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

| SOUND FINANCIAL, INC.                                  |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

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

| 2005 5th Avenue, Second Floor, Seattle, Washington 98121 |
|----------------------------------------------------------|
| (Address of principal executive offices)                 |

| (206) 448-0884                        |
|---------------------------------------|
| (Registrant’s telephone number) |

| None                                                                               |
|------------------------------------------------------------------------------------|
| (Former name, former address and former fiscal year, if changed since last report) |

| Large accelerated filer  o       | Accelerated filer  o       | Non-accelerated filer  o        | Smaller reporting company  x    |
|--------------------------------------------------------------------------|--------------------------------------------------------------------|------------------------------------------------------------------------------|----------------------------------------------------------|
|                                                                     | (Do not check if smaller reporting company)                        |                                                                         |

|                                                                                                                      | Page Number |
|---------------------------------------------------------------------------------------------------------------------------|-------------|
| PART IFINANCIAL INFORMATION                                                                                          |        |
| Item 1.   Financial Statements                                                                        |        |
| Condensed Consolidated Balance Sheets as of March 31,2011 (unaudited) and December 31, 2010                          |  3     |
| Condensed Consolidated Statements of Income for the Three Month Period Ended March 31,2011 and 2010 (unaudited)`     |  4     |
| Condensed Consolidated Statement of Stockholders’ Equity for the Three Month Period Ended March 31,2011 (unaudited) |  5     |
| Condensed Consolidated Statements of Cash Flows for the Three Month Period Ended March 31, 2011 and 2010 (unaudited)      |  6     |
|  Selected Notes to Condensed Consolidated Financial Statements                                                  |  7     |
| Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations                  | 24          |
| Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                             | 34          |
| Item 4.  Controls and Procedures                                                                                | 34          |
| PART IIOTHER INFORMATION                                                                                             |        |
| Item 1.     Legal Proceedings                                                               | 36          |
| Item 1A   Risk Factors                                                                                | 36          |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                            | 36          |
| Item 3.  Defaults Upon Senior Securities                                                                        | 36          |
| Item 4.  (Removed and Reserved)                                                                                 | 36          |
| Item 5.  Other Information                                                                                      | 36          |
| Item 6.  Exhibits                                                                                               | 37          |
| SIGNATURES                                                                                                           |        |
| EXHIBITS                                                                                                                  |        |

| SOUND FINANCIAL, INC AND SUBSIDIARY                                                                                                                                    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Condensed Consolidated Balance Sheets                                                                                                                                  |   |
| (Dollars in thousands)                                                                                                                                                 |   |
| (unaudited)                                                                                                                                                            |   |
|                                                                                                                                                                   |   | MARCH 31, |   |   | DECEMBER 31, |   |
|                                                                                                                                                                   |   | 2011 |   |   | 2010 |   |
| ASSETS                                                                                                                                                                 |   |   |   |
| Cash and cash equivalents                                                                                                                                              |   | $ | 5,734 |   |   | $ | 9,092 |   |
| Available-for-sale securities (AFS), at fair value                                                                                                                     |   |   | 3,642 |   |   |   | 4,541 |   |
| Federal Home Loan Bank stock, at cost                                                                                                                                  |   |   | 2,444 |   |   |   | 2,444 |   |
| Loans held for sale                                                                                                                                                    |   |   | 79 |   |   |   | 902 |   |
| Loans                                                                                                                                                                  |   |   | 297,335 |   |   |   | 299,246 |   |
| Less allowance for loan losses                                                                                                                                         |   |   | (4,416 | ) |   |   | (4,436 | ) |
| Total loans, net                                                                                                                                                       |   |   | 292,919 |   |   |   | 294,810 |   |
|                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Accrued interest receivable                                                                                                                                            |   |   | 1,246 |   |   |   | 1,280 |   |
| Premises and equipment, net                                                                                                                                            |   |   | 3,209 |   |   |   | 3,295 |   |
| Bank-owned life insurance, net                                                                                                                                         |   |   | 6,791 |   |   |   | 6,729 |   |
| Mortgage servicing rights, at fair value                                                                                                                               |   |   | 3,146 |   |   |   | 3,200 |   |
| Other real estate owned and repossessed assets                                                                                                                         |   |   | 3,113 |   |   |   | 2,625 |   |
| Other assets                                                                                                                                                           |   |   | 4,674 |   |   |   | 5,721 |   |
| Total assets                                                                                                                                                           |   | $ | 326,997 |   |   | $ | 334,639 |   |
|                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| LIABILITIES                                                                                                                                                            |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Interest-bearing                                                                                                                                                       |   | $ | 247,546 |   |   | $ | 251,424 |   |
| Noninterest-bearing demand                                                                                                                                             |   |   | 26,187 |   |   |   | 27,070 |   |
| Total deposits                                                                                                                                                         |   |   | 273,733 |   |   |   | 278,494 |   |
| Borrowings                                                                                                                                                             |   |   | 21,988 |   |   |   | 24,849 |   |
| Accrued interest payable                                                                                                                                               |   |   | 95 |   |   |   | 121 |   |
| Other liabilities                                                                                                                                                      |   |   | 3,098 |   |   |   | 4,020 |   |
| Advance payments from borrowers for taxes and insurance                                                                                                                |   |   | 409 |   |   |   | 252 |   |
| Total liabilities                                                                                                                                                      |   |   | 299,323 |   |   |   | 307,736 |   |
| COMMITMENTS AND CONTINGENCIES (NOTE 4)                                                                                                                                 |   |   |   |   |   |   |   |   |
| 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, 2,954,295 issued      and outstanding as of March 31, 2011 and December 31, 2010 |   |   | 30 |   |   |   | 30 |   |
| Additional paid-in capital                                                                                                                                             |   |   | 11,841 |   |   |   | 11,808 |   |
| Unearned shares - Employee Stock Ownership Plan (“ESOP”)                                                                                                   |   |   | (809 | ) |   |   | (809 | ) |
| Retained earnings                                                                                                                                                      |   |   | 17,041 |   |   |   | 16,545 |   |
| Accumulated other comprehensive loss, net of tax                                                                                                                       |   |   | (429 | ) |   |   | (671 | ) |
| Total stockholders’ equity                                                                                                                                       |   |   | 27,674 |   |   |   | 26,903 |   |
| Total liabilities and stockholders’ equity                                                                                                                       |   | $ | 326,997 |   |   | $ | 334,639 |   |

|                                                                  |   | THREE MONTHS ENDED MARCH 31, |   |
|-----------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                  |   | 2011                         |   |   | 2010 |   |
| INTEREST INCOME                                                       |   | (in thousands)               |   |
| Loans, including fees                                                 |   | $                            | 4,586  |   |   | $ | 4,593 |   |
| Interest and dividends on securities, cash and cash equivalents       |   |                         | 62     |   |   |   | 177 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| Total interest income                                                 |   |                         | 4,648  |   |   |   | 4,770 |   |
| INTEREST EXPENSE                                                      |   |                         |   |   |   |   |   |   |
| Deposits                                                              |   |                         | 648    |   |   |   | 1,020 |   |
| FHLB advances and other borrowings                                    |   |                         | 104    |   |   |   | 148 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| Total interest expense                                                |   |                         | 752    |   |   |   | 1,168 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| NET INTEREST INCOME                                                   |   |                         | 3,896  |   |   |   | 3,602 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| PROVISION FOR LOAN LOSSES                                             |   |                         | 825    |   |   |   | 1,425 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| NET INTEREST INCOME AFTER PROVISION                                   |   |                         |   |   |   |   |   |   |
| FOR LOAN LOSSES                                                       |   |                         | 3,071  |   |   |   | 2,177 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| NONINTEREST INCOME                                                    |   |                         |   |   |   |   |   |   |
| Service charges and fee income                                        |   |                         | 522    |   |   |   | 529 |   |
| Earnings on cash surrender value of bank owned life insurance         |   |                         | 62     |   |   |   | 66 |   |
| Mortgage servicing income                                             |   |                         | 135    |   |   |   | 165 |   |
| Fair value adjustment on mortgage servicing rights                    |   |                         | (1     | ) |   |   | 285 |   |
| (Loss) gain on sale of securities                                     |   |                         | (34    | ) |   |   | 75 |   |
| Other-than-temporary impairment losses on securities                  |   |                         | (39    | ) |   |   | - |   |
| Gain on sale of loans                                                 |   |                         | 34     |   |   |   | 64 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| Total noninterest income                                              |   |                         | 679    |   |   |   | 1,184 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| NONINTEREST EXPENSE                                                   |   |                         |   |   |   |   |   |   |
| Salaries and benefits                                                 |   |                         | 1,466  |   |   |   | 1,617 |   |
| Operations                                                            |   |                         | 669    |   |   |   | 834 |   |
| Regulatory assessments                                                |   |                         | 225    |   |   |   | 231 |   |
| Occupancy                                                             |   |                         | 294    |   |   |   | 381 |   |
| Data processing                                                       |   |                         | 239    |   |   |   | 200 |   |
| Losses and expenses on other real estate owned and repossessed assets |   |                         | 139    |   |   |   | 48 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| Total noninterest expense                                             |   |                         | 3,032  |   |   |   | 3,311 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| INCOME BEFORE PROVISION (BENEFIT) FOR  INCOME TAXES         |   |                         | 718    |   |   |   | 50 |   |
|                                                                  |   |                         |   |   |   |   |   |   |
| PROVISION (BENEFIT) FOR INCOME TAXES                                  |   |                         | 222    |   |   |   | (7 | ) |
|                                                                  |   |                         |   |   |   |   |   |   |
| NET INCOME                                                            |   | $                            | 496    |   |   | $ | 57 |   |
| BASIC EARNINGS PER SHARE                                              |   | $                            | 0.17   |   |   | $ | 0.02 |   |
| DILUTED EARNINGS PER SHARE                                            |   | $                            | 0.17   |   |   | $ | 0.02 |   |

|                                                                                        |   | Shares         |   |   | Common Stock |   |   | AdditionalPaid-inCapital |   |   | UnearnedESOPShares |   |   | RetainedEarnings |   |   | Accumulated Other Comprehensive Loss, net of tax |   |   | TotalStockholders’ Equity |   |
|--------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------------|--------|--------|--------------------------|--------|--------|--------------------|--------|--------|------------------|--------|--------|--------------------------------------------------|--------|--------|---------------------------------|--------|
|                                                                                             |   | (in thousands) |   |
| BALANCE, December 31, 2010                                                                       |   |           | 2,954  |   |         | $      | 30     |                     |   | $      | 11,808             |   |   | $                | (809   | )      |                                             | $      | 16,545 |                            |   | $ | (671 | ) |   | $ | 26,903 |   |
|                                                                                             |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |
| Other comprehensive income:                                                                      |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |
|                                                                                             |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |
| Net income                                                                                       |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   | 496    |                            |   |   |   |   |   |   | 496 |   |
|                                                                                             |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |
| Net unrealized gain in fair value of available forsale securities, net of tax  of $118 |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   | 242 |   |   |   | 242 |   |
|                                                                                             |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                                       |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   | 738 |   |
|                                                                                             |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |
| Compensation related to stock      options and restricted stock              |   |           |   |   |         |   |   |                     |   |   | 33                 |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   | 33 |   |
|                                                                                             |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |
| BALANCE, March 31, 2011                                                                          |   |           | 2,954  |   |         | $      | 30     |                     |   | $      | 11,841             |   |   | $                | (809   | )      |                                             | $      | 17,041 |                            |   | $ | (429 | ) |   | $ | 27,674 |   |
|                                                                                             |   |           |   |   |         |   |   |                     |   |   |               |   |   |             |   |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |

|                                                                      |   | Three Months Ended March 31, |    |
|---------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                      |   | 2011                         |    |   | 2010 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                      |   |                         |    |
| Net income                                                                |   | $                            | 496     |   |   | $ | 57 |   |
| Adjustments to reconcile net income to net cash from operating activities |   |                         |    |   |   |   |   |   |
| Accretion of net premium on investments                                   |   |                         | -       |   |   |   | (199 | ) |
| Loss (gain) on sale of available for sale securities                      |   |                         | 34      |   |   |   | (75 | ) |
| Other-than-temporary impairment on available for sale securities          |   |                         | 39      |   |   |   | - |   |
| Provision for loan losses                                                 |   |                         | 825     |   |   |   | 1,425 |   |
| Depreciation and amortization                                             |   |                         | 99      |   |   |   | 166 |   |
| Compensation expense related to stock options and restricted stock        |   |                         | 33      |   |   |   | 33 |   |
| Fair value adjustment on mortgage servicing rights                        |   |                         | 1       |   |   |   | (285 | ) |
| Additions to mortgage servicing rights                                    |   |                         | (148    | ) |   |   | (99 | ) |
| Amortization of mortgage servicing rights                                 |   |                         | 201     |   |   |   | 136 |   |
| Increase in cash surrender value of bank owned life insurance             |   |                         | (62     | ) |   |   | (66 | ) |
| Proceeds from sale of loans                                               |   |                         | 14,869  |   |   |   | 9,943 |   |
| Originations of loans held for sale                                       |   |                         | (14,012 | ) |   |   | (9,354 | ) |
| Loss on sale of other real estate owned and repossessed assets            |   |                         | 45      |   |   |   | 49 |   |
| Gain on sale of loans                                                     |   |                         | (34     | ) |   |   | (64 | ) |
| (Decrease) increase in operating assets and liabilities                   |   |                         |    |   |   |   |   |   |
| Accrued interest receivable                                               |   |                         | 34      |   |   |   | (32 | ) |
| Other assets                                                              |   |                         | 928     |   |   |   | (480 | ) |
| Accrued interest payable                                                  |   |                         | (26     | ) |   |   | (28 | ) |
| Other liabilities                                                         |   |                         | (922    | ) |   |   | (777 | ) |
|                                                                      |   |                         |    |   |   |   |   |   |
| Net cash provided (used) by from operating activities                     |   |                         | 2,400   |   |   |   | 350 |   |
|                                                                      |   |                         |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                      |   |                         |    |   |   |   |   |   |
| Proceeds from maturities and sales of available for sale securities       |   |                         | 1,187   |   |   |   | 3,913 |   |
| Purchase of available for sale investments                                |   |                         | -       |   |   |   | (5,832 | ) |
| Net increase in loans                                                     |   |                         | (3      | ) |   |   | (9,039 | ) |
| Improvements to OREO and other repossessed assets                    |   |                         | (30     | ) |   |   | - |   |
| Proceeds from sale of OREO and other repossessed assets              |   |                         | 566     |   |   |   | 77 |   |
| Purchases of premises and equipment                                       |   |                         | (13     | ) |   |   | (64 | ) |
|                                                                      |   |                         |    |   |   |   |   |   |
| Net cash provided (used) by investing activities                          |   |                         | 1,707   |   |   |   | (10,945 | ) |
|                                                                      |   |                         |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                      |   |                         |    |   |   |   |   |   |
| Net increase in deposits, net of acquired deposits                        |   |                         | (4,761  | ) |   |   | 368 |   |
| Proceeds from borrowings                                                  |   |                         | 28,000  |   |   |   | 17,100 |   |
| Repayment of borrowings                                                   |   |                         | (30,861 | ) |   |   | (17,100 | ) |
| Cash dividends paid                                                       |   |                         | -       |   |   |   | (27 | ) |
| Net change in advances from borrowers for taxes and insurance             |   |                         | 157     |   |   |   | 233 |   |
|                                                                      |   |                         |    |   |   |   |   |   |
| Net cash provided (used) by financing activities                          |   |                         | (7,465  | ) |   |   | 574 |   |
|                                                                      |   |                         |    |   |   |   |   |   |
| DECREASE IN CASH AND CASH EQUIVALENTS                                     |   |                         | (3,358  | ) |   |   | (10,021 | ) |
|                                                                      |   |                         |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, beginning of period                            |   |                         | 9,092   |   |   |   | 15,679 |   |
|                                                                      |   |                         |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, end of period                                  |   | $                            | 5,734   |   |   | $ | 5,658 |   |

| SUPPLEMENTAL CASH FLOW INFORMATION                                  |   |   |   |   |   |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|     Cash paid for income taxes                       |   | $      | 220    |   |   | $      | 160 |   |
|     Interest paid on deposits and borrowings         |   | $      | 778    |   |   | $      | 1,196 |   |
|     Net transfer of loans to other real estate owned |   | $      | 1,069  |   |   | $      | 647 |   |

|                                  |   | Fair Value at March 31, 2011    |   |
|---------------------------------------|--------|---------------------------------|--------|
| Description                           |   | Total                           |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                                  |   | (in thousands)                  |   |
| Mortgage Servicing Rights             |   | $                               | 3,146  |   |   | $ | - |   |   | $ | - |   |   | $ | 3,146 |   |
| Agency Mortgage-backed Securities     |   |                            | 61     |   |   |   | - |   |   |   | 61 |   |   |   | - |   |
| Non-agency Mortgage-backed Securities |   |                            | 3,581  |   |   |   | - |   |   |   | 3,581 |   |   |   | - |   |
|                                  |   |                            |   |
|                                  |   | Fair Value at December 31, 2010 |   |
| Description                           |   | Total                           |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                                  |   | (in thousands)                  |   |
| Mortgage Servicing Rights             |   | $                               | 3,200  |   |   | $ | - |   |   | $ | - |   |   | $ | 3,200 |   |
| Agency Mortgage-backed Securities     |   |                            | 61     |   |   |   | - |   |   |   | 61 |   |   |   | - |   |
| Non-agency Mortgage-backed Securities |   |                            | 4,480  |   |   |   | - |   |   |   | 4,480 |   |   |   | - |   |

|                        |   |  Fair Value at March 31, 2011 |   | Three Months EndedMarch 31, 2011 |    |
|-----------------------------|--------|------------------------------------|--------|----------------------------------|---------|
| Description                 |   | Total                              |   |                             | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total Losses |   |
|                        |   | (in thousands)                     |   |
| Loans Held for Sale         |   | $                                  | 79     |                             |    | $ | - |   |   | $ | 79 |   |   | $ | - |   |   | $ | - |   |
| OREO and Repossessed Assets |   |                               | 3,113  |                             |    |   | - |   |   |   | - |   |   |   | 3,113 |   |   |   | 45 |   |
| Impaired Loans              |   |                               | 11,246 |                             |    |   | - |   |   |   | - |   |   |   | 11,246 |   |   |   | 38 |   |

|                        |   |  Fair Value at December 31, 2010 |   | Year Ended December 31, 2010 |    |
|-----------------------------|--------|---------------------------------------|--------|------------------------------|---------|
| Description                 |   | Total                                 |   |                         | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total Losses |   |
|                        |   | (in thousands)                        |   |
| Loans Held for Sale         |   | $                                     | 902    |                         |    | $ | - |   |   | $ | 902 |   |   | $ | - |   |   | $ | - |   |
| OREO and Repossessed Assets |   |                                  | 2,625  |                         |    |   | - |   |   |   | - |   |   |   | 2,625 |   |   |   | 461 |   |
| Impaired Loans              |   |                                  | 11,730 |                         |    |   | - |   |   |   | - |   |   |   | 11,730 |   |   |   | 3,944 |   |

|                                                            |   | MortgageServicingRights |   |
|-----------------------------------------------------------------|--------|-------------------------|--------|
|                                                            |   |                    |   |
| Beginning balance as of January 1, 2011                         |   | $                       | 3,200  |   |
|                                                            |   |                    |   |   |
| Servicing rights that result from transfers of financial assets |   |                    | 148    |   |
| Other changes in Fair Value                                     |   |                    | (1     | ) |
| Net disposals of servicing rights                               |   |                    | (201   | ) |
| Transfers in and/or out of Level 3                              |   |                    | -      |   |
|                                                            |   |                    |   |   |
| Ending balance at March 31, 2011                                |   | $                       | 3,146  |   |

|                                                            |   | MortgageServicingRights |   |
|-----------------------------------------------------------------|--------|-------------------------|--------|
|                                                            |   |                    |   |
| Beginning balance at January 1, 2010                            |   | $                       | 3,327  |   |
| Adoption of fair value option on mortgage servicing rights      |   |                    | 39     |   |
| Fair Value as of January 1, 2010                                |   |                    | 3,366  |   |
|                                                            |   |                    |   |   |
| Servicing rights that result from transfers of financial assets |   |                    | 99     |   |
| Other changes in Fair Value                                     |   |                    | 285    |   |
| Net disposals of servicing rights                               |   |                    | (136   | ) |
| Transfers in and/or out of Level 3                              |   |                    | -      |   |
|                                                            |   |                    |   |   |
| Ending balance at March 31, 2010                                |   | $                       | 3,614  |   |

|                                                            |   | March 31, 2011 |    |   | December 31, 2010 |   |
|-----------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                                            |   | CarryingAmount |    |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Financial assets:                                               |   | (in thousands) |    |
|  Cash and cash equivalents                                 |   | $              | 5,734   |   |              | $      | 5,734 |   |   | $ | 9,092 |   |   | $ | 9,092 |   |
|  Available for sale securities                             |   |           | 3,642   |   |              |   | 3,642 |   |   |   | 4,541 |   |   |   | 4,541 |   |
|   FHLB Stock                                          |   |           | 2,444   |   |              |   | 2,444 |   |   |   | 2,444 |   |   |   | 2,444 |   |
|  Loans held for sale                                       |   |           | 79      |   |              |   | 79 |   |   |   | 902 |   |   |   | 902 |   |
|  Loans, net                                                |   |           | 292,919 |   |              |   | 293,474 |   |   |   | 294,810 |   |   |   | 295,161 |   |
|  Accrued interest receivable                               |   |           | 1,246   |   |              |   | 1,246 |   |   |   | 1,280 |   |   |   | 1,280 |   |
|   Bank-owned life insurance                           |   |           | 6,791   |   |              |   | 6,791 |   |   |   | 6,729 |   |   |   | 6,729 |   |
|   Mortgage servicing rights,  at fair value |   |           | 3,146   |   |              |   | 3,146 |   |   |   | 3,200 |   |   |   | 3,200 |   |
|                                                            |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                          |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                                 |   |           | 151,494 |   |              |   | 151,494 |   |   | $ | 148,111 |   |   | $ | 148,111 |   |
| Time deposits                                                   |   |           | 122,239 |   |              |   | 123,126 |   |   |   | 130,383 |   |   |   | 131,503 |   |
| Borrowings                                                      |   |           | 21,988  |   |              |   | 22,021 |   |   |   | 24,849 |   |   |   | 24,624 |   |
| Accrued interest payable                                        |   |           | 95      |   |              |   | 95 |   |   |   | 121 |   |   |   | 121 |   |
| Advance payments from                                           |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| borrowers for taxes                                             |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| and insurance                                                   |   |           | 409     |   |              |   | 409 |   |   |   | 252 |   |   |   | 252 |   |

|                                    |   | March 31,2011  |    |   | December 31,2010 |   |
|-----------------------------------------|--------|----------------|---------|--------|------------------|--------|
| One-to-four family loans                |   | (in thousands) |    |
| First mortgages                         |   | $              | 100,060 |   |             | $      | 107,600 |   |
| Home equity                             |   |           | 44,842  |   |             |   | 44,829 |   |
|                                    |   |           | 144,902 |   |             |   | 152,429 |   |
| Commercial loans                        |   |           |    |   |             |   |   |   |
| Commercial real estate                  |   |           | 70,383  |   |             |   | 69,531 |   |
| Multifamily residential                 |   |           | 36,215  |   |             |   | 30,887 |   |
| Business term loans and lines of credit |   |           | 14,900  |   |             |   | 14,678 |   |
|                                    |   |           | 121,498 |   |             |   | 115,096 |   |
| Consumer loans                          |   |           |    |   |             |   |   |   |
| Manufactured housing                    |   |           | 19,556  |   |             |   | 20,043 |   |
| Auto and other consumer                 |   |           | 11,822  |   |             |   | 12,109 |   |
|                                    |   |           | 31,378  |   |             |   | 32,152 |   |
|                                    |   |           |    |   |             |   |   |   |
| Total loans                             |   |           | 297,778 |   |             |   | 299,677 |   |
|                                    |   |           |    |   |             |   |   |   |
| Deferred loan origination fees          |   |           | (443    | )      |             |   | (431 | ) |
| Allowance for loan losses               |   |           | (4,416  | )      |             |   | (4,436 | ) |
| Total loans, net                        |   | $              | 292,919 |   |             | $      | 294,810 |   |

|                                                    |   | One-to-four familyfirstmortgage(1) |          |   | One-to-fourfamilyhomeequity |   |         | Commercialrealestate(2) |   |   | Commercialbusiness |   |   | Multifamilyresidential |         |   | Manufacturedhousing |   |         | Auto andotherconsumer |   |   | Serviced(1)  |   |   | Unallocated |         |   | Total  |     |
|--------------------------------------------------------------|--------|------------------------------------|---------------|--------|-----------------------------|--------|--------------|-------------------------|--------|--------|--------------------|--------|--------|------------------------|--------------|--------|---------------------|--------|--------------|-----------------------|--------|--------|--------------|--------|--------|-------------|--------------|--------|--------|----------|
|                                                         |   | (In thousands)                     |          |
| Allowance for loan losses:                                   |   |
|                                                         |   |                               |          |   |                        |   |         |                    |   |   |               |   |   |                   |         |   |                |   |         |                  |   |   |         |   |   |        |         |   |   |     |
| Ending balance                                          |   |                               |  863     |   |                        |   |  1,405  |                    |   |   |  1,300        |   |   |                   |  209    |   |                |   |  -      |                  |   |   |  287    |   |   |        |  197    |   |   |  65 |   |   |  90 |   |   |   |  4,416 |   |
|                                                         |   |                               |          |   |                        |   |         |                    |   |   |               |   |   |                   |         |   |                |   |         |                  |   |   |         |   |   |        |         |   |   |     |   |   |   |   |   |   |   |   |
| Ending balance:individually evaluatedfor impairment          |   |                               | 304           |   |                        |   | 236          |                    |   |   | 510                |   |   |                   | 82           |   |                |   | -            |                  |   |   | 5            |   |   |        | 13           |   |   |  -  |   |   |  - |   |   |   | 1,150 |   |
|                                                         |   |                               |          |   |                        |   |         |                    |   |   |               |   |   |                   |         |   |                |   |         |                  |   |   |         |   |   |        |         |   |   |     |   |   |   |   |   |   |   |   |
| Ending balance:collectively evaluatedfor impairment          |   |                               | 559           |   |                        |   | 1,169        |                    |   |   | 790                |   |   |                   | 127          |   |                |   | -            |                  |   |   | 282          |   |   |        | 184          |   |   |     | 65 |   |   |   | 90 |   |   |   | 3,266 |   |
|                                                         |   |                               |          |   |                        |   |         |                    |   |   |               |   |   |                   |         |   |                |   |         |                  |   |   |         |   |   |        |         |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Loans receivable:                                            |   |
| Ending balance                                               |   |                               |  100,060 |   |                        |   |  44,842 |                    |   |   |  70,383       |   |   |                   |  14,900 |   |                |   |  36,215 |                  |   |   |  19,556 |   |   |        |  11,822 |   |   |     |  - |   |   |   |  - |   |   |   |  297,778 |   |
|                                                         |   |                               |          |   |                        |   |         |                    |   |   |               |   |   |                   |         |   |                |   |         |                  |   |   |         |   |   |        |         |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Ending balance:individually evaluatedfor impairment          |   |                               | 5,055         |   |                        |   | 1,327        |                    |   |   | 4,272              |   |   |                   | 333          |   |                |   | -            |                  |   |   | 117          |   |   |        | 142          |   |   |     | - |   |   |   | - |   |   |   | 11,246 |   |
|                                                         |   |                               |          |   |                        |   |         |                    |   |   |               |   |   |                   |         |   |                |   |         |                  |   |   |         |   |   |        |         |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Ending balance:collectively evaluatedfor impairment          |   |                               | 95,024        |   |                        |   | 43,515       |                    |   |   | 66,111             |   |   |                   | 14,567       |   |                |   | 36,215       |                  |   |   | 19,439       |   |   |        | 11,680       |   |   |     | - |   |   |   | - |   |   |   | 286,551 |   |
|                                                         |   |                               |          |   |                        |   |         |                    |   |   |               |   |   |                   |         |   |                |   |         |                  |   |   |         |   |   |        |         |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Ending balance:loans acquired withdeteriorated creditquality |   |                               | -             |   |                        |   |         |                    |   |   | -                  |   |   |                   | -            |   |                |   | -            |                  |   |   | -            |   |   |        | -            |   |   |     | - |   |   |   | - |   |   |   | - |   |

|                                |   | Beginning      |   |   |        |   |   |       |   |   |      |   |   | Ending    |   |
|-------------------------------------|--------|----------------|--------|--------|-------------|--------|--------|------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                |   | Allowance      |   |   | Charge-offs |   |   | Recoveries |   |   | Provision |   |   | Allowance |   |
|                                |   | (In thousands) |   |
| One- to four- family first mortgage |   | $              | 909    |   |        | $      | (242   | )          |   |   | 12        |   |   |      | 185    |   |   |   | 863 |   |
| One- to four- family home equity    |   |           | 1,480  |   |        |   | (432   | )          |   |   | 5         |   |   |      | 352    |   |   |   | 1,405 |   |
| Commercial real estate              |   |           | 664    |   |        |   | (70    | )          |   |   | -         |   |   |      | 706    |   |   |   | 1,300 |   |
| Commercial business                 |   |           | 163    |   |        |   | -      |       |   |   | -         |   |   |      | 46     |   |   |   | 209 |   |
| Multifamily residential             |   |           | -      |   |        |   | -      |       |   |   | -         |   |   |      | -      |   |   |   | - |   |
| Manufactured housing                |   |           | 294    |   |        |   | -      |       |   |   | -         |   |   |      | (7     | ) |   |   | 287 |   |
| Auto and other consumer             |   |           | 309    |   |        |   | (131   | )          |   |   | 13        |   |   |      | 6      |   |   |   | 197 |   |
| Serviced                            |   |           | 65     |   |        |   |   |       |   |   | -         |   |   |      | -      |   |   |   | 65 |   |
| Unallocated                         |   |           | 553    |   |        |   |   |       |   |   | -         |   |   |      | (462   | ) |   |   | 90 |   |
|                                |   | $              | 4,436  |   |        | $      | (875   | )          |   | $      | 30        |   |   | $         | 825    |   |   | $ | 4,416 |   |

|       |   | One-to-fourfamily firstmortgages |    |   | One-to-fourfamily homeequity |   |   | CommercialReal Estate |   |   | CommercialBusiness |   |   | Multifamilyresidential |   |   | Manufacturedhousing |   |   | Auto and otherconsumer |   |   | Total  |   |
|-----------------|--------|----------------------------------|---------|--------|------------------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|---------------------|--------|--------|------------------------|--------|--------|--------|--------|
| (in thousands)  |   |
| Grade:          |   |
| Pass            |   | $                                | 81,896  |   |                         | $      | 40,499 |                  |   | $      | 60,195             |   |   | $                      | 11,206 |   |                | $      | 35,333 |                   |   | $      | 17,577 |   |   | $ | 10,432 |   |   | $ | 257,138 |   |
| Watch           |   |                             | 14,066  |   |                         |   | 3,506  |                  |   |   | 5,916              |   |   |                   | 3,347  |   |                |   | 882    |                   |   |   | 1,806  |   |   |   | 1,218 |   |   |   | 30,741 |   |
| Special Mention |   |                             | 1,447   |   |                         |   | 124    |                  |   |   | 2,043              |   |   |                   | 169    |   |                |   | -      |                   |   |   | 53     |   |   |   | 67 |   |   |   | 3,903 |   |
| Substandard     |   |                             | 2,651   |   |                         |   | 713    |                  |   |   | 2,229              |   |   |                   | 178    |   |                |   | -      |                   |   |   | 120    |   |   |   | 105 |   |   |   | 5,996 |   |
| Doubtful        |   |                             | -       |   |                         |   | -      |                  |   |   | -                  |   |   |                   | -      |   |                |   | -      |                   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Loss            |   |                             | -       |   |                         |   | -      |                  |   |   | -                  |   |   |                   | -      |   |                |   | -      |                   |   |   | -      |   |   |   | - |   |   |   | - |   |
|            |   |                             |    |   |                         |   |   |                  |   |   |               |   |   |                   |   |   |                |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total           |   | $                                | 100,060 |   |                         | $      | 44,842 |                  |   | $      | 70,383             |   |   | $                      | 14,900 |   |                | $      | 36,215 |                   |   | $      | 19,556 |   |   | $ | 11,822 |   |   | $ | 297,778 |   |

|     |   | One-to-fourfamily firstmortgages |    |   | One-to-fourfamily homeequity |   |   | Commercialreal estate |   |   | Commercialbusiness |   |   | Multifamilyresidential |   |   | Manufacturedhousing |   |   | Auto and otherconsumer |   |   | Total  |   |
|---------------|--------|----------------------------------|---------|--------|------------------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|---------------------|--------|--------|------------------------|--------|--------|--------|--------|
|          |   | (in thousands)                   |    |
|          |   |
| Performing    |   | $                                | 96,608  |   |                         | $      | 44,072 |                  |   | $      | 68,786             |   |   | $                      | 14,773 |   |                | $      | 36,215 |                   |   | $      | 19,470 |   |   | $ | 11,741 |   |   | $ | 291,665 |   |
| Nonperforming |   |                             | 3,452   |   |                         |   | 770    |                  |   |   | 1,597              |   |   |                   | 127    |   |                |   | -      |                   |   |   | 86     |   |   |   | 81 |   |   |   | 6,113 |   |
|          |   |                             |    |   |                         |   |   |                  |   |   |               |   |   |                   |   |   |                |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total         |   | $                                | 100,060 |   |                         | $      | 44,842 |                  |   | $      | 70,383             |   |   | $                      | 14,900 |   |                | $      | 36,215 |                   |   | $      | 19,556 |   |   | $ | 11,822 |   |   | $ | 297,778 |   |

|                          |   | 30-59 DaysPast Due |   |   | 60-89 DaysPast Due |   |   | Greater Than 90Days Past Due |   |   | Great Than 90Days andAccruing Interest |   |   | TotalPast Due |   |   | Current |   |   | Total Loans |   |
|------------------------------------|--------|--------------------|--------|--------|--------------------|--------|--------|------------------------------|--------|--------|----------------------------------------|--------|--------|---------------|--------|--------|---------|--------|--------|-------------|--------|
|                               |   | (in thousands)     |   |
| One-to-four family first mortgages |   | $                  | 4,758  |   |               | $      | 857    |                         |   | $      | 962                                    |   |   | $             | -      |   |    | $      | 6,577  |        |   | $ | 93,483 |   |   | $ | 100,060 |   |
| One-to-four family home equity     |   |               | 845    |   |               |   | 415    |                         |   |   | 222                                    |   |   |          | -      |   |    |   | 1,482  |        |   |   | 43,360 |   |   |   | 44,842 |   |
| Commercial real estate             |   |               | -      |   |               |   | -      |                         |   |   | -                                      |   |   |          | -      |   |    |   | -      |        |   |   | 70,383 |   |   |   | 70,383 |   |
| Commercial business                |   |               | -      |   |               |   | 178    |                         |   |   | -                                      |   |   |          | -      |   |    |   | 178    |        |   |   | 14,722 |   |   |   | 14,900 |   |
| Multifamily residential            |   |               | -      |   |               |   | -      |                         |   |   | -                                      |   |   |          | -      |   |    |   | -      |        |   |   | 36,215 |   |   |   | 36,215 |   |
| Manufactured housing               |   |               | 324    |   |               |   | 55     |                         |   |   |                                   |   |   |          | -      |   |    |   | 379    |        |   |   | 19,177 |   |   |   | 19,556 |   |
| Auto and other consumer            |   |               | 118    |   |               |   | 45     |                         |   |   |                                   |   |   |          | -      |   |    |   | 163    |        |   |   | 11,659 |   |   |   | 11,822 |   |
|                               |   |               |   |   |               |   |   |                         |   |   |                                   |   |   |          |   |   |    |   |   |        |   |   |   |   |   |   |   |   |
| Total                              |   | $                  | 6,045  |   |               | $      | 1,550  |                         |   | $      | 1,184                                  |   |   |          | -      |   |    | $      | 8,779  |        |   | $ | 288,999 |   |   | $ | 297,778 |   |
|                               |   |               |   |   |               |   |   |                         |   |   |                                   |   |   |          |   |   |    |   |   |        |   |   |   |   |   |   |   |   |

|                                |   | RecordedInvestment |   |   | Unpaid Principal Balance |   |   | RelatedAllowance |   |   | AverageRecordedInvestment |   |   | Interest Income Recognized |   |
|-------------------------------------|--------|--------------------|--------|--------|--------------------------|--------|--------|------------------|--------|--------|---------------------------|--------|--------|----------------------------|--------|
|                                |   | (in thousands)     |   |   |                     |   |   |             |   |
| With no related allowance recorded: |   |               |   |   |                     |   |   |
| One-to-four family first mortgages  |   | $                  | 2,047  |   |                     | $      | 2,047  |             |   |   | -                         |   |   | $                          | 1,731  |   |   | $ | 6 |   |
| One-to-four family home equity      |   |               | 631    |   |                     |   | 631    |             |   |   | -                         |   |   |                       | 542    |   |   |   | 3 |   |
| Commercial real estate              |   |               | 397    |   |                     |   | 397    |             |   |   | -                         |   |   |                       | 453    |   |   |   | 2 |   |
| Commercial business                 |   |               | 155    |   |                     |   | 155    |             |   |   | -                         |   |   |                       | 147    |   |   |   | - |   |
| Multifamily residential             |   |               | -      |   |                     |   | -      |             |   |   | -                         |   |   |                       | -      |   |   |   | - |   |
| Manufactured housing                |   |               | 91     |   |                     |   | 91     |             |   |   | -                         |   |   |                       | 46     |   |   |   | - |   |
| Auto and other consumer             |   |               | 87     |   |                     |   | 87     |             |   |   | -                         |   |   |                       | 55     |   |   |   | - |   |
| Total                               |   | $                  | 3,408  |   |                     | $      | 3,408  |             |   |   | -                         |   |   | $                          | 2,972  |   |   | $ | 11 |   |
|                                |   |               |   |   |                     |   |   |             |   |   |                      |   |   |                       |   |   |   |   |   |   |
| With an allowance recorded:         |   |               |   |   |                     |   |   |             |   |   |                      |   |   |                       |   |   |   |   |   |   |
| One-to-four family first mortgages  |   |               | 3,008  |   |                     |   | 3,008  |             |   |   | 304                       |   |   |                       | 4,135  |   |   |   | 7 |   |
| One-to-four family home equity      |   |               | 696    |   |                     |   | 734    |             |   |   | 235                       |   |   |                       | 1,069  |   |   |   | 3 |   |
| Commercial real estate              |   |               | 3,875  |   |                     |   | 3,875  |             |   |   | 510                       |   |   |                       | 3,074  |   |   |   | 32 |   |
| Commercial business                 |   |               | 178    |   |                     |   | 178    |             |   |   | 82                        |   |   |                       | 131    |   |   |   | 3 |   |
| Multifamily residential             |   |               | -      |   |                     |   | -      |             |   |   | -                         |   |   |                       | -      |   |   |   | - |   |
| Manufactured housing                |   |               | 26     |   |                     |   | 26     |             |   |   | 5                         |   |   |                       | 72     |   |   |   | 1 |   |
| Auto and other consumer             |   |               | 55     |   |                     |   | 55     |             |   |   | 13                        |   |   |                       | 35     |   |   |   | - |   |
| Total                               |   | $                  | 7,838  |   |                     | $      | 7,876  |             |   | $      | 1,150                     |   |   | $                          | 8,516  |   |   | $ | 46 |   |
|                                |   |               |   |   |                     |   |   |             |   |   |                      |   |   |                       |   |   |   |   |   |   |
| Totals:                             |   |               |   |   |                     |   |   |             |   |   |                      |   |   |                       |   |   |   |   |   |   |
| One-to-four family first mortgages  |   |               | 5,036  |   |                     |   | 5,055  |             |   |   | 304                       |   |   |                       | 5,866  |   |   |   | 13 |   |
| One-to-four family home equity      |   |               | 1,327  |   |                     |   | 1,365  |             |   |   | 236                       |   |   |                       | 1,611  |   |   |   | 6 |   |
| Commercial real estate              |   |               | 4,272  |   |                     |   | 4,272  |             |   |   | 510                       |   |   |                       | 3,527  |   |   |   | 34 |   |
| Commercial Business                 |   |               | 333    |   |                     |   | 333    |             |   |   | 82                        |   |   |                       | 278    |   |   |   | 3 |   |
| Multifamily residential             |   |               | -      |   |                     |   | -      |             |   |   | -                         |   |   |                       | -      |   |   |   | - |   |
| Manufactured Housing                |   |               | 117    |   |                     |   | 117    |             |   |   | 5                         |   |   |                       | 118    |   |   |   | 1 |   |
| Auto and other consumer             |   |               | 142    |   |                     |   | 142    |             |   |   | 13                        |   |   |                       | 90     |   |   |   | - |   |
| Total                               |   | $                  | 11,246 |   |                     | $      | 11,284 |             |   | $      | 1,150                     |   |   | $                          | 11,489 |   |   | $ | 57 |   |

|                              |   | Balance        |   |
|-----------------------------------|--------|----------------|--------|
|                              |   | (in thousands) |   |
|                              |   |           |   |
| One-to-four family first mortgage |   | $              | 1,673  |   |
| One-to-four home equity           |   |           | 393    |   |
| Manufactured housing              |   |           | 86     |   |
| Auto and other consumer           |   |           | 37     |   |
| Total                             |   | $              | 2,189  |   |
|                              |   |           |   |   |

|                                                            |   | March 31,      |   |   | December 31, |   |
|-----------------------------------------------------------------|--------|----------------|--------|--------|--------------|--------|
|                                                            |   | 2011           |   |   | 2010         |   |
|                                                            |   | (in thousands) |   |
| Total nonaccrual loans                                          |   | $              | 2,189  |   |         | $      | 2,898 |   |
| Loans greater than 90 days past due and still accruing interest |   |           | -      |   |         |   | - |   |
| Total impaired loans                                            |   |           | 11,246 |   |         |   | 11,730 |   |
| Average investment in impaired loans                            |   |           | 11,488 |   |         |   | 13,386 |   |
| Forgone interest on non-accrual loans                           |   |           | 75     |   |         |   | 259 |   |
| Interest income recognized on impaired loans                    |   |           | 57     |   |         |   | 419 |   |
| Troubled debt restructured loans still on accrual               |   |           | 3,924  |   |         |   | 4,396 |   |
| Troubled debt restructured loans included in impaired loans     |   |           | 3,924  |   |         |   | 4,396 |   |

|                                  |   |           |   |   | Gross Unrealized |   |   |                 |   |
|---------------------------------------|--------|----------------|--------|--------|------------------|--------|--------|----------------------|--------|
|                                  |   | AmortizedCost  |   |   | Gains            |   |   | Losses 1 Yearor Less |   |   | Losses GreaterThan 1 Year |   |   | EstimatedFairValue |   |
|                                  |
|                                  |
| March 31, 2011                        |   | (in thousands) |   |
| Agency mortgage-backed securities     |   | $              | 54     |   |             | $      | 7      |                 |   | $ | - |   |   | $ | - |   |   | $ | 61 |   |
| Non-agency mortgage-backed securities |   |           | 4,284  |   |             |   | -      |                 |   |   | - |   |   | $ | (703 | ) |   |   | 3,581 |   |
|      Total   |   | $              | 4,338  |   |             | $      | 7      |                 |   | $ | - |   |   | $ | (703 | ) |   | $ | 3,642 |   |
|                                  |   |           |   |   |             |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010                     |   | (in thousands) |   |
| Agency mortgage-backed securities     |   | $              | 54     |   |             | $      | 7      |                 |   | $ | - |   |   | $ | - |   |   | $ | 61 |   |
| Non-agency mortgage-backed securities |   |           | 5,543  |   |             |   | 2      |                 |   |   | - |   |   |   | (1,065 | ) |   |   | 4,480 |   |
|      Total   |   | $              | 5,597  |   |             | $      | 9      |                 |   | $ | - |   |   | $ | (1,065 | ) |   | $ | 4,541 |   |
|                                  |   |           |   |   |             |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |

|                                   |   | March 31, 2011 |   |
|----------------------------------------|--------|----------------|--------|
|                                   |   | Amortized Cost |   |   | Fair Value |   |
|                                   |   | (in thousands) |   |
| Due within one year                    |   | $              | -      |   |   | $ | - |   |
| Due after one year through five years  |   |           | -      |   |   |   | - |   |
| Due after five years through ten years |   |           | -      |   |   |   | - |   |
| Due after ten years                    |   |           | 4,338  |   |   |   | 3,642 |   |
|                                   |   | $              | 4,338  |   |   | $ | 3,642 |   |

|         |   | Three Months Ended March 31, |   |
|--------------|--------|------------------------------|--------|
|         |   | 2011                         |   |   | 2010 |   |
|         |   | (in thousands)               |   |
| Proceeds     |   | $                            | 1,096  |   |   | $ | 3,371 |   |
| Gross gains  |   |                         | 3      |   |   |   | 75 |   |
| Gross losses |   |                         | (37    | ) |   |   | - |   |

|                                  |   | March 31, 2011      |   |
|---------------------------------------|--------|---------------------|--------|
|                                  |   | Less Than 12 Months |   |   | 12 Months or Longer |   |   | Total |   |
|                                  |   | Fair Value          |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |
| March 31, 2011                        |   | (in thousands)      |   |
| Non-agency mortgage-backed securities |   | $                   | -      |   |   | $ | - |   |   | $ | 3,581 |   |   | $ | (703 | ) |   | $ | 3,581 |   |   | $ | (703 | ) |
| Total                                 |   | $                   | -      |   |   | $ | - |   |   | $ | 3,581 |   |   | $ | (703 | ) |   | $ | 3,581 |   |   | $ | (703 | ) |
|                                  |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | December 31, 2010   |   |
|                                  |   | Less Than 12 Months |   |   | 12 Months or Longer |   |   | Total |   |
|                                  |   | Fair Value          |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |   | Fair Value |   |   | Unrealized Loss |   |
| December 31, 2010                     |   | (in thousands)      |   |
| Non-agency mortgage-backed securities |   | $                   | -      |   |   | $ | - |   |   | $ | 3,842 |   |   | $ | (1,065 | ) |   | $ | 3,842 |   |   | $ | (1,065 | ) |
| Total                                 |   | $                   | -      |   |   | $ | - |   |   | $ | 3,842 |   |   | $ | (1,065 | ) |   | $ | 3,842 |   |   | $ | (1,065 | ) |

|                                                                                                     |   | Three Months Ended |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                     |   | March 31,          |   |
|                                                                                                     |   | 2011               |   |   | 2010 |   |
|                                                                                                     |   | (in thousands)     |   |
| Total other-than-temporary impairment losses                                                             |   | $                  | 39     |   |   | $ | - |   |
| Portion of other-than-temporary impairment losses recognized inother comprehensive income (before taxes) |   |               | -      |   |   |   | - |   |
| Net impairment losses recognized in earnings                                                             |   | $                  | 39     |   |   | $ | - |   |

|                                                  |   | Three Months Ended |   |
|-------------------------------------------------------|--------|--------------------|--------|
|                                                  |   | March 31,          |   |
|                                                  |   | 2011               |   |   | 2010 |   |
|                                                  |   | (in thousands)     |   |
| Estimated credit losses, beginning balance            |   | $                  | 160    |   |   | $ | 61 |   |
| Additions for credit losses not previously recognized |   |               | 39     |   |   |   | - |   |
| Reduction for increases in cash flows                 |   |               | -      |   |   |   | - |   |
| Reduction for realized losses                         |   |               | -      |   |   |   | - |   |
| Estimated losses, ending balance                      |   | $                  | 199    |   |   | $ | 61 |   |

| Beginning balance as of January 1, 2011                         |   | $      | 3,200  |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|
| Additions:                                                      |   |   |   |   |
| Servicing rights that result from transfers of financial assets |   |   | 148    |   |
| Other changes in Fair Value                                     |   |   | (1     | )      |
| Subtractions:                                                   |   |   |   |   |
| Net disposals of servicing obligations                          |   |   | (201   | )      |
| Fair Value as of March 31, 2011                                 |   | $      | 3,146  |   |

|                                                   |   | Three months ended March 31, |   |
|--------------------------------------------------------|--------|------------------------------|--------|
|                                                   |   | 2011                         |   |   | 2010 |   |
| Net income                                             |   | $                            | 496    |   |   | $ | 57 |   |
|                                                   |   |                         |   |   |   |   |   |   |
| Weighted average number of shares outstanding, basic   |   |                         | 2,921  |   |   |   | 2,909 |   |
| Effect of dilutive stock options                       |   |                         | -      |   |   |   | - |   |
| Weighted average number of shares outstanding, diluted |   |                         | 2,921  |   |   |   | 2,909 |   |
| Earnings per share, basic                              |   | $                            | 0.17   |   |   | $ | 0.02 |   |
| Earnings per share, diluted                            |   | $                            | 0.17   |   |   | $ | 0.02 |   |

|                                                                  |   | Shares |    |   | Weighted-AverageExercisePrice |   |   | Weighted-Average Remaining Contractual Term In Years |   |   | AggregateIntrinsicValue |   |
|-----------------------------------------------------------------------|--------|--------|---------|--------|-------------------------------|--------|--------|------------------------------------------------------|--------|--------|-------------------------|--------|
| Outstanding at the beginning of the year                              |   |   | 108,398 |   |                          | $      | 7.93   |                                                 |   |   | 8.34                    |   |   | $ | - |   |
| Granted                                                               |   |   |    |   |                          |   | -      |                                                 |   |   |                    |   |   |   |   |   |
| Exercised                                                             |   |   | -       |   |                          |   | -      |                                                 |   |   |                    |   |   |   |   |   |
| Forfeited or expired                                                  |   |   | -       |   |                          |   | -      |                                                 |   |   |                    |   |   |   |   |   |
| Outstanding at March 31, 2011                                         |   |   | 108,398 |   |                          | $      | 7.93   |                                                 |   |   | 7.83                    |   |   | $ | - |   |
| Exercisable                                                           |   |   | 21,680  |   |                          | $      | 7.93   |                                                 |   |   | 7.83                    |   |   | $ | - |   |
| Expected to vest, assuming a 0% forfeiture rate over the vesting term |   |   | 108,398 |   |                          | $      | 7.93   |                                                 |   |   | 7.83                    |   |   | $ | - |   |

|   Nonvested Shares                                         |   |   Shares |   |   | Weighted-Average Grant-Date Fair Value |   |   | AggregateIntrinsic Value |   |
|----------------------------------------------------------------------|--------|--------------------|--------|--------|----------------------------------------|--------|--------|--------------------------|--------|
|                                                                 |   |               |   |   |                                   |   |   |                     |   |
| Non-vested at January 1, 2011                                        |   |               | 41,626 |   |                                   | $      | 7.35   |                     |   |   |   |
| Granted                                                              |   |               | -      |   |                                   |   | -      |                     |   |   |   |
| Vested                                                               |   |               | 10,406 |   |                                   | $      | 7.35   |                     |   |   |   |
| Forfeited                                                            |   |               | -      |   |                                   |   | -      |                     |   |   |   |
| Non-vested at March 31, 2011                                         |   |               | 31,220 |   |                                   | $      | 7.35   |                     |   | $ | 7.50 |   |
|                                                                 |   |               |   |   |                                   |   |   |                     |   |   |   |   |
| Expected to vest assuming a 0% forfeiture rate over the vesting term |   |               | 31,220 |   |                                   | $      | 7.35   |                     |   | $ | 7.50 |   |

|                           |   |                          |    |   |                |   |    |         |   |   |          |   |
|--------------------------------|--------|-------------------------------|---------|--------|---------------------|--------|---------|--------------|--------|--------|---------------|--------|
|                           |   | At March 31,2011              |    |   | At December31, 2010 |   |    | AmountChange |   |   | PercentChange |   |
|                           |   | (Dollar amounts in thousands) |    |
| Residential mortgages          |   | $                             | 100,060 |   |                | $      | 107,600 |         |   | $      | (7,540        | )      |   |   | -7.0 | % |
| Home equity                    |   |                          | 44,842  |   |                |   | 44,829  |         |   |   | 13            |   |   |   | 0.0 | % |
| Multifamily mortgages          |   |                          | 36,215  |   |                |   | 30,887  |         |   |   | 5,328         |   |   |   | 17.3 | % |
| Commercial real estate         |   |                          | 70,383  |   |                |   | 69,531  |         |   |   | 852           |   |   |   | 1.2 | % |
| Commercial business            |   |                          | 14,900  |   |                |   | 14,678  |         |   |   | 222           |   |   |   | 1.5 | % |
| Consumer                       |   |                          | 31,378  |   |                |   | 32,152  |         |   |   | (774          | )      |   |   | -2.4 | % |
|   Deferred loan fees |   |                          | (443    | )      |                |   | (431    | )            |   |   | (12           | )      |   |   | -2.8 | % |
|   Total              |   | $                             | 297,335 |   |                | $      | 299,246 |         |   | $      | (1,911        | )      |   |   | -0.6 | % |

|                                                        |   | Non-performing Assets,        |   |
|-------------------------------------------------------------|--------|-------------------------------|--------|
|                                                        |   | March 31,2011                 |   |   | December 31,2010 |   |   | AmountChange |   |   | PercentChange |   |
|                                                        |   | (Dollar amounts in thousands) |   |
| Nonaccruing loans                                           |   | $                             | 2,189  |   |   | $ | 2,898 |   |   | $ | (709 | ) |   |   | -24.5 | % |
| Accruing loans 90 days or more    delinquent |   |                          | --     |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Restructured loans                                          |   |                          | 3,924  |   |   |   | 4,396 |   |   |   | (472 | ) |   |   | -10.7 | % |
| Foreclosed and repossessed assets                           |   |                          | 3,113  |   |   |   | 2,625 |   |   |   | 488 |   |   |   | 18.6 | % |
| Nonperforming investments                                   |   |                          | --     |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Total                                                       |   | $                             | 9,226  |   |   | $ | 9,919 |   |   | $ | (693 | ) |   |   | -7.0 | % |

|                                                                                     |   | At and for the Period Ended March 31, |   |
|------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                     |   | 2011                                  |   |   | 2010 |   |
|                                                                                     |   | (Dollar amounts in thousands)         |   |
| Balance at beginning of period                                                           |   | $                                     | 4,436  |   |   | $ | 3,468 |   |
| Charge-offs                                                                              |   |                                  | (875   | ) |   |   | (891 | ) |
| Recoveries:                                                                              |   |                                  | 30     |   |   |   | 22 |   |
| Net charge-offs                                                                          |   |                                  | (845   | ) |   |   | (869 | ) |
| Provisions charged to operations                                                         |   |                                  | 825    |   |   |   | 1,425 |   |
| Balance at end of period                                                                 |   | $                                     | 4,416  |   |   | $ | 4,024 |   |
|                                                                                     |   |                                  |   |   |   |   |   |   |
| Ratio of net charge-offs during the period toaverage loans outstanding during the period |   |                                  | 1.14   | % |   |   | 1.04 | % |
|                                                                                     |   |                                  |   |   |   |   |   |   |
| Allowance as a percentage of non-performing loans                                        |   |                                  | 72.2   | % |   |   | 30.1 | % |
|                                                                                     |   |                                  |   |   |   |   |   |   |
| Allowance as a percentage of totalloans (end of period)                                  |   |                                  | 1.49   | % |   |   | 1.35 | % |

|                   |   | As of March 31, 2011          |    |   | As of December 31, 2010 |   |
|------------------------|--------|-------------------------------|---------|--------|-------------------------|--------|
|                   |   | Amount                        |    |   | Wtd. Avg.Rate           |   |   | Amount |   |   | Wtd. Avg.Rate |   |
|                   |   | (Dollar amounts in thousands) |    |
| Checking (noninterest) |   | $                             | 22,132  |   |                    |   | 0.00 | % |   | $ | 22,148 |   |   |   | 0.00 | % |
| NOW (interest)         |   |                          | 22,567  |   |                    |   | 0.10 | % |   |   | 22,186 |   |   |   | 0.14 | % |
| Savings                |   |                          | 21,829  |   |                    |   | 0.10 | % |   |   | 21,598 |   |   |   | 0.18 | % |
| Money Market           |   |                          | 80,911  |   |                    |   | 0.53 | % |   |   | 77,257 |   |   |   | 0.69 | % |
| Escrow                 |   |                          | 4,055   |   |                    |   | 0.00 | % |   |   | 4,922 |   |   |   | 0.00 | % |
| Certificates           |   |                          | 122,239 |   |                    |   | 1.69 | % |   |   | 130,383 |   |   |   | 2.30 | % |
| Total                  |   | $                             | 273,733 |   |                    |   | 0.94 | % |   | $ | 278,494 |   |   |   | 1.29 | % |

|                                                          |   | Quarter EndedMarch 31,        |   |   | Amount |   |   | Percent |   |
|---------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|---------|--------|
|                                                          |   | 2011                          |   |   | 2010   |   |   | Change  |   |   | Change |   |
|                                                          |   | (Dollar amounts in thousands) |   |
| Service charges fee income                                    |   | $                             | 522    |   |   | $      | 528    |    |   | $ | (6 | ) |   |   | -1.1 | % |
| Earnings on cash surrender value of bank ownedlife insurance  |   |                          | 62     |   |   |   | 66     |    |   |   | (4 | ) |   |   | -6.1 | % |
| Mortgage servicing income                                     |   |                          | 135    |   |   |   | 165    |    |   |   | (30 | ) |   |   | -18.2 | % |
| Fair value adjustment  on mortgage servicing rights |   |                          | (1     | )      |   |   | 285    |    |   |   | (286 | ) |   |   | -100.4 | % |
| Gain (loss) on sale of securities                             |   |                          | (34    | )      |   |   | 75     |    |   |   | (109 | ) |   |   | -145.3 | % |
| Other-than-temporary impairment losses                        |   |                          | (39    | )      |   |   | ---    |    |   |   | (39 | ) |   |   | n/a |   |
| Gain on sale of loans                                         |   |                          | 34     |   |   |   | 64     |    |   |   | (30 | ) |   |   | -46.9 | % |

|                                            |   | Quarter Ended March 31, |   |   | Amount |   |   | Percent |   |
|-------------------------------------------------|--------|-------------------------|--------|--------|--------|--------|--------|---------|--------|
|                                            |   | 2011                    |   |   | 2010   |   |   | Change  |   |   | Change |   |
| Salaries and benefits                           |   | $                       | 1,466  |   |   | $      | 1,617  |    |   | $ | (151 | ) |   |   | -9.3 | % |
| Operations                                      |   |                    | 668    |   |   |   | 834    |    |   |   | (166 | ) |   |   | -19.9 | % |
| Regulatory assessments                          |   |                    | 225    |   |   |   | 231    |    |   |   | (6 | ) |   |   | -2.6 | % |
| Occupancy                                       |   |                    | 294    |   |   |   | 381    |    |   |   | (87 | ) |   |   | -22.8 | % |
| Data processing                                 |   |                    | 239    |   |   |   | 200    |    |   |   | 39 |   |   |   | 19.5 | % |
| Net loss on sale of OREO and repossessed assets |   |                    | 139    |   |   |   | 48     |    |   |   | 91 |   |   |   | 189.6 | % |

| Off-balance sheet loan commitments       |   |
|------------------------------------------|--------|
| (in thousands)                           |   |
| Commitments to extend credit             |   | $ | 1,557 |   |
| Undisbursed nonrevolving lines of credit |   |   | 3,960 |   |
| Undisbursed revolving lines of credit    |   |   | 27,430 |   |
| Irrevocable letters of credit            |   |   | 275 |   |
| Total loan commitments                   |   | $ | 33,222 |   |

|                                       | Actual                        |         | Minimum CapitalRequirements |         | Minimum Required toBe Well-CapitalizedUnder PromptCorrectiveAction Provisions |         | Minimum RequiredUnder MOU byMarch 31, 2011 |
|--------------------------------------------|-------------------------------|--------------|-----------------------------|--------------|-------------------------------------------------------------------------------|--------------|--------------------------------------------|
|                                       | Amount                        |    | Ratio                       |    | Amount                                                                        |    | Ratio                                      |    | Amount |   | Ratio |   | Amount |   | Ratio |
|                                       | (Dollar amounts in thousands) |
| Tier 1 Capital to total adjusted assets(1) | $26,952                       |         |     8.25%    |         | $13,073                                                                       | ≥      | 4.0%                                       |   | $16,341 | ≥ |   5.0% |   | $26,146 | ≥ |   8.0% |
| Tier 1 Capital to risk-weighted assets(2)  | $26,952                       |         |   10.87%          |         | $  9,915                                                                 | ≥      |     4.0%               | (3) | $14,873 | ≥ |   6.0% |   | N/A |   |     N/A |
| Total Capital to risk-weighted assets(2)   | $30,050                       |         |   12.12%          |         | $19,830                                                                       | ≥      | 8.0%                                       |   | $24,788 | ≥ | 10.0% |   | $29,745 | ≥ | 12.0% |

| (1) | Based on total adjusted assets of $326.8 million. |
|-----|---------------------------------------------------|

| (2) | Based on risk-weighted assets of $247.9 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 Controls over Financial Reporting. |
|-----------------|--------------------------------------------------------|

| Exhibit Number | Document                                                                                                                                                                                                                    | Reference toPrior Filingor Exhibit NumberAttached Hereto |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|
|           |                                                                                                                                                                                                                        |                                                     |
| 3.1            | Charter for Sound Financial, Inc.                                                                                                                                                                                           | *                                                        |
| 3.2            | Bylaws of Sound Financial, Inc.                                                                                                                                                                                             | **                                                       |
| 4              | Form of Stock Certificate of Sound Financial, Inc.                                                                                                                                                                          | **                                                       |
| 10.1           | Employment Agreement with Laura Lee Stewart                                                                                                                                                                                 | *                                                        |
| 10.2           | Executive Long Term Compensation Agreement with Laura Lee Stewart                                                                                                                                                           | *                                                        |
| 10.3           | Executive Long Term Compensation Agreement with Patricia Floyd                                                                                                                                                              | *                                                        |
| 10.4           | Sound Community Incentive Compensation Achievement Plan                                                                                                                                                                     | *                                                        |
| 10.5           | Summary of Annual Bonus Plan                                                                                                                                                                                                | *                                                        |
| 10.6           | Summary of Quarterly Bonus Plan                                                                                                                                                                                             | *                                                        |
| 10.7           | Director Fee Arrangements for 2009                                                                                                                                                                                          | ***                                                      |
| 10.8           | Sound Financial, Inc. 2008 Equity Incentive Plan                                                                                                                                                                            | ***                                                      |
| 10.9           | Form of Incentive Stock Option Agreement under the 2008 Equity Incentive Plan                                                                                                                                               | +                                                        |
| 10.10          | Form of Non-Qualified Stock Option Agreement under the 2008 Equity Incentive Plan                                                                                                                                           | +                                                        |
| 10.11          | Form of Restricted Stock Agreement under the 2008 Equity Incentive Plan                                                                                                                                                     | +                                                        |
| 10.12          | Employment Agreements with executive officers Matthew Denies,Matthew Moran, Scott Boyer and Marlene Price                                                                                                                   | ++                                                       |
| 11             | Statement re computation of per share earnings                                                                                                                                                                              | None                                                     |
| 15             | Letter re unaudited interim financial information                                                                                                                                                                           | None                                                     |
| 18.1           | Letter re change in accounting principles                                                                                                                                                                                   | +++                                                      |
| 19             | Reports furnished to security holders                                                                                                                                                                                       | None                                                     |
| 22             | Published report regarding matters submitted to vote of security holders                                                                                                                                                    | None                                                     |
| 23             | Consents                                                                                                                                                                                                                    | None                                                     |
| 24             | Power of Attorney                                                                                                                                                                                                           | None                                                     |
| 31.1           | Rule 13a–14(a) Certification of Chief Executive Officer                                                                                                                                                               | 31.1                                                     |
| 31.2           | Rule 13a–14(a) Certification of Chief Financial Officer                                                                                                                                                               | 31.2                                                     |
| 32             | Section 1350 Certification                                                                                                                                                                                                  | 32                                                       |
| *              | Filed as an exhibit to the Company's Form SB–2 registration statement filed on September 20, 2007 (File No.333–146196) pursuant to Section 5 of the Securities Act of 1933.                                |
| **             | Filed as an exhibit to Pre-effective Amendment No. 1 to the Company's Form SB–2 registration statement filed on November 2, 2007 (File No.333–146196) pursuant to Section 5 of the Securities Act of 1933. |
| ***            | Filed as an exhibit to the Company’s Form 10-K filed on March 31, 2009.                                                                                                                                               |
| +              | Filed as an exhibit to the Company’s Form 8-K filed on January 29. 2009.                                                                                                                                              |
| ++             | Filed as an exhibit to the Company’s Form 8-K filed on November 5, 2009.                                                                                                                                              |
| +++            | Filed as an exhibit to the Company’s Form 10-Q filed on May 17, 2010.                                                                                                                                                 |

|         |   | SOUND FINANICAL, INC.                      |
|--------------|--------|--------------------------------------------|
|         |   |                                       |
|         |   |                                       |
|         |   |                                       |
| May 16, 2011 | By:    | /s/  Laura Lee Stewart           |
|         |   | Laura Lee Stewart                          |
|         |   | President and Chief Executive Officer      |
|         |   |                                       |
|         |   |                                       |
|         |   |                                       |
|         |   |                                       |
| May 16, 2011 | By:    | /s/  Matthew P. Deines           |
|         |   | Matthew P. Deines                          |
|         |   | Executive Vice President                   |
|         |   | Chief Financial Officer                    |
|         |   | Principal Financial and Accounting Officer |

| 31.1 | Rule 13a–14(a) Certification of Chief Executive Officer                                               | 31.1 |
|------|-------------------------------------------------------------------------------------------------------------|------|
| 31.2 | Rule 13a–14(a) Certification of Chief Financial Officer, Principal Financial and Accounting Principal | 31.2 |
| 32   | Section 1350 Certification                                                                                  | 32   |