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Sound Financial Bancorp
SFBC
#9288
Rank
$0.11 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$44.18
Share price
-1.82%
Change (1 day)
-10.84%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Sound Financial Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2025 Q2

Sound Financial Bancorp - 10-Q quarterly report FY2025 Q2


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
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)
Maryland45-5188530
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2400 3rd Avenue, Suite 150, 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueSFBCThe NASDAQ Stock Market LLC

Indicate by check mark 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 check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).   Yes ☒   No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☒
 Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark 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 8, 2025, there were 2,566,069 shares of the registrant’s common stock outstanding. 

SOUND FINANCIAL BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
 Page Number
PART I    FINANCIAL INFORMATION 
 
3
4
5
6
8
9
29
47
47
 
48
48
48
48
48
48
49
50

2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share and per share amounts)
 June 30,
2025		December 31,
2024
ASSETS  
Cash and cash equivalents$102,542 $43,641 
Available-for-sale (“AFS”) securities, at fair value (amortized cost of $8,949 and $9,112 as of June 30, 2025 and December 31, 2024, respectively)
7,521 7,790 
Held-to-maturity (“HTM”) securities, at amortized cost (fair value of $1,687 and $1,712 at June 30, 2025 and December 31, 2024, respectively)
2,113 2,130 
Loans held-for-sale2,025 487 
Loans held-for-portfolio904,286 900,171 
Allowance for credit losses (“ACL”) on loans(8,536)(8,499)
Total loans held-for-portfolio, net895,750 891,672 
Accrued interest receivable3,658 3,471 
Bank-owned life insurance (“BOLI”), net22,913 22,490 
Other real estate owned (“OREO”) and repossessed assets, net300 — 
Mortgage servicing rights (“MSRs”), at fair value4,638 4,769 
Federal Home Loan Bank ("FHLB") stock, at cost1,734 1,730 
Premises and equipment, net4,498 4,697 
Right of use assets3,933 3,725 
Other assets6,617 7,031 
Total assets$1,058,242 $993,633 
LIABILITIES
Deposits
Interest-bearing$775,262 $705,267 
Noninterest-bearing demand124,197 132,532 
Total deposits899,459 837,799 
Borrowings25,000 25,000 
Accrued interest payable634 765 
Lease liabilities4,213 4,013 
Other liabilities10,238 9,371 
Advance payments from borrowers for taxes and insurance914 1,260 
Subordinated notes, net11,780 11,759 
Total liabilities952,238 889,967 
COMMITMENTS AND CONTINGENCIES (NOTE 7)— — 
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding
— — 
Common stock, $0.01 par value, 40,000,000 shares authorized, 2,566,069 and 2,564,907 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively
25 25 
Additional paid-in capital28,590 28,413 
Retained earnings78,517 76,272 
Accumulated other comprehensive loss, net of tax(1,128)(1,044)
Total stockholders’ equity106,004 103,666 
Total liabilities and stockholders’ equity$1,058,242 $993,633 
See Notes to Condensed Consolidated Financial Statements
3

SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (unaudited)
(In thousands, except share and per share amounts)
 Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
INTEREST INCOME  
Loans, including fees$13,695 $12,320 $26,283 $24,553 
Interest and dividends on investments, cash and cash equivalents1,220 1,719 2,339 3,246 
Total interest income14,915 14,039 28,622 27,799 
INTEREST EXPENSE
Deposits5,225 5,994 10,430 11,696 
Borrowings267 429 529 859 
Subordinated notes168 168 336 336 
Total interest expense5,660 6,591 11,295 12,891 
Net interest income9,255 7,448 17,327 14,908 
PROVISION FOR (RELEASE OF) CREDIT LOSSES170 (109)(33)(142)
Net interest income after provision (release of) for credit losses9,085 7,557 17,360 15,050 
NONINTEREST INCOME
Service charges and fee income664 761 1,348 1,373 
Earnings on BOLI229 134 423 311 
Mortgage servicing income263 279 531 561 
Fair value adjustment on MSRs(80)(116)(179)(181)
Net gain on sale of loans44 74 93 164 
Other income— 30 — 30 
Total noninterest income1,120 1,162 2,216 2,258 
NONINTEREST EXPENSE
Salaries and benefits4,321 4,658 8,916 9,201 
Operations1,443 1,569 2,808 3,026 
Regulatory assessments222 220 442 409 
Occupancy416 397 853 841 
Data processing1,254 910 2,547 1,928 
Net loss (gain) on OREO and repossessed assets9 (17)12 (11)
Total noninterest expense7,665 7,737 15,578 15,394 
Income before provision for income taxes2,540 982 3,998 1,914 
Provision for income taxes488 187 779 350 
Net income$2,052 $795 $3,219 $1,564 
Earnings per common share:
Basic$0.80 $0.31 $1.25 $0.61 
Diluted$0.79 $0.31 $1.24 $0.61 
Weighted-average number of common shares outstanding:
Basic2,556,562 2,540,538 2,555,413 2,539,872 
Diluted2,577,990 2,559,015 2,578,287 2,557,993 
See Notes to Condensed Consolidated Financial Statements
4

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,
2025202420252024
Net income$2,052 $795 $3,219 $1,564 
Available for sale securities:
Unrealized (losses) gains arising during the period(85)1 (106)(77)
Income tax expense related to unrealized losses18 — 22 16 
Other comprehensive (loss) gain, net of tax(67)1 (84)(61)
Comprehensive income$1,985 $796 $3,135 $1,503 

See Notes to Condensed Consolidated Financial Statements
5

SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Six Months Ended June 30, 2025 and 2024 (unaudited)
(In thousands, except share and per share amounts)
 SharesCommon
Stock		Additional Paid-in CapitalRetained
Earnings		Accumulated Other
Comprehensive Loss, net of tax		Total
Stockholders’
Equity
Balance, at March 31, 2025
2,566,069 $25 $28,515 $76,952 $(1,061)$104,431 
Net income— — — 2,052 — 2,052 
Other comprehensive loss, net of tax— — — — (67)(67)
Share-based compensation— — 75 — — 75 
Cash dividends paid on common stock ($0.19 per share)
— — — (487)— (487)
Balance, at June 30, 2025
2,566,069 $25 $28,590 $78,517 $(1,128)$106,004 
Balance, at December 31, 2024
2,564,907 $25 $28,413 $76,272 $(1,044)$103,666 
Net income— — — 3,219 — 3,219 
Other comprehensive loss, net of tax— — — — (84)(84)
Share-based compensation— — 156 — — 156 
Cash dividends paid on common stock ($0.38 per share)
— — — (974)— (974)
Common stock options exercised1,162 — 21 — — 21 
Balance, at June 30, 2025
2,566,069 $25 $28,590 $78,517 $(1,128)$106,004 
6

 SharesCommon
Stock		Additional Paid-in CapitalRetained
Earnings		Accumulated Other Comprehensive
Loss, net of tax		Total
Stockholders’
Equity
Balance, at March 31, 2024
2,558,546 $25 $28,110 $73,907 $(1,050)$100,992 
Net income— — — 795 — 795 
Other comprehensive gain, net of tax— — — — 1 1 
Share-based compensation— — 97 — — 97 
Cash dividends paid on common stock ($0.19 per share)
— — — (486)— (486)
Common stock repurchased(1,462)— (16)(43)— (59)
Common stock options exercised200 — 7 — — 7 
Balance, at June 30, 2024
2,557,284 $25 $28,198 $74,173 $(1,049)$101,347 
Balance, at December 31, 2023
2,549,427 $25 $27,990 $73,627 $(988)$100,654 
Net income— — — 1,564 — 1,564 
Other comprehensive loss, net of tax— — — — (61)(61)
Share-based compensation— — 193 — — 193 
Restricted common stock awards issued8,048 — — — — — 
Cash dividends paid on common stock ($0.38 per share)
— — — (972)— (972)
Common stock repurchased(1,626)— (18)(46)— (64)
Common stock options exercised1,435 — 33 — — 33 
Balance, at June 30, 2024
2,557,284 $25 $28,198 $74,173 $(1,049)$101,347 
See Notes to Condensed Consolidated Financial Statements
7

SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
 Six Months Ended June 30,
 20252024
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$3,219 $1,564 
Adjustments to reconcile net income to net cash from operating activities:
Amortization of net premiums on investments42 42 
Release of credit losses(33)(142)
Depreciation and amortization261 343 
Share-based compensation156 193 
Fair value adjustment on mortgage servicing rights179 181 
Right of use assets amortization505 476 
Change in lease liabilities(513)(493)
Change in cash surrender value of BOLI(423)(312)
Net change in advances from borrowers for taxes and insurance(346)(298)
Net gain on disposal of premises and equipment, net— (30)
Net gain on sale of loans(93)(164)
Proceeds from sale of loans held-for-sale5,621 8,280 
Originations of loans held-for-sale(8,314)(8,718)
Net gain on OREO and repossessed assets— (17)
Change in operating assets and liabilities:
Accrued interest receivable(187)39 
Other assets436 (925)
Accrued interest payable(131)(57)
Other liabilities979 (458)
Net cash provided by (used in) operating activities1,358 (496)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from principal payments, maturities and sales of available-for-sale securities142 193 
Proceeds from principal payments of held-to-maturity securities17 19 
Net (increase) decrease in loans(3,257)5,875 
Purchases of premises and equipment, net(62)(9)
Proceeds from disposal of premises and equipment, net— 30 
Proceeds from sale of OREO and other repossessed assets— 592 
Net cash (used in) provided by investing activities(3,160)6,700 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits61,660 80,230 
FHLB stock purchased(4)(10)
Common stock repurchases— (64)
Dividends paid on common stock(974)(972)
Proceeds from common stock option exercises21 33 
Net cash provided by financing activities60,703 79,217 
Net change in cash and cash equivalents58,901 85,421 
Cash and cash equivalents, beginning of period43,641 49,690 
Cash and cash equivalents, end of period$102,542 $135,111 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes$762 $237 
Interest paid on deposits and borrowings11,426 12,948 
Loans transferred from loans held-for-sale to loans held-for-portfolio1,200 859 
Loans transferred from loans held-for-portfolio to OREO and repossessed assets300 115 
Cash paid for principal portion from finance leases12 — 
ROU assets obtained in exchange for new operating lease liabilities583 — 
ROU assets obtained in exchange for new finance lease liabilities130 — 
See Notes to Condensed Consolidated Financial Statements
8

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 subsidiaries, Sound Community Bank and Sound Community Insurance Agency, Inc.  References in this document to “Sound Financial Bancorp” refer to Sound Financial Bancorp, Inc. and references to the “Bank” refer to Sound Community Bank. References to “we,” “us,” and “our” or the “Company” refer to Sound Financial Bancorp, the Bank and Sound Community Insurance Agency, Inc., collectively, 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 (“U.S. 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 adjustments) 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 U.S. 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, 2024, as filed with the SEC on March 18, 2025 (“2024 Form 10-K”). The results for the interim periods are not necessarily indicative of results for a full year or any other future period.
We have not made any changes in our significant accounting policies from those disclosed in the 2024 Form 10-K.

Note 2 – Accounting Pronouncements Recently Issued or Adopted
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU requires public business entities to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. This ASU was released in response to stakeholder feedback indicating that the existing income tax disclosures should be enhanced to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The Company adopted this ASU on January 1, 2025 for disclosure in the Company’s Annual Report on Form 10-K for the year ending December 31, 2025, with no material impact expected on the Company’s consolidated results of operations, financial position or cash flows.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which will change the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (for example, employee compensation, depreciation and amortization) in expense captions. This ASU’s amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and for interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will evaluate the impact of this guidance through the date of adoption.

9

Note 3 – Investments
At June 30, 2025, the Company did not own any debt securities classified as trading or any equity investment securities, except for the FHLB securities described in “Note 8 — Borrowings, FHLB Stock and Subordinated Notes.”
The amortized cost and estimated fair value of our 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, 2025    
Municipal bonds$6,333 $10 $(1,129)$5,214 
Agency mortgage-backed securities2,616 11 (320)2,307 
Total$8,949 $21 $(1,449)$7,521 
December 31, 2024
Municipal bonds$6,354 $11 $(991)$5,374 
Agency mortgage-backed securities2,758 7 (349)2,416 
Total$9,112 $18 $(1,340)$7,790 
The amortized cost and estimated fair value of our HTM 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, 2025
Municipal bonds$704 $— $(191)$513 
Agency mortgage-backed securities1,409 — (235)1,174 
Total$2,113 $— $(426)$1,687 
December 31, 2024
Municipal bonds$704 $— $(163)$541 
Agency mortgage-backed securities1,426 — (255)1,171 
Total$2,130 $— $(418)$1,712 
The amortized cost and estimated fair value of AFS and HTM securities at June 30, 2025, 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. Investments not due at a single maturity date, consisting of agency mortgage-backed securities, are shown separately.
June 30, 2025
Available-for-saleHeld-to-maturity
Amortized
Cost		Estimated Fair ValueAmortized
Cost		Estimated Fair Value
Due after one year through five years$454 $455 $— $— 
Due after five years through ten years1,717 1,623 — — 
Due after ten years4,162 3,136 704 512 
Agency mortgage-backed securities2,616 2,307 1,409 1,175 
Total$8,949 $7,521 $2,113 $1,687 
There were no pledged securities at June 30, 2025 or December 31, 2024.
There were no sales of AFS or HTM securities during the three and six months ended June 30, 2025 and 2024.
10

Accrued interest receivable on securities totaled $48 thousand at both June 30, 2025 and December 31, 2024, in the accompanying Condensed Consolidated Balance Sheets. Accrued interest receivable is excluded from the allowance for credit losses.
The following table summarizes the aggregate fair value and gross unrealized loss by length of time of those investments for which an allowance for credit losses has not been recorded that have been in a continuous unrealized loss position at the dates indicated (in thousands):
 June 30, 2025
 Less Than 12 Months12 Months or LongerTotal
 Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss
Available-for-sale securities
Municipal bonds$— $— $3,549 $(1,130)$3,549 $(1,130)
Agency mortgage-backed securities44 — 1,931 (319)1,975 (319)
Total available-for-sale securities$44 $— $5,480 $(1,449)$5,524 $(1,449)
Held-to-maturity securities
Municipal bonds$— $— $512 $(191)$512 $(191)
Agency mortgage-backed securities— — 1,175 (235)1,175 (235)
Total held-to-maturity securities$— $— $1,687 $(426)$1,687 $(426)
 December 31, 2024
 Less Than 12 Months12 Months or LongerTotal
 Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss
Available-for-sale securities
Municipal bonds$— $— $3,708 $(991)$3,708 $(991)
Agency mortgage-backed securities44 (2)2,020 (347)2,064 (349)
Total$44 $(2)$5,728 $(1,338)$5,772 $(1,340)
Held-to-maturity securities
Municipal bonds$— $— $540 $(163)$540 $(163)
Agency mortgage-backed securities— — 1,172 (255)1,172 (255)
Total held-to-maturity securities$— $— $1,712 $(418)$1,712 $(418)
There was no allowance for credit losses on securities at June 30, 2025 or December 31, 2024. At both June 30, 2025 and December 31, 2024, the total securities portfolio consisted of 11 agency mortgage-backed securities and 11 municipal bonds. At both June 30, 2025 and December 31, 2024, there was one security in an unrealized loss position for less than 12 months and 15 securities in an unrealized loss position for more than 12 months. The unrealized losses were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities, and not related to the underlying credit of the issuers or the underlying collateral. It is expected that these securities will not be settled at a price less than the amortized cost of each investment. There was no provision for credit losses recognized for investment securities during the three and six months ended June 30, 2025 and 2024, because the declines in fair value were not attributable to credit quality and because we do not intend, and it is not likely that we will be required, to sell these securities before recovery of their amortized cost basis. 

11

Note 4 – Loans

Loans-held-for portfolio (which excludes loans held-for-sale) at the dates indicated were as follows (in thousands):
 June 30,
2025		December 31,
2024
Real estate loans:  
One-to-four family$262,672 $269,684 
Home equity28,582 26,686 
Commercial and multifamily398,429 371,516 
Construction and land49,926 73,077 
Total real estate loans739,609 740,963 
Consumer loans:
Manufactured homes43,112 41,128 
Floating homes91,448 86,411 
Other consumer17,259 17,720 
Total consumer loans151,819 145,259 
Commercial business loans14,779 15,605 
Total loans held-for-portfolio906,207 901,827 
Premiums for purchased loans(1)
662 718 
Deferred fees, net(2,583)(2,374)
Total loans held-for-portfolio, gross904,286 900,171 
Allowance for credit losses — loans(8,536)(8,499)
Total loans held-for-portfolio, net$895,750 $891,672 
(1)Includes premiums resulting from purchased loans of $379 thousand related to one-to-four family loans, $228 thousand related to commercial and multifamily loans, and $54 thousand related to commercial business loans as of June 30, 2025. Includes premiums resulting from purchased loans of $404 thousand related to one-to-four family loans, $244 thousand related to commercial and multifamily loans, and $70 thousand related to commercial business loans as of December 31, 2024.
As of June 30, 2025, there were two collateral dependent consumer mortgage loans, totaling $166 thousand, that were in process of foreclosure.
The following table presents a summary of activity in the ACL on loans and the reserve for unfunded loan commitments for the periods indicated (in thousands):
12

Three Months Ended June 30,
20252024
ACL - LoansReserve for Unfunded Loan CommitmentsACL ACL - LoansReserve for Unfunded Loan CommitmentsACL
Balance at beginning of period$8,393 $116 $8,509 $8,598 $266 $8,864 
Provision for (release of) credit losses during the period164 6 170 (88)(21)(109)
Net charge-offs during the period(21)— (21)(17)— (17)
Balance at end of period$8,536 $122 $8,658 $8,493 $245 $8,738 
Six Months Ended June 30,
20252024
ACL - LoansReserve for Unfunded Loan CommitmentsACLACL - LoansReserve for Unfunded Loan CommitmentsACL
Balance at beginning of period$8,499 $234 $8,733 $8,760 $193 $8,953 
Provision for (release of) credit losses during the period79 (112)(33)(194)52 (142)
Net charge-offs during the period(42)— (42)(73)— (73)
Balance at end of period$8,536 $122 $8,658 $8,493 $245 $8,738 
Accrued interest receivable on loans receivable totaled $3.6 million at June 30, 2025 and $3.4 million at December 31, 2024, in the accompanying Condensed Consolidated Balance Sheets. Accrued interest receivable is excluded from the ACL.
The ACL is measured using the current expected credit losses (“CECL”) approach for financial instruments measured at amortized cost and for other commitments to extend credit. CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable forecasts. We estimate the ACL using relevant information from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. The ACL is measured on a collective (segment) basis when similar risk characteristics exist. Historical credit loss experience for both the Company and segment-specific peers provides the basis for the estimate of expected credit losses. Segments are based upon federal call report segmentation. The reserve was applied on a loan-by-loan basis and condensed into the applicable segments reported below. The ACL is determined using quantitative and qualitative analysis. The quantitative analysis utilizes macroeconomic variables to establish a quantitative relationship between economic conditions and loan performance through an economic cycle. Qualitative adjustments include but are not limited to changes in lending policies; changes in nature and volume of the portfolio; change in staff experience level; changes in the volume or trends of classified loans, delinquencies, and nonaccrual loans; concentration risk; value of underlying collateral; competitive, legal, and regulatory factors; changes in the loan review system; and economic conditions. We evaluate our ACL policy and judgments on an ongoing basis and update them as necessary based on changing conditions. See “Note 1—Organization and Significant Accounting Policies” in the Company’s 2024 Form 10-K for further information on the Company’s ACL accounting policy.
13

The following tables summarize the activity in the ACL - loans for the periods indicated (in thousands):
Three Months Ended June 30, 2025
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$3,328 $— $— $(1)$3,327 
Home equity362 — — (2)360 
Commercial and multifamily1,181 — — 55 1,236 
Construction and land279 — — (10)269 
Manufactured homes1,303 — — 92 1,395 
Floating homes1,409 — — 1 1,410 
Other consumer(1)
448 (23)2 24 451 
Commercial business83 — — 5 88 
Total$8,393 $(23)$2 $164 $8,536 
(1)During the three months ended June 30,2025, there was one other consumer loan for $16 thousand originated in 2024 related to a consumer line of credit that was charged off with the remainder of the gross charge-offs of other consumer loans related entirely to deposit overdrafts.
Three Months Ended June 30, 2024
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$2,910 $— $— $(112)$2,798 
Home equity179 — — 20 199 
Commercial and multifamily1,106 — — 24 1,130 
Construction and land1,329 — — (257)1,072 
Manufactured homes833 — 105 938 
Floating homes1,799 — — 111 1,910 
Other consumer(1)
333 (21)4 32 348 
Commercial business109 — — (11)98 
Total$8,598 $(21)$4 $(88)$8,493 
(1)During the three months ended June 30, 2024, the gross charge-offs of other consumer loans related entirely to deposit overdrafts that were charged off.
Six Months Ended June 30, 2025
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$3,025 $— $— $302 $3,327 
Home equity307 — — 53 360 
Commercial and multifamily1,218 — — 18 1,236 
Construction and land992 — — (723)269 
Manufactured homes(1)
1,172 (19)— 242 1,395 
Floating homes1,282 — — 128 1,410 
Other consumer(2)
401 (31)8 73 451 
Commercial business102 — — (14)88 
Total$8,499 $(50)$8 $79 $8,536 
(1)During the six months ended June 30, 2025, there was one manufactured home loan originated in 2022 that was charged off and then subsequently foreclosed upon.
(2)During the six months ended June 30, 2025, there was one other consumer loan for $23 thousand originated in 2024 related to a consumer line of credit that was charged off, with the remainder of the gross charge-offs of other consumer loans related entirely to deposit overdrafts.
14

Six Months Ended June 30, 2024
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$2,630 $— $— $168 $2,798 
Home equity185 — — 14 199 
Commercial and multifamily1,070 — — 60 1,130 
Construction and land1,349 — — (277)1,072 
Manufactured homes(1)
971 (23)— (10)938 
Floating homes2,022 — — (112)1,910 
Other consumer(2)
426 (60)10 (28)348 
Commercial business107 — — (9)98 
Unallocated— — — — — 
Total$8,760 $(83)$10 $(194)$8,493 
(1)During the six months ended June 30, 2024, there was one manufactured home loan that was charged off and then subsequently foreclosed upon.
(2)During the six months ended June 30, 2024, the gross charge-offs related entirely to deposit overdrafts that were charged off.
Credit Quality Indicators. Federal regulations provide for the classification of lower quality loans and other assets (such as OREO and repossessed assets), as well as debt and equity securities considered as "substandard," "doubtful" or "loss." An asset is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. "Substandard" assets include those characterized by the "distinct possibility" that the insured institution will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all of the weaknesses in those classified "substandard," with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions and values, "highly questionable and improbable." Assets classified as "loss" are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading. The grades for watch and special mention loans are used by the Company to identify and track potential problem loans which do not rise to the levels described for substandard, doubtful, or loss. These are loans which have been criticized and deserve management's close attention based upon known characteristics such as periodic payment delinquency, failure to comply with contractual terms of the loan, or collateral concerns. Loans identified as watch, special mention, substandard, doubtful, or loss are subject to additional problem loan reporting to management every three months.
When we classify problem assets as either substandard or doubtful, we may determine that these assets should be individually analyzed if they no longer share common risk characteristics with the rest of the portfolio. When we classify problem assets as a loss, we are required to charge off those assets in the period in which they are deemed uncollectible. Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the FDIC (the Bank’s federal regulator) and the Washington Department of Financial Institutions (the Bank’s state banking regulator), which can order the establishment of additional credit loss allowances. Assets which do not currently expose us to sufficient risk to warrant classification as substandard or doubtful but possess weaknesses are required to be designated as special mention. There were no loans classified as doubtful or loss as of June 30, 2025 and December 31, 2024.
The following tables present the internally assigned grades as of June 30, 2025 and December 31, 2024, by type of loan and origination year (in thousands):
15

At June 30, 2025
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis Converted to Term
20252024202320222021PriorTotal
One-to-four family:
Pass$15,187 $19,747 $17,857 $71,508 $95,097 $40,767 $— $— $260,163 
Substandard— — 1,118 229 901 331 — — 2,579 
Total one-to-four family$15,187 $19,747 $18,975 $71,737 $95,998 $41,098 $— $— $262,742 
Home equity:
Pass$430 $2,419 $2,804 $2,336 $846 $1,417 $17,177 $956 $28,385 
Substandard— — — — — 53 228 134 415 
Total home equity$430 $2,419 $2,804 $2,336 $846 $1,470 $17,405 $1,090 $28,800 
Commercial and multifamily:
Pass$47,364 $34,685 $24,873 $82,905 $106,476 $79,870 $— $— $376,173 
Substandard— — — — 6,453 14,493 — — 20,946 
Total commercial and multifamily$47,364 $34,685 $24,873 $82,905 $112,929 $94,363 $— $— $397,119 
Construction and land:
Pass$10,994 $15,450 $19,077 $1,498 $841 $1,609 $— $— $49,469 
Substandard— — — 69 — 22 — — 91 
Total construction and land$10,994 $15,450 $19,077 $1,567 $841 $1,631 $— $— $49,560 
Manufactured homes:
Pass$5,090 $9,024 $11,480 $5,948 $3,559 $7,186 $— $— $42,287 
Substandard— — 193 277 — 214 — — 684 
Total manufactured homes$5,090 $9,024 $11,673 $6,225 $3,559 $7,400 $— $— $42,971 
Floating homes:
Pass$10,433 $20,142 $6,342 $14,794 $23,572 $15,725 $— $— $91,008 
Total floating homes$10,433 $20,142 $6,342 $14,794 $23,572 $15,725 $— $— $91,008 
Other consumer:
Pass$1,378 $1,962 $2,671 $366 $3,448 $6,772 $603 $— $17,200 
Substandard— — 72 — 8 — — — 80 
Total other consumer$1,378 $1,962 $2,743 $366 $3,456 $6,772 $603 $— $17,280 
Commercial business:
Pass$340 $269 $1,059 $1,597 $1,530 $3,529 $6,262 $— $14,586 
Substandard— 35 — — — — 185 — 220 
Total commercial business$340 $304 $1,059 $1,597 $1,530 $3,529 $6,447 $— $14,806 
Total loans
Pass$91,216 $103,698 $86,163 $180,952 $235,369 $156,875 $24,042 $956 $879,271 
Substandard— 35 1,383 575 7,362 15,113 413 134 25,015 
Total loans$91,216 $103,733 $87,546 $181,527 $242,731 $171,988 $24,455 $1,090 $904,286 
16

At December 31, 2024
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term
20242023202220212020PriorTotal
One-to-four family:
Pass$26,327 $22,470 $78,427 $98,379 $14,095 $29,534 $— $— $269,232 
Substandard— — 259 104 — 214 — — 577 
Total one-to-four family$26,327 $22,470 $78,686 $98,483 $14,095 $29,748 $— $— $269,809 
Home equity:
Pass$3,084 $2,951 $2,420 $908 $210 $1,320 $14,578 $1,069 $26,540 
Substandard— — — — — 56 234 66 356 
Total home equity$3,084 $2,951 $2,420 $908 $210 $1,376 $14,812 $1,135 $26,896 
Commercial and multifamily:
Pass$34,844 $20,736 $90,067 $111,601 $21,240 $67,336 $— $— $345,824 
Special mention— — — — — 1,375 — — 1,375 
Substandard— — — 5,775 2,165 15,143 — — 23,083 
Total commercial and multifamily$34,844 $20,736 $90,067 $117,376 $23,405 $83,854 $— $— $370,282 
Construction and land:
Pass$26,458 $22,846 $2,166 $968 $593 $2,338 $— $— $55,369 
Special mention— — 17,349 — — — — — 17,349 
Substandard— — 70 — — 24 — — 94 
Total construction and land$26,458 $22,846 $19,585 $968 $593 $2,362 $— $— $72,812 
Manufactured homes:
Pass$9,396 $12,095 $7,039 $3,822 $1,816 $6,180 $— $— $40,348 
Substandard— 427 — — — 205 — — 632 
Total manufactured homes$9,396 $12,522 $7,039 $3,822 $1,816 $6,385 $— $— $40,980 
Floating homes:
Pass$20,587 $6,395 $16,225 $23,902 $6,059 $10,472 $— $— $83,640 
Substandard— — 2,350 — — — — — 2,350 
Total floating homes$20,587 $6,395 $18,575 $23,902 $6,059 $10,472 $— $— $85,990 
Other consumer:
Pass$2,273 $3,297 $622 $3,615 $5,387 $1,925 $618 $— $17,737 
Substandard— — — 1 — — — — 1 
Total other consumer$2,273 $3,297 $622 $3,616 $5,387 $1,925 $618 — $17,738 
Commercial business:
Pass$314 $1,256 $1,811 $3,032 $257 $3,895 $4,862 $— $15,427 
Substandard38 — — — — 11 188 — 237 
Total commercial business$352 $1,256 $1,811 $3,032 $257 $3,906 $5,050 $— $15,664 
Total loans
Pass$123,283 $92,046 $198,777 $246,227 $49,657 $123,000 $20,058 $1,069 $854,117 
Special mention— — 17,349 — — 1,375 — — 18,724 
Substandard38 427 2,679 5,880 2,165 15,653 422 66 27,330 
Total loans$123,321 $92,473 $218,805 $252,107 $51,822 $140,028 $20,480 $1,135 $900,171 
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Nonaccrual and Past Due Loans.  Loans are considered past due if the required principal and interest payments were not received as of the dates such payments were due.
The following table presents the amortized cost of nonaccrual loans as of the dates indicated, by type of loan (in thousands):
 June 30, 2025December 31, 2024
Total
Nonaccrual
Loans		Total
Nonaccrual
Loans
with no ACL		Total
Nonaccrual
Loans		Total
Nonaccrual
Loans
with no ACL
One-to-four family$1,423 $1,423 $537 $537 
Home equity359 359 298 298 
Commercial and multifamily1,065 1,065 3,734 3,734 
Construction and land21 21 24 24 
Manufactured homes489 489 521 521 
Floating homes— — 2,363 2,363 
Other consumer9 8 3 1 
Commercial business— — 11 11 
Total$3,366 $3,365 $7,491 $7,489 
The following tables present the aging of past due loans, based on amortized cost, as of the dates indicated, by type of loan (in thousands):
June 30, 2025
 30-59 Days
Past Due		60-89 Days
Past Due		90 Days and Greater Past Due90 Days and Greater Past Due and AccruingTotal Past
Due		CurrentTotal Loans
One-to-four family$— $327 $1,070 $— $1,397 $261,345 $262,742 
Home equity103 — 75 — 178 28,622 28,800 
Commercial and multifamily— — 1,061 — 1,061 396,058 397,119 
Construction and land— — — — — 49,560 49,560 
Manufactured homes— 200 302 — 502 42,469 42,971 
Floating homes— — — — — 91,008 91,008 
Other consumer5 3 7 — 15 17,265 17,280 
Commercial business— — — — — 14,806 14,806 
Total$108 $530 $2,515 $— $3,153 $901,133 $904,286 
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December 31, 2024
 30-59 Days
Past Due		60-89 Days
Past Due		90 Days and Greater Past Due90 Days and Greater Past Due and AccruingTotal Past
Due		CurrentTotal Loans
One-to-four family$34 $339 $352 $— $725 $269,084 $269,809 
Home equity249 — 66 — 315 26,581 26,896 
Commercial and multifamily— — 3,733 — 3,731 366,551 370,282 
Construction and land24 — — — 24 72,788 72,812 
Manufactured homes402 287 394 — 1,083 39,897 40,980 
Floating homes— — 2,350 — 2,350 83,640 85,990 
Other consumer6 12 — — 18 17,720 17,738 
Commercial business— — — — — 15,664 15,664 
Total$715 $638 $6,895 $— $8,246 $891,925 $900,171 

Loan Modifications to Borrowers Experiencing Financial Difficulty. The Company has granted modifications which can generally be described in the following categories:
Principal Forgiveness:  A modification in which the principal is reduced.
Rate Modification:  A modification in which the interest rate is changed.
Term Modification:  A modification in which the maturity date, timing of payments or frequency of payments is changed.
Payment Modification:  A modification in which the dollar amount of the payment is changed.  Interest-only modifications in which a loan is converted to interest-only payments for a period of time are included in this category.
Combination Modification:  Any other type of modification, including the use of multiple categories above.
At June 30, 2025, the Company had no commitments to extend additional credit to borrowers owing loan receivables with modified terms.

There were no loans modified within the three and six months ended June 30, 2025 and 2024.
At June 30, 2025 and December 31, 2024, we had no loan receivables that defaulted subsequent to their modification.
Troubled debt restructurings (“TDRs”). Prior to the adoption of ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, the Company had granted a variety of concessions to borrowers in the form of loan modifications that were considered TDRs. Loans classified as legacy TDRs totaled $1.3 million at both June 30, 2025 and December 31, 2024.

Collateral Dependent Loans. Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. Collateral dependent loans are evaluated individually for purposes of determining the ACL, which is determined based on the estimated fair value of the collateral. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated fair value of the collateral exceeds the amortized cost of the loan, no ACL is recorded.

19

The following tables summarize collateral dependent loans by collateral type as of the dates indicated (in thousands):
June 30, 2025
Commercial Real EstateResidential Real EstateLandOther ResidentialRVs/AutomobilesBusiness Assets Total
Real estate loans:
One- to four- family$— $1,230 $— $329 $— $— $1,559 
Home equity— 359 — — — — 359 
Commercial and multifamily— — — — — 1,065 1,065 
Construction and land— — 21 — — — 21 
Total real estate loans— 1,589 21 329 — 1,065 3,004 
Consumer loans:
Manufactured homes— — — 489 — — 489 
Other consumer— — — — 8 — 8 
Total consumer loans— — — 489 8 — 497 
Commercial business loans— — — — — — — 
Total loans$— $1,589 $21 $818 $8 $1,065 $3,501 
December 31, 2024
Commercial Real EstateResidential Real EstateLandOther ResidentialRVs/AutomobilesBusiness AssetsTotal
Real estate loans:
One- to four- family$— $311 $— $364 $— $— $675 
Home equity— 298 — — — — 298 
Commercial and multifamily3,734 — — — — — 3,734 
Construction and land— — 24 — — — 24 
Total real estate loans3,734 609 24 364 — — 4,731 
Consumer loans:
Manufactured homes— — — 521 — — 521 
Floating homes— — — 2,363 — — 2,363 
Other consumer— — — — 1 — 1 
Total consumer loans— — — 2,884 1 — 2,885 
Commercial business loans— — — — — 11 11 
Total loans$3,734 $609 $24 $3,248 $1 $11 $7,627 

Note 5 – Fair Value Measurements
The Company determines the fair values of its financial instruments based on the requirements established in ASC 820, Fair Value Measurements (“ASC 820”), which provides a framework for measuring fair value in accordance with U.S. GAAP and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 defines fair values for financial instruments as the exit price, the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions. The Company’s fair values for financial instruments at June 30, 2025 and December 31, 2024 were determined based on these requirements.
The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments:
Cash and cash equivalents - The estimated fair value is equal to the carrying amount.
Available-for-sale securities – AFS securities are recorded at fair value based on quoted market prices, if available (Level 1).  If quoted market prices are not available, management utilizes third-party pricing services or broker quotations from dealers
20

in the specific instruments (Level 2).  Level 2 securities include those traded on an active exchange, as well as U.S. government securities.  
Held-to-maturity securities – The fair value is based on quoted market prices, if available.  If quoted market prices are not available, management utilizes third-party pricing services or broker quotations from dealers in the specific instruments.  Level 2 securities include those traded on an active exchange, as well as U.S. government securities.   
Loans held-for-sale - The fair value of fixed-rate one-to-four family loans is based on whole loan forward prices obtained from government sponsored enterprises.
Loans held-for-portfolio - The estimated fair value of loans held-for-portfolio consists of a credit adjustment to reflect the estimated adjustment to the carrying value of the loans due to credit-related factors and a yield adjustment to reflect the estimated adjustment to the carrying value of the loans due to a differential in yield between the portfolio loan yields and estimated current market rate yields on loans with similar characteristics. The estimated fair values of loans held-for-portfolio reflect exit price assumptions. The liquidity premiums/discounts are part of the valuation for exit pricing.
Mortgage servicing rights –The fair value of MSRs is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds, discount rates, and delinquency rate assumptions as inputs.
Time deposits - The estimated fair value of time deposits is based on the difference between interest rates paid on the Company’s time deposits and current market rates for time deposits with comparable characteristics.
Borrowings - The fair value of borrowings is estimated using the contractual cash flows of each debt instrument discounted using the Company’s current incremental borrowing rates for similar types of borrowing arrangements.
Subordinated notes - The fair value of subordinated notes is estimated using discounted cash flows based on current borrowing rates for similar long-term debt instruments with similar terms and remaining time to maturity.
A description of the valuation methodologies used for collateral dependent loans, OREO and repossessed assets and off-balance sheet loan commitments is as follows:
Collateral dependent loans - The fair value of collateral dependent loans is based on the current appraised value of the collateral less estimated costs to sell.
OREO and repossessed assets – The fair value of OREO and repossessed assets is based on the current appraised value of the collateral less estimated costs to sell. 
Off-balance sheet financial instruments - The fair value of off-balance sheet financial instruments, which consisted entirely of loan commitments at June 30, 2025 and December 31, 2024, is estimated based on fees charged to others to enter into similar agreements, taking into account the remaining terms of the agreements and credit standing of the Company’s clients. The estimated fair value of these commitments was not significant at June 30, 2025 and December 31, 2024.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the lowest level of inputs that is significant to the measurement is used to determine the hierarchy for the entire asset or liability. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s quarterly valuation process. There were no transfers between levels during the three and six months ended June 30, 2025 and 2024.
21

The following tables present information about the level in the fair value hierarchy for the Company’s financial assets and liabilities, whether recognized or recorded at fair value or not as of the dates indicated (in thousands):
 June 30, 2025Fair Value Measurements Using:
 Carrying
Value		Estimated
Fair Value		Level 1Level 2Level 3
FINANCIAL ASSETS:     
Cash and cash equivalents$102,542 $102,542 $102,542 $— $— 
Available-for-sale securities7,521 7,521 — 7,521 — 
Held-to-maturity securities2,113 1,687 — 1,687 — 
Loans held-for-sale2,025 2,025 — 2,025 — 
   Loans held-for-portfolio, net895,750 860,566 — — 860,566 
Mortgage servicing rights4,638 4,638 — — 4,638 
FINANCIAL LIABILITIES:
   Time deposits293,881 294,173 — 294,173 — 
Borrowings25,000 25,000 — 25,000 — 
Subordinated notes11,780 12,567 — 12,567 — 
 December 31, 2024Fair Value Measurements Using:
 Carrying
Value		Estimated
Fair Value		Level 1Level 2Level 3
FINANCIAL ASSETS:     
Cash and cash equivalents$43,641 $43,641 $43,641 $— $— 
Available-for-sale securities7,790 7,790 — 7,790 — 
Held-to-maturity securities2,130 1,712 — 1,712 — 
Loans held-for-sale487 487 — 487 — 
Loans held-for-portfolio, net891,672 850,813 — — 850,813 
Mortgage servicing rights4,769 4,769 — — 4,769 
FINANCIAL LIABILITIES:
Time deposits295,822 296,575 — 296,575 — 
Borrowings25,000 25,000 — 25,000 — 
Subordinated notes11,759 12,653 — 12,653 — 
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The following tables present the balance of assets measured at fair value on a recurring basis as of the dates indicated (in thousands):
 Fair Value at June 30, 2025
DescriptionTotalLevel 1Level 2Level 3
Municipal bonds$5,214 $— $5,214 $— 
Agency mortgage-backed securities2,307 — 2,307 — 
Mortgage servicing rights4,638 — — 4,638 
 Fair Value at December 31, 2024
DescriptionTotalLevel 1Level 2Level 3
Municipal bonds$5,374 $— $5,374 $— 
Agency mortgage-backed securities2,416 — 2,416 — 
Mortgage servicing rights4,769 — — 4,769 
The following tables provide a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis as of the dates indicated:
June 30, 2025
Financial InstrumentValuation TechniqueUnobservable Input(s)Range
(Weighted-Average)
Mortgage Servicing RightsDiscounted cash flowPrepayment speed assumption
125%-438% (125%)
Discount rate
9.0%-13.5% (10%)
December 31, 2024
Financial InstrumentValuation TechniqueUnobservable Input(s)Range
(Weighted-Average)
Mortgage Servicing RightsDiscounted cash flowPrepayment speed assumption
125%-556% (125%)
Discount rate
 (10%)
Generally, any significant increases in the prepayment speed assumption and discount rate utilized in the fair value measurement of the MSRs will result in a negative fair value adjustment (and decrease in the fair value measurement). Conversely, a significant decrease in the prepayment speed assumption and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement). An increase in the weighted average life assumptions will result in a decrease in the prepayment speed assumption and conversely, a decrease in the weighted average life assumptions will result in an increase in the prepayment speed assumption. As a result of the difficulty in observing certain significant valuation inputs affecting our “Level 3” fair value assets, we are required to make judgments regarding these items’ fair values.
There were no assets or liabilities (excluding MSRs) measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and six months ended June 30, 2025 and 2024. 
MSRs are measured at fair value using significant unobservable inputs (Level 3) on a recurring basis, and a reconciliation of these assets can be found in “Note 6—Mortgage Servicing Rights.
23

The following tables present the balance of assets measured at fair value on a nonrecurring basis at the dates indicated (in thousands):
 Fair Value at June 30, 2025
 TotalLevel 1Level 2Level 3
OREO and repossessed assets$300 $— $— $300 
Collateral dependent loans3,501 — — 3,501 
 Fair Value at December 31, 2024
 TotalLevel 1Level 2Level 3
Collateral dependent loans$7,627 $— $— $7,627 
There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis, at both June 30, 2025 and December 31, 2024.

Note 6 – Mortgage Servicing Rights
The unpaid principal balance of the Company’s mortgage servicing rights portfolio totaled $414.1 million at June 30, 2025 compared to $425.8 million at December 31, 2024. Of these total balances, the unpaid principal balances of loans serviced for Federal National Mortgage Association (“Fannie Mae”) at June 30, 2025 and December 31, 2024 were $412.1 million and $423.7 million, respectively. The unpaid principal balance of loans serviced for other financial institutions totaled $2.1 million at both June 30, 2025 and December 31, 2024. Loans serviced for Fannie Mae and others are not included in the Company’s financial statements as they are not assets of the Company.
A summary of the change in the balance of mortgage servicing assets during the periods indicated were as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Beginning balance, at fair value$4,688 $4,612 $4,769 $4,632 
Servicing rights that result from transfers and sale of financial assets30 44 48 89 
Changes in fair value:
Due to changes in model inputs or assumptions and other(1)
(80)(116)(179)(181)
Ending balance, at fair value$4,638 $4,540 $4,638 $4,540 
(1) Represents changes due to collection/realization of expected cash flows and curtailments.
The key economic assumptions used in determining the fair value of mortgage servicing rights at the dates indicated are as follows:
June 30, 2025December 31, 2024
Prepayment speed (Public Securities Association “PSA” model)125 %125 %
Weighted-average life10.4 years10.6 years
Weighted average discount rate10.0 %10.0 %

The amount of contractually specified servicing, late and ancillary fees earned on mortgage servicing rights, which are included in mortgage servicing income on the Condensed Consolidated Statements of Income, totaled $263 thousand and $531 thousand for three and six months ended June 30, 2025, and $279 thousand and $561 thousand for the three and six months ended June 30, 2024, respectively.

24

Note 7 – Commitments and Contingencies
In the normal course of operations, the Company engages in a variety of financial transactions that are not recorded in our financial statements. These transactions involve varying degrees of off-balance sheet credit, interest rate and liquidity risks.  These transactions are used primarily to manage clients’ requests for funding and take the form of loan commitments and lines of credit.

Note 8 – Borrowings, FHLB Stock and Subordinated Notes
FHLB Advances
The following tables present advances from the FHLB as of the dates indicated (dollars in thousands):
 June 30, 2025December 31, 2024
FHLB advances:
Short-term advances (one year or less)$15,000 $— 
Long-term advances (over one year)10,000 25,000 
Total
$25,000 $25,000 
June 30, 2025December 31, 2024
Fixed Rate:
Outstanding balance$25,000 $25,000 
Interest rates ranging from4.06 %4.06 %
Interest rates ranging to4.27 %4.27 %
Weighted average interest rate4.16 %4.16 %
The following table presents the maturity of our FHLB advances (dollars in thousands):
June 30,
2025
Remainder of 2025$— 
202615,000 
2027— 
202810,000 
2029— 
Thereafter— 
$25,000 
FHLB Des Moines Borrowing Capacity
The Company has a loan agreement with the FHLB of Des Moines. The terms of the agreement call for a blanket pledge of a portion of the Company’s mortgage and commercial and multifamily loan portfolio based on the Company’s outstanding borrowing balance. Additionally, the Company had outstanding letters of credit from the FHLB of Des Moines to secure public deposits. The following table presents the Company’s borrowing capacity from the FHLB as of the dates indicated:
June 30, 2025December 31, 2024
Amount available to borrow under credit facility(1)
$374,270 $385,366 
Advance equivalent of collateral:
One-to-four family loans172,385 175,907 
Commercial and multifamily loans26,537 29,180 
Home equity loans232 241 
Notional amount of letters of credit outstanding13,000 8,000 
Remaining FHLB borrowing capacity(2)
$161,155 $172,327 
(1)Subject to eligible pledged collateral.
25


(2)Amount remaining from the advance equivalent of collateral less letters of credit outstanding and FHLB advances.
As a member of the FHLB, the Company is required to maintain a minimum level of investment in FHLB of Des Moines stock based on specific percentages of its outstanding FHLB advances. At both June 30, 2025 and December 31, 2024, the Company had an investment of $1.7 million in FHLB of Des Moines stock.
Federal Reserve Bank of San Francisco (“FRB SF”) Borrowings
The Company has a borrowing agreement with the FRB SF. The terms of the agreement call for a blanket pledge of a portion of the Company’s consumer and commercial business loans based on the Company’s outstanding borrowing balance. At June 30, 2025 and December 31, 2024, the amount available to borrow under this credit facility was $19.4 million and $20.8 million, respectively, subject to eligible pledged collateral. The Company had no outstanding borrowings under this arrangement at June 30, 2025 and December 31, 2024. 
Other Borrowings
The Company has access to an unsecured Fed Funds line of credit from Pacific Coast Banker’s Bank (“PCBB”). The line has a one year term maturing on June 30, 2026 and is renewable annually. As of June 30, 2025, the amount available under this line of credit was $20.0 million. There was no balance on this line of credit as of June 30, 2025 and December 31, 2024.
Subordinated Debt
In September 2020, the Company issued $12.0 million of fixed to floating rate subordinated notes that mature in 2030. The subordinated notes have an initial fixed interest rate of 5.25% to, but excluding, October 1, 2025, payable semi-annually in arrears. From, and including, October 1, 2025, the interest rate on the subordinated notes will reset quarterly to a floating rate per annum equal to a benchmark rate, which is expected to be the then-current three-month term Secured Overnight Financing Rate, or SOFR, plus 513 basis points, payable quarterly in arrears. The subordinated notes mature on May 15, 2030, and may be redeemed by the Company, in whole or in part, on October 1, 2025, or on any subsequent interest payment date. Prior to October 1, 2025, the Company may redeem these notes, in whole but not in part, only under certain limited circumstances set forth in the terms of the subordinated notes. The balance of the subordinated notes was $11.8 million as of both June 30, 2025 and December 31, 2024.

Note 9 – Earnings Per Common Share
The following table summarizes the calculation of earnings per share for the periods indicated (in thousands, except per share data):
 Three Months EndedSix Months Ended
 2025202420252024
Net income$2,052 $795 $3,219 $1,564 
LESS: Participating dividends - Unvested Restricted Stock Awards (“RSAs”)(2)(3)(4)(7)
LESS: Income allocated to participating securities - Unvested RSAs(6)(2)(9)(4)
Net income available to common stockholders - basic2,044 790 3,206 1,554 
ADD BACK: Income allocated to participating securities - Unvested RSAs6 2 9 4 
LESS: Income reallocated to participating securities - Unvested RSAs(6)(2)(9)(4)
Net income available to common stockholders - diluted$2,044 $790 $3,206 $1,554 
Weighted average number of shares outstanding, basic2,556,562 2,540,538 2,555,413 2,539,872 
Effect of potentially dilutive common shares21,428 18,477 22,874 18,121 
Weighted average number of shares outstanding, diluted2,577,990 2,559,015 2,578,287 2,557,993 
Earnings per share, basic$0.80 $0.31 $1.25 $0.61 
Earnings per share, diluted$0.79 $0.31 $1.24 $0.61 
There were no anti-dilutive securities during the three and six months ended June 30, 2025 and June 30, 2024.

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Note 10 – Leases
We currently have operating leases for branch locations, a loan production office and our corporate office. The term for our leases generally begins on the date we become legally obligated for the rent payments or we take possession of the building premises, whichever is earlier. Our real estate leases have initial terms ranging from one to 10.5 years and typically include one renewal option. As of June 30, 2025, our leases had remaining terms ranging from 8 months to 4.9 years. The operating leases require us to pay property taxes and operating expenses for the properties. We have finance leases for certain equipment, including copier machines. The lease initial term was for 5 years and has a remaining term 4.5 years.
The following table presents the lease right-of-use assets and lease liabilities recorded on the Condensed Consolidated Balance Sheets at the dates indicated (in thousands):
June 30,
2025		December 31,
2024
Operating lease right-of-use assets$3,816 $3,725 
Finance lease right-of-use assets117 — 
Operating lease liabilities4,095 4,013 
Finance lease liabilities118 — 
The following table presents the components of lease expense for the periods indicated (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Lease expense
Operating leases$275 $270 $548 $540 
Finance leases
Amortization of right-of-use assets13 — 13 — 
Interest on lease liabilities3 — 3 — 
Sublease income— (1)— (4)
Net lease expense$291 $269 $564 $536 
The following table presents the schedule of lease liability payments at the date indicated (in thousands):
June 30, Finance LeasesOperating LeasesTotal Lease Payments
2026$29 $1,158 $1,187 
202729 1,132 1,161 
202829 1,086 1,115 
202929 865 894 
203014 106 120 
Total lease payments130 4,347 4,477 
Less: Present value discount12 252 264 
Present value of lease liabilities$118 $4,095 $4,213 
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Lease term and discount rate by lease type consisted of the following at the dates indicated:
June 30,
2025		December 31,
2024
Weighted-average remaining lease term:
Operating leases3.9 years4.3 years
Finance leases4.5 years0.0 years
Weighted-average discount rate (annualized):
Operating leases3.09 %2.88 %
Finance leases4.41 %— %

Supplemental cash flow information related to leases was as follows for the periods indicated (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows:
Operating leases$280 $280 $559 $558 
Finance leases3 — 3 — 
Financing cash flows:
Finance leases12 — 12 — 

Note 11 – Subsequent Events
On July 29, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.19 per common share, payable on August 25, 2025 to stockholders of record at the close of business on August 11, 2025.




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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operation
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to:

•adverse economic conditions in our market areas, and other markets where we have lending relationships;
•effects of employment levels, persistent inflation, recessionary pressures, or slowing economic growth;
•changes in interest rate levels and the duration of such changes, including action by the Board of Governors of the Federal Reserve System (the “Federal Reserve”), which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity;
•the impact of inflation and monetary and fiscal policy responses thereto, and their impact on consumer behavior;
•the effects of a federal government shutdown, debt ceiling standoff, or other fiscal policy uncertainty;
•changes in consumer spending, borrowing and savings habits;
•the risks of lending and investing activities, including delinquencies write-offs and changes in our allowance for credit losses, and provision for credit losses;
•monetary and fiscal policies of the Federal Reserve and the U.S. Government and other governmental initiatives affecting the financial services industry;
•bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment;
•fluctuations in the demand for loans, unsold homes, land and other properties;
•fluctuations in real estate values and both residential and commercial and multifamily real estate market conditions in our market area;
•our ability to access cost-effective funding, including maintaining the confidence of depositors;
•the possibility that unexpected outflows of uninsured deposits may require us to sell investment securities at a loss;
•our ability to control operating costs and expenses;
•secondary market conditions for loans and our ability to sell loans in the secondary market;
•results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to increase our allowance for credit losses, write-down asset values or increase our capital levels, affect our ability to borrow funds or maintain or increase deposits;
•the inability of key third-party providers to perform their obligations;
•our ability to attract and retain deposits;
•competitive pressures among financial services companies;
•our ability to successfully integrate into our operations any assets, liabilities, clients, systems, and management personnel we may acquire and our ability to realize related revenue synergies and expected cost savings and other benefits within the anticipated time frames or at all;
•use of estimates in determining the fair values of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;
•our ability to keep pace with technological changes;
•changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies, the Financial Accounting Standards Board, the U.S. Securities and Exchange Commission (the “SEC”), or the Public Company Accounting Oversight Board;
•legislative or regulatory changes that adversely affect our business, including changes in banking, securities and tax law, in regulatory policies and principles, or the interpretation of regulatory capital or other rules, and other governmental initiatives affecting the financial services industry and the availability of resources to address such changes;
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•our ability to retain or attract key employees or members of our senior management team;
•costs and effects of litigation, including settlements and judgments;
•our ability to implement our business strategies, including expectations regarding key growth initiatives and strategic priorities;
•environmental, social and governance goals;
•staffing fluctuations in response to product demand or corporate implementation strategies;
•our ability to pay dividends on and repurchase our common stock;
•the quality and composition of our securities portfolio and the impact of any adverse changes in the securities markets;
•vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks;
•our ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity;
•geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors;
•the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest and other external events;
•other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and
•the other risks described from time to time in our reports filed with or furnished to the SEC, including this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”).
We caution readers not to place undue reliance on any forward-looking statements. The factors described above could materially affect our financial performance, cause our actual results for future periods to differ materially from those expressed in forward-looking statements, and negatively affect our stock price performance.
We do not undertake and specifically decline any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
General
Sound Financial Bancorp, a Maryland corporation, is a bank holding company for its wholly owned subsidiary, Sound Community Bank. Substantially all of Sound Financial Bancorp’s business is conducted through Sound Community Bank, a Washington state-chartered commercial bank. As a Washington commercial bank that is not a member of the Federal Reserve System, the Bank’s regulators are the Washington Department of Financial Institutions and the Federal Deposit Insurance Corporation (the “FDIC”). As a bank holding company, Sound Financial Bancorp is regulated by the Federal Reserve. We also sell insurance products and services through Sound Community Insurance Agency, Inc., a wholly owned subsidiary of the Bank.
Sound Community Bank’s deposits are insured up to applicable limits by the FDIC. At June 30, 2025, Sound Financial Bancorp, on a consolidated basis, had assets of $1.06 billion, net loans held-for-portfolio of $895.8 million, deposits of $899.5 million and stockholders’ equity of $106.0 million. The common stock of Sound Financial Bancorp is listed on the NASDAQ Capital Market under the symbol “SFBC.”  Our executive offices are located at 2400 3rd Avenue, Suite 150, Seattle, Washington, 98121.
Our principal business consists of attracting retail and commercial deposits from the general public and investing those funds, along with borrowed funds, in loans secured by first and second mortgages on one-to-four family residences (including home equity loans and lines of credit), commercial and multifamily real estate loans, construction and land loans, and consumer and commercial business loans. Our commercial business loans include unsecured lines of credit and secured term loans and lines of credit secured by inventory, equipment and accounts receivable. We also offer a variety of secured and unsecured consumer loan products, including manufactured home loans, floating home loans, automobile loans, boat loans and recreational vehicle loans. As part of our business, we focus on residential mortgage loan originations, a portion of which we sell to Fannie Mae and other investors and the remainder of which we retain for our loan portfolio consistent with our asset/liability objectives. We sell loans which conform to the underwriting standards of Fannie Mae (“conforming”) and retain the servicing of the loan in order to maintain the direct customer relationship and to generate noninterest income. Residential loans which do not conform to the underwriting standards of Fannie Mae (“non-conforming”) are either held in our loan portfolio or sold with servicing released. We originate and retain a significant amount of commercial real estate loans, including those secured by owner-occupied and nonowner-occupied commercial real estate, multifamily properties and mobile home parks, and construction and land development loans.
Critical Accounting Estimates
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Certain of our accounting policies require management to make difficult, complex or subjective judgments, which may relate to matters that are inherently uncertain.  Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances.  Facts and circumstances that could affect these judgments include, but are not limited to, changes in interest rates, other changes in economic conditions and changes in the financial condition and performance of borrowers.  Management believes that its critical accounting estimates include determining the allowance for credit losses and accounting for mortgage servicing rights. There have been no material changes in the Company’s critical accounting policies and estimates as previously disclosed in the Company’s 2024 Form 10-K. 

Comparison of Financial Condition at June 30, 2025 and December 31, 2024
General.  Total assets increased $64.6 million, or 6.5%, to $1.06 billion at June 30, 2025 from $993.6 million at December 31, 2024. The increase primarily was a result of increases in cash and cash equivalents and loans held-for-portfolio.
Cash and Cash Equivalents, and Investment Securities. Cash and cash equivalents increased $58.9 million, or 135.0%, to $102.5 million at June 30, 2025 from $43.6 million at December 31, 2024. The increase was primarily due to the strategic decision to sell reciprocal deposits at the end of 2024, which reduced our cash balances. These reciprocal deposits returned to our balance sheet in the first quarter of 2025. In addition, balances of cash and cash equivalents increased as a result of higher overall deposit balances.
Investment securities decreased $286 thousand, or 2.9%, to $9.6 million at June 30, 2025, compared to $9.9 million at December 31, 2024. Held-to-maturity securities totaled $2.1 million at both June 30, 2025 and December 31, 2024. Available-for-sale securities totaled $7.5 million at June 30, 2025, compared to $7.8 million at December 31, 2024. The decrease in available-for-sale securities was primarily due to regularly scheduled payments and higher net unrealized losses resulting from an increase in municipal bond yields during the first half of 2025.
Loans.  Loans held-for-portfolio, net, increased $4.1 million, or 0.5%, to $895.8 million at June 30, 2025 from $891.7 million at December 31, 2024.
The following table reflects the changes in the mix of our loans held-for-portfolio at June 30, 2025, as compared to December 31, 2024 (dollars in thousands):
 June 30,
2025		December 31,
2024		Amount
Change		Percent
Change
One-to-four family$262,672 $269,684 $(7,012)(2.6)%
Home equity28,582 26,686 1,896 7.1 
Commercial and multifamily398,429 371,516 26,913 7.2 
Construction and land49,926 73,077 (23,151)(31.7)
Manufactured homes43,112 41,128 1,984 4.8 
Floating homes91,448 86,411 5,037 5.8 
Other consumer17,259 17,720 (461)(2.6)
Commercial business14,779 15,605 (826)(5.3)
Premiums for purchased loans662 718 (56)(7.8)
Deferred loan fees(2,583)(2,374)(209)8.8 
Total loans held-for-portfolio, gross904,286 900,171 4,115 0.5 
Allowance for credit losses — loans(8,536)(8,499)(37)0.4 
Total loans held-for-portfolio, net$895,750 $891,672 $4,078 0.5 %

The increases in the loan held-for-portfolio were driven primarily by a $26.9 million, or 7.2%, increase in commercial and multifamily loans, driven by new originations and the conversion of construction projects to permanent financing, partially offset by pay downs and normal payment amortization. Home equity loans increased by $1.9 million, or 7.1%, as homeowners likely utilized their home equity lines to access liquidity, particularly in response to elevated living costs and inflationary pressures. Manufactured home loans and floating home loans increased by $2.0 million and $5.0 million, respectively, or 4.8% and 5.8%, primarily the result of seasonality as it relates to floating homes and affordability of manufactured homes in the current market as well internal efficiencies in how we process these loans. The growth in these portfolios were partially offset by a $23.2 million, or 31.7%, decline in construction and land loans largely due to project completions, a slowdown in new financing activities amid higher interest rates, as well as the payoff of a $17.0 million loan that had been risk rated as special mention. One-to-four-family loans and commercial business loans declined primarily due to loan repayments exceeding new
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originations.
At June 30, 2025, our loan portfolio, net of deferred loan fees, remained well-diversified. At that date, commercial and multifamily real estate loans accounted for 44.0% of total loans, one-to-four family loans, including home equity loans, accounted for 32.1% of total loans, commercial business loans accounted for 1.6% of total loans, and consumer loans, consisting of manufactured homes, floating homes, and other consumer loans, accounted for 16.8% of total loans. Construction and land loans accounted for 5.5% of total loans at June 30, 2025.
Loans held-for-sale totaled $2.03 million at June 30, 2025, compared to $487 thousand at December 31, 2024. The increase was primarily due to timing of mortgage originations and sales.

Allowance for Credit Losses.

The following table reflects the activity in our allowance for credit losses (“ACL”) during the periods indicated (dollars in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2025202420252024
ACL — Loans:
Balance at beginning of period$8,393 $8,598 $8,499 $8,760 
Charge-offs(23)(21)(50)(83)
Recoveries2 4 8 10 
Net charge-offs(21)(17)(42)(73)
Provision for (release of) credit losses164 (88)79 (194)
Balance at end of period$8,536 $8,493 $8,536 $8,493 
Reserve for Unfunded Commitments:
Balance at beginning of period116 266 234 193 
Provision for (release of) credit losses6 (21)(112)52 
Balance at end of period122 245 122 245 
ACL$8,658 $8,738 $8,658 $8,738 
Ratio of net charge-offs during the period to average loans outstanding during the period(0.01)%(0.01)%(0.01)%(0.02)%
Our ACL — loans increased $37 thousand, or 0.4%, to $8.5 million at June 30, 2025, from $8.5 million at December 31, 2024. The increase in the ACL - loans was primarily a result of an increase in the balance of our loan portfolio, as well as higher reserves on our portfolio of other consumer loans and residential loans due to qualitative adjustments for uncertainty in market conditions and concentrations, partially offset by lower reserves due to qualitative adjustments for improved credit quality. See “Comparison of Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024 — Provision for Credit Losses.”
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The following tables show certain credit ratios at and for the dates and periods indicated and the components of each ratio's calculation (dollars in thousands).
 At June 30, 2025At December 31, 2024
ACL - loans as a percentage of total loans outstanding0.94 %0.94 %
ACL — loans$8,536 $8,499 
Total loans outstanding$906,207 $901,827 
Nonaccrual loans as a percentage of total loans outstanding
0.37 %0.83 %
Total nonaccrual loans$3,366 $7,491 
Total loans outstanding$906,207 $901,827 
ACL - loans as a percentage of nonaccrual loans
253.59 %113.46 %
ACL — loans$8,536 $8,499 
Total nonaccrual loans$3,366 $7,491 
ACL as a percentage of total loans outstanding0.96 %0.97 %
ACL$8,658 $8,733 
Total loans outstanding$906,207 $901,827 
ACL as a percentage of nonaccrual loans257.22 %116.58 %
ACL$8,658 $8,733 
Total nonaccrual loans$3,366 $7,491 
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Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
($ in thousands)
Net recoveries (charge-offs) during period to average loans outstanding:
One-to-four family:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$261,685 $273,597 $264,318 $276,034 
Home equity:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$28,514 $25,442 $28,041 $24,371 
Commercial and multifamily real estate:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$395,683 $328,496 $386,853 $320,818 
Construction and land:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— — — 
Average loans outstanding
$45,332 $106,853 $55,205 $116,248 
Manufactured homes:
— %— %(0.09)%(0.12)%
Net (charge-offs)/recoveries
$— $— $(19)$(23)
Average loans outstanding
$42,751 $38,519 $42,172 $37,617 
Floating homes:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$89,704 $82,940 $87,660 $80,869 
Other consumer:
(0.48)%(0.37)%(0.26)%(0.54)%
Net (charge-offs)
$(21)$(17)$(23)$(50)
Average loans outstanding
$17,519 $18,570 $17,576 $18,757 
Commercial business:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$14,446 $18,421 $14,855 $19,809 
Total loans:(0.01)%(0.01)%(0.01)%(0.02)%
Net (charge-offs)
$(21)$(17)$(42)$(73)
Average loans outstanding
$895,634 $892,838 $896,680 $894,523 
Nonperforming Assets.  
Nonperforming assets (“NPAs”), which were comprised of nonperforming loans (nonaccrual loans and nonperforming modified loans), other real estate owned (“OREO”) and repossessed assets, decreased $3.8 million, or 51.1%, to $3.7 million, or 0.35% of total assets, at June 30, 2025 from $7.5 million, or 0.75% of total assets, at December 31, 2024. 
The table below sets forth the amounts and categories of NPAs at the dates indicated (dollars in thousands):
 Nonperforming Assets
 June 30,
2025		December 31,
2024		Amount
Change		Percent
Change
Total nonperforming loans$3,366 $7,491 $(4,125)(55.1)
OREO and repossessed assets300 — 300 — 
Total nonperforming assets$3,666 $7,491 $(3,825)(51.1)%

The decrease in NPAs from December 31, 2024 was primarily due to payoffs of nonaccrual loans totaling $6.9 million, including two commercial real estate loans and one floating home loan, the return of loans to accrual status, loans charged-off, and regular loan payments. These decreases were partially offset by the addition of 11 loans totaling $3.4 million to nonaccrual
34


status and $259 thousand of other real estate owned that was not included in nonperforming assets at December 31, 2024. The percentage of nonperforming loans to total loans was 0.37% at June 30, 2025, compared to 0.83% at December 31, 2024
Mortgage Servicing Rights.  The fair value of mortgage servicing rights decreased $131 thousand, or 2.7%, to $4.6 million at June 30, 2025 from $4.8 million at December 31, 2024. We record mortgage servicing rights on loans sold with servicing retained and upon acquisition of a servicing portfolio. Mortgage servicing rights are carried at fair value. If the fair value of our mortgage servicing rights fluctuates significantly, our financial results could be materially impacted.
Deposits and Borrowings. Total deposits increased $61.7 million, or 7.4%, to $899.5 million at June 30, 2025 from $837.8 million at December 31, 2024. This increase was primarily due to the return of reciprocal deposits that were temporarily moved off-balance sheet at year-end for liquidity and balance sheet management purposes. The reintroduction of these deposits in the first quarter of 2025 contributed significantly to the overall growth. In contrast, noninterest-bearing deposits decreased $8.3 million, or 6.3%, to $124.2 million at June 30, 2025, compared to $132.5 million at December 31, 2024. This decline was primarily the result of normal daily fluctuations in customer account balances, reflecting routine activity rather than significant changes in overall deposit levels. Noninterest-bearing deposits represented 13.8% of total deposits at June 30, 2025, compared to 15.8% at December 31, 2024.
A summary of deposit accounts with the corresponding weighted-average cost of funds at the dates indicated is presented below (dollars in thousands):
 June 30, 2025December 31, 2024
 AmountWtd. Avg. RateAmountWtd. Avg. Rate
Noninterest-bearing demand$120,979 — %$130,095 — %
Interest-bearing demand137,222 0.28 142,126 0.34 
Savings61,813 0.10 61,252 0.10 
Money market282,346 3.14 206,067 3.60 
Time deposits293,881 4.05 295,822 4.57 
Escrow (1)
3,218 — 2,437 — 
Total deposits$899,459 2.34 %$837,799 2.63 %
(1) Escrow balances shown in noninterest-bearing deposits on the Condensed Consolidated Balance Sheets. 
Scheduled maturities of time deposits at June 30, 2025, are as follows (in thousands):
Year Ending December 31,Amount
2025$184,673 
202684,302 
202710,766 
202811,899 
2029440 
Thereafter1,801 
 $293,881 
Savings, demand, and money market accounts have no contractual maturity. Certificates of deposit have maturities of five years or less.
The aggregate amount of time deposits in denominations of more than $250,000 at June 30, 2025 and December 31, 2024, totaled $104.5 million and $90.9 million, respectively. Deposit amounts in excess of $250,000 are not federally insured. As of June 30, 2025, uninsured deposits totaled $171.2 million, which represented 19.0% of total deposits, as compared to uninsured deposits of $167.3 million, or 20.0% of total deposits as of December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements. The increase in the balance of uninsured deposits primarily related to jumbo tier pricing offered on some of our deposit products, as well as normal fluctuations within deposit accounts.
Borrowings, comprised of FHLB advances, were $25.0 million at both June 30, 2025 and December 31, 2024. FHLB advances are primarily used to support organic loan growth and to maintain liquidity ratios in line with our asset/liability objectives.
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FHLB advances outstanding at June 30, 2025 had maturities ranging from early 2026 through early 2028. Subordinated notes, net totaled $11.8 million at both June 30, 2025 and December 31, 2024.
Stockholders’ Equity. Total stockholders’ equity increased $2.3 million, or 2.3%, to $106.0 million at June 30, 2025, from $103.7 million at December 31, 2024. This increase primarily reflects $3.2 million of net income earned during the six months ended June 30, 2025, $156 thousand in share-based compensation, and $21 thousand in common stock options exercised, partially offset by a $84 thousand decrease in accumulated other comprehensive loss, net of tax and the payment of $974 thousand in cash dividends to the Company's stockholders.

Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Income and yields on tax-exempt obligations have not been computed on a tax equivalent basis. All average balances are daily average balances. Nonaccrual loans have been included in the table as loans carrying a zero yield for the period they have been on nonaccrual (dollars in thousands).
Three Months Ended June 30,
20252024
Average
Outstanding
Balance		Interest
Earned/
Paid		Yield/
Rate Annualized		Average
Outstanding
Balance		Interest
Earned/
Paid		Yield/
Rate Annualized
Interest-earning assets:
Loans receivable$895,039 $13,695 6.14 %$891,863 $12,320 5.56 %
Investments12,842 123 3.84 13,935 133 3.84 
Cash and cash equivalents102,572 1,097 4.29 120,804 1,586 5.28 
Total interest-earning assets (1)
1,010,453 14,915 5.92 1,026,602 14,039 5.50 
Interest-bearing liabilities:
Savings and money market accounts346,655 2,258 2.61 301,454 2,115 2.82 
Demand and NOW accounts138,150 107 0.31 153,739 148 0.39 
Certificate accounts288,286 2,860 3.98 317,496 3,731 4.73 
Subordinated notes11,777 168 5.72 11,735 168 5.76 
Borrowings25,007 267 4.28 40,000 429 4.31 
Total interest-bearing liabilities809,875 5,660 2.80 %824,424 6,591 3.22 %
Net interest income$9,255 $7,448 
Net interest rate spread3.12 %2.28 %
Net earning assets$200,578  $202,178 
Net interest margin3.67 %2.92 %
Average interest-earning assets to average interest-bearing liabilities124.77 % 124.52 %
Noninterest-bearing deposits$121,906 $128,878 
Total deposits$894,997 $5,225 2.34 %$901,567 $5,994 2.67 %
Total funding(2)
$931,781 $5,660 2.44 %$953,302 $6,591 2.78 %
(1) Calculated net of deferred loan fees, loan discounts and loans in process.
(2) Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by total funding.
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Six Months Ended June 30,
20252024
Average
Outstanding
Balance		Interest
Earned/
Paid		Yield/
Rate Annualized		Average
Outstanding
Balance		Interest
Earned/
Paid		Yield/
Rate Annualized
Interest-earning assets:
Loans receivable$895,926 $26,283 5.92 %$893,646 $24,553 5.53 %
Investments11,551 232 4.05 12,633 244 3.88 
Cash and cash equivalents99,304 2,107 4.28 114,082 3,002 5.29 
Total interest-earning assets (1)
1,006,781 28,622 5.73 1,020,361 27,799 5.48 
Interest-bearing liabilities:
Savings and money market accounts341,068 4,317 2.55 292,954 3,981 2.73 
Demand and NOW accounts139,520 214 0.31 156,751 289 0.37 
Certificate accounts289,119 5,899 4.11 316,495 7,426 4.72 
Subordinated notes11,772 336 5.76 11,730 336 5.76 
Borrowings25,003 529 4.27 40,000 859 4.32 
Total interest-bearing liabilities806,482 11,295 2.82 %817,930 12,891 3.17 %
Net interest income$17,327 $14,908 
Net interest rate spread2.91 %2.31 %
Net earning assets$200,299 $202,431 
Net interest margin3.47 %2.94 %
Average interest-earning assets to average interest-bearing liabilities124.84 %124.75 %
Noninterest-bearing deposits$124,048 $130,658 
Total deposits$893,755 $10,430 2.35 %$896,858 $11,696 2.62 %
Total funding(2)
$930,530 $11,295 2.45 %$948,588 $12,891 2.73 %

(1) Calculated net of deferred loan fees, loan discounts and loans in process.
(2) Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by total funding.


Rate/Volume Analysis
The following table presents, for the periods indicated, the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between changes related to outstanding balances and changes due to interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate (dollars in thousands).
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Three Months Ended June 30, 2025 vs. 2024
Six Months Ended June 30, 2025 vs. 2024
 Increase (Decrease) due toTotal
Increase (Decrease)		Increase (Decrease) due toTotal
Increase (Decrease)
 VolumeRateVolumeRate
Interest-earning assets:   
Loans receivable$49 $1,326 $1,375 $67 $1,663 $1,730 
Investments(10)— (10)(22)10 (12)
Cash and cash equivalents(195)(294)(489)(314)(581)(895)
Total interest-earning assets(156)1,032 876 (269)1,092 823 
Interest-bearing liabilities:
Savings and Money Market accounts294 (151)143 609 (273)336 
Demand and NOW accounts(12)(29)(41)(26)(49)(75)
Certificate accounts(290)(581)(871)(559)(968)(1,527)
Subordinated notes1 (1)— 1 (1)— 
Borrowings(160)(2)(162)(317)(13)(330)
Total interest-bearing liabilities$(167)$(764)$(931)$(292)$(1,304)$(1,596)
Change in net interest income$1,807 $2,419 

Comparison of Results of Operation for the Three and Six Months Ended June 30, 2025 and 2024

General.  
Q2 2025 vs Q2 2024. Net income increased $1.3 million, or 158.1%, to $2.1 million, or $0.79 per diluted common share, for the three months ended June 30, 2025, compared to $795 thousand, or $0.31 per diluted common share, for the three months ended June 30, 2024. The increase was primarily the result of a $1.8 million increase in net interest income and a $72 thousand decrease in noninterest expense, partially offset by a $279 thousand increase in the provision for credit losses, a $42 thousand decrease in noninterest income and a $301 thousand increase in provision for income taxes.
YTD 2025 vs. YTD 2024. Net income increased $1.7 million, or 105.8%, to $3.2 million, or $1.24 per diluted common share, for the six months ended June 30, 2025, compared to $1.6 million, or $0.61 per diluted common share, for the six months ended June 30, 2024. The increase was primarily a result of a $2.4 million increase in net interest income, partially offset by a $109 thousand increase in the provision for credit losses, a $42 thousand decrease in noninterest income, a $184 thousand increase in noninterest expense, and a $429 thousand increase in provision for income taxes.

Interest Income 
Three Months Ended June 30,Amount
Change		Percent Change
20252024
Loans, including fees$13,695 $12,320 $1,375 11.2 %
Interest and dividends on investments123 133 (10)(7.5)
Cash and cash equivalents1,097 1,586 (489)(30.8)
  Total interest income$14,915 $14,039 $876 6.2 %
Q2 2025 vs Q2 2024. Interest income increased $876 thousand, or 6.2%, to $14.9 million for the three months ended June 30, 2025, from $14.0 million for the three months ended June 30, 2024, primarily due to a higher average balance and a 58 basis point increase in the average yield on loans, partially offset by lower average balance and a 99 basis point decline in the average yield on cash and cash equivalents.
Interest income on loans increased $1.4 million, or 11.2%, to $13.7 million for the three months ended June 30, 2025, from $12.3 million for the three months ended June 30, 2024. The average yield on total loans rose to 6.14% for the three months ended June 30, 2025, from 5.56% for the three months ended June 30, 2024, primarily due to recognition of interest income from the payoff of loans previously on nonaccrual, the origination of new loans at higher interest rates, and upward repricing on
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variable-rate loans. The average balance of total loans was $895.0 million for the three months ended June 30, 2025, compared to $891.9 million for the three months ended June 30, 2024.
Interest income on the investment portfolio decreased $10 thousand, or 7.5%, to $123 thousand for the three months ended June 30, 2025, compared to $133 thousand for the three months ended June 30, 2024. The decrease was due to a decrease in the average balance. The average balance of investments was $12.8 million for the three months ended June 30, 2025, compared to $13.9 million for the three months ended June 30, 2024, while the average yield on investments remained unchanged at 3.84% for both the three months ended June 30, 2025 and June 30, 2024. The decrease in the average balance was due to regularly scheduled payments and maturities.
Interest income on cash and cash equivalents decreased $489 thousand, or 30.8%, to $1.1 million for the three months ended June 30, 2025, compared to $1.6 million for the three months ended June 30, 2024. The decrease was due to a lower average balance of and yield on cash and cash equivalents. The average yield on cash and cash equivalents decreased to 4.29% for the three months ended June 30, 2025, compared to 5.28% for the three months ended June 30, 2024, as a result of lower market interest rates generally. Refer to “Net Interest Income” below for additional detail regarding the interest rate environment. The average balance of cash and cash equivalents was $102.6 million for the three months ended June 30, 2025, compared to $120.8 million for the three months ended June 30, 2024, primarily due to a lower average cash balance following the payoff of $15.0 million of FHLB advances during the fourth quarter of 2024.
Six Months Ended June 30,Amount
Change		Percent Change
20252024
Loans, including fees$26,283 $24,553 $1,730 7.0 %
Interest and dividends on investments232 244 (12)(4.9)
Cash and cash equivalents2,107 3,002 (895)(29.8)
  Total interest income$28,622 $27,799 $823 3.0 %
YTD 2025 vs. YTD 2024. Interest income increased $823 thousand, or 3.0%, to $28.6 million for the six months ended June 30, 2025, from $27.8 million for the six months ended June 30, 2024, primarily due to increases in average yields on loans and cash and cash equivalents of 39 basis points and 17 basis points, respectively, partially offset by a lower average balance of investments and a 101 basis point decline in the average yield on investments.
Interest income on loans increased $1.7 million, or 7.0%, to $26.3 million for the six months ended June 30, 2025, compared to $24.6 million for the six months ended June 30, 2024, driven by a 39 basis point increase in the average yield on loans. The average yield on total loans was 5.92% for the six months ended June 30, 2025, compared to 5.53% for the six months ended June 30, 2024. The average yield on total loans increased primarily due to recognition of interest income from the payoff of loans previously on nonaccrual, variable rate loans adjusting to higher market interest rates and new loan originations at higher interest rates. The average balance of total loans was $895.9 million for the six months ended June 30, 2025, compared to $893.6 million for the six months ended June 30, 2024
Interest income on cash and cash equivalents decreased $895 thousand, or 29.8% to $2.1 million for the six months ended June 30, 2025, compared to $3.0 million for the six months ended June 30, 2024. The decrease was due to a lower average balance of and yield on cash and cash equivalents. The average yield on cash and cash equivalents declined to 4.28% for the six months ended June 30, 2025, compared to 5.29% for the six months ended June 30, 2024, as a result of lower market interest rates generally. Refer to “Net Interest Income” below for additional detail regarding the interest rate environment. The average balance of cash and cash equivalents was $99.3 million for the six months ended June 30, 2025, compared to $114.1 million for the six months ended June 30, 2024, primarily due to a lower average cash balance following the payoff of $15.0 million of FHLB advances during the fourth quarter of 2024.

Interest Expense  
Three Months Ended June 30,
Amount
Change		Percent Change
20252024
Deposit$5,225 $5,994 $(769)(12.8)%
Borrowings267 429 (162)(37.8)
Subordinated notes168 168 — — 
  Total interest expense$5,660 $6,591 $(931)(14.1)%
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Q2 2025 vs Q2 2024. Interest expense decreased $931 thousand, or 14.1%, to $5.7 million for the three months ended June 30, 2025, from $6.6 million for the three months ended June 30, 2024. The decrease in total interest expense was primarily attributable to lower interest rates across most interest-bearing liabilities, resulting from lower market interest rates generally, as well as a $167 thousand decrease related to lower average balances, particularly in certificate accounts.
Interest expense on certificate accounts declined $871 thousand, driven by a $290 thousand volume-related decrease and a $581 thousand rate-related decrease. The average balance of certificate accounts declined to $288.3 million for the three months ended June 30, 2025, from $317.5 million during the same period in 2024, while the average rate paid decreased to 3.98% from 4.73%. These declines reflect the continued runoff and repricing of higher-rate time deposits originated in prior periods, and our strategy to focus on non-maturity interest-bearing deposits. In addition, interest expense on demand and NOW accounts decreased $41 thousand, due to both lower average balances and slightly lower rates. Partially offsetting these decreases was an increase in interest expense on savings and money market accounts, which increased $143 thousand, or 6.76%, to $2.3 million for the three months ended June 30, 2025, from $2.1 million for the same period in 2024. This increase was driven entirely by higher average balances, which increased to $346.7 million from $301.5 million, reflecting shifts in customer deposit preferences, as well as higher rates offered on some of these products as compared to new certificate accounts, partially offset by a lower average rate paid on these accounts, which declined 21 basis points to 2.61% from 2.82%. The rate decrease reflects competitive repricing strategies implemented to manage overall funding costs in a stabilizing rate environment.
Interest expense on borrowings, comprised solely of FHLB advances, decreased $162 thousand , primarily due to a $15.0 million decline in average borrowings following the payoff of an FHLB advance during the fourth quarter of 2024. The average balance of FHLB advances was $25.0 million for the three months ended June 30, 2025, compared to $40.0 million for the three months ended June 30, 2024. The average rate paid on borrowings decreased three basis points to 4.28% for the quarter ended June 30, 2025, compared to 4.31% for the same quarter in 2024. Interest expense on subordinated notes was $168 thousand for both the three months ended June 30, 2025 and June 30, 2024, with no material changes in the average balance or rate paid.
Six Months Ended June 30,Amount
Change		Percent Change
20252024
Deposit$10,430 $11,696 $(1,266)(10.8)%
Borrowings529 859 (330)(38.4)
Subordinated notes336 336 — — 
  Total interest expense$11,295 $12,891 $(1,596)(12.4)%
YTD 2025 vs. YTD 2024. Interest expense decreased $1.6 million, or 12.4%, to $11.3 million for the six months ended June 30, 2025, from $12.9 million for the six months ended June 30, 2024. Interest expense on deposits decreased $1.3 million, or 10.8%, to $10.4 million for the six months ended June 30, 2025, compared to $11.7 million for the six months ended June 30, 2024. The decrease was primarily the result of lower average rates paid on all categories of interest-bearing deposits and borrowings, as well as a lower average balance of demand and NOW accounts, certificate accounts, and borrowings, partially offset by an increase in the average balance of savings and money market accounts. The average cost of total deposits decreased 27 basis points to 2.35% for the six months ended June 30, 2025, from 2.62% for the six months ended June 30, 2024.
Interest expense on borrowings, comprised solely of FHLB advances, was $529 thousand for the six months ended June 30, 2025, compared to $859 thousand for the six months ended June 30, 2024, reflecting the decreased use of FHLB advances to supplement our liquidity needs. The average cost of FHLB advances decreased 5 basis points to 4.27% for the six months ended June 30, 2025, compared to 4.32% for the same period in 2024. The average cost of FHLB advances declined due to same reason note above. The average balance of FHLB advances was $25.0 million for the six months ended June 30, 2025, compared to $40.0 million for the six months ended June 30, 2024 following the payoff of an FHLB advance during the fourth quarter of 2024. Interest expense on subordinated notes was $336 thousand for both the six months ended June 30, 2025 and 2024.

Net Interest Income.  
Q2 2025 vs Q2 2024. Net interest income increased $1.8 million, or 24.3%, to $9.3 million for the three months ended June 30, 2025, from $7.4 million for the three months ended June 30, 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, as well as higher average yield on interest-earning assets due to the recognition of interest income from the payoff of loans previously on nonaccrual, variable rate loans adjusting to higher market interest rates and new
40


loan originations at higher interest rates. These increases were partially offset by a decrease in the average balance of interest-earning assets. Overall, the combined decline in funding costs and increased yield on loans primarily contributed to an 84 basis point improvement in the net interest rate spread and a 75 basis point increase in the annualized net interest margin, which rose to 3.67% for the three months ended June 30, 2025, compared to 2.92% for the same period in 2024.
YTD 2025 vs. YTD 2024. Net interest income increased $2.4 million, or 16.2%, to $17.3 million for the six months ended June 30, 2025, from $14.9 million for the six months ended June 30, 2024. Net interest margin (annualized) was 3.47% and 2.94% for the six months ended June 30, 2025 and 2024, respectively. The increase in net interest income primarily resulted from a decrease in the average balances of and rate paid on deposits and borrowings and higher average balances and yield earned on loans, partially offset by a lower average balance of and yield on interest-earning cash. The increase in net interest margin primarily was due to the lower cost of funding and the increase in loan yield as a result of the reasons mentioned above.
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 June 30, 2025, with all rate cuts occurring in the latter half of 2024.
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 June 30,Six Months Ended June 30,
2025202420252024
Provision (release of) for credit losses on loans$164 $(88)$79 $(194)
Release of credit losses on unfunded loan commitments6 (21)(112)52 
Provision (release of) for credit losses$170 $(109)$(33)$(142)
A provision for credit losses of $170 thousand was recorded for the quarter ended June 30, 2025, compared to a release of credit losses of $109 thousand for the quarter ended June 30, 2024. The provision for credit losses during the current quarter was primarily due to growth in the balance of the loan portfolio, an increase in the balance of unfunded commitments, and a qualitative adjustment applied to certain loan segments related to uncertainty in the market and concentrations, partially offset by a lower qualitative adjustment for improved credit quality. Expected credit loss estimates are based on a range of factors, including market conditions, borrower-specific information, projected delinquencies, and anticipated effects of economic trends on borrowers' ability to repay. Net charge-offs for the three months ended June 30, 2025 totaled $21 thousand, compared to $17 thousand for three months ended June 30, 2024.
A release of provision for credit losses of $33 thousand was recorded for the six months ended June 30, 2025, compared to a release of provision for credit losses of $142 thousand for the six months ended June 30, 2024. The release of provision for credit losses during the current period was primarily due to a lower qualitative adjustment for improved credit quality and a decrease in the balance of unfunded commitments, partially offset by growth in the balance of the loan portfolio and a qualitative adjustment applied to certain loan segments related to uncertainty in the market and concentrations. Expected credit loss estimates are based on a range of factors, including market conditions, borrower-specific information, projected delinquencies, and anticipated effects of economic trends on borrowers' ability to repay. Net charge-offs for the six months ended June 30, 2025 totaled $42 thousand, compared to $73 thousand for six months ended June 30, 2024.
While we believe the estimates and assumptions used in our determination of the adequacy of the ACL are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not have a material adverse impact on our financial condition and results of operations. A further decline in national and local economic conditions, as a result of the effects of inflation, and a potential recession or slowed economic growth, among other factors, could result in a material increase in the ACL and have a material adverse impact on our financial condition and results of operations. In addition, the determination of the amount of our ACL is subject to review by bank regulators as part of the routine examination process, which may result in the adjustment of reserves based upon their judgment of information available to them at the time of their examination.
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Noninterest Income.  Noninterest income decreased $42 thousand, or 3.6%, to $1.1 million for the three months ended June 30, 2025, as compared to $1.2 million for the three months ended June 30, 2024, as reflected below (dollars in thousands):
 Three Months Ended June 30,Amount
Change		Percent
Change
 20252024
Service charges and fee income$664 $761 $(97)(12.7)%
Earnings on BOLI229 134 95 70.9 
Mortgage servicing income263 279 (16)(5.7)
Fair value adjustment on mortgage servicing rights(80)(116)36 (31.0)
Net gain on sale of loans44 74 (30)(40.5)
Other income— 30 (30)(100.0)
Total noninterest income$1,120 $1,162 $(42)(3.6)%
The lower level of noninterest income for the three months ended June 30, 2025, compared to the same period in 2024, was primarily due to:
•a $97 thousand decrease in service charges and fee income, primarily due to a recovery of potential future lost fee income recorded in the second quarter of 2024 in connection with a vendor error; this decrease was partially offset by an increase in fees associated with new client acquisition in our specialty banking deposit accounts and higher interchange income in the current quarter;
•a $16 thousand decrease in mortgage servicing income as a result of the portfolio paying down at a faster rate than originations replaced repayments;
•a $30 thousand decrease in net gain on sale of loans due to fewer loans sold; and
•a $30 thousand decrease in other income due to gain on disposal of assets due to insurance claims on the loss of fully depreciated assets in same quarter last year.
These decreases were partially offset by:
•a $95 thousand increase in earnings from BOLI primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in the first quarter of 2025, with the benefit of improve yields continuing into the second quarter of 2025, partially offset by fluctuations in financial markets which reduced the values of policies; and
•a $36 thousand improvement in the adjustment for the fair value of mortgage servicing rights due to higher market value, partially offset by a smaller servicing portfolio.
Noninterest income decreased $42 thousand, or 1.9%, to $2.2 million for the six months ended June 30, 2025, as compared to $2.3 million for the six months ended June 30, 2024, as reflected below (dollars in thousands):
 Six Months Ended June 30,Amount
Change		Percent
Change
 20252024
Service charges and fee income$1,348 $1,373 $(25)(1.8)%
Earnings on BOLI423 311 112 36.0 
Mortgage servicing income531 561 (30)(5.3)
Fair value adjustment on mortgage servicing rights(179)(181)2 (1.1)
Net gain on sale of loans93 164 (71)(43.3)
Other income$— $30 $(30)(100.0)%
Total noninterest income$2,216 $2,258 $(42)(1.9)%
The reduction in noninterest income for the six months ended June 30, 2025, compared to the same period in 2024, was primarily due to:
•a $25 thousand decrease in service charges and fee income, primarily due to a recovery of potential future lost fee income recorded in the second quarter of 2024 in connection with a vendor error; this decrease was partially offset by an increase in fees associated with new client acquisition in our specialty banking deposit accounts, higher interchange income in the current year, and the Mastercard volume incentive received in the first quarter of 2025;
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•a $30 thousand decrease in mortgage servicing income as a result of the portfolio paying down at a faster rate than originations replaced repayments;
•a $71 thousand decrease in net gain on sale of loans due to fewer loans sold; and
•a $30 thousand decrease in other income due to same reason noted above in the comparison of the three-month periods.

These decreases were partially offset by a $112 thousand increase in earnings from BOLI primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in 2025, as well as changes due to market fluctuation.


Noninterest Expense.  Noninterest expense decreased $72 thousand, or 0.9%, to $7.7 million during the three months ended June 30, 2025, compared to $7.7 million during the three months ended June 30, 2024, as reflected below (dollars in thousands):
 Three Months Ended June 30,Amount
Change		Percent
Change
 20252024
Salaries and benefits$4,321 $4,658 $(337)(7.2)%
Operations1,443 1,569 (126)(8.0)%
Regulatory assessments222 220 2 0.9 %
Occupancy416 397 19 4.8 %
Data processing1,254 910 344 37.8 %
Net loss (gain) on OREO and repossessed assets9 (17)26 (152.9)%
Total noninterest expense$7,665 $7,737 $(72)(0.9)%
The lower level of noninterest expense for the three months ended June 30, 2025, compared to the same period in 2024, was primarily due to:
•a $337 thousand decrease in salaries and benefits related to lower deferred salaries and lower incentive expense as a result of lower growth in the current quarter than in the same quarter one year ago; and
•a $126 thousand decrease in operations expense primarily due to lower expenses across various accounts, resulting from ongoing cost saving initiatives and process improvements.
These decreases were partially offset by:
•a $344 thousand increase in data processing expenses due to various project implementations that began amortizing in the third quarter of 2024, as well as new software technology being deployed in 2025 that continues to streamline our operations;
•a $19 thousand increase in occupancy expense due to higher building lease charges in 2025; and
•a $26 thousand increase in expenses related to OREO and repossessed assets due to the addition of a new property in the second quarter of 2025 and the absence of property sales in the same quarter last year.
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The efficiency ratio for the quarter ended June 30, 2025 was 73.88%, compared to 89.86% for the quarter ended June 30, 2024. The improvement in the efficiency ratio was primarily due to higher net interest income resulting from lower funding costs and the recognition of interest income on nonaccrual loans that paid off during the quarter, as well as lower noninterest expense.
Noninterest expense increased $184 thousand, or 1.2%, to $15.6 million during the six months ended June 30, 2025, compared to $15.4 million during the six months ended June 30, 2024, as reflected below (dollars in thousands):
 Six Months Ended June 30,Amount
Change		Percent
Change
 20252024
Salaries and benefits$8,916 $9,201 $(285)(3.1)%
Operations2,808 3,026 (218)(7.2)
Regulatory assessments442 409 33 8.1 
Occupancy853 841 12 1.4 
Data processing2,547 1,928 619 32.1 
Net loss (gain) on OREO and repossessed assets12 (11)23 (209.1)
Total noninterest expense$15,578 $15,394 $184 1.2 %
The higher level of noninterest expense for the six months ended June 30, 2025, compared to the same period in 2024, was primarily due to:
•a $619 thousand increase in data processing expenses due to various project implementations that began amortizing in the third quarter of 2024, as well as new software technology being deployed in 2025 that continues to streamline our operations;
•a $33 thousand increase in regulatory assessments due to an increase in the accrual beginning in the second quarter of 2024 related to higher forecasted regulatory exam fees; and
•a $23 thousand increase in expenses related to OREO and repossessed assets due to the addition of new property in 2025 and the absence of property sales in the current year.
These increases were partially offset by:
•a $285 thousand decrease in salaries and benefits related to lower incentive compensation expense as a result of less growth in the current period than in the same period one year ago; and
•a $218 thousand decrease in operations expense primarily due to lower expenses across various accounts, resulting from ongoing cost saving initiatives and process improvements.
Income Tax Expense. The provision for income taxes was $488 thousand and $779 thousand for the three and six months ended June 30, 2025, compared to $187 thousand and $350 thousand for the three and six months ended June 30, 2024, respectively. The effective tax rates for the three and six months ended June 30, 2025 were 19.21% and 19.48%, respectively. The effective tax rates for the three and six months ended June 30, 2024 were 19.04% and 18.29%, respectively. The increase in the effective tax rate for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, was due to taxable earnings on BOLI in 2025, resulting from the surrender and exchange of existing BOLI policies in to higher yielding policies.
On July 4, 2025, the President of the United States signed and enacted the One Big Beautiful Bill Act (“OBBBA”) into law. Except for certain provisions, the OBBBA is effective for tax years beginning on or after January 1, 2025. The tax and and spending legislation permanently extends key business tax breaks originally enacted under the 2017 Tax Cuts and Jobs Act. The Company is currently evaluating the impact the law will have on the income tax provision.

Capital and Liquidity
The Management’s Discussion and Analysis in Item 7 of the Company’s 2024 Form 10-K contains an overview of Sound Financial Bancorp’s and the Bank’s liquidity management, sources of liquidity and cash flows. Although there have been no material changes in our liquidity management, sources of liquidity and cash flows since our 2024 Form 10-K, this discussion updates that disclosure for the six months ended June 30, 2025.
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Capital. Stockholders’ equity totaled $106.0 million at June 30, 2025 and $103.7 million at December 31, 2024. In addition to net income of $3.2 million, other sources of capital during the six months ended June 30, 2025 primarily included $156 thousand related to stock-based compensation and $21 thousand in proceeds from stock option exercises. Uses of capital during the six months ended June 30, 2025 primarily included $974 thousand of dividends paid on common stock and $84 thousand of other comprehensive income, net of tax, primarily resulting from unrealized losses on available for sale securities.
We paid cash dividends of $0.38 per common share during the six months ended June 30, 2025 and June 30, 2024, which equates to a dividend payout ratio of 30.26% and 62.15%, respectively. The Company expects to continue paying quarterly cash dividends on its common stock, subject to the Board of Directors' discretion to change this practice at any time and for any reason, without prior notice. Assuming continued payment of the regular quarterly cash dividend during the remainder of 2025 at the rate of $0.19 per share, our average total dividend paid each quarter would be approximately $488 thousand based on the number of outstanding shares as of June 30, 2025.
The dividends, if any, we pay may be limited as more fully discussed under “Business—How We Are Regulated—Limitations on Dividends and Stock Repurchases” contained in Item 1, Part I of the Company’s 2024 Form 10-K.
Stock Repurchase Programs. From time to time, our Board of Directors has authorized stock repurchase programs. In general, stock repurchases allow us to proactively manage our capital position and return excess capital to stockholders. Stock repurchases may also offset the dilutive effects of stock compensation awards. In January 2024, the Board of Directors approved a new stock repurchase program authorizing the Company to purchase up to $1.5 million of the Company’s issued and outstanding common stock over a period of 12 months which expired on January 26, 2025 and was not renewed. For additional details on our stock repurchase activity, see “Unregistered Sales of Equity Securities and Use of Proceeds” contained in Part II, Item 2 of this Form 10-Q.
Liquidity. Liquidity measures the ability to meet current and future cash flow needs. The liquidity of a financial institution reflects its ability to meet loan requests, accommodate possible outflows in deposits and take advantage of potential opportunities presented by changes in market interest rates. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. The objective of our liquidity management is to manage cash flows and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that our funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Our liquidity position is enhanced by our ability to raise additional funds as needed in the wholesale markets.
Asset liquidity is provided by assets that are readily marketable or pledgeable or that will mature in the near future. Liquid assets generally include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash flows from securities, sales of fixed rate residential mortgage loans in the secondary market and federal funds sold. Liability liquidity generally is provided by access to funding sources, which include core deposits and advances from the FHLB and other borrowing relationships with third party financial institutions.
We continuously monitor our liquidity position and adjust the balance between sources and uses of funds as we deem appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding challenges resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs.
As of June 30, 2025, we had $110.1 million in cash and cash equivalents and available-for-sale investment securities, and $2.0 million in loans held-for-sale. At June 30, 2025, we had the ability to borrow $161.2 million in FHLB advances and access to additional borrowings of $19.4 million through the Federal Reserve's discount window, in each case subject to certain collateral requirements. We had $25.0 million in outstanding advances from the FHLB and none from the Federal Reserve at June 30, 2025. We also had a $20.0 million credit facility with Pacific Coast Banker’s Bank available, with no balance outstanding, at June 30, 2025. Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, to repay maturing debt and to take advantage of investment opportunities to the extent feasible. As of June 30, 2025, management was not aware of any events reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us. For additional details, see “Note 8—Borrowings, FHLB Stock and Subordinated Notes” in the Notes to Condensed Consolidated Financial Statements contained in "Item 1. Financial Statements" of this Form 10-Q.
In the ordinary course of business, we enter into contractual obligations and other commitments to make future payments. Refer to the accompanying Notes to Condensed Consolidated Financial Statements elsewhere in this report for the expected timing of
45


such payments as of June 30, 2025. These include payments related to (i) long-term borrowings (Note 8—Borrowings, FHLB Stock and Subordinated Notes) and (ii) operating leases (Note 10—Leases). See the discussion below for information regarding commitments to extend credit and standby letters of credit.
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments generally represent commitments to extend credit in the form of loans. The instruments involve, to varying degrees, elements of credit- and interest-rate risk in excess of the amount recognized in the Condensed Consolidated Balance Sheets.
The Company's exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established by the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the client. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. These commitments are not reflected in the condensed consolidated financial statements. The Company evaluates each client's creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management's credit evaluation of the client.
At June 30, 2025 and December 31, 2024, financial instrument contractual amounts representing credit risk were as follows (in thousands):
 June 30, 2025December 31, 2024
Residential mortgage commitments$2,804 $3,758 
Unfunded construction commitments22,124 25,810 
Unused lines of credit27,415 26,105 
Irrevocable letters of credit183 163 
Total loan commitments$52,526 $55,836 
Sound Financial Bancorp is a separate legal entity from Sound Community Bank and must provide for its own liquidity. In addition to its own operating expenses (many of which are paid to Sound Community Bank), Sound Financial Bancorp is responsible for paying for any stock repurchases, dividends declared to its stockholders, interest and principal on its outstanding debt, and other general corporate expenses.
Sound Financial Bancorp is a holding company and does not conduct operations; its sources of liquidity are generally dividends up-streamed from Sound Community Bank, interest on investment securities, if any, and borrowings from outside sources. Banking regulations may limit the dividends that may be paid to Sound Financial Bancorp by Sound Community Bank. See “Business — How We Are Regulated — Limitations on Dividends and Stock Repurchases” contained in Item 1, Part I of the Company’s 2024 Form 10-K. At June 30, 2025, Sound Financial Bancorp, on an unconsolidated basis, had $6.8 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs.
See also the “Condensed Consolidated Statements of Cash Flows” included in “Item 1. Financial Statements and Supplementary Data” of this Form 10-Q, for further information.

Regulatory Capital
Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank per the regulatory framework for prompt corrective action (“PCA”). Qualifying institutions that elect to use the Community Bank Leverage Ratio, or CBLR, framework, such as the Bank and the Company, that maintain the required minimum leverage ratio will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules, and to have met the capital requirements for the well capitalized category under the agencies’ PCA framework. As of June 30, 2025, the Bank’s and the Company’s CBLRs were 10.60% and 10.09%, respectively, which exceeded the minimum requirement of 9%.
In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase-in over a three-year period the Day 1 adverse regulatory capital effects of the CECL accounting standard. The capital relief is phased into regulatory capital at 25% per year over a three-year transition period. The final rule
46


was adopted and became effective in September 2020. The Company implemented the CECL model commencing January 1, 2023 and elected to phase in the full effect of CECL on regulatory capital over the three-year transition period.
See "Part I, Item 1. Business – Regulation of Sound Community Bank – Capital Rules " in the Company's 2024 Form 10-K for additional information related to regulatory capital.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
The Company provided information about market risk in Item 7A of its 2024 Form 10-K.  There have been no material changes in our market risk since our 2024 Form 10-K.
Item 4.     Controls and Procedures
(a)Evaluation of Disclosure Controls and Procedures.
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a -15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of June 30, 2025, was carried out under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, and several other members of the Company’s senior management. The Company’s principal executive officer and principal financial officer concluded that, as of June 30, 2025, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Company’s principal executive officer and principal financial officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
We intend to continually review and evaluate the design and effectiveness of the Company’s disclosure controls and procedures and to improve the Company’s controls and procedures over time and to correct any deficiencies that we may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company’s business. While we believe the present design of our disclosure controls and procedures is effective to achieve this goal, future events affecting our business may cause the Company to modify its disclosure controls and procedures.
The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the acts of individuals, by collusion of two or more people, or by management override of the control. The design of any control procedure is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
(b)Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
47


PART II OTHER INFORMATION
Item 1     Legal Proceedings
In the normal course of business, the Company occasionally becomes involved in various legal proceedings.  Any liability from such currently pending proceedings is not expected to have a material adverse effect on the business or financial condition of the Company. 

Item 1A    Risk Factors
There have been no material changes in the Risk Factors previously disclosed in Item 1A of our 2024 Form 10-K.

Item 2    Unregistered Sales of Equity Securities and Use of Proceeds
(a)    Not applicable.
(b)Not applicable.
(c)The following table sets forth information with respect to our repurchases of our outstanding common shares during the three months ended June 30, 2025:
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximated Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
April 1, 2025 - April 30, 2025—$— —$— 
May 1, 2025 - May 31, 2025—$— —— 
June 1, 2025 - June 30, 2025—$— —— 
Total——$— 

Item 3    Defaults Upon Senior Securities
None.

Item 4.    Mine Safety Disclosures
Not applicable.

Item 5.    Other Information
(a)    Not applicable.
(b)    Not applicable.
(c)    Trading Plans. During the three months ended June 30, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
48


Item 6.    Exhibits
Exhibits:
3.1
Articles of Incorporation of Sound Financial Bancorp, Inc. (incorporated herein by reference to the Registration Statement on Form S-1 filed with the SEC on March 27, 2012 (File No. 333-180385))
3.2
Amended and Restated Bylaws of Sound Financial Bancorp, Inc. (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on October 26, 2021 (File No. 001-35633))
4.1
Form of Common Stock Certificate of Sound Financial Bancorp, Inc. (incorporated herein by reference to the Registration Statement on Form S-1 filed with the SEC on March 27, 2012 (File No. 333-180385))
4.3
Forms of 5.25% Fixed-to-Floating Rate Subordinated Note due October 1, 2030 (included as Exhibit A to the Subordinate Note Purchase Agreement included in Exhibit 10.16) (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on September 21, 2020 (File No. 001-35633)).
10.1+
Amended and Restated Employment Agreement dated January 25, 2019, by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 30, 2019 (File No. 001-35633))
10.2+
Amended and Restated Supplemental Executive Retirement Agreement dated July 11, 2022, by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on July 14, 2022 (File No. 001-35633))
10.3+
Amended and Restated Long Term Compensation Agreement dated November 23, 2015, by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on November 27, 2015 (File No. 001-35633))
10.4+
Amended and Restated Confidentiality, Non-Competition and Non-Solicitation Agreement dated January 25, 2019, by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 30, 2019 (File No. 001-35633))
10.5+
2008 Equity Incentive Plan (incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 31, 2009 (File No. 000-52889))
10.6+
Forms of Incentive Stock Option Agreement, Non-Qualified Stock Option Agreement and Restricted Stock Agreements under the 2008 Equity Incentive Plan (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 29, 2009 (File No. 000-52889))
10.7+
Summary of Annual Bonus Plan (included as Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and incorporated herein by reference (File No. 001-35633))
10.8+
2013 Equity Incentive Plan (included as Exhibit 10.13 to the Registrant's Quarterly Report on Form 10-Q/A
for the quarter ended September 30, 2013 and incorporated herein by reference (File No. 001-35633))
10.9+
Form of Incentive Stock Option Agreement, Non-Qualified Stock Option Agreement and Restricted Stock
Agreement under the 2013 Equity Incentive Plan (included as Exhibit 10.14 to the Registrant's Quarterly
Report on Form 10-Q/A for the quarter ended September 30, 2013 and incorporated herein by reference (File
No. 001-35633))
10.10+
Amended Form of Adoption Agreement for the Sound Community Bank Nonqualified Deferred Compensation Plan (included as Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and incorporated herein by reference (File No. 001-35633))
10.11+
The Sound Community Bank Nonqualified Deferred Compensation Plan (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on March 24, 2017 (File No. 001-35633))
10.12+
Change of Control Agreement dated October 25, 2018, by and among Sound Financial Bancorp, Inc., Sound Community Bank and Heidi Sexton (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on October 26, 2018 (File No. (001-35633))
10.13+
Credit Union of the Pacific Incentive Compensation Achievement Plan, dated January 1, 1994 (incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 14, 2019 (File No. (001-35633))
10.14+
Form of Subordinated Note Purchase Agreement, dated September 18, 2020, by and among Sound Financial Bancorp, Inc. and the Purchasers (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on September 21, 2020 (File No. 001-35633)).
10.15+
Change in Control Agreement dated August 25, 2021 by and among Sound Financial Bancorp, Inc., Sound Community Bank and Wes Ochs (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on August 31, 2021 (File No. 001-35633)).
10.16+
Amendment No 1 to Change of Control Agreement dated October 25, 2018, by and among Sound Financial Bancorp, Inc., Sound Community Bank and Heidi Sexton, effective as of October 30, 2024 (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on November 5, 2024 (File No. (001-35633))
10.17+
Amendment No. 1 to Change in Control Agreement dated August 25, 2021 by and among Sound Financial Bancorp, Inc., Sound Community Bank and Wes Ochs, effective as of October 30, 2024 (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on November 5, 2024 (File No. 001-35633)).
31.1
Rule 13(a)-14(a) Certification (Chief Executive Officer)
31.2
Rule 13(a)-14(a) Certification (Chief Financial Officer)
32
Section 1350 Certification
101
The following financial statements from the Sound Financial Bancorp, Inc. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025, formatted in Extensive Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income, (iii) condensed consolidated statements of comprehensive income, (iv) condensed consolidated statements of equity (v) condensed consolidated statements of cash flows and (vi) the notes to condensed consolidated financial statements
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

+ Indicates management contract or compensatory plan or arrangement.
49


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Sound Financial Bancorp, Inc.
   
Date: August 11, 2025By:/s/  Laura Lee Stewart
  Laura Lee Stewart
  President/Chief Executive Officer
  (Principal Executive Officer and Duly Authorized Officer)
By:/s/  Wes Ochs
Wes Ochs
Executive Vice President/Chief Strategy Officer and Chief Financial Officer
(Principal Financial Officer)
50

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