• Sound Financial Bancorp, Inc. Q4 2022 Results

    Source: Nasdaq GlobeNewswire / 27 Jan 2023 18:04:28   America/Chicago

    SEATTLE, Jan. 27, 2023 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (Nasdaq: SFBC), the holding company (the "Company") for Sound Community Bank (the "Bank"), today reported net income of $2.9 million for the quarter ended December 31, 2022, or $1.12 diluted earnings per share, as compared to net income of $2.5 million, or $0.97 diluted earnings per share, for the quarter ended September 30, 2022, and $1.9 million, or $0.70 diluted earnings per share, for the quarter ended December 31, 2021. The Company also announced today that its Board of Directors declared a cash dividend on Company common stock of $0.17 per share, payable on February 23, 2023 to stockholders of record as of the close of business on February 9, 2023.

    Comments from the President and Chief Executive Officer

    “Despite the continual increase in interest rates, and significant economic uncertainty, we sustained our loan origination efforts and posted our eighth consecutive quarter of loan growth,” remarked Ms. Stewart, President and Chief Executive Officer. "Organic funding via deposits remains very competitive but we continue our emphasis on the development of full relationships and generation of business and consumer deposits," concluded Stewart.

    Q4 2022 Financial Performance
        
    Total assets decreased $5.9 million or 0.6% to $976.4 million at December 31, 2022, from $982.2 million at September 30, 2022, and increased $56.7 million or 6.2% from $919.7 million at December 31, 2021.

    Loans held-for-portfolio increased $14.5 million or 1.7% to $866.0 million at December 31, 2022, compared to $851.4 million at September 30, 2022, and increased $179.6 million or 26.2% from $686.4 million at December 31, 2021.

    Total deposits decreased $6.6 million or 0.8% to $808.8 million at December 31, 2022, from $815.4 million at September 30, 2022, and increased $10.4 million or 1.3% from $798.3 million at December 31, 2021. Noninterest-bearing deposits decreased $19.1 million or 9.9% to $173.2 million at December 31, 2022 compared to $192.3 million at September 30, 2022, and decreased $17.3 million or 9.1% compared to $190.5 million at December 31, 2021.

    Our loan-to-deposit ratio was 107% at December 31, 2022, compared to 105% at September 30, 2022 and 86% at December 31, 2021.

    Total nonperforming loans increased $473 thousand or 19.0% to $3.0 million at December 31, 2022, from $2.5 million at September 30, 2022, and decreased $2.6 million or 46.7% from $5.6 million at December 31, 2021.    		  Net interest income increased $91 thousand or 0.9% to $9.7 million for the quarter ended December 31, 2022, from $9.6 million for the quarter ended September 30, 2022, and increased $2.0 million or 25.6% from $7.7 million for the quarter ended December 31, 2021.

    Net interest margin ("NIM"), annualized, was 4.05% for the quarter ended December 31, 2022, compared to 4.13% for the quarter ended September 30, 2022 and 3.53% for the quarter ended December 31, 2021.  

    A $125 thousand provision for loan losses was recorded for the quarter ended December 31, 2022, compared to a $375 thousand provision for loan losses for the quarter ended September 30, 2022 and no provision for loan losses for the quarter ended December 31, 2021. At December 31, 2022, the allowance for loan losses to total nonperforming loans and to total loans was 256.84% and 0.88%, respectively.  

    Net gain on sale of loans was $49 thousand for the quarter ended December 31, 2022, compared to $48 thousand for the quarter ended September 30, 2022 and $507 thousand for the quarter ended December 31, 2021.  

    The Bank continued to maintain capital levels in excess of regulatory requirements and was categorized as "well-capitalized" at December 31, 2022.
        

    Operating Results

    Net interest income increased $91 thousand, or 0.9%, to $9.7 million for the quarter ended December 31, 2022, compared to $9.6 million for the quarter ended September 30, 2022, and increased $2.0 million, or 25.6%, from $7.7 million for the quarter ended December 31, 2021. The increase in the current quarter, compared to the prior quarter and the fourth quarter of 2021 were primarily the result of a higher average balance of and yield earned on average interest-earning assets, partially offset by a higher average balance of and rate paid on average interest-bearing liabilities.

    Interest income increased $1.0 million, or 9.7%, to $11.8 million for the quarter ended December 31, 2022, compared to $10.8 million for the quarter ended September 30, 2022, and increased $3.5 million, or 41.4%, from $8.4 million for the quarter ended December 31, 2021. The increase from the prior quarter was primarily due to higher average loan balances, an 18 basis point rate increase in the average yield on loans and a 131 basis point rate increase in the average yield on investments and interest-bearing cash following increases in the targeted federal funds rate throughout 2022, partially offset by lower average balances of investments and interest-bearing cash. The increase in interest income from the same quarter last year was due primarily to higher average loan balances, a 37 basis point increase in the average loan yield and a 305 basis point increase in average yield on investments and interest-bearing cash, partially offset by a lower average balance of investments and interest-bearing cash.

    Interest income on loans increased $751 thousand, or 7.3%, to $11.1 million for the quarter ended December 31, 2022, compared to $10.3 million for the quarter ended September 30, 2022, and increased $2.8 million, or 34.5%, from $8.2 million for the quarter ended December 31, 2021. The average balance of total loans was $861.4 million for the quarter ended December 31, 2022, compared to $833.2 million for the quarter ended September 30, 2022 and $690.7 million for the quarter ended December 31, 2021. The average yield on total loans was 5.10% for the quarter ended December 31, 2022, compared to 4.92% for the quarter ended September 30, 2022 and 4.73% for the quarter ended December 31, 2021. The increase in the average loan yield during the current quarter compared to the prior quarter and fourth quarter of 2021 was primarily due to variable rate loans adjusting to higher market interest rates and new loan originations at higher interest rates. Interest income on investments and interest-bearing cash increased $292 thousand to $741 thousand for the quarter ended December 31, 2022, compared to $449 thousand for the quarter ended September 30, 2022, and increased $620 thousand from $121 thousand for the quarter ended December 31, 2021, due to a higher average yield on investments and interest-bearing cash, partially offset by a lower average balance as excess cash liquidity was deployed into higher yielding loans during the current quarter.

    Interest expense increased $952 thousand, or 80.7%, to $2.1 million for the quarter ended December 31, 2022, from $1.2 million for the quarter ended September 30, 2022, and increased $1.5 million, or 231.4%, from $643 thousand for the quarter ended December 31, 2021. The increase in interest expense during the current quarter from the prior quarter was primarily the result of a $12.9 million increase in the average balance of borrowings, comprised of Federal Home Loan Bank ("FHLB") advances, and a $55.7 million increase in the average balance of certificate accounts, as well as higher average rates paid on all interest-bearing deposits, partially offset by a $36.9 million decrease in the average balance of interest-bearing deposits other than certificate accounts. The increase in interest expense during the current quarter from the comparable period a year ago was primarily the result of a $59.3 million increase in the average balance of borrowings and a $75.3 million increase in the average balance of certificate accounts, as well as higher average rates paid on all interest-bearing deposits, partially offset by a $52.6 million decrease in the average balance of interest-bearing deposits other than certificate accounts. The average cost of total borrowings, comprised of FHLB advances and subordinated notes, increased to 4.20% for the quarter ended December 31, 2022, from 3.06% for the quarter ended September 30, 2022, and decreased from 5.73% for the quarter ended December 31, 2021, reflecting the increased use of lower cost FHLB advances during the second half of 2022 to supplement our liquidity needs. The average balance of our total borrowings increased $12.9 million to $71.0 million from $58.1 million for the quarter ended September 30, 2022, and increased $59.4 million from $11.6 million for the quarter ended December 31, 2021 as we used FHLB advances to fund loan growth.

    Net interest margin (annualized) was 4.05% for the quarter ended December 31, 2022, compared to 4.13% for the quarter ended September 30, 2022 and 3.53% for the quarter ended December 31, 2021. The decrease in net interest margin from the prior quarter was primarily due to cost of funding increasing at a faster pace than the yield earned on interest-earning assets, driven by the higher average balance of borrowings and certificate accounts, partially offset by the increase in the average balance of loans. The increase from the same quarter a year ago was the result of an increase in interest income on interest-earning assets, driven by the higher average balance of and yield earned on loans, partially offset by an increase in the cost of funding during the second half of 2022.

    The Company recorded a provision for loan losses of $125 thousand for the quarter ended December 31, 2022, as compared to $375 thousand for the quarter ended September 30, 2022 and no provision for the quarter ended December 31, 2021. The decrease in the provision for loan losses for the quarter ended December 31, 2022 compared to the quarter ended September 30, 2022 resulted primarily from the lower growth in our loans held-for-portfolio. The provision for loan losses in the fourth quarter of 2022 also reflects the inherent uncertainty related to the economic environment as a result of local, national and global events.

    Noninterest income remained essentially unchanged at $1.0 million for the quarters ended December 31, 2022 and September 30, 2022, and decreased $465 thousand, or 31.4%, from $1.5 million for the quarter ended December 31, 2021. The decrease in noninterest income from the comparable period in 2021 was primarily due to a $458 thousand decrease in net gain on sale of loans as a result of a decline in both the amount of loans originated for sale and gross margins for loans sold and a $13 thousand decrease in the fair value adjustment on mortgage servicing rights, partially offset by a $40 thousand increase in earnings on the cash surrender value of bank-owned life insurance (“BOLI”). Loans sold during the quarter ended December 31, 2022, totaled $3.5 million, compared to $2.3 million and $19.1 million during the quarters ended September 30, 2022 and December 31, 2021, respectively.

    Noninterest expense increased $82 thousand, or 1.2%, to $7.1 million for the quarter ended December 31, 2022, compared to $7.0 million for the quarter ended September 30, 2022 and increased $190 thousand, or 2.7%, from $6.9 million for the quarter ended December 31, 2021. The increase from the quarter ended September 30, 2022 was primarily a result of an increase in salaries and benefits expense of $190 thousand resulting from lower deferred compensation and higher medical expenses, partially offset by a decrease in incentive compensation expense as a result of lower loan and deposit growth. Operations expense decreased $92 thousand primarily due to decreases in various expenses including marketing expenses and charitable contributions, insurance costs, and office expenses, partially offset by an increase in audit and professional fees. The increase in noninterest expense compared to the quarter ended December 31, 2021 was primarily due to an increase in salaries and benefits of $448 thousand primarily due to higher wages and medical expenses and lower deferred compensation, partially offset by a decrease in incentive compensation as a result of a lower percentage earned on loans originated, changes to incentive compensation programs, such as the addition of non-production performance requirements, and lower commission expense related to a decline in mortgage originations. Operations expense decreased $243 thousand compared to the quarter ended December 31, 2021 due to lower loan origination costs due to lower mortgage origination volume, a lower reserve for unfunded commitments and decreases in various accounts including marketing, charitable contributions and professional fees. These decreases were partially offset by increases in various accounts including travel expenses, debit card processing, audit fees, fixed assets and office expenses.

    The efficiency ratio for the quarter ended December 31, 2022 was 66.49%, compared to 66.23% for the quarter ended September 30, 2022 and 75.31% for the quarter ended December 31, 2021. The improvement in the efficiency ratio for the current quarter compared to the same period in the prior year was primarily due to higher net interest income, partially offset by higher noninterest expense and lower noninterest income.

    Balance Sheet Review, Capital Management and Credit Quality

    Assets at December 31, 2022 totaled $976.4 million, compared to $982.2 million at September 30, 2022 and $919.7 million at December 31, 2021. The decrease in total assets from the sequential quarter was primarily due to a decrease in cash and cash equivalents as a result of a decrease in deposits and to repay borrowings. The increase from one year ago was primarily a result of increases in loans held-for-portfolio and investment securities, partially offset by lower balances in cash and cash equivalents.

    Cash and cash equivalents decreased $18.2 million, or 24.0%, to $57.8 million at December 31, 2022, compared to $76.1 million at September 30, 2022, and decreased $125.8 million, or 68.5%, from $183.6 million at December 31, 2021. The decrease from the prior quarter-end was primarily due to the deployment of excess liquidity into higher yielding loans. The decrease from one year ago was primarily due to deploying cash earning a nominal yield into higher interest-earning loans and investments securities, partially offset by an increase in deposits, primarily certificate accounts.

    Investment securities decreased $197 thousand, or 1.6%, to $12.4 million at December 31, 2022, compared to $12.6 million at September 30, 2022, and increased $4.0 million, or 47.4%, from $8.4 million at December 31, 2021. Held-to-maturity securities totaled $2.2 million at both December 31, 2022 and September 30, 2022, compared to zero at December 31, 2021. Available-for-sale securities totaled $10.2 million at December 31, 2022, compared to $10.4 million at September 30, 2022, and $8.4 million at December 31, 2021. The decrease in available-for-sale securities from the prior quarter-end was primarily due to the call of a municipal bond for $260 thousand and regularly scheduled payments, partially offset by a lower net unrealized losses resulting from an increase in market values during the quarter. The increase from one year ago was primarily due to investment purchases during the year, partially offset by the call of one municipal bond, regularly scheduled payments and maturities, and net unrealized losses resulting from the increases in market interest rates during the year.

    Loans held-for-portfolio increased to $866.0 million at December 31, 2022, compared to $851.4 million at September 30, 2022 and increased from $686.4 million at December 31, 2021. The increase in loans held-for-portfolio at December 31, 2022, compared to the prior quarter-end, primarily resulted from increases in residential, construction and land, and consumer loans, partially offset by a decline in commercial real estate and multifamily loans. The increase in loans held-for-portfolio at December 31, 2022, compared to one year ago, primarily resulted from increases across all loan categories, excluding commercial business loans which decreased between the periods primarily due to SBA loan forgiveness payments on Paycheck Protection Program loans. The increase in loans held-for-portfolio primarily resulted from focused marketing campaigns, increased utilization of digital marketing tools and the addition of experienced lending staff.

    Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans, including nonperforming troubled debt restructurings (“TDRs”), other real estate owned (“OREO”) and other repossessed assets, increased $473 thousand, or 15.0%, to $3.6 million at December 31, 2022, from $3.1 million at September 30, 2022 and decreased $2.6 million, or 41.7% from $6.2 million at December 31, 2021. The increase in nonperforming assets from the prior quarter-end was primarily due to the addition of four nonaccrual loans during the current quarter, including two one-to-four family loans, one home equity loan and one land loan. The decrease from one year ago was primarily due to the payoff of a $2.3 million nonperforming multifamily loan during 2022. Loans classified as TDRs totaled $2.0 million, $2.0 million and $2.6 million at December 31, 2022, September 30, 2022 and December 31, 2021, respectively, of which $103 thousand, $108 thousand and $422 thousand, respectively, were classified as nonperforming at those dates.

    NPAs to total assets were 0.37%, 0.32% and 0.68% at December 31, 2022, September 30, 2022 and December 31, 2021, respectively. The allowance for loan losses to total loans outstanding was 0.88%, 0.88% and 0.92% at December 31, 2022, September 30, 2022 and December 31, 2021, respectively. Net loan charge-offs for the fourth quarter of 2022 totaled $15 thousand, compared to $3 thousand for the third quarter of 2022, and $21 thousand for the fourth quarter of 2021.

    The following table summarizes our NPAs at the dates indicated (dollars in thousands):

     December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Nonperforming Loans:         
    One-to-four family$2,135  $1,960  $1,670  $1,676  $2,207 
    Home equity loans 142   133   152   155   140 
    Commercial and multifamily —   —   2,307   2,336   2,380 
    Construction and land 324   29   30   31   33 
    Manufactured homes 96   99   117   135   122 
    Floating homes —   —   —   —   493 
    Commercial business —   —   —   170   176 
    Other consumer 262   265   233   244   — 
    Total nonperforming loans 2,959   2,486   4,509   4,747   5,552 
    OREO and Other Repossessed Assets:         
    One-to-four family 84   84   84   84   84 
    Commercial and multifamily 575   575   575   575   575 
    Total OREO and repossessed assets 659   659   659   659   659 
    Total nonperforming assets$3,618  $3,145  $5,168  $5,406  $6,211 
              
    Nonperforming Loans:         
    One-to-four family 59.0%  62.3%  32.3%  31.0%  35.5%
    Home equity loans 3.9   4.2   2.9   2.9   2.3 
    Commercial and multifamily —   —   44.7   43.2   38.3 
    Construction and land 9.0   0.9   0.6   0.6   0.5 
    Manufactured homes 2.7   3.2   2.3   2.5   2.0 
    Floating homes —   —   —   —   7.9 
    Commercial business —   —   —   3.1   2.8 
    Other consumer 7.2   8.4   4.5   4.5   — 
    Total nonperforming loans 81.8   79.0   87.3   87.8   89.3 
    OREO and Other Repossessed Assets:         
    One-to-four family 2.3   2.7   1.6   1.6   1.4 
    Commercial and multifamily 15.9   18.3   11.1   10.6   9.3 
    Total OREO and repossessed assets 18.2   21.0   12.7   12.2   10.7 
    Total nonperforming assets 100.0%  100.0%  100.0%  100.0%  100.0%


    The following table summarizes the allowance for loan losses for the periods indicated (dollars in thousands, unaudited):

     For the Quarter Ended:
     December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Allowance for Loan Losses         
    Balance at beginning of period$7,489  $7,117  $6,407  $6,306  $6,327 
    Provision for loan losses during the period 125   375   600   125   — 
    Net (charge-offs)/recoveries during the period (15)  (3)  110   (24)  (21)
    Balance at end of period$7,599  $7,489  $7,117  $6,407  $6,306 
    Allowance for loan losses to total loans 0.88%  0.88%  0.88%  0.90%  0.92%
    Allowance for loan losses to total nonperforming loans 256.81%  301.25%  157.84%  134.97%  113.58%


    Deposits decreased $6.6 million, or 0.8%, to $808.8 million at December 31, 2022, from $815.4 million at September 30, 2022 and increased $10.4 million, or 1.3%, from $798.3 million at December 31, 2021. The decrease in deposits compared to the prior quarter-end was primarily a result of lower balances in all deposit products, excluding certificate accounts, largely driven by seasonal declines in escrow accounts and year end distributions in business accounts. The increase in our deposits compared to one year ago was a result of an increase in certificate accounts, which was primarily used to fund organic loan growth in 2022. Our noninterest-bearing deposits decreased $19.1 million, or 9.9% to $173.2 million at December 31, 2022, compared to $192.3 million at September 30, 2022 and decreased $17.3 million, or 9.1% from $190.5 million at December 31, 2021. Noninterest-bearing deposits represented 21.4%, 23.6% and 23.9% of total deposits at December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

    There were $43.0 million of outstanding FHLB advances at December 31, 2022, as compared to $44.5 million at September 30, 2022 and none at December 31, 2021. During 2022, FHLB advances were primarily used to support organic loan growth and to maintain liquidity ratios in line with our asset/liability objectives. Subordinated notes, net totaled $11.7 million at each of December 31, 2022, September 30, 2022 and December 31, 2021.

    Stockholders’ equity totaled $97.7 million at December 31, 2022, an increase of $2.7 million, or 2.9%, from $95.0 million at September 30, 2022, and an increase of $4.3 million, or 4.7%, from $93.4 million at December 31, 2021. The increase in stockholders’ equity from September 30, 2022 was primarily the result of $2.9 million of net income earned during the current quarter, a $148 thousand decrease in accumulated other comprehensive loss, net of tax, and $28 thousand in proceeds from exercises of stock options, partially offset by the payment of $441 thousand in dividends to Company stockholders .

    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 one Loan Production Office located in the Madison Park neighborhood of Seattle, Washington. For more information, please visit www.soundcb.com.

    Forward Looking Statement Disclaimer

    When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's other 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 listed below or because of other factors that we cannot foresee that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made.

    Factors which could cause actual results to differ materially, include, but are not limited to: potential adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation or deflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia's invasion of Ukraine, as well as supply chain disruptions and any governmental or societal responses to new COVID-19 variants; changes in consumer spending, borrowing and savings habits; 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; increased competition; changes in management's business strategies; legislative changes; 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 documents filed with or furnished to the Securities and Exchange Commission, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The risks inherent in these factors could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company and could negatively affect the Company's operating and stock performance.

    The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement.


    CONSOLIDATED INCOME STATEMENTS
    (Dollars in thousands, unaudited)

      For the Quarter Ended
      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Interest income $11,819  $10,776  $8,986  $8,213  $8,359 
    Interest expense  2,131   1,179   594   595   643 
    Net interest income  9,688   9,597   8,392   7,618   7,716 
    Provision for loan losses  125   375   600   125   — 
    Net interest income after provision for loan losses  9,563   9,222   7,792   7,493   7,716 
    Noninterest income:          
    Service charges and fee income  618   604   596   549   632 
    (Earnings) loss on cash surrender value of bank-owned life insurance  175   59   (35)  21   135 
    Mortgage servicing income  303   306   313   320   323 
    Fair value adjustment on mortgage servicing rights  (127)  9   57   268   (114)
    Net gain on sale of loans  49   48   84   365   507 
    Total noninterest income  1,018   1,026   1,015   1,523   1,483 
    Noninterest expense:          
    Salaries and benefits  4,234   4,044   3,969   4,167   3,786 
    Operations  1,489   1,581   1,428   1,314   1,732 
    Regulatory assessments  136   116   99   101   96 
    Occupancy  418   447   439   432   451 
    Data processing  841   848   849   821   863 
    Total noninterest expense  7,118   7,036   6,784   6,835   6,928 
    Income before provision for income taxes  3,463   3,212   2,023   2,181   2,271 
    Provision for income taxes  539   666   409   458   407 
    Net income $2,924  $2,546  $1,614  $1,723  $1,864 



    CONSOLIDATED INCOME STATEMENTS
    (Dollars in thousands, unaudited)

      For the Year Ended December 31
       2022   2021 
    Interest income $39,795  $33,874 
    Interest expense  4,500   3,954 
    Net interest income  35,295   29,920 
    Provision for loan losses  1,225   425 
    Net interest income after provision for loan losses  34,070   29,495 
    Noninterest income:    
    Service charges and fee income  2,368   2,247 
    Earnings on cash surrender value of bank-owned life insurance  219   416 
    Mortgage servicing income  1,242   1,284 
    Fair value adjustment on mortgage servicing rights  207   (808)
    Net gain on sale of loans  546   4,190 
    Total noninterest income  4,582   7,329 
    Noninterest expense:    
    Salaries and benefits  16,415   14,257 
    Operations  5,812   5,765 
    Regulatory assessments  452   379 
    Occupancy  1,737   1,748 
    Data processing  3,360   3,263 
    Net gain on OREO and repossessed assets  —   (16)
    Total noninterest expense  27,776   25,396 
    Income before provision for income taxes  10,876   11,428 
    Provision for income taxes  2,072   2,272 
    Net income $8,804  $9,156 



    CONSOLIDATED BALANCE SHEET
    (Dollars in thousands, unaudited)

      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    ASSETS          
    Cash and cash equivalents $57,836  $76,064  $80,051  $197,091  $183,590 
    Available-for-sale securities, at fair value  10,207   10,396   9,382   10,223   8,419 
    Held-to-maturity securities, at amortized cost  2,199   2,207   2,215   2,223   — 
    Loans held-for-sale  —   1,908   100   1,297   3,094 
    Loans held-for-portfolio  865,981   851,447   806,078   709,485   686,398 
    Allowance for loan losses  (7,599)  (7,489)  (7,117)  (6,407)  (6,306)
    Total loans held-for-portfolio, net  858,382   843,958   798,961   703,078   680,092 
    Accrued interest receivable  3,083   2,809   2,350   2,117   2,217 
    Bank-owned life insurance, net  21,314   21,140   21,081   21,116   21,095 
    Other real estate owned ("OREO") and other repossessed assets, net  659   659   659   659   659 
    Mortgage servicing rights, at fair value  4,687   4,787   4,754   4,668   4,273 
    Federal Home Loan Bank ("FHLB") stock, at cost  2,832   2,897   2,317   1,117   1,046 
    Premises and equipment, net  5,513   5,505   5,632   5,730   5,819 
    Right-of-use assets  5,102   5,319   5,548   5,777   5,811 
    Other assets  4,537   4,597   3,954   3,758   3,576 
    TOTAL ASSETS $976,351  $982,246  $937,004  $958,854  $919,691 
    LIABILITIES          
    Interest-bearing deposits $635,567  $623,122  $599,377  $627,323  $607,854 
    Noninterest-bearing deposits  173,196   192,275   186,609   208,768   190,466 
    Total deposits  808,763   815,397   785,986   836,091   798,320 
    Borrowings  43,000   44,500   30,000   —   — 
    Accrued interest payable  395   109   194   38   200 
    Lease liabilities  5,448   5,749   5,980   6,211   6,242 
    Other liabilities  8,318   8,071   9,210   9,169   8,571 
    Advance payments from borrowers for taxes and insurance  1,046   1,799   922   1,851   1,366 
    Subordinated notes, net  11,676   11,665   11,655   11,644   11,634 
    TOTAL LIABILITIES  878,646   887,290   843,947   865,004   826,333 
    STOCKHOLDERS' EQUITY:          
    Common stock  26   26   26   26   26 
    Additional paid-in capital  28,004   27,886   27,777   28,154   27,956 
    Retained earnings  70,792   68,309   66,203   66,139   65,237 
    Accumulated other comprehensive (loss) income, net of tax  (1,117)  (1,265)  (949)  (469)  139 
    TOTAL STOCKHOLDERS' EQUITY  97,705   94,956   93,057   93,850   93,358 
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $976,351  $982,246  $937,004  $958,854  $919,691 



    KEY FINANCIAL RATIOS
    (unaudited)

      For the Quarter Ended
      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Annualized return on average assets 1.16% 1.04% 0.70% 0.75% 0.81%
    Annualized return on average equity 11.94  10.61  6.86  7.39  7.90 
    Annualized net interest margin(1) 4.05  4.13  3.83  3.49  3.53 
    Annualized efficiency ratio(2) 66.49% 66.23% 72.12% 74.77% 75.31%

    (1)   Net interest income divided by average interest earning assets.
    (2)   Noninterest expense divided by total revenue (net interest income and noninterest income).


    PER COMMON SHARE DATA
    (unaudited)

      At or For the Quarter Ended
      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Basic earnings per share $1.13  $0.99  $0.62  $0.66  $0.72 
    Diluted earnings per share $1.12  $0.97  $0.61  $0.65  $0.70 
    Weighted-average basic shares outstanding  2,565,407   2,562,551   2,584,179   2,602,168   2,586,570 
    Weighted-average diluted shares outstanding  2,600,905   2,597,690   2,615,299   2,640,359   2,631,721 
    Common shares outstanding at period-end  2,583,619   2,581,949   2,578,595   2,621,531   2,613,768 
    Book value per share $37.82  $36.78  $36.09  $35.80  $35.72 
                         


    AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID
    (Dollars in thousands, unaudited)

    The following tables present, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Income and yields on tax-exempt obligations have not been computed on a tax equivalent basis. All average balances are daily average balances. Nonaccrual loans have been included in the table as loans carrying a zero yield for the period they have been on nonaccrual (dollars in thousands).

     Three Months Ended
     December 31, 2022 September 30, 2022 December 31, 2021
     Average
    Outstanding
    Balance    		 Interest
    Earned/
    Paid    		 Yield/
    Rate    		 Average
    Outstanding
    Balance    		 Interest
    Earned/
    Paid    		 Yield/
    Rate    		 Average
    Outstanding
    Balance    		 Interest
    Earned/
    Paid    		 Yield/
    Rate
    Interest-Earning Assets:                 
    Loans receivable$861,371  $11,078 5.10% $833,195  $10,327 4.92% $690,680  $8,238 4.73%
    Investments and interest-bearing cash 88,503   741 3.32%  88,812   449 2.01%  176,942   121 0.27%
    Total interest-earning assets$949,874  $11,819 4.94% $922,007  $10,776 4.64% $867,622  $8,359 3.82%
    Interest-Bearing Liabilities:                 
    Savings and money market accounts$174,410  $88 0.20% $188,276  $63 0.13% $183,730  $36 0.08%
    Demand and NOW accounts 267,043   280 0.42%  290,106   164 0.22%  310,352   126 0.16%
    Certificate accounts 186,277   1,011 2.15%  130,541   503 1.53%  110,985   313 1.12%
    Subordinated notes 11,669   168 5.71%  11,658   168 5.72%  11,627   168 5.73%
    Borrowings 59,348   584 3.90%  46,462   281 2.40%  2   — —%
    Total interest-bearing liabilities$698,747   2,131 1.21% $667,043   1,179 0.70% $616,696   643 0.41%
    Net interest income/spread  $9,688 3.73%   $9,597 3.94%   $7,716 3.41%
    Net interest margin    4.05%     4.13%     3.53%
                      
    Ratio of interest-earning assets to interest-bearing liabilities 136%      138%      141%    
    Noninterest-bearing deposits$183,800      $189,379      $190,551     
    Total deposits 811,530  $1,379 0.67%  798,302  $730 0.36%  795,618  $475 0.24%
    Total funding (1) 882,547   2,131 0.96%  856,422   1,179 0.55%  807,247   643 0.32%

    (1)   Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

     Year Ended
     December 31, 2022 December 31, 2021
     Average
    Outstanding
    Balance    		 Interest
    Earned/
    Paid    		 Yield/
    Rate    		 Average
    Outstanding
    Balance    		 Interest
    Earned/
    Paid    		 Yield/
    Rate
    Interest-Earning Assets:           
    Loans receivable$783,372  $38,177 4.87% $650,045  $33,389 5.14%
    Investments and interest-bearing cash 124,331   1,618 1.30%  221,577   485 0.22%
    Total interest-earning assets$907,703  $39,795 4.38% $871,622  $33,874 3.89%
    Interest-Bearing Liabilities:           
    Savings and money market accounts$188,478  $211 0.11% $171,406  $180 0.11%
    Demand and NOW accounts 295,919   690 0.23%  289,096   611 0.21%
    Certificate accounts 129,011   2,049 1.59%  158,649   2,491 1.57%
    Subordinated notes 11,653   672 5.77%  11,611   672 5.79%
    Borrowings 27,273   878 3.22%  1   — —%
    Total interest-bearing liabilities$652,334   4,500 0.69% $630,763   3,954 0.63%
    Net interest income/spread  $35,295 3.69%   $29,920 3.26%
    Net interest margin    3.89%     3.43%
                
    Ratio of interest-earning assets to interest-bearing liabilities 139%      138%    
    Noninterest-bearing deposits$190,113      $178,535     
    Total deposits 803,521  $2,950 0.37%  797,686  $3,282 0.41%
    Total funding (1) 842,447   4,500 0.53%  809,298   3,954 0.49%

    (1)   Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.


    LOANS
    (Dollars in thousands, unaudited)

      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Real estate loans:          
    One-to-four family $274,638  $270,009  $250,295  $221,832  $207,660 
    Home equity  19,548   17,642   16,374   13,798   13,250 
    Commercial and multifamily  313,358   315,677   307,462   279,892   278,175 
    Construction and land  116,878   112,980   101,394   70,402   63,105 
    Total real estate loans  724,422   716,308   675,525   585,924   562,190 
    Consumer Loans:          
    Manufactured homes  26,953   25,375   23,264   22,179   21,636 
    Floating homes  74,443   69,968   66,573   59,784   59,268 
    Other consumer  17,923   17,565   18,076   18,370   16,748 
    Total consumer loans  119,319   112,908   107,913   100,333   97,652 
    Commercial business loans  23,815   23,986   24,302   24,452   28,026 
    Total loans  867,556   853,202   807,740   710,709   687,868 
    Less:          
    Premiums  973   984   1,010   788   897 
    Deferred fees, net  (2,548)  (2,739)  (2,672)  (2,012)  (2,367)
    Allowance for loan losses  (7,599)  (7,489)  (7,117)  (6,407)  (6,306)
    Total loans held for portfolio, net $858,382  $843,958  $798,961  $703,078  $680,092 


    DEPOSITS
    (Dollars in thousands, unaudited)

      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Noninterest-bearing $173,196  $192,275  $186,609  $208,768  $190,466 
    Interest-bearing  254,982   284,267   312,439   333,449   307,061 
    Savings  95,641   99,602   103,311   106,217   103,401 
    Money market  74,639   84,692   87,672   89,164   91,670 
    Certificates  210,305   154,561   95,955   98,493   105,722 
    Total deposits $808,763  $815,397  $785,986  $836,091  $798,320 


    CREDIT QUALITY DATA
    (Dollars in thousands, unaudited)

      At or For the Quarter Ended
      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
    Nonaccrual loans $2,855  $2,378  $4,381  $4,474  $5,130 
    Nonperforming TDRs  103   108   128   273   422 
    Total nonperforming loans  2,959   2,486   4,509   4,747   5,552 
    OREO and other repossessed assets  659   659   659   659   659 
    Total nonperforming assets $3,618  $3,145  $5,168  $5,406  $6,211 
    Performing TDRs  1,885   1,912   1,866   2,072   2,174 
    Net (charge-offs) recoveries during the quarter  (15)  (3)  110   (24)  (21)
    Provision for loan losses during the quarter  125   375   600   125   — 
    Allowance for loan losses  7,599   7,489   7,117   6,407   6,306 
    Allowance for loan losses to total loans  0.88%  0.88%  0.88%  0.90%  0.92%
    Allowance for loan losses to total nonperforming loans  256.84%  301.24%  157.84%  134.96%  113.58%
    Nonperforming loans to total loans  0.34%  0.29%  0.56%  0.67%  0.81%
    Nonperforming assets to total assets  0.37%  0.32%  0.55%  0.56%  0.68%


    OTHER STATISTICS
    (Dollars in thousands, unaudited)

      At or For the Quarter Ended
      December 31,
    2022    		 September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021
               
    Total loans to total deposits  107.27%  104.64%  102.77%  85.00%  86.16%
    Noninterest-bearing deposits to total deposits  21.41%  23.58%  23.74%  24.97%  23.86%
               
    Average total assets for the quarter $996,042  $969,254  $920,984  $931,094  $916,261 
    Average total equity for the quarter $97,119  $95,244  $94,397  $94,497  $93,569 


    Category: Earnings


    Contact

    Financial:  
    Wes Ochs   
    Executive Vice President/CFO  
    (206) 436-8587   
        
    Media:  
    Laurie Stewart   
    President/CEO  
    (206) 436-1495
    		   


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