Sound Financial Reports Higher Second Quarter Earnings

SEATTLE--([ BUSINESS WIRE ])--Sound Financial Inc. (OTCBB:SNFL), holding company for Sound Community Bank, today announced financial results for the quarter ended June 30, 2010.

The Company reported a net profit of $278 thousand or $0.10 per share for the quarter ended June 30, 2010, compared to net income of $57 thousand or $0.02 per share in the first quarter of 2010 and a net loss of $303 thousand or $0.11 per share in the for the quarter ended June 30, 2009.

Financial Highlights:

- Net Interest Margin increased to 4.77% for the quarter ended 6/30/10

- Cost of Deposits decreased to 1.36% for the quarter ended 6/30/10

- Allowance for Loan Losses was 1.29% of total loans outstanding at 6/30/10

- The Bank remains aWell Capitalizeda with Tier 1 Capital of 7.40% and Total Risk Based Capital of 11.08% at 6/30/10

President and CEO Laurie Stewart said, aDespite the economic environment, we achieved positive results in our core business lines during the second quarter. We remain focused on improving credit quality, maintaining our net interest margin and increasing business efficiencies. With signs of stabilizing employment levels and real estate prices in the Puget Sound area, we are guardedly optimistic that we are experiencing the early stages of a recovery.a

	As of
	6/30/2010		3/31/2010		6/30/2009
	(In thousands)
Selected Consolidated Financial Condition Data:
Total assets	$	340,926	$	337,801	$	324,870
Loans receivable, net		305,450		293,323		276,945
Loans held for sale		1,096		2,333		4,822
Mortgage-backed securities available for sale (at fair value)		4,328		12,383		21,936
Federal Home Loan Bank stock		2,444		2,444		2,444
Bank owned life insurance		6,596		6,529		6,327
Repossessed assets and real estate owned		1,847		1,904		1,011
Deposits		285,339		287,931		254,943
Federal Home Loan Bank advances		26,617		20,000		41,400
Stockholdersa� Equity		25,299		25,268		25,528

		Quarter Ended
	6/30/2010			3/31/2010			6/30/2009
		(In thousands)
Selected Consolidated Operating Data:
Total interest income	$	4,924		$	4,770		$	4,738
Total interest expense		1,152			1,168			1,850
Net interest income		3,772			3,602			2,888
Provision for loan losses		775			1,425			925
Net interest income after provision for loan losses		2,997			2,177			1,963
Fees and service charges		550			529			476
Gain on sale of loans		58			64			52
Loss on sale of assets		(41	)		(48	)		(362	)
(Loss) gain on sale of securities		(11	)		75			-
Impairment on securities		(51	)		-			-
Fair value adjustment on mortgage servicing rights		(210	)		285			-
Other non-interest income		221			230			353
Total non-interest income		516			1,135			519
Total non-interest expense		3,135			3,262			2,966
Income (loss) before provision (benefit) for income taxes		378			50			(484	)
Provision (benefit) for income taxes		100			(7	)		(181	)
Net income (loss)		278			57			(303	)
Selected Financial Ratios and Other Data:
Performance ratios:
Return on assets (ratio of net income (loss) to average total assets)		0.32	%		0.07	%		(0.38	)%
Return on equity (ratio of net income (loss) to average equity)		4.40	%		0.88	%		(2.36	)%
Net interest margin		4.77	%		4.66	%		3.92	%
Non-interest income to operating revenue		12.02	%		23.97	%		15.20	%
Non-interest expense to average total assets		3.66	%		3.89	%		3.77	%
Average interest-earning assets to average interest-bearing liabilities		100.87	%		101.12	%		102.77	%
Efficiency ratio		73.11	%		68.86	%		87.06	%

Asset quality ratios:
Non-performing assets to total assets		3.54	%		4.24	%		2.11	%
Non-performing loans to gross loans		1.36	%		1.20	%		1.14	%
Allowance for loan losses to non-performing loans		96.07	%		114.46	%		59.72	%
Allowance for loan losses to gross loans		1.29	%		1.35	%		0.68	%
Net charge-offs to average loans outstanding		1.04	%		1.17	%		0.74	%

Consolidated capital ratios:
Equity to total assets at end of period		7.42	%		7.48	%		7.86	%
Average equity to average assets		7.37	%		7.70	%		8.14	%

	Six Months Ended
		6/30/2010			6/30/2009
	(In thousands)
Selected Consolidated Operating Data:
Total interest income	$	9,694		$	9,276
Total interest expense		2,321			3,758
Net interest income		7,374			5,518
Provision for loan losses		2,200			1,375
Net interest income after provision for loan losses		5,174			4,143
Fees and service charges		1,078			990
Gain on sale of loans		122			76
Loss on sale of assets		(89	)		(555	)
Gain on sale of securities		13			-
Impairment on securities		(51	)		-
Fair value adjustment on mortgage servicing rights		75			-
Other non-interest income		503			592
Total non-interest income		1,651			1,103
Total non-interest expense		6,397			5,649
Income (loss) before provision (benefit) for income taxes		428			(403	)
Provision (benefit) for income taxes		93			(175	)
Net income (loss)		335			(228	)
Selected Financial Ratios and Other Data:
Performance ratios:
Return on assets (ratio of net income to average total assets)		0.20	%		(0.15	%)
Return on equity (ratio of net income to average equity)		2.66	%		(1.76	%)
Net interest margin		4.72	%		3.86	%
Non-interest income to operating revenue		18.30	%		16.66	%
Non-interest expense to average total assets		3.77	%		3.64	%
Average interest-earning assets to average interest-bearing liabilities		101.00	%		103.00	%
Efficiency ratio		70.88	%		85.32	%

Sound Financial Inc. is the holding company for Sound Community Bank, a full-service bank, providing personal and business banking services in communities across the greater Puget Sound region. The Seattle-based company operates five full-service banking offices in King, Pierce, Snohomish and Clallam Counties, and is on the web at [ www.soundcb.com ].

Forward-Looking Statements

This report 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 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.

Results of operations and business are subject to various factors which could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors 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.

Contributing Sources

Market Wire

N@N

Sound Financial Reports Higher Second Quarter Earnings