Company: SFBC
Filing Date: 2025-03-18
Form Type: 10-K
Source: 0001541119-25-000009
Chunk: 10

Company: Sound Financial Bancorp, Inc.
Filing Date: 2025-03-18
Form: 10-K
Item: Item 1
Chunk 10
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-four family adjustable-rate loan originations decreased $688 thousand, or 4.0% to $16.4 million compared to $17.1 million in 2023. The decrease in both fixed and adjustable-rate residential loan originations can be attributed to several factors, including the high interest rate environment, economic uncertainty, and the limited housing supply coupled with elevated housing prices in our market area. At December 31, 2024, our average adjustable-rate, one-to-four family residential loan was $592 thousand.

Most of our loans are underwritten using generally accepted secondary market underwriting guidelines. A portion of the one-to-four family loans we originate are retained in our portfolio and the remaining loans are sold into the secondary market to Fannie Mae or other private investors. Loans that are sold into the secondary market to Fannie Mae are generally sold with the servicing retained to maintain the client relationship and to generate noninterest income. We also originate a small portion of government guaranteed and jumbo loans for sale servicing released to certain correspondent purchasers. The sale of mortgage loans provides a source of non-interest income through the gain on sale, reduces our interest-rate risk, provides a stream of servicing income, enhances liquidity and enables us to originate more loans at our current capital level than if we held the loans in our loan portfolio. At December 31, 2024, one-to-four family residential mortgage loans (excluding loans held-for-sale) totaled $269.7 million, or 29.8%, of our gross loan portfolio, of which $170.3 million were fixed-rate loans and $99.4 million were adjustable-rate loans, compared to $279.4 million (excluding loans held-for-sale), or 31.2% of our gross loan portfolio at December 31, 2023, of which $176.3 million were fixed-rate loans and $103.2 million were adjustable-rate loans.

Substantially all of the one-to-four family residential mortgage loans we retain in our portfolio consist of loans that do not satisfy acreage limits, income, credit, conforming loan limits (i.e., jumbo mortgages) or various other requirements imposed by Fannie Mae or private investors. Some of these loans are also originated to meet the needs of borrowers who cannot otherwise satisfy Fannie Mae credit requirements because of personal and financial reasons (i.e., bankruptcy, length of time employed, etc.), and other aspects, which do not conform to Fannie Mae’s guidelines. Such borrowers may have higher debt-to-income ratios