Sound Financial earnings rose from a year earlier in the third quarter of 2026, although net income declined from the preceding quarter. The parent of Sound Community Bank reported $2.3 million in net income, or $0.90 per diluted share, and declared a $0.21-per-share cash dividend.
Key Takeaways
- Third-quarter net income compared with $1.7 million a year earlier and $2.5 million in the second quarter.
- The annualized net interest margin widened to 3.76%, while loans and deposits declined from June.
- Nonperforming loans rose to $8.5 million at September 30, from $2.7 million a year earlier.
Sound Financial earnings and funding costs
Sound Financial Bancorp reported its results on October 27 for the quarter ended September 30, 2026. Diluted earnings per share were $0.90, compared with $0.98 in the second quarter and $0.66 in the third quarter of 2025.
Net interest income was $9.5 million, down from $9.6 million in the preceding quarter but up from $8.9 million a year earlier. The company attributed the increase in its annualized net interest margin from both periods primarily to lower funding costs.
Noninterest income fell $290,000 from the second quarter to $1.1 million. Sound Financial said the decline primarily reflected a lower fair-value adjustment on mortgage servicing rights and lower earnings on bank-owned life insurance.
| Item | Details |
|---|---|
| Annualized net interest margin | 3.76% in Q3 2026; 3.74% in Q2 2026; 3.48% in Q3 2025 |
| Average cost of deposits | 2.11% in Q3 2026; 2.15% in Q2 2026; 2.32% in Q3 2025 |
| Total assets | $1.04 billion at September 30, 2026; $1.07 billion at June 30, 2026 |
Loans, deposits and credit quality
Portfolio loans fell to $878.0 million at September 30 from $892.0 million at June 30. Deposits declined to $906.7 million from $930.9 million over the same period. Chief Executive Officer Laurie Stewart said economic uncertainty and increasing rates were influencing business and consumer loan demand.
Nonperforming loans represented 0.97% of total loans at September 30. The company recorded a $282,000 release of provision for credit losses in the third quarter, compared with a $223,000 release in the second quarter and a $55,000 provision a year earlier.
Sound Financial said the increase in the release from the second quarter primarily reflected lower loan and unfunded commitment balances and an improvement in the Federal Reserve’s unemployment forecast over the following 12 months. Sound Community Bank remained categorized as well-capitalized at September 30.
Debt repayment and dividend
The company repaid approximately $2.0 million of subordinated debt during the third quarter and the remaining $6.0 million after quarter-end. President and Chief Financial Officer Wes Ochs said the repayments were part of efforts to reduce higher-cost funding.
The declared dividend is payable on November 20, 2026, to shareholders of record at the close of business on November 6.
Next milestone
The next scheduled milestone is the November 6 dividend record date, followed by payment on November 20.
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This FinanceVelix article provides general information, not personalized financial, investment, legal, or tax advice. Market prices, interest rates and economic conditions can change; investments carry a risk of loss. Facts reflect the material available when published and may change. Check important information independently and consult a qualified professional when needed. Mentioning an asset, company, or service is not an endorsement.
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