SFBC

SEATTLE, July 28, 2026 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (the "Company") (Nasdaq: SFBC), the holding company for Sound Community Bank (the "Bank"), today reported net income of $2.5 million for the quarter ended June 30, 2026, or $0.98 diluted earnings per share, compared to net income of $1.6 million, or $0.61 diluted earnings per share, for the quarter ended March 31, 2026, and $2.1 million, or $0.79 diluted earnings per share, for the quarter ended June 30, 2025. Consistent with the Company's commitment to deploy capital thoughtfully, the Company also announced today that its Board of Directors declared a cash dividend on the Company's common stock of $0.21 per share, payable on August 21, 2026 to stockholders of record as of the close of business on August 7, 2026. Comments from the Chief Executive Officer and President / Chief Financial Officer “Our mid-year results reflect our continued focus on enhancing financial performance despite ongoing client concerns regarding economic uncertainty, inflation and interest rates. While commercial production slowed during the quarter, saleable residential production grew. As of June 30, 2026, our year-to-date originations of saleable residential loans nearly exceeded our total originations of those loans for all of 2025, representing significant improvement over both last year and 2024,” remarked Laurie Stewart, Chief Executive Officer. "The second quarter represented a continued step forward in our profitability and balance sheet optimization initiatives. During the quarter, we meaningfully reduced low-rate loans held-for-portfolio, managed down higher-rate reciprocal deposits, repaid FHLB advances, and maintained a loans-to-deposits ratio at quarter-end of approximately 96%. These actions reflect our ongoing focus on profitability, liquidity, and prudent capital deployment,” said Wes Ochs, President and Chief Financial Officer. “We remain focused on generating profitable growth, improving operating efficiency, and deploying capital thoughtfully while maintaining strong liquidity and capital ratios.” Operating Results Net Interest Income after Provision for Credit Losses Q2 2026 vs. Q1 2026 Interest income increased $296 thousand, or 2.0%, to $14.8 million for the quarter ended June 30, 2026, compared to $14.5 million for the quarter ended March 31, 2026. The increase was primarily due to a 16 basis point increase in the average yield on loans and an 18 basis point increase in the average yield on investments, partially offset by lower average balances of loans and interest-bearing cash. Interest income on loans increased $470 thousand, or 3.5%, to $13.8 million for the quarter ended June 30, 2026, compared to $13.3 million for the quarter ended March 31, 2026. The average balance of total loans was $911.9 million for the quarter ended June 30, 2026, compared to $914.1 million for the quarter ended March 31, 2026. The decrease in the average balance of total loans was primarily due to declines in commercial and multifamily loans, one-to-four family loans and other consumer loans, partially offset by growth in construction and land loans. The average balances for home equity loans, floating home loans and commercial business loans remained relatively unchanged from the prior quarter. The average yield on total loans was 6.06% for the quarter ended June 30, 2026, up from 5.90% for the quarter ended March 31, 2026. This increase in yield was primarily due to new loan originations at higher rates during the current quarter and repayment of loans at lower yields, as well as the collection of a large prepayment penalty on a commercial loan, a non-recurring item of a magnitude that the company does not expect to repeat in future periods. Interest income on investments was $102 thousand for the quarter ended June 30, 2026, compared to $97 thousand for the quarter ended March 31, 2026. The increase was primarily due to an 18 basis point increase in average yield, partially offset by a decrease in the average balance of investments. Interest income on interest-earning cash decreased to $882 thousand for the quarter ended June 30, 2026, compared to $1.1 million for quarter ended March 31, 2026, reflecting a lower average balance. Interest expense decreased $163 thousand, or 3.0%, to $5.3 million for the quarter ended June 30, 2026, compared to the quarter ended March 31, 2026. The decrease was primarily the result of lower average balances of savings and money market accounts, certificates of deposit and FHLB advances, together with lower funding costs on deposits. These decreases were partially offset by a higher average balance of demand and NOW accounts. The average cost of deposits declined to 2.15% for the quarter ended June 30, 2026, from 2.19% for the quarter ended March 31, 2026, as higher cost deposits repriced at lower rates in response to declining market interest rates from September 2025 through June 2026. Interest expense on FHLB advances also declined from the prior quarter, primarily reflecting the early repayment of an advance during the current quarter. Net interest margin, annualized, increased to 3.73% for the quarter ended June 30, 2026, from 3.51% for the quarter ended March 31, 2026, primarily due to an increase in yields earned on loans receivable and investments and lower funding costs, as well as the collection of a large prepayment penalty on a commercial loan mentioned above. A release of provision for credit losses of $223 thousand was recorded for the quarter ended June 30, 2026, consisting of a release of provision for credit losses on loans of $185 thousand and a release of provision for credit losses on unfunded loan commitments of $38 thousand. This compared to a provision for credit losses of $123 thousand for the quarter ended March 31, 2026, consisting of a provision for credit losses on loans of $49 thousand and provision for credit losses on unfunded loan commitments of $74 thousand. The decrease in the provision for credit losses for the quarter ended June 30, 2026 compared to the quarter ended March 31, 2026 primarily reflects decreases in the balances of loans and unfunded commitments. Other qualitative adjustments were largely applied to the same segments at a similar risk adjustment compared to the quarter ended March 31, 2026. Expected credit loss estimates are based on a range of factors, including market conditions, borrower-specific information, projected delinquencies, and the anticipated effects of economic trends on borrowers' ability to repay. Q2 2026 vs. Q2 2025 Interest income on loans increased $82 thousand, or 0.6%, to $13.8 million for the quarter ended June 30, 2026, compared to $13.7 million for the quarter ended June 30, 2025. The average balance of total loans was $911.9 million for the quarter ended June 30, 2026, up from $895.0 million for the quarter ended June 30, 2025. The average yield on total loans was 6.06% for the quarter ended June 30, 2026, down from 6.14% for the quarter ended June 30, 2025. Interest income on investments was $102 thousand for the quarter ended June 30, 2026, compared to $123 thousand for the quarter ended June 30, 2025. The decrease was primarily due to a 30 basis point decline in average yield and a decrease in the average balance of investments. Interest income on interest-earning cash decreased $215 thousand to $882 thousand for the quarter ended June 30, 2026, compared to $1.1 million for the quarter ended June 30, 2025. The decrease was primarily a result of a lower average yield, reflecting lower market interest rates, and, to a lesser extent, a lower average balance of interest-earning cash. Interest expense decreased $405 thousand, or 7.2%, to $5.3 million for the quarter ended June 30, 2026, compared to $5.7 million for the quarter ended June 30, 2025. The decrease was primarily the result of a $16.4 million decrease in the average balance of FHLB advances, a $7.9 million decrease in the average balance of interest-bearing demand and NOW accounts, and a $4.0 million decrease in the average balance of subordinated debt, as well as lower average rates paid on all categories of interest-bearing deposits and borrowings reflecting lower market interest rates, partially offset by a 398 basis point increase in the rate paid on subordinated debt, a $25.9 million increase in savings and money market account balances, and a $9.3 million increase in certificate account balances. During the current quarter, we repaid $10.0 million of FHLB borrowings that were scheduled to mature in January 2028 with an interest rate of 4.06%. During the fourth quarter of 2025, we paid down our subordinated debt by $4.0 million and repaid $15.0 million of FHLB borrowings that were scheduled to mature in January 2026. The average cost of deposits was 2.15% for the quarter ended June 30, 2026, down from 2.34% for the quarter ended June 30, 2025. The average cost of subordinated debt was 9.70% for the quarter ended June 30, 2026, up from 5.72% for the quarter ended June 30, 2025, due to the debt converting to a variable-rate instrument that reprices on a quarterly basis beginning in the fourth quarter of 2025 from the previous fixed-rate period. Subsequent to June 30, 2026, we paid down an additional $2.0 million in subordinated debt as part of our strategic objective to utilize our excess liquidity to pay down high costing debt. The average cost of FHLB advances was 4.21% for the quarter ended June 30, 2026, down from 4.28% for the quarter ended June 30, 2025, due to repayment of $15.0 million of advances during the fourth quarter of 2025 and repayment of $10.0 million of advances at the end of the current quarter. Net interest margin, annualized, increased to 3.73% for the quarter ended June 30, 2026, from 3.67% for the quarter ended June 30, 2025, reflecting lower funding costs, partially offset by lower interest income. A release of provision for credit losses of $223 thousand was recorded for the quarter ended June 30, 2026, consisting of a release of provision for credit losses on loans of $185 thousand and a release of provision for credit losses on unfunded loan commitments of $38 thousand. This compared to a provision for credit losses of $170 thousand for the quarter ended June 30, 2025, consisting of a provision for credit losses on loans of $164 thousand and a provision for credit losses on unfunded loan commitments of $6 thousand. The release of provision in the current quarter compared to the same quarter last year resulted primarily from a decrease in loan balances and from annual updates to the model assumptions, partially offset by additional qualitative adjustments applied to the commercial loan segment, reflecting increased uncertainty in market conditions surrounding geopolitical events, in addition to the uncertainty adjustment tied to the impact of tariffs and other external factors affecting our clients already applied to our consumer portfolio. Expected credit loss estimates consider various factors, including market conditions, borrower-specific information, projected delinquencies, and anticipated effects of economic trends on borrowers' ability to repay. Noninterest Income Q2 2026 vs. Q1 2026 Noninterest income during the second quarter of 2026 increased $604 thousand, or 66.4%, compared to the quarter ended March 31, 2026. The increase was primarily due to the following changes in certain income categories: a $259 thousand increase in the fair value adjustment on mortgage servicing rights, primarily due to changes in market valuation assumptions, including slower estimated prepayment speeds resulting from higher market interest rates, partially offset by the impact of a smaller servicing portfolio; a $147 thousand increase in earnings on BOLI, primarily due to higher market valuation in the current quarter; a $130 thousand increase in other income due to the receipt of a dividend paid from our equity investment in the second quarter, as well as lower costs associated with closing our Tacoma branch; and a $60 thousand increase in service charges and fee income, primarily due to higher interchange income, partially related to seasonal increases in debit card transaction activity, and higher fees related to past due loans and loan payoff activity. Loans sold during the quarter ended June 30, 2026, totaled $7.3 million, compared to $6.1 million during the quarter ended March 31, 2026. The increase was primarily due to seasonal fluctuations in loan origination volume and the timing of loan sales. Q2 2026 vs. Q2 2025 Noninterest income increased $394 thousand, or 35.2% during the current quarter compared to the quarter ended June 30, 2025, primarily as a result of: a $199 thousand improvement in the fair value adjustment on mortgage servicing rights, primarily due to changes in valuation assumptions, including an increase in the cost of servicing assumption recorded in the prior year quarter and slower estimated prepayment speeds resulting from higher market interest rates during the current quarter, partially offset by the impact of a smaller servicing portfolio; a $77 thousand increase in other income due to same reason noted above in the sequential quarter; and a $68 thousand increase in net gain on sale of loans due to an increase in the volume of loans sold. Noninterest Expense Q2 2026 vs. Q1 2026 The increase in noninterest expense during the current quarter compared to the quarter ended March 31, 2026 was primarily related to: a $187 thousand increase in salaries and benefits due to the impact of higher market valuations of investments supporting our deferred compensation arrangements for key executives (which was partially offset by increases in BOLI income recorded in noninterest income), partially offset by lower base salary expense and lower incentive compensation expense; a $116 thousand increase in operations expense, primarily due to higher costs associated with our debit card processing and higher charitable contributions in the current quarter; a $45 thousand increase in data processing expense, primarily due to higher processing costs related to annual increases in software vendor contracts and increased application programming interface ("API") and usage charges. These increases were partially offset by: a $69 thousand decrease in regulatory assessments primarily due to the release of an accrual related to exam costs as the actual costs incurred were lower than previously estimated; and a $39 thousand decrease in occupancy due to the closure of our Tacoma branch and repair work performed in connection with the decommissioning of ITMs in the prior quarter. Q2 2026 vs. Q2 2025 The increase in noninterest expense during the current quarter compared to the quarter ended June 30, 2025 was primarily related to: a $324 thousand increase in salaries and benefits due to annual wage increases, lower deferred loan origination costs due to smaller loan growth, higher market valuations on our deferred compensation for key executives (which was partially offset by the increase in income on BOLI recorded in noninterest income), and higher medical expense due to overall higher medical costs, partially offset by lower stock compensation expense and lower incentive compensation expense; a $174 thousand increase in operations expense, primarily due to higher costs associated with our debit card processing; and a $78 thousand increase in data processing expense, primarily due to higher processing costs related to annual increases in software vendor contracts, increased API and usage charges and partially due to the addition of new features, such as fraud detection software, with the goal of lowering operational losses. These increases were partially offset by: a $93 thousand decrease in regulatory assessments, primarily due to reduced quarterly assessments resulting from a lower rate applied to a lower average asset balance and the release of an accrual related to exam costs as actual costs incurred were lower than previously estimated; and a $28 thousand decrease in occupancy expense, primarily due to lower building lease charges in 2026 following the closure of our Tacoma branch during the second quarter of 2026. Balance Sheet Review, Capital Management and Credit Quality Assets totaled $1.07 billion at June 30, 2026, down from $1.11 billion at March 31, 2026 and up from $1.06 billion at June 30, 2025. The decrease from March 31, 2026 was primarily a result of a lower balance of loans held-for-portfolio and lower balances of cash and cash equivalents. The increase from June 30, 2025 was primarily a result of higher balances of cash and cash equivalents and a new equity investment in the first quarter of 2026, partially offset by lower balance of loans held-for-portfolio. Cash and cash equivalents decreased $17.9 million, or 13.0%, to $120.1 million at June 30, 2026, compared to $138.0 million at March 31, 2026, and increased $17.5 million, or 17.1%, from $102.5 million at June 30, 2025. The decrease from March 31, 2026 primarily relates to a decrease in deposit balances and early repayment of $10.0 million in FHLB borrowings that were scheduled to mature in January 2028, partially offset by a decrease in loans held-for-portfolio. The increase from June 30, 2025 was primarily due to higher deposit balances and a decrease in loans held-for-portfolio, partially offset by a new equity investment and the repayment of borrowings and subordinated debt during the fourth quarter of 2025 and the current quarter. Investment securities increased $50 thousand, or 0.5%, to $9.5 million at June 30, 2026, compared to $9.4 million at March 31, 2026, and decreased $183 thousand, or 1.9%, from $9.6 million at June 30, 2025. Held-to-maturity securities totaled $1.9 million at both June 30, 2026 and March 31, 2026, compared to $2.1 million at June 30, 2025. Available-for-sale securities totaled $7.6 million at June 30, 2026, compared to $7.5 million at both March 31, 2026 and June 30, 2025. The changes in our available-for-sale and held-to-maturity portfolios from March 31, 2026 and June 30, 2025 primarily related to principal paydowns and maturities, partially offset by fair value adjustments on the available-for-sale portfolio. Loans held-for-portfolio totaled $892.0 million at June 30, 2026, compared to $921.5 million at March 31, 2026 and $904.3 million at June 30, 2025. The decrease from March 31, 2026 was primarily due to a decline in commercial and multifamily loan balances, which consisted primarily of lower rate, long-term loans. The decrease from June 30, 2025 reflected declines in one-to-four family loans, driven by fewer new home loan originations and normal amortization, as well as decreases in commercial and multifamily loans, floating home loans, and other consumer loans. These decreases were partially offset by growth in construction and land loans and home equity loans. Equity securities totaled $5.0 million at both June 30, 2026 and March 31, 2026, compared to zero at June 30, 2025. The increase primarily related to an investment made during the first quarter of 2026 in a higher yielding Community Reinvestment Act (“CRA”)-eligible workforce housing equity investment. The investment represented a deployment of a portion of our interest-earning cash and partially replaced the reduction in our CRA-eligible available-for-sale debt securities. While equity investments generally carry greater risk than debt securities, the investment represents a relatively small percentage of our total assets. Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, increased $624 thousand, or 8.3%, to $8.1 million at June 30, 2026, from $7.5 million at March 31, 2026, and increased $4.4 million, or 121.0%, from $3.7 million at June 30, 2025. The increase from March 31, 2026 was primarily due to the placement of $850 thousand of loans on nonaccrual status, partially offset by loan payoffs, loans returned to accrual status, loan charge-offs, and OREO sales. The increase from one year ago was primarily due to $6.4 million of new nonaccrual loans, partially offset by loan payoffs totaling $1.0 million, loans returned to accrual status, and charge-offs. Nonperforming loans totaled $8.1 million at June 30, 2026, with commercial and multifamily loans representing $4.2 million, or 52.0% of total nonperforming loans, reflecting a concentration of nonperforming loans within in larger relationships. One-to-four family nonperforming loans totaled $2.5 million, or 30.5% of total nonperforming loans, and the remaining balance of nonperforming loans was primarily comprised of manufactured home, home equity, and other consumer loans. OREO and other repossessed assets totaled $47 thousand in June 30, 2026, representing 0.6% of total NPAs. NPAs to total assets were 0.76%, 0.67% and 0.35% at June 30, 2026, March 31, 2026 and June 30, 2025, respectively. The allowance for credit losses on loans as a percentage of total loans outstanding was 0.94% at June 30, 2026, March 31, 2026 and June 30, 2025. Net loan charge-offs were $30 thousand for the second quarter of 2026, compared to $19 thousand for the first quarter of 2026 and $21 thousand for the second quarter of 2025. The following table summarizes our NPAs at the dates indicated (dollars in thousands, unaudited): The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited): Total deposits decreased $37.6 million, or 3.9%, to $930.9 million at June 30, 2026, from $968.5 million at March 31, 2026, and increased $31.4 million, or 3.5%, from $899.5 million at June 30, 2025. The decrease in total deposits from March 31, 2026 was primarily due to the managed reduction of higher cost reciprocal deposits. The increase from June 30, 2025 was primarily due to growth from new depositors and existing depositors increasing their balances. Noninterest-bearing deposits decreased $1.8 million, or 1.3%, to $129.3 million at June 30, 2026, compared to $131.1 million at March 31, 2026 and increased $5.1 million, or 4.1%, compared to $124.2 million at June 30, 2025. Noninterest-bearing deposits represented 13.9%, 13.5% and 13.8% of total deposits at June 30, 2026, March 31, 2026 and June 30, 2025, respectively. There were no FHLB advances at June 30, 2026, compared to $10.0 million at March 31, 2026 and $25.0 million at June 30, 2025. The decreases from March 31, 2026 and June 30, 2025 were due to the early repayment of a $10.0 million FHLB advance during the current quarter, which was originally scheduled to mature in January 2028, and the early repayment of a $15.0 million FHLB advance during the fourth quarter of 2025, which was originally scheduled to mature in January 2026. FHLB advances are primarily used to support organic loan growth and maintain liquidity ratios in line with our asset/liability objectives. Subordinated notes, net, totaled $7.8 million at both June 30, 2026 and March 31, 2026, compared to $11.8 million at June 30, 2025. The decrease in subordinated notes reflects a $4.0 million paydown completed on the first scheduled repricing date of October 1, 2025, as part of a our ongoing efforts to reduce higher cost debt. Subsequent to June 30, 2026, we repaid an additional $2.0 million of subordinated debt. Stockholders’ equity totaled $112.6 million at June 30, 2026, an increase of $2.2 million, or 2.0%, from $110.4 million at March 31, 2026, and an increase of $6.6 million, or 6.2%, from $106.0 million at June 30, 2025. The increase from March 31, 2026 was primarily the result of $2.5 million of net income earned during the current quarter, a $127 thousand decrease in accumulated other comprehensive loss, net of tax, and $49 thousand in share-based compensation, partially offset by the payment of $540 thousand in cash dividends to the Company's stockholders. Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, which is headquartered in Seattle, Washington and has full-service branches in Seattle, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with one loan production office located in the Madison Park neighborhood of Seattle. For more information, please visit www.soundcb.com. Forward-Looking Statements Disclaimer When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), as well as in the Company's other press releases, other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of the Company's future financial performance based on its growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events and may turn out to be wrong because of inaccurate assumptions, the factors listed below or other factors that the Company cannot foresee that could cause the Company's actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Factors that could cause the Company's actual results to differ materially from those expressed or implied by these forward-looking statements and from historical performance include, but are not limited to: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of persistent inflation, recessionary pressures or slowing economic growth; changes in interest rate levels and volatility, and the timing and pace of such changes, including actions by the Board of Governors of the Federal Reserve System, which could adversely affect the Company's revenues and expenses, the values of the Company's assets and obligations and the availability and cost of capital and liquidity; the impact of inflation and related monetary and fiscal policy responses, including their effects on consumer and business behavior; the effects of a federal government shutdown, debt ceiling standoff, or other fiscal uncertainty; the impact of bank failures or adverse developments at other banks and related negative publicity about the banking industry on investor and depositor sentiment; changes in consumer spending, borrowing and savings habits; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans; the Company's ability to implement key growth initiatives and strategic priorities; environmental, social and governance matters; results of examinations of the Company or the Bank by their regulators; increased competition; changes in management's business strategies; the ability to adapt to rapid technological changes, including advancements related to artificial intelligence, digital banking platforms, and cybersecurity; legislation or regulatory changes, including but not limited to changes in capital requirements, banking regulations, tax laws, or consumer protection laws; vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; geopolitical developments and international conflicts, as well as the imposition of new or increased tariffs and trade restrictions, any of which may disrupt financial markets, global supply chains, commodity 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, domestic political unrest and other external events on our business; and other factors described in the Company's latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other documents filed with or furnished to the SEC, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement. (1)   Net interest income divided by average interest earning assets.(2)   Noninterest expense divided by total revenue (net interest income and noninterest income). AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID(Dollars in thousands, unaudited) 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). (1)   Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as total interest expense divided by average total funding. (1)   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 average total funding. Contact

SEATTLE, April 28, 2026 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (the "Company") (Nasdaq: SFBC), the holding company for Sound Community Bank (the "Bank"), today reported net income of $1.6 million for the quarter ended March 31, 2026, or $0.61 diluted earnings per share, compared to net income of $2.2 million, or $0.87 diluted earnings per share, for the quarter ended December 31, 2025, and $1.2 million, or $0.45 diluted earnings per share, for the quarter ended March 31, 2025. The Company also announced today that its Board of Directors declared a cash dividend on the Company's common stock of $0.21 per share, payable on May 26, 2026 to stockholders of record as of the close of business on May 11, 2026. Comments from the Chief Executive Officer and President / Chief Financial Officer “Economic uncertainty and elevated interest rates tempered loan demand in the first quarter. Nevertheless, we continued to generate solid deposit growth, with total deposits increasing $19.6 million during the quarter and $58.2 million over the past year, reflecting the strength of our customer relationships and franchise. We were also pleased to be ranked fourth in the Puget Sound Business Journal’s April 11, 2025 list of fastest-growing banks in Washington state based on deposit growth. Our continued ability to grow relationships, improve profitability and perform well despite external pressures reflects the dedication of our bankers and the trust our customers place in us,” remarked Laurie Stewart, Chief Executive Officer. "Our first quarter results demonstrate improving earnings capacity as margin expansion and balance sheet growth offset seasonal expense patterns,” said Wes Ochs, President and Chief Financial Officer. “Net interest income increased sequentially and year‑over‑year, both loans and deposits grew meaningfully during the quarter, and liquidity strengthened, providing flexibility to support loan demand.” Mr. Ochs added, “While credit metrics declined modestly during the quarter, nonperforming assets remain manageable and reserves continue to reflect the underlying risk characteristics of the portfolio. With improving funding dynamics and a healthy capital position, we remain focused on sustainable long‑term performance.” Operating Results Net Interest Income after Provision for Credit Losses Q1 2026 vs. Q4 2025 Interest income increased $181 thousand, or 1.3%, to $14.5 million for the quarter ended March 31, 2026, compared to $14.3 million for the quarter ended December 31, 2025. The increase was primarily due to higher average balance of loans, investments, interest earning cash, and a 14 basis point increase in the average yield on loans, offset by a 145 basis point decline in the average yield on investments and a 28 basis point decline in the average yield interest-earning cash. Interest income on loans increased $152 thousand, or 1.2%, to $13.3 million for the quarter ended March 31, 2026, compared to $13.2 million for the quarter ended December 31, 2025. The average balance of total loans was $914.1 million for the quarter ended March 31, 2026, compared to $905.8 million for the quarter ended December 31, 2025. The increase in the average balance of total loans was primarily due to growth in construction and land loans and home equity loans, partially offset by declines in one-to-four family loans, floating home loans and other consumer loans. The average balances for commercial and multifamily loans, manufactured home and commercial business loans remained relatively unchanged from the prior quarter. The average yield on total loans was 5.90% for the quarter ended March 31, 2026, up from 5.76% for the quarter ended December 31, 2025. This increase in yield was primarily due to new loan originations at higher rates during the current quarter. Interest income on investments was $97 thousand for the quarter ended March 31, 2026, compared to $122 thousand for the quarter ended December 31, 2025. The decrease in interest income was primarily due to a 145 basis point decline in average yield, partially offset by an increase in the average balance of investments. Interest income on interest-earning cash increased modestly to $1.1 million for the quarter ended March 31, 2026, compared to $1.0 million for quarter ended December 31, 2025, reflecting a higher average balance partially offset by a lower average yield. Interest expense decreased $204 thousand or 3.6%, to $5.4 million for the quarter ended March 31, 2026, compared to the quarter ended December 31, 2025. The decrease was primarily the result of lower borrowings, as well as lower average rates paid on all categories of interest-bearing deposits, subordinated debt, and borrowings, generally reflecting lower market interest rates. These decreases were partially offset by higher average balances of savings and money market accounts and certificate accounts. The average cost of deposits was 2.19% for the quarter ended March 31, 2026, down from 2.26% for the quarter ended December 31, 2025, as higher costing deposits repriced lower due to market interest rate decreases from September 2025 through March 2026. Interest expense on FHLB advances was lower during the current quarter compared to the prior quarter due to the repayment of a maturing advance late in the prior quarter. Net interest margin, annualized, increased to 3.49% for the quarter ended March 31, 2026, from 3.36% for the quarter ended December 31, 2025, primarily due to lower funding costs and an increase in the average balance of and rates paid on loans receivable. A provision for credit losses of $123 thousand was recorded for the quarter ended March 31, 2026, consisting of a provision for credit losses on loans of $49 thousand and provision for credit losses on unfunded loan commitments of $74 thousand. This compared to a provision for credit losses of $104 thousand for the quarter ended December 31, 2025, consisting of a provision for credit losses on loans of $68 thousand and provision for credit losses on unfunded loan commitments of $36 thousand. The increase in the provision for credit losses for the quarter ended March 31, 2026 compared to the quarter ended December 31, 2025 primarily reflects an increase in higher risk loan balances during the quarter, mainly construction and land loans, and an increase in unfunded loan commitments. Additionally, new qualitative adjustments were added to all commercial loan categories related to economic uncertainty surrounding geopolitical events as well as adjustments for volume of past due and adversely risk rated home equity and multifamily loans, as compared to economic uncertainty adjustments applied only to the consumer segments previously. These increases were partially offset by improvement in other consumer past due loans and commercial construction collateral values. Other qualitative adjustments were largely applied to the same segments at a similar risk adjustment compared to the quarter ended December 31, 2025. Expected credit loss estimates are based on a range of factors, including market conditions, borrower-specific information, projected delinquencies, and the anticipated effects of economic trends on borrowers' ability to repay. Q1 2026 vs. Q1 2025 Interest income on loans increased $719 thousand, or 5.7%, to $13.3 million for the quarter ended March 31, 2026, compared to $12.6 million for the quarter ended March 31, 2025. The average balance of total loans was $914.1 million for the quarter ended March 31, 2026, up from $896.8 million for the quarter ended March 31, 2025. The average yield on total loans was 5.90% for the quarter ended March 31, 2026, up from 5.69% for the quarter ended March 31, 2025. Interest income on investments was $97 thousand for the quarter ended March 31, 2026, compared to $108 thousand for the quarter ended March 31, 2025. The decrease in interest income was primarily due to an 88 basis point decline in average yield, partially offset by an increase in the average balance of investments. Interest income on interest-earning cash increased $51 thousand to $1.1 million for the quarter ended March 31, 2026, compared to $1.0 million for the quarter ended March 31, 2025. The increase was a result of higher average balance of interest-earning cash, partially offset by lower average yield due to a reduction in the average rate paid on interest-earning cash. Interest expense decreased $217 thousand, or 3.9%, to $5.4 million for the quarter ended March 31, 2026, compared to $5.6 million for the quarter ended March 31, 2025. The decrease was primarily the result of a $15.0 million decrease in the average balance of interest-bearing demand and NOW accounts and a $14.4 million decrease in the average balance of FHLB advances, as well as lower average rates paid on all categories of interest-bearing deposits and borrowings reflecting lower market interest rates. During the fourth quarter of 2025, we paid down our subordinated debt by $4.0 million and repaid $15.0 million of FHLB borrowings that were scheduled to mature in January 2026. These average-balance decreases were partially offset by a $56.2 million increase in the average balance of savings and money market accounts, an $8.4 million increase in the average balance of certificate accounts, and an increase in the rate paid on subordinated debt. The average cost of deposits was 2.19% for the quarter ended March 31, 2026, down from 2.37% for the quarter ended March 31, 2025. The average cost of subordinated debt was 9.66% for the quarter ended March 31, 2026, up from 5.79% for the quarter ended March 31, 2025, due to the debt converting to a variable-rate instrument that reprices on a quarterly basis from the previous fixed-rate period. The average cost of FHLB advances was 4.15% for the quarter ended March 31, 2026, down from 4.25% for the quarter ended March 31, 2025, due to repayment of $15.0 million of advances during the fourth quarter of 2025. Net interest margin, annualized, increased to 3.49% for the quarter ended March 31, 2026, from 3.25% for the quarter ended March 31, 2025, reflecting both higher interest income and lower funding costs. A provision for credit losses of $123 thousand was recorded for the quarter ended March 31, 2026, consisting of a provision for credit losses on loans of $49 thousand and a provision for credit losses on unfunded loan commitments of $74 thousand. This compared to a release of provision for credit losses of $203 thousand for the quarter ended March 31, 2025, consisting of a release of provision for credit losses on loans of $85 thousand and a release of provision for credit losses on unfunded loan commitments of $118 thousand. The larger provision in the current quarter compared to the same quarter last year resulted primarily from the annual updates to the model assumptions, a larger loan portfolio, as well as additional qualitative adjustments applied to the commercial loan segment, reflecting increased uncertainty in market conditions surrounding geopolitical events, in addition to the uncertainty adjustment tied to the impact of tariffs and other external factors affecting our clients already applied to our consumer portfolio. Expected credit loss estimates consider various factors, including market conditions, borrower-specific information, projected delinquencies, and anticipated effects of economic trends on borrowers' ability to repay. Noninterest Income Q1 2026 vs. Q4 2025 Noninterest income during the current quarter compared to the quarter ended December 31, 2025 increased by $43 thousand or 5.0%. There were fluctuations within certain income categories as noted below: an $84 thousand increase in other income due to lower estimated costs associated with closing our Tacoma branch in the current quarter compared to losses recognized on the disposal of Integrated Teller Machines (ITMs) decommissioned or replaced in the prior quarter; a $28 thousand increase in net gain on sale of loans, primarily related to a higher volume of loans sold; and a $20 thousand increase in the fair value adjustment on mortgage servicing rights, primarily reflecting changes in valuation assumptions associated with the prepayment speeds and interest rate declines applied to a smaller servicing portfolio, which led to a lower reduction in the portfolio fair value than in the prior quarter. These increases were partially offset by: a $59 thousand decrease in earnings on BOLI, primarily due to fluctuations in market interest rates; and a $25 thousand decrease in service charges and fee income, primarily due to lower interchange income partially related to seasonal swipe activity in the fourth quarter of 2025 being higher during the holiday season. Loans sold during the quarter ended March 31, 2026, totaled $6.1 million, compared to $4.1 million during the quarter ended December 31, 2025. The change primarily relates to the seasonal timing of loan sales and loan activity, which typically slows down in the fourth quarter. Q1 2026 vs. Q1 2025 Noninterest income decreased $188 thousand, or 17.1% during the current quarter compared to the quarter ended March 31, 2025, primarily as a result of: a $60 thousand decrease in service charges and fee income, primarily due to the timing of the recognition of the annual volume incentive paid by Mastercard in 2025 and 2026; a $65 thousand decrease in earnings from BOLI, primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in the first quarter of 2025, with the benefit of improved yields continuing into the current quarter, partially offset by lower market interest rates in the current quarter; a $21 thousand decrease in mortgage servicing income as a result of a smaller servicing portfolio; a $41 thousand decline in the fair value adjustment on mortgage servicing rights due to an overall smaller servicing portfolio and changes in valuation assumptions associated with the cost to service loans and interest rate movements compared to the prior year; and a $53 thousand decrease in other income due to estimated Tacoma branch closure expenditures in the current quarter. These decreases were partially offset by a $52 thousand increase in net gain on sale of loans due to an increase in the volume of loans sold. Noninterest Expense Q1 2026 vs. Q4 2025 The increase in noninterest expense during the current quarter compared to the quarter ended December 31, 2025 was primarily related to: a $925 thousand increase in salaries and benefits due to a higher salaries expense, partially due to accrual reversals in the fourth quarter 2025, higher incentive expense, higher payroll taxes related to annual bonus payments, and higher expenses related to our employee stock ownership plan resulting from the strategic decision to reduce the amount purchased in the fourth quarter of 2025, thereby reducing the expense in the fourth quarter; a $251 thousand increase in regulatory assessments primarily due to the downward revision of estimated accrued expense in the fourth quarter of 2025, which resulted from lower than expected exam costs and reduced quarterly assessments due to a lower rate applied to a lower average asset balance with no corresponding true-up in the current quarter; and an $87 thousand increase in data processing, primarily due to a vendor reimbursement during the prior quarter and higher processing costs related to some of our software vendors partially due to the addition of new features, such as fraud detection software, which has resulted in lower operational losses in our operations line item. These increases were partially offset by: a $182 thousand decrease in operations expense, primarily due to higher costs associated with our debit card processing in the prior quarter and lower fraud losses; and a $33 thousand decrease in occupancy due to higher property charges and maintenance fees recognized in the prior quarter primarily due to repair work performed in connection with the decommissioning of ITMs. Q1 2026 vs. Q1 2025 The decrease in noninterest expense during the current quarter compared to the quarter ended March 31, 2025 was primarily related to: a $137 thousand decrease in salaries and benefits due to a reduction in salary expense due to the impact of deferred compensation accruals for key executives and an increase in deferred salaries due to loan growth, partially offset by an increase in medical expense due to higher premiums paid by the Company; a $23 thousand decrease in regulatory assessments, primarily due to reduced quarterly assessments resulting from a lower rate applied to a lower average asset balance; and a $10 thousand decrease in occupancy expense, due to higher building lease charges in 2025 resulting from lease renewals and maintenance charges. These decreases were partially offset by a $136 thousand increase in operations expense, primarily due to higher costs associated with our debit card processing. Balance Sheet Review, Capital Management and Credit Quality Assets totaled $1.11 billion at March 31, 2026, up from $1.09 billion at December 31, 2025 and $1.07 billion at March 31, 2025. The increase in total assets from December 31, 2025 was primarily a result of higher balance of loans held-for-portfolio and a new equity investment in the first quarter of 2026. These were also the reasons for the increase in total assets from March 31, 2025, along with higher balances of cash and cash equivalents. Cash and cash equivalents decreased $469 thousand, or 0.3%, to $138.0 million at March 31, 2026, compared to $138.5 million at December 31, 2025, and increased $6.5 million, or 4.9%, from $131.5 million at March 31, 2025. The decrease from December 31, 2025 primarily relates to increase in loans held-for-portfolio and a new $5.0 million equity investment, partially offset by higher deposit balances. The increase from March 31, 2025 was primarily due to higher deposit balances, partially offset by an increase in loans held-for-portfolio, the new equity investment noted above, and the repayment of borrowings and subordinated debt during the fourth quarter of 2025. Investment securities decreased $190 thousand, or 2.0%, to $9.4 million at March 31, 2026, compared to $9.6 million at December 31, 2025, and decreased $409 thousand, or 4.2%, from $9.8 million at March 31, 2025. Held-to-maturity securities totaled $1.9 million at both March 31, 2026 and December 31, 2025, compared to $2.1 million at March 31, 2025. Available-for-sale securities totaled $7.5 million at March 31, 2026, compared to $7.7 million at both December 31, 2025 and March 31, 2025. The decreases in our available-for-sale and held-to-maturity portfolios from December 31, 2025 and March 31, 2025 related to principal paydowns or payoffs, as well as decreases in the fair value of available-for-sale securities. Loans held-for-portfolio totaled $921.5 million at March 31, 2026, compared to $905.5 million at December 31, 2025 and $886.2 million at March 31, 2025. The increase from December 31, 2025, was primarily due to growth in construction and land loans. The increase from March 31, 2025, reflected growth in home equity, commercial real estate, multifamily and construction and land loans. These increases were partially offset by a decline in one-to-four family loans, driven by fewer new home loans and normal amortization, as well as a decrease in floating home loans and other consumer loans. Equity securities totaled $5.0 million at March 31, 2026, compared to zero at both December 31, 2025 and March 31, 2025. The increase primarily related to the strategic decision to deploy some of our interest-earning cash into a higher yielding Community Reinvestment Act (“CRA”)-eligible workforce housing equity investment in the first quarter of 2026. While this investment carries more risk, the level of investment remains low compared to our total assets and partially replaces the runoff of our CRA-eligible available-for-sale debt securities over the past few years. Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, increased $1.4 million, or 22.1%, to $7.5 million at March 31, 2026, from $6.1 million at December 31, 2025, and decreased $2.2 million, or 22.9%, from $9.7 million at March 31, 2025. The increase from December 31, 2025 was primarily due to the placement of $1.8 million of loans on nonaccrual status, including one multifamily loan of $1.1 million, partially offset by loan payoffs, returns to accrual status, charged-offs, and OREO sales. The decrease from one year ago was primarily due to loan payoffs totaling $7.9 million, returns to accrual status, and charged-offs, partially offset by $6.5 million of new nonaccrual loans. Nonperforming loans totaled $7.4 million at March 31, 2026, with commercial and multifamily loans representing $4.2 million, or 57.1% of total nonperforming loans, reflecting a concentration in larger relationships. One-to-four family nonperforming loans totaled $1.9 million, or 26.3% of total nonperforming loans, and the remaining balance of nonperforming loans was primarily comprised of manufactured home, home equity, and other consumer loans. OREO and other repossessed assets totaled $99 thousand, representing 1.3% of total NPAs. NPAs to total assets were 0.67%, 0.56% and 0.91% at March 31, 2026, December 31, 2025 and March 31, 2025, respectively. The allowance for credit losses on loans to total loans outstanding was 0.94% at March 31, 2026, compared to 0.95% at both December 31, 2025 and March 31, 2025. Net loan charge-offs were $19 thousand for the first quarter of 2026, compared to $27 thousand for the fourth quarter of 2025 and $21 thousand for the first quarter of 2025. The following table summarizes our NPAs at the dates indicated (dollars in thousands): The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited): Total deposits increased $20 million, or 2.1%, to $968.5 million at March 31, 2026, from $948.9 million at December 31, 2025, and increased $58.2 million, or 6.4%, from $910.3 million at March 31, 2025. The increase in total deposits from December 31, 2025 was primarily due to seasonal fluctuations in customer account balances, new client deposits, and higher balances from large depositors. The increase from the prior year end was primarily due to new depositors and existing depositors increasing their balances. Noninterest-bearing deposits decreased $1.5 million, or 1.1%, to $131.1 million at March 31, 2026, compared to $132.6 million at December 31, 2025 and increased $4.4 million, or 3.5%, compared to $126.7 million at March 31, 2025. Noninterest-bearing deposits represented 13.5%, 14.0% and 13.9% of total deposits at March 31, 2026, December 31, 2025 and March 31, 2025, respectively. FHLB advances totaled $10.0 million at both March 31, 2026 and December 31, 2025, compared to $25.0 million at March 31, 2025. The decrease from March 31, 2025 was due to the early repayment of a $15.0 million FHLB advance during the fourth quarter of 2025 which was originally scheduled to mature in January 2026. FHLB advances are primarily used to support organic loan growth and maintain liquidity ratios in line with our asset/liability objectives. A single FHLB advance outstanding at March 31, 2026 matures in early 2028. Subordinated notes, net, totaled $7.8 million at both March 31, 2026 and December 31, 2025, compared to $11.8 million at March 31, 2025. The decrease in subordinated notes reflects a $4.0 million paydown completed on the first scheduled repricing date of October 1, 2025, as part of a strategic decision to reduce higher costing debt. Stockholders’ equity totaled $110.4 million at March 31, 2026, an increase of $1.0 million, or 0.9%, from $109.4 million at December 31, 2025, and an increase of $6.0 million, or 5.7%, from $104.4 million at March 31, 2025. The increase in stockholders’ equity from December 31, 2025 was primarily the result of $1.6 million of net income earned during the current quarter and $57 thousand in share-based compensation, partially offset by an $80 thousand increase in accumulated other comprehensive loss, net of tax, and the payment of $541 thousand in cash dividends to the Company's stockholders. Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, which is headquartered in Seattle, Washington and has full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow and University Place. Our Tacoma branch is scheduled to close on May 1, 2026 as part of ongoing strategic consolidation efforts. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with one loan production office located in the Madison Park neighborhood of Seattle. For more information, please visit www.soundcb.com. Forward-Looking Statements Disclaimer When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), as well as in the Company's other press releases, other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of the Company's future financial performance based on its growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events and may turn out to be wrong because of inaccurate assumptions, the factors listed below or other factors that the Company cannot foresee that could cause the Company's actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Factors that could cause the Company's actual results to differ materially from those expressed or implied by these forward-looking statements and from historical performance include, but are not limited to: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of persistent inflation, recessionary pressures or slowing economic growth; changes in interest rate levels and volatility, and the timing and pace of such changes, including actions by the Board of Governors of the Federal Reserve System, which could adversely affect the Company's revenues and expenses, the values of the Company's assets and obligations and the availability and cost of capital and liquidity; the impact of inflation and related monetary and fiscal policy responses, including their effects on consumer and business behavior; the effects of a federal government shutdown, debt ceiling standoff, or other fiscal uncertainty; the impact of bank failures or adverse developments at other banks and related negative publicity about the banking industry on investor and depositor sentiment; changes in consumer spending, borrowing and savings habits; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans; the Company's ability to implement key growth initiatives and strategic priorities; environmental, social and governance matters; results of examinations of the Company or the Bank by their regulators; increased competition; changes in management's business strategies; the ability to adapt to rapid technological changes, including advancements related to artificial intelligence, digital banking platforms, and cybersecurity; legislation or regulatory changes, including but not limited to changes in capital requirements, banking regulations, tax laws, or consumer protection laws; vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; geopolitical developments and international conflicts, as well as the imposition of new or increased tariffs and trade restrictions, any of which may disrupt financial markets, global supply chains, commodity 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, domestic political unrest and other external events on our business; and other factors described in the Company's latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other documents filed with or furnished to the SEC, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement. CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED BALANCE SHEETS (Dollars in thousands, unaudited) KEY FINANCIAL RATIOS (unaudited) (1) Net interest income divided by average interest earning assets. (2) Noninterest expense divided by total revenue (net interest income and noninterest income). PER COMMON SHARE DATA (unaudited) AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID (Dollars in thousands, unaudited) 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). LOANS (Dollars in thousands, unaudited) DEPOSITS (Dollars in thousands, unaudited) CREDIT QUALITY DATA (Dollars in thousands, unaudited) OTHER STATISTICS (Dollars in thousands, unaudited) Contact

Sound Financial Bancorp Inc. Announces Fourth Quarter and Full Year 2025 Results and Increase to Regular Cash Dividend SEATTLE, Jan. 27, 2026 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (the "Company") (Nasdaq: SFBC), the holding company for Sound Community Bank (the "Bank"), today reported net income of $2.2 million for the quarter ended December 31, 2025, or $0.87 diluted earnings per share, compared to net income of $1.7 million, or $0.66 diluted earnings per share, for the quarter ended September 30, 2025, and $1.9 million, or $0.74 diluted earnings per share, for the quarter ended December 31, 2024. The Company also announced today that its Board of Directors declared a cash dividend on the Company's common stock of $0.21 per share, payable on February 23, 2026 to stockholders of record as of the close of business on February 9, 2026. Comments from the Chief Executive Officer and President / Chief Financial Officer “Consistent expense control, automation improvements, and continued attention to our cost of funding contributed to meaningful year-over-year performance improvements. While the mortgage market did not rebound, the Company made operational progress during the year, and we believe we are positioned for an eventual recovery, supported by a commercial loan pipeline. Every employee contributed to our results and demonstrated an ability to do more with less,” remarked Laurie Stewart, Chief Executive Officer. "Our fourth quarter results reflect a solid finish to 2025, supported by disciplined financial management, prudent credit oversight, and operational progress. End‑of‑year adjustments positively influenced net income and helped close the year with improving underlying trends entering 2026. Our ongoing efforts to optimize funding costs, strengthen liquidity, and enhance margin performance were evident during the quarter, as total funding costs declined again and liquidity improved, supporting balance sheet repositioning initiatives. Most of our deposits are expected to continue to be repriced in the first half of 2026 while we simultaneously fund the commercial pipeline," explained Wes Ochs, President and Chief Financial Officer. Mr. Ochs continued, "Credit quality trends remained generally stable during the quarter. While nonperforming loans increased from the prior quarter, these changes were primarily related to well‑secured credits with collateral that exceeds our exposure and do not reflect a broader deterioration in credit quality. The fourth quarter included a number of balance sheet and operational activities, but the end result is improved operating flexibility, a more efficient cost structure, and the ability to support loan growth in the coming year." Operating Results Net Interest Income after Provision for Credit Losses Q4 2025 vs. Q3 2025 Interest income decreased $368 thousand, or 2.5%, to $14.3 million for the quarter ended December 31, 2025, compared to $14.7 million for the quarter ended September 30, 2025. The decrease was primarily due to a lower average balance of loans and investments, a 13 basis point decline in the average yield on loans and a 37 basis point decline in interest-earning cash, offset by a higher average balance of interest-earning cash. Interest income on loans decreased $357 thousand, or 2.6%, to $13.2 million for the quarter ended December 31, 2025, compared to $13.5 million for the quarter ended September 30, 2025. The average balance of total loans was $905.8 million for the quarter ended December 31, 2025, compared to $910.3 million for the quarter ended September 30, 2025. The decrease in the average balance of total loans was primarily due to declines in one-to-four family loans, construction and land loans, floating home loans and commercial business loans, partially offset by growth in commercial and multifamily loans and home equity loans. The average balances for manufactured home and other consumer loans remained relatively unchanged from the third quarter of 2025. The average yield on total loans was 5.76% for the quarter ended December 31, 2025, down from 5.89% for the quarter ended September 30, 2025. This decrease in yield was primarily due to lower market interest rates during the quarter, which lowered yields on variable rate loans, including home equity lines of credit and business lines of credit, and $147 thousand of interest reversed out of income due to loans moving to nonaccrual status. This impact was partially offset by new loan originations at higher rates during the fourth quarter of 2025. Interest income on investments was $122 thousand for the quarter ended December 31, 2025, compared to $124 thousand for the quarter ended September 30, 2025. Interest income on interest-earning cash decreased modestly to $1.0 million for the quarter ended December 31, 2025, compared to $1.0 million for quarter ended September 30, 2025, reflecting a lower average yield partially offset by a higher average balance. Interest expense decreased $90 thousand or 1.6%, to $5.6 million for the quarter ended December 31, 2025, compared to the quarter ended September 30, 2025. This decrease was primarily the result of lower average balances of demand and NOW accounts, subordinated debt and borrowings, as well as lower average rates paid on all categories of interest-bearing deposits, reflecting lower market interest rates. During the fourth quarter of 2025, we paid down our subordinated debt by $4.0 million and repaid $15.0 million of FHLB borrowings that had a maturity date in January 2026. These decreases were partially offset by higher average balances of savings and money market accounts and certificate accounts. The average cost of deposits was 2.26% for the quarter ended December 31, 2025, down from 2.32% for the quarter ended September 30, 2025, as higher costing deposits repriced lower due to market interest rate decreases from September 2025 through December 2025. Interest expense on our subordinated debt increased despite a lower average balance, due to the debt converting to variable-rate debt that reprices on a quarterly basis from the previous fixed-rate period. Interest expense on FHLB advances remained relatively unchanged during the current quarter compared to the prior quarter due to the repayment of the maturing advance late in the quarter. Net interest margin declined to 3.36% for the quarter ended December 31, 2025, from 3.48% for the quarter ended September 30, 2025, as the decline in earning asset yields outpaced reductions in funding costs. A provision for credit losses of $104 thousand was recorded for the quarter ended December 31, 2025, consisting of a provision for credit losses on loans of $68 thousand and provision for credit losses on unfunded loan commitments of $36 thousand. This compared to a provision for credit losses of $55 thousand for the quarter ended September 30, 2025, consisting of a provision for credit losses on loans of $65 thousand and a release of provision for credit losses on unfunded loan commitments of $10 thousand. The increase in the provision for credit losses for the quarter ended December 31, 2025 compared to the quarter ended September 30, 2025 primarily reflects updates to assumptions in the model related to our annual review completed in the fourth quarter of 2025 which included changes to benchmark ratios and the annual loss driver analysis. Additionally, qualitative adjustments related to past due loans and an increase to the specific reserve contributed to the increase in the provision from the prior quarter. A smaller loan portfolio and improvement in qualitative adjustments primarily related to the nature and volume of the portfolio, collateral values, and concentrations were applied across multiple segments partially offset the increase to provision. Other qualitative adjustments were largely applied to the same segments at a similar risk adjustment compared to the sequential quarter ended September 30, 2025. Expected credit loss estimates are based on a range of factors, including market conditions, borrower-specific information, projected delinquencies, and the anticipated effects of economic trends on borrowers' ability to repay. Q4 2025 vs. Q4 2024 Interest income on loans increased $85 thousand, or 0.7%, to $13.2 million for the quarter ended December 31, 2025, compared to $13.1 million for the quarter ended December 31, 2024. The average balance of total loans was $905.8 million for the quarter ended December 31, 2025, up from $900.8 million for the quarter ended December 31, 2024. The average yield on total loans was 5.76% for the quarter ended December 31, 2025, down from 5.77% for the quarter ended December 31, 2024. Interest income on investments was $122 thousand for the quarter ended December 31, 2025, compared to $132 thousand for the quarter ended December 31, 2024. Interest income on interest-earning cash decreased $527 thousand to $1.0 million for the quarter ended December 31, 2025, compared to $1.5 million for the quarter ended December 31, 2024. The latter decrease was a result of lower average yield, resulting from reductions in the rates paid on interest-earning cash, and a lower average balance of interest-earning cash during the period. Interest expense decreased $894 thousand, or 13.7%, to $5.6 million for the quarter ended December 31, 2025, compared to $6.5 million for the quarter ended December 31, 2024. The decrease was primarily the result of a $17.5 million decrease in the average balance of interest-bearing demand and NOW accounts, a $8.6 million decrease in the average balance of certificate accounts, a $4.0 million decrease in the average balance of subordinated debt, and a $10.4 million decrease in the average balance of FHLB advances, as well as lower average rates paid on all categories of interest-bearing deposits, reflecting lower market interest rates. These average-balance decreases were partially offset by a $14.1 million increase in the average balance of savings and money market accounts. The average cost of deposits was 2.26% for the quarter ended December 31, 2025, down from 2.58% for the quarter ended December 31, 2024. The average cost of subordinated debt was 10.02% for the quarter ended December 31, 2025, up from 5.69% for the quarter ended December 31, 2024, for the reason noted above. The average cost of FHLB advances was 4.40% for the quarter ended December 31, 2025, up from 4.31% for the quarter ended December 31, 2024, due to a higher rate on the remaining debt after the repayment of $15.0 million in advances during the fourth quarter of 2024, partially offset by the repayment of $15.0 million of advances during the fourth quarter of 2025. Net interest margin increased to 3.36% for the quarter ended December 31, 2025, from 3.13% for the quarter ended December 31, 2024, reflecting lower funding costs that more than offset the decline in the earning asset yields. A provision for credit losses of $104 thousand was recorded for the quarter ended December 31, 2025, consisting of a provision for credit losses on loans of $68 thousand and a provision for credit losses on unfunded loan commitments of $36 thousand. This compared to a provision for credit losses of $14 thousand for the quarter ended December 31, 2024, consisting of a release of provision for credit losses on loans of $73 thousand and a provision for credit losses on unfunded loan commitments of $87 thousand. The larger provision in the current quarter compared to the same quarter last year resulted primarily from the updates to the model assumptions noted above and a larger loan portfolio, as well as an additional qualitative adjustments applied to certain loan segments, specifically consumer and construction loans, reflecting increased uncertainty in market conditions tied to the impact of tariffs and other external factors affecting our clients. Expected credit loss estimates consider various factors, including market conditions, borrower-specific information, projected delinquencies, and anticipated effects of economic trends on borrowers' ability to repay. Noninterest Income Q4 2025 vs. Q3 2025 Noninterest income during the current quarter compared to the quarter ended September 30, 2025 decreased slightly by $14 thousand, or 1.6%, and was largely unchanged overall. There were fluctuations within certain income categories, however, as noted below: a $137 thousand decrease in other income due to losses recognized on the disposal of Integrated Teller Machines (ITMs) decommissioned or replaced during the current quarter; a $23 thousand decrease in service charges and fee income, primarily due to seasonally lower interchange income during the first half of the fourth quarter, consistent with patterns observed in prior years, before reverting to seasonally higher monthly averages during the holiday period; a $36 thousand decrease in earnings on BOLI primarily influenced, by fluctuating market interest rates; and a $21 thousand decrease in net gain on sale of loans, primarily related to a lower volume of loans sold, offset by a $212 thousand increase in the fair value adjustment on mortgage servicing rights, primarily reflecting a larger negative adjustment in the prior quarter related to interest rate declines and valuation assumptions that were not repeated during the current quarter. Loans sold during the quarter ended December 31, 2025, totaled $4.1 million, compared to $5.3 million during the quarter ended September 30, 2025. The change primarily relates to the timing of loan sales and loan activity, which typically slows down in the fourth quarter. Q4 2025 vs. Q4 2024 Noninterest income decreased $293 thousand, or 25.3%, primarily due to a decline in the fair value adjustment on mortgage servicing rights and losses recognized on the disposal of ITMs during the current quarter. More specifically, the decrease in noninterest income was primarily due to: a $237 thousand decline in the fair value adjustment on mortgage servicing rights due to an overall smaller servicing portfolio and changes in valuation assumption associated with interest rate movements compared to the prior year; a $24 thousand decrease in mortgage servicing income as a result of a smaller servicing portfolio; and a $144 thousand decrease in other income due to losses recognized on the disposal of ITMs decommissioned or replaced during the current quarter. These decreases were partially offset by: a $30 thousand increase in service charges and fee income, primarily due to higher interchange income in the current quarter related to overall consistently higher debit card usage in the current year as compared to the prior year; a $62 thousand increase in earnings from BOLI, primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in the first quarter of 2025, with the benefit of improved yields continuing into the fourth quarter of 2025; and a $20 thousand increase in net gain on sale of loans due to an increase in the volume of loans sold. Noninterest Expense Q4 2025 vs. Q3 2025 The decrease in noninterest expense during the current quarter compared to the quarter ended September 30, 2025 was primarily related to: a $726 thousand decrease in salaries and benefits due to a reduction in incentive compensation; a $274 thousand decrease in regulatory assessments, reflecting lower than expected exam costs, as well as reduced quarterly assessments resulting from a lower rate applied to a lower average asset balance. a $74 thousand decrease in data processing, primarily due to a vendor reimbursement during the fourth quarter of 2025. These decreases were partially offset by: a $200 thousand increase in operations expense, primarily due to higher costs associated with our debit card processing and a $29 thousand increase in occupancy due to higher property charges and maintenance fees recognized in the current quarter due primarily to repair work performed on the decommission of ITMs. Q4 2025 vs. Q4 2024 The decrease in noninterest expense during the current quarter compared to the quarter ended December 31, 2024 was primarily related to: a $387 thousand decrease in salaries and benefits due to a reduction in incentive compensation, partially offset by higher expense related to our employee stock ownership plan resulting from the Company's higher stock price; a $242 thousand decrease in regulatory assessments, due to the same reason noted above; and a $32 thousand decrease in data processing expense related to a vendor reimbursement in the fourth quarter. These decreases were partially offset by: a $354 thousand increase in operations expense, primarily due to higher costs associated with our debit card processing; a $51 thousand increase in occupancy expense, due to higher building lease charges in 2025 resulting from lease renewals and maintenance charges, as well as the repair cost noted above related to the work regarding decommissioned ITMs; and a $38 thousand increase in net loss (gain) on OREO and repossessed assets, as the current quarter reflected a net loss on new property additions in 2025 compared to a net gain in the same quarter of the prior year. Balance Sheet Review, Capital Management and Credit Quality Assets totaled $1.09 billion at December 31, 2025, up from $1.06 billion at September 30, 2025 and $993.6 million at December 31, 2024. The increase in total assets from September 30, 2025 and December 31, 2024 was primarily a result of higher balances of cash and cash equivalents. Cash and cash equivalents increased $37.3 million, or 36.9%, to $138.5 million at December 31, 2025, compared to $101.2 million at September 30, 2025, and increased $94.8 million, or 217.3%, from $43.6 million at December 31, 2024. The increase from September 30, 2025 primarily relates to higher deposit balances and a decrease in loans held-for-portfolio, partially offset by the repayment of borrowings and subordinated debt during the fourth quarter of 2025. The increase from December 31, 2024 was primarily due to higher deposit balances, including the effects of a strategic decision to utilize cash balances to sell reciprocal deposits at the end of 2024, partially offset by an increase in loans held-for-portfolio and the repayment of borrowings and subordinated debt during the fourth quarter of 2025. Investment securities increased $55 thousand, or 0.6%, to $9.6 million at December 31, 2025, compared to $9.5 million at September 30, 2025, and decreased $329 thousand, or 3.3%, from $9.9 million at December 31, 2024. Held-to-maturity securities totaled $1.9 million at both December 31, 2025 and September 30, 2025, compared to $2.1 million at December 31, 2024. Available-for-sale securities totaled $7.7 million at December 31, 2025, compared to $7.6 million at September 30, 2025 and $7.8 million at December 31, 2024. The increase in our available-for-sale portfolio from September 30, 2025 to December 31, 2025 was due to an increase in the fair value of the portfolio, which reduced unrealized losses. The decreases in our available-for-sale and held-to-maturity portfolios from December 31, 2024 related to principal paydowns or payoffs, partially offset by increases in the fair value of available-for-sale securities. Loans held-for-portfolio totaled $905.5 million at December 31, 2025, compared to $909.7 million at September 30, 2025 and $900.2 million at December 31, 2024. The decrease from September 30, 2025, was primarily due to a decline in one-to-four family loans. The increase from December 31, 2024, reflected growth in home equity, commercial and multifamily, manufactured home, and floating home loans. These increases were partially offset by a decline in one-to-four family loans, driven by fewer new home loans and normal amortization, as well as a decrease in construction and land loans due to the completion of projects that converted to permanent financing. Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, increased $3.1 million, or 100.1%, to $6.1 million at December 31, 2025, from $3.1 million at September 30, 2025, and decreased $1.4 million, or 18.2%, from $7.5 million at December 31, 2024. The increase in NPAs from September 30, 2025 was primarily due to the placement of an additional $3.3 million of loans on nonaccrual status, including one multifamily loan of $2.0 million and one single-family loan relationship of $1.1 million, each supported by substantial collateral. These factors were partially offset by the payoff of two loans totaling $127 thousand and regular loan payments, as well as a $20 thousand land loan that was charged-off. The decrease in NPAs from one year ago was primarily due to loan payoffs totaling $7.9 million, the return of $335 thousand of loans to accrual status, $281 thousand of loans charged-off, and regular loan payments. These factors were partially offset by the placement of an additional $7.1 million of loans on nonaccrual status and $344 thousand of new other real estate owned properties. Nonperforming loans totaled $5.8 million at December 31, 2025, with commercial and multifamily loans representing $3.2 million, or 51.6% of total nonperforming loans, reflecting the concentration in larger relationships. One-to-four family nonperforming loans totaled $1.6 million, or 26.1%, and the remaining balance of nonperforming loans was primarily comprised of manufactured home, home equity, and other consumer loans. OREO and other repossessed assets total $344 thousand, representing 5.6% of total NPAs. NPAs to total assets were 0.56%, 0.29% and 0.75% at December 31, 2025, September 30, 2025 and December 31, 2024, respectively. The allowance for credit losses on loans to total loans outstanding was 0.95% at December 31, 2025, compared to 0.94% at both September 30, 2025 and December 31, 2024. Net loan charge-offs were $27 thousand for the fourth quarter of 2025, compared to $37 thousand for the third quarter of 2025 and $13 thousand for the fourth quarter of 2024. The following table summarizes our NPAs at the dates indicated (dollars in thousands): The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited): Total deposits increased $50 million, or 5.6%, to $948.9 million at December 31, 2025, from $898.9 million at September 30, 2025 and increased $111.1 million, or 13.3%, from $837.8 million at December 31, 2024. The increase in total deposits from September 30, 2025 was primarily due to normal daily fluctuations in customer account balances and higher balances from large depositors. The increase from the prior year end was partially due to the strategic decision to sell reciprocal deposits at the end of 2024, which decreased our deposit balances by $63.0 million at December 31, 2024, a reduction that was reversed in the first quarter of 2025. Additionally, the increase from December 31, 2024 was due to large depositors increasing their balances held at the Bank during the year, as well as higher balances held by large depositors. Noninterest-bearing deposits increased $1.2 million, or 0.9%, to $132.6 million at December 31, 2025, compared to $131.4 million at September 30, 2025, and remained relatively flat compared with December 31, 2024. Noninterest-bearing deposits represented 14.0%, 14.6% and 15.8% of total deposits at December 31, 2025, September 30, 2025 and December 31, 2024, respectively. FHLB advances totaled $10.0 million at December 31, 2025, compared to $25.0 million at both September 30, 2025 and December 31, 2024. The decrease from both prior dates was due to the early repayment of a $15.0 million FHLB advance during the fourth quarter of 2025. FHLB advances are primarily used to support organic loan growth and maintain liquidity ratios in line with our asset/liability objectives. FHLB advances outstanding at December 31, 2025 have a maturity of early 2028. Subordinated notes, net totaled $7.8 million at December 31, 2025 and $11.8 million at both September 30, 2025 and December 31, 2024. The decrease in the subordinated notes balance reflects a $4.0 million paydown completed on the first scheduled repricing date of October 1, 2025, as part of a strategic decision to reduce higher cost debt that would reprice quarterly, and to repurpose cash for other uses. Stockholders’ equity totaled $109.4 million at December 31, 2025, an increase of $1.9 million, or 1.8%, from $107.5 million at September 30, 2025, and an increase of $5.7 million, or 5.5%, from $103.7 million at December 31, 2024. The increase in stockholders’ equity from September 30, 2025 was primarily the result of $2.2 million of net income earned during the current quarter, a $118 thousand increase in accumulated other comprehensive loss, net of tax, and $72 thousand in share-based compensation, partially offset by the payment of $487 thousand in cash dividends to the Company's stockholders. The increase in stockholders' equity from December 31, 2024 was primarily the result of $7.2 million of net income earned during the year, a $198 thousand increase in accumulated other comprehensive loss, net of tax, and $303 thousand in share-based compensation, partially offset by the payment of $1.9 million in cash dividends to the Company's stockholders. Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, which is headquartered in Seattle, Washington and has full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with one loan production office located in the Madison Park neighborhood of Seattle. For more information, please visit www.soundcb.com. Forward-Looking Statements Disclaimer When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), as well as in the Company's other press releases, other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of the Company's future financial performance based on its growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events and may turn out to be wrong because of inaccurate assumptions, the factors listed below or other factors that the Company cannot foresee that could cause the Company's actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Factors that could cause the Company's actual results to differ materially from those express or implied by these forward-looking statements and from historical performance include, but are not limited to: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of persistent inflation, recessionary pressures or slowing economic growth; changes in interest rate levels and volatility, and the timing and pace of such changes, including actions by the Board of Governors of the Federal Reserve System, which could adversely affect the Company's revenues and expenses, the values of the Company's assets and obligations and the availability and cost of capital and liquidity; the impact of inflation and related monetary and fiscal policy responses, including their effects on consumer and business behavior; the effects of a federal government shutdown, debt ceiling standoff, or other fiscal uncertainty; the impact of bank failures or adverse developments at other banks and related negative publicity about the banking industry on investor and depositor sentiment; changes in consumer spending, borrowing and savings habits; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans; the Company's ability to implement key growth initiatives and strategic priorities; environmental, social and governance matters; results of examinations of the Company or the Bank by their regulators; increased competition; changes in management's business strategies; the ability to adapt to rapid technological changes, including advancements related to artificial intelligence, digital banking platforms, and cybersecurity; legislation or regulatory changes, including but not limited to changes in capital requirements, banking regulations, tax laws, or consumer protection laws; vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; geopolitical developments and international conflicts, as well as the imposition of new or increased tariffs and trade restrictions, any of which may disrupt financial markets, global supply chains, commodity 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, domestic political unrest and other external events on our business; and other factors described in the Company's latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other documents filed with or furnished to the SEC, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement. CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED BALANCE SHEETS (Dollars in thousands, unaudited) KEY FINANCIAL RATIOS (unaudited) (1) Net interest income divided by average interest earning assets. (2) Noninterest expense divided by total revenue (net interest income and noninterest income). PER COMMON SHARE DATA (unaudited) AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID (Dollars in thousands, unaudited) 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). (1) Total funding is the sum of average interest-bearing liabilities and average noninterest-bearing deposits. The cost of total funding is calculated as total interest expense divided by average total funding. (1) 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 average total funding. LOANS (Dollars in thousands, unaudited) DEPOSITS (Dollars in thousands, unaudited) CREDIT QUALITY DATA (Dollars in thousands, unaudited) OTHER STATISTICS (Dollars in thousands, unaudited) Contact

SEATTLE, Oct. 28, 2025 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (the "Company") (Nasdaq: SFBC), the holding company for Sound Community Bank (the "Bank"), today reported net income of $1.7 million for the quarter ended September 30, 2025, or $0.66 diluted earnings per share, as compared to net income of $2.1 million, or $0.79 diluted earnings per share, for the quarter ended June 30, 2025, and $1.2 million, or $0.45 diluted earnings per share, for the quarter ended September 30, 2024. The Company also announced today that its Board of Directors declared a cash dividend on the Company's common stock of $0.19 per share, payable on November 21, 2025 to stockholders of record as of the close of business on November 7, 2025. Comments from the Chief Executive Officer and President / Chief Financial Officer “Despite the ongoing economic uncertainty exacerbated by the extended government shutdown, we continued to execute on our core banking strategies. This is reflected in a 50-basis point year-over-year improvement in our net interest margin, stable operating expenses and strong credit quality. Subsequent to quarter end, we paid down $4 million of our subordinated debt, further demonstrating our strong liquidity and capital positions,” remarked Laurie Stewart, Chief Executive Officer. "Although the valuation of our mortgage servicing portfolio declined during the quarter, our core earnings returned to levels last seen prior to the higher rate cycle. This improvement reflects our ongoing focus on disciplined expense management and prudent loan portfolio growth," explained Wes Ochs, President and Chief Financial Officer. Mr. Ochs continued, "Asset quality remains solid and well-managed, supported by a robust commercial pipeline as we head into year-end. While our technology investments have increased costs compared to the prior year, they have already generated operational efficiencies and positioned us to scale effectively for future growth." Operating Results Net Interest Income after Provision for Credit Losses Q3 2025 vs. Q2 2025 Interest income decreased $263 thousand, or 1.8%, to $14.7 million for the quarter ended September 30, 2025, compared to $14.9 million for the quarter ended June 30, 2025. The decrease was primarily due to a lower average balance of interest-earning cash, and a 25 basis point decline in the average yield on loans, offset by a higher average balance of loans. Interest income on loans decreased $183 thousand, or 1.3%, to $13.5 million for the quarter ended September 30, 2025, compared to $13.7 million for the quarter ended June 30, 2025. The average balance of total loans was $910.3 million for the quarter ended September 30, 2025, compared to $895.0 million for the quarter ended June 30, 2025. The increase in the average balance of total loans was primarily due to growth in commercial and multifamily loans, construction and land loans, home equity loans, and commercial business loans, partially offset by declines in one-to-four family loans. The average balances for manufactured home, floating home, and other consumer loans remained relatively unchanged from the second quarter of 2025. The average yield on total loans was 5.89% for the quarter ended September 30, 2025, down from 6.14% for the quarter ended June 30, 2025. This decrease in yield was primarily due to recognition of interest income from the payoff of loans previously on nonaccrual during the second quarter of 2025, which temporarily elevated yields in that period. Because those loans were no longer outstanding in the third quarter, the related income did not recur, resulting in a lower average yield. This impact was partially offset by new loan originations at higher rates and upward repricing of variable-rate loans during the third quarter of 2025. Interest income on investments was $124 thousand for the quarter ended September 30, 2025, compared to $123 thousand for the quarter ended June 30, 2025. Interest income on interest-bearing cash decreased $81 thousand to $1.0 million for the quarter ended September 30, 2025, compared to $1.1 million for the quarter ended June 30, 2025. This decrease was a result of a lower average balance and yield of interest-earning cash during the quarter. Interest expense increased $52 thousand or 0.9%, to $5.7 million for the quarter ended September 30, 2025, compared to the quarter ended June 30, 2025. The increase in interest expense during the current quarter from the prior quarter was primarily the result of higher average balances and rates paid on savings and money market accounts and higher average balances of certificate accounts, partially offset by lower rates paid on certificate accounts, as well as lower balances on demand and NOW accounts. The average cost of deposits was 2.32% for the quarter ended September 30, 2025, down from 2.34% for the quarter ended June 30, 2025, as higher costing deposits repriced lower due to market interest rate cuts beginning in September 2024. Interest expense on FHLB advances remained relatively unchanged during the current quarter compared to the prior quarter. A provision for credit losses of $55 thousand was recorded for the quarter ended September 30, 2025, consisting of a provision for credit losses on loans of $65 thousand and a release of provision for credit losses on unfunded loan commitments of $10 thousand. This compared to a provision for credit losses of $170 thousand for the quarter ended June 30, 2025, consisting of a provision for credit losses on loans of $164 thousand and a provision for credit losses on unfunded loan commitments of $6 thousand. The decrease in the provision for credit losses for the quarter ended September 30, 2025 compared to the quarter ended June 30, 2025 resulted primarily from a smaller increase in the size of the portfolio in the third quarter compared to the second quarter. Although loan growth continued, the smaller overall increase in portfolio size reduced the need for additional reserves. Qualitative adjustments remained largely consistent with the prior quarter, except for new adjustments reflecting a sustained decline in commercial real estate collateral primarily due to loan origination vintage. These adjustments were partially offset by a reduced proportion of consumer loan segments, including floating home loans, which carry higher expected credit loss rates compared to the commercial loan segments that experienced growth during the current quarter. 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. Q3 2025 vs. Q3 2024 Interest income on loans increased $636 thousand, or 4.9%, to $13.5 million for the quarter ended September 30, 2025, compared to $12.9 million for the quarter ended September 30, 2024. The average balance of total loans was $910.3 million for the quarter ended September 30, 2025, up from $898.6 million for the quarter ended September 30, 2024. The average yield on total loans was 5.89% for the quarter ended September 30, 2025, up from 5.70% for the quarter ended September 30, 2024. The increase in the average loan yield was primarily due to the origination of new loans at higher interest rates, and upward repricing on variable-rate loans. Interest income on investments was $124 thousand for the quarter ended September 30, 2025, compared to $132 thousand for the quarter ended September 30, 2024. Interest income on interest-bearing cash decreased $814 thousand to $1.0 million for the quarter ended September 30, 2025, compared to $1.8 million for the quarter ended September 30, 2024. The decrease was a result of both a lower average yield, resulting from reductions in the rates paid on interest-earning cash, and a lower average balance of interest-bearing cash during the period. Interest expense decreased $1.3 million, or 18.0%, to $5.7 million for the quarter ended September 30, 2025, compared to $7.0 million for the quarter ended September 30, 2024. The decrease was primarily the result of a $15.9 million decrease in the average balance of interest-bearing demand and NOW accounts, a $12.5 million decrease in the average balance of certificate accounts, and a $15.0 million decrease in the average balance of FHLB advances, as well as lower average rates paid on all categories of interest-bearing deposits, reflecting lower market interest rates. These average-balance decreases were partially offset by a $10.3 million increase in the average balance of savings and money market accounts. The average cost of deposits was 2.32% for the quarter ended September 30, 2025, down from 2.74% for the quarter ended September 30, 2024. The average cost of FHLB advances was 4.27% for the quarter ended September 30, 2025, down from 4.32% for the quarter ended September 30, 2024. A provision for credit losses of $55 thousand was recorded for the quarter ended September 30, 2025, consisting of a provision for credit losses on loans of $65 thousand and a release of provision for credit losses on unfunded loan commitments of $10 thousand. This compared to a provision for credit losses of $8 thousand for the quarter ended September 30, 2024, consisting of a provision for credit losses on loans of $106 thousand and a release of provision for credit losses on unfunded loan commitments of $98 thousand. The larger provision in the current quarter, compared to the same quarter last year, 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 in the third quarter of 2024 was also higher relative to the current quarter due to greater loan portfolio growth during the earlier quarter. Subsequent changes in portfolio composition, size, and qualitative factors have reduced the differences in provisions between the comparable periods. Noninterest Income Q3 2025 vs. Q2 2025 The decrease in noninterest income during the current quarter compared to the quarter ended June 30, 2025 was primarily related to: a $292 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 changes associated with a decline in interest rates, partially offset by; a $50 thousand increase in net gain on sale of loans, primarily related to an increase in the volume of loans sold. Loans sold during the quarter ended September 30, 2025, totaled $5.3 million, compared to $3.6 million during the quarter ended June 30, 2025. This was as a result of lower market interest rates increasing mortgage origination activity in the current quarter. Q3 2025 vs. Q3 2024 The decrease in noninterest income during the current quarter compared to the quarter ended September 30, 2024 was primarily due to: a $473 thousand decline in the fair value adjustment on mortgage servicing rights, for the same reasons noted above, as well as a smaller servicing portfolio; and an $18 thousand decrease in mortgage servicing income as a result of a smaller servicing portfolio. These decreases were partially offset by: a $44 thousand increase in service charges and fee income primarily due higher interchange income in the current quarter; a $39 thousand increase in earnings from BOLI, primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in the first quarter of 2025, with the benefit of improved yields continuing into the third quarter; and a $54 thousand increase in net gain on sale of loans due to an increase in the volume of loans sold. Noninterest Expense Q3 2025 vs. Q2 2025 Noninterest expense during the current quarter compared to the quarter ended June 30, 2025 was largely unchanged. Q3 2025 vs. Q3 2024 Noninterest expense during the current quarter compared to the quarter ended September 30, 2024 was largely unchanged. 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 as a result of 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 timing effects related to marketing campaigns and charitable contributions. These decreases were partially offset by: a $207 thousand increase in data processing expense, 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 increased 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. Balance Sheet Review, Capital Management and Credit Quality Assets totaled $1.06 billion at both September 30, 2025 and June 30, 2025, down from $1.10 billion at September 30, 2024. The decrease in total assets from September 30, 2024 was primarily a result of lower balances of cash and cash equivalents, partially offset by higher balances of loans held-for-portfolio. Cash and cash equivalents decreased $1.4 million, or 1.4%, to $101.2 million at September 30, 2025, compared to $102.5 million at June 30, 2025, and decreased $47.8 million, or 32.1%, from $148.9 million at September 30, 2024. The decrease from September 30, 2024 was primarily due to lower deposit balances and an increase in loans held-for-portfolio. Investment securities decreased $98 thousand, or 1.0%, to $9.5 million at September 30, 2025, compared to $9.6 million at June 30, 2025, and decreased $635 thousand, or 6.2%, from $10.2 million at September 30, 2024, as pay-offs and paydowns of investments exceeded new purchases. Held-to-maturity securities totaled $1.9 million at September 30, 2025, compared to $2.1 million at both June 30, 2025 and September 30, 2024. Available-for-sale securities totaled $7.6 million at September 30, 2025, compared to $7.5 million at June 30, 2025 and $8.0 million at September 30, 2024. The decreases in our available-for-sale portfolio from September 30, 2024 and in our held-to-maturity portfolio from June 30, 2025 and September 30, 2024 related entirely to principal paydowns. The increase in our available-for-sale portfolio from June 30, 2025 to September 30, 2025 was due to an increase in the market value of our portfolio, resulting in lower unrealized losses. Loans held-for-portfolio were $909.7 million at September 30, 2025, compared to $904.3 million at June 30, 2025 and $901.7 million at September 30, 2024. The increase from June 30, 2025, was primarily due to new loan originations in commercial and multifamily loans, construction and land loans, and to a lesser extent, home equity loans. The increase from September 30, 2024, reflected growth in home equity, commercial and multifamily, manufactured home, and floating home loans. These increases were partially offset by a decline in one-to-four family loans, driven by fewer new home loans and normal payment amortization, as well as a decrease in construction and land loans due to the completion of projects that were converted to permanent financing. Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, decreased $605 thousand, or 16.5%, to $3.1 million at September 30, 2025, from $3.7 million at June 30, 2025, and decreased $5.5 million, or 64.4%, from $8.6 million at September 30, 2024. The decrease in NPAs from June 30, 2025 was primarily due to the payoff of one mortgage loan of $804 thousand, the return of $226 thousand of loans to accrual status, and regular loan payments, partially offset by the addition of four loans totaling $413 thousand to nonaccrual status and $44 thousand of other real estate owned properties. The decrease in NPAs from one year ago was primarily due to payoffs totaling $8.9 million, the return of $411 thousand of loans to accrual status, $266 thousand of loans charged-off, and regular loan payments. These decreases were partially offset by the placement of an additional $4.1 million of loans on nonaccrual status and $229 thousand of new other real estate owned properties. NPAs to total assets were 0.29%, 0.35% and 0.78% at September 30, 2025, June 30, 2025 and September 30, 2024, respectively. The allowance for credit losses on loans to total loans outstanding was 0.94% at September 30, 2025 and June 30, 2025, compared to 0.95% at September 30, 2024. Net loan charge-offs were $37 thousand for the third quarter of 2025, compared to $21 thousand for the second quarter of 2025 and $14 thousand for the third quarter of 2024. The following table summarizes our NPAs at the dates indicated (dollars in thousands): The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited): Total deposits decreased $516 thousand, or 0.1%, to $898.9 million at September 30, 2025, from $899.5 million at June 30, 2025 and decreased $31.3 million, or 3.4%, from $930.2 million at September 30, 2024. The decrease in total deposits from both prior dates was primarily due to normal daily fluctuations in customer account balances, reflecting routine activity rather than significant changes in overall deposit levels. Noninterest-bearing deposits increased $7.2 million, or 5.8%, to $131.4 million at September 30, 2025, compared to $124.2 million at June 30, 2025 and increased $1.7 million, or 1.3%, from $129.7 million at September 30, 2024. Noninterest-bearing deposits represented 14.6%, 13.7% and 14.0% of total deposits at September 30, 2025, June 30, 2025 and September 30, 2024, respectively. FHLB advances totaled $25.0 million at September 30, 2025 and June 30, 2025, compared to $40.0 million at September 30, 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 June 30, 2025, and $11.7 million at September 30, 2024. Stockholders’ equity totaled $107.5 million at September 30, 2025, an increase of $1.4 million, or 1.4%, from $106.0 million at June 30, 2025, and an increase of $5.2 million, or 5.1%, from $102.2 million at September 30, 2024. The increase in stockholders’ equity from June 30, 2025 was primarily the result of $1.7 million of net income earned during the current quarter, a $164 thousand decrease in accumulated other comprehensive loss, net of tax, and $75 thousand in share-based compensation, partially offset by the payment of $488 thousand in cash dividends to the Company's stockholders. Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, which is headquartered in Seattle, Washington and has full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with one loan production office located in the Madison Park neighborhood of Seattle. For more information, please visit www.soundcb.com. Forward-Looking Statements Disclaimer When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's other press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors listed below or because of other factors that we cannot foresee that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Factors which could cause actual results to differ materially, include, but are not limited to: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of persistent inflation, recessionary pressures or slowing economic growth; changes in interest rate levels and the duration of such changes, including action by the Board of Governors of the Federal Reserve System 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; the effects of a federal government shutdown, debt ceiling standoff, or other fiscal uncertainty; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; changes in consumer spending, borrowing and savings habits; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans; expectations regarding key growth initiatives and strategic priorities; environmental, social and governance goals and targets; results of examinations of the Company or the Bank by their regulators; increased competition; changes in management's business strategies; the ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity; legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulations, tax laws, or consumer protection laws; vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; 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, domestic political unrest and other external events on our business; and other factors described in the Company's latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other documents filed with or furnished to the SEC, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The risks inherent in these factors could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company and could negatively affect the Company's operating and stock performance. The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement. CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED BALANCE SHEETS (Dollars in thousands, unaudited) KEY FINANCIAL RATIOS (unaudited) (1) Net interest income divided by average interest earning assets. (2) Noninterest expense divided by total revenue (net interest income and noninterest income). PER COMMON SHARE DATA (unaudited) AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID (Dollars in thousands, unaudited) 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). (1) 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 average total funding. (1) 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 average total funding. LOANS (Dollars in thousands, unaudited) DEPOSITS (Dollars in thousands, unaudited) CREDIT QUALITY DATA (Dollars in thousands, unaudited) OTHER STATISTICS (Dollars in thousands, unaudited) Contact

SEATTLE, July 29, 2025 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (the "Company") (Nasdaq: SFBC), the holding company for Sound Community Bank (the "Bank"), today reported net income of $2.1 million for the quarter ended June 30, 2025, or $0.79 diluted earnings per share, as compared to net income of $1.2 million, or $0.45 diluted earnings per share, for the quarter ended March 31, 2025, and $795 thousand, or $0.31 diluted earnings per share, for the quarter ended June 30, 2024. The Company also announced today that its Board of Directors declared a cash dividend on the Company's common stock of $0.19 per share, payable on August 25, 2025 to stockholders of record as of the close of business on August 11, 2025. Comments from the President / Chief Executive Officer and Chief Financial Officer “Despite the ongoing economic uncertainty impacting the communities and clients we serve, we remained keenly focused on supporting our stakeholders to meet their banking needs. This commitment enabled us to increase our loans held for portfolio by 2% in the quarter. Although credit quality improved, the growth in our loan portfolio resulted in provision expense during the quarter. We also reduced our cost of funds by 5 basis points and emphasized money market products, which are well-positioned to reprice quickly if we experience additional rate cuts in the future,” remarked Laurie Stewart, President and Chief Executive Officer. "Our teams remain focused on maintaining strong credit quality, improving our net interest margin, and controlling expenses. Importantly, we resolved three of our four largest nonaccrual loans during the quarter, which led to meaningful improvements in credit quality, net interest income, and net income. We achieved growth across most loan categories, and our commercial lending group maintains a solid pipeline to support continued near-term growth," explained Wes Ochs, Executive Vice President and Chief Financial Officer. Mr. Ochs continued, "Our net interest income continues to improve as we replace lower yielding loans and grow our portfolio. At the same time, we expect the decline in funding costs, driven by earlier rate cuts by the Federal Reserve, to continue though at a more gradual pace. As noted last quarter, we are continuing to realize benefits from prior technology investments, which have helped reduce expenses and are expected to drive further efficiencies as we grow." Operating Results Net Interest Income after Provision for (Release of) Credit Losses Q2 2025 vs Q1 2025 Interest income increased $1.2 million, or 8.8%, to $14.9 million for the quarter ended June 30, 2025, compared to $13.7 million for the quarter ended March 31, 2025. The increase in interest income from the prior quarter was primarily due to a higher average balance of interest-earning cash, a 45 basis point increase in the average yield on loans, and a 45 basis point increase in the average yield on investments. Interest income also increased due to loan payoffs and the timing of rate adjustment on variable-rate assets, as well as increased liquidity deployment through higher interest-bearing cash balances. Interest income on loans increased $1.1 million, or 8.8%, to $13.7 million for the quarter ended June 30, 2025, compared to $12.6 million for the quarter ended March 31, 2025. The average balance of total loans was $895.0 million for the quarter ended June 30, 2025, compared to $896.8 million for the quarter ended March 31, 2025. The change in the average balance of total loans was primarily due to growth in commercial and multifamily loans, manufactured home loans, and floating home loans, offset by declines in construction and land loans and one-to-four family loans. The average balances for home equity loans, commercial business loans, and other consumer loans remained relatively flat from the first quarter of 2025. The average yield on total loans was 6.14% for the quarter ended June 30, 2025, up from 5.69% for the quarter ended March 31, 2025. This was primarily due to recognition of interest income from the payoff of loans previously on nonaccrual, the origination of new loans at higher interest rates, and upward adjustments on variable-rate loans. The payoff of several large nonaccrual loans during the quarter contributed significantly to loan yield improvement but may not recur in future periods. Interest income on investments was $123 thousand for the quarter ended June 30, 2025, compared to $108 thousand for the quarter ended March 31, 2025. Interest income on interest-bearing cash increased $87 thousand to $1.1 million for the quarter ended June 30, 2025, compared to $1.0 million for the quarter ended March 31, 2025. This increase was a result of a higher average balance of interest-earning cash during the quarter. The increase in interest expense during the current quarter from the prior quarter was primarily the result of higher average balances and rates paid on savings and money market accounts, offset by lower average balances and rates paid on certificate accounts, as well as lower balances on demand and NOW accounts. The average cost of deposits was 2.34% for the quarter ended June 30, 2025, down from 2.37% for the quarter ended March 31, 2025, as higher costing deposits repriced lower due to market interest rate cuts beginning in September 2024. The average cost of FHLB advances was 4.28% for the quarter ended June 30, 2025, up from 4.25% for the quarter ended March 31, 2025. A provision for credit losses of $170 thousand was recorded for the quarter ended June 30, 2025, consisting of a provision for credit losses on loans of $164 thousand and a provision for credit losses on unfunded loan commitments of $6 thousand. This compared to a release of credit losses of $203 thousand for the quarter ended March 31, 2025, consisting of a release of credit losses on loans of $85 thousand and on unfunded loan commitments of $118 thousand. The increase in the provision for credit losses for the quarter ended June 30, 2025 compared to the quarter ended March 31, 2025 resulted primarily from a larger loan portfolio, an increase in the balance of unfunded commitments, and an additional qualitative adjustment applied to certain loan segments. Specifically, qualitative adjustments were increased for consumer loan segments related to manufactured home and floating home loans due to higher concentrations. These were partially offset by the removal of qualitative adjustments for improved credit quality within the commercial construction and floating home loan segments. 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. Q2 2025 vs Q2 2024 Interest income on loans increased $1.4 million, or 11.2%, to $13.7 million for the quarter ended June 30, 2025, compared to $12.3 million for the quarter ended June 30, 2024. The average balance of total loans was $895.0 million for the quarter ended June 30, 2025, up from $891.9 million for the quarter ended June 30, 2024. The average yield on total loans was 6.14% for the quarter ended June 30, 2025, up from 5.56% for the quarter ended June 30, 2024. The increase in the average loan yield was primarily due to recognition of interest income from the payoff of loans previously on nonaccrual, the origination of new loans at higher interest rates, and upward repricing on variable-rate loans. Interest income on investments was $123 thousand for the quarter ended June 30, 2025, compared to $133 thousand for the quarter ended June 30, 2024. Interest income on interest-bearing cash decreased $489 thousand to $1.1 million for the quarter ended June 30, 2025, compared to $1.6 million for the quarter ended June 30, 2024. The decrease was a result of both a lower average yield, as a result of reductions in the rates paid on interest-earning cash, and a lower average balance. The decrease in interest expense during the current quarter from the same quarter a year ago was primarily the result of a $15.6 million decrease in the average balance of interest-bearing demand and NOW accounts, a $29.2 million decrease in the average balance of certificate accounts, and a $15.0 million decrease in the average balance of FHLB advances, as well as lower average rates paid on all categories of interest-bearing deposits, reflecting lower market interest rates. These average-balance decreases were partially offset by a $45.2 million increase in the average balance of savings and money market accounts. The average cost of deposits was 2.34% for the quarter ended June 30, 2025, down from 2.67% for the quarter ended June 30, 2024. The average cost of FHLB advances was 4.28% for the quarter ended June 30, 2025, down from 4.31% for the quarter ended June 30, 2024. A provision for credit losses of $170 thousand was recorded for the quarter ended June 30, 2025, consisting of a provision for credit losses on loans of $164 thousand and a provision for credit losses on unfunded loan commitments of $6 thousand. This compared to a release of provision for credit losses of $109 thousand for the quarter ended June 30, 2024, consisting of a release of provision for credit losses on loans of $88 thousand and a release of provision for credit losses on unfunded loan commitments of $21 thousand. The larger provision recorded in the current quarter primarily reflected the factors discussed above. Noninterest Income Q2 2025 vs Q1 2025 The increase in noninterest income during the current quarter compared to the quarter ended March 31, 2025 was primarily related to an increase of $34 thousand in earnings from BOLI, primarily due to continued impact from fluctuations in financial markets that increased the values of policies; and a $19 thousand lower adjustment for the fair value of mortgage servicing rights due to an overall smaller servicing portfolio resulting in a lower adjustment needed, partially offset by: a $20 thousand decrease in service charges and fee income due primarily to the absence during the current quarter of Mastercard volume incentive received in the first quarter of 2025. Loans sold during the quarter ended June 30, 2025, totaled $3.6 million, compared to $2.0 million and $4.0 million of loans sold during the quarters ended March 31, 2025 and June 30, 2024, respectively. Although loan sale volume increased during the second quarter of 2025 from the first quarter of 2025, the related net gain declined by $5 thousand, reflecting lower pricing margins on loans sold in the current quarter. Q2 2025 vs Q2 2024 The decrease in noninterest income during the current quarter compared to the quarter ended June 30, 2024 was primarily due to a $97 thousand decrease in service charges and fee income, primarily due to a recovery of potential future lost fee income recorded in the second quarter of 2024 in connection with a vendor error; this decrease was partially offset by an increase in fees associated with new client acquisition in our specialty banking deposit accounts and higher interchange income in the current quarter, and a $16 thousand decrease in mortgage servicing income as a result of the portfolio paying down at a faster rate than originations replace repayments; a $30 thousand decrease in net gain on sale of loans due to fewer loans sold; and a $30 thousand decrease in other income due to gain on disposal of assets due to insurance claims on the loss of fully depreciated assets in same quarter last year. These decreases were partially offset by: an $95 thousand increase in earnings from BOLI primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in the first quarter, with the benefit of improve yields continuing into the second quarter, partially offset by fluctuations in financial markets which reduced the values of policies; and a $36 thousand improvement in the adjustment for the fair value of mortgage servicing rights due to higher market value, partially offset by a smaller servicing portfolio. Noninterest Expense Q2 2025 vs Q1 2025 The decrease in noninterest expense during the current quarter from the quarter ended March 31, 2025 was primarily a result of: a $274 thousand decrease in salaries and benefits related to lower salaries expense primarily due to an annual deferred compensation contribution for key executives made in the first quarter of each year, and higher deferred salaries related to increased loan originations, partially offset by higher incentive expense related to increased loan originations and higher retirement plan expense related to a higher market valuation in the second quarter; a $21 thousand decrease in occupancy primarily due to higher annual common area maintenance charges and maintenance fees typically recognized in the first quarter; and a $39 thousand decrease in data processing costs due to adjustments made to amortization and accrual estimates in the current quarter. The decreases were partially offset by: a $78 thousand increase in operations expense due to higher deposit product costs, including debit card processing fees and higher loan fees, as well as the recognition of annual fee reimbursements from Mastercard in the prior quarter; and a $6 thousand increase in expenses related to OREO and repossessed assets due to the addition of a new property in the second quarter of 2025. Q2 2025 vs Q2 2024 The decrease in noninterest expense during the current quarter from the quarter ended June 30, 2024 was primarily a result of: a $337 thousand decrease in salaries and benefits related to higher deferred salaries and lower incentive expense as a result of lower growth in the current quarter than in the same quarter one year ago; a $126 thousand decrease in operations expense primarily due to lower expenses across various accounts, resulting from ongoing cost saving initiatives and process improvements. These decrease were partially offset by: a $344 thousand increase in data processing expenses due to various project implementations that began amortizing in the third quarter of 2024, as well as new software technology being deployed in 2025 that continues to streamline our operations costs and processes; a $19 thousand increase in occupancy expense due to higher building lease charges in 2025; and a $26 thousand increase in expenses related to OREO and repossessed assets due to the addition of a new property in the second quarter of 2025 and the absence of property sales in the same quarter last year. Balance Sheet Review, Capital Management and Credit Quality Assets at June 30, 2025 totaled $1.06 billion, down from $1.07 billion at March 31, 2025 and June 30, 2024. The decrease in total assets from March 31, 2025 was primarily a result of lower balances of cash and cash equivalents, partially offset by higher balances of loans held-for-portfolio. Cash and cash equivalents decreased $29.0 million, or 22.0%, to $102.5 million at June 30, 2025, compared to $131.5 million at March 31, 2025, and decreased $32.6 million, or 24.1%, from $135.1 million at June 30, 2024. The decreased cash and cash equivalents from the prior quarter-end was primarily due to lower deposit balances and an increase in loans held-for-portfolio. Investment securities decreased $176 thousand, or 1.8%, to $9.6 million at June 30, 2025, compared to $9.8 million at March 31, 2025, and decreased $509 thousand, or 5.0%, from $10.1 million at June 30, 2024, as pay-offs and paydowns of investments exceeded new purchases. Held-to-maturity securities totaled $2.1 million at June 30, 2025, March 31, 2025, and June 30, 2024. Available-for-sale securities totaled $7.5 million at June 30, 2025, compared to $7.7 million at March 31, 2025 and $8.0 million at June 30, 2024. Loans held-for-portfolio were $904.3 million at June 30, 2025, compared to $886.2 million at March 31, 2025 and $889.3 million at June 30, 2024. The increase from March 31, 2025 was primarily due to the origination of new loans within all loan segments, excluding other consumer, during the quarter. The increase from June 30, 2024 was primarily due to the origination of new loans within all loan segments, excluding one-to-four family, construction and land, and other consumer loans. The decrease in one-to-four family loans was primarily due to fewer new home loans offset by normal payment amortization. The decrease in construction and land loans is primarily due to the completion of projects, of which $14 million converted to permanent financing. Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, decreased $6.0 million, or 62.2%, to $3.7 million at June 30, 2025, from $9.7 million at March 31, 2025 and decreased $5.4 million, or 59.4%, from $9.0 million at June 30, 2024. The decrease in NPAs from March 31, 2025 was primarily due to payoffs totaling $6.9 million, including two commercial real estate loans and one floating homes loan, partially offset by the addition of five loans totaling $1.0 million to nonaccrual status and $259 thousand of other real estate owned properties. The decrease in NPAs from one year ago was primarily due to payoffs totaling $8.3 million, the return of $605 thousand of loans to accrual status, and regular loan payments. These decreases were partially offset by the placement of an additional $4.0 million of loans on nonaccrual status. NPAs to total assets were 0.35%, 0.91% and 0.84% at June 30, 2025, March 31, 2025 and June 30, 2024, respectively. The allowance for credit losses on loans to total loans outstanding was 0.94% at June 30, 2025, compared to 0.95% at March 31, 2025 and 0.96% at June 30, 2024. Net loan charge-offs were $21 thousand for both the second and first quarters of 2025 compared to $17 thousand for the second quarter of 2024. The following table summarizes our NPAs at the dates indicated (dollars in thousands): The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited): Total deposits decreased $10.9 million, or 1.2%, to $899.5 million at June 30, 2025, from $910.3 million at March 31, 2025 and decreased $7.3 million, or 0.8%, from $906.8 million at June 30, 2024. The decrease in total deposits from both prior dates was primarily due to normal daily fluctuations in customer account balances, reflecting routine activity rather than significant changes in overall deposit levels. Noninterest-bearing deposits decreased $2.5 million, or 2.0%, to $124.2 million at June 30, 2025, compared to $126.7 million at March 31, 2025 and decreased $718 thousand, or 0.6%, from $124.9 million at June 30, 2024. Noninterest-bearing deposits represented 13.7%, 13.9% and 13.8% of total deposits at June 30, 2025, March 31, 2025 and June 30, 2024, respectively. FHLB advances totaled $25.0 million at June 30, 2025 and March 31, 2025, compared to $40.0 million at June 30, 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 June 30, 2025 had maturities ranging from early 2026 through early 2028. Subordinated notes, net totaled $11.8 million at both June 30, 2025 and March 31, 2025, and $11.7 million at June 30, 2024. Stockholders’ equity totaled $106.0 million at June 30, 2025, an increase of $1.6 million, or 1.5%, from $104.4 million at March 31, 2025, and an increase of $4.7 million, or 4.6%, from $101.3 million at June 30, 2024. The increase in stockholders’ equity from March 31, 2025 was primarily the result of $2.1 million of net income earned during the current quarter and $75 thousand in share-based compensation, partially offset by a $67 thousand increase in accumulated other comprehensive loss, net of tax and the payment of $487 thousand in cash dividends to the Company's stockholders. Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, which is headquartered in Seattle, Washington and has full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with one loan production office located in the Madison Park neighborhood of Seattle. For more information, please visit www.soundcb.com. Forward-Looking Statements Disclaimer When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's other press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors listed below or because of other factors that we cannot foresee that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Factors which could cause actual results to differ materially, include, but are not limited to: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of persistent inflation, recessionary pressures or slowing economic growth; changes in interest rate levels and the duration of such changes, including action by the Board of Governors of the Federal Reserve System 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; the effects of a federal government shutdown, debt ceiling standoff, or other fiscal uncertainty; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; changes in consumer spending, borrowing and savings habits; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans; expectations regarding key growth initiatives and strategic priorities; environmental, social and governance goals and targets; results of examinations of the Company or the Bank by their regulators; increased competition; changes in management's business strategies; the ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity; legislation or regulatory change, including but not limited to shifts in capital requirement, banking regulation, tax laws, or consumer protection laws; vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; geopolitical development and international conflict, 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, domestic political unrest and other external events on our business; and other factors described in the Company's latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other documents filed with or furnished to the SEC, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The risks inherent in these factors could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company and could negatively affect the Company's operating and stock performance. The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement. CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED BALANCE SHEETS (Dollars in thousands, unaudited) KEY FINANCIAL RATIOS (unaudited) (1) Net interest income divided by average interest earning assets. (2) Noninterest expense divided by total revenue (net interest income and noninterest income). PER COMMON SHARE DATA (unaudited) AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID (Dollars in thousands, unaudited) 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). LOANS (Dollars in thousands, unaudited) DEPOSITS (Dollars in thousands, unaudited) CREDIT QUALITY DATA (Dollars in thousands, unaudited) OTHER STATISTICS (Dollars in thousands, unaudited) Contact

SEATTLE, April 29, 2025 (GLOBE NEWSWIRE) -- Sound Financial Bancorp, Inc. (the "Company") (Nasdaq: SFBC), the holding company for Sound Community Bank (the "Bank"), today reported net income of $1.2 million for the quarter ended March 31, 2025, or $0.45 diluted earnings per share, as compared to net income of $1.9 million, or $0.74 diluted earnings per share, for the quarter ended December 31, 2024, and $770 thousand, or $0.30 diluted earnings per share, for the quarter ended March 31, 2024. The Company also announced today that its Board of Directors declared a cash dividend on the Company's common stock of $0.19 per share, payable on May 23, 2025 to stockholders of record as of the close of business on May 9, 2025. Comments from the President / Chief Executive Officer and Chief Financial Officer “Despite ongoing economic uncertainty, we remained focused on lowering our cost of deposits and originating new loans at higher rates, which contributed to a 12-basis point improvement in our net interest margin compared to the prior quarter. This reflects the team's strong efforts to build full banking relationships by addressing both the lending and deposit needs of our consumer and business clients,” remarked Laurie Stewart, President and Chief Executive Officer. "We continue to prioritize expense management, even though expenses increased compared to the previous quarter. The quarter-over-quarter increase was largely due to typical year-end accrual adjustments and annual expenses that are recognized in the first quarter. However, when compared to the first quarter of 2024, we have seen reductions in combined salaries and benefits, and operational expenses, thanks to our investments in technology. We also expect the year-over-year growth in data processing costs to moderate as the year progresses," explained Wes Ochs, Executive Vice President and Chief Financial Officer. Mr. Ochs continued, "While we did see an increase in nonperforming loans this quarter mainly due to two specific credits, one of which has since been repaid, we have not observed broader signs of stress in the loan portfolio. Importantly, we also successfully exited a $17 million loan that had been rated as special mention, which contributed to the decline in overall loan balances. Notably, 83% of our nonperforming loans are tied to just four loans, each with its own unique circumstances. These loans are well-secured, and we are actively working toward resolutions in the near-term." Operating Results Net Interest Income after (Release of) Provision for Credit Losses Q1 2025 vs Q4 2024 The decrease in interest income from the prior quarter was primarily due to a lower average balance of loans, investments and interest-earning cash, an eight basis point decline in the average yield on loans, a 41 basis point decline in the average yield on interest-bearing cash, and a 57 basis point decline in the average yield on investments. Interest income on loans decreased $482 thousand, or 3.7%, to $12.6 million for the quarter ended March 31, 2025, compared to $13.1 million for the quarter ended December 31, 2024. The average balance of total loans was $896.8 million for the quarter ended March 31, 2025, down from $900.8 million for the quarter ended December 31, 2024. The decrease in the average balance of total loans was primarily due to declines in construction and land loans and one-to-four family loans, offset by growth in commercial and multifamily loans and home equity loans. The average balances for manufactured home loans, floating home loans, commercial business loans, and other consumer loans remained relatively flat from the fourth quarter of 2024. The average yield on total loans was 5.69% for the quarter ended March 31, 2025, down from 5.77% for the quarter ended December 31, 2024. The decline was primarily due to interest that was reversed on nonaccrual loans during the first quarter, as well as interest that had been recognized on those loans in the fourth quarter. This was partly offset by new loans being made at higher interest rates and some variable-rate loans adjusting upward. Interest income on investments was $108 thousand for the quarter ended March 31, 2025, compared to $132 thousand for the quarter ended December 31, 2024. Interest income on interest-bearing cash decreased $524 thousand to $1.0 million for the quarter ended March 31, 2025, compared to $1.5 million for the quarter ended December 31, 2024. This decrease was a result of both lower average yields and average balances during the quarter. The decrease in interest expense during the current quarter from the prior quarter was primarily the result of lower average balances and rates paid on all categories of interest-bearing deposits. The average cost of deposits was 2.37% for the quarter ended March 31, 2025, down from 2.58% for the quarter ended December 31, 2024 as higher costing deposits repriced lower due to market interest rate cuts beginning in September 2024. The average cost of FHLB advances was 4.25% for the quarter ended March 31, 2025, down from 4.31% for the quarter ended December 31, 2024. A release of provision for credit losses of $203 thousand was recorded for the quarter ended March 31, 2025, consisting of a release of provision for credit losses on loans of $85 thousand and a release of provision for credit losses on unfunded loan commitments of $118 thousand. This compared to a provision for credit losses of $14 thousand for the quarter ended December 31, 2024, consisting of a release of provision for credit losses on loans of $73 thousand and a provision for credit losses on unfunded loan commitments of $87 thousand. The decrease in the provision for credit losses for the quarter ended March 31, 2025 compared to the quarter ended December 31, 2024 resulted primarily from a smaller loan portfolio and a reduced balance of unfunded commitments, partially offset by an additional qualitative adjustment applied to certain loan segments, specifically consumer and construction loans, reflecting increased uncertainty in market conditions tied to the impact of tariffs and other external factors affecting our clients. Expected credit loss estimates consider various factors, including market conditions, borrower-specific information, projected delinquencies, and anticipated effects of economic trends on borrowers' ability to repay. Q1 2025 vs Q1 2024 Interest income on loans increased $355 thousand, or 2.9%, to $12.6 million for the quarter ended March 31, 2025, compared to $12.2 million for the quarter ended March 31, 2024. The average balance of total loans was $896.8 million for the quarter ended March 31, 2025, up from $895.4 million for the quarter ended March 31, 2024. The average yield on total loans was 5.69% for the quarter ended March 31, 2025, up from 5.49% for the quarter ended March 31, 2024. The increase in the average loan yield during the current quarter, compared to the same quarter in 2024, was primarily due to the origination of new loans at higher interest rates. Additionally, variable-rate loans resetting to higher rates contributed to the increase in average yield compared to the first quarter of 2024. Interest income on investments was $108 thousand for the quarter ended March 31, 2025, compared to $111 thousand for the quarter ended March 31, 2024. Interest income on interest-bearing cash decreased $406 thousand to $1.0 million for the quarter ended March 31, 2025, compared to $1.4 million for the quarter ended March 31, 2024. The decrease was a result of both a lower average yield and average balance. The decrease in interest expense during the current quarter from the same quarter a year ago was primarily the result of a $18.9 million decrease in the average balance of interest-bearing demand and NOW accounts, a $25.5 million decrease in the average balance of certificate accounts, and a $15.0 million decrease in the average balance of FHLB advances, as well as lower average rates paid on all categories of interest-bearing deposits; resulting from lower market interest rates generally. These average-balance decreases were partially offset by a $51.0 million increase in the average balance of savings and money market accounts. The average cost of deposits was 2.37% for the quarter ended March 31, 2025, down from 2.57% for the quarter ended March 31, 2024. The average cost of FHLB advances was 4.25% for the quarter ended March 31, 2025, down from 4.31% for the quarter ended March 31, 2024. A release of provision for credit losses of $203 thousand was recorded for the quarter ended March 31, 2025, consisting of a release of provision for credit losses on loans of $85 thousand and a release of provision for credit losses on unfunded loan commitments of $118 thousand. This compared to a release of provision for credit losses of $33 thousand for the quarter ended March 31, 2024, consisting of a release of provision for credit losses on loans of $106 thousand and a provision for credit losses on unfunded loan commitments of $73 thousand. The larger release recorded in the current quarter primarily reflected the factors discussed above. Noninterest Income Q1 2025 vs Q4 2024 The decrease in noninterest income during the current quarter compared to the quarter ended December 31, 2024 was primarily related to a $176 thousand downward adjustment in fair value of mortgage servicing rights due to a smaller servicing portfolio, partially offset by : an increase of $68 thousand in earnings from BOLI primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in the first quarter, offset by fluctuations in financial markets which decreased the values of policies; and a $65 thousand increase in service charges and fee income due to a volume incentive paid by Mastercard in the first quarter of 2025 and higher interchange income. Loans sold during the quarter ended March 31, 2025, totaled $2.0 million, compared to $3.5 million and $4.2 million of loans sold during the quarters ended December 31, 2024 and March 31, 2024, respectively. Q1 2025 vs Q1 2024 The increase in noninterest income during the current quarter compared to the quarter ended March 31, 2024 was primarily due to a $72 thousand increase in service charges and fee income primarily due to the reasons noted above, and an $18 thousand increase in earnings from BOLI primarily due to the strategic decision to surrender and exchange existing policies into higher yielding policies in the first quarter, offset by fluctuations in financial markets, which reduced the values of policies. The increases in service charges and fee income and in earnings from BOLI were partially offset by a $13 thousand decrease in mortgage servicing income as a result of the portfolio paying down at a faster rate than originations replace repayments; a $34 thousand decrease in the fair value adjustment on mortgage servicing rights due to a smaller servicing portfolio; and a $41 thousand decrease in net gain on sale of loans due to fewer loans sold. Noninterest Expense Q1 2025 vs Q4 2024 The increase in noninterest expense during the current quarter from the quarter ended December 31, 2024 was primarily a result of: a $675 thousand increase in salaries and benefits related to higher salaries expense, partially due to accrual reversals in the fourth quarter 2024, along with an annual deferred compensation contribution for key executives made in the first quarter of each year, higher 401(k) contributions, and higher payroll taxes related to annual bonus payments; a $32 thousand increase in regulatory assessments due to a higher estimated accrual for exam costs; a $28 thousand increase in occupancy due to higher annual property charges and maintenance fees recognized in the first quarter; a $61 thousand increase in data processing due to higher vendor fees associated with annual subscription renewals; and a $24 thousand increase in OREO and repossessed assets due to the addition of a new property in the first quarter of 2025 and the absence of property sales in the prior quarter. Q1 2025 vs Q1 2024 The increase in noninterest expense during the current quarter from the quarter ended March 31, 2024 was primarily a result of: a $276 thousand increase in data processing expenses due to various project implementations that began amortizing in the third quarter of 2024 and the reimbursement of expenses by a software vendor in the first quarter of 2024; a $32 thousand increase in regulatory assessment expenses due to a higher estimated accrual for exam costs. These increases were partially offset by a $92 thousand decrease in operations expense, primarily due to the recognition of annual fee reimbursements from Mastercard beginning in the first quarter of 2025 and lower expenses across various accounts resulting from ongoing cost saving initiatives and process improvements. Balance Sheet Review, Capital Management and Credit Quality Assets at March 31, 2025 totaled $1.07 billion, up from $993.6 million at December 31, 2024 and down from $1.09 billion at March 31, 2024. The increase in total assets from December 31, 2024 was primarily due to an increase in cash and cash equivalents, partially offset by a lower balance of loans held-for-portfolio. The decrease from one year ago was primarily a result of lower balances of cash and cash equivalents and loans held-for-portfolio. Cash and cash equivalents increased $87.9 million, or 201.3%, to $131.5 million at March 31, 2025, compared to $43.6 million at December 31, 2024, and decreased $6.5 million, or 4.7%, from $138.0 million at March 31, 2024. The increased cash and cash equivalents from the prior quarter-end was primarily due to the strategic decision to sell reciprocal deposits at the end of 2024, which reduced our cash balances. These reciprocal deposits returned to our balance sheet in the first quarter of 2025. Investment securities decreased $110 thousand, or 1.1%, to $9.8 million at March 31, 2025, compared to $9.9 million at December 31, 2024, and decreased $462 thousand, or 4.5%, from $10.3 million at March 31, 2024, as pay-offs and paydowns of investments exceeded new purchases. Held-to-maturity securities totaled $2.1 million at both March 31, 2025 and December 31, 2024, and totaled $2.2 million at March 31, 2024. Available-for-sale securities totaled $7.7 million at March 31, 2025, compared to $7.8 million at December 31, 2024 and $8.1 million at March 31, 2024. Loans held-for-portfolio were $886.2 million at March 31, 2025, compared to $900.2 million at December 31, 2024 and $897.9 million at March 31, 2024. The decrease from both prior dates was primarily due to the payoff during the first quarter of 2025 of one $17.0 million loan that was risk rated special mention. Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, increased $2.2 million, or 29.4%, to $9.7 million at March 31, 2025, from $7.5 million at December 31, 2024 and decreased $49 thousand, or 0.5%, from $9.7 million at March 31, 2024. The increase in NPAs from December 31, 2024 was primarily due to the addition of six loans totaling $2.4 million to nonaccrual status, including two commercial real estate loans of $1.1 million and $988 thousand. The increase also included $41 thousand of other real estate owned properties. These additions were partially offset by $207 thousand in regular loan payments. Subsequent to quarter-end, the $988 thousand commercial real estate loan added during the quarter was paid-off. The decrease in NPAs from one year ago was primarily due to payoffs totaling $2.1 million, the return of $522 thousand of loans to accrual status, the sale of two other real estate owned properties for $690 thousand, and regular loan payments. These decreases were partially offset by the placement of an additional $3.6 million of loans on nonaccrual status, which included the two commercial real estate loans noted above. NPAs to total assets were 0.91%, 0.75% and 0.90% at March 31, 2025, December 31, 2024 and March 31, 2024, respectively. The allowance for credit losses on loans to total loans outstanding was 0.95% at March 31, 2025, compared to 0.94% at December 31, 2024 and 0.96% at March 31, 2024. Net loan charge-offs for the first quarter of 2025 totaled $21 thousand, compared to $13 thousand for the fourth quarter of 2024, and $56 thousand for the first quarter of 2024. The following table summarizes our NPAs at the dates indicated (dollars in thousands): The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited): Total deposits increased $72.5 million, or 8.7%, to $910.3 million at March 31, 2025, from $837.8 million at December 31, 2024 and decreased $6.5 million, or 0.7%, from $916.9 million at March 31, 2024. The increase in total deposits compared to the prior quarter-end was primarily a result of the movement of reciprocal deposits off balance sheet for strategic objectives at year-end, followed by the return of those deposits to our balance sheet in the first quarter of 2025, and a decrease in one high cost money market deposit relationship as part of our strategic decision to decrease our overall cost of funds. Noninterest-bearing deposits decreased $5.8 million, or 4.4%, to $126.7 million at March 31, 2025, compared to $132.5 million at December 31, 2024 and decreased $2.0 million, or 1.5%, from $128.7 million at March 31, 2024. Noninterest-bearing deposits represented 13.9%, 15.8% and 14.0% of total deposits at March 31, 2025, December 31, 2024 and March 31, 2024, respectively. FHLB advances totaled $25.0 million at March 31, 2025, compared to $25.0 million at both December 31, 2024, and March 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 March 31, 2025 had maturities ranging from early 2026 through early 2028. Subordinated notes, net totaled $11.8 million at both March 31, 2025 and December 31, 2024, and $11.7 million at March 31, 2024. Stockholders’ equity totaled $104.4 million at March 31, 2025, an increase of $765 thousand, or 0.7%, from $103.7 million at December 31, 2024, and an increase of $3.4 million, or 3.4%, from $101.0 million at March 31, 2024. The increase in stockholders’ equity from December 31, 2024 was primarily the result of $1.2 million of net income earned during the current quarter, $81 thousand in share-based compensation, and $21 thousand in common stock options exercised, partially offset by a $17 thousand increase in accumulated other comprehensive loss, net of tax and the payment of $487 thousand in cash dividends to the Company's stockholders. Sound Financial Bancorp, Inc., a bank holding company, is the parent company of Sound Community Bank, which is headquartered in Seattle, Washington and has full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow and University Place. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with one loan production office located in the Madison Park neighborhood of Seattle. For more information, please visit www.soundcb.com. Forward-Looking Statements Disclaimer When used in this press release and in documents filed or furnished by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's other press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors listed below or because of other factors that we cannot foresee that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Factors which could cause actual results to differ materially, include, but are not limited to: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation or deflation, a recession or slowed economic growth, as well as supply chain disruptions; changes in the interest rate environment, including increases and decreases in the Board of Governors of the Federal Reserve System (the Federal Reserve) benchmark rate and the duration at which such interest rate levels are maintained, 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 the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; changes in consumer spending, borrowing and savings habits; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans;expectations regarding key growth initiatives and strategic priorities; environmental, social and governance goals and targets; results of examinations of the Company or the Bank by their regulators; increased competition; changes in management's business strategies; legislative changes; changes in the regulatory and tax environments in which the Company operates; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on our third-party vendors; the potential for new or increased tariffs, trade restrictions, or geopolitical tensions that could affect economic activity or 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 on our business; and other factors described in the Company's latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other documents filed with or furnished to the SEC, which are available at www.soundcb.com and on the SEC's website at www.sec.gov. The risks inherent in these factors could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company and could negatively affect the Company's operating and stock performance. The Company does not undertake—and specifically disclaims any obligation—to revise any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement. CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, unaudited) CONSOLIDATED BALANCE SHEETS (Dollars in thousands, unaudited) KEY FINANCIAL RATIOS (unaudited) PER COMMON SHARE DATA (unaudited) AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID (Dollars in thousands, unaudited) 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). LOANS (Dollars in thousands, unaudited) DEPOSITS (Dollars in thousands, unaudited) CREDIT QUALITY DATA (Dollars in thousands, unaudited) OTHER STATISTICS (Dollars in thousands, unaudited) Contact