Document

Sound Financial Bancorp, Inc. Q3 2022 Results

Seattle, WA, October 25, 2022 — Sound Financial Bancorp, Inc. (Nasdaq: SFBC), the holding company (the "Company") for Sound Community Bank (the "Bank"), today reported net income of $2.5 million for the quarter ended September 30, 2022, or $0.97 diluted earnings per share, as compared to net income of $1.6 million, or $0.61 diluted earnings per share, for the quarter ended June 30, 2022, and $2.6 million, or $0.98 diluted earnings per share, for the quarter ended September 30, 2021. The Company also announced today that the Board of Directors declared a cash dividend on Company common stock of $0.17 per share, payable on November 23, 2022 to stockholders of record as of the close of business on November 9, 2022.

Comments from the President and Chief Executive Officer

“Consistent loan origination across all categories increased our average loan balance from $742 million for the three months ended June 30, 2022 to $833 million for the three months ended September 30, 2022,” remarked Ms. Stewart, President and Chief Executive Officer. "This portfolio growth contributed to an improved net interest margin of 4.13% for the current quarter, despite deposit pricing and borrowings being higher than they were at the end of the second quarter of 2022," concluded Stewart.

Q3 2022 Financial Performance

Total assets increased $45.2 million or 4.8% to $982.2 million at September 30, 2022, from $937.0 million at June 30, 2022, and increased $54.1 million or 5.8% from $928.1 million at September 30, 2021.

Net interest income increased $1.2 million or 14.4% to $9.6 million for the quarter ended September 30, 2022, from $8.4 million for the quarter ended June 30, 2022, and increased $1.3 million or 15.4% from $8.3 million for the quarter ended September 30, 2021.

Net interest margin ("NIM"), annualized, was 4.13% for the quarter ended September 30, 2022, compared to 3.83% for the quarter ended June 30, 2022 and 3.74% for the quarter ended September 30, 2021.

Loans held-for-portfolio increased $45.4 million or 5.6% to $851.4 million at September 30, 2022, compared to $806.1 million at June 30, 2022, and increased $183.9 million or 27.5% from $667.6 million at September 30, 2021. These increases are the result of organic loan growth and, coupled with a competitive deposit market, increased our loan-to-deposit ratio to 105% at September 30, 2022 from 103% at June 30, 2022 and 83% at September 30, 2021.

A $375 thousand provision for loan losses was recorded for the quarter ended September 30, 2022, compared to a $600 thousand provision for loan losses for the quarter ended June 30, 2022 and a $175 thousand for the quarter ended September 30, 2021. The allowance for loan losses to total nonperforming loans was 301.24% and to total loans was 0.88% at September 30, 2022.

Total deposits increased $29.4 million or 3.7% to $815.4 million at September 30, 2022, from $786.0 million at June 30, 2022, and increased $7.7 million or 1.0% from $807.7 million at September 30, 2021. Noninterest-bearing deposits increased $5.7 million or 3.0% to $192.3 million at September 30, 2022 compared to $186.6 million at June 30, 2022, and decreased $2.6 million or 1.3% compared to $194.8 million at September 30, 2021.

Net gain on sale of loans was $48 thousand for the quarter ended September 30, 2022, compared to $84 thousand for the quarter ended June 30, 2022 and $568 thousand for the quarter ended September 30, 2021.

The Bank continued to maintain capital levels in excess of regulatory requirements and was categorized as "well-capitalized" at September 30, 2022.

Total nonperforming loans decreased $2.0 million or 44.9% to $2.5 million at September 30, 2022, from $4.5 million at June 30, 2022, and decreased $582 thousand or 19.0% from $3.1 million at September 30, 2021.

Interest income increased $1.8 million, or 19.9%, to $10.8 million for the quarter ended September 30, 2022, compared to $9.0 million for the quarter ended June 30, 2022 and increased $1.7 million, or 18.4%, from $9.1 million for the quarter ended September 30, 2021. The increase from the prior quarter was primarily due to higher average loan balances, a 22 basis point rate increase in the average yield on loans and a 116 basis point rate increase in the average yield on investments and interest-bearing cash following recent increases in the targeted federal funds rate, partially offset by lower average investments and interest-bearing cash balances. The increase in interest income from the same quarter last year was due primarily to higher average loan balances and a 177 basis point increase in average yield on investments and interest-bearing cash, partially offset by a 54 basis point decline in the average loan yield and a lower average balance of investments and interest-bearing cash.

Interest income on loans increased $1.6 million, or 18.7%, to $10.3 million for the quarter ended September 30, 2022, compared to $8.7 million for the quarter ended June 30, 2022, and increased $1.4 million, or 15.2%, from $9.0 million for the quarter ended September 30, 2021. The average balance of total loans was $833.2 million for the quarter ended September 30, 2022, compared to $741.6 million for the quarter ended June 30, 2022 and $652.3 million for the quarter ended September 30, 2021. The average yield on total loans was 4.92% for the quarter ended September 30, 2022, compared to 4.70% for the quarter ended June 30, 2022 and 5.45% for the quarter ended September 30, 2021. The increase in the average yield on loans during the current quarter compared to the prior quarter was primarily due to variable rate loans adjusting to higher market interest rates and new loan originations at higher interest rates. The decrease in the average yield on loans during the current quarter compared to the same quarter in 2021 was primarily due to lower recognition of net deferred fees due to a reduced volume of PPP loan repayments from U.S. Small Business Administration’s (“SBA”) loan forgiveness. The Bank recognized $24 thousand, $40 thousand, and $1.1 million in deferred fees and interest income related to PPP loan forgiveness repayments during the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, respectively. Refer to the discussion below for the impact of PPP on our net interest margin. Interest income on investments and interest-bearing cash increased $160 thousand to $449 thousand for the quarter ended September 30, 2022, compared to $289 thousand for the quarter ended June 30, 2022, and increased $314 thousand from $135 thousand for the quarter ended September 30, 2021. These increases were both due to a higher average yield for investments and interest-bearing cash, partially offset by a lower average balance as excess cash liquidity was deployed into higher yielding loans.

Interest expense increased $585 thousand, or 98.5%, to $1.2 million for the quarter ended September 30, 2022, compared to $594 thousand for the quarter ended June 30, 2022, and increased $394 thousand, or 50.2%, from $785 thousand for the quarter ended September 30, 2021. The increase in interest expense during the current quarter from the prior quarter was primarily the result of a $44.0 million increase in the average balance of borrowings, comprised of Federal Home Loan Bank ("FHLB") advances, and a $34.6 million increase in the average balance of certificate accounts, as well as higher rates paid on all interest-bearing deposits, partially offset by a $28.9 million decrease in the average balance of interest-bearing deposits other than certificate accounts. Compared to the prior period, total deposit costs were negatively impacted by the 20 basis point increase in the average cost of interest-bearing deposits resulting from higher rates paid on deposits and the $3.5 million decrease in the average balance of noninterest bearing deposits to $189.4 million for the three months ended September 30, 2022, compared to $192.8 million for the three months ended June 30, 2022. The increase in interest expense during the current quarter from the comparable period a year ago was primarily the result of a $46.5 million increase in the average balance of borrowings and higher rates paid on all interest-bearing deposits, partially offset by a $17.3 million decrease in the average balance of interest-bearing deposits.Compared to the same period last year, total deposit costs were negatively impacted by the higher rates paid on deposits and favorably impacted by the $6.9 million increase in the average balance of noninterest bearing deposits from $182.5 million at September 30, 2021. The average cost of total borrowings, comprised of borrowings and subordinated notes, decreased to 3.06% for the quarter ended September 30, 2022, from 5.13% for the quarter ended June 30, 2022, and decreased from 5.74% for the quarter ended September 30, 2021, reflecting the increased use of lower cost FHLB advances during the third quarter to supplement our liquidity needs. The average balance of our total borrowings increased $44.1 million to $58.1 million from $14.1 million for the quarter ended June 30, 2022, and increased $46.5 million from $11.6 million for the quarter ended September 30, 2021.

Net interest margin (annualized) was 4.13% for the quarter ended September 30, 2022, compared to 3.83% for the quarter ended June 30, 2022 and 3.74% for the quarter ended September 30, 2021. These increases in net interest margin were primarily due to the higher interest income earned on interest-earning assets, driven by the higher average balance of loans and the increased average yield earned on investments and interest-bearing cash and, with respect to the same quarter a year ago, partially offset by lower recognition of net deferred fees related to PPP loan repayments from SBA loan forgiveness. During the third quarter of 2022, the average yield earned on PPP loans, including the recognition of the net deferred fees for PPP loans repaid and forgiven by the SBA, resulted in positive impact of one basis point to the net interest margin, compared to a positive impact of one basis point during the quarter ended June 30, 2022, and a positive impact of 41 basis points during the quarter ended September 30, 2021.

The Company recorded a provision for loan losses of $375 thousand for the quarter ended September 30, 2022, as compared to $600 thousand for the quarter ended June 30, 2022 and $175 thousand for the quarter ended September 30, 2021. The decrease in the provision for loan losses for the quarter ended September 30, 2022 compared to the quarter ended June 30, 2022 resulted primarily from the lower growth in our loans held-for-portfolio, partially offset by a qualitative adjustment to manufactured home loans increasing the amount of the allowance for loan losses attributable to these loans. The provision for loan losses in the third quarter of 2022 also reflects the inherent uncertainty related to the economic environment as a result of local, national and global events.

Noninterest income remained essentially unchanged at $1.0 million for both quarters ended September 30, 2022 and June 30, 2022, and decreased $405 thousand, or 28.3%, from $1.4 million for the quarter ended September 30, 2021. The decrease in noninterest income from the comparable period in 2021 was primarily due to a $520 thousand decrease in net gain on sale of loans as a result of a decline in both the amount of loans originated for sale and gross margins for loans sold and a $45 thousand decrease in earnings on the cash surrender value of bank-owned life insurance ("BOLI"), partially offset by a $134 thousand increase in the fair value adjustment on mortgage servicing rights due primarily from the effects of recent higher market interest rates causing a reduction in prepayment speeds. In addition, service charges and fee income increased $48 thousand primarily resulting from higher commercial loan and consumer deposit activity fees. Loans sold during the quarter ended September 30, 2022, totaled $2.3 million, compared to $2.9 million and $20.3 million during the quarters ended June 30, 2022 and September 30, 2021, respectively.

Noninterest expense increased $252 thousand, or 3.7%, to $7.0 million for the quarter ended September 30, 2022, compared to $6.8 million for the quarter ended June 30, 2022 and increased $718 thousand, or 11.4%, from $6.3 million for the quarter ended September 30, 2021. The increase from the quarter ended June 30, 2022 was a result of an increase in operations expense of $153 thousand primarily due to increases in various expenses including marketing and charitable expenses, insurance costs, and professional fees, and an increase in salaries and benefits expense of $75 thousand resulting from lower deferred compensation, partially offset by a decrease in incentive compensation expense as a result of a lower percentage allocated and changes to the incentive compensation programs. The increase in noninterest expense compared to the quarter ended September 30, 2021 was primarily due to an increase in salaries and benefits of $532 thousand primarily due to higher wages and medical expenses and lower deferred compensation, partially offset by a decrease in incentive compensation as a result of a lower percentage allocated and changes to the incentive compensation programs and lower commission expense related to a decline in mortgage originations. Operations expense increased $115 thousand compared to the quarter ended September 30, 2021 due to increases in various accounts including marketing and travel expenses, legal fees associated with higher commercial loan volume, and debit card processing, partially offset by lower loan origination costs due to lower mortgage origination volume.

The efficiency ratio for the quarter ended September 30, 2022 was 66.23%, compared to 72.12% for the quarter ended June 30, 2022 and 64.81% for the quarter ended September 30, 2021. The improvement in the efficiency ratio for the current quarter compared to the prior quarter is primarily due to higher net interest income from an increase in average balance of loans held-for-portfolio and a higher rate earned on reserve balances, partially offset by higher noninterest expense from reduced salaries and benefits costs. The weakening in the efficiency ratio for the current quarter compared to the same period in the prior year is primarily due to higher noninterest expense related to increased salaries and benefits and lower noninterest income primarily due to lower gain on sale of loans from mortgage banking, partially offset by higher net interest income primarily as a result of a higher average balance of loans held-for-portfolio at higher yields than prior investments.

Investment securities increased $1.0 million, or 8.7%, to $12.6 million at September 30, 2022, compared to $11.6 million at June 30, 2022, and increased $5.5 million, or 78.5%, from $7.1 million at September 30, 2021. Held-to-maturity securities totaled $2.2 million at both September 30, 2022 and June 30, 2022, and totaled none at September 30, 2021. Available-for-sale securities totaled $10.4 million at September 30, 2022, compared to $9.4 million at June 30, 2022, and $7.1 million at September 30, 2021. The increase in available-for-sale securities from the prior quarter was primarily due to $1.6 million of investment purchases, partially offset by net unrealized losses resulting from the increases in market interest rates during the year and regularly scheduled payments. The increase from the same period one year ago was primarily due to investment purchases throughout the previous year, partially offset by calls of securities, regularly scheduled payments and maturities, and net unrealized losses resulting from the increases in market interest rates during the year.

Nonperforming assets ("NPAs"), which are comprised of nonaccrual loans, including nonperforming troubled debt restructurings ("TDRs"), other real estate owned ("OREO"), and other repossessed assets, decreased $2.0 million, or 39.1%, to $3.1 million at September 30, 2022, from $5.2 million at June 30, 2022 and decreased $583 thousand, or 15.6% from $3.7 million at September 30, 2021. The decrease in nonperforming assets during the current quarter compared to the prior quarter primarily was due to the payoff of a $2.3 million nonperforming multifamily loan during the period. Loans classified as TDRs totaled $2.0 million, $2.0 million and $2.6 million at September 30, 2022, June 30, 2022 and September 30, 2021, respectively, of which $108 thousand, $128 thousand and $411 thousand, respectively, were not performing pursuant to their contractual repayment terms at those dates.


	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Nonperforming Loans:
One-to-four family	$	1,960		$	1,669		$	1,676		$	2,207		$	1,915
Home equity loans	133			152			155			140			150
Commercial and multifamily	—			2,307			2,336			2,380			—
Construction and land	29			30			31			33			220
Manufactured homes	99			117			135			122			98
Floating homes	—			—			—			493			504
Commercial business	—			—			170			176			182
Other consumer	265			233			244			—			—
Total nonperforming loans	2,486			4,509			4,747			5,552			3,069
OREO and Other Repossessed Assets:
One-to-four family	84			84			84			84			84
Commercial and multifamily	575			575			575			575			575

Total OREO and repossessed assets	659			659			659			659			659
Total nonperforming assets	$	3,145		$	5,168		$	5,406		$	6,211		$	3,728

Nonperforming Loans:
One-to-four family	62.3		%	32.3		%	31.0		%	35.5		%	51.4		%
Home equity loans	4.2			2.9			2.9			2.3			4.0
Commercial and multifamily	—			44.7			43.2			38.3			—
Construction and land	0.9			0.6			0.6			0.5			5.9
Manufactured homes	3.2			2.3			2.5			2.0			2.6
Floating homes	—			—			—			7.9			13.5
Commercial business	—			—			3.1			2.8			4.9
Other consumer	8.4			4.5			4.5			—			—
Total nonperforming loans	79.0			87.3			87.8			89.3			82.3
OREO and Other Repossessed Assets:
One-to-four family	2.7			1.6			1.6			1.4			2.3
Commercial and multifamily	18.3			11.1			10.6			9.3			15.4

Total OREO and repossessed assets	21.0			12.7			12.2			10.7			17.7
Total nonperforming assets	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Deposits increased $29.4 million, or 3.7%, to $815.4 million at September 30, 2022, compared to $786.0 million at June 30, 2022 and increased $7.7 million, or 1.0%, from $807.7 million at September 30, 2021. The increase in deposits compared to the prior quarter and the same quarter one year ago was primarily a result of an increase in certificate accounts. The increase in our certificate accounts was primarily used to fund organic loan growth. Our noninterest-bearing deposits increased $5.7 million, or 3.0% to $192.3 million at September 30, 2022, compared to $186.6 million at June 30, 2022 and decreased $2.6 million, or 1.3% from $194.8 million at September 30, 2021. Noninterest-bearing deposits represented 23.6%, 23.7% and 24.1% of total deposits at September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

When used in filings by Sound Financial Bancorp, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events, and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated below or because of other important factors that we cannot foresee that could cause our actual results to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.

Factors which could cause actual results to differ materially, include, but are not limited to: potential adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia's invasion of Ukraine, as well as increasing oil prices and supply chain disruptions, and any governmental or societal responses to the COVID-19 pandemic, including the possibility of new COVID-19 variants; changes in consumer spending, borrowing and savings habits; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; secondary market conditions for loans; results of examinations of the Company or its wholly owned bank subsidiary by their regulators; increased competition; changes in management's business strategies; legislative changes; changes in the regulatory and tax environments in which the Company operates; and other factors described in the Company's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – which are available at www.soundcb.com and on the SEC's website at www.sec.gov.

Any of the forward-looking statements that the Company makes in this press release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be incorrect because of the inaccurate assumptions the Company might make, because of the factors illustrated above or because of other factors that cannot be foreseen by the Company. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause the Company’s actual results for 2022 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of the Company and could negatively affect its operating and stock performance.

(Dollars in thousands, unaudited)


	For the Quarter Ended
	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Interest income	$	10,776	$	8,986	$	8,213	$	8,359	$	9,102
Interest expense	1,179		594		595		643		785
Net interest income	9,597		8,392		7,618		7,716		8,317
Provision for loan losses	375		600		125		—		175
Net interest income after provision for loan losses	9,222		7,792		7,493		7,716		8,142
Noninterest income:
Service charges and fee income	604		596		549		632		556
(Earnings) loss on cash surrender value of bank-owned life insurance	59		(35)		21		135		104
Mortgage servicing income	306		313		320		323		328
Fair value adjustment on mortgage servicing rights	9		57		268		(114)		(125)
Net gain on sale of loans	48		84		365		507		568

Total noninterest income	1,026		1,015		1,523		1,483		1,431
Noninterest expense:
Salaries and benefits	4,044		3,969		4,167		3,786		3,512
Operations	1,581		1,428		1,314		1,732		1,466
Regulatory assessments	116		99		101		96		91
Occupancy	447		439		432		451		441
Data processing	848		849		821		863		808

Total noninterest expense	7,036		6,784		6,835		6,928		6,318
Income before provision for income taxes	3,212		2,023		2,181		2,271		3,255
Provision for income taxes	666		409		458		407		663
Net income	$	2,546	$	1,614	$	1,723	$	1,864	$	2,592

(Dollars in thousands, unaudited)


	For the Nine Months Ended September 30
	2022		2021
Interest income	$	27,975	$	25,517
Interest expense	2,368		3,311
Net interest income	25,607		22,206
Provision for loan losses	1,101		425
Net interest income after provision for loan losses	24,506		21,781
Noninterest income:
Service charges and fee income	1,749		1,615
Earnings on cash surrender value of bank-owned life insurance	45		281
Mortgage servicing income	939		961
Fair value adjustment on mortgage servicing rights	334		(694)
Net gain on sale of loans	497		3,683

Total noninterest income	3,564		5,846
Noninterest expense:
Salaries and benefits	12,181		10,470
Operations	4,323		4,033
Regulatory assessments	316		283
Occupancy	1,318		1,298
Data processing	2,518		2,400
Net gain on OREO and repossessed assets	—		(16)
Total noninterest expense	20,656		18,468
Income before provision for income taxes	7,414		9,159
Provision for income taxes	1,533		1,865
Net income	$	5,881	$	7,294

(Dollars in thousands, unaudited)


	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
ASSETS
Cash and cash equivalents	$	76,064	$	80,051	$	197,091	$	183,590	$	206,702
Available-for-sale securities, at fair value	10,396		9,382		10,223		8,419		7,060
Held-to-maturity securities, at amortized cost	2,207		2,215		2,223		—		—
Loans held-for-sale	1,908		100		1,297		3,094		3,884
Loans held-for-portfolio	851,447		806,078		709,485		686,398		667,551
Allowance for loan losses	(7,489)		(7,117)		(6,407)		(6,306)		(6,327)
Total loans held-for-portfolio, net	843,958		798,961		703,078		680,092		661,224
Accrued interest receivable	2,809		2,350		2,117		2,217		2,231
Bank-owned life insurance, net	21,140		21,081		21,116		21,095		20,926
Other real estate owned ("OREO") and other repossessed assets, net	659		659		659		659		659
Mortgage servicing rights, at fair value	4,787		4,754		4,668		4,273		4,211
Federal Home Loan Bank ("FHLB") stock, at cost	2,897		2,317		1,117		1,046		1,052
Premises and equipment, net	5,505		5,632		5,730		5,819		5,941
Right-of-use assets	5,319		5,548		5,777		5,811		6,033
Other assets	4,597		3,954		3,758		3,576		8,188
TOTAL ASSETS	$	982,246	$	937,004	$	958,854	$	919,691	$	928,111
LIABILITIES
Interest-bearing deposits	$	623,122	$	599,377	$	627,323	$	607,854	$	612,805
Noninterest-bearing deposits	192,275		186,609		208,768		190,466		194,848
Total deposits	815,397		785,986		836,091		798,320		807,653
Borrowings	44,500		30,000		—		—		—
Accrued interest payable	109		194		38		200		48
Lease liabilities	5,749		5,980		6,211		6,242		6,462
Other liabilities	8,071		9,210		9,169		8,571		8,711
Advance payments from borrowers for taxes and insurance	1,799		922		1,851		1,366		1,708
Subordinated notes, net	11,665		11,655		11,644		11,634		11,623
TOTAL LIABILITIES	887,290		843,947		865,004		826,333		836,205
STOCKHOLDERS' EQUITY:

Common stock	26		26		26		26		26
Additional paid-in capital	27,886		27,777		28,154		27,956		27,835
Unearned shares – Employee Stock Ownership Plan ("ESOP")	—		—		—		—		(28)
Retained earnings	68,309		66,203		66,139		65,237		63,905
Accumulated other comprehensive (loss) income, net of tax	(1,265)		(949)		(469)		139		168
TOTAL STOCKHOLDERS' EQUITY	94,956		93,057		93,850		93,358		91,906
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	982,246	$	937,004	$	958,854	$	919,691	$	928,111


	Three Months Ended
	September 30, 2022							June 30, 2022							September 30, 2021
	Average Outstanding Balance			Interest Earned/Paid		Yield/Rate		Average Outstanding Balance			Interest Earned/Paid		Yield/Rate		Average Outstanding Balance			Interest Earned/Paid		Yield/Rate
Interest-Earning Assets:
Loans receivable	$	833,195		$	10,327	4.92	%	$	741,626		$	8,697	4.70	%	$	652,251		$	8,967	5.45	%
Investments and interest-bearing cash	88,812			449		2.01	%	136,723			289		0.85	%	230,905			135		0.23	%
Total interest-earning assets	$	922,007		$	10,776	4.64	%	$	878,349		$	8,986	4.10	%	$	883,156		$	9,102	4.09	%
Interest-Bearing Liabilities:
Savings and money market accounts	$	188,276		$	63	0.13	%	$	195,339		$	29	0.06	%	$	179,164		$	42	0.09	%
Demand and NOW accounts	290,106			164		0.22	%	311,941			125		0.16	%	311,273			141		0.18	%
Certificate accounts	130,541			503		1.53	%	95,974			260		1.09	%	135,757			434		1.27	%
Subordinated notes	11,658			168		5.72	%	11,648			168		5.79	%	11,616			168		5.74	%
Borrowings	46,462			281		2.40	%	2,418			12		1.99	%	2			—		—	%
Total interest-bearing liabilities	$	667,043		1,179		0.70	%	$	617,320		594		0.39	%	$	637,812		785		0.49	%
Net interest income/spread				$	9,597	3.94	%				$	8,392	3.72	%				$	8,317	3.60	%
Net interest margin						4.13	%						3.83	%						3.74	%

Ratio of interest-earning assets to interest-bearing liabilities	138		%					142		%					138		%
Noninterest-bearing deposits	$	189,379						$	192,843						$	182,503
Total deposits	798,302			$	730	0.36	%	796,097			$	414	0.21	%	808,697			$	617	0.30	%
Total funding (1)	856,422			1,179		0.55	%	810,163			594		0.29	%	820,315			785		0.38	%


	Nine Months Ended
	September 30, 2022							September 30, 2021
	Average Outstanding Balance			Interest Earned/Paid		Yield/Rate		Average Outstanding Balance			Interest Earned/Paid		Yield/Rate
Interest-Earning Assets:
Loans receivable	$	757,086		$	27,099	4.79	%	$	636,352		$	25,152	5.28	%
Investments and interest-bearing cash	136,899			876		0.86	%	236,495			365		0.21	%
Total interest-earning assets	$	893,985		$	27,975	4.18	%	$	872,847		$	25,517	3.91	%
Interest-Bearing Liabilities:
Savings and money market accounts	$	193,219		$	122	0.08	%	$	167,253		$	144	0.12	%
Demand and NOW accounts	305,651			412		0.18	%	281,933			485		0.23	%
Certificate accounts	109,713			1,037		1.26	%	174,712			2,178		1.67	%
Subordinated notes	11,648			504		5.79	%	11,606			504		5.81	%
Borrowings	16,463			293		2.38	%	1			—		—	%
Total interest-bearing liabilities	$	636,694		2,368		0.50	%	$	635,505		3,311		0.70	%
Net interest income/spread				$	25,607	3.69	%				$	22,206	3.21	%
Net interest margin						3.83	%						3.40	%

Ratio of interest-earning assets to interest-bearing liabilities	140		%					137		%
Noninterest-bearing deposits	$	192,240						$	174,486
Total deposits	800,823			$	1,571	0.26	%	798,384			$	2,807	0.47	%
Total funding (1)	828,934			2,368		0.38	%	809,991			3,311		0.55	%

(Dollars in thousands, unaudited)


	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Real estate loans:
One-to-four family	$	270,009	$	250,295	$	221,832	$	207,660	$	194,346
Home equity	17,642		16,374		13,798		13,250		14,012
Commercial and multifamily	315,677		307,462		279,892		278,175		246,794
Construction and land	112,980		101,394		70,402		63,105		81,576
Total real estate loans	716,308		675,525		585,924		562,190		536,728
Consumer Loans:
Manufactured homes	25,375		23,264		22,179		21,636		21,459
Floating homes	69,968		66,573		59,784		59,268		58,358
Other consumer	17,565		18,076		18,370		16,748		15,732
Total consumer loans	112,908		107,913		100,333		97,652		95,549
Commercial business loans	23,986		24,302		24,452		28,026		36,620
Total loans	853,202		807,740		710,709		687,868		668,897
Less:
Premiums/(Discounts)	984		1,010		788		897		—
Deferred fees, net	(2,739)		(2,672)		(2,012)		(2,367)		(1,346)
Allowance for loan losses	(7,489)		(7,117)		(6,407)		(6,306)		(6,327)
Total loans held for portfolio, net	$	843,958	$	798,961	$	703,078	$	680,092	$	661,224


	At or For the Quarter Ended
	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Nonaccrual loans	$	2,378		$	4,381		$	4,474		$	5,130		$	2,658
Nonperforming TDRs	108			128			273			422			411
Total nonperforming loans	2,486			4,509			4,747			5,552			3,069
OREO and other repossessed assets	659			659			659			659			659
Total nonperforming assets	$	3,145		$	5,168		$	5,406		$	6,211		$	3,728
Performing TDRs	1,912			1,866			2,072			2,174			2,198
Net (charge-offs) recoveries during the quarter	(3)			110			(24)			(21)			(5)
Provision for loan losses during the quarter	375			600			125			—			175
Allowance for loan losses	7,489			7,117			6,407			6,306			6,327
Allowance for loan losses to total loans	0.88		%	0.88		%	0.90		%	0.92		%	0.95		%

Allowance for loan losses to total nonperforming loans	301.24		%	157.84		%	134.96		%	113.58		%	206.19		%
Nonperforming loans to total loans	0.29		%	0.56		%	0.67		%	0.81		%	0.46		%
Nonperforming assets to total assets	0.32		%	0.55		%	0.56		%	0.68		%	0.40		%


	For the Quarter Ended
	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Annualized return on average assets	1.04	%	0.70	%	0.75	%	0.81	%	1.11	%
Annualized return on average equity	10.61		6.86		7.39		7.90		11.21
Annualized net interest margin(1)	4.13		3.83		3.49		3.53		3.74
Annualized efficiency ratio(2)	66.23	%	72.12	%	74.77	%	75.31	%	64.81	%


	At or For the Quarter Ended
	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Basic earnings per share	$	0.99	$	0.62	$	0.66	$	0.72	$	1.00
Diluted earnings per share	$	0.97	$	0.61	$	0.65	$	0.70	$	0.98
Weighted-average basic shares outstanding	2,562,551		2,584,179		2,602,168		2,586,570		2,586,966
Weighted-average diluted shares outstanding	2,597,690		2,615,299		2,640,359		2,631,721		2,633,459
Common shares outstanding at period-end	2,581,949		2,578,595		2,621,531		2,613,768		2,617,425
Book value per share	$	36.78	$	36.09	$	35.80	$	35.72	$	35.11


	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Noninterest-bearing	$	192,275	$	186,609	$	208,768	$	190,466	$	194,848
Interest-bearing	284,267		312,439		333,449		307,061		311,303
Savings	99,602		103,311		106,217		103,401		99,747
Money market	84,692		87,672		89,164		91,670		82,314
Certificates	154,561		95,955		98,493		105,722		119,441
Total deposits	$	815,397	$	785,986	$	836,091	$	798,320	$	807,653


	At or For the Quarter Ended
	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Sound Community Bank:
Total loans to total deposits	104.64		%	102.77		%	85.00		%	86.16		%	82.82		%
Noninterest-bearing deposits to total deposits	23.58		%	23.74		%	24.97		%	23.86		%	24.13		%
Sound Financial Bancorp, Inc.:
Average total assets for the quarter	$	969,254		$	920,984		$	931,094		$	916,261		$	928,097
Average total equity for the quarter	$	95,244		$	94,397		$	94,497		$	93,569		$	91,766


Financial:
Wes Ochs
Executive Vice President/CFO
(206) 436-8587

Media:
Laurie Stewart
President/CEO
(206) 436-1495


	For the Quarter Ended:
	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Allowance for Loan Losses
Balance at beginning of period	$	7,117		$	6,407		$	6,306		$	6,327		$	6,157
Provision for loan losses during the period	375			600			125			—			175
Net recoveries/(charge-offs) during the period	(3)			110			(24)			(21)			(5)
Balance at end of period	$	7,489		$	7,117		$	6,407		$	6,306		$	6,327
Allowance for loan losses to total loans	0.88		%	0.88		%	0.90		%	0.92		%	0.95		%

Allowance for loan losses to total nonperforming loans	301.25		%	157.84		%	134.97		%	113.58		%	206.16		%