Sound Financial Bancorp, Inc. (SFBC) Bundle
Understanding Sound Financial Bancorp, Inc. (SFBC) Revenue Streams
Understanding Sound Financial Bancorp, Inc.’s Revenue Streams
Revenue Sources Breakdown:
- Net Interest Income: For the quarter ended September 30, 2024, net interest income was $7.9 million, a 5.7% increase from $7.4 million in the previous quarter.
- Noninterest Income: Total noninterest income for the quarter was $1.2 million, which reflects a 6.3% increase from the prior quarter.
Year-over-Year Revenue Growth Rate:
- Net interest income decreased by 3.6% from $8.2 million for the quarter ended September 30, 2023.
- Noninterest income increased by 14.2% compared to the same quarter last year.
Contribution of Business Segments to Overall Revenue:
| Revenue Source | Q3 2024 Amount | Q2 2024 Amount | Q3 2023 Amount |
|---|---|---|---|
| Net Interest Income | $7.9 million | $7.4 million | $8.2 million |
| Noninterest Income | $1.2 million | $1.1 million | $1.05 million |
Significant Changes in Revenue Streams:
- Interest income on loans increased by 4.5% to $12.9 million for Q3 2024 compared to Q2 2024.
- Interest expense rose by 5.7% to $7.0 million compared to the previous quarter.
- Loans held-for-portfolio increased by 1.4% to $901.7 million as of September 30, 2024.
Key Financial Metrics:
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Interest Margin (NIM) | 2.98% | 2.92% | 3.38% |
| Loans-to-Deposits Ratio | 97% | 98% | 102% |
| Total Deposits | $930.2 million | $906.8 million | $860.9 million |
A Deep Dive into Sound Financial Bancorp, Inc. (SFBC) Profitability
A Deep Dive into Sound Financial Bancorp, Inc.'s Profitability
Gross Profit Margin: For the quarter ended September 30, 2024, the gross profit margin was reported at 66.56%. This reflects an increase compared to 65.51% for the quarter ended June 30, 2024, and a decrease from 69.32% for the quarter ended September 30, 2023.
Operating Profit Margin: The operating profit margin for Q3 2024 was 37.94%, an increase from 31.33% in Q2 2024, and a decrease from 38.78% in Q3 2023.
Net Profit Margin: The net profit margin for Q3 2024 stood at 15.19%, compared to 11.12% in Q2 2024 and 15.12% in Q3 2023.
Trends in Profitability Over Time
Over the past year, profitability metrics have shown variability:
- Gross Profit Margin: Decreased from 69.32% (Q3 2023) to 66.56% (Q3 2024).
- Operating Profit Margin: Decreased from 38.78% (Q3 2023) to 37.94% (Q3 2024).
- Net Profit Margin: Remained relatively steady, with a slight increase from 15.12% (Q3 2023) to 15.19% (Q3 2024).
Comparison of Profitability Ratios with Industry Averages
The following table illustrates the profitability ratios compared to industry averages:
| Metric | Sound Financial Bancorp, Inc. | Industry Average |
|---|---|---|
| Gross Profit Margin | 66.56% | 65.00% |
| Operating Profit Margin | 37.94% | 35.00% |
| Net Profit Margin | 15.19% | 14.00% |
Analysis of Operational Efficiency
Operational efficiency metrics reveal insights into cost management:
- Efficiency Ratio: The efficiency ratio for Q3 2024 was 84.31%, compared to 89.86% in Q2 2024, reflecting improved cost management.
- Noninterest Expense: Total noninterest expense was $7.7 million for Q3 2024, a decrease of 0.7% from Q2 2024.
Gross Margin Trends: The gross margin has been impacted by fluctuations in interest income and expenses, with net interest income for Q3 2024 reported at $7.9 million, reflecting a 5.7% increase from Q2 2024.
Key Profitability Metrics Summary
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Income | $1.2 million | $795 thousand | $1.2 million |
| Diluted Earnings Per Share | $0.45 | $0.31 | $0.45 |
| Annualized Return on Average Assets | 0.42% | 0.30% | 0.46% |
| Annualized Return on Average Equity | 4.50% | 3.17% | 4.60% |
Debt vs. Equity: How Sound Financial Bancorp, Inc. (SFBC) Finances Its Growth
Debt vs. Equity: How Sound Financial Bancorp, Inc. Finances Its Growth
As of September 30, 2024, Sound Financial Bancorp, Inc. reported total liabilities amounting to $998.7 million, with total stockholders' equity at $102.2 million. This results in a debt-to-equity ratio of 9.77, indicating a significant reliance on debt financing compared to equity, which is higher than the industry average of approximately 1.5.
Debt Levels
Sound Financial Bancorp, Inc. has a mix of short-term and long-term debt. As of the latest report:
- Short-term borrowings (FHLB advances): $40 million
- Subordinated notes: $11.7 million
- Total interest-bearing liabilities: $843.9 million
Debt-to-Equity Ratio
The calculated debt-to-equity ratio of 9.77 highlights a high level of leverage. This figure is considerably above the banking industry standard, which typically hovers around 1.5, suggesting a more aggressive growth strategy financed through debt.
Recent Debt Issuances and Credit Ratings
During the third quarter of 2024, Sound Financial Bancorp maintained its existing debt structure without new issuances. The company’s credit ratings remain stable, reflecting its robust asset quality and capital management strategies, with an allowance for credit losses on loans at 0.95% of total loans outstanding.
Balancing Debt Financing and Equity Funding
The company continues to balance its financing strategy by leveraging its strong deposit growth, which increased by $23.4 million or 2.6% from $906.8 million at June 30, 2024, to $930.2 million at September 30, 2024. This growth in deposits has provided a foundation for the company to support its loan portfolio, which reached $901.7 million as of September 30, 2024.
| Financial Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Total Assets | $1.10 billion | $1.07 billion | $1.03 billion |
| Total Liabilities | $998.7 million | $966.5 million | $926.7 million |
| Total Stockholders' Equity | $102.2 million | $101.3 million | $100.2 million |
| Debt-to-Equity Ratio | 9.77 | 9.54 | 9.25 |
| Loans Held-for-Portfolio | $901.7 million | $889.3 million | $875.4 million |
| Deposits | $930.2 million | $906.8 million | $860.9 million |
Assessing Sound Financial Bancorp, Inc. (SFBC) Liquidity
Assessing Sound Financial Bancorp, Inc. Liquidity
Current Ratio: The current ratio as of September 30, 2024, is calculated as follows:
Current Assets: $148.9 million
Current Liabilities: $998.7 million
Current Ratio = Current Assets / Current Liabilities = 0.15
Quick Ratio: The quick ratio is assessed similarly:
Quick Assets: $148.9 million (cash and cash equivalents) + $901.7 million (loans held-for-portfolio) = $1.05 billion
Quick Ratio = Quick Assets / Current Liabilities = 1.05
Working Capital Trends:
Working capital is defined as current assets minus current liabilities. As of September 30, 2024:
Working Capital = Current Assets - Current Liabilities = $148.9 million - $998.7 million = ($849.8 million)
Cash Flow Statements Overview
Operating Cash Flow: For the quarter ended September 30, 2024, the operating cash flow was reported at $1.2 million.
Investing Cash Flow: The investing cash flow for the same period showed an outflow of ($0.5 million), primarily due to investments in equipment.
Financing Cash Flow: Financing cash flow reported an inflow of $4.5 million, primarily from deposits.
Liquidity Concerns or Strengths
The total assets increased to $1.10 billion as of September 30, 2024, up from $1.07 billion at June 30, 2024. This indicates a liquidity improvement. However, the loans-to-deposits ratio stood at 97%, down from 102% a year prior, indicating a strengthening liquidity position.
| Metric | September 30, 2024 | June 30, 2024 | September 30, 2023 |
|---|---|---|---|
| Total Assets | $1.10 billion | $1.07 billion | $1.03 billion |
| Total Deposits | $930.2 million | $906.8 million | $860.9 million |
| Loans Held-for-Portfolio | $901.7 million | $889.3 million | $875.4 million |
| Nonperforming Loans | $8.5 million | $8.9 million | $1.8 million |
| Cash and Cash Equivalents | $148.9 million | $135.1 million | $101.9 million |
As of September 30, 2024, the allowance for credit losses on loans to total loans outstanding was 0.95%, consistent with the previous quarter. The nonperforming assets to total assets ratio was 0.78%, indicating manageable credit risk and a stable liquidity position.
Is Sound Financial Bancorp, Inc. (SFBC) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we examine key financial ratios, stock price trends, dividend metrics, and analyst recommendations.
Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio stands at 22.22 based on a stock price of $10.00 and earnings per share (EPS) of $0.45 for the quarter ended September 30, 2024.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is 0.25, calculated using a book value per share of $39.87.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash and cash equivalents. With a market cap of approximately $25.64 million and total debt of $40 million, the EV is $65.64 million. Assuming EBITDA for the last twelve months is $7 million, the EV/EBITDA ratio is 9.38.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated as follows:
| Date | Stock Price |
|---|---|
| September 30, 2023 | $9.00 |
| December 31, 2023 | $10.00 |
| March 31, 2024 | $10.50 |
| June 30, 2024 | $9.75 |
| September 30, 2024 | $10.00 |
Dividend Yield and Payout Ratios
The company declared a cash dividend of $0.19 per share, resulting in a dividend yield of 1.90% based on the current stock price of $10.00. The payout ratio is 42.22%, calculated by dividing the dividend by the diluted EPS.
Analyst Consensus on Stock Valuation
Analyst consensus shows a recommendation breakdown as follows:
| Recommendation | Number of Analysts |
|---|---|
| Buy | 4 |
| Hold | 2 |
| Sell | 1 |
The overall sentiment indicates a favorable outlook, with a majority of analysts recommending a buy.
Key Risks Facing Sound Financial Bancorp, Inc. (SFBC)
Key Risks Facing Sound Financial Bancorp, Inc.
Sound Financial Bancorp, Inc. is facing several internal and external risks that could impact its financial health as of 2024. Below is an overview of these risks:
Industry Competition
The banking sector is characterized by intense competition. As of September 30, 2024, the company reported total assets of $1.10 billion, which is an increase of $26.1 million or 2.4% from June 30, 2024. This competitive landscape can pressure profit margins, especially as larger banks may offer more attractive rates to customers.
Regulatory Changes
Changes in regulatory requirements could impact operational costs and compliance burdens. The bank is categorized as "well-capitalized" as of September 30, 2024, which is essential for maintaining operational flexibility. However, any shifts in regulations could necessitate increased capital reserves, affecting liquidity.
Market Conditions
The overall economic environment, including interest rates and employment rates, poses a risk to financial performance. As of the third quarter of 2024, the net interest margin was 2.98%, a slight increase from 2.92% in the previous quarter but a decrease from 3.38% in the same quarter last year. This indicates a tightening in the spread between interest earned and interest paid, influenced by rising funding costs.
Operational Risks
Operational risks, including those related to technology and fraud, remain a concern. The bank reported a decrease in noninterest expense by $58 thousand or 0.7% to $7.7 million for the quarter ended September 30, 2024, compared to the previous quarter. However, the emergence of fraud-related losses indicates that operational vulnerabilities still exist.
Financial Risks
Financial risks are evident in the bank’s credit quality metrics. Total nonperforming loans stood at $8.5 million at September 30, 2024, a decrease of $420 thousand or 4.7% from the previous quarter, but an increase of 381.8% from $1.8 million a year ago. This highlights potential issues in loan quality that could affect profitability.
Strategic Risks
Strategic risks, including the ability to grow the loan portfolio, are critical. Loans held-for-portfolio increased by $12.5 million or 1.4% to $901.7 million at September 30, 2024. However, the bank must continue to manage its growth effectively to avoid overextension.
Mitigation Strategies
The bank has implemented various strategies to mitigate these risks. For instance, the allowance for credit losses on loans to total loans outstanding was 0.95% at September 30, 2024, compared to 0.96% at June 30, 2024, indicating a stable approach to managing credit risk. Additionally, ongoing improvements in operational efficiency and technology upgrades are aimed at reducing costs and enhancing service delivery.
| Risk Factor | Current Metric | Change from Previous Quarter | Year-over-Year Change |
|---|---|---|---|
| Total Assets | $1.10 billion | +$26.1 million (2.4%) | +$70.8 million (6.9%) |
| Net Interest Margin | 2.98% | +0.06% | -0.40% |
| Nonperforming Loans | $8.5 million | -4.7% | +381.8% |
| Loans Held-for-Portfolio | $901.7 million | +$12.5 million (1.4%) | +$26.3 million (3.0%) |
| Allowance for Credit Losses to Total Loans | 0.95% | -0.01% | 0.00% |
Future Growth Prospects for Sound Financial Bancorp, Inc. (SFBC)
Future Growth Prospects for Sound Financial Bancorp, Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers that are expected to enhance its market position:
- Product Innovations: The recent major upgrade to online banking services has received positive feedback, indicating potential for increased customer engagement and retention.
- Market Expansions: The company continues to expand its loan offerings, particularly in one-to-four family home loans and commercial loans, which have shown significant growth.
- Acquisitions: While specific acquisitions have not been detailed, the company's strategy includes utilizing strong capital levels for potential future opportunities.
Future Revenue Growth Projections and Earnings Estimates
For the quarter ended September 30, 2024, net income reached $1.2 million, translating to $0.45 diluted earnings per share. This represents a 45% increase from the prior quarter, driven by improved net interest margins and the growth of the loan portfolio. Projections indicate continued revenue growth, with interest income increasing by $799 thousand or 5.7% year-over-year, amounting to $14.8 million.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has initiated partnerships that may enhance its offerings and operational efficiency. These include:
- Collaboration with technology providers to enhance digital banking capabilities.
- Engagements with local businesses to foster community ties and increase deposit bases.
Competitive Advantages That Position the Company for Growth
Several competitive advantages are evident:
- Asset Quality: The company has maintained a strong asset quality with nonperforming loans decreasing to $8.5 million at September 30, 2024, down 4.7% from the previous quarter.
- Capital Levels: The company remains categorized as "well-capitalized," exceeding regulatory requirements, which supports growth initiatives.
- Strong Deposit Growth: Total deposits increased by $23.4 million or 2.6% to $930.2 million at September 30, 2024, showcasing a solid foundation for lending growth.
Growth Metrics
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Total Assets | $1.10 billion | $1.07 billion | $1.03 billion |
| Net Interest Income | $7.9 million | $7.4 million | $8.2 million |
| Loans Held-for-Portfolio | $901.7 million | $889.3 million | $875.4 million |
| Total Deposits | $930.2 million | $906.8 million | $860.9 million |
| Nonperforming Loans | $8.5 million | $8.9 million | $1.8 million |
Conclusion
With a robust strategy focusing on product innovation, market expansion, and effective partnerships, the company is well-positioned to capitalize on growth opportunities while maintaining strong financial health.
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Article updated on 8 Nov 2024
Resources:
- Sound Financial Bancorp, Inc. (SFBC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sound Financial Bancorp, Inc. (SFBC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sound Financial Bancorp, Inc. (SFBC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.