Sound Financial Bancorp, Inc. 10-Q

Item 1. Financial Statements SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (unaudited) (In thousands, except share and per share amounts) March 31, 2025 December 31, 2024 ASSETS Cash and cash equivalents $ 131,494 $ 43,641 Available-for-sale (“AFS”) securities, at fair value (amortized cost of $ 9,032 and $ 9,112 as of March 31, 2025 and December 31, 2024, respectively) 7,689 7,790 Held-to-maturity (“HTM”) securities, at amortized cost (fair value of $ 1,711 and $ 1,712 at March 31, 2025 and December 31, 2024, respectively) 2,121 2,130 Loans held-for-sale 2,267 487 Loans held-for-portfolio 886,226 900,171 Allowance for credit losses (“ACL”) on loans ( 8,393 ) ( 8,499 ) Total loans held-for-portfolio, net 877,833 891,672 Accrued interest receivable 3,540 3,471 Bank-owned life insurance (“BOLI”), net 22,685 22,490 Other real estate owned (“OREO”) and repossessed assets, net 41 — Mortgage servicing rights (“MSRs”), at fair value 4,688 4,769 Federal Home Loan Bank ("FHLB") stock, at cost 1,734 1,730 Premises and equipment, net 4,591 4,697 Right of use assets 3,546 3,725 Other assets 6,957 7,031 Total assets $ 1,069,186 $ 993,633 LIABILITIES Deposits Interest-bearing $ 783,660 $ 705,267 Noninterest-bearing demand 126,687 132,532 Total deposits 910,347 837,799 Borrowings 25,000 25,000 Accrued interest payable 586 765 Lease liabilities 3,828 4,013 Other liabilities 10,774 9,371 Advance payments from borrowers for taxes and insurance 2,450 1,260 Subordinated notes, net 11,770 11,759 Total liabilities 964,755 889,967 COMMITMENTS AND CONTINGENCIES (NOTE 7) — — STOCKHOLDERS’ EQUITY Preferred stock, $ 0.01 par value, 10,000,000 shares authorized, none issued or outstanding — — Common stock, $ 0.01 par value, 40,000,000 shares authorized, 2,566,069 and 2,564,907 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 25 25 Additional paid-in capital 28,515 28,413 Retained earnings 76,952 76,272 Accumulated other comprehensive loss, net of tax ( 1,061 ) ( 1,044 ) Total stockholders’ equity 104,431 103,666 Total liabilities and stockholders’ equity $ 1,069,186 $ 993,633 See Notes to Condensed Consolidated Financial Statements 3 Table of Contents SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Income (unaudited) (In thousands, except share and per share amounts) Three Months Ended March 31, 2025 2024 INTEREST INCOME Loans, including fees $ 12,588 $ 12,233 Interest and dividends on investments, cash and cash equivalents 1,118 1,527 Total interest income 13,706 13,760 INTEREST EXPENSE Deposits 5,205 5,703 Borrowings 262 429 Subordinated notes 168 168 Total interest expense 5,635 6,300 Net interest income 8,071 7,460 RELEASE OF CREDIT LOSSES ( 203 ) ( 33 ) Net interest income after release of credit losses 8,274 7,493 NONINTEREST INCOME Service charges and fee income 684 612 Earnings on BOLI 195 177 Mortgage servicing income 269 282 Fair value adjustment on MSRs ( 99 ) ( 65 ) Net gain on sale of loans 49 90 Total noninterest income 1,098 1,096 NONINTEREST EXPENSE Salaries and benefits 4,595 4,543 Operations 1,365 1,457 Regulatory assessments 221 189 Occupancy 437 444 Data processing 1,293 1,017 Net loss on OREO and repossessed assets 3 6 Total noninterest expense 7,914 7,656 Income before provision for income taxes 1,458 933 Provision for income taxes 291 163 Net income $ 1,167 $ 770 Earnings per common share: Basic $ 0.45 $ 0.30 Diluted $ 0.45 $ 0.30 Weighted-average number of common shares outstanding: Basic 2,554,265 2,539,213 Diluted 2,578,609 2,556,958 See Notes to Condensed Consolidated Financial Statements 4 Table of Contents SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Comprehensive Income (unaudited) (In thousands) Three Months Ended March 31, 2025 2024 Net income $ 1,167 $ 770 Available for sale securities: Unrealized losses arising during the period ( 21 ) ( 78 ) Income tax benefit related to unrealized losses 4 16 Other comprehensive loss, net of tax ( 17 ) ( 62 ) Comprehensive income $ 1,150 $ 708 See Notes to Condensed Consolidated Financial Statements 5 Table of Contents SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2025 and 2024 (unaudited) (In thousands, except share and per share amounts) Shares Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss, net of tax Total Stockholders’ Equity Balance, at December 31, 2024 2,564,907 $ 25 $ 28,413 $ 76,272 $ ( 1,044 ) $ 103,666 Net income — — — 1,167 — 1,167 Other comprehensive loss, net of tax — — — — ( 17 ) ( 17 ) Share-based compensation — — 81 — — 81 Cash dividends paid on common stock ($ 0.19 per share) — — — ( 487 ) — ( 487 ) Common stock options exercised 1,162 — 21 — — 21 Balance, at March 31, 2025 2,566,069 $ 25 $ 28,515 $ 76,952 $ ( 1,061 ) $ 104,431 Shares Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss, net of tax Total Stockholders’ Equity Balance, at December 31, 2023 2,549,427 $ 25 $ 27,990 $ 73,627 $ ( 988 ) $ 100,654 Net income — — — 770 — 770 Other comprehensive loss, net of tax — — — — ( 62 ) ( 62 ) Share-based compensation — — 95 — — 95 Restricted common stock awards issued 8,048 — — — — Cash dividends paid on common stock ($ 0.19 per share) — — ( 486 ) — ( 486 ) Common stock repurchased ( 164 ) — ( 1 ) ( 4 ) — ( 5 ) Common stock options exercised 1,235 — 26 — — 26 Balance, at March 31, 2024 2,558,546 $ 25 $ 28,110 $ 73,907 $ ( 1,050 ) $ 100,992 See Notes to Condensed Consolidated Financial Statements 6 Table of Contents SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows (unaudited) (In thousands) Three Months Ended March 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,167 $ 770 Adjustments to reconcile net income to net cash from operating activities: Amortization of net premiums on investments 22 22 Release of credit losses ( 203 ) ( 33 ) Depreciation and amortization 144 178 Share based compensation 81 95 Fair value adjustment on mortgage servicing rights 99 65 Right of use assets amortization 245 237 Change in lease liabilities ( 251 ) ( 245 ) Change in cash surrender value of BOLI ( 195 ) ( 177 ) Net change in advances from borrowers for taxes and insurance 1,190 1,099 Deferred income tax ( 273 ) — Net gain on sale of loans ( 49 ) ( 90 ) Proceeds from sale of loans held-for-sale 2,023 4,234 Originations of loans held-for-sale ( 3,772 ) ( 3,937 ) Change in operating assets and liabilities: Accrued interest receivable ( 69 ) ( 165 ) Other assets 351 1,549 Accrued interest payable ( 179 ) ( 98 ) Other liabilities 1,521 15 Net cash provided by operating activities 1,852 3,519 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from principal payments, maturities and sales of available-for-sale securities 69 83 Proceeds from principal payments of held-to-maturity securities 9 9 Net decrease (increase) in loans 13,883 ( 3,570 ) Purchases of premises and equipment, net ( 38 ) ( 1,623 ) Net cash provided by (used in) investing activities 13,923 ( 5,101 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 72,548 90,344 FHLB stock purchased ( 4 ) ( 10 ) Common stock repurchases — ( 5 ) Dividends paid on common stock ( 487 ) ( 486 ) Proceeds from common stock option exercises 21 26 Net cash provided by financing activities 72,078 89,869 Net change in cash and cash equivalents 87,853 88,287 Cash and cash equivalents, beginning of period 43,641 49,690 Cash and cash equivalents, end of period $ 131,494 $ 137,977 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ — $ — Interest paid on deposits and borrowings 5,814 6,398 Loans transferred from loans held-for-portfolio to OREO and repossessed assets 41 115 ROU assets obtained in exchange for new operating lease liabilities 66 — See Notes to Condensed Consolidated Financial Statements 7 Table of Contents SOUND FINANCIAL BANCORP, INC. AND SUBSIDIARY Notes to Condensed Consolidated Financial Statements (unaudited) Note 1 – Basis of Presentation The accompanying financial information is unaudited and has been prepared from the consolidated financial statements of Sound Financial Bancorp, Inc, and its wholly owned subsidiaries, Sound Community Bank and Sound Community Insurance Agency, Inc. References in this document to “Sound Financial Bancorp” refer to Sound Financial Bancorp, Inc. and references to the “Bank” refer to Sound Community Bank. References to “we,” “us,” and “our” or the “Company” refer to Sound Financial Bancorp, the Bank and Sound Community Insurance Agency, Inc., collectively, unless the context otherwise requires. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 18, 2025 (“2024 Form 10-K”). The results for the interim periods are not necessarily indicative of results for a full year or any other future period. We have not made any changes in our significant accounting policies from those disclosed in the 2024 Form 10-K. Note 2 – Accounting Pronouncements Recently Issued or Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The Company adopted this ASU on January 1, 2024. ASU 2023-07 did not have an impact on the Company's financial position or results of operation as it impacts disclosures only. The adoption of this ASU did not have a material impact on the Company’s disclosures as the Company operates under one segment. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures . This ASU requires public business entities to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. This ASU was released in response to stakeholder feedback indicating that the existing income tax disclosures should be enhanced to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. This ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2024, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) , which will change the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (for example, employee compensation, depreciation and amortization) in expense captions. This ASU’s amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and for interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance. 8 Table of Contents Note 3 – Investments At March 31, 2025, the Company did not own any debt securities classified as trading or any equity investment securities, except for the FHLB securities described in “Note 8 — Borrowings, FHLB Stock and Subordinated Notes.” The amortized cost and estimated fair value of our AFS securities and the corresponding amounts of gross unrealized gains and losses at the dates indicated were as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value March 31, 2025 Municipal bonds $ 6,344 $ 10 $ ( 1,013 ) $ 5,341 Agency mortgage-backed securities 2,688 10 ( 350 ) 2,348 Total $ 9,032 $ 20 $ ( 1,363 ) $ 7,689 December 31, 2024 Municipal bonds $ 6,354 $ 11 $ ( 991 ) $ 5,374 Agency mortgage-backed securities 2,758 7 ( 349 ) 2,416 Total $ 9,112 $ 18 $ ( 1,340 ) $ 7,790 The amortized cost and estimated fair value of our HTM securities and the corresponding amounts of gross unrealized gains and losses at the dates indicated were as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value March 31, 2025 Municipal bonds $ 703 $ — $ ( 174 ) $ 529 Agency mortgage-backed securities 1,418 — ( 236 ) 1,182 Total $ 2,121 $ — $ ( 410 ) $ 1,711 December 31, 2024 Municipal bonds $ 704 $ — $ ( 163 ) $ 541 Agency mortgage-backed securities 1,426 — ( 255 ) 1,171 Total $ 2,130 $ — $ ( 418 ) $ 1,712 The amortized cost and estimated fair value of AFS and HTM securities at March 31, 2025, by contractual maturity, are shown below (in thousands). Expected maturities of AFS securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments not due at a single maturity date, consisting of agency mortgage-backed securities, are shown separately. March 31, 2025 Available-for-sale Held-to-maturity Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value Due after one year through five years $ 455 $ 455 $ — $ — Due after five years through ten years 1,200 1,210 — — Due after ten years 4,689 3,676 703 529 Agency mortgage-backed securities 2,688 2,348 1,418 1,182 Total $ 9,032 $ 7,689 $ 2,121 $ 1,711 There were no pledged securities at March 31, 2025 or December 31, 2024. There were no sales of AFS or HTM securities during both the three months ended March 31, 2025 and 2024. 9 Table of Contents Accrued interest receivable on securities totaled $ 76 thousand at March 31, 2025 and $ 48 thousand at December 31, 2024, in the accompanying Condensed Consolidated Balance Sheets. Accrued interest receivable is excluded from the allowance for credit losses. The following table summarizes the aggregate fair value and gross unrealized loss by length of time of those investments for which an allowance for credit losses has not been recorded that have been in a continuous unrealized loss position at the dates indicated (in thousands): March 31, 2025 Less Than 12 Months 12 Months or Longer Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Available-for-sale securities Municipal bonds $ — $ — $ 3,676 $ ( 1,013 ) $ 3,676 $ ( 1,013 ) Agency mortgage-backed securities 44 ( 1 ) 1,960 ( 349 ) 2,004 ( 350 ) Total available-for-sale securities $ 44 $ ( 1 ) $ 5,636 $ ( 1,362 ) $ 5,680 $ ( 1,363 ) Held-to-maturity securities Municipal bonds $ — $ — $ 529 $ ( 174 ) $ 529 $ ( 174 ) Agency mortgage-backed securities — — 1,181 ( 236 ) 1,182 ( 236 ) Total held-to-maturity securities $ — $ — $ 1,710 $ ( 410 ) $ 1,711 $ ( 410 ) December 31, 2024 Less Than 12 Months 12 Months or Longer Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Available-for-sale securities Municipal bonds $ — $ — $ 3,708 $ ( 991 ) $ 3,708 $ ( 991 ) Agency mortgage-backed securities 44 ( 2 ) 2,020 ( 347 ) 2,064 ( 349 ) Total $ 44 $ ( 2 ) $ 5,728 $ ( 1,338 ) $ 5,772 $ ( 1,340 ) Held-to-maturity securities Municipal bonds $ — $ — $ 540 $ ( 163 ) $ 540 $ ( 163 ) Agency mortgage-backed securities — — 1,172 ( 255 ) 1,172 ( 255 ) Total held-to-maturity securities $ — $ — $ 1,712 $ ( 418 ) $ 1,712 $ ( 418 ) There was no allowance for credit losses on securities at March 31, 2025 or December 31, 2024. At both March 31, 2025 and December 31, 2024, the total securities portfolio consisted of 11 agency mortgage-backed securities and 11 municipal bonds, with a total portfolio fair value of $ 9.4 million and $ 9.5 million, respectively. At both March 31, 2025 and December 31, 2024, there was one security in an unrealized loss position for less than 12 months and 15 securities in an unrealized loss position for more than 12 months. The unrealized losses were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities, and not related to the underlying credit of the issuers or the underlying collateral. It is expected that these securities will not be settled at a price less than the amortized cost of each investment. There was no provision for credit losses recognized for investment securities during the three months ended March 31, 2025 and 2024, because the declines in fair value were not attributable to credit quality and because we do not intend, and it is not likely that we will be required, to sell these securities before recovery of their amortized cost basis. 10 Table of Contents Note 4 – Loans Loans-held-for portfolio (which excludes loans held-for-sale) at the dates indicated were as follows (in thousands): March 31, 2025 December 31, 2024 Real estate loans: One-to-four family $ 262,457 $ 269,684 Home equity 28,112 26,686 Commercial and multifamily 392,798 371,516 Construction and land 42,492 73,077 Total real estate loans 725,859 740,963 Consumer loans: Manufactured homes 42,448 41,128 Floating homes 86,626 86,411 Other consumer 18,224 17,720 Total consumer loans 147,298 145,259 Commercial business loans 14,690 15,605 Total loans held-for-portfolio 887,847 901,827 Premiums for purchased loans (1) 688 718 Deferred fees, net ( 2,309 ) ( 2,374 ) Total loans held-for-portfolio, gross 886,226 900,171 Allowance for credit losses — loans ( 8,393 ) ( 8,499 ) Total loans held-for-portfolio, net $ 877,833 $ 891,672 (1) Includes premiums resulting from purchased loans of $ 386 thousand related to one-to-four family loans, $ 236 thousand related to commercial and multifamily loans, and $ 66 thousand related to commercial business loans as of March 31, 2025. Includes premiums resulting from purchased loans of $ 404 thousand related to one-to-four family loans, $ 244 thousand related to commercial and multifamily loans, and $ 70 thousand related to commercial business loans as of December 31, 2024. As of March 31, 2025, there was one collateral dependent consumer mortgage loan, totaling $ 260 thousand, that was in process of foreclosure . The following table presents a summary of activity in the ACL on loans and the reserve for unfunded loan commitments for the periods indicated (in thousands): Three Months Ended March 31, 2025 2024 ACL - Loans Reserve for Unfunded Loan Commitments ACL ACL - Loans Reserve for Unfunded Loan Commitments ACL Balance at beginning of period $ 8,499 $ 234 $ 8,733 $ 8,760 $ 193 $ 8,953 (Release of) provision for credit losses during the period ( 85 ) ( 118 ) ( 203 ) ( 106 ) 73 ( 33 ) Net charge-offs during the period ( 21 ) — ( 21 ) ( 56 ) — ( 56 ) Balance at end of period $ 8,393 $ 116 $ 8,509 $ 8,598 $ 266 $ 8,864 Accrued interest receivable on loans receivable totaled $ 3.3 million at March 31, 2025 and $ 3.4 million at December 31, 2024, in the accompanying Condensed Consolidated Balance Sheets. Accrued interest receivable is excluded from the ACL. 11 Table of Contents The ACL is measured using the current expected credit losses (“CECL”) approach for financial instruments measured at amortized cost and for other commitments to extend credit. CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable forecasts. We estimate the ACL using relevant information from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. The ACL is measured on a collective (segment) basis when similar risk characteristics exist. Historical credit loss experience for both the Company and segment-specific peers provides the basis for the estimate of expected credit losses. Segments are based upon federal call report segmentation. The reserve was applied on a loan-by-loan basis and condensed into the applicable segments reported below. The ACL is determined using quantitative and qualitative analysis. The quantitative analysis utilizes macroeconomic variables to establish a quantitative relationship between economic conditions and loan performance through an economic cycle. Qualitative adjustments include but are not limited to changes in lending policies; changes in nature and volume of the portfolio; change in staff experience level; changes in the volume or trends of classified loans, delinquencies, and nonaccrual loans; concentration risk; value of underlying collateral; competitive, legal, and regulatory factors; changes in the loan review system; and economic conditions. We evaluate our ACL policy and judgments on an ongoing basis and update them as necessary based on changing conditions. See “Note 1—Organization and Significant Accounting Policies” in the Company’s 2024 Form 10-K for further information on the Company’s ACL accounting policy. The following tables summarize the activity in the ACL - loans for the periods indicated (in thousands): Three Months Ended March 31, 2025 Beginning Allowance Charge-offs Recoveries Provision for (Release of) Credit Losses Ending Allowance One-to-four family $ 3,025 $ — $ — $ 303 $ 3,328 Home equity 307 — — 55 362 Commercial and multifamily 1,218 — — ( 37 ) 1,181 Construction and land 992 — — ( 713 ) 279 Manufactured homes (1) 1,172 ( 19 ) — 150 1,303 Floating homes 1,282 — — 127 1,409 Other consumer (2) 401 ( 8 ) 6 49 448 Commercial business 102 — — ( 19 ) 83 Total $ 8,499 $ ( 27 ) $ 6 $ ( 85 ) $ 8,393 (1) During the three months ended March 31, 2025, there was one manufactured home loan originated in 2022 that was charged off and then subsequently foreclosed upon. (2) During the three months ended March 31, 2025, the gross charge-offs of other consumer loans related entirely to deposit overdrafts that were charged off. Three Months Ended March 31, 2024 Beginning Allowance Charge-offs Recoveries Provision for (Release of) Credit Losses Ending Allowance One-to-four family $ 2,630 $ — $ — $ 280 $ 2,910 Home equity 185 — — ( 6 ) 179 Commercial and multifamily 1,070 — — 36 1,106 Construction and land 1,349 — — ( 20 ) 1,329 Manufactured homes (1) 971 ( 23 ) — ( 115 ) 833 Floating homes 2,022 — — ( 223 ) 1,799 Other consumer (2) 426 ( 39 ) 6 ( 60 ) 333 Commercial business 107 — — 2 109 Total $ 8,760 $ ( 62 ) $ 6 $ ( 106 ) $ 8,598 (1) During the three months ended March 31, 2024, there was one manufactured home loan originated in 2020 that was charged off and then subsequently foreclosed upon. (2) During the three months ended March 31, 2024, the gross charge-offs of other consumer loans related entirely to deposit overdrafts that were charged off. 12 Table of Contents Credit Quality Indicators. Federal regulations provide for the classification of lower quality loans and other assets (such as OREO and repossessed assets), as well as debt and equity securities considered as "substandard," "doubtful" or "loss." An asset is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. "Substandard" assets include those characterized by the "distinct possibility" that the insured institution will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all of the weaknesses in those classified "substandard," with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions and values, "highly questionable and improbable." Assets classified as "loss" are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading. The grades for watch and special mention loans are used by the Company to identify and track potential problem loans which do not rise to the levels described for substandard, doubtful, or loss. These are loans which have been criticized and deserve management's close attention based upon known characteristics such as periodic payment delinquency, failure to comply with contractual terms of the loan, or collateral concerns. Loans identified as watch, special mention, substandard, doubtful, or loss are subject to additional problem loan reporting to management every three months. When we classify problem assets as either substandard or doubtful, we may determine that these assets should be individually analyzed if they no longer share common risk characteristics with the rest of the portfolio. When we classify problem assets as a loss, we are required to charge off those assets in the period in which they are deemed uncollectible. Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the FDIC (the Bank’s federal regulator) and the Washington Department of Financial Institutions (the Bank’s state banking regulator), which can order the establishment of additional credit loss allowances. Assets which do not currently expose us to sufficient risk to warrant classification as substandard or doubtful but possess weaknesses are required to be designated as special mention. There were no loans classified as doubtful or loss as of March 31, 2025 and December 31, 2024. The following tables present the internally assigned grades as of March 31, 2025 and December 31, 2024, by type of loan and origination year (in thousands): 13 Table of Contents At March 31, 2025 Term Loans Amortized Cost Basis by Origination Year Revolving Loans Amortized Cost Basis Revolving Loans Amortized Cost Basis Converted to Term 2025 2024 2023 2022 2021 Prior Total One-to-four family: Pass $ 2,112 $ 23,262 $ 22,393 $ 74,764 $ 96,929 $ 42,317 $ — $ — $ 261,777 Substandard — — — 491 101 209 — — 801 Total one-to-four family $ 2,112 $ 23,262 $ 22,393 $ 75,255 $ 97,030 $ 42,526 $ — $ — $ 262,578 Home equity: Pass $ 59 $ 2,996 $ 2,911 $ 2,359 $ 862 $ 1,468 $ 16,278 $ 967 $ 27,900 Substandard — — — — — 55 309 62 426 Total home equity $ 59 $ 2,996 $ 2,911 $ 2,359 $ 862 $ 1,523 $ 16,587 $ 1,029 $ 28,326 Commercial and multifamily: Pass $ 23,140 $ 34,755 $ 24,960 $ 88,745 $ 109,532 $ 84,509 $ — $ — $ 365,641 Substandard — — — — 6,453 19,443 — — 25,896 Total commercial and multifamily $ 23,140 $ 34,755 $ 24,960 $ 88,745 $ 115,985 $ 103,952 $ — $ — $ 391,537 Construction and land: Pass $ 753 $ 17,844 $ 18,856 $ 2,143 $ 849 $ 1,742 $ — $ — $ 42,187 Substandard — — — 69 — 23 — — 92 Total construction and land $ 753 $ 17,844 $ 18,856 $ 2,212 $ 849 $ 1,765 $ — $ — $ 42,279 Manufactured homes: Pass $ 2,631 $ 9,202 $ 11,976 $ 6,610 $ 3,678 $ 7,563 $ — $ — $ 41,660 Substandard — — 305 141 — 195 — — 641 Total manufactured homes $ 2,631 $ 9,202 $ 12,281 $ 6,751 $ 3,678 $ 7,758 $ — $ — $ 42,301 Floating homes: Pass $ 1,986 $ 20,256 $ 6,367 $ 15,165 $ 23,734 $ 16,353 $ — $ — $ 83,861 Substandard — — — 2,350 — — — — 2,350 Total floating homes $ 1,986 $ 20,256 $ 6,367 $ 17,515 $ 23,734 $ 16,353 $ — $ — $ 86,211 Other consumer: Pass $ 1,250 $ 2,131 $ 2,911 $ 379 $ 3,562 $ 7,224 $ 704 $ — $ 18,161 Substandard — — 74 — 9 — — — 83 Total other consumer $ 1,250 $ 2,131 $ 2,985 $ 379 $ 3,571 $ 7,224 $ 704 $ — $ 18,244 Commercial business: Pass $ — $ 292 $ 1,148 $ 1,636 $ 2,901 $ 3,849 $ 4,700 $ — $ 14,526 Substandard — 37 — — — — 187 — 224 Total commercial business $ — $ 329 $ 1,148 $ 1,636 $ 2,901 $ 3,849 $ 4,887 $ — $ 14,750 Total loans Pass $ 31,931 $ 110,738 $ 91,522 $ 191,801 $ 242,047 $ 165,025 $ 21,682 $ 967 $ 855,713 Substandard — 37 379 3,051 6,563 19,925 496 62 30,513 Total loans $ 31,931 $ 110,775 $ 91,901 $ 194,852 $ 248,610 $ 184,950 $ 22,178 $ 1,029 $ 886,226 14 Table of Contents At December 31, 2024 Term Loans Amortized Cost Basis by Origination Year Revolving Loans Amortized Cost Basis Revolving Loans Amortized Cost Basis Converted to Term 2024 2023 2022 2021 2020 Prior Total One-to-four family: Pass $ 26,327 $ 22,470 $ 78,427 $ 98,379 $ 14,095 $ 29,534 $ — $ — $ 269,232 Substandard — — 259 104 — 214 — — 577 Total one-to-four family $ 26,327 $ 22,470 $ 78,686 $ 98,483 $ 14,095 $ 29,748 $ — $ — $ 269,809 Home equity: Pass $ 3,084 $ 2,951 $ 2,420 $ 908 $ 210 $ 1,320 $ 14,578 $ 1,069 $ 26,540 Substandard — — — — — 56 234 66 356 Total home equity $ 3,084 $ 2,951 $ 2,420 $ 908 $ 210 $ 1,376 $ 14,812 $ 1,135 $ 26,896 Commercial and multifamily: Pass $ 34,844 $ 20,736 $ 90,067 $ 111,601 $ 21,240 $ 67,336 $ — $ — $ 345,824 Special mention — — — — — 1,375 — — 1,375 Substandard — — — 5,775 2,165 15,143 — — 23,083 Total commercial and multifamily $ 34,844 $ 20,736 $ 90,067 $ 117,376 $ 23,405 $ 83,854 $ — $ — $ 370,282 Construction and land: Pass $ 26,458 $ 22,846 $ 2,166 $ 968 $ 593 $ 2,338 $ — $ — $ 55,369 Special mention — — 17,349 — — — — — 17,349 Substandard — — 70 — — 24 — — 94 Total construction and land $ 26,458 $ 22,846 $ 19,585 $ 968 $ 593 $ 2,362 $ — $ — $ 72,812 Manufactured homes: Pass $ 9,396 $ 12,095 $ 7,039 $ 3,822 $ 1,816 $ 6,180 $ — $ — $ 40,348 Substandard — 427 — — — 205 — — 632 Total manufactured homes $ 9,396 $ 12,522 $ 7,039 $ 3,822 $ 1,816 $ 6,385 $ — $ — $ 40,980 Floating homes: Pass $ 20,587 $ 6,395 $ 16,225 $ 23,902 $ 6,059 $ 10,472 $ — $ — $ 83,640 Substandard — — 2,350 — — — — — 2,350 Total floating homes $ 20,587 $ 6,395 $ 18,575 $ 23,902 $ 6,059 $ 10,472 $ — $ — $ 85,990 Other consumer: Pass $ 2,273 $ 3,297 $ 622 $ 3,615 $ 5,387 $ 1,925 $ 618 $ — $ 17,737 Substandard — — — 1 — — — — 1 Total other consumer $ 2,273 $ 3,297 $ 622 $ 3,616 $ 5,387 $ 1,925 $ 618 — $ 17,738 Commercial business: Pass $ 314 $ 1,256 $ 1,811 $ 3,032 $ 257 $ 3,895 $ 4,862 $ — $ 15,427 Substandard 38 — — — — 11 188 — 237 Total commercial business $ 352 $ 1,256 $ 1,811 $ 3,032 $ 257 $ 3,906 $ 5,050 $ — $ 15,664 Total loans Pass $ 123,283 $ 92,046 $ 198,777 $ 246,227 $ 49,657 $ 123,000 $ 20,058 $ 1,069 $ 854,117 Special mention — — 17,349 — — 1,375 — — 18,724 Substandard 38 427 2,679 5,880 2,165 15,653 422 66 27,330 Total loans $ 123,321 $ 92,473 $ 218,805 $ 252,107 $ 51,822 $ 140,028 $ 20,480 $ 1,135 $ 900,171 15 Table of Contents Nonaccrual and Past Due Loans . Loans are considered past due if the required principal and interest payments were not received as of the dates such payments were due. The following table presents the amortized cost of nonaccrual loans as of the dates indicated, by type of loan (in thousands): March 31, 2025 December 31, 2024 Total Nonaccrual Loans Total Nonaccrual Loans with no ACL Total Nonaccrual Loans Total Nonaccrual Loans with no ACL One-to-four family $ 762 $ 762 $ 537 $ 537 Home equity 368 368 298 298 Commercial and multifamily 5,627 5,627 3,734 3,734 Construction and land 22 22 24 24 Manufactured homes 501 501 521 521 Floating homes 2,363 2,363 2,363 2,363 Other consumer 10 9 3 1 Commercial business — — 11 11 Total $ 9,653 $ 9,652 $ 7,491 $ 7,489 The following tables present the aging of past due loans, based on amortized cost, as of the dates indicated, by type of loan (in thousands): March 31, 2025 30-59 Days Past Due 60-89 Days Past Due 90 Days and Greater Past Due 90 Days and Greater Past Due and Accruing Total Past Due Current Total Loans One-to-four family $ 668 $ 49 $ 351 $ — $ 1,068 $ 261,510 $ 262,578 Home equity 35 — 138 — 173 28,153 28,326 Commercial and multifamily 967 — 5,621 — 6,588 384,949 391,537 Construction and land — — — — — 42,279 42,279 Manufactured homes 770 — 200 — 970 41,331 42,301 Floating homes — — 2,350 — 2,350 83,861 86,211 Other consumer 5 3 9 — 17 18,227 18,244 Commercial business — — — — — 14,750 14,750 Total $ 2,445 $ 52 $ 8,669 $ — $ 11,166 $ 875,060 $ 886,226 16 Table of Contents December 31, 2024 30-59 Days Past Due 60-89 Days Past Due 90 Days and Greater Past Due 90 Days and Greater Past Due and Accruing Total Past Due Current Total Loans One-to-four family $ 34 $ 339 $ 352 $ — $ 725 $ 269,084 $ 269,809 Home equity 249 — 66 — 315 26,581 26,896 Commercial and multifamily — — 3,733 — 3,731 366,551 370,282 Construction and land 24 — — — 24 72,788 72,812 Manufactured homes 402 287 394 — 1,083 39,897 40,980 Floating homes — — 2,350 — 2,350 83,640 85,990 Other consumer 6 12 — — 18 17,720 17,738 Commercial business — — — — — 15,664 15,664 Total $ 715 $ 638 $ 6,895 $ — $ 8,246 $ 891,925 $ 900,171 Loan Modifications to Borrowers Experiencing Financial Difficulty. The Company has granted modifications which can generally be described in the following categories: Principal Forgiveness : A modification in which the principal is reduced. Rate Modification : A modification in which the interest rate is changed. Term Modification : A modification in which the maturity date, timing of payments or frequency of payments is changed. Payment Modification : A modification in which the dollar amount of the payment is changed. Interest only modifications in which a loan is converted to interest only payments for a period of time are included in this category. Combination Modification : Any other type of modification, including the use of multiple categories above. At March 31, 2025, the Company had no commitments to extend additional credit to borrowers owing loan receivables with modified terms. There were no loans modified within the three months ended March 31, 2025 and 2024. At March 31, 2025 and December 31, 2024, we had no loan receivables that defaulted subsequent to their modification. Troubled debt restructurings (“TDRs”). Prior to the adoption of ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures , the Company had granted a variety of concessions to borrowers in the form of loan modifications that were considered TDRs. Loans classified as legacy TDRs totaled $ 1.3 million at both March 31, 2025 and December 31, 2024. Collateral Dependent Loans . Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. Collateral dependent loans are evaluated individually for purposes of determining the ACL, which is determined based on the estimated fair value of the collateral. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated fair value of the collateral exceeds the amortized cost of the loan, no ACL is recorded. 17 Table of Contents The following tables summarize collateral dependent loans by collateral type as of the dates indicated (in thousands): March 31, 2025 Commercial Real Estate Residential Real Estate Land Other Residential RVs/Automobiles Business Assets Total Real estate loans: One- to four- family $ — $ 305 $ — $ 594 $ — $ — $ 899 Home equity — 368 — — — — 368 Commercial and multifamily 4,561 — — — — 1,065 5,626 Construction and land — — 22 — — — 22 Total real estate loans 4,561 673 22 594 — 1,065 6,915 Consumer loans: Manufactured homes — — — 501 — — 501 Floating homes — — — 2,363 — — 2,363 Other consumer — — — — 9 — 9 Total consumer loans — — — 2,864 9 — 2,873 Commercial business loans — — — — — — — Total loans $ 4,561 $ 673 $ 22 $ 3,458 $ 9 $ 1,065 $ 9,789 December 31, 2024 Commercial Real Estate Residential Real Estate Land Other Residential RVs/Automobiles Business Assets Total Real estate loans: One- to four- family $ — $ 311 $ — $ 364 $ — $ — $ 675 Home equity — 298 — — — — 298 Commercial and multifamily 3,734 — — — — — 3,734 Construction and land — — 24 — — — 24 Total real estate loans 3,734 609 24 364 — — 4,731 Consumer loans: Manufactured homes — — — 521 — — 521 Floating homes — — — 2,363 — — 2,363 Other consumer — — — — 1 — 1 Total consumer loans — — — 2,884 1 — 2,885 Commercial business loans — — — — — 11 11 Total loans $ 3,734 $ 609 $ 24 $ 3,248 $ 1 $ 11 $ 7,627 Note 5 – Fair Value Measurements The Company determines the fair values of its financial instruments based on the requirements established in ASC 820 , Fair Value Measurements (“ASC 820”), which provides a framework for measuring fair value in accordance with U.S. GAAP and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 defines fair values for financial instruments as the exit price, the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions. The Company’s fair values for financial instruments at March 31, 2025 and December 31, 2024 were determined based on these requirements. The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments: Cash and cash equivalents - The estimated fair value is equal to the carrying amount. 18 Table of Contents Available-for-sale securities – AFS securities are recorded at fair value based on quoted market prices, if available (Level 1). If quoted market prices are not available, management utilizes third-party pricing services or broker quotations from dealers in the specific instruments (Level 2). Level 2 securities include those traded on an active exchange, as well as U.S. government securities. Held-to-maturity securities – The fair value is based on quoted market prices, if available. If quoted market prices are not available, management utilizes third-party pricing services or broker quotations from dealers in the specific instruments. Level 2 securities include those traded on an active exchange, as well as U.S. government securities. Loans held-for-sale - The fair value of fixed-rate one-to-four family loans is based on whole loan forward prices obtained from government sponsored enterprises. Loans held-for-portfolio - The estimated fair value of loans held-for-portfolio consists of a credit adjustment to reflect the estimated adjustment to the carrying value of the loans due to credit-related factors and a yield adjustment to reflect the estimated adjustment to the carrying value of the loans due to a differential in yield between the portfolio loan yields and estimated current market rate yields on loans with similar characteristics. The estimated fair values of loans held-for-portfolio reflect exit price assumptions. The liquidity premiums/discounts are part of the valuation for exit pricing. Mortgage servicing rights –The fair value of MSRs is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds, discount rates, and delinquency rate assumptions as inputs. Time deposits - The estimated fair value of time deposits is based on the difference between interest rates paid on the Company’s time deposits and current market rates for time deposits with comparable characteristics. Borrowings - The fair value of borrowings is estimated using the contractual cash flows of each debt instrument discounted using the Company’s current incremental borrowing rates for similar types of borrowing arrangements. Subordinated notes - The fair value of subordinated notes is estimated using discounted cash flows based on current borrowing rates for similar long-term debt instruments with similar terms and remaining time to maturity. A description of the valuation methodologies used for collateral dependent loans, OREO and repossessed assets and off-balance sheet loan commitments is as follows: Collateral dependent loans - The fair value of collateral dependent loans is based on the current appraised value of the collateral less estimated costs to sell. OREO and repossessed assets – The fair value of OREO and repossessed assets is based on the current appraised value of the collateral less estimated costs to sell. Off-balance sheet financial instruments - The fair value of off-balance sheet financial instruments, which consisted entirely of loan commitments at March 31, 2025 and December 31, 2024, is estimated based on fees charged to others to enter into similar agreements, taking into account the remaining terms of the agreements and credit standing of the Company’s clients. The estimated fair value of these commitments was not significant at March 31, 2025 and December 31, 2024. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the lowest level of inputs that is significant to the measurement is used to determine the hierarchy for the entire asset or liability. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s quarterly valuation process. There were no transfers between levels during the three months ended March 31, 2025 and 2024. 19 Table of Contents The following tables present information about the level in the fair value hierarchy for the Company’s financial assets and liabilities, whether recognized or recorded at fair value or not as of the dates indicated (in thousands): March 31, 2025 Fair Value Measurements Using: Carrying Value Estimated Fair Value Level 1 Level 2 Level 3 FINANCIAL ASSETS: Cash and cash equivalents $ 131,494 $ 131,494 $ 131,494 $ — $ — Available-for-sale securities 7,689 7,689 — 7,689 — Held-to-maturity securities 2,121 1,711 — 1,711 — Loans held-for-sale 2,267 2,267 — 2,267 — Loans held-for-portfolio, net 877,833 840,425 — — 840,425 Mortgage servicing rights 4,688 4,688 — — 4,688 FINANCIAL LIABILITIES: Time deposits 289,474 290,245 — 290,245 — Borrowings 25,000 25,000 — 25,000 — Subordinated notes 11,770 12,310 — 12,310 — December 31, 2024 Fair Value Measurements Using: Carrying Value Estimated Fair Value Level 1 Level 2 Level 3 FINANCIAL ASSETS: Cash and cash equivalents $ 43,641 $ 43,641 $ 43,641 $ — $ — Available-for-sale securities 7,790 7,790 — 7,790 — Held-to-maturity securities 2,130 1,712 — 1,712 — Loans held-for-sale 487 487 — 487 — Loans held-for-portfolio, net 891,672 850,813 — — 850,813 Mortgage servicing rights 4,769 4,769 — — 4,769 FINANCIAL LIABILITIES: Time deposits 295,822 296,575 — 296,575 — Borrowings 25,000 25,000 — 25,000 — Subordinated notes 11,759 12,653 — 12,653 — 20 Table of Contents The following tables present the balance of assets measured at fair value on a recurring basis as of the dates indicated (in thousands): Fair Value at March 31, 2025 Description Total Level 1 Level 2 Level 3 Municipal bonds $ 5,341 $ — $ 5,341 $ — Agency mortgage-backed securities 2,348 — 2,348 — Mortgage servicing rights 4,688 — — 4,688 Fair Value at December 31, 2024 Description Total Level 1 Level 2 Level 3 Municipal bonds $ 5,374 $ — $ 5,374 $ — Agency mortgage-backed securities 2,416 — 2,416 — Mortgage servicing rights 4,769 — — 4,769 The following tables provide a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis as of the dates indicated: March 31, 2025 Financial Instrument Valuation Technique Unobservable Input(s) Range (Weighted-Average) Mortgage Servicing Rights Discounted cash flow Prepayment speed assumption 125 %- 364 % ( 125 %) Discount rate 10.0 %- 10.3 % ( 10 %) December 31, 2024 Financial Instrument Valuation Technique Unobservable Input(s) Range (Weighted-Average) Mortgage Servicing Rights Discounted cash flow Prepayment speed assumption 125 %- 556 % ( 125 %) Discount rate ( 10 %) Generally, any significant increases in the prepayment speed assumption and discount rate utilized in the fair value measurement of the MSRs will result in a negative fair value adjustment (and decrease in the fair value measurement). Conversely, a significant decrease in the prepayment speed assumption and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement). An increase in the weighted average life assumptions will result in a decrease in the prepayment speed assumption and conversely, a decrease in the weighted average life assumptions will result in an increase in the prepayment speed assumption. As a result of the difficulty in observing certain significant valuation inputs affecting our “Level 3” fair value assets, we are required to make judgments regarding these items’ fair values. There were no assets or liabilities (excluding MSRs) measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine months ended March 31, 2025 and 2024. MSRs are measured at fair value using significant unobservable inputs (Level 3) on a recurring basis, and a reconciliation of these assets can be found in “Note 6—Mortgage Servicing Rights. 21 Table of Contents The following tables present the balance of assets measured at fair value on a nonrecurring basis at the dates indicated (in thousands): Fair Value at March 31, 2025 Total Level 1 Level 2 Level 3 OREO and repossessed assets $ 41 $ — $ — $ 41 Collateral dependent loans 9,789 — — 9,789 Fair Value at December 31, 2024 Total Level 1 Level 2 Level 3 Collateral dependent loans 7,627 — — 7,627 There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis, at both March 31, 2025 and December 31, 2024. Note 6 – Mortgage Servicing Rights The unpaid principal balance of the Company’s mortgage servicing rights portfolio totaled $ 418.6 million at March 31, 2025 compared to $ 425.8 million at December 31, 2024. Of these total balances, the unpaid principal balance of loans serviced for Federal National Mortgage Association (“Fannie Mae”) at March 31, 2025 and December 31, 2024 were $ 416.5 million and $ 423.7 million, respectively. The unpaid principal balance of loans serviced for other financial institutions totaled $ 2.1 million at both March 31, 2025 and December 31, 2024. Loans serviced for Fannie Mae and others are not included in the Company’s financial statements as they are not assets of the Company. A summary of the change in the balance of mortgage servicing assets during the periods indicated were as follows (in thousands): Three Months Ended March 31, 2025 2024 Beginning balance, at fair value $ 4,769 $ 4,632 Servicing rights that result from transfers and sale of financial assets 18 45 Changes in fair value: Due to changes in model inputs or assumptions and other (1) ( 99 ) ( 65 ) Ending balance, at fair value $ 4,688 $ 4,612 (1) Represents changes due to collection/realization of expected cash flows and curtailments. The key economic assumptions used in determining the fair value of mortgage servicing rights at the dates indicated are as follows: March 31, 2025 December 31, 2024 Prepayment speed (Public Securities Association “PSA” model) 125 % 125 % Weighted-average life 10.8 years 10.6 years Weighted average discount rate 10.0 % 10.0 % The amount of contractually specified servicing, late and ancillary fees earned on mortgage servicing rights are included in mortgage servicing income on the Condensed Consolidated Statements of Income and totaled $ 269 thousand and $ 282 thousand for the three months ended March 31, 2025 and 2024, respectively. Note 7 – Commitments and Contingencies In the normal course of operations, the Company engages in a variety of financial transactions that are not recorded in our financial statements. These transactions involve varying degrees of off-balance sheet credit, interest rate and liquidity risks. 22 Table of Contents These transactions are used primarily to manage clients’ requests for funding and take the form of loan commitments and lines of credit. Note 8 – Borrowings, FHLB Stock and Subordinated Notes FHLB Advances The following tables present advances from the FHLB as of the dates indicated (dollars in thousands): March 31, 2025 December 31, 2024 FHLB advances: Short-term advances $ 15,000 $ — Long-term advances 10,000 25,000 Total $ 25,000 $ 25,000 March 31, 2025 December 31, 2024 Fixed Rate: Outstanding balance $ 25,000 $ 25,000 Interest rates ranging from 4.06 % 4.06 % Interest rates ranging to 4.27 % 4.27 % Weighted average interest rate 4.16 % 4.16 % The following table presents the maturity of our FHLB advances (dollars in thousands): March 31, 2025 Remainder of 2025 $ — 2026 15,000 2027 — 2028 10,000 2029 — Thereafter — $ 25,000 FHLB Des Moines Borrowing Capacity The Company has a loan agreement with the FHLB of Des Moines. The terms of the agreement call for a blanket pledge of a portion of the Company’s mortgage and commercial and multifamily loan portfolio based on the Company’s outstanding borrowing balance. Additionally, the Company had outstanding letters of credit from the FHLB of Des Moines to secure public deposits. The following table presents the Company’s borrowing capacity from the FHLB as of the dates indicated: March 31, 2025 December 31, 2024 Amount available to borrow under credit facility (1) $ 347,813 $ 385,366 Advance equivalent of collateral: One-to-four family loans 176,342 175,907 Commercial and multifamily loans 28,951 29,180 Home equity loans 237 241 Notional amount of letters of credit outstanding 13,000 8,000 Remaining FHLB borrowing capacity (2) $ 167,529 $ 172,327 (1) Subject to eligible pledged collateral. (2) Amount remaining from the advance equivalent of collateral less letters of credit outstanding and FHLB advances. 23 As a member of the FHLB, the Company is required to maintain a minimum level of investment in FHLB of Des Moines stock based on specific percentages of its outstanding FHLB advances. At both March 31, 2025 and December 31, 2024, the Company had an investment of $ 1.7 million in FHLB of Des Moines stock. Federal Reserve Bank of San Francisco (“FRB SF”) Borrowings The Company has a borrowing agreement with the FRB SF. The terms of the agreement call for a blanket pledge of a portion of the Company’s consumer and commercial business loans based on the Company’s outstanding borrowing balance. At March 31, 2025 and December 31, 2024, the amount available to borrow under this credit facility was $ 20.3 million and $ 20.8 million, respectively, subject to eligible pledged collateral. The Company had no outstanding borrowings under this arrangement at March 31, 2025 and December 31, 2024. Other Borrowings The Company has access to an unsecured Fed Funds line of credit from Pacific Coast Banker’s Bank (“PCBB”). The line has a one year term maturing on June 30, 2025 and is renewable annually. As of March 31, 2025, the amount available under this line of credit was $ 20.0 million. There was no balance on this line of credit as of March 31, 2025 and December 31, 2024. Subordinated Debt In September 2020, the Company issued $ 12.0 million of fixed to floating rate subordinated notes that mature in 2030. The subordinated notes have an initial fixed interest rate of 5.25 % to, but excluding, October 1, 2025, payable semi-annually in arrears. From, and including, October 1, 2025, the interest rate on the subordinated notes will reset quarterly to a floating rate per annum equal to a benchmark rate, which is expected to be the then-current three-month term Secured Overnight Financing Rate, or SOFR, plus 513 basis points, payable quarterly in arrears. The subordinated notes mature on May 15, 2030, and may be redeemed by the Company, in whole or in part, on October 1, 2025, or on any subsequent interest payment date. Prior to October 1, 2025, the Company may redeem these notes, in whole but not in part, only under certain limited circumstances set forth in the terms of the subordinated notes. The balance of the subordinated notes was $ 11.8 million as of both March 31, 2025 and December 31, 2024. Note 9 – Earnings Per Common Share The following table summarizes the calculation of earnings per share for the periods indicated (in thousands, except per share data): Three Months Ended 2025 2024 Net income $ 1,167 $ 770 LESS: Participating dividends - Unvested Restricted Stock Awards (“RSAs”) ( 2 ) ( 3 ) LESS: Income allocated to participating securities - Unvested RSAs ( 3 ) ( 2 ) Net income available to common stockholders - basic 1,162 765 ADD BACK: Income allocated to participating securities - Unvested RSAs 3 2 LESS: Income reallocated to participating securities - Unvested RSAs ( 3 ) ( 2 ) Net income available to common stockholders - diluted $ 1,162 $ 765 Weighted average number of shares outstanding, basic 2,554,265 2,539,213 Effect of potentially dilutive common shares 24,344 17,745 Weighted average number of shares outstanding, diluted 2,578,609 2,556,958 Earnings per share, basic $ 0.45 $ 0.30 Earnings per share, diluted $ 0.45 $ 0.30 There were no anti-dilutive securities during the three months ended March 31, 2025 and 7,596 anti-dilutive securities during the three months ended March 31, 2024. Note 10 – Leases We currently have operating leases for branch locations, a loan production office and our corporate office and in the past, we also had operating leases for certain equipment. The term for our leases begins on the date we become legally obligated for the 24 rent payments or we take possession of the building premises, whichever is earlier. Our real estate leases have initial terms ranging from one to 10.5 years and typically include one renewal option. As of March 31, 2025, our leases had remaining terms ranging from 11 months to 5.2 years. The operating leases require us to pay property taxes and operating expenses for the properties. The following table presents the lease right-of-use assets and lease liabilities recorded on the Condensed Consolidated Balance Sheets at the dates indicated (in thousands): March 31, 2025 December 31, 2024 Operating lease right-of-use assets $ 3,546 $ 3,725 Operating lease liabilities $ 3,828 $ 4,013 The following table presents the components of lease expense for the periods indicated (in thousands): Three Months Ended March 31, 2025 2024 Operating lease expense Office leases $ 273 $ 270 Sublease income — ( 3 ) Net lease expense $ 273 $ 267 The following table presents the schedule of lease liability payments at the date indicated (in thousands): March 31, 2025 Remainder of 2025 $ 1,061 2026 1,012 2027 997 2028 844 2029 136 Thereafter — Total lease payments 4,050 Less: Present value discount 222 Present value of lease liabilities $ 3,828 Lease term and discount rate by lease type consisted of the following at the dates indicated: March 31, 2025 December 31, 2024 Weighted-average remaining lease term: Office leases 4.0 years 4.3 years Weighted-average discount rate (annualized): Office leases 2.90 % 2.88 % 25 Supplemental cash flow information related to leases was as follows for the periods indicated (in thousands): Three Months Ended March 31, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities for operating leases: Operating cash flows Office leases $ 279 $ 278 Note 11 – Subsequent Events On April 29, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $ 0.19 per common share, payable on May 23, 2025 to stockholders of record at the close of business on May 9, 2025. 26 Table of Contents