Revenue from Contracts with Customers

12 Months Ended

Dec. 31, 2024

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

Revenue from Contracts with Customers

All of the Company's revenue from contracts with customers within the scope of ASC 606—Revenue from Contracts with Customers ("ASC 606") is recognized in noninterest income on the Consolidated Income Statements with the exception of the net loss on OREO and repossessed assets, which is included in noninterest expense on the Consolidated Income Statements. The following table presents the Company's sources of noninterest income for the year ended December 31, 2024 and 2023 (in thousands). Items outside of the scope of ASC 606 are noted as such.

	Year Ended December 31,
	2024		2023
Noninterest income:
Service charges and fee income
Account maintenance fees	$	317	$	280
Transaction-based and overdraft service charges	482		511
Debit/ATM interchange fees	1,380		1,388
Credit card interchange fees	83		111
Loan fees (a)	154		101
Other fees (a)	204		136
Total service charges and fee income	2,620		2,527
Earnings on cash surrender value of bank-owned life insurance (a)	625		1,179
Mortgage servicing income (a)	1,118		1,179
Fair value adjustment on MSRs (a)	(4)		(219)
Net gain on sale of loans (a)	258		340
Other income (a)	38		—
Total noninterest income	$	4,655	$	5,006

(a) Not within scope of ASC 606

Account maintenance fees and transaction-based and overdraft service charges

The Company earns fees from its customers for account maintenance, transaction-based and overdraft services. Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts monthly.The performance obligation is satisfied and fees are recognized monthly as the service period is completed. Transaction-based fees and overdraft service fees on deposit accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds, overdraft, and wire services. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

Debit/ATM and credit card interchange income

Debit/ATM interchange income represent fees earned when a debit card issued by the Bank is used for a transaction. The Bank earns interchange fees from debit cardholder transactions through the MasterCard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders' account. Certain expenses directly associated with the debit card are recorded on a net basis with the interchange income.

The Company utilizes a third-party agency relationship to brand credit cards with fees for originating new accounts paid by the issuing bank. Credit card interchange income represents fees earned when a credit card is issued by the third-party agent. Similar to debit card interchange fees, the Bank earns an interchange fee for each transaction made with Sound Community Bank's branded credit cards. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholder’s credit card. Certain expenses and rebates directly related to the credit card interchange contract are recorded net of the interchange income.

Net loss on OREO and repossessed assets

We record a gain or loss from the sale of other real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed of trust. When the Bank finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is

recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on sale, we adjust the transaction price and related gain or loss on sale if a significant financing component is present. The Company generated income/incurred expenses on OREO properties, net of (gains)/losses on sale of OREO, of $(31) thousand and $13 thousand for the years ended December 31, 2024 and 2023, respectively, included under noninterest expense on the Consolidated Statements of Income.