Company: SFBC
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001541119-25-000041
Chunk: 22

Company: Sound Financial Bancorp, Inc.
Filing Date: 2025-11-12
Form: 10-Q
Item: Item 2
Chunk 22
---
 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 lowered the target range 100 basis points to 4.25% to 4.50% between September 2024 and December 2024. The target rate range remained at this level until September 2025, when the FOMC implemented an additional 25 basis point reduction, lowering the target range to 4.00% to 4.25%. The lower interest rate environment has contributed to decreased funding costs, while loan yields have remained elevated due to repricing of variable-rate loans and higher rates on new loan originations. 

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 September 30,Nine Months Ended September 30,2025202420252024Provision for (release of) credit losses on loans$65 $106 $144 $(88)Release of credit losses on unfunded loan commitments(10)(98)(122)(46)Provision for (release of) credit losses$55 $8 $22 $(134)

A provision for credit losses of $55 thousand was recorded for the quarter ended September 30, 2025, compared to a provision for credit losses of $8 thousand for the quarter ended September 30, 2024. The larger provision in the current quarter, primarily reflects the significant release of unfunded commitment reserves in the third quarter of 2024. That release was largely driven by both a reduction in unfunded balances as projects were completed and improvements in qualitative factors within the construction loan segment due to improved economic conditions.  The provision for credit losses on loans in the current quarter was lower relative to the third quarter of 2024 due to lower loan portfolio growth during the current quarter as compared to the same quarter one year ago and a lower loss reserve rate, which was partially influenced by improving credit quality. Net charge-offs for the three months ended September 30, 2025 totaled $37 thousand, compared to $14 thousand for three months ended September 30, 2024. 

A provision for credit losses of $22 thousand was recorded for