Sound Financial Bancorp, Inc. Q4 2024 Results

SEATTLE, Jan. 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 $1.9 million for the quarter ended December 31, 2024, or $0.74 diluted earnings per share, as compared to net income of $1.2 million, or $0.45 diluted earnings per share, for the quarter ended September 30, 2024, and $1.2 million, or $0.47 diluted earnings per share, for the quarter ended December 31, 2023. 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 February 26, 2025 to stockholders of record as of the close of business on February 12, 2025. Comments from the President and Chief Executive Officer “The Bank ended the year with many positives, including a 15-basis-point increase in net interest margin compared to the third quarter of 2024. This was largely due to our significant progress in reducing deposit costs, which fell by 16 basis points,” remarked Laurie Stewart, President and Chief Executive Officer. “Additionally, nonperforming loans decreased by 11.8% from the third quarter, and for the first time in more than a decade, we have no OREO," concluded Ms. Stewart."Notable progress was made in reducing funding costs during the quarter and in controlling expenses throughout the entire year. We hope to continue this momentum in 2025. Our staff across the company played an important role in these accomplishments by focusing on client relationships and increasing efficiencies through technological improvements," explained Wes Ochs, Executive Vice President and Chief Financial Officer. Mr. Ochs continued, "We ended the year with the same balance sheet strategy that we used to close out 2023, which helped reduce the Bank’s asset size below $1 billion. This strategy is intended to provide the Bank with additional operational flexibility and continued cost savings in 2025."Q4 2024 Financial PerformanceTotal assets decreased $107.3 million or 9.7% to $993.6 million at December 31, 2024, from $1.10 billion at September 30, 2024, and decreased $1.6 million or 0.2% from $995.2 million at December 31, 2023. Net interest income increased $347 thousand or 4.4% to $8.2 million for the quarter ended December 31, 2024, from $7.9 million for the quarter ended September 30, 2024, and increased $653 thousand or 8.6% from $7.6 million for the quarter ended December 31, 2023. Net interest margin ("NIM"), annualized, was 3.13% for the quarter ended December 31, 2024, compared to 2.98% for the quarter ended September 30, 2024 and 3.04% for the quarter ended December 31, 2023.Loans held-for-portfolio decreased $1.6 million or 0.2% to $900.2 million at December 31, 2024, compared to $901.7 million at September 30, 2024, and increased $5.7 million or 0.6% from $894.5 million at December 31, 2023. A $14 thousand provision for credit losses was recorded for the quarter ended December 31, 2024, compared to an $8 thousand provision and a $27 thousand release of provision for credit losses for the quarters ended September 30, 2024 and December 31, 2023, respectively. At December 31, 2024, the allowance for credit losses on loans to total loans outstanding was 0.94%, compared to 0.95% at September 30, 2024 and 0.98% December 31, 2023.Total deposits decreased $92.4 million or 9.9% to $837.8 million at December 31, 2024, from $930.2 million at September 30, 2024, and increased $11.3 million or 1.4% from $826.5 million at December 31, 2023. Noninterest-bearing deposits increased $2.8 million or 2.2% to $132.5 million at December 31, 2024 compared to $129.7 million at September 30, 2024, and increased $5.8 million or 4.6% compared to $126.7 million at December 31, 2023. Total noninterest income decreased $75 thousand or 6.1% to $1.2 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and increased $94 thousand or 8.8% compared to the quarter ended December 31, 2023.The loans-to-deposits ratio was 108% at December 31, 2024, compared to 97% at September 30, 2024 and 108% at December 31, 2023. Total noninterest expense decreased $621 thousand or 8.1% to $7.1 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and decreased $248 thousand or 3.4% compared to the quarter ended December 31, 2023.Total nonperforming loans decreased $998 thousand or 11.8% to $7.5 million at December 31, 2024, from $8.5 million at September 30, 2024, and increased $3.9 million or 110.7% from $3.6 million at December 31, 2023. Nonperforming loans to total loans was 0.83% and the allowance for credit losses on loans to total nonperforming loans was 113.46% at December 31, 2024. The Bank continued to maintain capital levels in excess of regulatory requirements and was categorized as "well-capitalized" at December 31, 2024. Operating Results Net interest income increased $347 thousand, or 4.4%, to $8.2 million for the quarter ended December 31, 2024, compared to $7.9 million for the quarter ended September 30, 2024, and increased $653 thousand, or 8.6%, from $7.6 million for the quarter ended December 31, 2023.The increase from the prior quarter was primarily the result of lower funding costs and an increase in average yield on loans receivable and investments, partially offset by a decrease in the average balance and yield on interest-bearing cash. The increase in net interest income compared to the same quarter one year ago was primarily due to a higher average yield on interest-earning assets, particularly loans receivable and investments, and an increase in the average balances of both loans receivable and interest-bearing cash, partially offset by a lower average yield on interest-bearing cash and higher funding costs. Interest income decreased $102 thousand, or 0.7%, to $14.7 million for the quarter ended December 31, 2024, compared to $14.8 million for the quarter ended September 30, 2024, and increased $1.4 million, or 10.5%, from $13.3 million for the quarter ended December 31, 2023. The decrease from the prior quarter was primarily due to a lower average balance of interest-bearing cash, and a 59 basis point decline in the average yield on interest-bearing cash, offset by a seven basis point increase in the average loan yield and a 16 basis point increase in the average yield on investments. The increase in interest income compared to the same quarter last year was due primarily to higher average balances of loans and interest-bearing cash, a 37 basis point increase in the average yield on loans, and a 43 basis point increase in the average yield on investments, partially offset by a decline in the average balance of investments and a 59 basis point decline in the average yield on interest-bearing cash. Interest income on loans increased $194 thousand, or 1.5%, to $13.1 million for the quarter ended December 31, 2024, compared to $12.9 million for the quarter ended September 30, 2024, and increased $1.0 million, or 8.6%, from $12.0 million for the quarter ended December 31, 2023. The average balance of total loans was $900.8 million for the quarter ended December 31, 2024, up from $898.6 million for the quarter ended September 30, 2024 and $884.7 million for the quarter ended December 31, 2023. The average yield on total loans was 5.77% for the quarter ended December 31, 2024, up from 5.70% for the quarter ended September 30, 2024 and 5.40% for the quarter ended December 31, 2023. The increase in the average loan yield during the current quarter, compared to both the prior quarter and the fourth quarter of 2023, 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 prior quarters. The increase in the average balance during the current quarter compared to the prior quarter was primarily due to growth in commercial and multifamily loans, manufactured housing loans and floating home loans. This was partially offset by a decline in construction and land loans and commercial business loans. The average balances for one-to-four family loans, home equity loans, and other consumer loans remained relatively flat from the third quarter of 2024. The increase in the average balance of loans during the current quarter compared to the fourth quarter of 2023 was primarily due to loan growth across all categories, except for one-to-four family loans, construction and land loans, commercial business loans, and other consumer loans, with the largest decrease being in construction and land loans. Interest income on investments was $132 thousand for both the quarters ended December 31, 2024 and September 30, 2024, and $129 thousand for the quarter ended December 31, 2023. Interest income on interest-bearing cash decreased $296 thousand to $1.5 million for the quarter ended December 31, 2024, compared to $1.8 million for the quarter ended September 30, 2024, and increased $359 thousand from $1.2 million for the quarter ended December 31, 2023. The decrease from the prior quarter was due to decreases in the average yield and average balance of interest-bearing cash. The increase from the same quarter in the prior year was a result of a higher average balance, partially offset by a lower average yield. Interest expense decreased $449 thousand, or 6.4%, to $6.5 million for the quarter ended December 31, 2024, from $7.0 million for the quarter ended September 30, 2024, and increased $746 thousand, or 12.9%, from $5.8 million for the quarter ended December 31, 2023. The decrease in interest expense during the current quarter from the prior quarter was primarily the result of average balance decreases of $3.8 million in demand and NOW accounts, $2.3 million in certificate accounts and $9.5 million in FHLB advances, as well as lower average rates paid on all categories of interest-bearing deposits, partially offset by a $10.2 million increase in the average balance of savings and money market accounts. The increase in interest expense during the current quarter from the same quarter a year ago was primarily the result of a $91.9 million increase in the average balance of savings and money market accounts and a $1.3 million increase in the average balance of certificate accounts, as well as higher average rates paid on savings and money market accounts. This was partially offset by a $25.3 million decrease in the average balance of demand and NOW accounts and a $9.6 million decrease in the average balance of FHLB advances. The average cost of deposits was 2.58% for the quarter ended December 31, 2024, down from 2.74% for the quarter ended September 30, 2024 and up from 2.38% for the quarter ended December 31, 2023. The average cost of FHLB advances was 4.31% for the quarter ended December 31, 2024, down from 4.32% for the quarter ended September 30, 2024, and up from 4.26% for the quarter ended December 31, 2023. NIM (annualized) was 3.13% for the quarter ended December 31, 2024, up from 2.98% for the quarter ended September 30, 2024 and 3.04% for the quarter ended December 31, 2023. The increase in NIM from the prior quarter was the result of lower cost of funding, partially offset by a decrease in interest income on interest-earning assets. The increase in NIM from the quarter one year ago was primarily due to an increase in interest income on interest-earning assets, driven by the higher average balance in loans and interest-bearing cash and a higher yield earned on loans and investments, partially offset by a higher average balance of and cost of savings and money market accounts. A provision for credit losses of $14 thousand was recorded 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. 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, and a release of provision for credit losses of $27 thousand for the quarter ended December 31, 2023, consisting of a provision for credit losses on loans of $337 thousand and a release of the provision for credit losses on unfunded loan commitments of $364 thousand. The increase in the provision for credit losses for the quarter ended December 31, 2024 compared to the quarter ended September 30, 2024 resulted primarily from an additional qualitative adjustment related to our loan review, additional enhancements to the loss model related to how we adjust for the qualitative component, including the utilization of a scorecard to drive managements analysis, and growth in our unfunded construction loan portfolio, which has a higher loss rate than our other loan portfolios. These increases were offset by lower reserves in both our floating home sub-segment of other consumer loans within our quantitative analysis and in our qualitative analysis related to market conditions and value of underlying collateral, as economic conditions have improved. Expected loss estimates consider various factors, such as market conditions, borrower-specific information, projected delinquencies, and the impact of economic conditions on borrowers' ability to repay. Noninterest income decreased $75 thousand, or 6.1%, to $1.2 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and increased $94 thousand, or 8.8%, compared to the quarter ended December 31, 2023. The decrease from the prior quarter was primarily related to a $24 thousand downward adjustment in fair value of mortgage servicing rights and a $59 thousand decrease in earnings from bank-owned life insurance (“BOLI”), both influenced by fluctuating market interest rates. These decreases were partially offset by an increase of $13 thousand in net gain on sale of loans due to higher sales volume in the fourth quarter of 2024, and a $7 thousand increase in gain on disposal of assets due to insurance claims exceeding the book value on the replacement of stolen laptops in the second quarter of 2024. The increase in noninterest income from the same quarter of 2023 was primarily due an $43 thousand increase in service charges and fee income primarily due to increases in late fees on loans, higher interchange income and income related to a new, multi-year agreement with our credit card provider that was effective in 2024, a late fee on one commercial loan and higher specialty deposit fees due to fewer reversals of fees in 2024, a $173 thousand increase in the fair value adjustment on mortgage servicing rights due to changes in prepayment speeds, servicing costs, and discount rate, and a $7 thousand increase in gain on disposal of assets as noted above. These increases were partially offset by a $95 thousand decrease in earnings on BOLI due to market rate fluctuations, and a $23 thousand decrease in net gain on sale of loans due to fewer loans sold, and an $11 thousand decrease in mortgage servicing income as a result of the portfolio paying down at a faster rate than we are replacing the loans. Loans sold during the quarter ended December 31, 2024, totaled $3.5 million, compared to $2.4 million and $4.5 million of loans sold during the quarters ended September 30, 2024 and December 31, 2023, respectively. Noninterest expense decreased $621 thousand, or 8.1%, to $7.1 million for the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024, and decreased $248 thousand, or 3.4%, from the quarter ended December 31, 2023. The decrease from the quarter ended September 30, 2024 was primarily a result of lower salaries and benefits and operations expenses, partially offset by higher data processing expense. Salaries and benefits decreased $549 thousand primarily due to lower incentive compensation, lower retirement plan expense due to fluctuating market rates, lower medical expense due to higher medical costs during the third quarter of 2024, and lower salaries expense, as well as higher deferred salaries due to higher loan production. Operations expense decreased $211 thousand primarily due to a reversal of state and local tax expense related to higher estimated tax payments made than actual tax due, and lower operational losses in the current quarter as the prior quarter included the charge-off of a fraudulently obtained loan. This was partially offset by an $165 thousand increase in data processing expenses, reflecting new technology implementation costs. Compared to same quarter in 2023, the decrease in noninterest expense was primarily due to lower operations expenses, occupancy expenses and data processing expenses, which were partially offset by a $118 thousand increase in salaries and benefits costs. Operations expenses decreased due to reduction in loan originations costs, office expenses, operational losses, charitable contributions and state and local taxes, partially offset by higher professional fees primarily related to costs for future FDIC Improvement Act implementation. Data processing expenses decreased due to lower costs related to our core processor, while occupancy expenses decreased primarily due to fully amortized leasehold improvements. The increase in salaries and benefits compared to the same quarter last year reflected higher incentive compensation, lower deferred salaries, higher medical expenses due primarily to a change in insurance providers, and a higher contribution to our employee stock ownership plan due to the increase in value of our stock in 2024. This was partially offset by lower retirement plan expenses due to fluctuating market rates and lower salaries from a restructuring of positions at the end of 2023. Balance Sheet Review, Capital Management and Credit Quality Assets at December 31, 2024 totaled $993.6 million, down from $1.10 billion at September 30, 2024 and $995.22 million at December 31, 2023. The decrease in total assets from September 30, 2024 was primarily due to decreases in cash and cash equivalents and loans held-for-portfolio. The decrease from one year ago was primarily a result of lower balances of cash and cash equivalents and investment securities, offset by an increase in loans held-for-portfolio. Cash and cash equivalents decreased $105.3 million, or 70.7%, to $43.6 million at December 31, 2024, compared to $148.9 million at September 30, 2024, and decreased $6.0 million, or 12.2%, from $49.7 million at December 31, 2023. The decrease from the prior quarter was primarily due to higher deposit withdrawals, as well as the strategic decision to sell reciprocal deposits at the end of the year. Cash and cash equivalents decreased from one year ago primarily due to the increase in loans held-for-portfolio and the payoff of one FHLB borrowing, partially offset by an increase in deposits. Investment securities decreased $251 thousand, or 2.5%, to $9.9 million at December 31, 2024, compared to $10.2 million at September 30, 2024, and decreased $533 thousand, or 5.1%, from $10.5 million at December 31, 2023. Held-to-maturity securities totaled $2.1 million at both December 31, 2024 and September 30, 2024, and totaled $2.2 million at December 31, 2023. Available-for-sale securities totaled $7.8 million at December 31, 2024, compared to $8.0 million at September 30, 2024 and $8.3 million at December 31, 2023. Loans held-for-portfolio were $900.2 million at December 31, 2024, compared to $901.7 million at September 30, 2024 and $894.5 million at December 31, 2023. Nonperforming assets (“NPAs”), which are comprised of nonaccrual loans (including nonperforming modified loans), other real estate owned (“OREO”) and other repossessed assets, decreased $1.1 million, or 12.9%, to $7.5 million at December 31, 2024, from $8.6 million at September 30, 2024 and increased $3.4 million, or 81.3%, from $4.1 million at December 31, 2023. The decrease in NPAs from September 30, 2024 was primarily due to the payoff of seven loans totaling $1.2 million, one loan totaling $76 thousand returning to accrual status, and sale of one other real estate owned property for $115 thousand for a small net gain on sale, partially offset by the addition of seven loans totaling $326 thousand to nonaccrual. The increase in NPAs from one year ago was primarily due to the placement of an additional $9.3 million of loans on nonaccrual status, which included a $3.7 million matured commercial real estate loan where the borrower is in the process of securing financing from another lender, and a $2.4 million floating home loan, all of which are well secured. These additions were partially offset by payoffs totaling $4.2 million, the return of $784 thousand of loans to accrual status, charge-offs of $142 thousand, the sale of two other real estate owned properties for $685 thousand, and normal loan payments. NPAs to total assets were 0.75%, 0.78% and 0.42% at December 31, 2024, September 30, 2024 and December 31, 2023, respectively. The allowance for credit losses on loans to total loans outstanding was 0.94% at December 31, 2024, compared to 0.95% at September 30, 2024 and 0.98% at December 31, 2023. Net loan charge-offs for the fourth quarter of 2024 totaled $13 thousand, compared to $14 thousand for the third quarter of 2024, and $15 thousand for the fourth quarter of 2023. The following table summarizes our NPAs at the dates indicated (dollars in thousands): December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023Nonperforming Loans: One-to-four family$537 $745 $822 $835 $1,108 Home equity loans 298 338 342 83 84 Commercial and multifamily 3,734 4,719 5,161 4,747 — Construction and land 24 25 28 29 — Manufactured homes 521 230 136 166 228 Floating homes 2,363 2,377 2,417 3,192 — Commercial business 11 23 — — 2,135 Other consumer 3 32 3 1 1 Total nonperforming loans 7,491 8,489 8,909 9,053 3,556 OREO and Other Repossessed Assets: Commercial and multifamily — — — 575 575 Manufactured homes — 115 115 115 — Total OREO and repossessed assets — 115 115 690 575 Total NPAs$7,491 $8,604 $9,024 $9,743 $4,131 Percentage of Nonperforming Loans: One-to-four family 7.3% 8.7% 9.1% 8.5% 26.9%Home equity loans 4.0 3.9 3.8 0.9 2.0 Commercial and multifamily 49.8 54.8 57.2 48.7 — Construction and land 0.3 0.3 0.3 0.3 — Manufactured homes 7.0 2.7 1.5 1.7 5.5 Floating homes 31.5 27.6 26.8 32.8 — Commercial business 0.1 0.3 — — 51.7 Other consumer — 0.4 — — — Total nonperforming loans 100.0 98.7 98.7 92.9 86.1 Percentage of OREO and Other Repossessed Assets: Commercial and multifamily — — — 5.9 13.9 Manufactured homes — 1.3 1.3 1.2 — Total OREO and repossessed assets — 1.3 1.3 7.1 13.9 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: December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023Allowance for Credit Losses on Loans Balance at beginning of period$8,585 $8,493 $8,598 $8,760 $8,438 (Release of) provision for credit losses during the period (73) 106 (88) (106) 337 Net charge-offs during the period (13) (14) (17) (56) (15)Balance at end of period$8,499 $8,585 $8,493 $8,598 $8,760 Allowance for Credit Losses on Unfunded Loan Commitments Balance at beginning of period$147 $245 $266 $193 $557 Provision for (release of) provision for credit losses during the period 87 (98) (21) 73 (364)Balance at end of period 234 147 245 266 193 Allowance for Credit Losses$8,733 $8,732 $8,738 $8,864 $8,953 Allowance for credit losses on loans to total loans 0.94% 0.95% 0.96% 0.96% 0.98%Allowance for credit losses to total loans 0.97% 0.97% 0.98% 0.99% 1.00%Allowance for credit losses on loans to total nonperforming loans 113.46% 101.13% 95.33% 94.97% 246.34%Allowance for credit losses to total nonperforming loans 116.58% 102.86% 98.08% 97.91% 251.77% Total deposits decreased $92.4 million, or 9.9%, to $837.8 million at December 31, 2024, from $930.2 million at September 30, 2024 and increased $11.3 million, or 1.4%, from $826.5 million at December 31, 2023. The decrease 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 depositor relationship as part of our strategic decision to decrease our overall cost of funds. Noninterest-bearing deposits increased $2.8 million, or 2.2%, to $132.5 million at December 31, 2024, compared to $129.7 million at September 30, 2024 and increased $5.8 million, or 4.6%, from $126.7 million at December 31, 2023. Noninterest-bearing deposits represented 15.8%, 14.0% and 15.3% of total deposits at December 31, 2024, September 30, 2024 and December 31, 2023, respectively. FHLB advances totaled $25.0 million at December 31, 2024, compared to $40.0 million at both September 30, 2024, and December 31, 2023. The decrease from both prior dated was due to the repayment of a $15.0 million FHLB advance that matured in November 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 December 31, 2024 had maturities ranging from early 2026 through early 2028. Subordinated notes, net totaled $11.8 million at each of December 31, 2024, September 30, 2024 and December 31, 2023. Stockholders’ equity totaled $103.7 million at December 31, 2024, an increase of $1.4 million, or 1.4%, from $102.2 million at September 30, 2024, and an increase of $3.0 million, or 3.0%, from $100.7 million at December 31, 2023. The increase in stockholders’ equity from September 30, 2024 was primarily the result of $1.9 million of net income earned during the current quarter, $98 thousand in share-based compensation, and $19 thousand in common stock options exercised, partially offset by a $122 thousand increase in accumulated other comprehensive loss, net of tax and the payment of $486 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 imposition of new tariffs or changes to existing trade policies that could affect economic activity or specific industry sector; 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 December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023Interest income $14,736 $14,838 $14,039 $13,760 $13,337 Interest expense 6,516 6,965 6,591 6,300 5,770 Net interest income 8,220 7,873 7,448 7,460 7,567 Provision for (release of) credit losses 14 8 (109) (33) (27)Net interest income after provision for (release of) credit losses 8,206 7,865 7,557 7,493 7,594 Noninterest income: Service charges and fee income 619 628 761 612 576 Earnings on bank-owned life insurance 127 186 134 177 222 Mortgage servicing income 277 280 279 282 288 Fair value adjustment on mortgage servicing rights 77 101 (116) (65) (96)Net gain on sale of loans 53 40 74 90 76 Other income 7 — 30 — — Total noninterest income 1,160 1,235 1,162 1,096 1,066 Noninterest expense: Salaries and benefits 3,920 4,469 4,658 4,543 3,802 Operations 1,329 1,540 1,569 1,457 1,537 Regulatory assessments 189 189 220 189 198 Occupancy 409 414 397 444 458 Data processing 1,232 1,067 910 1,017 1,311 Net (gain) loss on OREO and repossessed assets (21) — (17) 6 — Total noninterest expense 7,058 7,679 7,737 7,656 7,306 Income before provision for income taxes 2,308 1,421 982 933 1,354 Provision for income taxes 389 267 187 163 143 Net income $1,919 $1,154 $795 $770 $1,211 CONSOLIDATED INCOME STATEMENTS(Dollars in thousands, unaudited) For theYear Ended December 31 2024 2023 Interest income $57,374 $50,609 Interest expense 26,372 16,759 Net interest income 31,002 33,850 (Release of) provision for credit losses (120) (273)Net interest income after (release of) provision for credit losses 31,122 34,123 Noninterest income: Service charges and fee income 2,620 2,527 Earnings on bank-owned life insurance 625 1,179 Mortgage servicing income 1,118 1,179 Fair value adjustment on mortgage servicing rights (4) (219)Net gain on sale of loans 258 340 Other income 38 — Total noninterest income 4,655 5,006 Noninterest expense: Salaries and benefits 17,590 17,135 Operations 5,894 6,095 Regulatory assessments 787 688 Occupancy 1,665 1,810 Data processing 4,226 4,388 Net (gain) loss on OREO and repossessed assets (31) 13 Total noninterest expense 30,131 30,129 Income before provision for income taxes 5,646 9,000 Provision for income taxes 1,006 1,561 Net income $4,640 $7,439 CONSOLIDATED BALANCE SHEETS(Dollars in thousands, unaudited) December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023ASSETS Cash and cash equivalents $43,641 $148,930 $135,111 $137,977 $49,690 Available-for-sale securities, at fair value 7,790 8,032 7,996 8,115 8,287 Held-to-maturity securities, at amortized cost 2,130 2,139 2,147 2,157 2,166 Loans held-for-sale 487 65 257 351 603 Loans held-for-portfolio 900,171 901,733 889,274 897,877 894,478 Allowance for credit losses - loans (8,499) (8,585) (8,493) (8,598) (8,760)Total loans held-for-portfolio, net 891,672 893,148 880,781 889,279 885,718 Accrued interest receivable 3,471 3,705 3,413 3,617 3,452 Bank-owned life insurance, net 22,490 22,363 22,172 22,037 21,860 Other real estate owned ("OREO") and other repossessed assets, net — 115 115 690 575 Mortgage servicing rights, at fair value 4,769 4,665 4,540 4,612 4,632 Federal Home Loan Bank ("FHLB") stock, at cost 1,730 2,405 2,406 2,406 2,396 Premises and equipment, net 4,697 4,807 4,906 6,685 5,240 Right-of-use assets 3,725 3,779 4,020 4,259 4,496 Other assets 7,031 6,777 6,995 4,500 6,106 TOTAL ASSETS $993,633 $1,100,930 $1,074,859 $1,086,685 $995,221 LIABILITIES Interest-bearing deposits $705,267 $800,480 $781,854 $788,217 $699,813 Noninterest-bearing deposits 132,532 129,717 124,915 128,666 126,726 Total deposits 837,799 930,197 906,769 916,883 826,539 Borrowings 25,000 40,000 40,000 40,000 40,000 Accrued interest payable 765 908 760 719 817 Lease liabilities 4,013 4,079 4,328 4,576 4,821 Other liabilities 9,371 9,711 9,105 9,578 9,563 Advance payments from borrowers for taxes and insurance 1,260 2,047 812 2,209 1,110 Subordinated notes, net 11,759 11,749 11,738 11,728 11,717 TOTAL LIABILITIES 889,967 998,691 973,512 985,693 894,567 STOCKHOLDERS' EQUITY: Common stock 25 25 25 25 25 Additional paid-in capital 28,413 28,296 28,198 28,110 27,990 Retained earnings 76,272 74,840 74,173 73,907 73,627 Accumulated other comprehensive loss, net of tax (1,044) (922) (1,049) (1,050) (988)TOTAL STOCKHOLDERS' EQUITY 103,666 102,239 101,347 100,992 100,654 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $993,633 $1,100,930 $1,074,859 $1,086,685 $995,221 KEY FINANCIAL RATIOS(unaudited) For the Quarter Ended December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023Annualized return on average assets 0.70% 0.42% 0.30% 0.29% 0.46%Annualized return on average equity 7.40% 4.50% 3.17% 3.06% 4.78%Annualized net interest margin(1) 3.13% 2.98% 2.92% 2.95% 3.04%Annualized efficiency ratio(2) 75.25% 84.31% 89.86% 89.48% 84.63% (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 December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023Basic earnings per share $0.75 $0.45 $0.31 $0.30 $0.47Diluted earnings per share $0.74 $0.45 $0.31 $0.30 $0.47Weighted-average basic shares outstanding 2,547,210 2,544,233 2,540,538 2,539,213 2,542,175Weighted-average diluted shares outstanding 2,578,771 2,569,368 2,559,015 2,556,958 2,560,656Common shares outstanding at period-end 2,564,907 2,564,095 2,557,284 2,558,546 2,549,427Book value per share $40.42 $39.87 $39.63 $39.47 $39.48 AVERAGE BALANCE, AVERAGE YIELD EARNED, AND AVERAGE RATE PAID(Dollars in thousands, unaudited) The following tables present, 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 December 31, 2024 September 30, 2024 December 31, 2023 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$900,832 $13,070 5.77% $898,570 $12,876 5.70% $884,677 $12,033 5.40%Interest-earning cash 130,412 1,534 4.68% 138,240 1,830 5.27% 88,401 1,175 5.27%Investments 13,263 132 3.96% 13,806 132 3.80% 14,479 129 3.53%Total interest-earning assets$1,044,507 14,736 5.61% 1,050,616 $14,838 5.62% $987,557 13,337 5.36%Interest-Bearing Liabilities: Savings and money market accounts$350,495 2,476 2.81% $340,281 2,688 3.14% $258,583 1,586 2.43%Demand and NOW accounts 144,470 128 0.35% 148,252 151 0.41% 169,816 149 0.35%Certificate accounts 301,293 3,413 4.51% 303,632 3,524 4.62% 300,042 3,436 4.54%Subordinated notes 11,756 168 5.69% 11,745 168 5.69% 11,714 168 5.69%Borrowings 30,546 331 4.31% 40,000 434 4.32% 40,109 431 4.26%Total interest-bearing liabilities$838,560 6,516 3.09% $843,910 6,965 3.28% $780,264 5,770 2.93%Net interest income/spread $8,220 2.52% $7,873 2.34% $7,567 2.42%Net interest margin 3.13% 2.98% 3.04% Ratio of interest-earning assets to interest-bearing liabilities 125% 124% 127% Noninterest-bearing deposits$130,476 $132,762 $134,857 Total deposits 926,734 $6,017 2.58% 924,927 $6,363 2.74% 863,298 $5,171 2.38%Total funding(1) 969,036 6,516 2.68% 976,672 6,965 2.84% 915,121 5,770 2.50% (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. Year Ended December 31, 2024 December 31, 2023 Average Outstanding Balance Interest Earned/Paid Yield/Rate Average Outstanding Balance Interest Earned/Paid Yield/RateInterest-Earning Assets: Loans receivable$896,690 $50,499 5.63% $870,227 $46,470 5.34%Interest-earning cash 124,259 6,367 5.12% 74,708 3,621 4.85%Investments 12,468 508 4.07% 13,661 518 3.79%Total interest-earning assets$1,033,417 57,374 5.55% $958,596 50,609 5.28%Interest-Bearing Liabilities: Savings and money market accounts$319,314 9,145 2.86% $194,810 2,783 1.43%Demand and NOW accounts 151,528 568 0.37% 204,922 736 0.36%Certificate accounts 309,441 14,363 4.64% 280,238 10,617 3.79%Subordinated notes 11,740 672 5.72% 11,698 672 5.74%Borrowings 37,623 1,624 4.32% 43,977 1,951 4.44%Total interest-bearing liabilities$829,646 26,372 3.18% $735,645 16,759 2.28%Net interest income/spread $31,002 2.37% $33,850 3.00%Net interest margin 3.00% 3.53% Ratio of interest-earning assets to interest-bearing liabilities 125% 130% Noninterest-bearing deposits$131,141 $154,448 Total deposits 911,424 $24,076 2.64% 834,418 $14,136 1.69%Total funding(1) 960,787 26,372 2.74% 890,093 16,759 1.88% (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) December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023Real estate loans: One-to-four family $269,684 $271,702 $268,488 $279,213 $279,448 Home equity 26,686 25,199 26,185 24,380 23,073 Commercial and multifamily 371,516 358,587 342,632 324,483 315,280 Construction and land 73,077 85,724 96,962 111,726 126,758 Total real estate loans 740,963 741,212 734,267 739,802 744,559 Consumer Loans: Manufactured homes 41,128 40,371 38,953 37,583 36,193 Floating homes 86,411 86,155 81,622 84,237 75,108 Other consumer 17,720 18,266 18,422 18,847 19,612 Total consumer loans 145,259 144,792 138,997 140,667 130,913 Commercial business loans 15,605 17,481 17,860 19,075 20,688 Total loans 901,827 903,485 891,124 899,544 896,160 Less: Premiums 718 736 754 808 829 Deferred fees, net (2,374) (2,488) (2,604) (2,475) (2,511)Allowance for credit losses - loans (8,499) (8,585) (8,493) (8,598) (8,760)Total loans held-for-portfolio, net $891,672 $893,148 $880,781 $889,279 $885,718 DEPOSITS(Dollars in thousands, unaudited) December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023Noninterest-bearing demand $132,532 $129,717 $124,915 $128,666 $126,726Interest-bearing demand 142,126 148,740 152,829 159,178 168,346Savings 61,252 61,455 63,368 65,723 69,461Money market(1) 206,067 285,655 253,873 241,976 154,044Certificates 295,822 304,630 311,784 321,340 307,962Total deposits $837,799 $930,197 $906,769 $916,883 $826,539 (1) Includes $5.0 million of brokered deposits at December 31, 2023. CREDIT QUALITY DATA(Dollars in thousands, unaudited) At or For the Quarter Ended December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023Total nonperforming loans $7,491 $8,489 $8,909 $9,053 $3,556 OREO and other repossessed assets — 115 115 690 575 Total nonperforming assets $7,491 $8,604 $9,024 $9,743 $4,131 Net charge-offs during the quarter $(13) $(14) $(17) $(56) $(15)Provision for (release of) credit losses during the quarter 14 8 (109) (33) (27)Allowance for credit losses - loans 8,499 8,585 8,493 8,598 8,760 Allowance for credit losses - loans to total loans 0.94% 0.95% 0.96% 0.96% 0.98%Allowance for credit losses - loans to total nonperforming loans 113.46% 101.13% 95.33% 94.97% 246.34%Nonperforming loans to total loans 0.83% 0.94% 1.00% 1.01% 0.40%Nonperforming assets to total assets 0.75% 0.78% 0.84% 0.90% 0.42% OTHER STATISTICS(Dollars in thousands, unaudited) At or For the Quarter Ended December 31,2024 September 30,2024 June 30,2024 March 31,2024 December 31,2023 Total loans to total deposits 107.64% 97.13% 98.27% 98.11% 108.42%Noninterest-bearing deposits to total deposits 15.82% 13.95% 13.78% 14.03% 15.33% Average total assets for the quarter $1,089,067 $1,095,404 $1,070,579 $1,062,036 $1,033,985 Average total equity for the quarter $103,181 $102,059 $100,961 $101,292 $100,612 Contact Financial: Wes Ochs Executive Vice President/CFO (206) 436-8587 Media: Laurie Stewart President/CEO (206) 436-1495

Sound Financial Bancorp, Inc. Q4 2024 Results

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