Sound Financial Bancorp, Inc. Q1 2025 Results

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." Q1 2025 Financial PerformanceTotal assets increased $75.6 million or 7.6% to $1.07 billion at March 31, 2025, from $993.6 million at December 31, 2024, and decreased $17.5 million or 1.6% from $1.09 billion at March 31, 2024. Net interest income decreased $149 thousand or 1.8% to $8.1 million for the quarter ended March 31, 2025, from $8.2 million for the quarter ended December 31, 2024, and increased $611 thousand or 8.2% from $7.5 million for the quarter ended March 31, 2024. Loans held-for-portfolio decreased $13.9 million or 1.5% to $886.2 million at March 31, 2025, compared to $900.2 million at December 31, 2024, and decreased $11.7 million or 1.3% from $897.9 million at March 31, 2024. Net interest margin ("NIM"), annualized, was 3.25% for the quarter ended March 31, 2025, compared to 3.13% for the quarter ended December 31, 2024 and 2.95% for the quarter ended March 31, 2024. 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. 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% compared to $128.7 million at March 31, 2024. A $203 thousand release of provision for credit losses was recorded for the quarter ended March 31, 2025, compared to a $14 thousand provision and a $33 thousand release of provision for credit losses for the quarters ended December 31, 2024 and March 31, 2024, respectively. At March 31, 2025, the allowance for credit losses on loans to total loans outstanding was 0.95%, compared to 0.94% at December 31, 2024 and 0.96% at March 31, 2024. The loans-to-deposits ratio was 98% at March 31, 2025, compared to 108% at December 31, 2024 and 98% at March 31, 2024. Total noninterest income decreased $62 thousand or 5.3% to $1.1 million for the quarter ended March 31, 2025, compared to the quarter ended December 31, 2024, and was virtually unchanged compared to the quarter ended March 31, 2024. Total nonperforming loans increased $2.2 million or 28.9% to $9.7 million at March 31, 2025, from $7.5 million at December 31, 2024, and increased $600 thousand or 6.6% from $9.1 million at March 31, 2024. Nonperforming loans to total loans was 1.09% and the allowance for credit losses on loans to total nonperforming loans was 86.95% at March 31, 2025. Total noninterest expense increased $856 thousand or 12.1% to $7.9 million for the quarter ended March 31, 2025, compared to the quarter ended December 31, 2024, and increased $258 thousand or 3.4% compared to the quarter ended March 31, 2024. The Bank continued to maintain capital levels in excess of regulatory requirements and was categorized as "well-capitalized" at March 31, 2025. Operating Results Net Interest Income after (Release of) Provision for Credit Losses For the Quarter Ended Q1 2025 vs. Q4 2024 Q1 2025 vs. Q1 2024 March 31,2025 December 31,2024 March 31,2024 Amount ($) Percentage (%) Amount ($) Percentage (%) (Dollars in thousands, unaudited)Interest income $13,706 $14,736 $13,760 $(1,030) (7.0)% $(54) (0.4)%Interest expense 5,635 6,516 6,300 (881) (13.5)% (665) (10.6)%Net interest income 8,071 8,220 7,460 (149) (1.8)% 611 8.2%(Release of) provision for credit losses (203) 14 (33) (217) (1550.0)% (170) 515.2%Net interest income after (release of) provision for credit losses 8,274 8,206 7,493 68 0.8% 781 10.4% 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 $73 thousand. The larger release recorded in the current quarter primarily reflected the factors discussed above. Noninterest Income For the Quarter Ended Q1 2025 vs. Q4 2024 Q1 2025 vs. Q1 2024 March 31,2025 December 31,2024 March 31,2024 Amount ($) Percentage (%) Amount ($) Percentage (%) (Dollars in thousands, unaudited)Service charges and fee income $684 $619 $612 $65 10.5% $72 11.8%Earnings on bank-owned life insurance (“BOLI”) 195 127 177 68 53.5% 18 10.2%Mortgage servicing income 269 277 282 (8) (2.9)% (13) (4.6)%Fair value adjustment on mortgage servicing rights (99) 77 (65) (176) (228.6)% (34) 52.3%Net gain on sale of loans 49 53 90 (4) (7.5)% (41) (45.6)%Other income — 7 — (7) (100.0)% — 100.0%Total noninterest income $1,098 $1,160 $1,096 $(62) (5.3)% $2 0.2% 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; anda $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, andan $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 bya $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; anda $41 thousand decrease in net gain on sale of loans due to fewer loans sold. Noninterest Expense For the Quarter Ended Q1 2025 vs. Q4 2024 Q1 2025 vs. Q1 2024 March 31,2025 December 31,2024 March 31,2024 Amount ($) Percentage (%) Amount ($) Percentage (%) (Dollars in thousands, unaudited)Salaries and benefits $4,595 $3,920 $4,543 $675 17.2% $52 1.1%Operations 1,365 1,329 1,457 36 2.7% (92) (6.3)%Regulatory assessments 221 189 189 32 16.9% 32 16.9%Occupancy 437 409 444 28 6.8% (7) (1.6)%Data processing 1,293 1,232 1,017 61 5.0% 276 27.1%Net loss (gain) on OREO and repossessed assets 3 (21) 6 24 (114.3)% (3) (50.0)%Total noninterest expense $7,914 $7,058 $7,656 $856 12.1% $258 3.4% 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; anda $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): March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024Nonperforming Loans: One-to-four family$762 $537 $745 $822 $835 Home equity loans 368 298 338 342 83 Commercial and multifamily 5,627 3,734 4,719 5,161 4,747 Construction and land 22 24 25 28 29 Manufactured homes 501 521 230 136 166 Floating homes 2,363 2,363 2,377 2,417 3,192 Commercial business — 11 23 — — Other consumer 10 3 32 3 1 Total nonperforming loans 9,653 7,491 8,489 8,909 9,053 OREO and Other Repossessed Assets: Commercial and multifamily — — — — 575 Manufactured homes 41 — 115 115 115 Total OREO and repossessed assets 41 — 115 115 690 Total NPAs$9,694 $7,491 $8,604 $9,024 $9,743 Percentage of Nonperforming Loans: One-to-four family 7.9% 7.3% 8.7% 9.1% 8.5%Home equity loans 3.8 4.0 3.9 3.8 0.9 Commercial and multifamily 58.0 49.8 54.8 57.2 48.7 Construction and land 0.2 0.3 0.3 0.3 0.3 Manufactured homes 5.2 7.0 2.7 1.5 1.7 Floating homes 24.4 31.5 27.6 26.8 32.8 Commercial business — 0.1 0.3 — — Other consumer 0.1 — 0.4 — — Total nonperforming loans 99.6 100.0 98.7 98.7 92.9 Percentage of OREO and Other Repossessed Assets: Commercial and multifamily — — — — 5.9 Manufactured homes 0.4 — 1.3 1.3 1.2 Total OREO and repossessed assets 0.4 — 1.3 1.3 7.1 Total NPAs 100.0% 100.0% 100.0% 100.0% 100.0% The following table summarizes the allowance for credit losses at the dates and for the periods indicated (dollars in thousands, unaudited): At or For the Quarter Ended: March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024Allowance for Credit Losses on Loans Balance at beginning of period$8,499 $8,585 $8,493 $8,598 $8,760 (Release of) provision for credit losses during the period (85) (73) 106 (88) (106)Net charge-offs during the period (21) (13) (14) (17) (56)Balance at end of period$8,393 $8,499 $8,585 $8,493 $8,598 Allowance for Credit Losses on Unfunded Loan Commitments Balance at beginning of period$234 $147 $245 $266 $193 Provision for (release of) provision for credit losses during the period (118) 87 (98) (21) 73 Balance at end of period 116 234 147 245 266 Allowance for Credit Losses$8,509 $8,733 $8,732 $8,738 $8,864 Allowance for credit losses on loans to total loans 0.95% 0.94% 0.95% 0.96% 0.96%Allowance for credit losses to total loans 0.96% 0.97% 0.97% 0.98% 0.99%Allowance for credit losses on loans to total nonperforming loans 86.95% 113.46% 101.13% 95.33% 94.97%Allowance for credit losses to total nonperforming loans 88.15% 116.58% 102.86% 98.08% 97.91% 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) For the Quarter Ended March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024Interest income $13,706 $14,736 $14,838 $14,039 $13,760 Interest expense 5,635 6,516 6,965 6,591 6,300 Net interest income 8,071 8,220 7,873 7,448 7,460 (Release of) provision for credit losses (203) 14 8 (109) (33)Net interest income after (release of) provision for credit losses 8,274 8,206 7,865 7,557 7,493 Noninterest income: Service charges and fee income 684 619 628 761 612 Earnings on bank-owned life insurance 195 127 186 134 177 Mortgage servicing income 269 277 280 279 282 Fair value adjustment on mortgage servicing rights (99) 77 101 (116) (65)Net gain on sale of loans 49 53 40 74 90 Other income — 7 — 30 — Total noninterest income 1,098 1,160 1,235 1,162 1,096 Noninterest expense: Salaries and benefits 4,595 3,920 4,469 4,658 4,543 Operations 1,365 1,329 1,540 1,569 1,457 Regulatory assessments 221 189 189 220 189 Occupancy 437 409 414 397 444 Data processing 1,293 1,232 1,067 910 1,017 Net (gain) loss on OREO and repossessed assets 3 (21) — (17) 6 Total noninterest expense 7,914 7,058 7,679 7,737 7,656 Income before provision for income taxes 1,458 2,308 1,421 982 933 Provision for income taxes 291 389 267 187 163 Net income $1,167 $1,919 $1,154 $795 $770 CONSOLIDATED BALANCE SHEETS(Dollars in thousands, unaudited) March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024ASSETS Cash and cash equivalents $131,494 $43,641 $148,930 $135,111 $137,977 Available-for-sale securities, at fair value 7,689 7,790 8,032 7,996 8,115 Held-to-maturity securities, at amortized cost 2,121 2,130 2,139 2,147 2,157 Loans held-for-sale 2,267 487 65 257 351 Loans held-for-portfolio 886,226 900,171 901,733 889,274 897,877 Allowance for credit losses - loans (8,393) (8,499) (8,585) (8,493) (8,598)Total loans held-for-portfolio, net 877,833 891,672 893,148 880,781 889,279 Accrued interest receivable 3,540 3,471 3,705 3,413 3,617 Bank-owned life insurance, net 22,685 22,490 22,363 22,172 22,037 Other real estate owned ("OREO") and other repossessed assets, net 41 — 115 115 690 Mortgage servicing rights, at fair value 4,688 4,769 4,665 4,540 4,612 Federal Home Loan Bank ("FHLB") stock, at cost 1,734 1,730 2,405 2,406 2,406 Premises and equipment, net 4,591 4,697 4,807 4,906 6,685 Right-of-use assets 3,546 3,725 3,779 4,020 4,259 Other assets 6,957 7,031 6,777 6,995 4,500 TOTAL ASSETS $1,069,186 $993,633 $1,100,930 $1,074,859 $1,086,685 LIABILITIES Interest-bearing deposits $783,660 $705,267 $800,480 $781,854 $788,217 Noninterest-bearing deposits 126,687 132,532 129,717 124,915 128,666 Total deposits 910,347 837,799 930,197 906,769 916,883 Borrowings 25,000 25,000 40,000 40,000 40,000 Accrued interest payable 586 765 908 760 719 Lease liabilities 3,828 4,013 4,079 4,328 4,576 Other liabilities 10,774 9,371 9,711 9,105 9,578 Advance payments from borrowers for taxes and insurance 2,450 1,260 2,047 812 2,209 Subordinated notes, net 11,770 11,759 11,749 11,738 11,728 TOTAL LIABILITIES 964,755 889,967 998,691 973,512 985,693 STOCKHOLDERS' EQUITY: Common stock 25 25 25 25 25 Additional paid-in capital 28,515 28,413 28,296 28,198 28,110 Retained earnings 76,952 76,272 74,840 74,173 73,907 Accumulated other comprehensive loss, net of tax (1,061) (1,044) (922) (1,049) (1,050)TOTAL STOCKHOLDERS' EQUITY 104,431 103,666 102,239 101,347 100,992 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,069,186 $993,633 $1,100,930 $1,074,859 $1,086,685 KEY FINANCIAL RATIOS(unaudited) For the Quarter Ended March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024Annualized return on average assets 0.45% 0.70% 0.42% 0.30% 0.29%Annualized return on average equity 4.53% 7.40% 4.50% 3.17% 3.06%Annualized net interest margin(1) 3.25% 3.13% 2.98% 2.92% 2.95%Annualized efficiency ratio(2) 86.31% 75.25% 84.31% 89.86% 89.48%(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) At or For the Quarter Ended March 31, 2025 December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024Basic earnings per share $0.45 $0.75 $0.45 $0.31 $0.30Diluted earnings per share $0.45 $0.74 $0.45 $0.31 $0.30Weighted-average basic shares outstanding 2,554,265 2,547,210 2,544,233 2,540,538 2,539,213Weighted-average diluted shares outstanding 2,578,609 2,578,771 2,569,368 2,559,015 2,556,958Common shares outstanding at period-end 2,566,069 2,564,907 2,564,095 2,557,284 2,558,546Book value per share $40.70 $40.42 $39.87 $39.63 $39.47 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). Three Months Ended March 31, 2025 December 31, 2024 March 31, 2024 Average Outstanding Balance Interest Earned/Paid Yield/Rate Average Outstanding Balance Interest Earned/Paid Yield/Rate Average Outstanding Balance Interest Earned/Paid Yield/RateInterest-Earning Assets: Loans receivable$896,822 $12,588 5.69% $900,832 $13,070 5.77% $895,430 $12,233 5.49%Interest-earning cash 95,999 1,010 4.27% 130,412 1,534 4.68% 107,361 1,416 5.30%Investments 12,924 108 3.39% 13,263 132 3.96% 14,038 111 3.18%Total interest-earning assets$1,005,745 13,706 5.53% 1,044,507 $14,736 5.61% $1,016,829 13,760 5.44%Interest-Bearing Liabilities: Savings and money market accounts$335,419 2,058 2.49% $350,495 2,476 2.81% $284,455 1,866 2.64%Demand and NOW accounts 140,905 108 0.31% 144,470 128 0.35% 159,762 141 0.35%Certificate accounts 289,960 3,039 4.25% 301,293 3,413 4.51% 315,495 3,696 4.71%Subordinated notes 11,766 168 5.79% 11,756 168 5.69% 11,724 168 5.76%Borrowings 25,000 262 4.25% 30,546 331 4.31% 40,000 429 4.31%Total interest-bearing liabilities$803,050 5,635 2.85% $838,560 6,516 3.09% $811,436 6,300 3.12%Net interest income/spread $8,071 2.68% $8,220 2.52% $7,460 2.32%Net interest margin 3.25% 3.13% 2.95% Ratio of interest-earning assets to interest-bearing liabilities 125% 125% 125% Noninterest-bearing deposits$126,215 $130,476 $132,438 Total deposits 892,499 $5,205 2.37% 926,734 $6,017 2.58% 892,150 $5,703 2.57%Total funding (1) 929,265 5,635 2.46% 969,036 6,516 2.68% 943,874 6,300 2.68% (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) March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024Real estate loans: One-to-four family $262,457 $269,684 $271,702 $268,488 $279,213 Home equity 28,112 26,686 25,199 26,185 24,380 Commercial and multifamily 392,798 371,516 358,587 342,632 324,483 Construction and land 42,492 73,077 85,724 96,962 111,726 Total real estate loans 725,859 740,963 741,212 734,267 739,802 Consumer Loans: Manufactured homes 42,448 41,128 40,371 38,953 37,583 Floating homes 86,626 86,411 86,155 81,622 84,237 Other consumer 18,224 17,720 18,266 18,422 18,847 Total consumer loans 147,298 145,259 144,792 138,997 140,667 Commercial business loans 14,690 15,605 17,481 17,860 19,075 Total loans 887,847 901,827 903,485 891,124 899,544 Less: Premiums 688 718 736 754 808 Deferred fees, net (2,309) (2,374) (2,488) (2,604) (2,475)Allowance for credit losses - loans (8,393) (8,499) (8,585) (8,493) (8,598)Total loans held-for-portfolio, net $877,833 $891,672 $893,148 $880,781 $889,279 DEPOSITS(Dollars in thousands, unaudited) March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024Noninterest-bearing demand $126,687 $132,532 $129,717 $124,915 $128,666Interest-bearing demand 143,595 142,126 148,740 152,829 159,178Savings 63,533 61,252 61,455 63,368 65,723Money market 287,058 206,067 285,655 253,873 241,976Certificates 289,474 295,822 304,630 311,784 321,340Total deposits $910,347 $837,799 $930,197 $906,769 $916,883 CREDIT QUALITY DATA(Dollars in thousands, unaudited) At or For the Quarter Ended March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024Total nonperforming loans $9,653 $7,491 $8,489 $8,909 $9,053 OREO and other repossessed assets 41 — 115 115 690 Total nonperforming assets $9,694 $7,491 $8,604 $9,024 $9,743 Net charge-offs during the quarter $(21) $(13) $(14) $(17) $(56)Provision for (release of) credit losses during the quarter (203) 14 8 (109) (33)Allowance for credit losses - loans 8,393 8,499 8,585 8,493 8,598 Allowance for credit losses - loans to total loans 0.95% 0.94% 0.95% 0.96% 0.96%Allowance for credit losses - loans to total nonperforming loans 86.95% 113.46% 101.13% 95.33% 94.97%Nonperforming loans to total loans 1.09% 0.83% 0.94% 1.00% 1.01%Nonperforming assets to total assets 0.91% 0.75% 0.78% 0.84% 0.90% OTHER STATISTICS(Dollars in thousands, unaudited) At or For the Quarter Ended March 31,2025 December 31,2024 September 30,2024 June 30,2024 March 31,2024 Total loans to total deposits 97.53% 107.64% 97.13% 98.27% 98.11%Noninterest-bearing deposits to total deposits 13.92% 15.82% 13.95% 13.78% 14.03% Average total assets for the quarter $1,051,135 $1,089,067 $1,095,404 $1,070,579 $1,062,036 Average total equity for the quarter $104,543 $103,181 $102,059 $100,961 $101,292 Contact Financial:Wes Ochs Executive Vice President/CFO(206) 436-8587 Media:Laurie Stewart President/CEO(206) 436-1495

Sound Financial Bancorp, Inc. Q1 2025 Results

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