What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-18 compared with 2025-03-18 · 189 added, 180 removed, 1323 unchanged (22% of the section changed)

4 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sound Financial Bancorp, Inc., and Subsidiary (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Sound Financial Bancorp, Inc.

(the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

14 unchanged sentences

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses on loans balance was $8.5 million at December 31, 2024.

The allowance for credit losses is maintained to provide for estimated losses expected to occur over the estimated remaining life of the asset.

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses on loans was $8.6 million at December 31, 2025.

The allowance for credit losses on loans is maintained to provide for estimated losses expected to occur over the estimated remaining life of the asset.

The Company uses relevant and reliable information from internal and external sources related to past events, current conditions, and a reasonable and supportable forecast.

The quantitative component of the allowance is measured using a discounted cash flow model incorporating gross historical loss rates, adjusted for defaults, recoveries, expected prepayments,

and an economic forecast based on unemployment.

Qualitative adjustments are used to estimate additional losses related to risks that are not captured in the quantitative analysis and are based on management’s evaluation of available internal and external data.

We identified the auditing of the allowance for credit losses on loans, including management’s use of reasonable and supportable forecasts of future economic conditions in the discounted cash flow model, and the estimation of qualitative adjustments, both of which are used in the estimate, as a critical audit matter.

Determination of the inputs used in the discounted cash flow model involve significant management judgment based on management’s consideration of the forecast of relevant economic conditions.

The quantitative component of the allowance is measured using a discounted cash flow model incorporating gross historical loss rates, adjusted for defaults, recoveries, expected prepayments, and an economic forecast based on unemployment.

Qualitative adjustments are used to estimate additional losses

SOUND FINANCIAL BANCORP, INC.

AND SUBSIDIARY

related to risks that are not captured in the quantitative analysis and are based on management’s evaluation of available internal and external data.

We identified the auditing of the allowance for credit losses on loans, specifically management’s estimation of the qualitative adjustments, which are used in the estimate, as a critical audit matter.

Qualitative adjustments are based on management’s evaluation of available internal and external data and involves significant management judgment.

Auditing management’s judgments relating to the determination of the inputs used in the discounted cash flow model and qualitative adjustments involved significant audit effort as well as especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

Auditing management’s judgments relating to the qualitative adjustments involved significant audit effort as well as especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

How We Addressed the Matter in Our Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

Our audit procedures related to the critical audit matter included the following, among others:

• Evaluating the appropriateness of the methodology, including the application of the forecasted economic conditions and qualitative adjustments determined by management and used in the calculation.

■ Evaluating the appropriateness of the methodology, including the application of the qualitative adjustments determined by management and used in the calculation.

■ Testing the completeness and accuracy of the internal data and evaluating the relevance and reliability of the external data used in the calculation.

• Obtaining management’s analysis and supporting documentation related to the forecasted economic conditions assumption, and evaluating whether the significant assumptions used in the forecast is reasonable and supportable based on the analysis provided

■ Obtaining management’s analysis of internal and external qualitative adjustments and evaluating the reasonableness of the qualitative adjustments used in the calculation.

/s/ Moss Adams LLP

/s/ Baker Tilly US, LLP

Everett, Washington

20 unchanged sentences

Premises and equipment, net 4,239 4,697

Operating lease right of use assets, net 3,725 4,496

Lease right of use assets, net 3,423 3,725

Other assets 6,312 7,031

5 unchanged sentences

Accrued interest payable 674 765

Operating lease liabilities 4,013 4,821

Lease liabilities 3,671 4,013

Other liabilities 10,366 9,371

2 unchanged sentences

Total liabilities 982,774 889,967

COMMITMENTS AND CONTINGENCIES (Notes 18)

COMMITMENTS AND CONTINGENCIES (Note 18)

STOCKHOLDERS' EQUITY

23 unchanged sentences

Net interest income 34,927 31,002

(RELEASE OF) PROVISION FOR CREDIT LOSSES

( 120 ) ( 273 )

Net interest income after (release of) provision for credit losses

31,122 34,123

PROVISION FOR (RELEASE OF) CREDIT LOSSES 127 ( 120 )

Net interest income after provision for (release of) credit losses 34,800 31,122

NONINTEREST INCOME

12 unchanged sentences

Data processing 5,021 4,226

Net (gain) loss and expenses on OREO and repossessed assets

Net loss (gain) and expenses on OREO and repossessed assets 37 ( 31 )

Total noninterest expense 30,092 30,131

16 unchanged sentences

AFS securities:

Unrealized (losses) gains arising during the year

Income tax benefit (expense) related to unrealized (losses) gains

Other comprehensive (loss) income, net of tax

Unrealized gains (losses) arising during the year 251 ( 71 )

Income tax (expense) benefit related to unrealized gains (losses) ( 53 ) 15

Other comprehensive income (loss), net of tax 198 ( 56 )

Comprehensive income $ 7,356 $ 4,584

12 unchanged sentences

Net income 7,158 7,158

Other comprehensive loss, net of tax benefit

( 56 ) ( 56 )

Other comprehensive income, net of tax expense 198 198

Share-based compensation 303 303

Restricted stock awards issued 8,048 —

Cash dividends on common stock ($ 0.76 per share)

( 1,947 ) ( 1,947 )

Common stock repurchased ( 1,626 ) ( 18 ) ( 47 ) ( 65 )

Common stock surrendered ( 2,906 ) ( 130 ) ( 130 )

Restricted shares forfeited ( 110 ) —

Common stock options exercised 6,062 151 151

8 unchanged sentences

2,549,427 $ 25 $ 27,990 $ 73,627 $ ( 988 ) $ 100,654

Impact of adoption of ASU No.

2016-13 ( 1,149 ) ( 1,149 )

Net income 4,640 4,640

Other comprehensive income, net of tax

( 56 ) ( 56 )

Share-based compensation 390 390

4 unchanged sentences

Common stock surrendered ( 5,053 ) ( 218 ) ( 218 )

Restricted shares forfeited ( 755 )

Common stock options exercised 14,111 269 269

11 unchanged sentences

Amortization of net discounts on investments 84 84

(Reversal of) provision for credit losses

( 120 ) ( 273 )

Provision for (reversal of) credit losses 127 ( 120 )

Depreciation and amortization 491 619

3 unchanged sentences

Increase in cash surrender value of BOLI ( 837 ) ( 625 )

Net gain on BOLI death benefit — ( 567 )

Deferred income tax 70 ( 273 )

Net gain on disposal of premises and equipment, net

Net loss (gain) on disposal of premises and equipment, net 137 ( 38 )

Net gain on sale of loans ( 260 ) ( 258 )

1 unchanged sentence

Originations of loans held-for-sale ( 17,264 ) ( 14,899 )

Net (gain) loss on sale of OREO and repossessed assets

Net loss on sale of OREO and repossessed assets — ( 37 )

Change in operating assets and liabilities:

7 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from principal payments, maturities and sales of AFS securities

Proceeds from principal payments and maturities of AFS securities 300 385

Proceeds from principal payments, maturities and sales of HTM securities 238 35

Net increase in loans ( 3,537 ) ( 5,049 )

(Purchases of BOLI) / Proceeds from death benefit of BOLI

FHLB Stock redeemed 670 —

Purchases of BOLI — ( 5 )

Purchases of premises and equipment, net ( 170 ) ( 76 )

4 unchanged sentences

Net increase in deposits 111,076 11,260

Proceeds from borrowings — 40,000

Repayment of borrowings ( 15,000 ) ( 15,000 )

FHLB Stock redeemed — 666

Repayment of subordinated notes, net ( 4,000 ) —

Common stock repurchases — ( 65 )

1 unchanged sentence

Surrender of stock to pay tax liability ( 130 ) ( 218 )

( 218 ) ( 265 )

Proceeds from common stock option exercises 151 269

6 unchanged sentences

Interest paid on deposits, borrowings and subordinated debt 22,721 26,424

Noncash investing and financing activities:

Loans transferred from loans held-for-portfolio to OREO and repossessed assets 344 115

Loans transferred from loans held-for-sale to loans held-for-portfolio 2,275 859

ROU assets obtained in exchange for new operating lease liabilities 583 189

ROU assets obtained in exchange for new finance lease liabilities 130 —

See notes to consolidated financial statements

87 unchanged sentences

We have identified the following pools of financial assets with similar risk characteristics for measuring expected credit losses:

• Construction — While secured by real estate, construction loans carry greater risk than term real estate loans due to additional uncertainties, including the timely and cost-effective completion of construction, as well as the ability to sell the building or achieve stabilized occupancy sufficient to generate necessary cash flows for debt service and operating costs.

• Construction — While secured by real estate, construction loans carry greater risk than term real estate loans due to additional uncertainties, including the timely and cost-effective completion of construction and the ability to sell the building or achieve stabilized occupancy sufficient to generate cash flows for debt service and operating costs.

Some loans are originated for borrowers who intend to occupy the property, creating a risk that they may be unable to secure permanent financing upon construction completion.

To mitigate these risks, we require borrowers to adhere to lower loan-to-value ratios and additional covenants and demonstrate strong financial support from guarantors or borrowers.

• One-to-four family residential closed end loans secured by first liens — The primary drivers of potential loss in our residential real estate portfolio included general, regional, or individual economic conditions that effect employment and borrowers’ cash flows.

To mitigate these risks, we require borrowers to adhere to lower loan-to-value ratios, comply with additional covenants and demonstrate strong financial support from guarantors or borrowers.

• One-to-four family residential closed end loans secured by first liens — The primary drivers of potential loss in our residential real estate portfolio include general, regional, or individual economic conditions that affect employment and borrowers’ cash flows.

Risk in this portfolio is best measured through changes in borrower credit scores and loan-to-value ratios.

15 unchanged sentences

Losses in this portfolio tend to be closely correlated with actual and forecasted changes in gross domestic product.

• Floating homes — The primary drivers of potential loss in our floating homes portfolio included general, regional, or individual economic conditions that effect employment and borrowers’ cash flows.

• Floating homes — The primary drivers of potential loss in our floating homes portfolio include general, regional, or individual economic conditions that affect employment and borrowers’ cash flows.

Risk in this portfolio is best measured through changes in borrower credit scores and loan-to-value ratios.

17 unchanged sentences

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 nature and volume of the portfolio;

changes in staff experience levels;

changes in the volume or trends of classified loans, delinquencies, and nonaccrual loans;

6 unchanged sentences

The qualitative factors are evaluated using a five-point scale ranging from improvement to major risk.

Improvement represents an adjustment down to the minimum historical loss rate.

Improvement represents an adjustment down to zero historical loss rate.

Major risk represents an adjustment up to the maximum historical loss rate.

7 unchanged sentences

We evaluate our ACL policy and judgments on an ongoing basis and update them as necessary based on changing conditions.

As part of our continuous enhancement to the ACL methodology, during the year ended December 31, 2023, an assessment of the loss rates utilized for each segment was performed and updated to use peer loss rates.

Additionally, we enhanced the inputs related to our reasonable and supportable forecast through the inclusion of a quantitative model as part of our forecast which replaced a previous qualitative method.

This change in the ACL is considered a change in accounting estimate as per ASC 250-10, where adjustments should be made prospectively.

As part of our continuous enhancement to the ACL methodology, during the year ended December 31, 2024, we enhanced the inputs related to our reasonable and supportable forecast through the inclusion of a quantitative model as part of our forecast which replaced a previous qualitative method.

This change in the ACL was considered a change in accounting estimate as per ASC 250-10, where adjustments should be made prospectively.

During the year ended December 31, 2025, we made changes to benchmark ratios and the annual loss driver analysis.

This change in the ACL is not considered a change in accounting estimate but reflects continual updating of assumptions within the model.

Accrued interest receivable for loans is reported in accrued interest receivable balances in the Consolidated Balance Sheets.

18 unchanged sentences

The value is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds and delinquency rate assumptions as inputs.

The Company measures its MSRs at fair value and reports changes in fair value through earnings under the caption fair value adjustment on MSRs in other income in the period in which the change occurs.

The Company measures its MSRs at fair value and reports changes in fair value through earnings under the caption fair value adjustment on MSRs in noninterest income in the period in which the change occurs.

Changes in the fair values of MSRs occur primarily due to the collection/realization of expected cash flows, as well as changes in valuation inputs and assumptions.

9 unchanged sentences

As a member of the FHLB, the Company is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances.

At December 31, 2024 and 2023, the Company's minimum required investment in FHLB stock was $ 1.7 million and $ 2.4 million, respectively.

Typically, the Company may request redemption at par value of any stock in excess of the minimum required investment.

80 unchanged sentences

Note 2— Accounting Pronouncements Recently Issued or Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance in November 2018, ASU No.

2018-19, April 2019, ASU 2019-04, May 2019, ASU 2019-05, November 2019, ASU 2019-11, February 2020, ASU 2020-02, and March 2020, ASU 2020-03, all of which clarify the codification and correct unintended application of the guidance.

This ASU replaces the incurred loss impairment methodology that recognizes credit losses when a probable loss has been incurred with new methodology where loss estimates are based upon lifetime expected credit losses.

The amendments in this ASU require a financial asset that is measured at amortized cost to be presented at the net amount expected to be collected.

The income statement would then reflect the measurement of credit losses for newly recognized financial assets as well as changes to the expected credit losses that have taken place during the reporting period.

The Company adopted the provisions of ASC 326 through the application of the modified retrospective transition approach and recorded a net decrease of approximately $ 1.1 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment, reflecting an initial adjustment to the ACL of $ 1.5 million, net of related deferred tax assets arising from temporary differences of $ 305 thousand, commonly referred to as the “Day 1” adjustment.

The Day 1 adjustment to the ACL is reflective of expected lifetime credit losses associated with the composition of financial assets within the scope of ASC 326 as of January 1, 2023, which is comprised of loans held for investment and off-balance sheet credit exposures at January 1, 2023, as well as management’s expectation of future economic conditions.

The following table presents the impact of adopting ASU 2016-13 on January 1, 2023:

(dollars in thousands) As Reported

ASC 326 Prior to Adopting

ASC 326 Impact of ASC 326

Real estate loans:

One- to four- family $ 2,126 $ 1,771 $ 355

Home equity 201 132 69

Commercial and multifamily 2,181 2,501 ( 320 )

Construction and land 2,568 1,209 1,359

Total real estate loans 7,075 5,613 1,462

Consumer loans:

Manufactured homes 282 462 ( 180 )

Floating homes 622 456 166

Other consumer 161 324 ( 163 )

Total consumer loans 1,065 1,242 ( 177 )

Commercial business loans 221 256 ( 35 )

Unallocated ( 3 ) 488 ( 491 )

Total loans 8,359 7,599 760

ACL - unfunded commitments

Reserve for unfunded commitments 1,030 335 695

Total $ 9,389 $ 7,934 $ 1,455

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

This ASU eliminates the accounting guidance for troubled debt restructured loans (“TDRs”) by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Additionally, this ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

This ASU was effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, upon the Company’s adoption of the amendments in ASU 2016-13, which is commonly referred to as the current expected credit loss methodology.

The Company adopted ASU 2022-02 on January 1, 2023 using the prospective transition guidance which allows the entity to continue estimating expected credit losses in accordance with legacy GAAP for receivables modified in a TDR until the receivables are subsequently modified or settled.

Once a legacy TDR is modified after adoption of ASU 2022-02, the prospective transition guidance no longer applies and the impact to the ACL is recognized in earnings in the period of modification.

The adoption of this ASU did not have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

As a result of the election to adopt this ASU on a prospective basis, the impact in future periods is not expected to be material.

In November 2023, the FASB issued 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.

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.

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.

The Company adopted this ASU on January 1, 2025 for disclosure in the Company’s Annual Report on Form 10-K for the year ending December 31, 2025, with no material impact expected 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.

This ASU is 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.

The Company will evaluate the impact of this guidance through the date of adoption.

In September 2025, the FASB issued ASU No.

2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software , which simplifies and modernizes the accounting for internal-use software by removing prescriptive project stage guidance and introducing a new capitalization threshold.

Under the revised standard, software development costs are capitalized when management authorizes and commits funding for the project, and it is probable the software will be completed and used as intended.

This ASU is effective for interim reporting periods beginning after December 15, 2027.

The Company does not expect the adoption of this guidance to have a significant impact on its Consolidated Financial Statements.

In November 2025, the FASB issued ASU 2025‑08, Financial Instruments - Credit Losses (Topic 326):

Purchased Loans , which expands the scope of the “gross‑up” method, formerly applicable only to purchased credit‑deteriorated ("PCD") assets, to include acquired non‑PCD loans that meet certain criteria, now referred to as “purchased seasoned loans” (PSLs).

Under this model, an allowance for expected credit losses is recognized at acquisition, offsetting the loan’s amortized cost basis, thereby eliminating the day-one credit‑loss expense previously required for non‑PCD assets.

PSLs are defined as non‑PCD loans

acquired either (i) through a business combination, or (ii) purchased more than 90 days after origination when the acquirer was not involved in origination.

This ASU is effective on a prospective basis for loans acquired on or after the adoption date, which is for interim and annual reporting periods beginning after December 15, 2026.

Early adoption is permitted.

This ASU is not expected to have an impact on our financial statements.

In December 2025, the FASB issued ASU 2025‑11, Interim Reporting (Topic 270):

Narrow‑Scope Improvements , which clarifies and enhances guidance under ASC 270 on interim financial reporting by (i) clarifying the scope of ASC 270 such that it now explicitly applies only to entities that issue complete interim financial statements and related notes under U.S.

GAAP, (ii) establishing clear guidance on the form of interim statements and notes, incorporating a comprehensive list of required interim disclosures drawn from across the ASC, and (iii) introducing a requirement to disclose material events and changes occurring after the end of the last annual period that could impact interim results.

This ASU is effective for interim and annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

This ASU is not expected to have a significant impact on our financial statements.

Note 3— Restricted Cash

44 unchanged sentences

There were no sales of AFS or HTM securities during the years ended December 31, 2025 and 2024.

Accrued interest receivable on securities totaled $ 48 thousand and $ 49 thousand at December 31, 2024 and 2023, respectively, in the accompanying Condensed Consolidated Balance Sheets.

Accrued interest receivable on securities totaled $ 47 thousand and $ 48 thousand at December 31, 2025 and 2024, respectively, in the accompanying Consolidated Balance Sheets.

Accrued interest receivable is excluded from the estimate of expected credit losses.

33 unchanged sentences

At December 31, 2024, the securities portfolio consisted of 11 municipal bonds and 11 agency mortgage-backed securities with a fair value of $ 9.5 million.

At December 31, 2024, there was one security in an unrealized loss position for less than 12 months and fifteen securities in an unrealized loss position for more than 12 months.

At December 31, 2025, there were no securities in an unrealized loss position for less than 12 months and fifteen securities in an unrealized loss position for more than 12 months.

At 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.

For both 2024 and 2023, 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.

For both 2025 and 2024, 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 were 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.

The unrealized losses on these investments are not considered credit losses during the years ended December 31, 2024 and 2023, because the decline in fair value is 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 .

The unrealized losses on these investments were considered non-credit-related unrealized losses during the years ended December 31, 2025 and 2024, because the decline in fair value was not attributable to credit quality and because we did not intend, and it was not likely that we would be required, to sell these securities before recovery of their amortized cost basis .

Note 5— Loans

22 unchanged sentences

Premiums resulting from purchased loans totaled $ 404 thousand on one-to-four family loans, $ 244 thousand on commercial and multifamily loans, and $ 70 thousand on commercial business loans as of December 31, 2024.

The Company purchased $ 2.0 million of loans during the year ended December 31, 2024 and zero loans during the year ended December 31, 2023.

The Company purchased no loans during the year ended December 31, 2025 and $ 2.0 million of loans during the year ended December 31, 2024.

The following table presents a summary of activity in the ACL on loans and unfunded commitments for the periods indicated (in thousands):

5 unchanged sentences

Balance at beginning of period $ 8,499 $ 234 $ 8,733 $ 8,760 $ 193 $ 8,953

Adoption of ASU 2016-13 (1)

— — — 760 695 1,455

(Release of) provision for credit losses during the period

( 161 ) 41 ( 120 ) 564 ( 837 ) ( 273 )

Provision for (release of) credit losses during the period 212 ( 86 ) 126 ( 161 ) 41 ( 120 )

Net charge-offs during the period

1 unchanged sentence

Balance at end of period $ 8,605 $ 148 $ 8,753 $ 8,499 $ 234 $ 8,733

(1) Represents the impact of adopting ASU 2016-13, Financial Instruments — Credit Losses on January 1, 2023.

Accrued interest receivable on loans receivable totaled $ 3.4 million at both December 31, 2024 and December 31, 2023, in the accompanying Consolidated Balance Sheets .

Accrued interest receivable on loans receivable totaled $ 3.6 million at December 31, 2025 and $ 3.4 million at December 31, 2024, in the accompanying Consolidated Balance Sheets .

Accrued interest receivable is excluded from the estimate of expected credit losses.

6 unchanged sentences

Construction and land (1)

992 ( 20 ) — ( 453 ) 519

Manufactured homes (2)

4 unchanged sentences

Commercial business 102 — — 14 116

Unallocated — — — — —

$ 8,499 $ ( 135 ) $ 29 $ 212 $ 8,605

(1) During the year ended December 31, 2024, there was one manufactured housing loan originated in 2020 that was charged off.

(2) During the year ended December 31, 2024, gross charge-offs related primarily to deposit overdrafts that were charged off.

(1) During the year ended December 31, 2025, there was one construction and land loan originated in 2015 for $ 20 thousand that was charged off and then subsequently foreclosed upon.

(2) During the year ended December 31, 2025, there were two manufactured home loans originated in 2022 and 2023 for $ 19 thousand and $ 47 thousand, respectively, that were charged off and then subsequently foreclosed upon.

(3) During the year ended December 31, 2025, there was one automobile loan for $ 1 thousand originated in 2021 that was charged off and one other consumer loan for $ 16 thousand originated in 2024 related to a consumer line of credit that was charged off, with the remainder of the gross charge-offs of other consumer loans related entirely to deposit overdrafts.

Year ended December 31, 2024

2 unchanged sentences

Home equity 185 — — 122 307

132 ( 25 ) — 9 185

Commercial and multifamily 1,070 — — 148 1,218

6 unchanged sentences

Commercial business 107 — — ( 5 ) 102

Unallocated 488 — — 3 —

$ 8,760 $ ( 122 ) $ 22 $ ( 161 ) $ 8,499

(1) During the year ended December 31, 2023, there was one revolving home equity loan that was charged off.

(1) During the year ended December 31, 2024, there was one manufactured home loans originated in 2020 for $ 23 thousand that was charged off and then subsequently foreclosed upon.

(2) During the year ended December 31, 2024, gross charge-offs related primarily to deposit overdrafts that were charged off.

25 unchanged sentences

Pass $ 97,005 $ 33,810 $ 24,641 $ 78,185 $ 87,836 $ 72,359 $ — $ — $ 393,836

Special mention — — — — — 1,375 — — 1,375

Substandard — — — 4,990 6,069 3,197 — — 14,256

2 unchanged sentences

Pass $ 22,342 $ 16,867 $ 7,785 $ 1,025 $ 668 $ 1,134 $ — $ — $ 49,821

Special mention — — 17,349 — — — — — 17,349

Substandard — — — 150 — — — — 150

6 unchanged sentences

Pass $ 10,100 $ 18,833 $ 6,291 $ 14,636 $ 22,632 $ 14,404 $ — $ — $ 86,896

Substandard — — 2,350 — — — — — 2,350

Total floating homes $ 10,100 $ 18,833 $ 6,291 $ 14,636 $ 22,632 $ 14,404 $ — $ — $ 86,896

8 unchanged sentences

Pass $ 162,554 $ 99,941 $ 72,049 $ 168,464 $ 213,077 $ 142,445 $ 28,787 $ 881 $ 888,198

Special mention — — 17,349 — — 1,375 — — 18,724

Substandard — — 1,345 5,648 6,166 3,957 98 121 17,335

18 unchanged sentences

Pass $ 26,458 $ 22,846 $ 2,166 $ 968 $ 593 $ 2,338 $ — $ — $ 55,369

Special mention — — 17,349 — — — — — 17,349

Substandard — — 70 — — 24 — — 94

6 unchanged sentences

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

1 unchanged sentence

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

64 unchanged sentences

At December 31, 2025, the Company had no commitments to extend additional credit to borrowers owing loan receivables with modified terms.

There were no loans modified during the year ended December 31, 2024.

During the year ended December 31, 2023, there was one modified one-to-four family loan to a borrower experiencing financial difficulty.

This loan received a term extension for 90 days, with an amortized cost basis of $ 90 thousand representing 0.03 % of the total class of loans.

We have no modified loan receivables that have subsequently defaulted at December 31, 2024.

There were no loans modified during the year ended December 31, 2025 and December 31, 2024.

We have no modified loan receivables that have subsequently defaulted at December 31, 2025 and December 31, 2024.

Troubled debt restructurings.

18 unchanged sentences

Manufactured homes — — — 480 — — 480

Floating homes — — — 2,363 — — 2,363

Other consumer — — — 256 6 — 262

3 unchanged sentences

December 31, 2024

Commercial Real Estate Residential Real Estate Land Other Residential Total

Commercial Real Estate Residential Real Estate Land Other Residential RVs/Automobiles Business Assets Total

Real estate loans:

1 unchanged sentence

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

1 unchanged sentence

Manufactured homes — — — 521 — — 521

Floating homes — — — 2,363 — — 2,363

Other consumer — — — — 1 — 1

Total consumer loans — — — 2,884 1 — 2,885

1 unchanged sentence

Total loans $ 3,734 $ 609 $ 24 $ 3,248 $ 1 $ 11 $ 7,627

Related Parties and Regulatory Matters.

Related Parties.

In the ordinary course of business, the Company makes loans to its employees, officers and directors.

1 unchanged sentence

Employees, officers, and directors are eligible for mortgage loans with an adjustable rate that resets annually to 1.0 % - 1.5 % over the Bank's rolling cost of funds.

Employees, officers and directors are also eligible for consumer loans that are 1.00 % below the market loan rate at the time of origination.

Director and officer loans are summarized as follows (in thousands):

Balance, beginning of period $ 6,682 $ 5,906

Advances — 60

New / (reclassified) loans, net — 1,548

1 unchanged sentence

Balance, end of period $ 5,988 $ 6,682

At December 31, 2024 and 2023, loans totaling $ 526 thousand and $ 9.4 million, respectively, represented real estate secured loans that had current loan-to-value ratios above supervisory guidelines.

Note 6— Mortgage Servicing Rights

15 unchanged sentences

Yield to maturity discount rate 10.0 % 10.0 %

Average debt service cost per residential loan $ 96.00 $ 80.00

The amount of contractually specified servicing, late and ancillary fees earned on the MSRs are included in “Mortgage servicing income” on the Consolidated Statements of Income and totaled $ 1.0 million and $ 1.1 million for the years ended December 31, 2025 and 2024, respectively.

37 unchanged sentences

Deposits in excess of $250 thousand are not federally insured.

There were no money market brokered deposits outstanding at December 31, 2024 and $ 5.0 million at December 31, 2023.

There were no money market brokered deposits outstanding at December 31, 2025 and December 31, 2024.

Deposits from related parties held by the Company were $ 102.1 million and $ 9.8 million at December 31, 2025 and 2024, respectively.

Included within the deposits from related parties at December 31, 2025 was a deposit relationship with a company that is a related party to a member of our board of directors, which represented 9.87 % of our total deposits as of that date.

Note 10— Borrowings, FHLB Stock and Subordinated Notes

46 unchanged sentences

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 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.

From, and including, October 1, 2025, the interest rate on the subordinated notes resets quarterly to a floating rate per annum equal to 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 are redeemable by the Company, in whole or in part, on any interest payment date on or after October 1, 2025.

Prior to October 1, 2025, the Company could redeem these notes, in whole but not in part, only under certain limited circumstances set forth in the terms of the subordinated notes.

The Company completed a partial redemption of $ 4.0 million on October 1, 2025, the first date on which partial redemptions were allowed.

The subordinated notes may be included in Tier 2 capital for Sound Financial Bancorp under current regulatory guidelines and interpretations.

15 unchanged sentences

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.

At December 31, 2024 and 2023, loans held-for-sale were carried at cost, as no impairment was required.

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.

5 unchanged sentences

A description of the valuation methodologies used for impaired loans and OREO 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.

Collateral dependent loans - The fair value of collateral dependent loans is based on the current appraised value (or other appropriate third-party market estimates) 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 (or other appropriate third-party market estimates) 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 December 31, 2025 and 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.

54 unchanged sentences

Discount rate 9.0 %- 13.5 % ( 10 %)

Average debt service cost per residential loan $ 96.00

The following table provides 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 at December 31, 2024:

4 unchanged sentences

Discount rate 10.0 %

Average debt service cost per residential loan $ 80.00

Generally, any significant increases in the constant prepayment rate 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).

2 unchanged sentences

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.

MSRs are measured at fair value using significant unobservable inputs (Level 3) on a recurring basis and a reconciliation of this asset can be found in “Note 6—Mortgage Servicing Rights.”

There were no assets or liabilities (excluding MSRs) measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the years ended December 31, 2025 and 2024.

MSRs are measured at fair value using significant unobservable input (Level 3) on a recurring basis and a reconciliation of this asset can be found in “Note 6—Mortgage Servicing Rights.”

The following table presents the balance of assets measured at fair value on a nonrecurring basis (in thousands):

7 unchanged sentences

OREO and repossessed assets $ — $ — $ — $ —

Impaired loans 3,656 — — 3,656

Collateral-dependent loans 7,627 — — 7,627

There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis, at December 31, 2025 and 2024.

1 unchanged sentence

We have operating leases for branch locations, loan production offices, and our corporate office.

The term for our leases begins on the date we become legally obligated for the rent payments or we take possession of the building premises, whichever is earlier.

Generally, our real estate leases have initial terms of three to 10 years and typically include one renewal option.

Our leases have remaining terms of five months to 4.5 years.

The term for our leases begins on the date we become legally obligated for the rent payments or take possession of the premises, whichever is earlier.

Our real estate leases have initial terms of one to 10.5 years and typically include one renewal option.

As of December 31, 2025, our leases had remaining terms ranging from two months to 4.4 years.

The operating leases require us to pay property taxes and operating expenses for the properties.

We also have finance leases for certain equipment, including copier machines, which had an initial term of 5 years and a remaining term of approximately 4.0 years as of December 31, 2025.

The following table represents the Consolidated Balance Sheet classification of the Company’s lease right of use assets and lease liabilities at December 31, 2025 and 2024 (in thousands):

Operating lease right of use assets $ 3,319 $ 3,725

Finance lease right-of-use assets 104 —

Operating lease liabilities 3,565 4,013

Finance lease liabilities 106 —

The following table represents the components of lease expense for the years ended December 31, 2025 and 2024 (in thousands):

1 unchanged sentence

Operating lease expense:

Office leases $ 1,083 $ 1,078

Operating leases $ 1,106 $ 1,083

Finance leases

Amortization of right-of-use assets 26

Interest on lease liabilities 5

Sublease income — ( 4 )

2 unchanged sentences

December 31, 2025

Leases Finance Leases Total Lease Payments

Operating Lease Commitments

2026 $ 1,133 $ 29 $ 1,162

2027 1,125 29 1,154

2028 996 29 1,025

2029 456 29 485

Total lease payments 3,758 116 3,874

4 unchanged sentences

Office leases 3.5 years 4.3 years

Finance leases 4.0 years 0.0 years

Weighted-average discount rate:

Office leases 3.08 % 2.88 %

Finance leases 4.41 % — %

Supplemental cash flow information related to leases for the years ended December 31, 2025 and 2024 was as follows (in thousands):

3 unchanged sentences

Office leases $ 1,147 $ 1,120

Finance leases 5 —

Financing cash flows:

Finance leases 24 —

Note 13— Earnings Per Share

Earnings per share are summarized for the years ended December 31, 2024 and 2023 as follows (in thousands, except per share data):

Earnings per share are summarized for the years ended December 31, 2025 and 2024 as follows (dollars in thousands, except per share data):

Year Ended December 31,

11 unchanged sentences

Earnings per share, diluted $ 2.77 $ 1.80

There were no anti-dilutive securities for the year ended December 31, 2024 and 7,892 anti-dilutive securities for the year ended December 31, 2023.

There were no anti-dilutive securities for the years ended December 31, 2025 and December 31, 2024.

Note 14— Employee Benefits

7 unchanged sentences

In the event of the death of the Chief Executive Officer and her designated beneficiary prior to the account being fully paid, the remaining value of the account shall be paid in a lump sum to the beneficiary’s estate.

The assets in the deferred compensation account consist of cash, which is held in a certificate of deposit at

the Bank and earns interest at market rates.

The assets in the deferred compensation account consist of cash, which is held in a certificate of deposit at the Bank and earns interest at market rates.

At December 31, 2025 and 2024, the amount held in the certificate of deposit at the Bank was $ 122 thousand and $ 117 thousand, respectively.

29 unchanged sentences

At December 31, 2025, awards for stock options totaling 301,383 shares and awards for restricted stock totaling 167,004 shares of Company common stock have been granted in the aggregate, net of any forfeitures, under the 2008 Plan and 2013 Plan to participants.

As of December 31, 2024, 257 awards for stock options and no awards for restricted stock remained available for issuance under the 2013 Plan.

As of December 31, 2025, 327 awards for stock options and 110 awards for restricted stock remained available for issuance under the 2013 Plan.

During the years ended December 31, 2025 and 2024, share-based compensation expense totaled $ 302 thousand and $ 390 thousand, respectively.

12 unchanged sentences

72,836 $ 35.50 5.59 $ 1,249

Granted 6,469 39.89

Exercised ( 6,062 ) 24.93

Forfeited ( 70 ) 40.91

Expired ( 257 ) 36.57

Outstanding at December 31, 2025

5 unchanged sentences

This cost is expected to be recognized over the remaining weighted-average vesting period of 1.0 years.

The total intrinsic value of the shares exercised during the years ended December 31, 2024 and 2023 was $ 341 thousand and $ 477 thousand, respectively.

The total intrinsic value

of the shares exercised during the years ended December 31, 2025 and 2024 was $ 130 thousand and $ 341 thousand, respectively.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model.

14 unchanged sentences

Grant-Date Fair Value

Per Share Aggregate

Intrinsic Value

Non-vested at January 1, 2025

17,143 $ 39.93

Granted 8,048 39.89

Vested ( 7,616 ) 39.34

Forfeited ( 110 ) 41.12

Non-vested at December 31, 2025

17,143 39.93 $ 52.65

Expected to vest assuming a 0 % forfeiture rate over the vesting term

3 unchanged sentences

The total fair value of shares vested for the years ended December 31, 2025 and 2024 was $ 300 thousand and $ 262 thousand, respectively.

The weighted average grant date fair value per share for the years ended December 31, 2024 and 2023 was $ 39.89 and $ 40.13 , respectively.

The weighted average grant date fair value per share for the year ended December 31, 2024 was $ 39.89 .

Employee Stock Ownership Plan

9 unchanged sentences

Total tax expense $ 1,514 $ 1,006

The cash paid for income taxes for the years ended December 31, 2025 and 2024 was as follows (in thousands):

Federal income taxes paid $ 1,915 $ 825

State income taxes paid 10 6

A reconciliation of the provision for income taxes for the years ended December 31, 2025 and 2024, with amounts determined by applying the statutory U.S.

2 unchanged sentences

Provision at statutory rate $ 1,822 $ 1,186

State and local income tax (1)

Nontaxable or nondeductible items

Tax-exempt income ( 175 ) ( 125 )

( 131 ) ( 248 )

BOLI ( 67 ) ( 131 )

Other ( 88 ) ( 37 )

$ 1,514 $ 1,006

Federal Tax Rate 21.0 % 21.0 %

State and local income tax 0.1 0.1

Nontaxable or nondeductible items

Tax exempt rate ( 2.0 ) ( 2.2 )

( 2.3 ) ( 2.7 )

BOLI ( 0.8 ) ( 2.3 )

Other 0.2 1.9

Other ( 1.0 ) ( 0.7 )

Effective tax rate 17.5 % 17.8 %

(1) The majority of the balance consists of California state income taxes.

The following table reflects the temporary differences that gave rise to the components of the Company's deferred tax assets at December 31, 2025 and 2024 (in thousands):

6 unchanged sentences

Unrealized loss on securities 225 278

Allowance for loan losses 1,784 1,840

Allowance for credit losses 1,807 1,784

Other, net 206 101

3 unchanged sentences

FHLB stock dividends ( 40 ) ( 40 )

Depreciation — ( 39 )

Mortgage servicing rights ( 223 ) ( 308 )

11 unchanged sentences

Sound Financial Bancorp is a bank holding company under the supervision of the Federal Reserve.

Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve, except that, pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act, effective August 30, 2018, a bank holding company with consolidated assets of less than $3.0 billion is generally not subject to the Federal Reserve’s capital regulations, which parallel the FDIC’s capital regulations.The Bank is a state-chartered, federally insured institution and is subject to the capital requirements established by the FDIC.

The Bank is a state-chartered, federally insured institution and is subject to the capital requirements established by the FDIC.

Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements.

6 unchanged sentences

To be eligible to utilize the CBLR, the Bank must have total consolidated assets of less than $10 billion, off-balance sheet exposures of 25% or less of its total consolidated assets, and trading assets and trading liabilities of 5.0% or less of its total consolidated assets, all as of the end of the most recent quarter.

Under the CBLR framework, a bank will generally be considered well-capitalized and to have met the risk-based and leverage capital requirements of the capital regulations if it has a CBLR greater than 9.0%.

A bank electing the framework that ceases to meet any qualifying criteria in a future period and that has a leverage ratio greater than 8% will be allowed a grace period of two reporting periods to satisfy the CBLR qualifying criteria or comply with the generally applicable capital requirements.

Under the CBLR framework, a bank is considered well-capitalized and to have satisfied the risk-based and leverage capital requirements of the capital regulations if it has a CBLR of at least 9.0%.

A bank electing the framework that ceases to meet any qualifying criteria in a future period and that has a leverage ratio greater than 8% is permitted a grace period of two reporting periods to satisfy the CBLR qualifying criteria or comply with the generally applicable capital requirements.

A bank may opt out of the framework at any time, without restriction, by reverting to the generally applicable risk-based capital rule.

1 unchanged sentence

For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank-only basis and the Federal Reserve expects the holding company's subsidiary banks to be well-capitalized under the prompt corrective action regulations.

If Sound Financial Bancorp were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at December 31, 2024, Sound Financial Bancorp would have exceeded all regulatory capital requirements.

The estimated CBLR calculated for Sound Financial Bancorp at December 31, 2024 was 9.56 %

On January 26, 2024, the Company announced that its Board of Directors approved an extension of the Company’s then-existing stock repurchase program, which was set to expire on January 31, 2024, until January 26, 2025.

1 unchanged sentence

After this program expired on January 26, 2025, the Company’s Board of Directors did not extend the program or adopt a new program.

During the years ended December 31, 2024 and 2023, the Company repurchased a total of 1,626 and 58,035 shares of Company common stock at an average price of $ 39.71 and $ 36.81 per share pursuant to the Company’s stock repurchase programs, leaving $ 1.4 million available for repurchases as of December 31, 2024.

The Company had no repurchases during the year ended December 31, 2025.

The Company repurchased 1,626 shares of Company common stock at an average price of $ 39.71 per share pursuant to the Company’s stock repurchase programs during the year ended December 31, 2024.

Note 17— Concentrations of Credit Risk

31 unchanged sentences

These amounts represent the unpaid principal balances of the Company's loans serviced for others' portfolios.

There were no loans repurchased during the year ended December 31, 2024, and one loan for $ 448 thousand was repurchased during the year ended December 31, 2023.

There were no loans repurchased during the years ended December 31, 2025 and 2024.

The Company pays certain medical, dental, prescription, and vision claims for its employees on a self-insured basis.

34 unchanged sentences

Dividends paid ( 1,947 ) ( 1,948 )

Repurchase of stock ( 65 ) ( 2,137 )

Repayment of subordinated debt ( 4,000 )

Stock options exercised 151 269

1 unchanged sentence

Net increase (decrease) in cash

1,132 ( 1,975 )

Cash and cash equivalents at beginning of year 1,309 177

23 unchanged sentences

The Company earns fees from its customers for account maintenance, transaction-based and overdraft services.

Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts monthly.The performance obligation is satisfied and fees are recognized monthly as the service period is completed.

Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts monthly.

The performance obligation is satisfied and fees are recognized monthly as the service period is completed.

Transaction-based fees and overdraft service fees on deposit accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds, overdraft, and wire services.

11 unchanged sentences

Certain expenses and rebates directly related to the credit card interchange contract are recorded net of the interchange income.

Net loss on OREO and repossessed assets

Net loss (gain) on OREO and repossessed assets

We record a gain or loss from the sale of other real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed of trust.

3 unchanged sentences

In determining the gain or loss on sale, we adjust the transaction price and related gain or loss on sale if a significant financing component is present.

The Company generated income/incurred expenses on OREO properties, net of (gains)/losses on sale of OREO, of $( 31 ) thousand and $ 13 thousand for the years ended December 31, 2024 and 2023, respectively, included under noninterest expense on the Consolidated Statements of Income.

The Company generated income/incurred expenses on OREO properties, net of losses/(gains) on sale of OREO, of $ 37 thousand and $( 31 ) thousand for the years ended December 31, 2025 and 2024, respectively, included under noninterest expense on the Consolidated Statements of Income.

Note 21— Business Segments

1 unchanged sentence

the Banking Segment.

Loans and investments are the primary sources of revenues in the Banking Segment.

Interest expense, provision for credit losses, and salaries and benefits are usually the most significant expenses in the Banking Segment.

All operations are domestic.

The accounting policies of the Banking Segment are the same as those described in the significant accounting policies.

2 unchanged sentences

As a part of the CODM review, pre-tax net income is utilized to allocate resources.

Loans and investments are the primary sources of revenues in the Banking Segment.

Interest expense, provision for credit losses, and salaries and benefits are usually the most significant expenses in the Banking Segment.

All operations are domestic.

In accordance with ASC 280, as amended by ASU 2023-07, the Company discloses the following significant expense categories and other items on a consolidated basis which are regularly provided to the CODM and included in the measure of consolidated profit or loss:

• Interest expense - includes interest paid on deposits, borrowings, and subordinated notes;

• Provision for credit losses - represents the amount charged to earnings to maintain the allowance for credit losses at an appropriate level;

• Salaries and benefits expense - includes wages, incentive compensation, payroll taxes, ESOP expenses and employee benefits;

• Operations expense - includes the following types of expenses:

◦ loan related expenses associated with loan origination, servicing, and collection;

◦ marketing expenses which includes advertising, and business development costs;

◦ FDIC insurance which represents deposit insurance premiums paid to the FDIC;

◦ professional services which includes legal, audit, consulting, and other professional fees;

◦ other miscellaneous expenses such as the cost of office supplies, local jurisdiction fees, and travel and conference costs;

• Regulatory assessments expense - includes periodic fees paid to the FRB and FDIC, as well as costs related to regulatory examinations;

• Occupancy expense - includes rent, depreciation, utilities, and maintenance of premises and equipment;

• Data processing expense - includes data processing and software costs related to core processing, digital banking platforms, and other technology-related services;

• Net loss (gain) and expenses on OREO and repossessed assets - includes expenses related to maintaining OREO or repossessed assets and any gains or losses on the sale of such assets.

Other items regularly provided to the CODM and included in the measure of consolidated profit or loss include:

• Noninterest income - such as service charges on deposit accounts, gain on sale of loans, mortgage servicing income, loan-related fees, dividends on FHLB stock, and earnings on BOLI;

• Provision for income tax expense - represents the provision for federal and state income taxes.

Segment profit or loss is measured as consolidated net income, which is calculated as total revenues (net interest income and noninterest income) less total expenses (interest expense, provision for credit losses, and noninterest expenses) and income tax expense.

These financial metrics are used by the CODM to make key operating decisions, such as determination of the rate at which the Company seeks to grow, loan and deposit pricing, and the allocation of budget for noninterest expenses.

Net income is used to monitor budgeted versus actual results.

The Company does not have any other reportable segments, and discrete financial information is not available other than on a consolidated basis.

All significant operating decisions are made on a consolidated basis.

Note 22— Subsequent Events

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data