Company: SFBC
Filing Date: 2025-05-13
Form Type: 10-Q
Source: 0001541119-25-000023
Chunk: 109

Company: Sound Financial Bancorp, Inc.
Filing Date: 2025-05-13
Form: 10-Q
Item: Item 8
Chunk 109
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 for the same quarter in 2024.  Interest expense on subordinated notes was $168 thousand for both the three months ended March 31, 2025 and March 31, 2024, with no material changes in the average balance or rate paid. 

36

Net Interest Income.   

Net interest income increased $611 thousand, or 8.2%, to $8.1 million for the three months ended March 31, 2025, from $7.5 million for the three months ended March 31, 2024. The increase in net interest income was mainly the result of decreased funding costs, primarily from lower average rates paid on all categories of interest-bearing deposits and a lower average balance of borrowings, partially offset by a decrease in the average balance of interest-earning assets. Overall, the decline in funding costs contributed to a 36 basis point improvement in the net interest rate spread and a 30 basis point increase in the net interest margin, which rose to 3.25% for the three months ended March 31, 2025, compared to 2.95% for the same period in 2024.

Through most of 2024, the Federal Open Market Committee of the Federal Reserve (“FOMC”) maintained the target range for the federal funds rate at 5.25% to 5.50%, where it remained until September 18, 2024. In light of continued progress on reducing inflation and after considering the balance of risks to the economy, the FOMC has since lowered the target range 100 basis points to 4.25% to 4.50% as March 31, 2025 .

Provision for Credit Losses.  

The following table reflects the components of the provision for (release of) credit losses during the periods indicated (dollars in thousands):

Three Months Ended March 31,20252024Release of credit losses on loans$(85)$(106)Release of credit losses on unfunded loan commitments(118)73  (Release of) provision for credit losses$(203)$(33)

A release of credit losses of $203 thousand was recorded for the quarter ended March 31, 2025, compared to a release of credit losses of $33 thousand for the quarter ended March 31, 2024. The release of credit losses on loans during the current quarter was primarily due to a decline in the balance of the loan portfolio, partially offset by higher qualitative factors which were