----

|  [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------|-----------------------------------------------------------------------------------------|

| United States                                             | 26-0776123                       |
|----------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|
| (State or other jurisdiction of incorporation of organization) | (IRS Employer Identification No.)                                                                                                              |

----

----

|  [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------|-----------------------------------------------------------------------------------------|

| United States                                             | 26-0776123                       |
|----------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|
| (State or other jurisdiction of incorporation of organization) | (IRS Employer Identification No.)                                                                                                              |

----

|                                                                                                                                                      | Page Number |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
| PART I                 FINANCIAL INFORMATION                    |        |
| Item 1.           Financial Statements                                                        |        |
|      Condensed Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011                                | 3           |
|      Condensed Consolidated Statements of Income for the Three Month Periods Ended March 31, 2012 and 2011 (unaudited)`          | 4           |
| Condensed Consolidated Statements of Comprehensive Income for the Three Month Periods Ended March 31, 2012 and 2011 (unaudited)                      | 5           |
|      Condensed Consolidated Statement of Stockholders’ Equity for the Three Month Period Ended March 31, 2012 (unaudited)  | 6           |
|     Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 2012 and 2011 (unaudited)             | 7           |
|      Selected Notes to Condensed Consolidated Financial Statements                                                               | 8           |
| Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations                                 | 34          |
| Item 3.    Quantitative and Qualitative Disclosures About Market Risk                                                            | 42          |
| Item 4.    Controls and Procedures                                                                                               | 42          |
| PART II                 OTHER INFORMATION                       | 44          |
| Item 1.             Legal Proceedings                                               | 44          |
| Item 1A          Risk Factors                                                                      | 44          |
| Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds                                                           | 44          |
| Item 3.    Defaults Upon Senior Securities                                                                                       | 44          |
| Item 4.    Mine Safety Disclosures                                                                                               | 44          |
| Item 5.    Other Information                                                                                                     | 44          |
| Item 6.    Exhibits                                                                                                              | 45          |
| SIGNATURES                                                                                                                                           |        |
| EXHIBITS                                                                                                                                                  |        |

----

| SOUND FINANCIAL, INC AND SUBSIDIARY                                                                                                      |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Condensed Consolidated Balance Sheets                                                                                                    |   |
| (Unaudited)                                                                                                                              |   |
|                                                                                                                                     |   | MARCH 31, |   |   | DECEMBER 31, |   |
|                                                                                                                                     |   | 2012 |   |   | 2011 |   |
|                                                                                                                                     |   | (Dollars in thousands) |   |
| ASSETS                                                                                                                                   |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                                                |   | $ | 25,409 |   |   | $ | 17,031 |   |
| Available-for-sale securities, at fair value                                                                                             |   |   | 3,035 |   |   |   | 2,992 |   |
| Federal Home Loan Bank stock, at cost                                                                                                    |   |   | 2,444 |   |   |   | 2,444 |   |
| Loans held for sale                                                                                                                      |   |   | 1,139 |   |   |   | 1,807 |   |
| Loans                                                                                                                                    |   |   | 300,743 |   |   |   | 300,096 |   |
| Less allowance for loan losses                                                                                                           |   |   | (4,350 | ) |   |   | (4,455 | ) |
| Total loans, net                                                                                                                         |   |   | 296,393 |   |   |   | 295,641 |   |
|                                                                                                                                     |   |   |   |   |   |   |   |   |
| Accrued interest receivable                                                                                                              |   |   | 1,153 |   |   |   | 1,234 |   |
| Premises and equipment, net                                                                                                              |   |   | 2,310 |   |   |   | 2,385 |   |
| Bank-owned life insurance, net                                                                                                           |   |   | 7,047 |   |   |   | 6,981 |   |
| Mortgage servicing rights, at fair value                                                                                                 |   |   | 2,791 |   |   |   | 2,437 |   |
| Other real estate owned and repossessed assets, net                                                                                      |   |   | 2,065 |   |   |   | 2,821 |   |
| Other assets                                                                                                                             |   |   | 4,911 |   |   |   | 3,967 |   |
| Total assets                                                                                                                             |   | $ | 348,697 |   |   | $ | 339,740 |   |
|                                                                                                                                     |   |   |   |   |   |   |   |   |
| LIABILITIES                                                                                                                              |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                                 |   |   |   |   |   |   |   |   |
| Interest-bearing                                                                                                                         |   |   | 275,523 |   |   |   | 269,421 |   |
| Noninterest-bearing demand                                                                                                               |   |   | 32,253 |   |   |   | 30,576 |   |
| Total deposits                                                                                                                           |   |   | 307,776 |   |   |   | 299,997 |   |
|                                                                                                                                     |   |   |   |   |   |   |   |   |
| Borrowings                                                                                                                               |   |   | 8,346 |   |   |   | 8,506 |   |
| Accrued interest payable                                                                                                                 |   |   | 82 |   |   |   | 84 |   |
| Other liabilities                                                                                                                        |   |   | 2,448 |   |   |   | 2,149 |   |
| Advance payments from borrowers for taxes and insurance                                                                                  |   |   | 579 |   |   |   | 291 |   |
| Total liabilities                                                                                                                        |   |   | 319,231 |   |   |   | 311,027 |   |
|                                                                                                                                     |   |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES (NOTE 6)                                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                     |   |   |   |   |   |   |   |   |
| STOCKHOLDERS' EQUITY                                                                                                                     |   |   |   |   |   |   |   |   |
| Preferred stock, $0.01 par value, 1,000,000 shares authorized, none outstanding                                                          |   |   | - |   |   |   | - |   |
| Common stock, $0.01 par value, 24,000,000 shares authorized, 2,960,045 issued and outstanding as of March 31, 2012 and December 31, 2011 |   |   | 30 |   |   |   | 30 |   |
| Additional paid-in capital                                                                                                               |   |   | 11,973 |   |   |   | 11,939 |   |
| Unearned shares - Employee Stock Ownership Plan (“ESOP”)                                                                     |   |   | (693 | ) |   |   | (693 | ) |
| Retained earnings                                                                                                                        |   |   | 18,641 |   |   |   | 18,096 |   |
| Accumulated other comprehensive loss, net of tax                                                                                         |   |   | (485 | ) |   |   | (659 | ) |
| Total stockholders’ equity                                                                                                         |   |   | 29,466 |   |   |   | 28,713 |   |
| Total liabilities and stockholders’ equity                                                                                         |   | $ | 348,697 |   |   | $ | 339,740 |   |

----

|                                                                  |   |                                             |   |
|-----------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                  |   | THREE MONTHS ENDED                               |   |
|                                                                  |   | MARCH 31,                                        |   |
|                                                                  |   | 2012                                             |   |   | 2011 |   |
|                                                                  |   | (Dollars in thousands, except per share amounts) |   |
| INTEREST INCOME                                                       |   |                                             |   |   |   |   |
| Loans, including fees                                                 |   | $                                                | 4,508  |   |   | $ | 4,586 |   |
| Interest and dividends on investments, cash and cash equivalents      |   |                                             | 55     |   |   |   | 62 |   |
| Total interest income                                                 |   |                                             | 4,563  |   |   |   | 4,648 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| INTEREST EXPENSE                                                      |   |                                             |   |   |   |   |   |   |
| Deposits                                                              |   |                                             | 546    |   |   |   | 648 |   |
| Borrowings                                                            |   |                                             | 55     |   |   |   | 104 |   |
| Total interest expense                                                |   |                                             | 601    |   |   |   | 752 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| NET INTEREST INCOME                                                   |   |                                             | 3,962  |   |   |   | 3,896 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| PROVISION FOR LOAN LOSSES                                             |   |                                             | 1,500  |   |   |   | 825 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                   |   |                                             | 2,462  |   |   |   | 3,071 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| NONINTEREST INCOME                                                    |   |                                             |   |   |   |   |   |   |
| Service charges and fee income                                        |   |                                             | 550    |   |   |   | 522 |   |
| Earnings on cash surrender value of bank-owned life insurance         |   |                                             | 66     |   |   |   | 62 |   |
| Mortgage servicing income                                             |   |                                             | 177    |   |   |   | 135 |   |
| Fair value adjustment on mortgage servicing rights                    |   |                                             | 384    |   |   |   | (1 | ) |
| Loss on sale of securities                                            |   |                                             | -      |   |   |   | (34 | ) |
| Other-than-temporary impairment losses on securities                  |   |                                             | (91    | ) |   |   | (39 | ) |
| Gain on sale of loans                                                 |   |                                             | 251    |   |   |   | 34 |   |
| Total noninterest income                                              |   |                                             | 1,337  |   |   |   | 679 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| NONINTEREST EXPENSE                                                   |   |                                             |   |   |   |   |   |   |
| Salaries and benefits                                                 |   |                                             | 1,283  |   |   |   | 1,466 |   |
| Operations                                                            |   |                                             | 582    |   |   |   | 669 |   |
| Regulatory assessments                                                |   |                                             | 122    |   |   |   | 225 |   |
| Occupancy                                                             |   |                                             | 310    |   |   |   | 294 |   |
| Data processing                                                       |   |                                             | 242    |   |   |   | 239 |   |
| Losses and expenses on other real estate owned and repossessed assets |   |                                             | 469    |   |   |   | 139 |   |
| Total noninterest expense                                             |   |                                             | 3,008  |   |   |   | 3,032 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| INCOME BEFORE PROVISION FOR INCOME TAXES                              |   |                                             | 791    |   |   |   | 718 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| PROVISION FOR INCOME TAXES                                            |   |                                             | 245    |   |   |   | 222 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| NET INCOME                                                            |   | $                                                | 546    |   |   | $ | 496 |   |
|                                                                  |   |                                             |   |   |   |   |   |   |
| BASIC EARNINGS PER SHARE                                              |   | $                                                | 0.19   |   |   | $ | 0.17 |   |
| DILUTED EARNINGS PER SHARE                                            |   | $                                                | 0.19   |   |   | $ | 0.17 |   |

----

|                                                                |   | THREE MONTHS ENDED     |   |
|---------------------------------------------------------------------|--------|------------------------|--------|
|                                                                |   | MARCH 31,              |   |
|                                                                |   | 2012                   |   |   | 2011 |   |
|                                                                |   | (Dollars in thousands) |   |
| Net income                                                          |   | $                      | 546    |   |   | $ | 496 |   |
| Other comprehensive income, net of tax                              |   |                   |   |   |   |   |   |   |
| Unrealized holding gain, net of                                     |   |                   |   |   |   |   |   |   |
| taxes of $90 and $125 respectively                                  |   |                   | 174    |   |   |   | 242 |   |
| Reclassification adjustments for losses on                          |   |                   |   |   |   |   |   |   |
| sales of securities, net of taxes of $0 and $12, respectively       |   |                   | -      |   |   |   | 22 |   |
| Reclassification adjustments for other-than-temporary               |   |                   |   |   |   |   |   |   |
| impairment on securities, net of taxes of $31 and $13, respectively |   |                   | 60     |   |   |   | 26 |   |
|                                                                |   |                   |   |   |   |   |   |   |
| Other comprehensive income                                          |   |                   | 234    |   |   |   | 290 |   |
|                                                                |   |                   |   |   |   |   |   |   |
| Comprehensive income                                                |   | $                      | 780    |   |   | $ | 786 |   |
|                                                                |   |                   |   |   |   |   |   |   |

----

|                                                                                  |   | Shares         |   |   | Common Stock |   |   | Additional Paid-in Capital |   |   | UnearnedESOP Shares |   |   | Retained Earnings |   |   | Accumulated Other Comprehensive Loss, net of tax |   |   | Total Stockholders’ Equity |   |
|---------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------------|--------|--------|----------------------------|--------|--------|---------------------|--------|--------|-------------------|--------|--------|--------------------------------------------------|--------|--------|---------------------------------------|--------|
|                                                                                  |   | (in thousands) |   |
| BALANCE, December 31, 2011                                                            |   |           | 2,949  |   |         | $      | 30     |                       |   | $      | 11,939              |   |   | $                 | (693   | )      |                                             | $      | 18,096 |                                  |   | $ | (659 | ) |   | $ | 28,713 |   |
|                                                                                  |   |           |   |   |         |   |   |                       |   |   |                |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   |   |   |
| Net income                                                                            |   |           |   |   |         |   |   |                       |   |   |                |   |   |              |   |   |                                             |   | 546    |                                  |   |   |   |   |   |   | 546 |   |
|                                                                                  |   |           |   |   |         |   |   |                       |   |   |                |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   |   |   |
| Net unrealized gain in fair value of available for sale securities, net of tax of $90 |   |           |   |   |         |   | -      |                       |   |   | -                   |   |   |              | -      |   |                                             |   | -      |                                  |   |   | 174 |   |   |   | 174 |   |
|                                                                                  |   |           |   |   |         |   |   |                       |   |   |                |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   |   |   |
| Restricted stock awards                                                               |   |           | 11     |   |         |   | -      |                       |   |   | -                   |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   | - |   |
|                                                                                  |   |           |   |   |         |   |   |                       |   |   |                |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   |   |   |
| Share-based compensation                                                              |   |           |   |   |         |   |   |                       |   |   | 33                  |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   | 33 |   |
|                                                                                  |   |           |   |   |         |   |   |                       |   |   |                |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   |   |   |
| BALANCE, March 31, 2012                                                               |   |           | 2,960  |   |         | $      | 30     |                       |   | $      | 11,972              |   |   | $                 | (693   | )      |                                             | $      | 18,642 |                                  |   | $ | (485 | ) |   | $ | 29,466 |   |
|                                                                                  |   |           |   |   |         |   |   |                       |   |   |                |   |   |              |   |   |                                             |   |   |                                  |   |   |   |   |   |   |   |   |

----

|                                                                                    |   | THREE MONTHS ENDED MARCH 31, |    |
|-----------------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                                    |   | 2012                         |    |   | 2011 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                    |   | (Dollars in thousands)       |    |
| Net income                                                                              |   | $                            | 546     |   |   | $ | 496 |   |
| Adjustments to reconcile net income to net cash from operating activities               |   |                         |    |   |   |   |   |   |
| Loss on sale of available for sale securities                                           |   |                         | -       |   |   |   | 34 |   |
| Other-than-temporary impairment losses on securities                                    |   |                         | 91      |   |   |   | 39 |   |
| Provision for loan losses                                                               |   |                         | 1,500   |   |   |   | 825 |   |
| Depreciation and amortization                                                           |   |                         | 90      |   |   |   | 99 |   |
| Compensation expense related to stock options and restricted stock                      |   |                         | 33      |   |   |   | 33 |   |
| Fair value adjustment on mortgage servicing rights                                      |   |                         | (384    | ) |   |   | 1 |   |
| Additions to mortgage servicing rights                                                  |   |                         | (185    | ) |   |   | (148 | ) |
| Amortization of mortgage servicing rights                                               |   |                         | 215     |   |   |   | 201 |   |
| Increase in cash surrender value of bank owned life insurance                           |   |                         | (66     | ) |   |   | (62 | ) |
| Proceeds from sale of loans                                                             |   |                         | 21,132  |   |   |   | 14,869 |   |
| Originations of loans held for sale                                                     |   |                         | (20,213 | ) |   |   | (14,012 | ) |
| Loss on sale of other real estate owned and repossessed assets                          |   |                         | 255     |   |   |   | 45 |   |
| Gain on sale of loans                                                                   |   |                         | (251    | ) |   |   | (34 | ) |
| (Decrease) increase in operating assets and liabilities                                 |   |                         |    |   |   |   |   |   |
| Accrued interest receivable                                                             |   |                         | 81      |   |   |   | 34 |   |
| Other assets                                                                            |   |                         | (1,034  | ) |   |   | 928 |   |
| Accrued interest payable                                                                |   |                         | (2      | ) |   |   | (26 | ) |
| Other liabilities                                                                       |   |                         | 299     |   |   |   | (922 | ) |
|                                                                                    |   |                         |    |   |   |   |   |   |
| Net cash provided by operating activities                                               |   |                         | 2,107   |   |   |   | 2,400 |   |
|                                                                                    |   |                         |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                    |   |                         |    |   |   |   |   |   |
| Proceeds from principal payments, maturities and sales of available for sale securities |   |                         | 130     |   |   |   | 1,187 |   |
| Net increase in loans                                                                   |   |                         | (2,735  | ) |   |   | (3 | ) |
| Improvements to OREO and other repossessed assets                                       |   |                         | (206    | ) |   |   | (30 | ) |
| Proceeds from sale of OREO and other repossessed assets                                 |   |                         | 1,190   |   |   |   | 566 |   |
| Purchases of premises and equipment                                                     |   |                         | (15     | ) |   |   | (13 | ) |
|                                                                                    |   |                         |    |   |   |   |   |   |
| Net cash provided (used) by investing activities                                        |   |                         | (1,636  | ) |   |   | 1,707 |   |
|                                                                                    |   |                         |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                    |   |                         |    |   |   |   |   |   |
| Net increase (decrease) in deposits                                                     |   |                         | 7,779   |   |   |   | (4,761 | ) |
| Proceeds from borrowings                                                                |   |                         | -       |   |   |   | 28,000 |   |
| Repayment of borrowings                                                                 |   |                         | (160    | ) |   |   | (30,861 | ) |
| Net change in advances from borrowers for taxes and insurance                           |   |                         | 288     |   |   |   | 157 |   |
|                                                                                    |   |                         |    |   |   |   |   |   |
| Net cash provided (used) by financing activities                                        |   |                         | 7,907   |   |   |   | (7,465 | ) |
|                                                                                    |   |                         |    |   |   |   |   |   |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        |   |                         | 8,378   |   |   |   | (3,358 | ) |
|                                                                                    |   |                         |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, beginning of period                                          |   |                         | 17,031  |   |   |   | 9,092 |   |
|                                                                                    |   |                         |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, end of period                                                |   | $                            | 25,409  |   |   | $ | 5,734 |   |

| SUPPLEMENTAL CASH FLOW INFORMATION               |   |   |   |   |   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Cash paid for income taxes                       |   | $      | -      |   |   | $      | 220 |   |
| Interest paid on deposits and borrowings         |   | $      | 603    |   |   | $      | 778 |   |
| Net transfer of loans to other real estate owned |   | $      | 483    |   |   | $      | 1,069 |   |

----

----

----

|                                  |   |           |   |   | Gross Unrealized |             |   |                 |   |
|---------------------------------------|--------|----------------|--------|--------|------------------|------------------|--------|----------------------|--------|
|                                  |   | AmortizedCost  |   |   | Gains            |             |   | Losses 1 Yearor Less |   |   | Losses GreaterThan 1 Year |   |   | Estimated FairValue |   |
| March 31, 2012                        |   | (in thousands) |   |
| Agency mortgage-backed securities     |   | $              | 52     |   |             | $                | 6      |                 |   | $ | - |   |   | $ | - |   |   | $ | 58 |   |
| Non-agency mortgage-backed securities |   |           | 3,718  |   |             |             | -      |                 |   |   | - |   |   |   | (741 | ) |   | $ | 2,977 |   |
|      Total   |   | $              | 3,770  |   |             | $                | 6      |                 |   | $ | - |   |   | $ | (741 | ) |   | $ | 3,035 |   |
|                                  |   |           |   |   |             |             |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   |
|                                  |   |           |   |   |             | Gross Unrealized |   |                 |   |   |   |
|                                  |   | AmortizedCost  |   |   | Gains            |             |   | Losses 1 Yearor Less |   |   | Losses GreaterThan 1 Year |   |   | Estimated FairValue |   |
| December 31, 2011                     |   | (in thousands) |   |
| Agency mortgage-backed securities     |   | $              | 53     |   |             | $                | 6      |                 |   | $ | - |   |   | $ | - |   |   | $ | 59 |   |
| Non-agency mortgage-backed securities |   |           | 3,939  |   |             |             | -      |                 |   |   | - |   |   |   | (1,006 | ) |   |   | 2,933 |   |
|      Total   |   | $              | 3,992  |   |             | $                | 6      |                 |   | $ | - |   |   | $ | (1,006 | ) |   | $ | 2,992 |   |
|                                  |   |           |   |   |             |             |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |

|                |   | March 31, 2012 |   |
|---------------------|--------|----------------|--------|
|                |   | Amortized Cost |   |   | Fair Value |   |
|                |   | (in thousands) |   |
| Due after ten years |   | $              | 3,770  |   |   | $ | 3,035 |   |

----

|         |   | Three Months Ended March 31, |   |
|--------------|--------|------------------------------|--------|
|         |   | 2012                         |   |   | 2011 |   |
|         |   | (in thousands)               |   |
| Proceeds     |   | $                            | -      |   |   | $ | 1,096 |   |
| Gross gains  |   |                         | -      |   |   |   | 3 |   |
| Gross losses |   |                         | -      |   |   |   | (37 | ) |

|                                  |   | March 31, 2012      |   |
|---------------------------------------|--------|---------------------|--------|
|                                  |   | Less Than 12 Months |   |   | 12 Months or Longer |   |   | Total |   |
|                                  |   | Fair Value          |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |
|                                  |   | (in thousands)      |   |
| Non-agency mortgage-backed securities |   | $                   | -      |   |   | $ | - |   |   | $ | 2,977 |   |   | $ | (741 | ) |   | $ | 2,977 |   |   | $ | (741 | ) |
| Total                                 |   | $                   | -      |   |   | $ | - |   |   | $ | 2,977 |   |   | $ | (741 | ) |   | $ | 2,977 |   |   | $ | (741 | ) |
|                                  |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | December 31, 2011   |   |
|                                  |   | Less Than 12 Months |   |   | 12 Months or Longer |   |   | Total |   |
|                                  |   | Fair Value          |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |
|                                  |   | (in thousands)      |   |
| Non-agency mortgage-backed securities |   | $                   | -      |   |   | $ | - |   |   | $ | 2,933 |   |   | $ | (1,006 | ) |   | $ | 2,933 |   |   | $ | (1,006 | ) |
| Total                                 |   | $                   | -      |   |   | $ | - |   |   | $ | 2,933 |   |   | $ | (1,006 | ) |   | $ | 2,933 |   |   | $ | (1,006 | ) |

|                                                  |   | Three Months Ended |   |
|-------------------------------------------------------|--------|--------------------|--------|
|                                                  |   | March 31,          |   |
|                                                  |   | 2012               |   |   | 2011 |   |
|                                                  |   | (in thousands)     |   |
| Estimated credit losses, beginning balance            |   | $                  | 256    |   |   | $ | 39 |   |
| Additions for credit losses not previously recognized |   |               | 91     |   |   |   | - |   |
| Reduction for increases in cash flows                 |   |               | -      |   |   |   | - |   |
| Reduction for realized losses                         |   |               | -      |   |   |   | - |   |
| Estimated losses, ending balance                      |   | $                  | 347    |   |   | $ | 39 |   |

----

----

|                       |   | March 312012   |    |   | December 31,2011 |   |
|----------------------------|--------|----------------|---------|--------|------------------|--------|
|                       |   |           |    |   |
|                       |   | (in thousands) |    |
| Real Estate Loans:         |   |           |    |   |             |   |
| One-to four- family        |   | $              | 98,600  |   |             | $      | 96,305 |   |
| Home equity                |   |           | 38,654  |   |             |   | 39,656 |   |
| Commercial and multifamily |   |           | 105,313 |   |             |   | 106,016 |   |
| Construction and land      |   |           | 18,226  |   |             |   | 17,805 |   |
| Total real estate loans    |   |           | 260,793 |   |             |   | 259,782 |   |
|                       |   |           |    |   |             |   |   |   |
| Consumer loans:            |   |           |    |   |             |   |   |   |
| Manufactured homes         |   |           | 17,994  |   |             |   | 18,444 |   |
| Other consumer             |   |           | 10,267  |   |             |   | 10,920 |   |
| Total consumer loans       |   |           | 28,261  |   |             |   | 29,364 |   |
|                       |   |           |    |   |             |   |   |   |
| Commercial business loans  |   |           | 13,291  |   |             |   | 13,163 |   |
|                       |   |           |    |   |             |   |   |   |
| Total loans                |   |           | 302,345 |   |             |   | 302,309 |   |
| Deferred fees              |   |           | (463    | )      |             |   | (406 | ) |
| Loans held for sale        |   |           | (1,139  | )      |             |   | (1,807 | ) |
| Total loans, gross         |   |           | 300,743 |   |             |   | 300,096 |   |
| Allowance for loan losses  |   |           | (4,350  | )      |             |   | (4,455 | ) |
| Total loans, net           |   | $              | 296,393 |   |             | $      | 295,641 |   |

----

|                                                  |   | One- to four- family |   |   | Home equity |   |   | Commercial and multifamily |   |   | Construction and land |   |   | Manufactured homes |   |   | Other consumer |   |   | Commercial business |   |   | Unallocated |   |   | Total  |   |
|-------------------------------------------------------|--------|----------------------|--------|--------|-------------|--------|--------|----------------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|----------------|--------|--------|---------------------|--------|--------|-------------|--------|--------|--------|--------|
|                                                  |   | (In thousands)       |   |
| Allowance for loan losses:                            |   |                 |   |   |        |   |   |                       |   |   |                  |   |   |               |   |
| Ending balance: individually evaluated for impairment |   | $                    | 869    |   |        | $      | 229    |                       |   | $      | 62                    |   |   | $                  | 18     |   |           | $      | 170    |                |   |   | 7           |   |   |   | 115    |   |   |   | - |   |   | $ | 1,470 |   |
| Ending balance: collectively evaluated for impairment |   |                 | 713    |   |        |   | 1,181  |                       |   |   | 446                   |   |   |               | 48     |   |           |   | 207    |                |   |   | 135         |   |   |   | 119    |   |   |   | 31 |   |   |   | 2,880 |   |
| Ending balance                                        |   | $                    | 1,582  |   |        | $      | 1,410  |                       |   | $      | 508                   |   |   | $                  | 66     |   |           | $      | 377    |                |   | $      | 142         |   |   | $      | 234    |   |   | $ | 31 |   |   | $ | 4,350 |   |
|                                                  |   |
| Loans receivable:                                     |   |                 |   |   |        |   |   |                       |   |   |                  |   |   |               |   |   |           |   |   |
| Ending balance: individually evaluated for impairment |   | $                    | 9,507  |   |        | $      | 1,948  |                       |   | $      | 2,259                 |   |   | $                  | 805    |   |           | $      | 904    |                |   | $      | 92          |   |   | $      | 971    |   |   | $ | - |   |   | $ | 16,486 |   |
| Ending balance: collectively evaluated for impairment |   |                 | 89,093 |   |        |   | 36,706 |                       |   |   | 103,054               |   |   |               | 17,421 |   |           |   | 17,090 |                |   |   | 10,175      |   |   |   | 12,320 |   |   |   | - |   |   | $ | 285,859 |   |
| Ending balance                                        |   | $                    | 98,600 |   |        | $      | 38,654 |                       |   | $      | 105,313               |   |   | $                  | 18,226 |   |           | $      | 17,994 |                |   | $      | 10,267      |   |   | $      | 13,291 |   |   | $ | - |   |   | $ | 302,345 |   |
|                                                  |   |                 |   |   |        |   |   |                       |   |   |                  |   |   |               |   |   |           |   |   |                |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                  |   | One- to four- family |   |   | Home equity |   |   | Commercial and multifamily |   |   | Construction and land |   |   | Manufactured homes |   |   | Other consumer |   |   | Commercial business |   |   | Unallocated |   |   | Total  |   |
|-------------------------------------------------------|--------|----------------------|--------|--------|-------------|--------|--------|----------------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|----------------|--------|--------|---------------------|--------|--------|-------------|--------|--------|--------|--------|
|                                                  |   | (In thousands)       |   |
| Allowance for loan losses:                            |   |                 |   |   |        |   |   |                       |   |   |                  |   |   |               |   |
| Ending balance: individually evaluated for impairment |   | $                    | 541    |   |        | $      | 447    |                       |   | $      | 38                    |   |   | $                  | 37     |   |           | $      | 11     |                |   | $      | 48          |   |   | $      | 132    |   |   | $ | - |   |   | $ | 1,254 |   |
| Ending balance: collectively evaluated for impairment |   |                 | 576    |   |        |   | 979    |                       |   |   | 931                   |   |   |               | 68     |   |           |   | 279    |                |   |   | 165         |   |   |   | 122    |   |   |   | 81 |   |   |   | 3,201 |   |
| Ending balance                                        |   | $                    | 1,117  |   |        | $      | 1,426  |                       |   | $      | 969                   |   |   | $                  | 105    |   |           | $      | 290    |                |   | $      | 213         |   |   | $      | 254    |   |   | $ | 81 |   |   | $ | 4,455 |   |
|                                                  |   |
| Loans receivable:                                     |   |                 |   |   |        |   |   |                       |   |   |                  |   |   |               |   |   |           |   |   |
| Ending balance: individually evaluated for impairment |   | $                    | 8,260  |   |        | $      | 1,784  |                       |   | $      | 2,003                 |   |   | $                  | 902    |   |           | $      | 122    |                |   | $      | 101         |   |   | $      | 447    |   |   | $ | - |   |   | $ | 13,619 |   |
| Ending balance: collectively evaluated for impairment |   |                 | 88,045 |   |        |   | 37,872 |                       |   |   | 104,013               |   |   |               | 16,903 |   |           |   | 18,322 |                |   |   | 10,819      |   |   |   | 12,716 |   |   |   | - |   |   |   | 288,690 |   |
| Ending balance                                        |   | $                    | 96,305 |   |        | $      | 39,656 |                       |   | $      | 106,016               |   |   | $                  | 17,805 |   |           | $      | 18,444 |                |   | $      | 10,920      |   |   | $      | 13,163 |   |   | $ | - |   |   | $ | 302,309 |   |
|                                                  |   |                 |   |   |        |   |   |                       |   |   |                  |   |   |               |   |   |           |   |   |                |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                       |   | BeginningAllowance |   |   | Charge-offs |   |   | Recoveries |   |   | Provision |   |   | EndingAllowance |   |
|----------------------------|--------|--------------------|--------|--------|-------------|--------|--------|------------|--------|--------|-----------|--------|--------|-----------------|--------|
|                       |   | (in thousands)     |   |
| One-to four- family        |   | $                  | 1,117  |   |        | $      | (750   | )          |   | $      | -         |   |   | $               | 1,215  |   |   | $ | 1,582 |   |
| Home equity                |   |               | 1,426  |   |        |   | (714   | )          |   |   | 2         |   |   |            | 697    |   |   |   | 1,410 |   |
| Commercial and multifamily |   |               | 969    |   |        |   | -      |       |   |   | -         |   |   |            | (461   | ) |   |   | 508 |   |
| Construction and land      |   |               | 105    |   |        |   | (37    | )          |   |   | -         |   |   |            | (2     | ) |   |   | 66 |   |
| Manufactured homes         |   |               | 290    |   |        |   | (28    | )          |   |   | 1         |   |   |            | 114    |   |   |   | 377 |   |
| Other consumer             |   |               | 213    |   |        |   | (78    | )          |   |   | 7         |   |   |            | 2      |   |   |   | 142 |   |
| Commercial business        |   |               | 254    |   |        |   | (6     | )          |   |   | -         |   |   |            | (14    | ) |   |   | 234 |   |
| Unallocated                |   |               | 81     |   |        |   | -      |       |   |   | -         |   |   |            | (50    | ) |   |   | 31 |   |
|                       |   | $                  | 4,455  |   |        | $      | (1,613 | )          |   | $      | 10        |   |   | $               | 1,500  |   |   | $ | 4,350 |   |

|                       |   | BeginningAllowance |   |   | Charge-offs |   |   | Recoveries |   |   | Provision |   |   | EndingAllowance |   |
|----------------------------|--------|--------------------|--------|--------|-------------|--------|--------|------------|--------|--------|-----------|--------|--------|-----------------|--------|
|                       |   | (in thousands)     |   |
| One-to four- family        |   | $                  | 909    |   |        | $      | (242   | )          |   | $      | 10        |   |   | $               | 163    |   |   | $ | 840 |   |
| Home equity                |   |               | 1,480  |   |        |   | (432   | )          |   |   | 5         |   |   |            | 327    |   |   |   | 1,380 |   |
| Commercial and multifamily |   |               | 664    |   |        |   | (70    | )          |   |   | -         |   |   |            | 310    |   |   |   | 904 |   |
| Construction and land      |   |               | 205    |   |        |   | -      |       |   |   | -         |   |   |            | 5      |   |   |   | 210 |   |
| Manufactured homes         |   |               | 293    |   |        |   | (101   | )          |   |   | 1         |   |   |            | 42     |   |   |   | 235 |   |
| Other consumer             |   |               | 309    |   |        |   | (30    | )          |   |   | 11        |   |   |            | 71     |   |   |   | 361 |   |
| Commercial business        |   |               | 163    |   |        |   | -      |       |   |   | -         |   |   |            | 82     |   |   |   | 245 |   |
| Unallocated                |   |               | 413    |   |        |   | -      |       |   |   | -         |   |   |            | (172   | ) |   |   | 241 |   |
|                       |   | $                  | 4,436  |   |        | $      | (875   | )          |   | $      | 27        |   |   | $               | 828    |   |   | $ | 4,416 |   |

----

|            |   | One-to four- family |   |   | Home equity |   |   | Commercial and multifamily |   |   | Commercial Business |   |   | Construction and land |   |   | Manufactured homes |   |   | Other consumer |   |   | Total  |   |
|-----------------|--------|---------------------|--------|--------|-------------|--------|--------|----------------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|----------------|--------|--------|--------|--------|
| Grade:          |   | (in thousands)      |   |
| Pass            |   | $                   | 75,775 |   |        | $      | 30,836 |                       |   | $      | 99,497              |   |   | $                     | 10,528 |   |               | $      | 16,714 |           |   | $      | 15,344 |   |   | $ | 8,978 |   |   | $ | 257,672 |   |
| Watch           |   |                | 16,989 |   |        |   | 6,346  |                       |   |   | 3,763               |   |   |                  | 2,357  |   |               |   | 942    |           |   |   | 2,571  |   |   |   | 1,163 |   |   |   | 34,131 |   |
| Special Mention |   |                | 243    |   |        |   | 514    |                       |   |   | 603                 |   |   |                  | -      |   |               |   | -      |           |   |   | 54     |   |   |   | 3 |   |   |   | 1,417 |   |
| Substandard     |   |                | 5,593  |   |        |   | 958    |                       |   |   | 1,450               |   |   |                  | 406    |   |               |   | 570    |           |   |   | 25     |   |   |   | 123 |   |   |   | 9,125 |   |
| Doubtful        |   |                | -      |   |        |   | -      |                       |   |   | -                   |   |   |                  | -      |   |               |   | -      |           |   |   | -      |   |   |   | - |   |   |   | - |   |
| Loss            |   |                | -      |   |        |   | -      |                       |   |   | -                   |   |   |                  | -      |   |               |   | -      |           |   |   | -      |   |   |   | - |   |   |   | - |   |
| Total           |   | $                   | 98,600 |   |        | $      | 38,654 |                       |   | $      | 105,313             |   |   | $                     | 13,291 |   |               | $      | 18,226 |           |   | $      | 17,994 |   |   | $ | 10,267 |   |   | $ | 302,345 |   |

|            |   | One-to four- family |   |   | Home equity |   |   | Commercial and multifamily |   |   | Commercial Business |   |   | Construction and land |   |   | Manufactured homes |   |   | Other consumer |   |   | Total  |   |
|-----------------|--------|---------------------|--------|--------|-------------|--------|--------|----------------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|----------------|--------|--------|--------|--------|
| Grade:          |   | (in thousands)      |   |
| Pass            |   | $                   | 70,392 |   |        | $      | 31,943 |                       |   | $      | 100,002             |   |   | $                     | 10,331 |   |               | $      | 16,087 |           |   | $      | 16,062 |   |   | $ | 9,507 |   |   | $ | 254,324 |   |
| Watch           |   |                | 18,088 |   |        |   | 6,138  |                       |   |   | 4,048               |   |   |                  | 2,385  |   |               |   | 778    |           |   |   | 2,260  |   |   |   | 1,312 |   |   |   | 35,009 |   |
| Special Mention |   |                | 1,505  |   |        |   | 183    |                       |   |   | -                   |   |   |                  | 11     |   |               |   | -      |           |   |   | -      |   |   |   | 4 |   |   |   | 1,703 |   |
| Substandard     |   |                | 6,320  |   |        |   | 1,392  |                       |   |   | 1,966               |   |   |                  | 436    |   |               |   | 940    |           |   |   | 122    |   |   |   | 97 |   |   |   | 11,273 |   |
| Doubtful        |   |                | -      |   |        |   | -      |                       |   |   | -                   |   |   |                  | -      |   |               |   | -      |           |   |   | -      |   |   |   | - |   |   |   | - |   |
| Loss            |   |                | -      |   |        |   | -      |                       |   |   | -                   |   |   |                  | -      |   |               |   | -      |           |   |   | -      |   |   |   | - |   |   |   | - |   |
| Total           |   | $                   | 96,305 |   |        | $      | 39,656 |                       |   | $      | 106,016             |   |   | $                     | 13,163 |   |               | $      | 17,805 |           |   | $      | 18,444 |   |   | $ | 10,920 |   |   | $ | 302,309 |   |

|                       |   | March 31, 2012 |   |   | December 31, 2011 |   |
|----------------------------|--------|----------------|--------|--------|-------------------|--------|
|                       |   | (in thousands) |   |
| One- to four- family       |   | $              | 2,208  |   |              | $      | 3,124 |   |
| Home equity                |   |           | 745    |   |              |   | 731 |   |
| Commercial and multifamily |   |           | 1,203  |   |              |   | 1,299 |   |
| Construction and land      |   |           | -      |   |              |   | - |   |
| Other consumer             |   |           | 93     |   |              |   | 64 |   |
| Total                      |   | $              | 4,249  |   |              | $      | 5,218 |   |

----

|                       |   | 30-59 Days Past Due |   |   | 60-89 Days Past Due |   |   | Greater Than 90 Days Past Due |   |   | Recorded Investment > 90 Days and Accruing |   |   | Total Past Due |   |   | Current |   |   | Total Loans |   |
|----------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-------------------------------|--------|--------|-----------------------------------------------|--------|--------|----------------|--------|--------|---------|--------|--------|-------------|--------|
|                       |   | (in thousands)      |   |
| One- to four- family       |   | $                   | 3,378  |   |                | $      | -      |                          |   | $      | 2,123                                         |   |   | $              | -      |   |    | $      | 5,501  |        |   | $ | 93,099 |   |   | $ | 98,600 |   |
| Home equity                |   |                | 605    |   |                |   | 368    |                          |   |   | 440                                           |   |   |           | -      |   |    |   | 1,413  |        |   |   | 37,241 |   |   |   | 38,654 |   |
| Commercial and multifamily |   |                | 40     |   |                |   | -      |                          |   |   | -                                             |   |   |           | -      |   |    |   | 40     |        |   |   | 105,273 |   |   |   | 105,313 |   |
| Construction and land      |   |                | -      |   |                |   | -      |                          |   |   | -                                             |   |   |           | -      |   |    |   | -      |        |   |   | 18,226 |   |   |   | 18,226 |   |
| Manufactured homes         |   |                | 179    |   |                |   | 44     |                          |   |   | 45                                            |   |   |           | -      |   |    |   | 268    |        |   |   | 17,726 |   |   |   | 17,994 |   |
| Other consumer             |   |                | 159    |   |                |   | 22     |                          |   |   | 4                                             |   |   |           | -      |   |    |   | 185    |        |   |   | 10,082 |   |   |   | 10,267 |   |
| Commercial business        |   |                | 54     |   |                |   | -      |                          |   |   | -                                             |   |   |           | -      |   |    |   | 54     |        |   |   | 13,237 |   |   |   | 13,291 |   |
| Total                      |   | $                   | 4,415  |   |                | $      | 434    |                          |   | $      | 2,612                                         |   |   | $              | -      |   |    | $      | 7,461  |        |   | $ | 294,884 |   |   | $ | 302,345 |   |

|                       |   | 30-59 Days Past Due |   |   | 60-89 Days Past Due |   |   | Greater Than 90 Days Past Due |   |   | Recorded Investment > 90 Days and Accruing |   |   | Total Past Due |   |   | Current |   |   | Total Loans |   |
|----------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-------------------------------|--------|--------|-----------------------------------------------|--------|--------|----------------|--------|--------|---------|--------|--------|-------------|--------|
|                       |   | (in thousands)      |   |
| One- to four- family       |   | $                   | 4,321  |   |                | $      | 935    |                          |   | $      | 2,683                                         |   |   | $              | -      |   |    | $      | 7,939  |        |   | $ | 88,366 |   |   | $ | 96,305 |   |
| Home equity                |   |                | 583    |   |                |   | 176    |                          |   |   | 683                                           |   |   |           | -      |   |    |   | 1,442  |        |   |   | 38,214 |   |   |   | 39,656 |   |
| Commercial and multifamily |   |                | -      |   |                |   | -      |                          |   |   | -                                             |   |   |           | -      |   |    |   | -      |        |   |   | 106,016 |   |   |   | 106,016 |   |
| Construction and land      |   |                | -      |   |                |   | 123    |                          |   |   | 80                                            |   |   |           | -      |   |    |   | 203    |        |   |   | 17,602 |   |   |   | 17,805 |   |
| Manufactured homes         |   |                | 327    |   |                |   | 7      |                          |   |   | -                                             |   |   |           | -      |   |    |   | 334    |        |   |   | 18,110 |   |   |   | 18,444 |   |
| Other consumer             |   |                | 172    |   |                |   | 3      |                          |   |   | -                                             |   |   |           | -      |   |    |   | 175    |        |   |   | 10,745 |   |   |   | 10,920 |   |
| Commercial business        |   |                | 669    |   |                |   | -      |                          |   |   | -                                             |   |   |           | -      |   |    |   | 669    |        |   |   | 12,494 |   |   |   | 13,163 |   |
| Total                      |   | $                   | 6,072  |   |                | $      | 1,244  |                          |   | $      | 3,446                                         |   |   | $              | -      |   |    | $      | 10,762 |        |   | $ | 291,547 |   |   | $ | 302,309 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | One- to four-family |   |   | Home equity |   |   | Commercial and multifamily |   |   | Commercial Business |   |   | Construction and land |   |   | Manufactured homes |   |   | Other consumer |   |   | Total  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|-------------|--------|--------|----------------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|----------------|--------|--------|--------|--------|
|                                                                                                                (in thousands) |   |
| Performing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                   | 94,441 |   |        | $      | 37,359 |                       |   | $      | 103,264             |   |   | $                     | 13,170 |   |               | $      | 18,226 |           |   | $      | 17,994 |   |   | $ | 10,162 |   |   | $ | 294,616 |   |
| Nonperforming                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                | 4,159  |   |        |   | 1,295  |                       |   |   | 2,049               |   |   |                  | 121    |   |               |   | -      |           |   |   | -      |   |   |   | 105 |   |   |   | 7,729 |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                   | 98,600 |   |        | $      | 38,654 |                       |   | $      | 105,313             |   |   | $                     | 13,291 |   |               | $      | 18,226 |           |   | $      | 17,994 |   |   | $ | 10,267 |   |   | $ | 302,345 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | One-to four- family |   |   | Home equity |   |   | Commercial and multifamily |   |   | Commercial Business |   |   | Construction and land |   |   | Manufactured homes |   |   | Other consumer |   |   | Total  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|-------------|--------|--------|----------------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|----------------|--------|--------|--------|--------|
|                                                                                                               (in thousands) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Performing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $                   | 91,904 |   |        | $      | 38,783 |                       |   | $      | 104,797             |   |   | $                     | 13,163 |   |               | $      | 17,725 |           |   | $      | 18,444 |   |   | $ | 10,856 |   |   | $ | 295,672 |   |
| Nonperforming                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                | 4,401  |   |        |   | 873    |                       |   |   | 1,219               |   |   |                  | -      |   |               |   | 80     |           |   |   | -      |   |   |   | 64 |   |   |   | 6,637 |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $                   | 96,305 |   |        | $      | 39,656 |                       |   | $      | 106,016             |   |   | $                     | 13,163 |   |               | $      | 17,805 |           |   | $      | 18,444 |   |   | $ | 10,920 |   |   | $ | 302,309 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                |   |   |        |   |   |                       |   |   |                |   |   |                  |   |   |               |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                |   | Recorded Investment |   |   | Unpaid Principal Balance |   |   | Related Allowance |   |
|-------------------------------------|--------|---------------------|--------|--------|--------------------------|--------|--------|-------------------|--------|
| With no related allowance recorded: |   | (in thousands)      |   |
| One-to four-family                  |   | $                   | 3,857  |   |                     | $      | 4,117  |              |   | $ | - |   |
| Home equity                         |   |                | 656    |   |                     |   | 797    |              |   |   | - |   |
| Commercial and multifamily          |   |                | 1,834  |   |                     |   | 1,834  |              |   |   | - |   |
| Construction and land               |   |                | 726    |   |                     |   | 726    |              |   |   | - |   |
| Manufactured homes                  |   |                | 72     |   |                     |   | 72     |              |   |   | - |   |
| Other consumer                      |   |                | 28     |   |                     |   | 69     |              |   |   | - |   |
| Commercial business                 |   |                | 825    |   |                     |   | 825    |              |   |   | - |   |
| Total                               |   | $                   | 7,998  |   |                     | $      | 8,440  |              |   | $ | - |   |
|                                |   |                |   |   |                     |   |   |              |   |   |   |   |
| With an allowance recorded:         |   |                |   |   |                     |   |   |              |   |   |   |   |
| One-to four-family                  |   | $                   | 5,650  |   |                     | $      | 5,878  |              |   | $ | 869 |   |
| Home equity                         |   |                | 1,292  |   |                     |   | 1,614  |              |   |   | 229 |   |
| Commercial and multifamily          |   |                | 425    |   |                     |   | 425    |              |   |   | 62 |   |
| Construction and land               |   |                | 78     |   |                     |   | 78     |              |   |   | 18 |   |
| Manufactured homes                  |   |                | 797    |   |                     |   | 797    |              |   |   | 170 |   |
| Other consumer                      |   |                | 64     |   |                     |   | 64     |              |   |   | 7 |   |
| Commercial business                 |   |                | 146    |   |                     |   | 146    |              |   |   | 115 |   |
| Total                               |   | $                   | 8,452  |   |                     | $      | 9,002  |              |   | $ | 1,470 |   |
|                                |   |                |   |   |                     |   |   |              |   |   |   |   |
| Totals:                             |   |                |   |   |                     |   |   |              |   |   |   |   |
| One-to four- family                 |   | $                   | 9,507  |   |                     | $      | 9,995  |              |   | $ | 869 |   |
| Home equity                         |   |                | 1,948  |   |                     |   | 2,411  |              |   |   | 229 |   |
| Commercial and multifamily          |   |                | 2,259  |   |                     |   | 2,259  |              |   |   | 62 |   |
| Construction and land               |   |                | 805    |   |                     |   | 804    |              |   |   | 18 |   |
| Manufactured homes                  |   |                | 904    |   |                     |   | 869    |              |   |   | 170 |   |
| Other consumer                      |   |                | 92     |   |                     |   | 133    |              |   |   | 7 |   |
| Commercial business                 |   |                | 971    |   |                     |   | 971    |              |   |   | 115 |   |
| Total                               |   | $                   | 16,486 |   |                     | $      | 17,442 |              |   | $ | 1,470 |   |

----

|                                |   | Recorded Investment |   |   | Unpaid Principal Balance |   |   | Related Allowance |   |
|-------------------------------------|--------|---------------------|--------|--------|--------------------------|--------|--------|-------------------|--------|
| With no related allowance recorded: |   | (in thousands)      |   |
| One-to four-family                  |   | $                   | 3,104  |   |                     | $      | 3,104  |              |   | $ | - |   |
| Home equity                         |   |                | 773    |   |                     |   | 773    |              |   |   | - |   |
| Commercial and multifamily          |   |                | 1,784  |   |                     |   | 1,784  |              |   |   | - |   |
| Construction and land               |   |                | 779    |   |                     |   | 785    |              |   |   | - |   |
| Manufactured homes                  |   |                | -      |   |                     |   | -      |              |   |   | - |   |
| Other consumer                      |   |                | 14     |   |                     |   | 55     |              |   |   | - |   |
| Commercial business                 |   |                | 233    |   |                     |   | 233    |              |   |   | - |   |
| Total                               |   | $                   | 6,687  |   |                     | $      | 6,734  |              |   | $ | - |   |
|                                |   |                |   |   |                     |   |   |              |   |   |   |   |
| With an allowance recorded:         |   |                |   |   |                     |   |   |              |   |   |   |   |
| One-to four-family                  |   | $                   | 5,156  |   |                     | $      | 5,280  |              |   | $ | 541 |   |
| Home equity                         |   |                | 1,011  |   |                     |   | 1,038  |              |   |   | 447 |   |
| Commercial and multifamily          |   |                | 219    |   |                     |   | 219    |              |   |   | 38 |   |
| Construction and land               |   |                | 123    |   |                     |   | 178    |              |   |   | 37 |   |
| Manufactured homes                  |   |                | 122    |   |                     |   | 122    |              |   |   | 11 |   |
| Other consumer                      |   |                | 87     |   |                     |   | 87     |              |   |   | 48 |   |
| Commercial business                 |   |                | 217    |   |                     |   | 214    |              |   |   | 132 |   |
| Total                               |   | $                   | 6,932  |   |                     | $      | 7,138  |              |   | $ | 1,254 |   |
|                                |   |                |   |   |                     |   |   |              |   |   |   |   |
| Totals:                             |   |                |   |   |                     |   |   |              |   |   |   |   |
| One-to four-family                  |   | $                   | 8,260  |   |                     | $      | 8,384  |              |   | $ | 541 |   |
| Home equity                         |   |                | 1,784  |   |                     |   | 1,811  |              |   |   | 447 |   |
| Commercial and multifamily          |   |                | 2,003  |   |                     |   | 2,003  |              |   |   | 38 |   |
| Construction and land               |   |                | 902    |   |                     |   | 963    |              |   |   | 37 |   |
| Manufactured homes                  |   |                | 122    |   |                     |   | 122    |              |   |   | 11 |   |
| Other consumer                      |   |                | 101    |   |                     |   | 142    |              |   |   | 48 |   |
| Commercial Business                 |   |                | 447    |   |                     |   | 447    |              |   |   | 132 |   |
| Total                               |   | $                   | 13,619 |   |                     | $      | 13,872 |              |   | $ | 1,254 |   |

----

|                                |   | Three Months Ended          |   |
|-------------------------------------|--------|-----------------------------|--------|
|                                |   | March 31, 2012              |   |   | March 31, 2011 |   |
|                                |   | Average Recorded Investment |   |   | Interest Income Recognized |   |   | Average Recorded Investment |   |   | Interest Income Recognized |   |
| With no related allowance recorded: |   |                        |   |
| One-to four-family                  |   | $                           | 3,236  |   |   | $ | 43 |   |   | $ | 1,731 |   |   | $ | 6 |   |
| Home equity                         |   |                        | 715    |   |   |   | 12 |   |   |   | 542 |   |   |   | 3 |   |
| Commercial and multifamily          |   |                        | 1,809  |   |   |   | 19 |   |   |   | 453 |   |   |   | 2 |   |
| Construction and land               |   |                        | 740    |   |   |   | 12 |   |   |   | - |   |   |   | - |   |
| Manufactured homes                  |   |                        | 13     |   |   |   | 1 |   |   |   | 46 |   |   |   | - |   |
| Other consumer                      |   |                        | 14     |   |   |   | 1 |   |   |   | 55 |   |   |   | - |   |
| Commercial business                 |   |                        | 260    |   |   |   | 4 |   |   |   | 147 |   |   |   | - |   |
| Total                               |   | $                           | 6,787  |   |   | $ | 92 |   |   | $ | 2,972 |   |   | $ | 11 |   |
|                                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to four-family                  |   | $                           | 3,867  |   |   | $ | 48 |   |   | $ | 4,135 |   |   | $ | 7 |   |
| Home equity                         |   |                        | 885    |   |   |   | 14 |   |   |   | 1,069 |   |   |   | 3 |   |
| Commercial and multifamily          |   |                        | 322    |   |   |   | 2 |   |   |   | 3,074 |   |   |   | 32 |   |
| Construction and land               |   |                        | 62     |   |   |   | 1 |   |   |   | - |   |   |   | - |   |
| Manufactured homes                  |   |                        | 116    |   |   |   | 15 |   |   |   | 72 |   |   |   | 1 |   |
| Other consumer                      |   |                        | 57     |   |   |   | 1 |   |   |   | 35 |   |   |   | - |   |
| Commercial business                 |   |                        | 180    |   |   |   | 1 |   |   |   | 131 |   |   |   | 3 |   |
| Total                               |   | $                           | 5,489  |   |   | $ | 82 |   |   | $ | 8,516 |   |   | $ | 46 |   |
|                                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Totals:                             |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to four-family                  |   | $                           | 7,103  |   |   | $ | 91 |   |   | $ | 5,866 |   |   | $ | 13 |   |
| Home equity                         |   |                        | 1,600  |   |   |   | 26 |   |   |   | 1,611 |   |   |   | 6 |   |
| Commercial and multifamily          |   |                        | 2,131  |   |   |   | 21 |   |   |   | 3,527 |   |   |   | 34 |   |
| Construction and land               |   |                        | 802    |   |   |   | 13 |   |   |   | - |   |   |   | - |   |
| Manufactured homes                  |   |                        | 129    |   |   |   | 16 |   |   |   | 118 |   |   |   | 1 |   |
| Other consumer                      |   |                        | 71     |   |   |   | 2 |   |   |   | 90 |   |   |   | - |   |
| Commercial Business                 |   |                        | 440    |   |   |   | 5 |   |   |   | 278 |   |   |   | 3 |   |
| Total                               |   | $                           | 12,276 |   |   | $ | 174 |   |   | $ | 11,489 |   |   | $ | 57 |   |

----

|                       |   | Three Months Ended March 31, 2012              |
|----------------------------|--------|------------------------------------------------|
|                       |   | Number of Contracts                            |   | Rate Modifications |   | Term Modifications |   | Payment Modifications |   | Combination Modifications |   | Total Modifications |
|                       |   | (in thousands, except for number of contracts) |
| One- to four- family       |   | 2                                              |   | $- |   | $- |   | $- |   | $88 |   | $88 |
| Home equity                |   | 1                                              |   | - |   | - |   | - |   | 49 |   | 49 |
| Commercial and multifamily |   | 1                                              |   | - |   | - |   | - |   | 243 |   | 243 |
| Construction and land      |   | -                                              |   | - |   | - |   | - |   | - |   | - |
| Manufactured homes         |   | -                                              |   | - |   | - |   | - |   | - |   | - |
| Other consumer             |   | 1                                              |   | - |   | - |   | - |   | 12 |   | 12 |
| Commercial business        |   | 2                                              |   | 121 |   | - |   | - |   | 160 |   | 281 |
| Total                      |   | 7                                              |   | $121 |   | $ |   | $ |   | $552 |   | $673 |
|                       |   |                                           |   |   |   |   |   |   |   |   |   |   |

----

|                |   | Quarter endedMarch 31, 2012 |   |
|---------------------|--------|-----------------------------|--------|
|                |   | (in thousands)              |   |
| One-to four-family  |   | $                           | 2,749  |   |
| Home equity         |   |                        | 767    |   |
| Manufactured homes  |   |                        | 574    |   |
| Other consumer      |   |                        | 42     |   |
| Commercial business |   |                        | 540    |   |
| Total               |   | $                           | 4,672  |   |

----

|                                                    |   | March 31, 2012 |    |   | December 31, 2011 |   |
|---------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
| Description                                             |   | CarryingAmount |    |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Financial assets:                                       |   | (in thousands) |    |
|  Cash and cash equivalents                         |   | $              | 25,409  |   |              | $      | 25,409 |   |   | $ | 17,031 |   |   | $ | 17,031 |   |
|  Available for sale securities                     |   |           | 3,035   |   |              |   | 3,035 |   |   |   | 2,992 |   |   |   | 2,992 |   |
|   FHLB Stock                                  |   |           | 2,444   |   |              |   | 2,444 |   |   |   | 2,444 |   |   |   | 2,444 |   |
|  Loans held for sale                               |   |           | 1,139   |   |              |   | 1,139 |   |   |   | 1,807 |   |   |   | 1,807 |   |
|  Loans, net                                        |   |           | 296,393 |   |              |   | 298,276 |   |   |   | 295,641 |   |   |   | 297,358 |   |
|  Accrued interest receivable                       |   |           | 1,153   |   |              |   | 1,153 |   |   |   | 1,234 |   |   |   | 1,234 |   |
|   Bank owned life insurance, net              |   |           | 7,047   |   |              |   | 7,047 |   |   |   | 6,981 |   |   |   | 6,981 |   |
|   Mortgage servicing rights                   |   |           | 2,791   |   |              |   | 2,791 |   |   |   | 2,437 |   |   |   | 2,437 |   |
|                                                    |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                  |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Non-maturity deposits                                   |   |           | 171,881 |   |              |   | 171,881 |   |   |   | 170,029 |   |   |   | 170,029 |   |
| Time deposits                                           |   |           | 135,896 |   |              |   | 136,309 |   |   |   | 129,968 |   |   |   | 130,672 |   |
| Borrowings                                              |   |           | 8,346   |   |              |   | 8,126 |   |   |   | 8,506 |   |   |   | 8,451 |   |
| Accrued interest payable                                |   |           | 82      |   |              |   | 82 |   |   |   | 84 |   |   |   | 84 |   |
| Advance payments from borrowers for taxes and insurance |   |           | 579     |   |              |   | 579 |   |   |   | 291 |   |   |   | 291 |   |

|                                                    |   | Fair Value at March 31, 2012 |    |
|---------------------------------------------------------|--------|------------------------------|---------|
| Description                                             |   | Total                        |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| ASSETS                                                  |   | (in thousands)               |    |
| Cash and cash equivalents                               |   | $                            | 25,409  |   |   | $ | 25,409 |   |   | $ | - |   |   | $ | - |   |
| FHLB Stock                                              |   |                         | 2,444   |   |   |   | - |   |   |   | - |   |   |   | 2,444 |   |
| Loans held for sale                                     |   |                         | 1,139   |   |   |   | - |   |   |   | 1,139 |   |   |   | - |   |
| Loans, net                                              |   |                         | 298,276 |   |   |   | - |   |   |   | 298,276 |   |   |   | - |   |
| Accrued interest receivable                             |   |                         | 1,153   |   |   |   | - |   |   |   | - |   |   |   | 1,153 |   |
| Bank owned life insurance, net                          |   |                         | 7,047   |   |   |   | 7,047 |   |   |   | - |   |   |   | - |   |
|                                                    |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                                             |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-maturity deposits                                   |   | $                            | 171,881 |   |   | $ | - |   |   | $ | - |   |   | $ | 171,881 |   |
| Time deposits                                           |   |                         | 136,309 |   |   |   | - |   |   |   | 136,309 |   |   |   | - |   |
| Accrued interest payable                                |   |                         | 82      |   |   |   | - |   |   |   | - |   |   |   | 82 |   |
| Advance payments from borrowers for taxes and insurance |   |                         | 579     |   |   |   | - |   |   |   | - |   |   |   | 579 |   |

----

|                                  |   | Fair Value at March 31, 2012    |   |
|---------------------------------------|--------|---------------------------------|--------|
| Description                           |   | Total                           |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                                  |   | (in thousands)                  |   |
| Agency Mortgage-backed Securities     |   | $                               | 58     |   |   | $ | - |   |   | $ | 58 |   |   | $ | - |   |
| Non-agency Mortgage-backed Securities |   |                            | 2,977  |   |   |   | - |   |   |   | 2,977 |   |   |   | - |   |
| Mortgage Servicing Rights             |   |                            | 2,791  |   |   |   | - |   |   |   |   |   |   |   | 2,791 |   |
|                                  |   |
|                                  |   | Fair Value at December 31, 2011 |   |
| Description                           |   | Total                           |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                                  |   | (in thousands)                  |   |
| Agency Mortgage-backed Securities     |   | $                               | 59     |   |   | $ | - |   |   | $ | 59 |   |   | $ | - |   |
| Non-agency Mortgage-backed Securities |   |                            | 2,933  |   |   |   | - |   |   |   | 2,933 |   |   |   | - |   |
| Mortgage Servicing Rights             |   |                            | 2,437  |   |   |   | - |   |   |   | - |   |   |   | 2,437 |   |

| Financial Instrument      |   | Valuation Technique  |   | Unobservable Inputs                      |   | Weighted Average |
|---------------------------|--------|----------------------|--------|------------------------------------------|--------|------------------|
| Mortgage Servicing Rights |   | Discounted cash flow |   | Prepayment Speed AssumptionDiscount rate |   | 331.0%9.0%       |

----

|                        |   | Fair Value at March 31, 2012    |   |
|-----------------------------|--------|---------------------------------|--------|
|                        |   | Total                           |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Description                 |   | (in thousands)                  |
| OREO and Repossessed Assets |   | $                               | 2,065  |   |   | $ | - |   |   | $ | - |   |   | $ | 2,065 |   |
| Impaired Loans              |   |                            | 16,537 |   |   |   | - |   |   |   | - |   |   |   | 16,537 |   |
|                        |
|                        |   | Fair Value at December 31, 2011 |   |
|                        |   | Total                           |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Description                 |   | (in thousands)                  |
| OREO and Repossessed Assets |   | $                               | 2,821  |   |   | $ | - |   |   | $ | - |   |   | $ | 2,821 |   |
| Impaired Loans              |   |                            | 13,619 |   |   |   | - |   |   |   | - |   |   |   | 13,619 |   |

| Description                 |   | Year EndedMarch 31, 2011Total Losses |   |   | Year EndedMarch 31, 2011Total Losses |   |
|-----------------------------|--------|--------------------------------------|--------|--------|--------------------------------------|--------|
| OREO and repossessed Assets |   | $                                    | 469    |   |                                 | $      | 45 |   |
| Impaired Loans              |   |                                 | 1,615  |   |                                 |   | 38 |   |
|                        |   |                                 |   |   |                                 |   |   |   |

----

----

|                                                            |   | MortgageServicingRights |   |
|-----------------------------------------------------------------|--------|-------------------------|--------|
|                                                            |   |                    |   |
| Beginning balance as of January 1, 2012                         |   | $                       | 2,437  |   |
| Servicing rights that result from transfers of financial assets |   |                    | 185    |   |
| Changes in Fair Value(1)                                        |   |                    | 384    |   |
| Other(2)                                                        |   |                    | (215   | ) |
| Fair Value as of March 31, 2012                                 |   | $                       | 2,791  |   |

|                                                            |   | MortgageServicingRights |   |
|-----------------------------------------------------------------|--------|-------------------------|--------|
|                                                            |   |                    |   |
| Beginning balance at January 1, 2011                            |   | $                       | 3,200  |   |
| Servicing rights that result from transfers of financial assets |   |                    | 148    |   |
| Changes in Fair Value(1)                                        |   |                    | (1     | ) |
| Other(2)                                                        |   |                    | (201   | ) |
| Fair Value as of March 31, 2011                                 |   | $                       | 3,148  |   |

----

|                                                        |   | Three MonthsEnded March 31, |   |
|-------------------------------------------------------------|--------|-----------------------------|--------|
|                                                        |   | 2012                        |   |   | 2011 |   |
| Net income                                                  |   | $                           | 546    |   |   | $ | 496 |   |
| Less net income attributable to participating securities(1) |   |                        | 9      |   |   |   | 8 |   |
| Net income available to common shareholders                 |   | $                           | 537    |   |   | $ | 488 |   |
|                                                        |   |                        |   |   |   |   |   |   |
| Weighted average number of shares outstanding, basic        |   |                        | 2,886  |   |   |   | 2,921 |   |
|                                                        |   |                        |   |   |   |   |   |   |
| Earnings per share, basic                                   |   | $                           | 0.19   |   |   | $ | 0.17 |   |
| Earnings per share, diluted                                 |   | $                           | 0.19   |   |   | $ | 0.17 |   |

----

|                                                                  |   | Shares |    |   | Weighted-Average Exercise Price |   |   | Weighted-Average Remaining Contractual Term In Years |   |   | Aggregate Intrinsic Value |   |
|-----------------------------------------------------------------------|--------|--------|---------|--------|---------------------------------|--------|--------|------------------------------------------------------|--------|--------|---------------------------|--------|
| Outstanding at the beginning of the year                              |   |   | 95,438  |   |                            | $      | 7.93   |                                                 |   |   | 6.83                      |   |   | $ | 7,158 |   |
| Granted                                                               |   |   | 30,212  |   |                            |   | 7.42   |                                                 |   |   | 9.92                      |   |   |   | 2,417 |   |
| Exercised                                                             |   |   | -       |   |                            |   | -      |                                                 |   |   |                      |   |   |   |   |   |
| Forfeited or expired                                                  |   |   | -       |   |                            |   | -      |                                                 |   |   |                      |   |   |   |   |   |
| Outstanding at March 31, 2012                                         |   |   | 125,650 |   |                            | $      | 7.81   |                                                 |   |   | 7.57                      |   |   | $ | 9,575 |   |
| Exercisable                                                           |   |   | 52,139  |   |                            | $      | 7.93   |                                                 |   |   | 7.57                      |   |   |   |   |   |
| Expected to vest, assuming a 0% forfeiture rate over the vesting term |   |   | 125,650 |   |                            | $      | 7.81   |                                                 |   |   | 7.57                      |   |   |   |   |   |

----

| Annual dividend yield                                     |   | 2.00                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | %      |
|-----------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Expected volatility                                       |   | 30.00                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | %      |
| Risk-free interest rate                                   |   | 1.36                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | %      |
| Expected term                                             |   |                                                                            7.5 years    |
| Weighted-average grant date fair value per option granted |   | $                                                                             2.50 |   |

|   Nonvested Shares                                         |   |  Shares |   |   | Weighted-Average Grant-Date Fair Value Per Share |   |   | Aggregate Intrinsic Value Per Share |   |
|----------------------------------------------------------------------|--------|--------------|--------|--------|--------------------------------------------------|--------|--------|-------------------------------------|--------|
|                                                                 |   |         |   |   |                                             |   |   |                                |   |
| Non-vested at January 1, 2012                                        |   |         | 25,972 |   |                                             | $      | 7.35   |                                |   |   |   |
| Granted                                                              |   |         | 11,000 |   |                                             |   | 7.42   |                                |   |   |   |
| Vested                                                               |   |         | 8,656  |   |                                             |   | 7.35   |                                |   |   |   |
| Forfeited                                                            |   |         | -      |   |                                             |   | -      |                                |   |   |   |
| Non-vested at March 31, 2012                                         |   |         | 28,316 |   |                                             | $      | 7.38   |                                |   | $ | 7.50 |   |
|                                                                 |   |         |   |   |                                             |   |   |                                |   |   |   |   |
| Expected to vest assuming a 0% forfeiture rate over the vesting term |   |         | 28,316 |   |                                             | $      | 7.38   |                                |   | $ | 7.50 |   |

----

----

----

| ·   | changes in economic conditions, either nationally or in our market area; |
|--------------------|--------------------------------------------------------------------------|

| ·   | 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 our allowance for loan losses; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the possibility of other-than-temporary impairments of securities held in our securities portfolio; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | our ability to access cost-effective funding; |
|--------------------|-----------------------------------------------|

| ·   | fluctuations in the demand for loans, the number of unsold homes, land and other properties, and fluctuations in real estate values and both residential and commercial and multifamily real estate market conditions in our market area; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | secondary market conditions for loans and our ability to sell loans in the secondary market; |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | our ability to attract and retain deposits; |
|--------------------|---------------------------------------------|

| ·   | our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations and our ability to realize related revenue synergies and expected cost savings and other benefits within the anticipated time frames or at all; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | monetary and fiscal policies of the Federal Reserve and the U.S. Government and other governmental initiatives affecting the financial services industry; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | results of examinations of Sound Financial and Sound Community Bank by their regulators, including the possibility that the regulators may, among other things, require us to increase our allowance for loan losses or to write-down assets, change Sound Community Bank’s regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | increases in premiums for deposit insurance; |
|--------------------|----------------------------------------------|

| ·   | our ability to control operating costs and expenses; |
|--------------------|------------------------------------------------------|

----

| ·   | the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | difficulties in reducing risks associated with the loans on our balance sheet; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | computer systems on which we depend could fail or experience a security breach; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | our ability to retain key members of our senior management team; |
|--------------------|------------------------------------------------------------------|

| ·   | costs and effects of litigation, including settlements and judgments; |
|--------------------|-----------------------------------------------------------------------|

| ·   | our ability to implement our business strategies; |
|--------------------|---------------------------------------------------|

| ·   | increased competitive pressures among financial services companies; |
|--------------------|---------------------------------------------------------------------|

| ·   | changes in consumer spending, borrowing and savings habits; |
|--------------------|-------------------------------------------------------------|

| ·   | the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   |   |
|--------------------|--------|

| ·   | our ability to pay dividends on our common stock; |
|--------------------|---------------------------------------------------|

| ·   | adverse changes in the securities markets; |
|--------------------|--------------------------------------------|

| ·   | the inability of key third-party providers to perform their obligations to us; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described from time to time in our filings with the Securities and Exchange Commission (“SEC”). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                       |   | March 31, 2012         |    |   | December31, 2011 |   |    | Amount Change |   |   | Percent Change |   |
|----------------------------|--------|------------------------|---------|--------|------------------|--------|---------|---------------|--------|--------|----------------|--------|
|                       |   | (Dollars in thousands) |    |
| One-to-four family loans   |   | $                      | 98,600  |   |             | $      | 96,305  |          |   | $      | 2,295          |   |   |   | 2.4 | % |
| Home equity                |   |                   | 38,654  |   |             |   | 39,656  |          |   |   | (1,002         | )      |   |   | (2.5 | ) |
| Commercial and multifamily |   |                   | 105,313 |   |             |   | 106,016 |          |   |   | (703           | )      |   |   | (0.7 | ) |
| Construction and land      |   |                   | 18,226  |   |             |   | 17,805  |          |   |   | 421            |   |   |   | 2.4 |   |
| Manufactured homes         |   |                   | 17,994  |   |             |   | 18,444  |          |   |   | (450           | )      |   |   | (2.4 | ) |
| Other consumer             |   |                   | 10,276  |   |             |   | 10,920  |          |   |   | (644           | )      |   |   | (5.9 | ) |
| Commercial business        |   |                   | 13,291  |   |             |   | 13,163  |          |   |   | 128            |   |   |   | 1.0 |   |
| Total                      |   | $                      | 302,345 |   |             | $      | 302,309 |          |   | $      | (36            | )      |   |   | (0.0 | )% |

----

----

|                                                 |   | Nonperforming Assets   |   |
|------------------------------------------------------|--------|------------------------|--------|
|                                                 |   | March 31, 2012    |   |   | December 31, 2011 |   |   | AmountChange |   | PercentChange |   |
|                                                 |   | (Dollars in thousands) |   |
| Nonperforming loans(1):                              |   |                   |   |   |   |   |   |   |   |   |   |   |
| One-to four- family                                  |   | $                      | 4,159  |   |   | $ | 4,401 |   |   | $ | (242 | ) |   |   | (5.5 | )% |
| Home equity                                          |   |                   | 1,135  |   |   |   | 873 |   |   |   | 262 |   |   |   | 30.0 |   |
| Commercial and multifamily                           |   |                   | 1,806  |   |   |   | 1,219 |   |   |   | 587 |   |   |   | 48.2 |   |
| Construction and land                                |   |                   | -      |   |   |   | 80 |   |   |   | (80 | ) |   |   | (100.0 | ) |
| Other consumer                                       |   |                   | 105    |   |   |   | 64 |   |   |   | 41 |   |   |   | 64.1 |   |
| Commercial business                                  |   |                   | 524    |   |   |   | - |   |   |   | 524 |   |   | NM |   |
| Total                                                |   | $                      | 7,729  |   |   | $ | 6,637 |   |   | $ | 1,092 |   |   |   | 16.5 | % |
|                                                 |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OREO and repossessed assets:                         |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to four- family                                  |   | $                      | 592    |   |   | $ | 478 |   |   | $ | 114 |   |   |   | 23.8 | % |
| Commercial and multifamily                           |   |                   | 1,348  |   |   |   | 2,225 |   |   |   | (877 | ) |   |   | (39.4 | )% |
| Manufactured homes                                   |   |                   | 125    |   |   |   | 118 |   |   |   | 7 |   |   |   | 5.9 | % |
| Total                                                |   | $                      | 2,065  |   |   | $ | 2,821 |   |   | $ | (756 | ) |   |   | 26.7 | % |
|                                                 |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total nonperforming assets                           |   | $                      | 9,794  |   |   | $ | 9,458 |   |   | $ | 336 |   |   |   | 3.5 | % |
| Nonperforming assets as a percentage of total assets |   |                   | 2.80   | % |   |   | 2.78 | % |   |   |   |   |   |   |   |   |
|                                                 |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performing restructured loans:                       |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to four- family                                  |   | $                      | 3,563  |   |   | $ | 2,508 |   |   | $ | 1,055 |   |   |   | 42.1 | % |
| Home equity                                          |   |                   | 620    |   |   |   | 812 |   |   |   | (192 | ) |   |   | (23.6 | ) |
| Commercial and multifamily                           |   |                   | 178    |   |   |   | 785 |   |   |   | (606 | ) |   |   | (77.2 | ) |
| Construction and land                                |   |                   | 78     |   |   |   | - |   |   |   | 78 |   |   | NM |   |
| Manufactured homes                                   |   |                   | 734    |   |   |   | - |   |   |   | 734 |   |   | NM |   |
| Other consumer                                       |   |                   | 51     |   |   |   | 4 |   |   |   | 47 |   |   |   | 1175.0 |   |
| Commercial business                                  |   |                   | 405    |   |   |   | 26 |   |   |   | 379 |   |   |   | 1457.7 |   |
| Total                                                |   | $                      | 5,630  |   |   | $ | 4,135 |   |   | $ | 1,495 |   |   |   | 36.2 | % |

| (1)   | Nonperforming loans include $3.5 million and $2.8 million in nonperforming TDRs as of March 31, 2012 and December 31, 2011. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                      |   | At and for the Period Ended March 31, |   |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                      |   | 2012                                       |   |   | 2011 |   |
|                                                                                      |   | (Dollars in thousands)                     |   |
| Balance at beginning of period                                                            |   | $                                          | 4,455  |   |   | $ | 4,436 |   |
| Charge-offs                                                                               |   |                                       | (1,615 | ) |   |   | (875 | ) |
| Recoveries                                                                                |   |                                       | 10     |   |   |   | 30 |   |
| Net charge-offs                                                                           |   |                                       | (1,605 | ) |   |   | (845 | ) |
| Provisions charged to operations                                                          |   |                                       | 1,500  |   |   |   | 825 |   |
| Balance at end of period                                                                  |   | $                                          | 4,350  |   |   | $ | 4,416 |   |
|                                                                                      |   |                                       |   |   |   |   |   |   |
| Ratio of net charge-offs during the period to average loans outstanding during the period |   |                                       | 2.14   | % |   |   | 1.14 | % |
|                                                                                      |   |                                       |   |   |   |   |   |   |
| Allowance as a percentage of non-performing loans                                         |   |                                       | 56.3   |   |   |   | 72.2 | % |
|                                                                                      |   |                                       |   |   |   |   |   |   |
| Allowance as a percentage of total loans (end of period)                                  |   |                                       | 1.45   | % |   |   | 1.49 | % |

|                   |   | As of March 31, 2012   |    |   | As of December 31, 2011 |   |
|------------------------|--------|------------------------|---------|--------|-------------------------|--------|
|                   |   | Amount                 |    |   | Wtd. Avg.Rate           |   |   | Amount |   |   | Wtd. Avg.Rate |   |
|                   |   | (Dollars in thousands) |    |
| Checking (noninterest) |   | $                      | 28,282  |   |                    |   | 0.00 | % |   | $ | 26,907 |   |   |   | 0.00 | % |
| NOW (interest)         |   |                   | 25,141  |   |                    |   | 0.08 |   |   |   | 22,332 |   |   |   | 0.09 |   |
| Savings                |   |                   | 23,446  |   |                    |   | 0.06 |   |   |   | 22,092 |   |   |   | 0.10 |   |
| Money Market           |   |                   | 91,040  |   |                    |   | 0.33 |   |   |   | 95,029 |   |   |   | 0.58 |   |
| Certificates           |   |                   | 135,896 |   |                    |   | 1.33 |   |   |   | 129,968 |   |   |   | 1.53 |   |
| Escrow                 |   |                   | 3,972   |   |                    |   | 0.00 |   |   |   | 3,669 |   |   |   | 0.00 |   |
| Total                  |   | $                      | 307,777 |   |                    |   | 0.69 | % |   | $ | 299,997 |   |   |   | 0.87 | % |

----

|                                                          |   | Quarter EndedMarch 31, |   |   |   |   |   |          |   |
|---------------------------------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|---------------|--------|
|                                                          |   | 2012                   |   |   | 2011   |   |   | Amount Change |   |   | Percent Change |   |
|                                                          |   | (Dollars in thousands) |   |
| Service charges and fee income                                |   | $                      | 550    |   |   | $      | 522    |          |   | $ | 28 |   |   |   | 5.3 | % |
| Earnings on cash surrender value of bank owned life insurance |   |                   | 66     |   |   |   | 62     |          |   |   | 4 |   |   |   | 6.5 |   |
| Mortgage servicing income                                     |   |                   | 177    |   |   |   | 135    |          |   |   | 42 |   |   |   | 31.1 |   |
| Fair value adjustment  on mortgage servicing rights |   |                   | 384    |   |   |   | (1     | )             |   |   | 385 |   |   |   | 385.0 |   |
| Loss on sale of securities                                    |   |                   | -      |   |   |   | (34    | )             |   |   | 34 |   |   |   | 100.0 |   |
| Other-than-temporary impairment losses                        |   |                   | (91    | )      |   |   | (39    | )             |   |   | (52 | ) |   |   | (133.3) |   |
| Gain on sale of loans                                         |   |                   | 251    |   |   |   | 34     |          |   |   | 217 |   |   |   | 638.2 |   |
| Total                                                         |   | $                      | 1,337  |   |   | $      | 679    |          |   | $ | 658 |   |   |   | 96.9 | % |

|                                                       |   | Quarter EndedMarch 31,        |   |   |   |   |   |         |   |
|------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------------|--------|
|                                                       |   | 2012                          |   |   | 2011   |   |   | AmountChange |   |   | PercentChange |   |
|                                                       |   | (Dollar amounts in thousands) |   |
| Salaries and benefits                                      |   | $                             | 1,283  |   |   | $      | 1,466  |         |   | $ | (183 | ) |   |   | (12.5) | % |
| Operations                                                 |   |                          | 582    |   |   |   | 669    |         |   |   | (87 | ) |   |   | (13.0) |   |
| Regulatory assessments                                     |   |                          | 122    |   |   |   | 225    |         |   |   | (103 | ) |   |   | (45.8) |   |
| Occupancy                                                  |   |                          | 310    |   |   |   | 294    |         |   |   | 16 |   |   |   | 5.4 |   |
| Data processing                                            |   |                          | 242    |   |   |   | 239    |         |   |   | 3 |   |   |   | 1.3 |   |
| Losses and expenses on sale of OREO and repossessed assets |   |                          | 469    |   |   |   | 139    |         |   |   | 330 |   |   |   | 237.4 |   |
| Total                                                      |   | $                             | 3,008  |   |   | $      | 3,032  |         |   | $ | (24 | ) |   |   | (0.8) | % |

| Off-balance sheet loan commitments  |   |
|-------------------------------------|--------|
| (in thousands)                      |   |
| Commitments to make loans           |   | $ | 9,740 |   |
| Undisbursed portion of loans closed |   |   | 4,661 |   |
| Unused lines of credit              |   |   | 27,089 |   |
| Irrevocable letters of credit       |   |   | 578 |   |
| Total loan commitments              |   | $ | 42,068 |   |

----

|                                       |   | Actual |   |   | Minimum CapitalRequirements |   |   | Minimum Required toBe Well-CapitalizedUnder Prompt |   |
|--------------------------------------------|--------|--------|--------|--------|-----------------------------|--------|--------|----------------------------------------------------|--------|
|                                       |   | Amount |   |   | Ratio                       |   |   | Amount                                             |   |   |   | Ratio |   |   | Amount |   |   |   | Ratio |   |
| Tier 1 Capital to total adjusted assets(1) |   | $      | 28,650 |   |                        |   | 8.24   | %                                                  |   | $ | 13,910 |   | ≥ |   |   | 4.00 | % |   |   | 17,388 |   | ≥ |   |   | 5.00 | % |
| Tier 1 Capital to risk-weighted assets(2)  |   | $      | 28,650 |   |                        |   | 10.87  | %                                                  |   | $ | 10,542 |   | ≥ |   |   | 4.00 | %(3) |   |   | 15,812 |   | ≥ |   |   | 6.00 | % |
| Total Capital to risk-weighted assets(2)   |   | $      | 31,948 |   |                        |   | 12.12  | %                                                  |   | $ | 21,083 |   | ≥ |   |   | 8.00 | % |   |   | 26,354 |   | ≥ |   |   | 10.00 | % |

| (1) | Based on total adjusted assets of $347.8 million. |
|-----|---------------------------------------------------|

| (2) | Based on risk-weighted assets of $263.5 million. |
|-----|--------------------------------------------------|

| (3) | The Tier 1 risk-based capital requirement for a well-capitalized institution is 6% of risk-weighted assets. |
|-----|-------------------------------------------------------------------------------------------------------------|

| (a)   | Evaluation of Disclosure Controls and Procedures. |
|-----------------|---------------------------------------------------|

----

| (b)   | Changes in Internal Control over Financial Reporting. |
|-----------------|-------------------------------------------------------|

----

----

| Exhibits: |
|-----------|
| 2.0       | Plan of Conversion and Reorganization (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 30, 2012 (File No. 000-52889)) |
| 3.1       | Charter of Sound Financial, Inc. (incorporated herein by reference to the Registration Statement on Form SB-2 filed with the SEC on September 20, 2007 (File No. 333-146196)) |
| 3.2       | Bylaws of Sound Financial, Inc. (incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form SB-2 filed with the SEC on September 20, 2007 (File No. 333-146196)) |
| 4.0       | Form of Common Stock Certificate of Sound Financial, Inc. (incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form SB-2 filed with the SEC on September 20, 2007 (File No. 333-146196)) |
| 10.1      | Employment Agreement by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Registration Statement on Form SB-2 filed with the SEC on September 20, 2007 (File No. 333-146196)) |
| 10.2      | Executive Long Term Compensation Agreement effective August 14, 2007 by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Registration Statement on Form SB-2 filed with the SEC on September 20, 2007 (File No. 333-146196)) |
| 10.3      | Amendment to Freeze Benefit Accruals Under the Executive Long Term Compensation Agreement effective August 14, 2007, by and between Sound Community Bank (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 5, 2012 (File No. 000-52889)) |
| 10.4      | Supplemental Executive Long Term Compensation Agreement effective December 31, 2011 by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 5, 2012 (File No. 000-52889)) |
| 10.5      | Confidentiality, Non-Competition and Non-Solicitation Agreement  by and between Sound Community Bank and Laura Lee Stewart (incorporated herein by reference to the Report on Form 8-K filed with the SEC on January 5, 2012 (File No. 000-52889))  |
| 10.6      | Employment Agreement by and between Sound Community Bank and Matthew Deines (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on November 5, 2009 (File No. 000-52889))  |
| 10.7      | Employment Agreement by and between Sound Community Bank and Matthew Moran (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on November 5, 2009 (File No. 000-52889))  |
| 10.8      | Addendums to the Employment Agreements by and between Sound Community Bank and each of Matthew Deines and Matthew Moran (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 3, 2012 (File No. 000-52889))  |
| 10.9      | Summary of Director Board Fee Arrangements (incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 31, 2011 (File No. 000-52889)) |
| 10.10     | Sound Financial, Inc. 2008 Equity Incentive Plan (incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 31, 2009 (File No. 000-52889)) |
| 10.11     | Forms of Incentive Stock Option Agreement, Non-Qualified Stock Option Agreement and Restricted Stock Agreements under the 2008 Equity Incentive Plan (incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on January 29, 2009 (File No. 000-52889)) |
| 10.12     | Summary of Annual Bonus Plan (incorporated herein by reference to the Registration Statement on Form SB-2 filed with the SEC on September 20, 2007 (File No. 333-146196)) |
| 11        | Statement re computation of per share earnings (See Note 8 of the Notes to Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.) |
| 31.1      | Rule 13(a)-14(a) Certification (Chief Executive Officer) |
| 31.2      | Rule 13(a)-14(a) Certification (Chief Financial Officer) |
| 32        | Section 1350 Certification |
| 101       | Interactive Data Files* |

----

| Date:  May 25, 2012 | By:    | /s/  Laura Lee Stewart                     |   |
|-------------------------------|--------|------------------------------------------------------|--------|
|                          |   | Laura Lee Stewart                                    |   |
|                          |   | President and Chief Executive Officer                |   |
|                          |   |                                                 |   |
|                          |   |                                                 |   |
|                          |   |                                                 |   |
| Date:  May 25, 2012 | By:    | /s/  Matthew P. Deines                     |   |
|                          |   | Matthew P. Deines                                    |   |
|                          |   | Executive Vice President and Chief Financial Officer |   |