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, 2026 December 31, 2025 ASSETS Cash and cash equivalents $ 137,984 $ 138,453 Available-for-sale (“AFS”) securities, at fair value (amortized cost of $ 8,690 and $ 8,770 as of March 31, 2026 and December 31, 2025, respectively) 7,517 7,699 Held-to-maturity (“HTM”) securities, at amortized cost (fair value of $ 1,528 and $ 1,578 at March 31, 2026 and December 31, 2025, respectively) 1,884 1,892 Equity securities 5,000 — Loans held-for-sale 281 542 Loans held-for-portfolio 921,518 905,533 Allowance for credit losses (“ACL”) on loans ( 8,635 ) ( 8,605 ) Total loans held-for-portfolio, net 912,883 896,928 Accrued interest receivable 3,888 3,771 Bank-owned life insurance (“BOLI”), net 23,747 23,327 Other real estate owned (“OREO”) and repossessed assets, net 99 344 Mortgage servicing rights (“MSRs”), at fair value 4,096 4,183 Federal Home Loan Bank ("FHLB") stock, at cost 1,120 1,060 Premises and equipment, net 4,168 4,239 Right of use assets 3,133 3,423 Other assets 6,251 6,312 Total assets $ 1,112,051 $ 1,092,173 LIABILITIES Deposits Interest-bearing $ 837,409 $ 816,309 Noninterest-bearing demand 131,092 132,566 Total deposits 968,501 948,875 Borrowings 10,000 10,000 Accrued interest payable 496 674 Lease liabilities 3,364 3,671 Other liabilities 8,839 10,366 Advance payments from borrowers for taxes and insurance 2,625 1,387 Subordinated notes, net 7,812 7,801 Total liabilities 1,001,637 982,774 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, 2,568,043 and 2,567,953 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 25 25 Additional paid-in capital 28,797 28,737 Retained earnings 82,518 81,483 Accumulated other comprehensive loss, net of tax ( 926 ) ( 846 ) Total stockholders’ equity 110,414 109,399 Total liabilities and stockholders’ equity $ 1,112,051 $ 1,092,173 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, 2026 2025 INTEREST INCOME Loans, including fees $ 13,307 $ 12,588 Interest and dividends on investments, cash and cash equivalents 1,158 1,118 Total interest income 14,465 13,706 INTEREST EXPENSE Deposits 5,124 5,205 Borrowings 108 262 Subordinated notes 186 168 Total interest expense 5,418 5,635 Net interest income 9,047 8,071 PROVISION FOR (RELEASE OF) CREDIT LOSSES 123 ( 203 ) Net interest income after provision for (release of) credit losses 8,924 8,274 NONINTEREST INCOME Service charges and fee income 624 684 Earnings on BOLI 130 195 Mortgage servicing income 248 269 Fair value adjustment on MSRs ( 140 ) ( 99 ) Net gain on sale of loans 101 49 Other income (loss) ( 53 ) — Total noninterest income 910 1,098 NONINTEREST EXPENSE Salaries and benefits 4,458 4,595 Operations 1,501 1,365 Regulatory assessments 198 221 Occupancy 427 437 Data processing 1,287 1,293 Net loss and expenses on OREO and repossessed assets 3 3 Total noninterest expense 7,874 7,914 Income before provision for income taxes 1,960 1,458 Provision for income taxes 384 291 Net income $ 1,576 $ 1,167 Earnings per common share: Basic $ 0.61 $ 0.45 Diluted $ 0.61 $ 0.45 Weighted-average number of common shares outstanding: Basic 2,562,467 2,554,265 Diluted 2,574,212 2,578,609 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, 2026 2025 Net income $ 1,576 $ 1,167 Available for sale securities: Unrealized losses arising during the period ( 101 ) ( 21 ) Income tax benefit related to unrealized losses 21 4 Other comprehensive loss, net of tax benefit ( 80 ) ( 17 ) Comprehensive income $ 1,496 $ 1,150 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, 2026 and 2025 (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, 2025 2,567,953 $ 25 $ 28,737 $ 81,483 $ ( 846 ) $ 109,399 Net income — — — 1,576 — 1,576 Other comprehensive loss, net of tax benefit — — — — ( 80 ) ( 80 ) Share-based compensation — — 57 — — 57 Cash dividends paid on common stock ($ 0.21 per share) — — — ( 541 ) — ( 541 ) Common stock options exercised 90 — 3 — — 3 Balance, at March 31, 2026 2,568,043 $ 25 $ 28,797 $ 82,518 $ ( 926 ) $ 110,414 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 benefit — — — — ( 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 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, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,576 $ 1,167 Adjustments to reconcile net income to net cash from operating activities: Amortization of net premiums on investments 22 22 Provision for (release of) credit losses 123 ( 203 ) Depreciation and amortization 103 144 Share-based compensation 57 81 Fair value adjustment on mortgage servicing rights 140 99 Right of use assets amortization 192 245 Change in lease liabilities ( 209 ) ( 251 ) Change in cash surrender value of BOLI ( 130 ) ( 195 ) Net change in advances from borrowers for taxes and insurance 1,238 1,190 Deferred income tax 70 ( 273 ) Net loss on disposal of assets, net 53 — Net gain on sale of loans ( 101 ) ( 49 ) Proceeds from sale of loans held-for-sale 6,163 2,023 Originations of loans held-for-sale ( 5,854 ) ( 3,772 ) Net gain on OREO and repossessed assets ( 1 ) — Change in operating assets and liabilities: Accrued interest receivable ( 117 ) ( 69 ) Other assets 12 351 Accrued interest payable ( 178 ) ( 179 ) Other liabilities ( 1,654 ) 1,521 Net cash provided by operating activities 1,505 1,852 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from principal payments, maturities and sales of available-for-sale securities 70 69 Proceeds from principal payments of held-to-maturity securities 8 9 Purchase of equity investments ( 5,000 ) — Net change in loans ( 16,019 ) 13,883 FHLB stock purchased ( 60 ) ( 4 ) Purchase of BOLI ( 290 ) — Purchases of premises and equipment, net ( 32 ) ( 38 ) Proceeds from sale of OREO and other repossessed assets 261 — Net cash (used in)/provided by investing activities ( 21,062 ) 13,919 CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 19,626 72,548 Dividends paid on common stock ( 541 ) ( 487 ) Proceeds from common stock option exercises 3 21 Net cash provided by financing activities 19,088 72,082 Net change in cash and cash equivalents ( 469 ) 87,853 Cash and cash equivalents, beginning of period 138,453 43,641 Cash and cash equivalents, end of period $ 137,984 $ 131,494 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ — $ — Interest paid on deposits and borrowings 5,596 5,814 Noncash investing and financing activities: Loans transferred from loans held-for-portfolio to OREO and repossessed assets 15 41 ROU assets obtained in exchange for new operating lease liabilities — 66 Derecognition of ROU asset 98 — Derecognition of lease liability 98 — 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, 2025, as filed with the SEC on March 18, 2026 (“2025 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 2025 Form 10-K. Note 2 – Accounting Pronouncements Recently Issued or Adopted In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 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 on its disclosures and expects adoption will result in a more disaggregated presentation of expense line items in its financial statement footnotes. 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 annual and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a significant impact on the Company’s 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 a significant impact on the Company’s Consolidated 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 financial statements and notes, incorporating a comprehensive list of 8 Table of Contents 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 the Company’s Consolidated Financial Statements. Note 3 – Investments At March 31, 2026, the Company did not own any debt securities classified as trading. Debt securities 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, 2026 Municipal bonds $ 6,303 $ 9 $ ( 930 ) $ 5,382 Agency mortgage-backed securities 2,387 7 ( 259 ) 2,135 Total $ 8,690 $ 16 $ ( 1,189 ) $ 7,517 December 31, 2025 Municipal bonds $ 6,313 $ 10 $ ( 841 ) $ 5,482 Agency mortgage-backed securities 2,457 10 ( 250 ) 2,217 Total $ 8,770 $ 20 $ ( 1,091 ) $ 7,699 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, 2026 Municipal bonds $ 703 $ — $ ( 180 ) $ 523 Agency mortgage-backed securities 1,181 — ( 176 ) 1,005 Total $ 1,884 $ — $ ( 356 ) $ 1,528 December 31, 2025 Municipal bonds $ 703 $ — $ ( 147 ) $ 556 Agency mortgage-backed securities 1,189 — ( 167 ) 1,022 Total $ 1,892 $ — $ ( 314 ) $ 1,578 The amortized cost and estimated fair value of AFS and HTM securities at March 31, 2026, 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. 9 Table of Contents March 31, 2026 Available-for-sale Held-to-maturity Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value Due within one year $ 150 $ 150 $ — $ — Due after one year through five years 305 305 — — Due after five years through ten years 1,716 1,635 — — Due after ten years 4,132 3,292 703 523 Agency mortgage-backed securities 2,387 2,135 1,181 1,005 Total $ 8,690 $ 7,517 $ 1,884 $ 1,528 There were no pledged securities at March 31, 2026 or December 31, 2025. There were no sales of AFS or HTM securities during the three months ended March 31, 2026 and 2025. Accrued interest receivable on securities totaled $ 75 thousand at March 31, 2026 and $ 47 thousand at December 31, 2025, 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, 2026 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 $ — $ — $ 3,717 $ ( 930 ) $ 3,717 $ ( 930 ) Agency mortgage-backed securities — — 1,804 ( 259 ) 1,804 ( 259 ) Total available-for-sale securities $ — $ — $ 5,521 $ ( 1,189 ) $ 5,521 $ ( 1,189 ) Held-to-maturity securities Municipal bonds $ — $ — $ 523 $ ( 180 ) $ 523 $ ( 180 ) Agency mortgage-backed securities — — 1,005 ( 176 ) 1,005 ( 176 ) Total held-to-maturity securities $ — $ — $ 1,528 $ ( 356 ) $ 1,528 $ ( 356 ) December 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 $ — $ — $ 3,816 $ ( 841 ) $ 3,816 $ ( 841 ) Agency mortgage-backed securities — — 1,871 ( 250 ) 1,871 ( 250 ) Total $ — $ — $ 5,687 $ ( 1,091 ) $ 5,687 $ ( 1,091 ) Held-to-maturity securities Municipal bonds $ — $ — $ 556 $ ( 147 ) $ 556 $ ( 147 ) Agency mortgage-backed securities — — 1,022 ( 167 ) 1,022 ( 167 ) Total held-to-maturity securities $ — $ — $ 1,578 $ ( 314 ) $ 1,578 $ ( 314 ) There was no allowance for credit losses on securities at March 31, 2026 or December 31, 2025. At both March 31, 2026 and December 31, 2025, the total securities portfolio consisted of 11 agency mortgage-backed securities and 11 municipal bonds. There were no securities in an unrealized loss position for less than 12 months and 15 securities in an unrealized loss position 10 Table of Contents for more than 12 months at both March 31, 2026 and December 31, 2025. 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, 2026 and 2025, 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. Equity Securities At March 31, 2026, the Company held equity securities without readily determinable fair values with a carrying value of $ 5.0 million, accounted for under the measurement alternative in accordance with ASC 321. During the three months ended March 31, 2026, there was no impairment and no observable price changes. The Company held no equity securities at December 31, 2025. Note 4 – Loans Loans-held-for portfolio (which excludes loans held-for-sale) at the dates indicated were as follows (in thousands): March 31, 2026 December 31, 2025 Real estate loans: One-to-four family $ 251,146 $ 253,841 Home equity 31,903 31,468 Commercial and multifamily 409,810 409,729 Construction and land 71,878 50,261 Total real estate loans 764,737 745,299 Consumer loans: Manufactured homes 42,968 43,080 Floating homes 84,927 87,315 Other consumer 15,978 16,571 Total consumer loans 143,873 146,966 Commercial business loans 15,164 15,378 Total loans held-for-portfolio 923,774 907,643 Premiums for purchased loans (1) 610 627 Deferred fees, net ( 2,866 ) ( 2,737 ) Total loans held-for-portfolio, gross 921,518 905,533 Allowance for credit losses — loans ( 8,635 ) ( 8,605 ) Total loans held-for-portfolio, net $ 912,883 $ 896,928 (1) Includes premiums resulting from purchased loans of $ 361 thousand related to one-to-four family loans, $ 204 thousand related to commercial and multifamily loans, and $ 46 thousand related to commercial business loans as of March 31, 2026. Includes premiums resulting from purchased loans of $ 367 thousand related to one-to-four family loans, $ 212 thousand related to commercial and multifamily loans, and $ 49 thousand related to commercial business loans as of December 31, 2025. As of March 31, 2026, there were five collateral dependent one-to-four-family real estate loans, totaling $ 1.1 million, that were 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): 11 Table of Contents Three Months Ended March 31, 2026 2025 ACL - Loans Reserve for Unfunded Loan Commitments ACL ACL - Loans Reserve for Unfunded Loan Commitments ACL Balance at beginning of period $ 8,605 $ 148 $ 8,753 $ 8,499 $ 234 $ 8,733 Provision for (release of) credit losses during the period 49 74 123 ( 85 ) ( 118 ) ( 203 ) Net charge-offs during the period ( 19 ) — ( 19 ) ( 21 ) — ( 21 ) Balance at end of period $ 8,635 $ 222 $ 8,857 $ 8,393 $ 116 $ 8,509 Accrued interest receivable on loans receivable totaled $ 3.6 million at both March 31, 2026 and December 31, 2025, in the accompanying Condensed Consolidated Balance Sheets. Accrued interest receivable is excluded from the ACL. 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 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; 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 2025 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, 2026 Beginning Allowance Charge-offs Recoveries Provision for (Release of) Credit Losses Ending Allowance One-to-four family $ 3,340 $ — $ — $ ( 76 ) $ 3,264 Home equity 343 — — 20 363 Commercial and multifamily 1,484 — — 174 1,658 Construction and land 519 — — 65 584 Manufactured homes (1) 1,174 ( 20 ) — ( 69 ) 1,085 Floating homes 1,259 — — ( 34 ) 1,225 Other consumer (2) 370 ( 6 ) 7 ( 39 ) 332 Commercial business 116 — — 8 124 Total $ 8,605 $ ( 26 ) $ 7 $ 49 $ 8,635 (1) During the three months ended March 31,2026, there was one manufactured loan for $ 20 thousand originated in 2017 that was charged off. (2) During the three months ended March 31,2026, gross charge-offs of other consumer loans related entirely to deposit overdrafts. 12 Table of Contents 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. 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 banking 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, 2026 and December 31, 2025. The following tables present the internally assigned grades as of March 31, 2026 and December 31, 2025, by type of loan and origination year (in thousands): 13 Table of Contents At March 31, 2026 Term Loans Amortized Cost Basis by Origination Year Revolving Loans Amortized Cost Basis Revolving Loans Amortized Cost Basis Converted to Term 2026 2025 2024 2023 2022 Prior Total One-to-four family: Pass $ 4,456 $ 17,160 $ 17,186 $ 17,094 $ 65,508 $ 127,640 $ — $ — $ 249,044 Substandard — — — 1,473 291 367 — — 2,131 Total one-to-four family $ 4,456 $ 17,160 $ 17,186 $ 18,567 $ 65,799 $ 128,007 $ — $ — $ 251,175 Home equity: Pass $ — $ 1,284 $ 2,260 $ 2,292 $ 2,066 $ 1,501 $ 21,320 $ 908 $ 31,631 Substandard — — — 46 — 48 322 65 481 Total home equity $ — $ 1,284 $ 2,260 $ 2,338 $ 2,066 $ 1,549 $ 21,642 $ 973 $ 32,112 Commercial and multifamily: Pass $ 7,823 $ 96,177 $ 33,681 $ 19,538 $ 77,800 $ 152,741 $ — $ — $ 387,760 Substandard — — — 4,990 4,970 10,505 — — 20,465 Total commercial and multifamily $ 7,823 $ 96,177 $ 33,681 $ 24,528 $ 82,770 $ 163,246 $ — $ — $ 408,225 Construction and land: Pass $ 18,391 $ 29,072 $ 13,441 $ 7,586 $ 1,010 $ 1,731 $ — $ — $ 71,231 Substandard — — — 27 147 — — — 174 Total construction and land $ 18,391 $ 29,072 $ 13,441 $ 7,613 $ 1,157 $ 1,731 $ — $ — $ 71,405 Manufactured homes: Pass $ 1,140 $ 7,942 $ 7,807 $ 10,622 $ 5,561 $ 9,107 $ — $ — $ 42,179 Substandard — — — 175 219 271 — — 665 Total manufactured homes $ 1,140 $ 7,942 $ 7,807 $ 10,797 $ 5,780 $ 9,378 $ — $ — $ 42,844 Floating homes: Pass $ 283 $ 9,970 $ 18,534 $ 6,264 $ 13,613 $ 35,857 $ — $ — $ 84,521 Total floating homes $ 283 $ 9,970 $ 18,534 $ 6,264 $ 13,613 $ 35,857 $ — $ — $ 84,521 Other consumer: Pass $ 781 $ 2,342 $ 1,490 $ 1,871 $ 304 $ 8,038 $ 917 $ — $ 15,743 Substandard — — — — — 259 1 — 260 Total other consumer $ 781 $ 2,342 $ 1,490 $ 1,871 $ 304 $ 8,297 $ 918 $ — $ 16,003 Commercial business: Pass $ 54 $ 3,194 $ 201 $ 160 $ 271 $ 3,599 $ 7,696 $ — $ 15,175 Substandard — — 28 — — — 30 — 58 Total commercial business $ 54 $ 3,194 $ 229 $ 160 $ 271 $ 3,599 $ 7,726 $ — $ 15,233 Total loans Pass $ 32,928 $ 167,141 $ 94,600 $ 65,427 $ 166,133 $ 340,214 $ 29,933 $ 908 $ 897,284 Substandard — — 28 6,711 5,627 11,450 353 65 24,234 Total loans $ 32,928 $ 167,141 $ 94,628 $ 72,138 $ 171,760 $ 351,664 $ 30,286 $ 973 $ 921,518 14 Table of Contents At December 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 $ 17,896 $ 18,112 $ 17,717 $ 66,239 $ 93,367 $ 38,871 $ — $ — $ 252,202 Substandard — — 1,117 289 91 200 — — 1,697 Total one-to-four family $ 17,896 $ 18,112 $ 18,834 $ 66,528 $ 93,458 $ 39,071 $ — $ — $ 253,899 Home equity: Pass $ 1,292 $ 2,277 $ 2,534 $ 2,086 $ 771 $ 777 $ 20,827 $ 881 $ 31,445 Substandard — — — — — 50 68 121 239 Total home equity $ 1,292 $ 2,277 $ 2,534 $ 2,086 $ 771 $ 827 $ 20,895 $ 1,002 $ 31,684 Commercial and multifamily: Pass $ 97,005 $ 33,810 $ 24,641 $ 78,185 $ 87,836 $ 72,359 $ — $ — $ 393,836 Substandard — — — 4,990 6,069 3,197 — — 14,256 Total commercial and multifamily $ 97,005 $ 33,810 $ 24,641 $ 83,175 $ 93,905 $ 75,556 $ — $ — $ 408,092 Construction and land: Pass $ 22,342 $ 16,867 $ 7,785 $ 1,025 $ 668 $ 1,134 $ — $ — $ 49,821 Substandard — — — 150 — — — — 150 Total construction and land $ 22,342 $ 16,867 $ 7,785 $ 1,175 $ 668 $ 1,134 $ — $ — $ 49,971 Manufactured homes: Pass $ 8,124 $ 8,183 $ 10,684 $ 5,678 $ 3,265 $ 6,316 $ — $ — $ 42,250 Substandard — — 228 219 — 254 — — 701 Total manufactured homes $ 8,124 $ 8,183 $ 10,912 $ 5,897 $ 3,265 $ 6,570 $ — $ — $ 42,951 Floating homes: Pass $ 10,100 $ 18,833 $ 6,291 $ 14,636 $ 22,632 $ 14,404 $ — $ — $ 86,896 Total floating homes $ 10,100 $ 18,833 $ 6,291 $ 14,636 $ 22,632 $ 14,404 $ — $ — $ 86,896 Other consumer: Pass $ 2,471 $ 1,604 $ 2,144 $ 327 $ 3,283 $ 5,837 $ 667 $ — $ 16,333 Substandard — — — — 6 256 — — 262 Total other consumer $ 2,471 $ 1,604 $ 2,144 $ 327 $ 3,289 $ 6,093 $ 667 — $ 16,595 Commercial business: Pass $ 3,324 $ 255 $ 253 $ 288 $ 1,255 $ 2,747 $ 7,293 $ — $ 15,415 Substandard — — — — — — 30 — 30 Total commercial business $ 3,324 $ 255 $ 253 $ 288 $ 1,255 $ 2,747 $ 7,323 $ — $ 15,445 Total loans Pass $ 162,554 $ 99,941 $ 72,049 $ 168,464 $ 213,077 $ 142,445 $ 28,787 $ 881 $ 888,198 Substandard — — 1,345 5,648 6,166 3,957 98 121 17,335 Total loans $ 162,554 $ 99,941 $ 73,394 $ 174,112 $ 219,243 $ 146,402 $ 28,885 $ 1,002 $ 905,533 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, 2026 December 31, 2025 Total Nonaccrual Loans Total Nonaccrual Loans with no ACL Total Nonaccrual Loans Total Nonaccrual Loans with no ACL One-to-four family $ 1,939 $ 1,939 $ 1,597 $ 1,597 Home equity 383 383 187 187 Commercial and multifamily 4,213 4,213 3,163 3,163 Construction and land 80 80 82 82 Manufactured homes 475 475 461 461 Other consumer 259 259 262 262 Commercial business 30 — 30 — Total $ 7,379 $ 7,349 $ 5,782 $ 5,752 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, 2026 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 $ 250 $ 216 $ 1,612 $ — $ 2,078 $ 249,097 $ 251,175 Home equity 462 135 — — 597 31,515 32,112 Commercial and multifamily 943 — 4,044 — 4,987 403,238 408,225 Construction and land 78 — 79 — 157 71,248 71,405 Manufactured homes 820 44 311 — 1,175 41,669 42,844 Floating homes — — — — — 84,521 84,521 Other consumer 172 1 259 — 432 15,571 16,003 Commercial business — — 30 — 30 15,203 15,233 Total $ 2,725 $ 396 $ 6,335 $ — $ 9,456 $ 912,062 $ 921,518 16 Table of Contents December 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 $ 529 $ 491 $ 1,358 $ — $ 2,378 $ 251,521 $ 253,899 Home equity 522 275 — — 797 30,887 31,684 Commercial and multifamily 2,228 — 2,993 — 5,221 402,871 408,092 Construction and land — — 82 — 82 49,889 49,971 Manufactured homes 702 641 336 — 1,679 41,272 42,951 Floating homes 849 — — — 849 86,047 86,896 Other consumer 7 4 262 — 273 16,322 16,595 Commercial business 32 — 30 — 62 15,383 15,445 Total $ 4,869 $ 1,411 $ 5,061 $ — $ 11,341 $ 894,192 $ 905,533 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, 2026, 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, 2026 and 2025. We have no modified loan receivables that have subsequently defaulted at March 31, 2026 and December 31, 2025. 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 $ 1.1 million at both March 31, 2026 and December 31, 2025 . 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, 2026 Commercial Real Estate Residential Real Estate Land Other Residential RVs/Automobiles Business Assets Total Real estate loans: One- to four- family $ — $ 1,408 $ — $ 663 $ — $ — $ 2,071 Home equity — 383 — — — — 383 Commercial and multifamily 3,173 — — — — 1,040 4,213 Construction and land — — — 80 — — 80 Total real estate loans 3,173 1,791 — 743 — 1,040 6,747 Consumer loans: Manufactured homes — — — 475 — — 475 Other consumer — — — 256 3 — 259 Total consumer loans — — — 731 3 — 734 Commercial business loans — — — — — 30 30 Total loans $ 3,173 $ 1,791 $ — $ 1,474 $ 3 $ 1,070 $ 7,511 December 31, 2025 Commercial Real Estate Residential Real Estate Land Other Residential RVs/Automobiles Business Assets Total Real estate loans: One- to four- family $ — $ 1,416 $ — $ 314 $ — $ — $ 1,730 Home equity — 187 — — — — 187 Commercial and multifamily 2,123 — — — — 1,040 3,163 Construction and land — — — 82 — — 82 Total real estate loans 2,123 1,603 — 396 — 1,040 5,162 Consumer loans: Manufactured homes — — — 480 — — 480 Other consumer — — — 256 6 — 262 Total consumer loans — — — 736 6 — 742 Commercial business loans — — — — — 30 30 Total loans $ 2,123 $ 1,603 $ — $ 1,132 $ 6 $ 1,070 $ 5,934 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, 2026 and December 31, 2025 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. 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 18 Table of Contents 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. Equity investments - Equity investments consist of securities without readily determinable fair values and are accounted for under the measurement alternative in accordance with ASC 321. Accordingly, these investments are carried at cost, less impairment, and adjusted for observable price changes in orderly transactions for identical or similar investments, with any such adjustments and impairment recognized in net income. 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, 2026 and December 31, 2025, 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, 2026 and December 31, 2025. 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, 2026 and 2025. 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, 2026 Fair Value Measurements Using: Carrying Value Estimated Fair Value Level 1 Level 2 Level 3 FINANCIAL ASSETS: Cash and cash equivalents $ 137,984 $ 137,984 $ 137,984 $ — $ — Available-for-sale securities 7,517 7,517 — 7,517 — Held-to-maturity securities 1,884 1,528 — 1,528 — Equity securities 5,000 5,000 — — 5,000 Loans held-for-sale 281 281 — 281 — Loans held-for-portfolio, net 912,883 878,228 — — 878,228 Mortgage servicing rights 4,096 4,096 — — 4,096 FINANCIAL LIABILITIES: Time deposits 301,973 302,387 — 302,387 — Borrowings 10,000 10,000 — 10,000 — Subordinated notes 7,812 8,200 — 8,200 — December 31, 2025 Fair Value Measurements Using: Carrying Value Estimated Fair Value Level 1 Level 2 Level 3 FINANCIAL ASSETS: Cash and cash equivalents $ 138,453 $ 138,453 $ 138,453 $ — $ — Available-for-sale securities 7,699 7,699 — 7,699 — Held-to-maturity securities 1,892 1,578 — 1,578 — Loans held-for-sale 542 542 — 542 — Loans held-for-portfolio, net 896,928 868,356 — — 868,356 Mortgage servicing rights 4,183 4,183 — — 4,183 FINANCIAL LIABILITIES: Time deposits 299,593 300,290 — 300,290 — Borrowings 10,000 10,000 — 10,000 — Subordinated notes 7,801 8,102 — 8,102 — 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, 2026 Description Total Level 1 Level 2 Level 3 Municipal bonds $ 5,382 $ — $ 5,382 $ — Agency mortgage-backed securities 2,135 — 2,135 — Mortgage servicing rights 4,096 — — 4,096 Fair Value at December 31, 2025 Description Total Level 1 Level 2 Level 3 Municipal bonds $ 5,482 $ — $ 5,482 $ — Agency mortgage-backed securities 2,217 — 2,217 — Mortgage servicing rights 4,183 — — 4,183 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, 2026 Financial Instrument Valuation Technique Unobservable Input(s) Range (Weighted-Average) Mortgage Servicing Rights Discounted cash flow Prepayment speed assumption 125 %- 581 % ( 125 %) Discount rate 9.0 %- 13.5 % ( 10 %) Average debt service cost per residential loan $ 96.00 December 31, 2025 Financial Instrument Valuation Technique Unobservable Input(s) Range (Weighted-Average) Mortgage Servicing Rights Discounted cash flow Prepayment speed assumption 125 %- 368 % ( 125 %) Discount rate 9.0 %- 13.5 % ( 10 %) Average debt service cost per residential loan $ 96.00 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 months ended March 31, 2026 and 2025. 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, 2026 Total Level 1 Level 2 Level 3 Equity securities $ 5,000 $ — $ — $ 5,000 OREO and repossessed assets 99 — — 99 Collateral dependent loans 7,511 — — 7,511 Fair Value at December 31, 2025 Total Level 1 Level 2 Level 3 OREO and repossessed assets $ 344 $ — $ — $ 344 Collateral dependent loans 5,934 — — 5,934 There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis at both March 31, 2026 and December 31, 2025. Note 6 – Mortgage Servicing Rights The unpaid principal balance of the Company’s mortgage servicing rights portfolio totaled $ 393.8 million at March 31, 2026 compared to $ 398.4 million at December 31, 2025. Of these total balances, the unpaid principal balances of loans serviced for Federal National Mortgage Association (“Fannie Mae”) at March 31, 2026 and December 31, 2025 were $ 392.1 million and $ 396.3 million, respectively. The unpaid principal balance of loans serviced for other financial institutions totaled $ 1.8 million at March 31, 2026 compared to $ 2.0 million at December 31, 2025. 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, 2026 2025 Beginning balance, at fair value $ 4,183 $ 4,769 Servicing rights that result from transfers and sale of financial assets 53 18 Changes in fair value: Due to changes in model inputs or assumptions and other (1) ( 140 ) ( 99 ) Ending balance, at fair value $ 4,096 $ 4,688 (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, 2026 December 31, 2025 Prepayment speed (Public Securities Association “PSA” model) 125 % 125 % Weighted-average life 10.2 years 10.1 years Weighted average discount rate 10.0 % 10.0 % Average debt service cost per residential loan $ 96.00 $ 96.00 The amount of contractually specified servicing, late and ancillary fees earned on mortgage servicing rights, which are included in mortgage servicing income on the Condensed Consolidated Statements of Income, totaled $ 248 thousand and $ 269 thousand for three months ended March 31, 2026 and 2025, respectively. 22 Table of Contents 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. 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, 2026 December 31, 2025 FHLB advances: Short-term advances (one year or less) $ — $ — Long-term advances (over one year) 10,000 10,000 Total $ 10,000 $ 10,000 March 31, 2026 December 31, 2025 Fixed Rate: Outstanding balance $ 10,000 $ 10,000 Interest rates ranging from 4.06 % 4.06 % Interest rates ranging to 4.06 % 4.06 % Weighted average interest rate 4.06 % 4.06 % The following table presents the maturity of our FHLB advances (dollars in thousands): March 31, 2026 Remainder of 2026 $ — 2027 — 2028 10,000 $ 10,000 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, 2026 December 31, 2025 Amount available to borrow under credit facility (1) $ 357,308 $ 347,095 Advance equivalent of collateral: One-to-four family loans $ 187,048 $ 190,290 Commercial and multifamily loans 20,260 21,097 Home equity loans 273 278 Notional amount of letters of credit outstanding 15,000 14,000 Remaining FHLB borrowing capacity (2) $ 182,581 $ 187,665 (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, 2026 and December 31, 2025, the Company had an investment of $ 1.1 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, 2026 and December 31, 2025, the amount available to borrow under this credit facility was $ 19.1 million and $ 18.5 million, respectively, subject to eligible pledged collateral. The Company had no outstanding borrowings under this arrangement at March 31, 2026 and December 31, 2025. 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, 2026 and is renewable annually. As of March 31, 2026, 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, 2026 and December 31, 2025. 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 had 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 reset 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. 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. The balance of the subordinated notes, net of debt issuance costs, was $ 7.8 million at both March 31, 2026 and December 31, 2025. Note 9 – Earnings Per Common Share The following table summarizes the calculation of earnings per share for the periods indicated (dollars in thousands, except per share data): Three Months Ended 2026 2025 Net income $ 1,576 $ 1,167 LESS: Participating dividends - Unvested Restricted Stock Awards (“RSAs”) ( 1 ) ( 2 ) LESS: Income allocated to participating securities - Unvested RSAs ( 2 ) ( 3 ) Net income available to common stockholders - basic 1,573 1,162 ADD BACK: Income allocated to participating securities - Unvested RSAs 2 3 LESS: Income reallocated to participating securities - Unvested RSAs ( 2 ) ( 3 ) Net income available to common stockholders - diluted $ 1,573 $ 1,162 Weighted average number of shares outstanding, basic 2,562,467 2,554,265 Effect of potentially dilutive common shares 11,745 24,344 Weighted average number of shares outstanding, diluted 2,574,212 2,578,609 Earnings per share, basic $ 0.61 $ 0.45 Earnings per share, diluted $ 0.61 $ 0.45 There were no anti-dilutive securities during the three months ended March 31, 2026 and March 31, 2025. Note 10 – Leases We currently have operating leases for branch locations, a loan production office and our corporate office. The term for our leases generally begins on the date we become legally obligated for the rent payments or we take possession of the building 24 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, 2026, our leases had remaining terms ranging from 11 months to 4.2 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 five years and a remaining term of approximately 3.75 years as of March 31, 2026 . During the three months ended March 31, 2026, we provided notice that our Tacoma branch would close in April 2026 as part of ongoing strategic consolidation efforts. In connection with this closure, the lease was modified to a shorter term ending in the second quarter of 2026. The modification resulted in the derecognition of $ 98 thousand in both our operating right-of-use asset and operating lease liability. 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, 2026 December 31, 2025 Operating lease right-of-use assets $ 3,036 $ 3,319 Finance lease right-of-use assets 97 104 Operating lease liabilities 3,264 3,565 Finance lease liabilities 100 106 The following table presents the components of lease expense for the periods indicated (in thousands): Three Months Ended March 31, 2026 2025 Lease expense Operating leases $ 278 $ 273 Finance leases Amortization of right-of-use assets 6 — Interest on lease liabilities 1 — Sublease income — — Net lease expense $ 285 $ 273 The following table presents the schedule of lease liability payments at the date indicated (in thousands): March 31, Finance Leases Operating Leases Total Lease Payments Remainder of 2026 $ 22 $ 849 $ 871 2027 29 1,083 1,112 2028 29 996 1,025 2029 29 456 485 2030 — 48 48 Total lease payments 109 3,432 3,541 Less: Present value discount 9 168 177 Present value of lease liabilities $ 100 $ 3,264 $ 3,364 25 Lease term and discount rate by lease type consisted of the following at the dates indicated: March 31, 2026 December 31, 2025 Weighted-average remaining lease term: Operating leases 3.2 years 3.5 years Finance leases 3.8 years 4.0 years Weighted-average discount rate (annualized): Operating leases 3.10 % 3.08 % Finance leases 4.41 % 4.41 % Supplemental cash flow information related to leases was as follows for the periods indicated (in thousands): Three Months Ended March 31, 2026 2025 Cash paid for amounts included in the measurement of lease liabilities for operating leases: Operating cash flows: Operating leases $ 294 $ 279 Finance leases 1 — Financing cash flows: Finance leases 6 — Note 11 – Subsequent Events On April 28, 2026, the Company announced that its Board of Directors declared a quarterly cash dividend of $ 0.21 per common share, payable on May 26, 2026 to stockholders of record at the close of business on May 11, 2026. 26 Table of Contents