) | |||||||
| Nonaccrual loans | $ 1,481 | $ 3,003 | $ 3,830 | -50.7% | -61.3% | ||
| Nonperforming restructured and loans over 90 days past due and on accrual | 515 | 909 | 2,947 | -43.3% | -82.5% | ||
| Total nonperforming loans | 1,996 | 3,912 | 6,777 | -49.0% | -70.5% | ||
| Foreclosed assets | 1,190 | 2,503 | 2,839 | -52.5% | -58.1% | ||
| Total nonperforming assets | $ 3,186 | $ 6,415 | $ 9,616 | -50.3% | -66.9% | ||
| Restructured loans on accrual | $ 6,067 | $ 5,614 | $5,408 | 8.0% | 12.2% | ||
| Net charge-offs during the quarter | $ (367) | $ (936) | $ (1,001) | -59.5% | -62.1% | ||
| Provision for loan losses during the quarter | $ 450 | $ 850 | $ 1,100 | -47.1% | -59.1% | ||
| Allowance for loan losses | $ 4,129 | $ 4,248 | $ 4,449 | -2.8% | -7.2% | ||
| Classified assets | $ 11,384 | $ 11,169 | $ 14,677 | 1.9% | -22.4% | ||
| Allowance for loan losses to total loans | 1.15% | 1.30% | 1.45% | -11.5% | -20.7% | ||
| Allowance for loan losses to total nonperforming loans | 206.86% | 110.88% | 65.65% | 86.6% | 215.1% | ||
| Nonperforming assets to total assets | 0.78% | 1.68% | 2.71% | -53.1% | -71.3% | ||
| Nonperforming loans to total loans | 0.56% | 1.20% | 2.21% | -53.2% | -74.8% | ||
| OTHER PERIOD-END STATISTICS | |||||||
| (in $000's, unaudited) | |||||||
| Sound Community Bank: | |||||||
| Tangible equity | $ 44,805 | $ 42,704 | $ 29,228 | 4.9% | 53.3% | ||
| Shareholders' equity / total assets | 11.1% | 11.4% | 8.5% | -2.6% | 30.6% | ||
| Tangible equity / tangible assets | 11.0% | 11.2% | 8.3% | -1.8% | 32.5% | ||
| Loan to deposit ratio | 112.3% | 104.7% | 97.7% | 7.2% | 14.9% | ||
| Noninterest-bearing deposits / total deposits | 10.6% | 11.3% | 11.5% | -6.2% | -7.8% | ||
| Total risk-based capital ratio | 14.15% | 14.60% | 12.06% | 14.4% | 38.5% | ||
| Tier 1 risk-based capital ratio | 12.90% | 13.35% | 10.81% | 16.1% | 43.4% | ||
| Leverage ratio | 10.22% | 10.12% | 8.28% | 13.6% | 38.9% | ||