Sound Financial Bancorp, Inc. Q3 2026 Results

Lower funding costs widened the interest margin, while loans contracted and nonperforming loans increased.

Rhea-AI Summary

Sound Financial Bancorp (SFBC) reported third-quarter 2026 net income of $2.3 million, below the prior quarter but above a year earlier. Diluted earnings per share were $0.90, versus $0.98 in the second quarter and $0.66 a year earlier. Net interest margin rose to 3.76%, from 3.74% and 3.48%, respectively, while net interest income fell 1.1% sequentially to $9.490 million.

At September 30, loans held-for-portfolio were $878.0 million, down 1.6% sequentially, and deposits fell 2.6% to $906.7 million. Nonperforming loans rose to $8.5 million from $8.1 million in June and $2.7 million a year earlier. A $282 thousand credit-loss provision release supported quarterly results. The company repaid $2.0 million of subordinated debt during the quarter and the remaining $6.0 million afterward. A $0.21-per-share dividend is payable November 20, 2026, to holders of record November 6.

7 points · 0 major

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0 major · 13 points

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Positive

• Moderate pointYear-to-date earnings increased 30.5% compared with the prior year.
• Moderate pointSubordinated debt repayments totaled $2.0 million during Q3 2026 and the remaining $6.0 million after quarter-end. 1.7% of market cap
• Minor pointAnnualized net interest margin reached 3.76% in Q3 2026, versus 3.74% sequentially and 3.48% a year earlier.
• Minor pointQ3 2026 interest expense fell to $4.988 million, down 5.1% sequentially and 12.7% year over year.
• Minor pointAverage deposit costs declined to 2.11% in Q3 2026, from 2.15% sequentially and 2.32% a year earlier.

2 minor points

• Minor pointQ3 2026 credit-loss provision release was $282 thousand, versus $223 thousand sequentially and a $55 thousand provision a year earlier.
• Minor pointThe Bank remained well-capitalized at September 30, 2026, with capital above regulatory requirements.

Negative

• Moderate pointQ3 2026 net income was $2.3 million, versus $2.5 million sequentially and $1.7 million a year earlier.
• Moderate pointNonperforming loans reached $8.5 million at September 30, 2026, up 5.5% sequentially and 212.7% year over year.
• Moderate pointLoans held-for-portfolio fell to $878.0 million at September 30, 2026, down 1.6% sequentially and 3.5% year over year.
• Moderate pointDeposits were $906.7 million at September 30, 2026, down 2.6% sequentially but up 0.9% year over year.
• Minor pointQ3 2026 diluted EPS was $0.90, versus $0.98 sequentially and $0.66 a year earlier.

8 minor points

• Minor pointNonperforming loans represented 0.97% of total loans; loan-loss allowance coverage was 96.22% at September 30, 2026.
• Minor pointNoninterest-bearing deposits fell to $128.4 million at September 30, 2026, down 0.7% sequentially and 2.3% year over year.
• Minor pointTotal assets fell to $1.04 billion at September 30, 2026, down 2.2% sequentially and 1.7% year over year.
• Minor pointQ3 2026 net interest income was $9.490 million, down 1.1% sequentially but up 6.2% year over year.
• Minor pointQ3 2026 interest income fell to $14.478 million, down 2.5% sequentially and 1.2% year over year.
• Minor pointQ3 2026 noninterest income fell 20.3% sequentially to $1.1 million, but rose 29.3% year over year.
• Minor pointQ3 2026 noninterest expense was $8.0 million, up 4.3% year over year despite declining 1.5% sequentially.
• Minor pointAverage subordinated debt cost rose to 10.01% in Q3 2026, from 5.65% a year earlier.

Key Figures

Net income: $2.3 million Diluted EPS: $0.90 per share Cash dividend: $0.21 per share +5 more

Net income

$2.3 million

Q3 2026; compared with $2.5 million in Q2 2026 and $1.7 million in Q3 2025

Diluted EPS

$0.90 per share

Q3 2026; compared with $0.98 in Q2 2026 and $0.66 in Q3 2025

Cash dividend

$0.21 per share

Payable November 20, 2026; record date November 6, 2026

Net interest margin

3.76%

Annualized Q3 2026; compared with 3.74% in Q2 2026 and 3.48% in Q3 2025

Average cost of deposits

2.11%

Q3 2026; compared with 2.15% in Q2 2026 and 2.32% in Q3 2025

Year-to-date earnings growth

30.5%

Increase compared with the prior-year period

Remaining subordinated debt repaid

$6.0 million

Repaid subsequent to September 30, 2026

Nonperforming loans

$8.5 million

At September 30, 2026; up 212.7% from Q3 2025

Previous Earnings Reports

2 past events · Latest: Jul 28

Same Type 2 events

1. Jul 28

   Quarterly earnings

   24h Move

   -0.5%

   Reported $2.5 million net income and $0.98 diluted EPS, with NIM at 3.73%.

2. Oct 28

   Quarterly earnings

   24h Move

   -1.1%

   Reported $1.7 million net income, $0.66 diluted EPS and 3.48% NIM.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Key Terms

net interest margin, subordinated debt, allowance for credit losses, nonperforming loans

4 terms

net interest margin financial

"Net interest margin ("NIM"), annualized, was 3.76%"

Net interest margin measures how much a bank earns from lending and investing compared with what it pays for funding, expressed as a percentage of its interest-earning assets. Think of it like a grocery store’s markup: it shows the gap between buying cost and selling price per dollar of goods — here, the cost is interest paid and the sale is interest received. Investors watch it because a higher margin usually means a bank is more profitable and better at managing interest rate and credit conditions.

subordinated debt financial

"repayment of our remaining subordinated debt subsequent to quarter-end"

Subordinated debt is a type of loan that is paid back after other debts have been settled if a company encounters financial trouble. It is considered riskier for lenders because they have lower priority in getting repaid, similar to being last in line during a payout. For investors, this means higher potential returns in exchange for taking on more risk.

allowance for credit losses financial

"The allowance for credit losses on loans to total nonperforming loans was 96.22%"

Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.

nonperforming loans financial

"Total nonperforming loans increased $440 thousand or 5.5%"

Nonperforming loans are loans on which borrowers have stopped making the scheduled interest or principal payments for an extended period (commonly 90 days or more) or are otherwise in serious danger of default. Think of them as IOUs that aren’t being repaid: they tie up a lender’s money, reduce future interest income, and force the lender to hold extra reserves or take losses. For investors, a rising share of nonperforming loans signals weakening credit quality, higher potential losses, and greater risk to a bank’s profitability and capital.

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SEATTLE, Oct. 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 $2.3 million for the quarter ended September 30, 2026, or $0.90 diluted earnings per share, compared to net income of $2.5 million, or $0.98 diluted earnings per share, for the quarter ended June 30, 2026, and $1.7 million, or $0.66 diluted earnings per share, for the quarter ended September 30, 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 November 20, 2026 to stockholders of record as of the close of business on November 6, 2026.

Comments from the Chief Executive Officer and President / Chief Financial Officer

“Economic uncertainty and increasing rates are influencing business and consumer loan demand again this quarter. Given slower growth, our strong capital position and the reduced Community Bank Leverage Ratio requirement, we continued our efforts to reduce higher-cost debt, including the repayment of our remaining subordinated debt subsequent to quarter-end. Consistent balance sheet management is key to our steady performance in the third quarter, much like last quarter,” remarked Laurie Stewart, Chief Executive Officer. 

"Third-quarter results demonstrate continued progress in improving the underlying economics of our balance sheet. Net interest margin increased to 3.76%, compared to 3.74% the prior quarter and 3.48% a year ago, while our average cost of deposits declined to 2.11% from 2.15% last quarter and 2.32% a year ago. Year-to-date earnings increased 30.5% compared to the prior year. We also continued to reduce higher-cost funding, including repayment of approximately $2.0 million of subordinated debt during the quarter and repayment of the remaining $6.0 million subsequent to quarter-end. While loans declined during the quarter, we remain focused on adding relationships where returns appropriately compensate us for credit, liquidity and capital risk. We believe these actions position us to continue improving the Company's earnings profile while maintaining strong liquidity and capital," said Wes Ochs, President and Chief Financial Officer.

Q3 2026 Financial Performance
Total assets decreased $23.1 million or 2.2% to $1.04 billion at September 30, 2026, from $1.07 billion at June 30, 2026, and decreased $17.6 million or 1.7% from $1.06 billion at September 30, 2025. Loans held-for-portfolio decreased $14.0 million or 1.6% to $878.0 million at September 30, 2026, compared to $892.0 million at June 30, 2026, and decreased $31.7 million or 3.5% compared to $909.7 million at September 30, 2025. Total deposits decreased $24.2 million or 2.6% to $906.7 million at September 30, 2026, compared to $930.9 million at June 30, 2026, and increased $7.7 million or 0.9% compared to $898.9 million at September 30, 2025. Noninterest-bearing deposits decreased $921 thousand or 0.7% to $128.4 million at September 30, 2026, compared to $129.3 million at June 30, 2026, and decreased $3.0 million or 2.3% compared to $131.4 million at September 30, 2025. The loans-to-deposits ratio was 97.1% at September 30, 2026, compared to 96.0% at June 30, 2026 and 101.4% at September 30, 2025. Total nonperforming loans increased $440 thousand or 5.5% to $8.5 million at September 30, 2026, from $8.1 million at June 30, 2026, and increased $5.8 million or 212.7% from $2.7 million at September 30, 2025. Nonperforming loans to total loans was 0.97% and the allowance for credit losses on loans to total nonperforming loans was 96.22% at September 30, 2026.			Net interest income decreased $101 thousand or 1.1% to $9.5 million for the quarter ended September 30, 2026, from $9.6 million for the quarter ended June 30, 2026, and increased $550 thousand or 6.2% from $8.9 million for the quarter ended September 30, 2025. Net interest margin ("NIM"), annualized, was 3.76% for the quarter ended September 30, 2026, compared to 3.74% for the quarter ended June 30, 2026 and 3.48% for the quarter ended September 30, 2025. A $282 thousand release of provision for credit losses was recorded for the quarter ended September 30, 2026, compared to a $223 thousand release of provision for the quarter ended June 30, 2026, and a $55 thousand provision for the quarter ended September 30, 2025. The allowance for credit losses on loans to total loans outstanding was 0.93% at September 30, 2026, compared to 0.94% at June 30, 2026 and September 30, 2025. Total noninterest income decreased $290 thousand or 20.3% to $1.1 million for the quarter ended September 30, 2026, compared to the quarter ended June 30, 2026, and increased $258 thousand or 29.3% compared to the quarter ended September 30, 2025. Total noninterest expense decreased $123 thousand or 1.5% to $8.0 million for the quarter ended September 30, 2026, compared to the quarter ended June 30, 2026, and increased $329 thousand or 4.3% compared to the quarter ended September 30, 2025. The Bank maintained capital levels in excess of regulatory requirements and was categorized as "well-capitalized" at September 30, 2026.

Operating Results

Net Interest Income after Provision for Credit Losses

		For the Quarter Ended											Q3 2026 vs. Q2 2026							Q3 2026 vs. Q3 2025
		September 30, 2026				June 30, 2026				September 30, 2025			Amount ($)				Percentage (%)			Amount ($)				Percentage (%)
		(Dollars in thousands, unaudited)
Interest income		$	14,478			$	14,846			$	14,652		$	(368	)		(2.5	)%		$	(174	)		(1.2	)%
Interest expense			4,988				5,255				5,712			(267	)		(5.1	)%			(724	)		(12.7	)%
Net interest income			9,490				9,591				8,940			(101	)		(1.1	)%			550			6.2	%
(Release of) Provision for credit losses			(282	)			(223	)			55			(59	)		26.5	%			(337	)		(612.7	)%
Net interest income after provision for credit losses		$	9,772			$	9,814			$	8,885		$	(42	)		(0.4	)%		$	887			10.0	%

Q3 2026 vs. Q2 2026

Interest income decreased $368 thousand, or 2.5%, to $14.5 million for the quarter ended September 30, 2026, compared to $14.8 million for the quarter ended June 30, 2026. The decrease was primarily due to a seven basis point decline in the average yield on loans and lower average balances of loans, interest-bearing cash, and investments, partially offset by a 45 basis point increase in the average yield on investments and three basis point increase in the average yield on interest-earning cash.

Interest income on loans decreased $399 thousand, or 2.9%, to $13.4 million for the quarter ended September 30, 2026, compared to $13.8 million for the quarter ended June 30, 2026. The average balance of total loans was $886.6 million for the quarter ended September 30, 2026, compared to $911.9 million for the quarter ended June 30, 2026. The decrease in the average balance of total loans was primarily due to declines in commercial construction loans, partially offset by growth in home equity lines of credit, residential construction loans, and floating home loans. The average yield on total loans was 5.99% for the quarter ended September 30, 2026, down from 6.06% for the quarter ended June 30, 2026. This decrease in yield was primarily due to the collection of a large prepayment penalty on a commercial loan in the prior quarter.

Interest income on investments was $202 thousand for the quarter ended September 30, 2026, compared to $187 thousand for the quarter ended June 30, 2026. The increase was due to a 45 basis point increase in average yield, partially offset by a decrease in the average balance of investments. Interest income on interest-earning cash increased to $898 thousand for the quarter ended September 30, 2026, compared to $882 thousand for quarter ended June 30, 2026, reflecting a higher average yield as a result of the Federal Reserve rate increase in September.

Interest expense decreased $267 thousand, or 5.1%, to $5.0 million for the quarter ended September 30, 2026, compared to the quarter ended June 30, 2026. The decrease was primarily the result of lower average balances of savings and money market accounts, certificates of deposit, subordinated notes and FHLB advances, together with lower average rates paid on deposits. These decreases were partially offset by a higher rate paid on subordinated notes, which bear a variable rate. The average cost of deposits declined to 2.11% for the quarter ended September 30, 2026, from 2.15% for the quarter ended June 30, 2026, as higher cost deposits repriced at lower rates in response to declining market interest rates from September 2025 through September 2026. Interest expense on FHLB advances also declined from the prior quarter, primarily reflecting the early repayment of an advance during the prior quarter.

Net interest margin, annualized, increased to 3.76% for the quarter ended September 30, 2026, from 3.74% for the quarter ended June 30, 2026, primarily due to lower funding costs. The average cost of interest-bearing liabilities decreased six basis points to 2.52%, reflecting the repayment of borrowings, which averaged $8.6 million at 4.21% during the prior quarter, a $2.0 million decrease in average subordinated notes outstanding, and a nine basis point decrease in the average rate paid on certificate accounts to 3.53%. The yield on interest-earning assets decreased six basis points to 5.74%, primarily due to the absence of a $109 thousand prepayment penalty on a commercial loan collected during the prior quarter.

A release of provision for credit losses of $282 thousand was recorded for the quarter ended September 30, 2026, consisting of a release of provision for credit losses on loans of $233 thousand and a release of provision for credit losses on unfunded loan commitments of $49 thousand. This compared to a release of provision for credit losses of $223 thousand for the quarter ended June 30, 2026, consisting of a release of provision for credit losses on loans of $185 thousand and release of provision for credit losses on unfunded loan commitments of $38 thousand. The increase in the release of provision for credit losses for the quarter ended September 30, 2026, compared to the quarter ended June 30, 2026, primarily reflected decreases in the balances of loans and unfunded commitments and an improvement in the Federal Reserve's unemployment forecast over the next 12 months. Other qualitative adjustments were largely applied to the same segments at a similar risk adjustment compared to the quarter ended June 30, 2026; however, there was an increase in the qualitative reserve for the volume of past-due consumer secured loans. 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.

Q3 2026 vs. Q3 2025

Interest income on loans decreased $134 thousand, or 1.0%, to $13.4 million for the quarter ended September 30, 2026, compared to $13.5 million for the quarter ended September 30, 2025. The average balance of total loans was $886.6 million for the quarter ended September 30, 2026, down from $910.3 million for the quarter ended September 30, 2025. The average yield on total loans was 5.99% for the quarter ended September 30, 2026, up from 5.89% for the quarter ended September 30, 2025.

Interest income on investments was $202 thousand for the quarter ended September 30, 2026, compared to $124 thousand for the quarter ended September 30, 2025. The increase was primarily due to a 106 basis point increase in average yield and an increase in the average balance of investments, as lower yielding investments paid down and a higher yielding equity investment was purchased in January 2026. Interest income on interest-earning cash decreased $118 thousand to $898 thousand for the quarter ended September 30, 2026, compared to $1.0 million for the quarter ended September 30, 2025. The decrease was primarily a result of a lower average yield, reflecting lower market interest rates, partially offset by a higher average balance of interest-earning cash.

Interest expense decreased $724 thousand, or 12.7%, to $5.0 million for the quarter ended September 30, 2026, compared to $5.7 million for the quarter ended September 30, 2025. The decrease was primarily the result of a $25.0 million decrease in the average balance of FHLB advances, a $6.0 million decrease in the average balance of subordinated debt, and a $5.8 million decrease in the average balance of interest-bearing demand and NOW accounts, 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 436 basis point increase in the rate paid on subordinated debt, an $8.7 million increase in savings and money market account balances, and a $3.2 million increase in certificate account balances. In the current quarter, we repaid all outstanding FHLB advances and $2.0 million in subordinated debt. During the prior quarter, we repaid $10.0 million of FHLB advances that were scheduled to mature in January 2028 and bore an interest rate of 4.06%. During the fourth quarter of 2025, we paid down 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 2.11% for the quarter ended September 30, 2026, down from 2.32% for the quarter ended September 30, 2025. The average cost of subordinated debt was 10.01% for the quarter ended September 30, 2026, up from 5.65% for the quarter ended September 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 September 30, 2026, we paid off all remaining subordinated debt, totaling $6.0 million, as part of our strategic objective to utilize our excess liquidity to pay down high cost debt. There were no FHLB advances for the quarter ended September 30, 2026, compared to $25.0 million in advances with an average rate of 4.27% for the quarter ended September 30, 2025.

Net interest margin, annualized, increased to 3.76% for the quarter ended September 30, 2026, from 3.48% for the quarter ended September 30, 2025, primarily due to lower funding costs. The average cost of interest-bearing liabilities decreased 27 basis points to 2.52%, reflecting the repayment of borrowings, which averaged $25.0 million at 4.27% during the prior year quarter, and decreases in the average rates paid on savings and money market accounts, to 2.36% from 2.69%, and on certificate accounts, to 3.53% from 3.80%. The yield on interest-earning assets increased three basis points to 5.74% as higher yields on loans and investments were largely offset by a lower yield on interest-earning cash, which decreased to 3.61% from 4.22%.

A release of provision for credit losses of $282 thousand was recorded for the quarter ended September 30, 2026, consisting of a release of provision for credit losses on loans of $233 thousand and a release of provision for credit losses on unfunded loan commitments of $49 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 release of provision in the current quarter compared to the same quarter last year resulted primarily from a decrease in loan balances, improvements in the Federal Reserve's unemployment forecast, changes in loan mix, and annual updates to the model assumptions, partially offset by additional qualitative adjustments applied to all commercial loan segments, reflecting increased uncertainty in market conditions surrounding inflation, geopolitical events, an uncertainty adjustment tied to the impact of tariffs, and other external factors affecting our clients. Additional qualitative adjustments were also made to multifamily and other consumer secured segments related to the volume of past due and adversely rated loans in the current quarter that were not present in the third quarter of 2025. 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

		For the Quarter Ended												Q3 2026 vs. Q2 2026							Q3 2026 vs. Q3 2025
		September 30, 2026				June 30, 2026				September 30, 2025				Amount ($)				Percentage (%)			Amount ($)				Percentage (%)
		(Dollars in thousands, unaudited)
Service charges and fee income		$	711			$	684			$	672			$	27			3.9	%		$	39			5.8	%
Earnings on bank-owned life insurance (“BOLI”)			142				277				225				(135	)		(48.7	)%			(83	)		(36.9	)%
Mortgage servicing income			249				245				262				4			1.6	%			(13	)		(5.0	)%
Fair value adjustment on mortgage servicing rights			(105	)			119				(372	)			(224	)		(188.2	)%			267			(71.8	)%
Net gain on sale of loans			145				112				94				33			29.5	%			51			54.3	%
Other income			(3	)			(8	)			—				5			(62.5	)%			(3	)		—	%
Total noninterest income		$	1,139			$	1,429			$	881			$	(290	)		(20.3	)%		$	258			29.3	%

Q3 2026 vs. Q2 2026

Noninterest income during the third quarter of 2026 decreased $290 thousand, or 20.3%, compared to the quarter ended June 30, 2026. The decrease was primarily due to the following changes:

• a $224 thousand decrease in the fair value adjustment on mortgage servicing rights, primarily due to changes in market valuation assumptions during the third quarter, including an increase in the cost of servicing assumption and the impact of a smaller servicing portfolio; and
• a $135 thousand decrease in earnings on BOLI, primarily due to lower market valuation in the current quarter.

The decreases were partially offset by:

• a $33 thousand increase in gain on sale of loans, primarily due to higher loan origination volumes in the current quarter; and
• a $27 thousand increase in service charges and fee income, primarily due to an increase in the collection of loan late fees and deposit fees as a result of a new large depositor relationship in the third quarter and higher fees on existing business depositor relationships.

Loans sold during the quarter ended September 30, 2026, totaled $9.4 million, compared to $7.3 million during the quarter ended June 30, 2026. The increase was primarily due to seasonal fluctuations in loan origination volume and the timing of loan sales.

Q3 2026 vs. Q3 2025

Noninterest income increased $258 thousand, or 29.3%, during the current quarter compared to the quarter ended September 30, 2025, primarily as a result of:

• a $267 thousand improvement in the fair value adjustment on mortgage servicing rights, primarily due to changes in valuation assumptions, including slower estimated prepayment speeds resulting from higher market interest rates, partially offset by an increase in the cost of servicing assumption recorded in the current quarter and by the impact of a smaller servicing portfolio;
• a $51 thousand increase in net gain on sale of loans due to an increase in the volume of loans sold resulting from lower market interest rates in the current year; and
• a $39 thousand increase in service charges and fee income primarily due to higher deposit fee income, higher loan fees associated with reconveyance activity, and higher loan late fees.

These increases were partially offset by:

• an $83 thousand decrease in BOLI earnings primarily due to fluctuations in market conditions affecting BOLI valuations; and
• a $13 thousand decrease in mortgage servicing income, primarily due to the impact of a smaller servicing portfolio.

Noninterest Expense

		For the Quarter Ended									Q3 2026 vs. Q2 2026							Q3 2026 vs. Q3 2025
		September 30, 2026			June 30, 2026			September 30, 2025			Amount ($)				Percentage (%)			Amount ($)				Percentage (%)
		(Dollars in thousands, unaudited)
Salaries and benefits		$	4,293		$	4,645		$	4,259		$	(352	)		(7.6	)%		$	34			0.8	%
Operations			1,701			1,617			1,483			84			5.2	%			218			14.7	%
Regulatory assessments			198			129			221			69			53.5	%			(23	)		(10.4	)%
Occupancy			399			388			431			11			2.8	%			(32	)		(7.4	)%
Data processing			1,404			1,332			1,274			72			5.4	%			130			10.2	%
Net loss (gain) on OREO and repossessed assets			10			17			8			(7	)		(41.2	)%			2			25.0	%
Total noninterest expense		$	8,005		$	8,128		$	7,676		$	(123	)		(1.5	)%		$	329			4.3	%

Q3 2026 vs. Q2 2026

The decrease in noninterest expense during the current quarter compared to the quarter ended June 30, 2026 was primarily related to:

• a $352 thousand decrease in salaries and benefits due to lower incentive compensation expense, the impact of lower market valuations of investments supporting our deferred compensation arrangements for key executives (which was partially offset by decreases in BOLI income recorded in noninterest income), partially offset by higher medical expenses;

This decrease was partially offset by

• an $84 thousand increase in operations expense, primarily due to higher costs associated with our debit card processing, partially offset by lower state and local tax expense and lower legal expenses;
• a $72 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;
• a $69 thousand increase in regulatory assessments primarily due to the release of an accrual in the prior quarter related to exam costs, as the actual costs incurred were lower than previously estimated as compared to no release in the current quarter; and
• an $11 thousand increase in occupancy, primarily due to a refund of triple net overpayments on a leased property in the prior quarter.

Q3 2026 vs. Q3 2025

The increase in noninterest expense during the current quarter compared to the quarter ended September 30, 2025 was primarily related to:

• a $218 thousand increase in operations expense, primarily due to higher costs associated with debit card processing;
• a $130 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 the addition of new features, such as fraud detection software, with the goal of lowering operational losses; and
• a $34 thousand increase in salaries and benefits, primarily due to an increase in medical expense, lower deferred loan origination costs due to fewer loan originations in the current quarter, and higher salaries, partially offset by lower market valuations on our deferred compensation for key executives (which was partially offset by the decrease in income on BOLI recorded in noninterest income), lower stock compensation expense and lower incentive compensation expense.

These increases were partially offset by:

• a $32 thousand decrease in occupancy expense, primarily due to lower building lease charges in the third quarter of 2026 following the closure of our Tacoma branch during the second quarter of 2026; and
• 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 the release of an accrual related to exam costs, as actual costs incurred were lower than previously estimated.

Balance Sheet Review, Capital Management and Credit Quality

Assets totaled $1.04 billion at September 30, 2026, down from $1.07 billion at June 30, 2026 and down from $1.06 billion at September 30, 2025. The decrease from June 30, 2026 was primarily a result of a lower balance of loans held-for-portfolio and lower balances of cash and cash equivalents. The decrease from September 30, 2025 was primarily a result of a lower balance of loans held-for-portfolio, partially offset by a higher balance of cash and cash equivalents and a new equity investment in the first quarter of 2026.

Cash and cash equivalents decreased $7.3 million, or 6.1%, to $112.8 million at September 30, 2026, compared to $120.1 million at June 30, 2026, and increased $11.6 million, or 11.5%, from $101.2 million at September 30, 2025. The decrease from June 30, 2026 primarily reflected deposit outflows and repayments of subordinated debt, partially offset by repayment of loans held-for-portfolio. The increase from September 30, 2025 was primarily due to repayment of loans held-for-portfolio and an increase in deposits, partially offset by the purchase of a $5.0 million Community Reinvestment Act ("CRA") - eligible workforce housing equity investment and the repayment of borrowings and subordinated debt.

Investment securities decreased $605 thousand, or 6.4%, to $8.8 million at September 30, 2026, compared to $9.5 million at June 30, 2026, and decreased $690 thousand, or 7.2%, from $9.5 million at September 30, 2025. Held-to-maturity securities totaled $1.9 million at September 30, 2026, June 30, 2026 and September 30, 2025. Available-for-sale securities totaled $7.0 million at September 30, 2026, compared to $7.6 million at both June 30, 2026 and September 30, 2025. The changes in our available-for-sale and held-to-maturity portfolios from June 30, 2026 and September 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 $878.0 million at September 30, 2026, compared to $892.0 million at June 30, 2026 and $909.7 million at September 30, 2025. The decrease from June 30, 2026 was primarily due to a decline in commercial construction loan balances. The decrease from September 30, 2025 reflected declines in commercial nonowner occupied loans, primarily due to the early payoff of low-rate loans, as well as one-to-four family loans, driven by fewer new home loan originations and normal amortization, and a smaller reduction in consumer secured loans. These decreases were partially offset by growth in residential construction and land loans, home equity loans, and several commercial loan categories.

Equity securities totaled $5.0 million at both September 30, 2026 and June 30, 2026, compared to zero at September 30, 2025. The increase primarily related to an investment made during the first quarter of 2026 in an 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 $470 thousand, or 5.8%, to $8.6 million at September 30, 2026, from $8.1 million at June 30, 2026, and increased $5.5 million, or 180.0%, from $3.1 million at September 30, 2025. The increase from June 30, 2026 was primarily due to the placement of $649 thousand of consumer secured loans on nonaccrual status, partially offset by loans returned to accrual status and principal repayments. The increase from one year ago was primarily due to $6.6 million of new nonaccrual loans, partially offset by loan payoffs totaling $282 thousand, loans returned to accrual status, principal repayments, and charge-offs.

Nonperforming loans totaled $8.5 million at September 30, 2026, with commercial and multifamily loans representing $4.2 million, or 48.9% of total nonperforming loans, reflecting a concentration of nonperforming loans within larger relationships. One-to-four family nonperforming loans totaled $2.3 million, or 27.6% 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 $77 thousand at September 30, 2026, representing 0.9% of total NPAs.

NPAs to total assets were 0.82%, 0.76% and 0.29% at September 30, 2026, June 30, 2026 and September 30, 2025, respectively. The allowance for credit losses on loans as a percentage of total loans outstanding was 0.93% at September 30, 2026, compared to 0.94% at both June 30, 2026 and September 30, 2025. Net loan charge-offs were $13 thousand for the third quarter of 2026, compared to $30 thousand for the second quarter of 2026 and $37 thousand for the third quarter of 2025.

The following table summarizes our NPAs at the dates indicated (dollars in thousands, unaudited):

	September 30, 2026				June 30, 2026				March 31, 2026				December 31, 2025				September 30, 2025
Nonperforming Loans:
One-to-four family	$	2,346			$	2,458			$	1,939			$	1,597			$	609
Home equity loans		307				310				383				187				201
Commercial and multifamily		4,155				4,191				4,213				3,163				1,065
Construction and land		159				159				80				82				103
Manufactured homes		949				696				475				461				476
Commercial business		—				—				30				30				—
Other consumer		579				241				259				262				263
Total nonperforming loans		8,495				8,055				7,379				5,782				2,717
OREO and Other Repossessed Assets:
One-to-four family		—				—				—				259				259
Manufactured homes		77				47				99				85				85
Total OREO and repossessed assets		77				47				99				344				344
Total NPAs	$	8,572			$	8,102			$	7,478			$	6,126			$	3,061
Percentage of Nonperforming Assets:
One-to-four family		27.4	%			30.3	%			25.9	%			26.1	%			19.9	%
Home equity loans		3.6				3.8				5.1				3.1				6.6
Commercial and multifamily		48.5				51.7				56.3				51.6				34.8
Construction and land		1.9				2.0				1.1				1.3				3.4
Manufactured homes		11.1				8.6				6.4				7.5				15.6
Commercial business		—				—				0.4				0.5				—
Other consumer		6.8				3.0				3.5				4.3				8.5
Total nonperforming loans		99.1				99.4				98.7				94.4				88.8
Percentage of OREO and Other Repossessed Assets:
One-to-four family		—				—				—				4.2				8.4
Manufactured homes		0.9				0.6				1.3				1.4				2.8
Total OREO and repossessed assets		0.9				0.6				1.3				5.6				11.2
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:
	September 30, 2026				June 30, 2026				March 31, 2026				December 31, 2025				September 30, 2025
Allowance for Credit Losses on Loans
Balance at beginning of period	$	8,420			$	8,635			$	8,605			$	8,564			$	8,536
(Release of) provision for credit losses during the period		(233	)			(185	)			49				68				65
Net charge-offs during the period		(13	)			(30	)			(19	)			(27	)			(37	)
Balance at end of period	$	8,174			$	8,420			$	8,635			$	8,605			$	8,564
Allowance for Credit Losses on Unfunded Loan Commitments
Balance at beginning of period	$	184			$	222			$	148			$	112			$	122
(Release of) provision for credit losses during the period		(49	)			(38	)			74				36				(10	)
Balance at end of period		135				184				222				148				112
Allowance for Credit Losses	$	8,309			$	8,604			$	8,857			$	8,753			$	8,676
Allowance for credit losses on loans to total loans		0.93	%			0.94	%			0.94	%			0.95	%			0.94	%
Allowance for credit losses on loans and unfunded loan commitments to total loans		0.95	%			0.96	%			0.96	%			0.97	%			0.95	%
Allowance for credit losses on loans to total nonperforming loans		96.22	%			104.53	%			117.02	%			148.82	%			315.20	%
Allowance for credit losses on loans and unfunded loan commitments to total nonperforming loans		97.81	%			106.82	%			120.03	%			151.38	%			319.32	%

Total deposits decreased $24.2 million, or 2.6%, to $906.7 million at September 30, 2026, from $930.9 million at June 30, 2026, and increased $7.7 million, or 0.9%, from $898.9 million at September 30, 2025. The decrease in total deposits from June 30, 2026 was primarily due to the managed reduction of higher cost reciprocal deposits. The increase from September 30, 2025 was primarily due to growth from new depositors and existing depositors increasing their balances. Noninterest-bearing deposits decreased $921 thousand, or 0.7%, to $128.4 million at September 30, 2026, compared to $129.3 million at June 30, 2026, and decreased $3.0 million, or 2.3%, compared to $131.4 million at September 30, 2025. Noninterest-bearing deposits represented 14.2%, 13.9% and 14.6% of total deposits at September 30, 2026, June 30, 2026 and September 30, 2025, respectively.

There were no FHLB advances at September 30, 2026 or June 30, 2026, and $25.0 million at September 30, 2025. The decrease from September 30, 2025 was due to the early repayment of a $10.0 million FHLB advance during the prior 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 $5.8 million at September 30, 2026 and $7.8 million at June 30, 2026, compared to $11.8 million at September 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 our ongoing efforts to reduce higher cost debt, and an additional $2.0 million paydown during the current quarter. Subsequent to September 30, 2026, we repaid the remaining $6.0 million in subordinated debt.

Stockholders’ equity totaled $114.0 million at September 30, 2026, an increase of $1.4 million, or 1.3%, from $112.6 million at June 30, 2026, and an increase of $6.5 million, or 6.1%, from $107.5 million at September 30, 2025. The increase from June 30, 2026 was primarily the result of $2.3 million of net income earned during the current quarter, partially offset by a $400 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, 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 "may," "believe," "will likely result," "are expected to," "will continue," "is anticipated," "anticipate," "expect," "estimate," "project," "plan," "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; 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 Sound Community 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 the Company's 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, except as required by law.

CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)

		For the Quarter Ended
		September 30, 2026				June 30, 2026				March 31, 2026				December 31, 2025				September 30, 2025
Interest income		$	14,478			$	14,846			$	14,465			$	14,284			$	14,652
Interest expense			4,988				5,255				5,418				5,622				5,712
Net interest income			9,490				9,591				9,047				8,662				8,940
(Release of) provision for credit losses			(282	)			(223	)			123				104				55
Net interest income after (release of) provision for credit losses			9,772				9,814				8,924				8,558				8,885
Noninterest income:
Service charges and fee income			711				684				624				649				672
Earnings on bank-owned life insurance			142				277				130				189				225
Mortgage servicing income			249				245				248				253				262
Fair value adjustment on mortgage servicing rights			(105	)			119				(140	)			(160	)			(372	)
Net gain on sale of loans			145				112				101				73				94
Other income (loss)			(3	)			(8	)			(53	)			(137	)			—
Total noninterest income			1,139				1,429				910				867				881
Noninterest expense:
Salaries and benefits			4,293				4,645				4,458				3,533				4,259
Operations			1,701				1,617				1,501				1,683				1,483
Regulatory assessments			198				129				198				(53	)			221
Occupancy			399				388				427				460				431
Data processing			1,404				1,332				1,287				1,200				1,274
Net loss on OREO and repossessed assets			10				17				3				17				8
Total noninterest expense			8,005				8,128				7,874				6,840				7,676
Income before provision for income taxes			2,906				3,115				1,960				2,585				2,090
Provision for income taxes			584				597				384				339				395
Net income		$	2,322			$	2,518			$	1,576			$	2,246			$	1,695

CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, unaudited)

		For the Nine Months Ended September 30
			2026				2025
Interest income		$	43,789			$	43,273
Interest expense			15,661				17,007
Net interest income			28,128				26,266
(Release of) provision for credit losses			(382	)			22
Net interest income after release of provision for credit losses			28,510				26,244
Noninterest income:
Service charges and fee income			2,018				2,020
Earnings on bank-owned life insurance			549				648
Mortgage servicing income			742				794
Fair value adjustment on mortgage servicing rights			(126	)			(551	)
Net gain on sale of loans			357				187
Other income			(64	)			—
Total noninterest income			3,476				3,098
Noninterest expense:
Salaries and benefits			13,396				13,175
Operations			4,819				4,291
Regulatory assessments			525				663
Occupancy			1,214				1,284
Data processing			4,024				3,821
Net loss (gain) on OREO and repossessed assets			30				19
Total noninterest expense			24,008				23,253
Income before provision for income taxes			7,978				6,089
Provision for income taxes			1,565				1,175
Net income		$	6,413			$	4,914

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, unaudited)

		September 30, 2026				June 30, 2026				March 31, 2026				December 31, 2025				September 30, 2025
ASSETS
Cash and cash equivalents		$	112,752			$	120,072			$	137,984			$	138,453			$	101,156
Available-for-sale securities, at fair value			6,978				7,575				7,517				7,699				7,637
Held-to-maturity securities, at amortized cost			1,868				1,876				1,884				1,892				1,899
Equity securities			5,000				5,000				5,000				—				—
Loans held-for-sale			283				1,591				281				542				271
Loans held-for-portfolio			878,000				891,969				921,518				905,533				909,715
Allowance for credit losses - loans			(8,174	)			(8,420	)			(8,635	)			(8,605	)			(8,564	)
Total loans held-for-portfolio, net			869,826				883,549				912,883				896,928				901,151
Accrued interest receivable			3,783				3,747				3,888				3,771				3,896
Bank-owned life insurance, net			24,217				24,055				23,747				23,327				23,138
Other real estate owned ("OREO") and other repossessed assets, net			77				47				99				344				344
Mortgage servicing rights, at fair value			4,268				4,277				4,096				4,183				4,305
Federal Home Loan Bank ("FHLB") stock, at cost			669				670				1,120				1,060				1,735
Premises and equipment, net			4,075				4,127				4,168				4,239				4,421
Right-of-use assets			2,643				2,889				3,133				3,423				3,679
Other assets			6,150				6,249				6,251				6,312				6,531
TOTAL ASSETS		$	1,042,589			$	1,065,724			$	1,112,051			$	1,092,173			$	1,060,163
LIABILITIES
Interest-bearing deposits		$	778,272			$	801,541			$	837,409			$	816,309			$	767,554
Noninterest-bearing deposits			128,419				129,340				131,092				132,566				131,389
Total deposits			906,691				930,881				968,501				948,875				898,943
Borrowings			—				—				10,000				10,000				25,000
Accrued interest payable			623				634				496				674				774
Lease liabilities			2,836				3,103				3,364				3,671				3,943
Other liabilities			10,187				9,597				8,839				10,366				10,146
Advance payments from borrowers for taxes and insurance			2,420				1,119				2,625				1,387				2,116
Subordinated notes, net			5,833				7,822				7,812				7,801				11,791
TOTAL LIABILITIES			928,590				953,156				1,001,637				982,774				952,713
STOCKHOLDERS' EQUITY:
Common stock			25				25				25				25				25
Additional paid-in capital			28,896				28,846				28,797				28,737				28,665
Retained earnings			86,277				84,496				82,518				81,483				79,724
Accumulated other comprehensive loss, net of tax			(1,199	)			(799	)			(926	)			(846	)			(964	)
TOTAL STOCKHOLDERS' EQUITY			113,999				112,568				110,414				109,399				107,450
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,042,589			$	1,065,724			$	1,112,051			$	1,092,173			$	1,060,163

KEY FINANCIAL RATIOS
(unaudited)

		For the Quarter Ended
		September 30, 2026			June 30, 2026			March 31, 2026			December 31, 2025			September 30, 2025
Annualized return on average assets		0.88	%		0.94	%		0.58	%		0.84	%		0.63	%
Annualized return on average equity		8.10	%		9.03	%		5.78	%		8.19	%		6.26	%
Annualized net interest margin(1)		3.76	%		3.74	%		3.51	%		3.36	%		3.48	%
Annualized efficiency ratio(2)		75.31	%		73.76	%		79.08	%		71.78	%		78.16	%

(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
		September 30, 2026			June 30, 2026			March 31, 2026			December 31, 2025			September 30, 2025
Basic earnings per share		$	0.90		$	0.98		$	0.61		$	0.87		$	0.66
Diluted earnings per share		$	0.90		$	0.98		$	0.61		$	0.87		$	0.66
Weighted-average basic shares outstanding			2,564,776			2,564,165			2,562,467			2,557,608			2,556,562
Weighted-average diluted shares outstanding			2,580,513			2,574,631			2,574,212			2,574,586			2,575,575
Common shares outstanding at period-end			2,569,649			2,568,043			2,568,043			2,567,953			2,566,069
Book value per share		$	44.36		$	43.83		$	43.00		$	42.60		$	41.87

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
	September 30, 2026										June 30, 2026										September 30, 2025
	Average Outstanding Balance				Interest Earned/Paid			Yield/Rate			Average Outstanding Balance				Interest Earned/Paid			Yield/Rate			Average Outstanding Balance				Interest Earned/Paid			Yield/Rate
Interest-Earning Assets:
Loans receivable	$	886,588			$	13,378		5.99	%		$	911,869			$	13,777		6.06	%		$	910,330			$	13,512		5.89	%
Interest-earning cash		98,803				898		3.61	%			98,902				882		3.58	%			95,422				1,016		4.22	%
Investments		16,077				202		4.98	%			16,566				187		4.53	%			12,541				124		3.92	%
Total interest-earning assets	$	1,001,468				14,478		5.74	%		$	1,027,337			$	14,846		5.80	%		$	1,018,293				14,652		5.71	%
Interest-Bearing Liabilities:
Savings and money market accounts	$	357,714				2,126		2.36	%		$	370,406				2,177		2.36	%		$	348,996				2,367		2.69	%
Demand and NOW accounts		126,483				85		0.27	%			130,208				95		0.29	%			132,309				103		0.31	%
Certificate accounts		295,895				2,630		3.53	%			299,654				2,704		3.62	%			292,725				2,805		3.80	%
Subordinated notes		5,829				147		10.01	%			7,819				189		9.70	%			11,787				168		5.65	%
Borrowings		—				—		—	%			8,571				90		4.21	%			25,000				269		4.27	%
Total interest-bearing liabilities	$	785,921				4,988		2.52	%		$	816,658				5,255		2.58	%		$	810,817				5,712		2.79	%
Net interest income/spread					$	9,490		3.22	%						$	9,591		3.22	%						$	8,940		2.91	%
Net interest margin								3.76	%									3.74	%									3.48	%
Ratio of interest-earning assets to interest-bearing liabilities		127	%									126	%									126	%
Noninterest-bearing deposits	$	131,276									$	128,204									$	127,970
Total deposits	$	911,368			$	4,841		2.11	%		$	928,472			$	4,976		2.15	%		$	902,000			$	5,275		2.32	%
Total funding(1)	$	917,197			$	4,988		2.16	%		$	944,862			$	5,255		2.23	%		$	938,787			$	5,712		2.41	%

(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.

	Nine Months Ended
	September 30, 2026										September 30, 2025
	Average Outstanding Balance				Interest Earned/Paid			Yield/Rate			Average Outstanding Balance				Interest Earned/Paid			Yield/Rate
Interest-Earning Assets:
Loans receivable	$	904,089			$	40,461		5.98	%		$	900,780			$	39,795		5.91	%
Interest-earning cash		106,049				2,841		3.58	%			97,996				3,123		4.26	%
Investments		16,099				487		4.04	%			12,769				355		3.72	%
Total interest-earning assets	$	1,026,237				43,789		5.70	%		$	1,011,545				43,273		5.72	%
Interest-Bearing Liabilities:
Savings and money market accounts	$	372,138				6,610		2.37	%		$	342,046				6,684		2.61	%
Demand and NOW accounts		127,543				261		0.27	%			137,090				317		0.31	%
Certificate accounts		298,943				8,070		3.61	%			292,028				8,704		3.98	%
Subordinated notes		7,145				522		9.77	%			11,777				504		5.72	%
Borrowings		6,337				198		4.18	%			25,002				798		4.27	%
Total interest-bearing liabilities	$	812,106				15,661		2.58	%		$	807,943				17,007		2.81	%
Net interest income/spread					$	28,128		3.13	%						$	26,266		2.91	%
Net interest margin								3.66	%									3.47	%
Ratio of interest-earning assets to interest-bearing liabilities		126	%									125	%
Noninterest-bearing deposits	$	131,048									$	125,370
Total deposits	$	929,672			$	14,941		2.15	%		$	896,534			$	15,705		2.34	%
Total funding(1)	$	943,154			$	15,661		2.22	%		$	933,313			$	17,007		2.44	%

(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)

		September 30, 2026				June 30, 2026				March 31, 2026				December 31, 2025				September 30, 2025
Real estate loans:
One-to-four family		$	238,083			$	244,168			$	251,146			$	253,841			$	257,797
Home equity			34,790				32,107				31,903				31,468				29,903
Commercial and multifamily			389,734				381,809				409,810				409,729				408,802
Construction and land			57,612				76,158				71,878				50,261				52,797
Total real estate loans			720,219				734,242				764,737				745,299				749,299
Consumer loans:
Manufactured homes			43,343				42,668				42,968				43,080				42,735
Floating homes			88,556				87,566				84,927				87,315				88,674
Other consumer			13,096				13,832				15,978				16,571				17,031
Total consumer loans			144,995				144,066				143,873				146,966				148,440
Commercial business loans			14,737				15,748				15,164				15,378				14,214
Total loans			879,951				894,056				923,774				907,643				911,953
Less:
Premiums			553				583				610				627				644
Deferred fees, net			(2,504	)			(2,670	)			(2,866	)			(2,737	)			(2,882	)
Allowance for credit losses - loans			(8,174	)			(8,420	)			(8,635	)			(8,605	)			(8,564	)
Total loans held-for-portfolio, net		$	869,826			$	883,549			$	912,883			$	896,928			$	901,151

DEPOSITS
(Dollars in thousands, unaudited)

		September 30, 2026			June 30, 2026			March 31, 2026			December 31, 2025			September 30, 2025
Noninterest-bearing demand		$	128,419		$	129,340		$	131,092		$	132,566		$	131,388
Interest-bearing demand			129,058			130,210			130,642			125,634			129,570
Savings			59,154			59,081			58,881			59,478			60,106
Money market			296,994			314,205			345,913			331,604			286,827
Certificates			293,066			298,045			301,973			299,593			291,052
Total deposits		$	906,691		$	930,881		$	968,501		$	948,875		$	898,943

CREDIT QUALITY DATA
(Dollars in thousands, unaudited)

		At or For the Quarter Ended
		September 30, 2026				June 30, 2026				March 31, 2026				December 31, 2025				September 30, 2025
Total nonperforming loans		$	8,495			$	8,055			$	7,379			$	5,782			$	2,717
OREO and other repossessed assets			77				47				99				344				344
Total nonperforming assets		$	8,572			$	8,102			$	7,478			$	6,126			$	3,061
Net charge-offs during the quarter		$	(13	)		$	(30	)		$	(19	)		$	(27	)		$	(37	)
(Release of) provision for credit losses during the quarter			(282	)			(223	)			123				104				55
Allowance for credit losses - loans			8,174				8,420				8,635				8,605				8,564
Allowance for credit losses - loans to total loans			0.93	%			0.94	%			0.94	%			0.95	%			0.94	%
Allowance for credit losses - loans to total nonperforming loans			96.22	%			104.53	%			117.02	%			148.82	%			315.20	%
Nonperforming loans to total loans			0.97	%			0.90	%			0.80	%			0.64	%			0.30	%
Nonperforming assets to total assets			0.82	%			0.76	%			0.67	%			0.56	%			0.29	%

OTHER STATISTICS
(Dollars in thousands, unaudited)

		At or For the Quarter Ended
		September 30, 2026				June 30, 2026				March 31, 2026				December 31, 2025				September 30, 2025
Total loans to total deposits			97.05	%			96.04	%			95.38	%			95.65	%			101.45	%
Noninterest-bearing deposits to total deposits			14.16	%			13.89	%			13.54	%			13.97	%			14.62	%
Average total assets for the quarter		$	1,047,197			$	1,071,897			$	1,094,501			$	1,066,451			$	1,063,972
Average total equity for the quarter		$	113,791			$	111,863			$	110,575			$	108,837			$	107,375

Contact

Financial:
Wes Ochs
President/CFO
(206) 436-8587
Media:
Laurie Stewart
CEO
(206) 436-1495

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were Sound Financial Bancorp's Q3 2026 earnings?

Sound Financial Bancorp earned $2.3 million, or $0.90 per diluted share, in the quarter ended September 30, 2026. That compares with $2.5 million, or $0.98 per diluted share, in the preceding quarter and $1.7 million, or $0.66 per diluted share, a year earlier.

Why did Sound Financial Bancorp release credit-loss provisions in Q3 2026?

The company attributed the increased release versus the prior quarter primarily to lower loan and unfunded commitment balances and an improved Federal Reserve unemployment forecast over the next 12 months. The $282 thousand release comprised $233 thousand for loans and $49 thousand for unfunded loan commitments. The qualitative reserve for past-due consumer secured loan volume increased.

Why did Sound Financial Bancorp's loan yield decline from Q2 to Q3 2026?

The average loan yield fell to 5.99% from 6.06%, primarily because the prior quarter included a large commercial-loan prepayment penalty. The prior quarter's penalty was $109 thousand. Average total loans also fell to $886.6 million from $911.9 million, primarily reflecting declines in commercial construction loans.