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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 Q3

Sound Financial Bancorp - 10-Q quarterly report FY2025 Q3


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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 September 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 November 6, 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)
 September 30,
2025		December 31,
2024
ASSETS  
Cash and cash equivalents$101,156 $43,641 
Available-for-sale (“AFS”) securities, at fair value (amortized cost of $8,857 and $9,112 as of September 30, 2025 and December 31, 2024, respectively)
7,637 7,790 
Held-to-maturity (“HTM”) securities, at amortized cost (fair value of $1,552 and $1,712 at September 30, 2025 and December 31, 2024, respectively)
1,899 2,130 
Loans held-for-sale271 487 
Loans held-for-portfolio909,715 900,171 
Allowance for credit losses (“ACL”) on loans(8,564)(8,499)
Total loans held-for-portfolio, net901,151 891,672 
Accrued interest receivable3,896 3,471 
Bank-owned life insurance (“BOLI”), net23,138 22,490 
Other real estate owned (“OREO”) and repossessed assets, net344 — 
Mortgage servicing rights (“MSRs”), at fair value4,305 4,769 
Federal Home Loan Bank ("FHLB") stock, at cost1,735 1,730 
Premises and equipment, net4,421 4,697 
Right of use assets3,679 3,725 
Other assets6,531 7,031 
Total assets$1,060,163 $993,633 
LIABILITIES
Deposits
Interest-bearing$767,554 $705,267 
Noninterest-bearing demand131,389 132,532 
Total deposits898,943 837,799 
Borrowings25,000 25,000 
Accrued interest payable774 765 
Lease liabilities3,943 4,013 
Other liabilities10,146 9,371 
Advance payments from borrowers for taxes and insurance2,116 1,260 
Subordinated notes, net11,791 11,759 
Total liabilities952,713 889,967 
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 September 30, 2025 and December 31, 2024, respectively
25 25 
Additional paid-in capital28,665 28,413 
Retained earnings79,724 76,272 
Accumulated other comprehensive loss, net of tax(964)(1,044)
Total stockholders’ equity107,450 103,666 
Total liabilities and stockholders’ equity$1,060,163 $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 September 30,Nine Months Ended September 30,
2025202420252024
INTEREST INCOME  
Loans, including fees$13,512 $12,876 $39,795 $37,429 
Interest and dividends on investments, cash and cash equivalents1,140 1,962 3,478 5,209 
Total interest income14,652 14,838 43,273 42,638 
INTEREST EXPENSE
Deposits5,275 6,363 15,705 18,059 
Borrowings269 434 798 1,293 
Subordinated notes168 168 504 504 
Total interest expense5,712 6,965 17,007 19,856 
Net interest income8,940 7,873 26,266 22,782 
PROVISION FOR (RELEASE OF) CREDIT LOSSES55 8 22 (134)
Net interest income after provision for (release of) credit losses8,885 7,865 26,244 22,916 
NONINTEREST INCOME
Service charges and fee income672 628 2,020 2,001 
Earnings on BOLI225 186 648 498 
Mortgage servicing income262 280 794 841 
Fair value adjustment on MSRs(372)101 (551)(81)
Net gain on sale of loans94 40 187 205 
Other income— — — 30 
Total noninterest income881 1,235 3,098 3,494 
NONINTEREST EXPENSE
Salaries and benefits4,259 4,469 13,175 13,670 
Operations1,483 1,540 4,291 4,566 
Regulatory assessments221 189 663 598 
Occupancy431 414 1,284 1,255 
Data processing1,274 1,067 3,821 2,995 
Net loss (gain) on OREO and repossessed assets8 — 19 (10)
Total noninterest expense7,676 7,679 23,253 23,074 
Income before provision for income taxes2,090 1,421 6,089 3,336 
Provision for income taxes395 267 1,175 617 
Net income$1,695 $1,154 $4,914 $2,719 
Earnings per common share:
Basic$0.66 $0.45 $1.92 $1.06 
Diluted$0.66 $0.45 $1.90 $1.05 
Weighted-average number of common shares outstanding:
Basic2,556,562 2,544,233 2,555,799 2,541,331 
Diluted2,575,575 2,569,368 2,577,387 2,561,942 
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 September 30,Nine Months Ended September 30,
2025202420252024
Net income$1,695 $1,154 $4,914 $2,719 
Available for sale securities:
Unrealized gains arising during the period208 161 101 84 
Income tax expense related to unrealized gains(44)(34)(21)(18)
Other comprehensive income, net of tax164 127 80 66 
Comprehensive income$1,859 $1,281 $4,994 $2,785 

See Notes to Condensed Consolidated Financial Statements
5

SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Nine Months Ended September 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 June 30, 2025
2,566,069 $25 $28,590 $78,517 $(1,128)$106,004 
Net income— — — 1,695 — 1,695 
Other comprehensive income, net of tax— — — — 164 164 
Share-based compensation— — 75 — — 75 
Cash dividends paid on common stock ($0.19 per share)
— — — (488)— (488)
Balance, at September 30, 2025
2,566,069 $25 $28,665 $79,724 $(964)$107,450 
Balance, at December 31, 2024
2,564,907 $25 $28,413 $76,272 $(1,044)$103,666 
Net income— — — 4,914 — 4,914 
Other comprehensive income, net of tax— — — — 80 80 
Share-based compensation— — 231 — — 231 
Cash dividends paid on common stock ($0.57 per share)
— — — (1,462)— (1,462)
Common stock options exercised1,162 — 21 — — 21 
Balance, at September 30, 2025
2,566,069 $25 $28,665 $79,724 $(964)$107,450 
6

 SharesCommon
Stock		Additional Paid-in CapitalRetained
Earnings		Accumulated Other Comprehensive
Loss, net of tax		Total
Stockholders’
Equity
Balance, at June 30, 2024
2,557,284 $25 $28,198 $74,173 $(1,049)$101,347 
Net income— — — 1,154 — 1,154 
Other comprehensive gain, net of tax— — — — 127 127 
Share-based compensation— — 98 — — 98 
Common stock surrendered(5,053)— (218)— — (218)
Cash dividends paid on common stock ($0.19 per share)
— — — (487)— (487)
Common stock options exercised11,864 — 218 — — 218 
Balance, at September 30, 2024
2,564,095 $25 $28,296 $74,840 $(922)$102,239 
Balance, at December 31, 2023
2,549,427 $25 $27,990 $73,627 $(988)$100,654 
Net income— — — 2,719 — 2,719 
Other comprehensive gain, net of tax— — — — 66 66 
Share-based compensation— — 291 — — 291 
Restricted common stock awards issued8,048 — — — — — 
Cash dividends paid on common stock ($0.57 per share)
— — — (1,459)— (1,459)
Common stock repurchased(1,626)— (18)(47)— (65)
Common stock surrendered(5,053)— (218)— — (218)
Common stock options exercised13,299 — 251 — — 251 
Balance, at September 30, 2024
2,564,095 $25 $28,296 $74,840 $(922)$102,239 
See Notes to Condensed Consolidated Financial Statements
7

SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
 Nine Months Ended September 30,
 20252024
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$4,914 $2,719 
Adjustments to reconcile net income to net cash from operating activities:
Amortization of net premiums on investments64 64 
Provision for (release of) credit losses22 (134)
Depreciation and amortization376 483 
Share-based compensation231 291 
Fair value adjustment on mortgage servicing rights551 81 
Right of use assets amortization759 717 
Change in lease liabilities(783)(742)
Change in cash surrender value of BOLI(648)(498)
Net change in advances from borrowers for taxes and insurance856 937 
Net gain on disposal of premises and equipment, net— (30)
Net gain on sale of loans(187)(205)
Proceeds from sale of loans held-for-sale10,973 10,722 
Originations of loans held-for-sale(12,932)(10,952)
Net gain on OREO and repossessed assets— (17)
Change in operating assets and liabilities:
Accrued interest receivable(425)(253)
Other assets479 (643)
Accrued interest payable9 91 
Other liabilities897 148 
Net cash provided by operating activities5,156 2,779 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from principal payments, maturities and sales of available-for-sale securities222 307 
Proceeds from principal payments of held-to-maturity securities231 27 
Net increase in loans(7,692)(6,598)
Purchase of BOLI— (5)
Purchases of premises and equipment, net(100)(50)
Proceeds from disposal of premises and equipment, net— 30 
Proceeds from sale of OREO and other repossessed assets— 592 
Net cash used in investing activities(7,339)(5,697)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits61,144 103,658 
FHLB stock purchased(5)(9)
Common stock repurchases— (65)
Purchase of common stock surrendered to pay tax liability— (218)
Dividends paid on common stock(1,462)(1,459)
Proceeds from common stock option exercises21 251 
Net cash provided by financing activities59,698 102,158 
Net change in cash and cash equivalents57,515 99,240 
Cash and cash equivalents, beginning of period43,641 49,690 
Cash and cash equivalents, end of period$101,156 $148,930 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes$762 $407 
Interest paid on deposits and borrowings16,998 19,765 
Noncash investing and financing activities:
Loans transferred from loans held-for-sale to loans held-for-portfolio2,275 859 
Loans transferred from loans held-for-portfolio to OREO and repossessed assets344 115 
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 is 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 September 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
September 30, 2025    
Municipal bonds$6,323 $10 $(950)$5,383 
Agency mortgage-backed securities2,534 9 (289)2,254 
Total$8,857 $19 $(1,239)$7,637 
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
September 30, 2025
Municipal bonds$703 $— $(170)$533 
Agency mortgage-backed securities1,196 — (177)1,019 
Total$1,899 $— $(347)$1,552 
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 September 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.
September 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 1,640 — — 
Due after ten years4,152 3,288 703 533 
Agency mortgage-backed securities2,534 2,254 1,196 1,019 
Total$8,857 $7,637 $1,899 $1,552 
There were no pledged securities at September 30, 2025 or December 31, 2024.
There were no sales of AFS or HTM securities during the three and nine months ended September 30, 2025 and 2024.
10

Accrued interest receivable on securities totaled $76 thousand at September 30, 2025 and $48 thousand at December 31, 2024, in the accompanying Condensed Consolidated Balance Sheets. Accrued interest receivable is excluded from the allowance for credit losses.
The following table summarizes the aggregate fair value and gross unrealized loss by length of time of those investments for which an allowance for credit losses has not been recorded that have been in a continuous unrealized loss position at the dates indicated (in thousands):
 September 30, 2025
 Less Than 12 Months12 Months or LongerTotal
 Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss
Available-for-sale securities
Municipal bonds$— $— $3,717 $(950)$3,717 $(950)
Agency mortgage-backed securities— — 1,939 (289)1,939 (289)
Total available-for-sale securities$— $— $5,656 $(1,239)$5,656 $(1,239)
Held-to-maturity securities
Municipal bonds$— $— $533 $(170)$533 $(170)
Agency mortgage-backed securities— — 1,019 (177)1,019 (177)
Total held-to-maturity securities$— $— $1,552 $(347)$1,552 $(347)
 December 31, 2024
 Less Than 12 Months12 Months or LongerTotal
 Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss
Available-for-sale securities
Municipal bonds$— $— $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 September 30, 2025 or December 31, 2024. At both September 30, 2025 and December 31, 2024, the total securities portfolio consisted of 11 agency mortgage-backed securities and 11 municipal bonds. At September 30, 2025 , there were no securities in an unrealized loss position for less than 12 months and 16 securities in an unrealized loss position for more than 12 months. At 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 nine months ended September 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):
 September 30,
2025		December 31,
2024
Real estate loans:  
One-to-four family$257,797 $269,684 
Home equity29,903 26,686 
Commercial and multifamily408,802 371,516 
Construction and land52,797 73,077 
Total real estate loans749,299 740,963 
Consumer loans:
Manufactured homes42,735 41,128 
Floating homes88,674 86,411 
Other consumer17,031 17,720 
Total consumer loans148,440 145,259 
Commercial business loans14,214 15,605 
Total loans held-for-portfolio911,953 901,827 
Premiums for purchased loans(1)
644 718 
Deferred fees, net(2,882)(2,374)
Total loans held-for-portfolio, gross909,715 900,171 
Allowance for credit losses — loans(8,564)(8,499)
Total loans held-for-portfolio, net$901,151 $891,672 
(1)Includes premiums resulting from purchased loans of $373 thousand related to one-to-four family loans, $220 thousand related to commercial and multifamily loans, and $51 thousand related to commercial business loans as of September 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 September 30, 2025, there were three collateral dependent consumer mortgage loans, totaling $186 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 September 30,
20252024
ACL - LoansReserve for Unfunded Loan CommitmentsACL ACL - LoansReserve for Unfunded Loan CommitmentsACL
Balance at beginning of period$8,536 $122 $8,658 $8,493 $245 $8,738 
Provision for (release of) credit losses during the period65 (10)55 106 (98)8 
Net charge-offs during the period(37)— (37)(14)— (14)
Balance at end of period$8,564 $112 $8,676 $8,585 $147 $8,732 
Nine Months Ended September 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 period144 (122)22 (88)(46)(134)
Net charge-offs during the period(79)— (79)(87)— (87)
Balance at end of period$8,564 $112 $8,676 $8,585 $147 $8,732 
Accrued interest receivable on loans receivable totaled $3.7 million at September 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 the nature and volume of the portfolio; changes in staff experience levels; 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 September 30, 2025
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$3,327 $— $— $(47)$3,280 
Home equity360 — — (6)354 
Commercial and multifamily1,236 — — 74 1,310 
Construction and land269 — — 64 333 
Manufactured homes(1)
1,395 (47)— 31 1,379 
Floating homes1,410 — — (47)1,363 
Other consumer(2)
451 (10)20 (21)440 
Commercial business88 — — 17 105 
Total$8,536 $(57)$20 $65 $8,564 
(1)During the three months ended September 30,2025, there was one manufactured loan for $47 thousand originated in 2023 that was charged off.
(2)During the three months ended September 30,2025, there was one automobile loan for $1 thousand originated in 2021 that was charged off, with the remainder of the gross charge-offs of other consumer loans related entirely to deposit overdrafts.
Three Months Ended September 30, 2024
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$2,798 $— $— $14 $2,812 
Home equity199 — — 15 214 
Commercial and multifamily1,130 — — 155 1,285 
Construction and land1,072 — — (302)770 
Manufactured homes938 — 53 991 
Floating homes1,910 — — 150 2,060 
Other consumer(1)
348 (20)6 23 357 
Commercial business98 — — (2)96 
Total$8,493 $(20)$6 $106 $8,585 
(1)During the three months ended September 30, 2024, the gross charge-offs of other consumer loans related entirely to deposit overdrafts that were charged off.
Nine Months Ended September 30, 2025
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$3,025 $— $— $255 $3,280 
Home equity307 — — 47 354 
Commercial and multifamily1,218 — — 92 1,310 
Construction and land992 — — (659)333 
Manufactured homes(1)
1,172 (66)— 273 1,379 
Floating homes1,282 — — 81 1,363 
Other consumer(2)
401 (41)28 52 440 
Commercial business102 — — 3 105 
Total$8,499 $(107)$28 $144 $8,564 
(1)During the nine months ended September 30, 2025, there were two manufactured home loans originated in 2022 and 2023 for $19 thousand and $47 thousand, respectively, that were charged off and then subsequently foreclosed upon.
(2)During the nine months ended September 30, 2025, there was one automobile loan for $1 thousand originated in 2021 that was charged off and 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.
14

Nine Months Ended September 30, 2024
 Beginning
Allowance		Charge-offsRecoveriesProvision for (Release of) Credit LossesEnding
Allowance
One-to-four family$2,630 $— $— $182 $2,812 
Home equity185 — — 29 214 
Commercial and multifamily1,070 — — 215 1,285 
Construction and land1,349 — — (579)770 
Manufactured homes(1)
971 (23)— 43 991 
Floating homes2,022 — — 38 2,060 
Other consumer(2)
426 (80)16 (5)357 
Commercial business107 — — (11)96 
Total$8,760 $(103)$16 $(88)$8,585 
(1)During the nine months ended September 30, 2024, there was one manufactured home loan for $23 thousand originated in 2020 that was charged off and then subsequently foreclosed upon.
(2)During the nine months ended September 30, 2024, the gross charge-offs of other consumer loans 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 banking 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 September 30, 2025 and December 31, 2024.
The following tables present the internally assigned grades as of September 30, 2025 and December 31, 2024, by type of loan and origination year (in thousands):
15

At September 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$18,003 $18,174 $17,792 $68,038 $94,401 $39,678 $— $— $256,086 
Substandard— — 1,117 225 94 328 — — 1,764 
Total one-to-four family$18,003 $18,174 $18,909 $68,263 $94,495 $40,006 $— $— $257,850 
Home equity:
Pass$663 $2,403 $2,630 $2,131 $818 $815 $19,509 $903 $29,872 
Substandard— — — — — 51 72 131 254 
Total home equity$663 $2,403 $2,630 $2,131 $818 $866 $19,581 $1,034 $30,126 
Commercial and multifamily:
Pass$91,875 $31,486 $24,771 $83,595 $89,355 $75,334 $— $— $396,416 
Substandard— — — — 6,094 4,622 — — 10,716 
Total commercial and multifamily$91,875 $31,486 $24,771 $83,595 $95,449 $79,956 $— $— $407,132 
Construction and land:
Pass$14,934 $18,426 $15,393 $1,396 $801 $1,332 $— $— $52,282 
Substandard— — — 152 — 21 — — 173 
Total construction and land$14,934 $18,426 $15,393 $1,548 $801 $1,353 $— $— $52,455 
Manufactured homes:
Pass$6,655 $8,389 $11,066 $5,797 $3,333 $6,691 $— $— $41,931 
Substandard— — 184 276 — 210 — — 670 
Total manufactured homes$6,655 $8,389 $11,250 $6,073 $3,333 $6,901 $— $— $42,601 
Floating homes:
Pass$9,019 $19,720 $6,316 $14,715 $23,402 $15,075 $— $— $88,247 
Total floating homes$9,019 $19,720 $6,316 $14,715 $23,402 $15,075 $— $— $88,247 
Other consumer:
Pass$1,748 $1,783 $2,497 $354 $3,404 $6,630 $636 $— $17,052 
Substandard— — — — 6 — — — 6 
Total other consumer$1,748 $1,783 $2,497 $354 $3,410 $6,630 $636 $— $17,058 
Commercial business:
Pass$2,700 $278 $344 $304 $1,394 $3,002 $6,224 $— $14,246 
Substandard— — — — — — — — — 
Total commercial business$2,700 $278 $344 $304 $1,394 $3,002 $6,224 $— $14,246 
Total loans
Pass$145,597 $100,659 $80,809 $176,330 $216,908 $148,557 $26,369 $903 $896,132 
Substandard— — 1,301 653 6,194 5,232 72 131 13,583 
Total loans$145,597 $100,659 $82,110 $176,983 $223,102 $153,789 $26,441 $1,034 $909,715 
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):
 September 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$609 $649 $537 $537 
Home equity201 201 298 298 
Commercial and multifamily1,065 1,065 3,734 3,734 
Construction and land103 103 24 24 
Manufactured homes476 476 521 521 
Floating homes— — 2,363 2,363 
Other consumer263 262 3 1 
Commercial business— — 11 11 
Total$2,717 $2,756 $7,491 $7,489 
The following tables present the aging of past due loans, based on amortized cost, as of the dates indicated, by type of loan (in thousands):
September 30, 2025
 30-59 Days
Past Due		60-89 Days
Past Due		90 Days and Greater Past Due90 Days and Greater Past Due and AccruingTotal Past
Due		CurrentTotal Loans
One-to-four family$— $2,334 $267 $— $2,601 $255,249 $257,850 
Home equity1 42 147 — 190 29,936 30,126 
Commercial and multifamily— 2,015 1,061 — 3,076 404,056 407,132 
Construction and land— 472 83 — 555 51,900 52,455 
Manufactured homes— 238 394 — 632 41,969 42,601 
Floating homes— — — — — 88,247 88,247 
Other consumer5 — 262 — 267 16,791 17,058 
Commercial business— — — — — 14,246 14,246 
Total$6 $5,100 $2,214 $— $7,320 $902,395 $909,715 
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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 September 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 nine months ended September 30, 2025 and 2024.
At September 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 $1.1 million and $1.3 million at September 30, 2025 and December 31, 2024, respectively.

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):
September 30, 2025
Commercial Real EstateResidential Real EstateLandOther ResidentialRVs/AutomobilesBusiness Assets Total
Real estate loans:
One- to four- family$— $423 $— $321 $— $— $744 
Home equity— 201 — — — — 201 
Commercial and multifamily— — — — — 1,065 1,065 
Construction and land— — 20 83 — — 103 
Total real estate loans— 624 20 404 — 1,065 2,114 
Consumer loans:
Manufactured homes— — — 476 — — 476 
Other consumer— — — 256 6 — 262 
Total consumer loans— — — 732 6 — 738 
Commercial business loans— — — — — — — 
Total loans$— $624 $20 $1,136 $6 $1,065 $2,852 
December 31, 2024
Commercial Real EstateResidential Real EstateLandOther ResidentialRVs/AutomobilesBusiness AssetsTotal
Real estate loans:
One- to four- family$— $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 September 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 September 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 September 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 nine months ended September 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):
 September 30, 2025Fair Value Measurements Using:
 Carrying
Value		Estimated
Fair Value		Level 1Level 2Level 3
FINANCIAL ASSETS:     
Cash and cash equivalents$101,156 $101,156 $101,156 $— $— 
Available-for-sale securities7,637 7,637 — 7,637 — 
Held-to-maturity securities1,899 1,552 — 1,552 — 
Loans held-for-sale271 271 — 271 — 
   Loans held-for-portfolio, net901,151 872,999 — — 872,999 
Mortgage servicing rights4,305 4,305 — — 4,305 
FINANCIAL LIABILITIES:
   Time deposits291,052 291,383 — 291,383 — 
Borrowings25,000 25,000 — 25,000 — 
Subordinated notes11,791 12,620 — 12,620 — 
 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 September 30, 2025
DescriptionTotalLevel 1Level 2Level 3
Municipal bonds$5,383 $— $5,383 $— 
Agency mortgage-backed securities2,254 — 2,254 — 
Mortgage servicing rights4,305 — — 4,305 
 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:
September 30, 2025
Financial InstrumentValuation TechniqueUnobservable Input(s)Range
(Weighted-Average)
Mortgage Servicing RightsDiscounted cash flowPrepayment speed assumption
125%-380% (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 nine months ended September 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 September 30, 2025
 TotalLevel 1Level 2Level 3
OREO and repossessed assets$344 $— $— $344 
Collateral dependent loans2,852 — — 2,852 
 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 September 30, 2025 and December 31, 2024.

Note 6 – Mortgage Servicing Rights
The unpaid principal balance of the Company’s mortgage servicing rights portfolio totaled $406.2 million at September 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 September 30, 2025 and December 31, 2024 were $404.1 million and $423.7 million, respectively. The unpaid principal balance of loans serviced for other financial institutions totaled $2.1 million at both September 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 September 30,Nine Months Ended September 30,
2025202420252024
Beginning balance, at fair value$4,638 $4,540 $4,769 $4,632 
Servicing rights that result from transfers and sale of financial assets39 24 87 114 
Changes in fair value:
Due to changes in model inputs or assumptions and other(1)
(372)101 (551)(81)
Ending balance, at fair value$4,305 $4,665 $4,305 $4,665 
(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:
September 30, 2025December 31, 2024
Prepayment speed (Public Securities Association “PSA” model)125 %125 %
Weighted-average life10.2 years10.6 years
Weighted average discount rate10.0 %10.0 %
Average debt service cost per residential loan$96.00 $80.00 

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 $262 thousand and $794 thousand for three and nine months ended September 30, 2025, and $280 thousand and $841 thousand for the three and nine months ended September 30, 2024, respectively.

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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):
 September 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 
September 30, 2025December 31, 2024
Fixed Rate:
Outstanding balance$25,000 $25,000 
Interest rates ranging from4.06 %4.06 %
Interest rates ranging to4.27 %4.27 %
Weighted average interest rate4.16 %4.16 %
The following table presents the maturity of our FHLB advances (dollars in thousands):
September 30, 2025
Remainder of 2025$— 
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:
September 30, 2025December 31, 2024
Amount available to borrow under credit facility(1)
$370,427 $385,366 
Advance equivalent of collateral:
One-to-four family loans174,048 175,907 
Commercial and multifamily loans23,583 29,180 
Home equity loans226 241 
Notional amount of letters of credit outstanding14,000 8,000 
Remaining FHLB borrowing capacity(2)
$158,856 $172,327 
(1)Subject to eligible pledged collateral.
(2)Amount remaining from the advance equivalent of collateral less letters of credit outstanding and FHLB advances.
25


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 September 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 September 30, 2025 and December 31, 2024, the amount available to borrow under this credit facility was $19.5 million and $20.8 million, respectively, subject to eligible pledged collateral. The Company had no outstanding borrowings under this arrangement at September 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 September 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 September 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 could redeem these notes, in whole but not in part, only under limited circumstances set forth in the terms of the subordinated notes. The balance of the subordinated notes was $11.8 million as of both September 30, 2025 and December 31, 2024. Subsequent to quarter end on October 1, 2025, the Company redeemed $4.0 million of the $12.0 million of its subordinated notes outstanding. Refer to “Note 11—Subsequent Events” for further detail.

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 EndedNine Months Ended
 2025202420252024
Net income$1,695 $1,154 $4,914 $2,719 
LESS: Participating dividends - Unvested Restricted Stock Awards (“RSAs”)(2)(3)(5)(10)
LESS: Income allocated to participating securities - Unvested RSAs(4)(4)(14)(8)
Net income available to common stockholders - basic1,689 1,146 4,895 2,701 
ADD BACK: Income allocated to participating securities - Unvested RSAs4 4 14 8 
LESS: Income reallocated to participating securities - Unvested RSAs(4)(4)(14)(8)
Net income available to common stockholders - diluted$1,689 $1,146 $4,895 $2,701 
Weighted average number of shares outstanding, basic2,556,562 2,544,233 2,555,799 2,541,331 
Effect of potentially dilutive common shares19,013 25,135 21,588 20,611 
Weighted average number of shares outstanding, diluted2,575,575 2,569,368 2,577,387 2,561,942 
Earnings per share, basic$0.66 $0.45 $1.92 $1.06 
Earnings per share, diluted$0.66 $0.45 $1.90 $1.05 
There were no anti-dilutive securities during the three and nine months ended September 30, 2025 and September 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 September 30, 2025, our leases had remaining terms ranging from 5 months to 4.7 years. The operating leases require us to pay property taxes and operating expenses for the properties. We also have finance leases for certain equipment, including copier machines which had an initial term of five years and a remaining term of approximately 4.25 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):
September 30,
2025		December 31,
2024
Operating lease right-of-use assets$3,569 $3,725 
Finance lease right-of-use assets110 — 
Operating lease liabilities3,831 4,013 
Finance lease liabilities112 — 
The following table presents the components of lease expense for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Lease expense
Operating leases$278 $270 $827 $811 
Finance leases
Amortization of right-of-use assets6 — 19 — 
Interest on lease liabilities1 — 4 — 
Sublease income— — — (4)
Net lease expense$285 $270 $850 $807 
The following table presents the schedule of lease liability payments at the date indicated (in thousands):
September 30,Finance LeasesOperating LeasesTotal Lease Payments
2026$29 $1,145 $1,174 
202729 1,137 1,166 
202829 1,033 1,062 
202929 661 690 
20307 77 84 
Total lease payments123 4,053 4,176 
Less: Present value discount11 222 233 
Present value of lease liabilities$112 $3,831 $3,943 
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Lease term and discount rate by lease type consisted of the following at the dates indicated:
September 30,
2025		December 31,
2024
Weighted-average remaining lease term:
Operating leases3.7 years4.3 years
Finance leases4.3 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 September 30,Nine Months Ended September 30,
2025202420252024
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows:
Operating leases$294 $278 $853 $836 
Finance leases1 — 4 — 
Financing cash flows:
Finance leases6 — 18 — 

Note 11 – Subsequent Events
On October 1, 2025, the Company redeemed $4.0 million of its $12.0 million of outstanding subordinated notes. This transaction represented a partial redemption under the terms of the subordinated notes. Refer to “Note—8 Borrowings” for additional information regarding the redemption parameters.
On October 28, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.19 per common share, payable on November 21, 2025 to stockholders of record at the close of business on November 7, 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 actions 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 uncertainties;
•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, or affect our ability to borrow funds or maintain or increase deposits;
•the inability of key third-party providers to perform their obligations to us;
•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 laws, 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 September 30, 2025, Sound Financial Bancorp, on a consolidated basis, had total assets of $1.06 billion, net loans held-for-portfolio of $901.2 million, deposits of $898.9 million and stockholders’ equity of $107.5 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, 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.

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Critical Accounting Estimates
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 September 30, 2025 and December 31, 2024
General.  Total assets increased $66.5 million, or 6.7%, to $1.06 billion at September 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 $57.5 million, or 131.8%, to $101.2 million at September 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 temporarily 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 $384 thousand, or 3.9%, to $9.5 million at September 30, 2025, compared to $9.9 million at December 31, 2024. Held-to-maturity securities totaled $1.9 million and $2.1 million at September 30, 2025 and December 31, 2024, respectively. Available-for-sale securities totaled $7.6 million at September 30, 2025, compared to $7.8 million at December 31, 2024. The decrease in held-to-maturity securities was primarily due to principal paydowns. The decrease in available-for-sale securities was primarily due to regularly scheduled payments, partially offset by lower net unrealized losses resulting from an increase in the market value of our portfolio in 2025.
Loans.  Loans held-for-portfolio, net increased $9.5 million, or 1.1%, to $901.2 million at September 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 September 30, 2025, as compared to December 31, 2024 (dollars in thousands):
 September 30,
2025		December 31,
2024		Amount
Change		Percent
Change
One-to-four family$257,797 $269,684 $(11,887)(4.4)%
Home equity29,903 26,686 3,217 12.1 
Commercial and multifamily408,802 371,516 37,286 10.0 
Construction and land52,797 73,077 (20,280)(27.8)
Manufactured homes42,735 41,128 1,607 3.9 
Floating homes88,674 86,411 2,263 2.6 
Other consumer17,031 17,720 (689)(3.9)
Commercial business14,214 15,605 (1,391)(8.9)
Premiums for purchased loans644 718 (74)(10.3)
Deferred loan fees(2,882)(2,374)(508)21.4 
Total loans held-for-portfolio, gross909,715 900,171 9,544 1.1 
Allowance for credit losses — loans(8,564)(8,499)(65)0.8 
Total loans held-for-portfolio, net$901,151 $891,672 $9,479 1.1 %

The increases in the loan held-for-portfolio were driven primarily by a $37.3 million, or 10.0%, 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 $3.2 million, or 12.1%, as demand for this product remains high with homeowners utilizing their home equity lines to access liquidity as opposed to paying off their lower rate mortgages. Manufactured home loans and floating home loans increased by $1.6 million and $2.3 million, respectively, or 3.9% and 2.6%, primarily the result of seasonality as it relates to floating homes and affordability of manufactured homes in the current market as well as internal efficiencies in how we process these loans. The growth in these
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portfolios were partially offset by a $20.3 million, or 27.8%, decline in construction and land loans largely due to project completions and 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 originations.
At September 30, 2025, our loan portfolio, net of deferred loan fees, remained well-diversified. At that date, commercial and multifamily real estate loans accounted for 44.8% of total loans, one-to-four family loans, including home equity loans, accounted for 31.5% 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 16.3% of total loans. Construction and land loans accounted for 5.8% of total loans at September 30, 2025.
Loans held-for-sale totaled $271 thousand at September 30, 2025, compared to $487 thousand at December 31, 2024. The decrease 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 September 30,Nine Months Ended September 30,
 2025202420252024
ACL — Loans:
Balance at beginning of period$8,536 $8,493 $8,499 $8,760 
Charge-offs(57)(20)(107)(103)
Recoveries20 6 28 16 
Net charge-offs(37)(14)(79)(87)
Provision for (release of) credit losses65 106 144 (88)
Balance at end of period$8,564 $8,585 $8,564 $8,585 
Reserve for Unfunded Commitments:
Balance at beginning of period122 245 234 193 
Provision for (release of) credit losses(10)(98)(122)(46)
Balance at end of period112 147 112 147 
ACL$8,676 $8,732 $8,676 $8,732 
Ratio of net charge-offs during the period to average loans outstanding during the period(0.02)%(0.01)%(0.01)%(0.01)%
Our ACL — loans increased $65 thousand, or 0.8%, to $8.6 million at September 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 Nine Months Ended September 30, 2025 and 2024 — Provision for Credit Losses.”
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The following tables show certain credit ratios at the dates and for the periods indicated and the components of each ratio's calculation (dollars in thousands).
 At September 30, 2025At December 31, 2024
ACL - loans as a percentage of total loans outstanding0.94 %0.94 %
ACL — loans$8,564 $8,499 
Total loans outstanding$911,953 $901,827 
Nonaccrual loans as a percentage of total loans outstanding
0.30 %0.83 %
Total nonaccrual loans$2,717 $7,491 
Total loans outstanding$911,953 $901,827 
ACL - loans as a percentage of nonaccrual loans
315.20 %113.46 %
ACL — loans$8,564 $8,499 
Total nonaccrual loans$2,717 $7,491 
ACL as a percentage of total loans outstanding0.95 %0.97 %
ACL$8,676 $8,733 
Total loans outstanding$911,953 $901,827 
ACL as a percentage of nonaccrual loans319.32 %116.58 %
ACL$8,676 $8,733 
Total nonaccrual loans$2,717 $7,491 
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Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
($ in thousands)
Net recoveries (charge-offs) during period to average loans outstanding:
One-to-four family:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$259,374 $273,113 $262,652 $275,054 
Home equity:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$29,166 $25,762 $28,420 $24,838 
Commercial and multifamily real estate:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$404,999 $343,282 $392,968 $328,361 
Construction and land:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— — — 
Average loans outstanding
$52,710 $97,296 $54,364 $109,884 
Manufactured homes:
(0.44)%— %(0.21)%(0.08)%
Net (charge-offs)/recoveries
$(47)$— $(66)$(23)
Average loans outstanding
$42,748 $39,582 $42,366 $38,277 
Floating homes:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$89,699 $84,766 $88,347 $82,177 
Other consumer:
0.23 %(0.30)%(0.10)%(0.46)%
Net (charge-offs)
$10 $(14)$(13)$(64)
Average loans outstanding
$17,075 $18,331 $17,407 $18,614 
Commercial business:
— %— %— %— %
Net (charge-offs)/recoveries
$— $— $— $— 
Average loans outstanding
$15,406 $18,024 $15,041 $19,210 
Total loans:(0.02)%(0.01)%(0.01)%(0.01)%
Net (charge-offs)
$(37)$(14)$(79)$(87)
Average loans outstanding
$911,177 $900,156 $901,565 $896,415 
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 $4.4 million, or 59.1%, to $3.1 million, or 0.29% of total assets, at September 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
 September 30,
2025		December 31,
2024		Amount
Change		Percent
Change
Total nonperforming loans$2,717 $7,491 $(4,774)(63.7)
OREO and repossessed assets344 — 344 — 
Total nonperforming assets$3,061 $7,491 $(4,430)(59.1)%

The decrease in NPAs from December 31, 2024 was primarily due to payoffs of nonaccrual loans totaling $7.7 million, including one commercial real estate loan, one floating home loan and one mortgage loan, the return of $334 thousand of loans
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to accrual status, loan charge-offs of $261 thousand, and regular loan payments totaling $269 thousand. These decreases were partially offset by the addition of 15 loans totaling $3.8 million to nonaccrual status and $344 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 0.30% at September 30, 2025, compared to 0.83% at December 31, 2024.

Mortgage Servicing Rights.  The fair value of mortgage servicing rights decreased $464 thousand, or 9.7%, to $4.3 million at September 30, 2025 from $4.8 million at December 31, 2024. The decrease was primarily related to a decline in the size of our mortgage servicing portfolio and an increase in the estimated cost of servicing. 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 $61.1 million, or 7.3%, to $898.9 million at September 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 $1.1 million, or 0.9%, to $131.4 million at September 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 14.6% of total deposits at September 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):
 September 30, 2025December 31, 2024
 AmountWtd. Avg. RateAmountWtd. Avg. Rate
Noninterest-bearing demand$126,708 — %$130,095 — %
Interest-bearing demand129,570 0.28 142,126 0.34 
Savings60,106 0.10 61,252 0.10 
Money market286,827 3.18 206,067 3.60 
Time deposits291,052 3.95 295,822 4.57 
Escrow (1)
4,680 — 2,437 — 
Total deposits$898,943 2.33 %$837,799 2.63 %
(1) Escrow balances shown in noninterest-bearing deposits on the Condensed Consolidated Balance Sheets. 
Scheduled maturities of time deposits at September 30, 2025, are as follows (in thousands):
Year Ending December 31,Amount
2025$96,600 
2026168,410 
202711,943 
202811,895 
2029442 
Thereafter1,762 
 $291,052 
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 September 30, 2025 and December 31, 2024, totaled $103.9 million and $90.9 million, respectively. Deposit amounts in excess of $250,000 are not federally insured. As of September 30, 2025, uninsured deposits totaled $168.6 million, which represented 18.8% 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.
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Borrowings, comprised of FHLB advances, were $25.0 million at both September 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. FHLB advances outstanding at September 30, 2025 had maturities ranging from early 2026 through early 2028. Subordinated notes, net totaled $11.8 million at both September 30, 2025 and December 31, 2024.
Stockholders’ Equity. Total stockholders’ equity increased $3.8 million, or 3.7%, to $107.5 million at September 30, 2025, from $103.7 million at December 31, 2024. This increase primarily reflects $4.9 million of net income earned during the nine months ended September 30, 2025, $231 thousand of share-based compensation, an $80 thousand decrease in accumulated other comprehensive loss, net of tax, and $21 thousand related to the exercise of common stock options. These changes were partially offset by the payment of $1.5 million in cash dividends to 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 September 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$910,330 $13,512 5.89 %$898,570 $12,876 5.70 %
Investments12,541 124 3.92 13,806 132 3.80 
Cash and cash equivalents95,422 1,016 4.22 138,240 1,830 5.27 
Total interest-earning assets (1)
1,018,293 14,652 5.71 1,050,616 14,838 5.62 
Interest-bearing liabilities:
Savings and money market accounts350,582 2,367 2.68 340,281 2,688 3.14 
Demand and NOW accounts132,309 103 0.31 148,252 151 0.41 
Certificate accounts291,139 2,805 3.82 303,632 3,524 4.62 
Subordinated notes11,787 168 5.65 11,745 168 5.69 
Borrowings25,000 269 4.27 40,000 434 4.32 
Total interest-bearing liabilities810,817 5,712 2.79 %843,910 6,965 3.28 %
Net interest income$8,940 $7,873 
Net interest rate spread2.91 %2.34 %
Net earning assets$207,476  $206,706 
Net interest margin3.48 %2.98 %
Average interest-earning assets to average interest-bearing liabilities125.59 % 124.49 %
Noninterest-bearing deposits$127,970 $132,762 
Total deposits$902,000 $5,275 2.32 %$924,927 $6,363 2.74 %
Total funding(2)
$938,787 $5,712 2.41 %$976,672 $6,965 2.84 %
(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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Nine Months Ended September 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$900,780 $39,795 5.91 %$895,300 $37,429 5.58 %
Investments11,431 355 4.15 12,607 377 3.99 
Cash and cash equivalents97,996 3,123 4.26 122,194 4,832 5.28 
Total interest-earning assets (1)
1,010,207 43,273 5.73 1,030,101 42,638 5.53 
Interest-bearing liabilities:
Savings and money market accounts344,274 6,684 2.60 308,845 6,669 2.88 
Demand and NOW accounts137,090 317 0.31 153,897 440 0.38 
Certificate accounts289,800 8,704 4.02 312,176 10,950 4.69 
Subordinated notes11,777 504 5.72 11,735 504 5.74 
Borrowings25,002 798 4.27 40,000 1,293 4.32 
Total interest-bearing liabilities807,943 17,007 2.81 %826,653 19,856 3.21 %
Net interest income$26,266 $22,782 
Net interest rate spread2.91 %2.32 %
Net earning assets$202,264 $203,448 
Net interest margin3.48 %2.95 %
Average interest-earning assets to average interest-bearing liabilities125.03 %124.61 %
Noninterest-bearing deposits$125,370 $131,365 
Total deposits$896,534 $15,705 2.34 %$906,283 $18,059 2.66 %
Total funding(2)
$933,313 $17,007 2.44 %$958,018 $19,856 2.77 %
(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 September 30, 2025 vs. 2024
Nine Months Ended September 30, 2025 vs. 2024
 Increase (Decrease) due toTotal
Increase (Decrease)		Increase (Decrease) due toTotal
Increase (Decrease)
 VolumeRateVolumeRate
Interest-earning assets:   
Loans receivable$175 $461 $636 $242 $2,124 $2,366 
Investments(13)5 (8)(37)15 (22)
Cash and cash equivalents(456)(358)(814)(771)(938)(1,709)
Total interest-earning assets(294)108 (186)(566)1,201 635 
Interest-bearing liabilities:
Savings and Money Market accounts70 (391)(321)688 (673)15 
Demand and NOW accounts(12)(36)(48)(39)(84)(123)
Certificate accounts(120)(599)(719)(672)(1,574)(2,246)
Subordinated notes1 (1)— 2 (2)— 
Borrowings(161)(4)(165)(479)(16)(495)
Total interest-bearing liabilities$(222)$(1,031)$(1,253)$(500)$(2,349)$(2,849)
Change in net interest income$1,067 $3,484 

Comparison of Results of Operation for the Three and Nine Months Ended September 30, 2025 and 2024

General.  
Q3 2025 vs Q3 2024. Net income increased $541 thousand, or 46.9%, to $1.7 million, or $0.66 per diluted common share, for the three months ended September 30, 2025, compared to $1.2 million, or $0.45 per diluted common share, for the three months ended September 30, 2024, reflecting strong growth in net interest income. The improvement was partially offset by higher provisions for credit losses, a modest decline in noninterest income, and slightly higher income taxes. Noninterest expenses remained relatively flat contributing positively to the overall increase in net income.
YTD 2025 vs. YTD 2024. Net income increased $2.2 million, or 80.7%, to $4.9 million, or $1.90 per diluted common share, for the nine months ended September 30, 2025, compared to $2.7 million, or $1.05 per diluted common share, for the nine months ended September 30, 2024, primarily driven by higher net interest income. This was partially offset by modest increases in provisions for credit losses, higher noninterest expenses, and an increase in income taxes, as well as a decrease in noninterest income. Overall, the Company’s strong interest income performance was the primarily factor behind the year-to-date improvement in profitability.

Interest Income 
Three Months Ended September 30,Amount
Change		Percent Change
20252024
Loans, including fees$13,512 $12,876 $636 4.9 %
Interest and dividends on investments124 132 (8)(6.1)
Cash and cash equivalents1,016 1,830 (814)(44.5)
  Total interest income$14,652 $14,838 $(186)(1.3)%
Q3 2025 vs Q3 2024. Total interest income decreased $186 thousand, or 1.3%, to $14.7 million for the three months ended September 30, 2025, from $14.8 million for the three months ended September 30, 2024, primarily due to a higher average balance of loans and a 19 basis point increase in the average yield on loans, partially offset by lower average balance of cash and cash equivalents and a 105 basis point decline in the average yield on cash and cash equivalents.
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Interest income on loans increased $636 thousand, or 4.9%, to $13.5 million for the three months ended September 30, 2025, from $12.9 million for the three months ended September 30, 2024. The average yield on total loans rose to 5.89% for the three months ended September 30, 2025, from 5.70% for the three months ended September 30, 2024, primarily due to the origination of new loans at higher interest rates and upward repricing on variable-rate loans. The average balance of total loans was $910.3 million for the three months ended September 30, 2025, compared to $898.6 million for the three months ended September 30, 2024.
Interest and dividends on investments decreased $8 thousand, or 6.1%, to $124 thousand for the three months ended September 30, 2025, compared to $132 thousand for the three months ended September 30, 2024. The decrease was due to a lower average balance, which totaled $12.5 million for the three months ended September 30, 2025, compared to $13.8 million for the three months ended September 30, 2024, resulting from regularly scheduled payments and maturities. Partially offsetting this decrease in balance, the average yield on investments increased to 3.92% for the three months ended September 30, 2025, from 3.80% for the same period in 2024, due to larger paydowns on lower yielding investments.
Interest income on cash and cash equivalents decreased $814 thousand, or 44.5%, to $1.0 million for the three months ended September 30, 2025, compared to $1.8 million for the three months ended September 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 4.22% for the three months ended September 30, 2025, compared to 5.27% for the three months ended September 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 $95.4 million for the three months ended September 30, 2025, compared to $138.2 million for the three months ended September 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, redeploying cash into higher yielding loans and a decrease in certificate accounts which contributed to the overall lower cash balance.
Nine Months Ended September 30,Amount
Change		Percent Change
20252024
Loans, including fees$39,795 $37,429 $2,366 6.3 %
Interest and dividends on investments355 377 (22)(5.8)
Cash and cash equivalents3,123 4,832 (1,709)(35.4)
  Total interest income$43,273 $42,638 $635 1.5 %

YTD 2025 vs. YTD 2024. Total interest income increased $635 thousand, or 1.5%, to $43.3 million for the nine months ended September 30, 2025, from $42.6 million for the nine months ended September 30, 2024, due to a higher average loan balance and a 33 basis points increase in average yield on loans, as well as a 16 basis points increase in average yield on investments. These increases were partially offset by a lower average balance of cash and cash equivalents, and a 102 basis point decline in average yield on cash and cash equivalents, along with a lower average balance of investments.
Interest income on loans increased $2.4 million, or 6.3%, to $39.8 million for the nine months ended September 30, 2025, compared to $37.4 million for the nine months ended September 30, 2024, primarily driven by a 33 basis point increase in the average yield on loans. The average yield on total loans was 5.91% for the nine months ended September 30, 2025, compared to 5.58% for the nine months ended September 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 $900.8 million for the nine months ended September 30, 2025, compared to $895.3 million for the nine months ended September 30, 2024.
Interest income on cash and cash equivalents decreased $1.7 million, or 35.4% to $3.1 million for the nine months ended September 30, 2025, compared to $4.8 million for the nine months ended September 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 4.26% for the nine months ended September 30, 2025, compared to 5.28% for the nine months ended September 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 $98.0 million for the nine months ended September 30, 2025, compared to $122.2 million for the nine months ended September 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, the redeployment of cash into higher yielding loans and a decrease in certificate accounts which contributed to the overall lower cash balance.

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Interest Expense  
Three Months Ended September 30,
Amount
Change		Percent Change
20252024
Deposits$5,275 $6,363 $(1,088)(17.1)%
Borrowings269 434 (165)(38.0)
Subordinated notes168 168 — — 
  Total interest expense$5,712 $6,965 $(1,253)(18.0)%
Q3 2025 vs Q3 2024. Total interest expense decreased $1.3 million, or 18.0%, to $5.7 million for the three months ended September 30, 2025, from $7.0 million for the three months ended September 30, 2024. The decrease was primarily attributable to lower interest rates across most interest-bearing liabilities, resulting from lower market interest rates generally, as well as a $222 thousand decrease related to lower average liability balances, particularly in certificate accounts and borrowings.
Interest expense on certificate accounts declined $719 thousand, driven by a $120 thousand volume-related decrease and a $599 thousand rate-related decrease. The average balance of certificate accounts declined to $291.1 million for the three months ended September 30, 2025, from $303.6 million during the same period in 2024, while the average rate paid decreased to 3.82% from 4.62%. 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 savings and money market accounts decreased $321 thousand, or 11.94%, to $2.4 million for the three months ended September 30, 2025, from $2.7 million for the same period in 2024. The decrease was driven entirely by lower average rate paid on these accounts, which declined 46 basis points to 2.68% from 3.14%. The rate decrease reflects repricing strategies implemented to manage overall funding costs in a stabilizing rate environment, partially offset by higher average balances, which increased to $350.6 million from $340.3 million, reflecting shifts in customer deposit preferences, as well as higher rates offered on some of these products as compared to new certificate accounts. The interest expense on demand and NOW accounts decreased $48 thousand, due to both lower average balances and slightly lower rates.
Interest expense on borrowings, comprised solely of FHLB advances, decreased $165 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 September 30, 2025, compared to $40.0 million for the three months ended September 30, 2024. The average rate paid on borrowings decreased five basis points to 4.27% for the quarter ended September 30, 2025, compared to 4.32% for the same quarter in 2024. Interest expense on subordinated notes was $168 thousand for both the three months ended September 30, 2025 and the three months ended September 30, 2024, with no material changes in the average balance or rate paid. On October 1, 2025, we redeemed $4.0 million of the $12.0 million of our outstanding subordinated notes.
Nine Months Ended September 30,Amount
Change		Percent Change
20252024
Deposits$15,705 $18,059 $(2,354)(13.0)%
Borrowings798 1,293 (495)(38.3)
Subordinated notes504 504 — — 
  Total interest expense$17,007 $19,856 $(2,849)(14.3)%
YTD 2025 vs. YTD 2024. Total interest expense decreased $2.8 million, or 14.3%, to $17.0 million for the nine months ended September 30, 2025, from $19.9 million for the nine months ended September 30, 2024. Interest expense on deposits decreased $2.4 million, or 13.0%, to $15.7 million for the nine months ended September 30, 2025, compared to $18.1 million for the nine months ended September 30, 2024. The decrease was primarily the result of lower average rates paid on all categories of interest-bearing deposits, as well as a lower average balance of demand and NOW accounts, and certificate accounts, partially offset by an increase in the average balance of savings and money market accounts. The average cost of total deposits decreased 32 basis points to 2.34% for the nine months ended September 30, 2025, from 2.66% for the nine months ended September 30, 2024.
Interest expense on borrowings, comprised solely of FHLB advances, was $798 thousand for the nine months ended September 30, 2025, compared to $1.3 million for the nine months ended September 30, 2024, reflecting the decreased use of FHLB advances to supplement our liquidity needs. The average cost of FHLB advances decreased five basis points to 4.27% for the nine months ended September 30, 2025, compared to 4.32% for the same period in 2024. The average cost of FHLB advances declined due to same reason noted above in the quarterly comparison. The average balance of FHLB advances was $25.0 million for the nine months ended September 30, 2025, compared to $40.0 million for the nine months ended
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September 30, 2024, due to the payoff of an FHLB advance during the fourth quarter of 2024. Interest expense on subordinated notes was $504 thousand for both the nine months ended September 30, 2025 and nine months ended September 30, 2024. On October 1, 2025, we redeemed $4.0 million of the $12.0 million of our outstanding subordinated notes.

Net Interest Income.  
Q3 2025 vs Q3 2024. Net interest income increased $1.1 million, or 13.6%, to $8.9 million for the three months ended September 30, 2025, from $7.9 million for the three months ended September 30, 2024. The increase 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 yields 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 loan originations at higher interest rates. These increases were partially offset by a decrease in the average balance of interest-earning assets. Overall, the decline in average funding costs and increase in average yield on loans primarily contributed to a 57 basis point improvement in the net interest rate spread and a 50 basis point increase in the annualized net interest margin, which rose to 3.48% for the three months ended September 30, 2025, compared to 2.98% for the same period in 2024.
YTD 2025 vs. YTD 2024. Net interest income increased $3.5 million, or 15.3%, to $26.3 million for the nine months ended September 30, 2025, from $22.8 million for the nine months ended September 30, 2024. Net interest margin (annualized) was 3.48% and 2.95% for the nine months ended September 30, 2025 and 2024, respectively. The increases in net interest income and net interest margin primarily were due to the lower average cost of funding and the increase in average loan yields, as described above in the quarterly comparison.
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 lowered the target range 100 basis points to 4.25% to 4.50% between September 2024 and December 2024. The target rate range remained at this level until September 2025, when the FOMC implemented an additional 25 basis point reduction, lowering the target range to 4.00% to 4.25%. The lower interest rate environment has contributed to decreased funding costs, while loan yields have remained elevated due to repricing of variable-rate loans and higher rates on new loan originations.
Provision for Credit Losses.  
The following table reflects the components of the provision for (release of) credit losses during the periods indicated (dollars in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Provision for (release of) credit losses on loans$65 $106 $144 $(88)
Release of credit losses on unfunded loan commitments(10)(98)(122)(46)
Provision for (release of) credit losses$55 $8 $22 $(134)
A provision for credit losses of $55 thousand was recorded for the quarter ended September 30, 2025, compared to a provision for credit losses of $8 thousand for the quarter ended September 30, 2024. The larger provision in the current quarter, primarily reflects the significant release of unfunded commitment reserves in the third quarter of 2024. That release was largely driven by both a reduction in unfunded balances as projects were completed and improvements in qualitative factors within the construction loan segment due to improved economic conditions. The provision for credit losses on loans in the current quarter was lower relative to the third quarter of 2024 due to lower loan portfolio growth during the current quarter as compared to the same quarter one year ago and a lower loss reserve rate, which was partially influenced by improving credit quality. Net charge-offs for the three months ended September 30, 2025 totaled $37 thousand, compared to $14 thousand for three months ended September 30, 2024.
A provision for credit losses of $22 thousand was recorded for the nine months ended September 30, 2025, compared to a release of credit losses of $134 thousand for the nine months ended September 30, 2024. The provision for credit losses during the current year period was due primarily to a larger overall loan portfolio, largely contributing to the need for a provision in the current year period, as compared to a decline in loan growth in the prior year period. Qualitative adjustments remained largely consistent throughout 2025, with the exception of new adjustments for increased uncertainty about economic conditions and a decline in commercial real estate values. During the prior year period, the release of credit losses on loans primarily related to lower reserves on our other consumer loan portfolio and residential loan portfolios due to qualitative adjustments for changes in concentration, the value of underlying collateral, and market conditions, partially offset by growth in the loan portfolio, an increase in nonaccrual loans, the weighted average life of the portfolio, and enhancements to the loss model, including an
41


additional qualitative adjustment related to loan review. Net charge-offs for the nine months ended September 30, 2025 totaled $79 thousand, compared to $87 thousand for nine months ended September 30, 2024.
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.
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.
Noninterest Income.  Total noninterest income decreased $354 thousand, or 28.7%, to $881 thousand for the three months ended September 30, 2025, as compared to $1.2 million for the three months ended September 30, 2024, as reflected below (dollars in thousands):
 Three Months Ended September 30,Amount
Change		Percent
Change
 20252024
Service charges and fee income$672 $628 $44 7.0 %
Earnings on BOLI225 186 39 21.0 
Mortgage servicing income262 280 (18)(6.4)
Fair value adjustment on mortgage servicing rights(372)101 (473)(468.3)
Net gain on sale of loans94 40 54 135.0
Total noninterest income$881 $1,235 $(354)(28.7)%
The decrease in noninterest income was primarily due to:
•a $473 thousand decline in the fair value adjustment on mortgage servicing rights due to an overall smaller servicing portfolio, as well as a lower market valuation due to a change in one of our assumptions which assumed higher costs to service loans than previously estimated; and
•an $18 thousand decrease in mortgage servicing income as a result of the portfolio paying down at a faster rate than originations replaced repayments;

These decreases were partially offset by:
•a $44 thousand increase in service charges and fee income, primarily due to higher interchange income in the current quarter;
•a $39 thousand increase in earnings on BOLI, primarily due to the strategic surrender and exchange of existing policies into higher yielding policies in the first quarter of 2025, with the benefit of improved yields continuing to the third quarter.
•a $54 thousand increase in net gain on sale of loans due to an increase in the volume of loans sold.
42


Total noninterest income decreased $396 thousand, or 11.3%, to $3.1 million for the nine months ended September 30, 2025, as compared to $3.5 million for the nine months ended September 30, 2024, as reflected below (dollars in thousands):
 Nine Months Ended September 30,Amount
Change		Percent
Change
 20252024
Service charges and fee income$2,020 $2,001 $19 0.9 %
Earnings on BOLI648 498 150 30.1 
Mortgage servicing income794 841 (47)(5.6)
Fair value adjustment on mortgage servicing rights(551)(81)(470)580.2 
Net gain on sale of loans187 205 (18)(8.8)
Other income$— $30 $(30)(100.0)%
Total noninterest income$3,098 $3,494 $(396)(11.3)%
The decrease in noninterest income was primarily due to:
•a $470 thousand decrease in fair value adjustment on mortgage servicing rights, for the same reasons noted above in the quarterly comparison;
•a $47 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 other income due to a prior year gain on disposal of assets due to insurance claims on the loss of fully depreciated assets and no comparable gain in the current period; and
•a $18 thousand decrease in net gain on sale of loans due to fewer loans sold.
These decreases were partially offset by;
•a $150 thousand increase in earnings on BOLI, primarily due to the strategic surrender and exchange of existing policies into higher-yielding policies in 2025, as well as changes due to market fluctuations; and
•a $19 thousand increase in service charges and fee income, reflecting higher fees from new client acquisitions in specialty banking deposit accounts, increased interchange income, and a Mastercard volume incentive received in the first quarter of 202, partially offset by a second-quarter 2024 recovery of potential lost fee income related to a vendor error.


Noninterest Expense.  Total noninterest expense remained relatively unchanged during the three months ended September 30, 2025, compared the three months ended September 30, 2024, as reflected below (dollars in thousands):
 Three Months Ended September 30,Amount
Change		Percent
Change
 20252024
Salaries and benefits$4,259 $4,469 $(210)(4.7)%
Operations1,483 1,540 (57)(3.7)%
Regulatory assessments221 189 32 16.9 %
Occupancy431 414 17 4.1 %
Data processing1,274 1,067 207 19.4 %
Net loss (gain) on OREO and repossessed assets8 — 8 — %
Total noninterest expense$7,676 $7,679 $(3)— %
While overall noninterest expense remained flat, there were fluctuations within certain expense categories, as noted below:
•a $210 thousand decrease in salaries and benefits related to higher deferred salaries resulting from higher loan originations in the current quarter than in the same quarter one year ago; and
•a $57 thousand decrease in operations expense, primarily due to lower expenses across various accounts, resulting from ongoing cost-saving initiatives and process improvements, as well as the impact of timing of expenses, including marketing campaigns and charitable contributions.
These decreases were partially offset by:
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•a $207 thousand increase in data processing expenses, reflecting the amortization of projects implemented at the end of the third quarter of 2024, as well as the deployment of new software technology in 2025 that continues to streamline operations and processes;
•a $32 thousand increase in regulatory assessments, due to higher accruals in the current year based on an increase in estimated exam costs; and
•a $17 thousand increase in occupancy expense, due to higher building lease charges in 2025 resulting from lease renewals and maintenance charges.
The efficiency ratio for the quarter ended September 30, 2025 was 78.16%, compared to 84.31% for the quarter ended September 30, 2024. The improvement in the efficiency ratio was primarily due to higher net interest income resulting from lower funding costs.
Total noninterest expense increased $179 thousand, or 0.8%, to $23.3 million during the nine months ended September 30, 2025, compared to $23.1 million during the nine months ended September 30, 2024, as reflected below (dollars in thousands):
 Nine Months Ended September 30,Amount
Change		Percent
Change
 20252024
Salaries and benefits$13,175 $13,670 $(495)(3.6)%
Operations4,291 4,566 (275)(6.0)
Regulatory assessments663 598 65 10.9 
Occupancy1,284 1,255 29 2.3 
Data processing3,821 2,995 826 27.6 
Net loss (gain) on OREO and repossessed assets19 (10)29 (290.0)
Total noninterest expense$23,253 $23,074 $179 0.8 %
The increase in noninterest expense was primarily due to:
•an $826 thousand increase in data processing expenses, due to the reasons stated above in the quarterly comparison, as well as new software technology being deployed in 2025 that continues to streamline our operations;
•a $65 thousand increase in regulatory assessments, due to higher accruals in the current year based on an increase in estimated exam costs;
•a $29 thousand increase in occupancy expense due to same reason noted above in the quarterly comparison; and
•a $29 thousand increase in OREO and repossessed assets related-expense, due to the addition of new properties in 2025 and the absence of property sales in the current year.
These increases were partially offset by:
•a $495 thousand decrease in salaries and benefits related to lower incentive compensation expense as a result of changes to the calculation of incentive compensation; and
•a $275 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 $395 thousand and $1.2 million for the three and nine months ended September 30, 2025, compared to $267 thousand and $617 thousand for the three and nine months ended September 30, 2024, respectively. The effective tax rates for the three and nine months ended September 30, 2025 were 18.90% and 19.30%, compared to 18.79% and 18.50% for the same periods in 2024. The increase in the effective tax rate for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily 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 into law the One Big Beautiful Bill Act (“OBBBA”). Except for certain provisions, the OBBBA is effective for tax years beginning on or after January 1, 2025 and permanently extends key business tax breaks originally enacted under the 2017 Tax Cuts and Jobs Act. The Company evaluated the potential impact of this legislation on its income tax provision and determined that the impact was not material to our consolidated financial statements.
44


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 nine months ended September 30, 2025.
Capital. Stockholders’ equity totaled $107.5 million at September 30, 2025 and $103.7 million at December 31, 2024. In addition to net income of $4.9 million, other sources of capital during the nine months ended September 30, 2025 primarily included $231 thousand related to stock-based compensation, $80 thousand of other comprehensive income, net of tax, primarily resulting from lower unrealized losses on available for sale securities, and $21 thousand in proceeds from stock option exercises. Uses of capital during the nine months ended September 30, 2025 primarily included $1.5 million of dividends paid on common stock.
We paid cash dividends of $0.57 per common share during the nine months ended September 30, 2025 and September 30, 2024, which equates to a dividend payout ratio of 29.75% and 53.66%, 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 September 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 asset sources 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 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.
45


As of September 30, 2025, we had $108.8 million in cash and cash equivalents and available-for-sale investment securities, and $271 thousand in loans held-for-sale. At September 30, 2025, we had the ability to borrow $158.9 million in FHLB advances and access to additional borrowings of $19.5 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 September 30, 2025. We also had a $20.0 million credit facility with Pacific Coast Banker’s Bank available, with no balance outstanding, at September 30, 2025. Subject to market conditions, we expect to utilize these borrowing facilities from time to time 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 September 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 such payments as of September 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 September 30, 2025 and December 31, 2024, financial instrument contractual amounts representing credit risk were as follows (in thousands):
 September 30, 2025December 31, 2024
Residential mortgage commitments$4,372 $3,758 
Unfunded construction commitments19,640 25,810 
Unused lines of credit30,186 26,105 
Irrevocable letters of credit183 163 
Total loan commitments$54,381 $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 September 30, 2025, Sound Financial Bancorp, on an unconsolidated basis, had $6.3 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs. Subsequent to September 30, 2025, the Company utilized $4.0 million to partially redeem its outstanding subordinated notes. See “Note 8 — Borrowings” for additional detail.
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.
46



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 September 30, 2025, the Bank’s and the Company’s CBLRs were 10.71% and 10.14%, 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 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 September 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 September 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 September 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 September 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
July 1, 2025 - July 31, 2025—$— —$— 
August 1, 2025 - August 31, 2025—$— —— 
September 1, 2025 - September 30, 2025—$— —— 
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 September 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 September 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: November 10, 2025By:/s/  Laura Lee Stewart
  Laura Lee Stewart
  Chief Executive Officer
  (Principal Executive Officer and Duly Authorized Officer)
By:/s/  Wes Ochs
Wes Ochs
President/Chief Financial Officer
(Principal Financial Officer)
50

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