Executive Summary

Q3 2025 diluted EPS was $0.66, down vs. $0.79 in Q2 2025 but up vs. $0.45 in Q3 2024; net interest margin compressed sequentially to 3.48% while credit quality improved materially (NPLs down 19% q/q and 68% y/y) .
Noninterest income fell sharply (-21% q/q, -29% y/y) on a negative mortgage servicing rights (MSR) fair value adjustment, partially offset by stronger loan sale gains and higher BOLI income .
Board declared a $0.19 per-share dividend payable Nov 21, 2025; subsequent to quarter-end, the company paid down $4 million of subordinated debt, supporting capital/liquidity .
Management highlighted cost discipline, stronger core earnings versus the higher-rate cycle, and solid asset quality with a robust commercial pipeline set for year-end .
No formal Wall Street (S&P Global) consensus for EPS or revenue was available for SFBC; beat/miss analysis versus street estimates is not possible (values retrieved from S&P Global).*

What Went Well and What Went Wrong

What Went Well

Credit quality improved: nonperforming loans fell to $2.7M (-19% q/q, -68% y/y); NPAs/Assets dropped to 0.29% (vs. 0.35% in Q2 and 0.78% in Q3 2024), and allowance coverage of NPLs rose to 315% .
Deposit mix improved at the margin: noninterest-bearing deposits rose $7.2M q/q to $131.4M and represented 14.6% of total deposits, supporting funding cost trends .
Management quotes indicate core earnings strength and operational efficiency from technology investments: “our core earnings returned to levels last seen prior to the higher rate cycle… technology investments … generated operational efficiencies and positioned us to scale” .

What Went Wrong

Sequential margin compression: NIM fell to 3.48% from 3.67% in Q2, driven by lower loan yields (nonrecurring nonaccrual payoff benefits in Q2) and lower interest-earning cash balances .
Noninterest income declined materially (-$239k q/q; -$354k y/y) due to a $372k negative MSR fair value adjustment (reflecting lower market valuation as rates declined) and a smaller servicing portfolio .
Net interest income decreased $315k q/q on lower interest income and slightly higher interest expense; provision for credit losses remained modest but increased y/y given the prior-year unfunded commitment reserve release .

Financial Results

Core P&L and Margins (oldest → newest)

Metric	Q3 2024	Q2 2025	Q3 2025
Diluted EPS ($)	$0.45	$0.79	$0.66
Net Interest Income ($000)	$7,873	$9,255	$8,940
Total Noninterest Income ($000)	$1,235	$1,120	$881
NIM (annualized)	2.98%	3.67%	3.48%
Efficiency Ratio (annualized)	84.31%	73.88%	78.16%

Notes: Net interest income and noninterest income from consolidated statements; margin and efficiency from key ratios .

Balance Sheet & Credit KPIs (oldest → newest)

KPI	Q3 2024	Q2 2025	Q3 2025
Loans HFP ($000)	$901,733	$904,286	$909,715
Deposits ($000)	$930,197	$899,459	$898,943
Loans-to-Deposits (%)	97.13%	100.75%	101.45%
NPLs ($000)	$8,489	$3,366	$2,717
NPLs / Loans (%)	0.94%	0.37%	0.30%
NPAs / Assets (%)	0.78%	0.35%	0.29%
ACL on Loans / Loans (%)	0.95%	0.94%	0.94%
ACL / NPLs (%)	101.13%	253.59%	315.20%
ROAA (annualized)	0.42%	0.78%	0.63%
ROAE (annualized)	4.50%	7.78%	6.26%

Loan Portfolio Breakdown ($000) (oldest → newest)

Category	Q3 2024	Q2 2025	Q3 2025
One-to-four family	$271,702	$262,672	$257,797
Home equity	$25,199	$28,582	$29,903
Commercial & multifamily	$358,587	$398,429	$408,802
Construction & land	$85,724	$49,926	$52,797
Manufactured homes	$40,371	$43,112	$42,735
Floating homes	$86,155	$91,448	$88,674
Other consumer	$18,266	$17,259	$17,031
Commercial business	$17,481	$14,779	$14,214
Total loans	$903,485	$906,207	$911,953

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share	Q4 2025 payment (Nov 21, 2025)	$0.19 (declared July 29, 2025)	$0.19 (declared Oct 28, 2025)	Maintained

Notes: No formal quantitative guidance on NIM, revenue, OpEx, OI&E, tax rate or segment targets was issued in the Q3 2025 press release; management commentary emphasized operational efficiency and asset quality .

Earnings Call Themes & Trends

Note: A Q3 2025 earnings call transcript was not available via our document tools; themes below reflect management commentary across press releases.

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3 2025)	Trend
Net interest margin & funding costs	Q1: NIM +12bps q/q; deposit costs declining with Fed cuts . Q2: NIM +42bps q/q; average cost of deposits fell to 2.34% .	NIM 3.48% (down q/q); average deposit cost 2.32%; loan yields down due to nonrecurring Q2 nonaccrual payoff impact .	Moderating sequentially; still higher y/y.
Technology investments & efficiency	Q1: Tech investments reducing OpEx, data processing rising near term . Q2: New software deployments streamlining ops; data processing higher .	Tech investments “generated operational efficiencies” and support scalable growth; data processing up y/y .	Continuing execution; efficiency improving structurally.
Credit quality	Q1: NPLs increased due to two credits; 83% of NPLs concentrated in four loans . Q2: Resolved three of four largest nonaccrual loans; NPLs down to $3.4M .	NPLs down to $2.7M; NPAs/Assets 0.29%; ACL/NPLs coverage up to 315% .	Improving, well-managed.
Deposit mix & liquidity	Q1: Deposits +$72.5M q/q; strategy to lower cost of funds . Q2: Mix shift to savings/MM; total deposits down modestly .	Noninterest-bearing deposits +$7.2M q/q; total deposits flat; loans-to-deposits ~101% .	Stable with slight mix improvement.
Macro/regulatory	Q1: Tariffs/external factors cited in CECL qualitative adjustments . Q2: Lower market rates aiding funding cost declines .	“Ongoing economic uncertainty exacerbated by extended government shutdown” noted; bank remains well-capitalized .	Mixed macro; resilient operations.

Management Commentary

Laurie Stewart, CEO: “Despite the ongoing economic uncertainty exacerbated by the extended government shutdown, we continued to execute on our core banking strategies… Subsequent to quarter end, we paid down $4 million of our subordinated debt, further demonstrating our strong liquidity and capital positions” .
Wes Ochs, President/CFO: “Although the valuation of our mortgage servicing portfolio declined during the quarter, our core earnings returned to levels last seen prior to the higher rate cycle… technology investments have… generated operational efficiencies and positioned us to scale effectively for future growth” .
Operating drivers: lower loan yields q/q due to nonrecurring nonaccrual payoffs in Q2; average deposit costs edged down to 2.32%; loan growth in commercial/multifamily, construction/land, and home equity .

Q&A Highlights

A full Q3 2025 earnings call transcript was not available via our document tools; no Q&A themes could be extracted at this time (we reviewed company filings and press releases through Nov 20, 2025) .

Estimates Context

S&P Global indicates no available Wall Street consensus for EPS or revenue for SFBC in Q3 2025; therefore, we cannot assess beat/miss versus estimates. Values retrieved from S&P Global.*

Key Takeaways for Investors

Sequential moderation: EPS and NIM declined vs. Q2 due to nonrecurring loan payoff benefits in Q2 and lower interest-earning cash, but both remain above prior-year levels—suggesting healthier core earnings vs. the higher-rate cycle baseline .
Credit quality is a tailwind: NPLs and NPAs materially lower q/q and y/y, with ACL/NPLs coverage >300%, reducing downside risk to earnings and capital .
Fee headwind is likely temporary: MSR fair value was a significant drag this quarter; with rate dynamics and servicing portfolio size driving valuation, investors should monitor the MSR line for normalization .
Deposit mix and funding costs: incremental improvement in noninterest-bearing deposits and slight decline in average deposit costs aid margin defense if asset yields stabilize .
Capital actions: the post-quarter $4M subordinated debt paydown plus continued dividend at $0.19/share indicate confidence in liquidity/capital; watch for additional balance-sheet optimization .
Loan growth pipeline: continued growth in commercial/multifamily and construction lending supports net interest income, contingent on prudent credit standards and macro conditions .
Near-term trading: with margin compression q/q and a visible MSR drag, stock may be sensitive to subsequent-quarter NIM trajectory and fee normalization; medium term, improving credit metrics and operational efficiencies underpin the thesis .

Footnote: *Values retrieved from S&P Global.

Sound Financial Bancorp, Inc. (SFBC)·Q3 2025 Earnings Summary