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EX-32 - EXHIBIT 32 - Sound Financial Bancorp, Inc.ex32.htm
EX-31.2 - EXHIBIT 31.2 - Sound Financial Bancorp, Inc.ex31_2.htm
EX-31.1 - EXHIBIT 31.1 - Sound Financial Bancorp, Inc.ex31_1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to 

COMMISSION FILE NUMBER 001-35633

Sound Financial Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)

Maryland
 
45-5188530
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
2005 5th Avenue, Suite 200, Seattle, Washington
 
98121
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code:  (206) 448-0884

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES ☒  NO ☐

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES ☒ NO ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting Company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☒
   
(Do not check if smaller reporting company)
 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES ☐ NO ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

As of August 10, 2016, there were 2,486,899 shares of the registrant’s common stock outstanding.
 


SOUND FINANCIAL BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS

 
Page Number
PART I    FINANCIAL INFORMATION
 
   
Item 1.      Financial Statements
 
   
3
   
4
   
5
   
6
   
7
   
8
   
Item 2.   
Management's Discussion and Analysis of Financial Condition and Results of Operations
25
   
Item 3.   
Quantitative and Qualitative Disclosures About Market Risk
35
   
Item 4.   
Controls and Procedures
35
   
PART II
OTHER INFORMATION
 
     
Item 1.
36
     
Item 1A 
36
     
Item 2.
36
     
Item 3.
36
     
Item 4.
36
     
Item 5.
36
     
Item 6.
37
     
 
   
 
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share and per share amounts)

   
June 30,
2016
   
December 31,
 2015
 
ASSETS
           
Cash and cash equivalents
 
$
45,187
   
$
48,264
 
Available-for-sale securities, at fair value
   
7,393
     
6,696
 
Loans held for sale
   
687
     
2,091
 
Loans
   
464,648
     
459,469
 
Allowance for loan losses
   
(4,838
)
   
(4,636
)
Total loans, net
   
459,810
     
454,833
 
Accrued interest receivable
   
1,592
     
1,608
 
Bank-owned life insurance (“BOLI”), net
   
11,914
     
11,746
 
Other real estate owned (“OREO”) and repossessed assets, net
   
780
     
769
 
Mortgage servicing rights, at fair value
   
3,026
     
3,249
 
Federal Home Loan Bank (“FHLB”) stock, at cost
   
2,073
     
2,212
 
Premises and equipment, net
   
5,088
     
5,335
 
Other assets
   
4,209
     
3,957
 
Total assets
 
$
541,759
   
$
540,760
 
LIABILITIES
               
Deposits
               
Interest-bearing
 
$
384,323
   
$
389,151
 
Noninterest-bearing demand
   
59,544
     
50,873
 
Total deposits
   
443,867
     
440,024
 
Borrowings
   
35,613
     
40,435
 
Accrued interest payable
   
90
     
72
 
Other liabilities
   
4,873
     
5,140
 
Advance payments from borrowers for taxes and insurance
   
505
     
569
 
Total liabilities
   
484,948
     
486,240
 
COMMITMENTS AND CONTINGENCIES (NOTE 7)
               
STOCKHOLDERS' EQUITY
               
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued or outstanding
   
-
     
-
 
Common stock, $0.01 par value, 40,000,000 shares authorized, 2,480,830 and 2,469,206 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively
   
25
     
25
 
Additional paid-in capital
   
23,247
     
23,002
 
Unearned shares - Employee Stock Ownership Plan (“ESOP”)
   
(911
)
   
(911
)
Retained earnings
   
34,228
     
32,240
 
Accumulated other comprehensive income, net of tax
   
222
     
164
 
Total stockholders’ equity
   
56,811
     
54,520
 
Total liabilities and stockholders’ equity
 
$
541,759
   
$
540,760
 

See notes to condensed consolidated financial statements
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (unaudited)
(In thousands, except shares and per share amounts)

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2016
   
2015
   
2016
   
2015
 
INTEREST INCOME
                       
Loans, including fees
 
$
6,051
   
$
5,363
   
$
12,003
   
$
10,685
 
Interest and dividends on investments, cash and cash equivalents
   
92
     
47
     
181
     
102
 
Total interest income
   
6,143
     
5,410
     
12,184
     
10,787
 
INTEREST EXPENSE
                               
Deposits
   
654
     
661
     
1,342
     
1,322
 
Borrowings
   
55
     
19
     
84
     
47
 
Total interest expense
   
709
     
680
     
1,426
     
1,369
 
Net interest income
   
5,434
     
4,730
     
10,758
     
9,418
 
PROVISION FOR LOAN LOSSES
   
100
     
200
     
250
     
300
 
Net interest income after provision for loan losses
   
5,334
     
4,530
     
10,508
     
9,118
 
NONINTEREST INCOME
                               
Service charges and fee income
   
652
     
671
     
1,245
     
1,316
 
Earnings on cash surrender value of bank-owned life insurance
   
85
     
84
     
168
     
168
 
Mortgage servicing income
   
208
     
214
     
413
     
469
 
Fair value adjustment on mortgage servicing rights
   
(76
)
   
347
     
(190
)
   
169
 
Loss on sale of securities
   
-
     
-
     
-
     
(31
)
Net gain on sale of loans
   
341
     
390
     
551
     
786
 
Total noninterest income
   
1,210
     
1,706
     
2,187
     
2,877
 
NONINTEREST EXPENSE
                               
Salaries and benefits
   
2,618
     
2,205
     
5,181
     
4,460
 
Operations
   
1,084
     
1,053
     
2,056
     
1,957
 
Regulatory assessments
   
125
     
230
     
280
     
296
 
Occupancy
   
380
     
448
     
765
     
773
 
Data processing
   
444
     
454
     
830
     
856
 
Net loss on OREO and repossessed assets
   
6
     
10
     
6
     
82
 
Total noninterest expense
   
4,657
     
4,400
     
9,118
     
8,424
 
Income before provision for income taxes
   
1,887
     
1,836
     
3,577
     
3,571
 
Provision for income taxes
   
633
     
589
     
1,217
     
1,116
 
Net income
 
$
1,254
   
$
1,247
   
$
2,360
   
$
2,455
 
                                 
Earnings per common share:
                               
Basic
 
$
0.51
   
$
0.50
   
$
0.95
   
$
0.98
 
Diluted
 
$
0.49
   
$
0.48
   
$
0.92
   
$
0.94
 
Weighted average number of common shares outstanding:
                               
Basic
   
2,481,093
     
2,510,673
     
2,479,422
     
2,517,734
 
Diluted
   
2,578,948
     
2,601,984
     
2,575,128
     
2,602,777
 

See notes to condensed consolidated financial statements
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(In thousands)

   
Three Months Ended
 June 30,
   
Six Months Ended
June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Net income
 
$
1,254
   
$
1,247
   
$
2,360
   
$
2,455
 
Available for sale securities:
                               
Unrealized gains (losses) arising during the period, net of tax provision (benefits) of $27, $9, $30 and $(12), respectively
   
52
     
21
     
58
     
(17
)
Reclassification adjustments for the net losses realized in earnings, net of tax benefit of $0, $0, $0 and $11
   
-
     
-
     
-
     
20
 
Other comprehensive income, net of tax
   
52
     
21
     
58
     
3
 
Comprehensive income
 
$
1,306
   
$
1,268
   
$
2,418
   
$
2,458
 

See notes to condensed consolidated financial statements
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders’ Equity
For the Six Months Ended June 30, 2016 and 2015 (unaudited)
(Dollars in thousands, except per share amounts)

   
Shares
   
Common
Stock
   
Additional Paid-
in Capital
   
Unearned
ESOP Shares
   
Retained
 Earnings
   
Accumulated
Other
 Comprehensive
Income net of
tax
   
Total
 Stockholders’
 Equity
 
Balances at December 31, 2014
   
2,524,645
   
$
25
   
$
23,552
   
$
(1,140
)
 
$
28,024
   
$
183
   
$
50,644
 
Net income
                                   
2,455
             
2,455
 
Other comprehensive income, net of tax
                                           
3
     
3
 
Share-based compensation
                   
207
                             
207
 
                                                         
Cash dividends paid on common stock ($0.11 per share)
                                   
(277
)
           
(277
)
Restricted stock awards issued
   
10,208
                                             
-
 
Restricted stock forfeited and retired
   
(7,535
)
                                           
-
 
Common stock repurchased
   
(63,371
)
           
(1,261
)
                           
(1,261
)
Exercise of options
   
1,783
             
17
                             
17
 
Balances at June 30, 2015
   
2,465,730
   
$
25
   
$
22,515
   
$
(1,140
)
 
$
30,202
   
$
186
   
$
51,788
 

   
Shares
   
Common
Stock
   
Additional Paid-
in Capital
   
Unearned
ESOP Shares
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income net of
tax
   
Total
Stockholders’
Equity
 
Balances at December 31, 2015
   
2,469,206
   
$
25
   
$
23,002
   
$
(911
)
 
$
32,240
   
$
164
   
$
54,520
 
Net income
                                   
2,360
             
2,360
 
Other comprehensive income, net of tax
                                           
58
     
58
 
Share-based compensation
                   
228
                             
228
 
                                                         
Cash dividends paid on common stock ($0.15 per share)
                                   
(372
)
           
(372
)
Restricted stock awards issued
   
11,606
                                             
-
 
Restricted stock forfeited and retired
   
(1,059
)
                                           
-
 
                                                         
Exercise of options
   
1,077
             
17
                             
17
 
Balances at June 30, 2016
   
2,480,830
   
$
25
   
$
23,247
   
$
(911
)
 
$
34,228
   
$
222
   
$
56,811
 

See notes to condensed consolidated financial statements
 
 SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
 
   
Six Months Ended June 30,
 
   
2016
   
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
 
$
2,360
   
$
2,455
 
Adjustments to reconcile net income to net cash from operating activities:
               
Accretion of net discounts on investments
   
17
     
79
 
Loss on sale of securities
   
-
     
31
 
Dividends paid on FHLB stock
   
32
     
-
 
Provision for loan losses
   
250
     
300
 
Depreciation and amortization
   
394
     
295
 
Compensation expense related to stock options and restricted stock
   
228
     
207
 
Changes in fair value of mortgage servicing rights
   
482
     
193
 
Additions to mortgage servicing rights
   
(259
)
   
(436
)
Increase in cash surrender value of BOLI
   
(168
)
   
(168
)
Gain on sale of loans
   
(551
)
   
(786
)
Proceeds from sale of loans
   
36,080
     
44,610
 
Originations of loans held for sale
   
(34,125
)
   
(46,075
)
Net Loss on sale and write-downs of OREO and repossessed assets
   
8
     
22
 
Change in operating assets and liabilities:
               
Accrued interest receivable
   
16
     
3
 
Other assets
   
(282
)
   
(710
)
Accrued interest payable
   
18
     
3
 
Other liabilities
   
(267
)
   
608
 
Net cash from operating activities
   
4,233
     
631
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from principal payments, maturities and sales of available for sale securities
   
737
     
3,516
 
Purchases of available for sale securities
   
(1,363
)
   
-
 
FHLB stock redeemed
   
107
     
579
 
Net increase in loans
   
(5,378
)
   
(4,833
)
Proceeds from sale of OREO and other repossessed assets
   
132
     
400
 
Purchases of premises and equipment, net
   
(147
)
   
(479
)
Net cash used by investing activities
   
(5,912
)
   
(817
)
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net increase in deposits
   
3,843
     
10,820
 
Proceeds from borrowings
   
56,500
     
36,000
 
Repayment of borrowings
   
(61,322
)
   
(40,322
)
Dividends paid on common stock
   
(372
)
   
(277
)
Net change in advances from borrowers for taxes and insurance
   
(64
)
   
7
 
Proceeds from stock option exercises
   
17
     
17
 
Repurchase of common stock
   
-
     
(1,261
)
Net cash (used by) from financing activities
   
(1,398
)
   
4,984
 
Net change in cash and cash equivalents
   
(3,077
)    
4,798
 
Cash and cash equivalents, beginning of period
   
48,264
     
29,289
 
Cash and cash equivalents, end of period
 
$
45,187
   
$
34,087
 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Cash paid for income taxes
 
$
1,000
   
$
625
 
Interest paid on deposits and borrowings
 
$
1,408
   
$
1,366
 
Noncash net transfer from loans to OREO and repossessed assets
 
$
712
   
$
481
 

See notes to condensed consolidated financial statements
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 – Basis of Presentation

The accompanying financial information is unaudited and has been prepared from the consolidated financial statements of Sound Financial Bancorp, Inc., and its wholly owned subsidiary, Sound Community Bank.  References in this document to Sound Financial Bancorp refer to Sound Financial Bancorp, Inc. and its predecessor, Sound Financial, Inc., a federal corporation, and references to the “Bank” refer to Sound Community Bank.  References to “we,” “us,” and “our” or the “Company” means Sound Financial Bancorp and its wholly-owned subsidiary, Sound Community Bank unless the context otherwise requires.

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”).  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.  Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.  These unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on March 30, 2016 (“2015 Form 10-K”).  The results for the interim periods are not necessarily indicative of results for a full year.  For further information, refer to the consolidated financial statements and footnotes for the year ended December 31, 2015, included in the 2015 Form 10-K.  Certain amounts in the prior quarters’ consolidated financial statements have been reclassified to conform to the current presentation.  These classifications do not have an impact on previously reported consolidated net income, retained earnings, stockholders’ equity or earnings per share.

Note 2 – Accounting Pronouncements Recently Issued or Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which creates Topic 606 and supersedes Topic 605, Revenue Recognition. In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), which postponed the effective date of 2014-09. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net, which amended the principal versus agent implementation guidance set for in ASU 2014-09. Among other things, ASU 2016-08 clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The ASU amends certain aspects of the guidance set forth in the FASB's new revenue standard related to identifying performance obligations and licensing implementation. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new ASU requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard is effective for public entities for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company is currently evaluating the provisions to determine the potential impact the new standard will have on the Company's consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805). The ASU simplifies the accounting for measurement period adjustments. The amendments require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period when the adjustment amounts are determined. The acquirer is required to record in the same period's financial statements the effect on earnings from changes in depreciation, amortization, or other income effects resulting from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date. The acquirer must present separately on the income statement, or disclose in the notes, the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the provisional amount had been recognized at the acquisition date. ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. This ASU is not expected to have a material effect on the Company's consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. This ASU requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. In addition, the amendment requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This ASU also eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The amendment also requires a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU No. 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for certain provisions. The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements.
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-02 requires lessees to recognize, on the balance sheet, the assets and liabilities arising from operating leases. A lessee should recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. A lessee should include payments to be made in an optional period only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. For a finance lease, interest payments should be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income. For operating leases, the lease cost should be allocated over the lease term on a generally straight-line basis. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in the ASU is permitted. The adoption of ASU 2016-02 is not expected to have a material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. A contract novation refers to replacing one of the parties to a derivative instrument with a new party. This ASU clarifies that a change in counterparty in a derivative instrument does not, in and of itself, require dedesignation of that hedging relationship and therefore discontinue the application of hedge accounting. ASU 2016-05 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period.  The adoption of ASU 2016-05 is not expected to have a material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. The ASU eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an adjustment must be made to the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The ASU is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In March 2016, FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in this ASU require entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The adoption of ASU No. 2016-08 is not expected to have a material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation - Stock Compensation. The ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The ASU is effective for annual and interim periods beginning after December 15, 2016. The adoption of ASU is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the existing incurred loss impairment methodology that recognizes credit losses when a probable loss has been incurred with new methodology where loss estimates are based upon lifetime expected credit losses. The amendments in this ASU require a financial asset that is measured at amortized cost to be presented at the net amount expected to be collected. The income statement would then reflect the measurement of credit losses for newly recognized financial assets as well as changes to the expected credit losses that have taken place during the reporting period. The measurement of expected credit losses will be based on historical information, current conditions, and reasonable and supportable forecasts that impact the collectability of the reported amount. Available-for-sale securities will bifurcate the fair value mark and establish an allowance for credit losses through the income statement for the credit portion of that mark. The interest portion will continue to be recognized through accumulated other comprehensive income or loss. The change in allowance recognized as a result of adoption will occur through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the ASU is adopted. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 with early adoption permitted after December 15, 2018. The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements.
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

Note 3 – Investments

The amortized cost and fair value of our available-for-sale (“AFS”) securities and the corresponding amounts of gross unrealized gains and losses at the dates indicated were as follows (in thousands):

   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Estimated
Fair Value
 
June 30, 2016
                       
Municipal bonds
 
$
3,272
   
$
272
   
$
-
   
$
3,544
 
Agency mortgage-backed securities
   
3,387
     
83
     
-
     
3,470
 
Non-agency mortgage-backed securities
   
397
     
-
     
(18
)
   
379
 
Total
 
$
7,056
   
$
355
   
$
(18
)
 
$
7,393
 
December 31, 2015
                               
Municipal bonds
 
$
1,912
   
$
184
   
$
-
   
$
2,096
 
Agency mortgage-backed securities
   
4,088
     
102
     
(18
)
   
4,172
 
Non-agency mortgage-backed securities
   
449
     
-
     
(21
)
   
428
 
Total
 
$
6,449
   
$
286
   
$
(39
)
 
$
6,696
 

The amortized cost and fair value of AFS securities at June 30, 2016, by contractual maturity, are shown below (in thousands).  Expected maturities of AFS securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   
At June 30, 2016
 
   
Amortized
Cost
   
Fair
Value
 
Due within five years
 
$
1,115
   
$
1,120
 
Due in five to ten years
   
505
     
534
 
Due after ten years
   
5,436
     
5,739
 
Total
 
$
7,056
   
$
7,393
 

No securities were pledged to secure Washington State Public Funds as of June 30, 2016.

There were no sales of AFS securities during the three or six months ended June 30, 2016. There were no sales of AFS securities during the three months ended June 30, 2015. We sold $1.7 million of non-agency mortgage-backed securities generating gross losses of $31,000 and no gross gains during the six months ended June 30, 2015.

The following tables summarize at the dates indicated the aggregate fair value and gross unrealized loss by length of time of those investments that have been continuously in an unrealized loss position (in thousands):

 
June 30, 2016
 
   
Less Than 12 Months
   
12 Months or Longer
   
Total
 
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
 
Non-agency mortgage-backed securities
 
$
-
   
$
-
   
$
379
   
$
(18
)
 
$
379
   
$
(18
)
Total
 
$
-
   
$
-
   
$
379
   
$
(18
)
 
$
379
   
$
(18
)

 
December 31, 2015
 
   
Less Than 12 Months
   
12 Months or Longer
   
Total
 
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
 
Agency mortgage-backed securities
 
$
     
$
     
$
1,370
   
$
(18
)
 
$
1,370
   
$
(18
)
Non-agency mortgage-backed securities
   
-
     
-
     
428
     
(21
)
   
428
     
(21
)
Total
 
$
     
$
     
$
1,798
   
$
(39
)
 
$
1,798
   
$
(39
)
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents the cumulative roll forward of credit losses recognized in earnings during the three and six months ended June 30, 2016 and 2015 relating to the Company’s non-U.S. agency mortgage-backed securities (in thousands):

 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Estimated credit losses, beginning balance
 
$
-
   
$
-
   
$
-
   
$
450
 
Additions for credit losses not previously recognized
   
-
     
-
     
-
     
-
 
Reduction for increases in cash flows
   
-
     
-
     
-
     
-
 
Reduction of related OTTI due to sales
   
-
     
-
     
-
     
(450
)
Reduction for realized losses
   
-
     
-
     
-
     
-
 
Estimated credit losses, ending balance
 
$
-
   
$
-
   
$
-
   
$
-
 

Note 4 – Loans

The composition of the loan portfolio at the dates indicated, excluding loans held for sale, was as follows (in thousands):
 
   
At June 30,
2016
   
At December
31, 2015
 
Real estate loans:
           
One- to four- family
 
$
149,874
   
$
141,125
 
Home equity
   
31,804
     
31,573
 
Commercial and multifamily
   
164,916
     
175,312
 
Construction and land
   
57,792
     
57,043
 
Total real estate loans
 
$
404,386
   
$
405,053
 
Consumer loans:
               
Manufactured homes
   
15,114
     
13,798
 
Other consumer
   
24,953
     
23,030
 
Total consumer loans
   
40,067
     
36,828
 
Commercial business loans
   
21,967
     
19,295
 
Total loans
   
466,420
     
461,176
 
Deferred fees
   
(1,772
)
   
(1,707
)
Total loans, gross
   
464,648
     
459,469
 
Allowance for loan losses
   
(4,838
)
   
(4,636
)
Total loans, net
 
$
459,810
   
$
454,833
 
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2016 (in thousands):

   
One- to
four- family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Other
consumer
   
Commercial
business
   
Unallocated
   
Total
 
Allowance for loan losses:
                                                     
Individually evaluated for impairment
 
$
637
   
$
100
   
$
424
   
$
23
   
$
56
   
$
24
   
$
38
   
$
-
   
$
1,302
 
Collectively evaluated for impairment
   
1,076
     
401
     
953
     
365
     
133
     
197
     
133
     
278
     
3,536
 
Ending balance
 
$
1,713
   
$
501
   
$
1,377
   
$
388
   
$
189
   
$
221
   
$
171
   
$
278
   
$
4,838
 
                                                                         
Loans receivable:
                                                                       
Individually evaluated for impairment
 
$
5,612
   
$
1,049
   
$
4,861
   
$
87
   
$
394
   
$
24
   
$
646
   
$
-
   
$
12,673
 
Collectively evaluated for impairment
   
144,262
     
30,755
     
160,055
     
57,705
     
14,720
     
24,929
     
21,321
     
-
     
453,747
 
Ending balance
 
$
149,874
   
$
31,804
   
$
164,916
   
$
57,792
   
$
15,114
   
$
24,953
   
$
21,967
   
$
-
   
$
466,420
 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2015 (in thousands):

   
One-to-
four family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Other
consumer
   
Commercial
business
   
Unallocated
   
Total
 
Allowance for  loan losses:
                                                     
Individually evaluated for impairment
 
$
647
   
$
110
   
$
36
   
$
18
   
$
63
   
$
-
   
$
8
   
$
-
   
$
882
 
Collectively evaluated for impairment
   
1,192
     
497
     
885
     
364
     
238
     
188
     
149
     
241
     
3,754
 
Ending balance
 
$
1,839
   
$
607
   
$
921
   
$
382
   
$
301
   
$
188
   
$
157
   
$
241
   
$
4,636
 
                                                                         
Loans  receivable:
                                                                       
Individually evaluated for impairment
 
$
5,779
   
$
904
   
$
1,966
   
$
91
   
$
361
   
$
5
   
$
114
   
$
-
   
$
9,220
 
Collectively evaluated for impairment
   
135,346
     
30,669
     
173,346
     
56,952
     
13,437
     
23,025
     
19,181
     
-
     
451,956
 
Ending balance
 
$
141,125
   
$
31,573
   
$
175,312
   
$
57,043
   
$
13,798
   
$
23,030
   
$
19,295
   
$
-
   
$
461,176
 
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

The following table summarizes the activity in the allowance for loan losses for the three months ended June 30, 2016 (in thousands):

   
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One-to four- family
 
$
1,733
   
$
(7
)
 
$
-
   
$
(13
)
 
$
1,713
 
Home equity
   
597
     
-
     
63
     
(159
)
   
501
 
Commercial and multifamily
   
1,267
     
-
     
-
     
110
     
1,377
 
Construction and land
   
463
     
-
     
-
     
(75
)
   
388
 
Manufactured homes
   
202
     
-
     
3
     
(16
)
   
189
 
Other consumer
   
233
     
(3
)
   
2
     
(11
)
   
221
 
Commercial business
   
164
     
(29
)
   
-
     
36
     
171
 
Unallocated
   
50
     
-
     
-
     
228
     
278
 
Total
 
$
4,709
   
$
(39
)
 
$
68
   
$
100
   
$
4,838
 

The following table summarizes the activity in the allowance for loan losses for the six months ended June 30, 2016 (in thousands):

   
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One-to four- family
 
$
1,839
   
$
(72
)
 
$
-
   
$
(54
)
 
$
1,713
 
Home equity
   
607
     
-
     
65
     
(171
)
   
501
 
Commercial and multifamily
   
921
     
-
     
-
     
456
     
1,377
 
Construction and land
   
382
     
-
     
-
     
6
     
388
 
Manufactured homes
   
301
     
-
     
5
     
(117
)
   
189
 
Other consumer
   
188
     
(21
)
   
4
     
50
     
221
 
Commercial business
   
157
     
(29
)
   
-
     
43
     
171
 
Unallocated
   
241
     
-
     
-
     
37
     
278
 
Total
 
$
4,636
   
$
(122
)
 
$
74
   
$
250
   
$
4,838
 

The following table summarizes the activity in the allowance for loan losses for the three months ended June 30, 2015 (in thousands):

   
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One-to four- family
 
$
1,429
   
$
-
   
$
-
   
$
165
   
$
1,594
 
Home equity
   
514
     
-
     
6
     
(11
)
   
509
 
Commercial and multifamily
   
1,406
     
-
     
-
     
101
     
1,507
 
Construction and land
   
414
     
(40
)
   
-
     
(29
)
   
345
 
Manufactured homes
   
184
     
(32
)
   
2
     
39
     
193
 
Other consumer
   
154
     
(3
)
   
3
     
29
     
183
 
Commercial business
   
104
     
-
     
-
     
41
     
145
 
Unallocated
   
231
     
-
     
-
     
(135
)
   
96
 
Total
 
$
4,436
   
$
(75
)
 
$
11
   
$
200
   
$
4,572
 

The following table summarizes the activity in the allowance for loan losses for the six months ended June 30, 2015 (in thousands):

   
Beginning
Allowance
   
Charge-offs
   
Recoveries
   
Provision
   
Ending
Allowance
 
One-to four- family
 
$
1,442
   
$
(21
)
 
$
-
   
$
173
   
$
1,594
 
Home equity
   
601
     
(19
)
   
10
     
(83
)
   
509
 
Commercial and multifamily
   
1,244
     
-
     
-
     
263
     
1,507
 
Construction and land
   
399
     
(40
)
   
-
     
(14
)
   
345
 
Manufactured homes
   
193
     
(32
)
   
5
     
27
     
193
 
Other consumer
   
167
     
(27
)
   
9
     
34
     
183
 
Commercial business
   
108
     
-
     
-
     
37
     
145
 
Unallocated
   
233
     
-
     
-
     
(137
)
   
96
 
Total
 
$
4,387
   
$
(139
)
 
$
24
   
$
300
   
$
4,572
 
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

Credit Quality Indicators.  Federal regulations provide for the classification of lower quality loans as substandard, doubtful or loss.  An asset is considered substandard if it is inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged.  Substandard assets include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.  Assets classified as doubtful have all the weaknesses of currently existing facts, conditions and values.  Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without establishment of a specific loss reserve is not warranted.
 
When we classify problem loans as either substandard or doubtful, we may establish a specific allowance in an amount we deem prudent to address the risk specifically (if the loan is impaired) or we may allow the loss to be addressed in the general allowance (if the loan is not impaired).  General allowances represent loss reserves which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been specifically allocated to particular problem loans.  When the Company classifies problem loans as a loss, we charge off such assets in the period in which they are deemed uncollectible.  Assets that do not currently expose us to sufficient risk to warrant classification as substandard, doubtful or loss but possess identified weaknesses are classified as either watch or special mention assets.  Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the Federal Deposit Insurance Corporation (“FDIC”), the Bank’s federal regulatory, and the Washington Department of Financial Institutions, the Bank’s state banking regulator, which can order the establishment of additional loss allowances.  Pass rated loans are loans that are not otherwise classified or criticized.
 
The following table represents the internally assigned grades as of June 30, 2016 by type of loan (in thousands):

   
One- to
four- family
   
Home
equity
   
Commercial
and multifamily
   
Construction
and land
   
Manufactured
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Grade:
                                               
Pass
 
$
145,696
   
$
30,464
   
$
158,819
   
$
54,586
   
$
14,863
   
$
24,877
   
$
21,554
   
$
450,859
 
Watch
   
1,089
     
538
     
1,763
     
3,206
     
115
     
52
     
25
     
6,788
 
Special Mention
   
1,408
     
-
     
1,415
     
-
     
31
     
-
     
-
     
2,854
 
Substandard
   
1,681
     
802
     
2,919
             
105
     
24
     
388
     
5,919
 
Doubtful
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Total
 
$
149,874
   
$
31,804
   
$
164,916
   
$
57,792
   
$
15,114
   
$
24,953
   
$
21,967
   
$
466,420
 

The following table represents the internally assigned grades as of December 31, 2015 by type of loan (in thousands):

   
One- to
four- family
   
Home
equity
   
Commercial
and multifamily
   
Construction
and land
   
Manufactured
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Grade:
                                               
Pass
 
$
136,879
   
$
30,310
   
$
169,072
   
$
55,984
   
$
13,621
   
$
22,967
   
$
18,449
   
$
447,282
 
Watch
   
1,015
     
609
     
4,810
     
1,059
     
96
     
58
     
846
     
8,493
 
Special Mention
   
1,409
     
-
     
1,430
     
-
     
33
     
-
     
-
     
2,872
 
Substandard
   
1,822
     
654
     
-
     
-
     
48
     
5
     
-
     
2,529
 
Doubtful
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Total
 
$
141,125
   
$
31,573
   
$
175,312
   
$
57,043
   
$
13,798
   
$
23,030
   
$
19,295
   
$
461,176
 

Nonaccrual and Past Due Loans.  Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are automatically placed on nonaccrual once the loan is 90 days past due or sooner if, in management’s opinion, the borrower may be unable to meet payment of obligations as they become due, as well as when required by regulatory authorities.

The following table presents the recorded investment in nonaccrual loans as of June 30, 2016 and December 31, 2015, by type of loan (in thousands):

   
June 30,
2016
   
December
31, 2015
 
One- to four- family
 
$
875
   
$
1,157
 
Home equity
   
494
     
344
 
Commercial and multifamily
   
2,143
     
-
 
Construction and land
   
164
     
-
 
Manufactured homes
   
79
     
27
 
Other consumer
   
22
     
-
 
Total
 
$
3,777
   
$
1,528
 
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

The following table represents the aging of the recorded investment in past due loans as of June 30, 2016 by type of loan (in thousands):

   
30-59 Days
Past Due
   
60-89 Days
Past Due
   
90 Days
and Greater
Past Due
   
90 Days and
Greater Past
Due and Still
Accruing
   
Total Past
Due
   
Current
   
Total Loans
 
One-to four- family
 
$
-
   
$
458
   
$
730
   
$
-
   
$
1,188
   
$
148,686
   
$
149,874
 
Home equity
   
469
     
120
     
354
     
-
     
943
     
30,861
     
31,804
 
Commercial and multifamily
   
231
     
-
     
-
     
-
     
231
     
164,685
     
164,916
 
Construction and land
   
-
     
64
     
-
     
-
     
64
     
57,728
     
57,792
 
Manufactured homes
   
61
     
-
     
62
     
-
     
123
     
14,991
     
15,114
 
Other consumer
   
11
     
3
     
21
     
-
     
35
     
24,918
     
24,953
 
Commercial business
   
5
     
-
     
-
     
-
     
5
     
21,962
     
21,967
 
Total
 
$
777
   
$
645
   
$
1,167
   
$
-
   
$
2,589
   
$
463,831
   
$
466,420
 

The following table represents the aging of the recorded investment in past due loans as of December 31, 2015 by type of loan (in thousands):

   
30-59 Days
Past Due
   
60-89 Days
Past Due
   
90 Days
and Greater
Past Due
   
90 Days and
Greater Past
Due and Still
Accruing
   
Total Past
Due
   
Current
   
Total Loans
 
One-to four- family
 
$
2,453
   
$
265
   
$
881
   
$
117
   
$
3,716
   
$
137,409
   
$
141,125
 
Home equity
   
352
     
60
     
296
     
-
     
708
     
30,865
     
31,573
 
Commercial and multifamily
   
203
     
-
     
-
     
-
     
203
     
175,109
     
175,312
 
Construction and land
   
65
     
-
     
-
     
-
     
65
     
56,978
     
57,043
 
Manufactured homes
   
103
     
27
     
-
     
-
     
130
     
13,668
     
13,798
 
Other consumer
   
17
     
26
     
-
     
-
     
43
     
22,987
     
23,030
 
Commercial business
   
154
     
8
     
-
     
-
     
162
     
19,133
     
19,295
 
Total
 
$
3,347
   
$
386
   
$
1,177
   
$
117
   
$
5,027
   
$
456,149
   
$
461,176
 

Nonperforming Loans.  Loans are considered nonperforming when they are placed on nonaccrual and/or when they are considered to be nonperforming troubled debt restructurings (“TDRs”) and/or when they are 90 days or greater past due and still accruing.  A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession of some kind.  Nonperforming TDRs include TDRs that do not have sufficient payment history (typically greater than six months) to be considered performing or TDRs that have become 30 or more days past due.

The following table represents the credit risk profile of our loan portfolio based on payment activity as of June 30, 2016 by type of loan (in thousands):

   
One- to
four-
family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Performing
 
$
148,631
   
$
31,143
   
$
162,772
   
$
57,792
   
$
14,964
   
$
24,931
   
$
21,706
   
$
461,939
 
Nonperforming
   
1,244
     
661
     
2,144
     
-
     
150
     
22
     
261
     
4,482
 
Total
 
$
149,874
   
$
31,804
   
$
164,916
   
$
57,792
   
$
15,114
   
$
24,953
   
$
21,967
   
$
466,420
 

The following table represents the credit risk profile of our loan portfolio based on payment activity as of December 31, 2015 by type of loan (in thousands):

   
One- to
four-
family
   
Home
equity
   
Commercial
and
multifamily
   
Construction
and land
   
Manufactured
homes
   
Other
consumer
   
Commercial
business
   
Total
 
Performing
 
$
139,484
   
$
31,146
   
$
175,312
   
$
57,043
   
$
13,736
   
$
23,030
   
$
19,295
   
$
459,046
 
Nonperforming
   
1,641
     
427
     
-
             
62
     
-
     
-
     
2,130
 
Total
 
$
141,125
   
$
31,573
   
$
175,312
   
$
57,043
   
$
13,798
   
$
23,030
   
$
19,295
   
$
461,176
 
 
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)

Impaired Loans.  A loan is considered impaired when we have determined that we may be unable to collect payments of principal or interest when due under the terms of the loan.  In the process of identifying loans as impaired, we take into consideration factors which include payment history and status, collateral value, financial condition of the borrower, and the probability of collecting scheduled payments in the future.  Minor payment delays and insignificant payment shortfalls typically do not result in a loan being classified as impaired.  The significance of payment delays and shortfalls is considered on a case by case basis, after taking into consideration the totality of circumstances surrounding the loans and the borrowers, including payment history. Impairment is measured on a loan by loan basis for all loans in the portfolio.  All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the allowance for loan losses.

Impaired loans at June 30, 2016  and December 31, 2015 by type of loan were as follows (in thousands):

 
June 30, 2016
 
           
Recorded Investment
       
Unpaid
Principal
Balance
   
Without
Allowance
   
With
Allowance
   
Related
Allowance
 
                         
One- to four- family
 
$
6,066
   
$
2,482
   
$
3,129
   
$
639
 
Home equity
   
1,079
     
606
     
443
     
100
 
Commercial and multifamily
   
4,862
     
2,191
     
2,671
     
424
 
Construction and land
   
87
     
-
     
87
     
23
 
Manufactured homes
   
414
     
129
     
265
     
56
 
Other consumer
   
24
     
-
     
24
     
24
 
Commercial business
   
646
     
149
     
497
     
37
 
Total
 
$
13,178
   
$
5,558
   
$
7,116
   
$
1,303
 

 
December 31, 2015
 
         Recorded Investment        
Unpaid
Principal
Balance
   
Without
Allowance
   
With
Allowance
   
Related
Allowance
 
                   
One- to four- family
 
$
6,011
   
$
499
 
$
5,280
   
$
647
 
Home equity
   
994
     
162
   
742
     
110
 
Commercial and multifamily
   
1,966
     
1,430
   
536
     
36
 
Construction and land
   
91
     
-
   
91
     
18
 
Manufactured homes
   
366
     
-
   
361
     
63
 
Other consumer
   
5
     
-
   
5
     
-
 
Commercial business
   
114
     
-
   
114
     
8
 
Total
 
$
9,547
   
$
2,091
 
$
7,129
   
$