Sound Financial Bancorp, Inc. operates as the bank holding company for Sound Community Bank that provides various banking products and services.
As a Washington commercial bank that is not a member of the Federal Reserve System, the bank’s regulators are the Washington State Department of Financial Institutions (‘WDFI’) and the Federal Deposit Insurance Corporation (‘FDIC’). As a bank holding company, the company is regulated by the Federal Reserve. The company also sell insurance products and...
Sound Financial Bancorp, Inc. operates as the bank holding company for Sound Community Bank that provides various banking products and services.
As a Washington commercial bank that is not a member of the Federal Reserve System, the bank’s regulators are the Washington State Department of Financial Institutions (‘WDFI’) and the Federal Deposit Insurance Corporation (‘FDIC’). As a bank holding company, the company is regulated by the Federal Reserve. The company also sell insurance products and services to consumers through Sound Community Insurance Agency, Inc., a wholly owned subsidiary of the bank. Sound Community Bank's deposits are insured up to applicable limits by the FDIC.
The company’s principal business consists of attracting retail and commercial deposits from the general public and investing those funds, along with borrowed funds, in loans secured by first and second mortgages on one-to-four family residences (including home equity loans and lines of credit), commercial and multifamily real estate, construction and land, consumer and commercial business loans. The company’s commercial business loans include unsecured lines of credit and secured term loans and lines of credit secured by inventory, equipment and accounts receivable. The company also offers a variety of secured and unsecured consumer loan products, including manufactured home loans, floating home loans, automobile loans, boat loans and recreational vehicle loans. As part of the company’s business, the company focuses on residential mortgage loan originations, a significant portion of which the company sells to the Federal National Mortgage Association (‘Fannie Mae’) and other correspondents and the remainder of which the company retains for its loan portfolio consistent with the company’s asset/liability objectives. The company sells loans that conform to the underwriting standards of Fannie Mae (‘conforming’) but generally retain the servicing of the loan in order to maintain the direct customer relationship and to generate noninterest income. Residential loans that do not conform to the underwriting standards of Fannie Mae (‘non-conforming’), are either held in the company’s loan portfolio or sold with servicing released. The company originates and retains a significant amount of commercial real estate loans, including those secured by owner-occupied and nonowner-occupied commercial real estate, multifamily property, mobile home parks and construction and land development loans.
Market Area
The company operates in the Seattle Metropolitan Statistical Area (‘MSA’), which includes King County (which includes the city of Seattle), Pierce County, and Snohomish County in the Puget Sound region. The company also operates in Clallam and Jefferson counties on the North Olympic Peninsula of Washington. The company serves these markets through its headquarters in Seattle and various branch offices, located in the Seattle MSA, Clallam County, and Jefferson County. The company also has a loan production office in the Madison Park neighborhood of Seattle.
The company’s market area includes a diverse population of management, professional and sales personnel, office employees, health care workers, software and technology workers, manufacturing and transportation workers, service industry workers and government employees, as well as retired and self-employed individuals.
The company’s market area has a high concentration of financial institutions, many of which are branches of large money center and regional banks that have resulted from the consolidation of the banking industry in Washington and other western states. These include such large national lenders as US Bank, JP Morgan Chase, Wells Fargo, Bank of America, Key Bank and others in the company’s market area that have greater resources than the company do.
Lending Activities
One-to-Four Family Real Estate Lending
One of the company’s primary lending activities is the origination of loans secured by first mortgages on one-to-four family residences, substantially all of which are secured by properties located in the company’s geographic lending area. The company originates both fixed-rate and adjustable-rate loans.
A portion of the one-to-four family loans the company originates are retained in its portfolio and the remaining loans are sold into the secondary market to Fannie Mae or other private investors. Loans that are sold into the secondary market to Fannie Mae are generally sold with the servicing retained to maintain the client relationship and to generate noninterest income. The company also originates a small portion of government guaranteed and jumbo loans for sale servicing released to certain correspondent purchasers.
Home Equity Lending
The company originates home equity loans that consist of fixed-rate, fully-amortizing loans and variable-rate lines of credit. The company’s fixed-rate home equity loans generally have terms of up to 20 years and are fully amortizing.
Commercial and Multifamily Real Estate Lending
The company offers a variety of commercial and multifamily real estate loans. Most of these loans are secured by owner-occupied and nonowner-occupied commercial income producing properties, apartment buildings, warehouses, office buildings, gas station/convenience stores and mobile home parks located in the company’s market area.
Construction and Land Lending
The company originates construction loans secured by single-family residences and commercial and multifamily real estate. The company also originates land acquisition and development loans, which are secured by raw land or developed lots on which the borrower intends to build a residence, or a commercial or multifamily property.
In addition to custom home construction loans to individuals, the company originates loans that are termed ‘speculative,’ which are those loans where the builder does not have, at the time of loan origination, a signed contract with a buyer for the home or lot but has a commitment for permanent financing with either the company or another lender.
The company also originates developed lot and raw land loans to individuals intending to construct a residence in the future on the property. The company makes land acquisition and development loans to experienced builders or residential lot developers in the company’s market area.
The company also offers commercial and multifamily construction loans. These loans are underwritten as interest only with financing typically up to 24 months under terms similar to the company’s residential construction loans.
Commercial Business Lending
Substantially all the company’s commercial business loans have been to borrowers in the company’s market area. The company’s commercial business lending activities encompass loans with a variety of purposes and security, including loans to finance commercial vehicles and equipment and loans secured by accounts receivable and/or inventory. The company generally requires personal guarantees on both the company’s secured and unsecured commercial business loans.
The company’s business lines of credit generally have terms ranging from 12 months to 24 months and provide for interest-only monthly payments during the term.
Consumer Lending
The company offers a variety of secured and unsecured consumer loans, including new and used manufactured homes, floating homes, automobiles, boats and recreational vehicle loans, and loans secured by deposit accounts. The company also offers unsecured consumer loans. The company originates its consumer loans primarily in its market area. All the company’s consumer loans are originated on a direct basis.
The company typically originates new and used manufactured home loans to borrowers who intend to use the home as a primary residence.
The company originates floating home, houseboat and house barge loans, typically located on cooperative or condominium moorages.
The balance of the company’s consumer loans includes loans secured by new and used automobiles, boats, motorcycles and recreational vehicles, loans secured by deposits and unsecured consumer loans.
Investment Securities
As of December 31, 2023, the company’s investment securities were municipal bonds and agency mortgage-backed securities.
Deposits
The company offers a variety of deposit accounts to both consumers and businesses with a wide range of interest rates and terms. The company’s deposits consist of savings accounts, money market deposit accounts, NOW accounts, demand accounts and certificates of deposit. The company solicits deposits primarily in the company’s market area; however, at December 31, 2023, approximately 6.9% of the company’s deposits were from persons outside the state of Washington.
Subsidiary and Other Activities
In 2018, Sound Community Bank formed Sound Community Insurance Agency, Inc. as a wholly owned subsidiary for purposes of selling a full range of insurance products.
Regulation
Sound Community Bank, as a state-chartered commercial bank, is subject to applicable provisions of Washington law and to regulations and examinations of the WDFI. As an insured institution, it also is subject to examination and regulation by the FDIC, which insures the deposits of Sound Community Bank to the maximum amount permitted by law.
As a state-chartered commercial bank, Sound Community Bank must pay semi-annual assessments, examination costs and certain other charges to the WDFI.
Sound Community Bank’s deposits are insured up to $250 thousand per separately insured deposit ownership right or category by the DIF of the FDIC. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of, and to require reporting by, FDIC-insured institutions.
The FDIC also conducts examinations of and requires reporting by state non-member banks, such as Sound Community Bank.
Federal law also requires that covered transactions and certain other transactions listed in Section 23B of the Federal Reserve Act between a bank and its affiliates be on terms as favorable to the bank as transactions with non-affiliates.
In connection with its lending and other activities, Sound Community Bank is subject to a number of federal and state laws designed to protect clients and promote lending to various sectors of the economy and population. These include, among others, the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, and the Community Reinvestment Act (‘CRA’). Sound Community Bank’s compliance with consumer protection rules is examined by the WDFI and the FDIC.
The CRA requires the appropriate federal banking agency to assess the bank’s record in meeting the credit needs of the communities served by the bank, including low- and moderate-income neighborhoods. The FDIC examines Sound Community Bank for compliance with its CRA obligations.
Sound Community Bank received a ‘satisfactory’ rating from the WDFI in its most recent WDFI CRA evaluation.
As a member, the bank is required to purchase and maintain stock in the FHLB of Des Moines based on the bank’s asset size and level of borrowings from the FHLB of Des Moines.
The company, as the sole stockholder of Sound Community Bank, is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations promulgated thereunder.
As a bank holding company, the company is required to file quarterly and annual reports with the Federal Reserve and any additional information required by the Federal Reserve and is subject to regular examinations by the Federal Reserve and to examination by the WDFI.
The common stock of the company is registered with the SEC under the Securities Exchange Act of 1934, as amended. The company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the SEC under the Securities Exchange Act of 1934 (the ‘Exchange Act’).
History
Sound Financial Bancorp, Inc. was founded in 1953. The company was incorporated in 2008.
The Analyst Price Target shows the analysts’ low, high, and average target at a glance.
