Sunshine Financial 10-Q 2015 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

[  ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______ to ________

Commission file number:001-54280

SUNSHINE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Maryland	36-4678532
(State or other jurisdiction of incorporation of organization)	(IRS Employer Identification No.)

1400 East Park Avenue, Tallahassee, Florida  32301

(Address of principal executive offices; Zip Code)

(850) 219-7200

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes [X ]No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer   [  ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each issuer's classes of common equity, as of the latest practicable date:

At November 16, 2015, there were issued and outstanding 1,051,156 shares of the issuer's common stock.

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Index

		Page Number
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014	2
	Condensed Consolidated Statements of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2015 and 2014 (Unaudited)	3
	Condensed Consolidated Statements of Stockholders' Equity for the Nine-Month Periods Ended September 30, 2015 and 2014 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows For the Nine-Month Periods Ended September 30, 2015 and 2014 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6-24
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25-31
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	32
Item 4.	Controls and Procedures	32
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
SIGNATURES		35
EXHIBIT INDEX

1

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Condensed Consolidated Balance Sheets

($ in thousands)

	At September 30, 2015			At December 31, 2014
	(Unaudited)
Assets
Cash and due from banks	$	2,562			3,682
Interest-bearing deposits with banks		7,167			9,350
Cash and cash equivalents		9,729			13,032
Securities held to maturity (fair value of $22,228 and $25,835)		22,168			26,035
Loans, net of allowance for loan losses of $910 and $1,087		108,114			102,786
Premises and equipment, net		4,656			4,907
Bank owned life insurance		3,050			-
Federal Home Loan Bank stock, at cost		136			130
Deferred income taxes		2,621			2,561
Accrued interest receivable		353			350
Foreclosed real estate		523			206
Other assets		1,003			999
Total assets	$	152,353			151,006
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing deposit accounts	$	26,686			26,206
Money-market deposit accounts		36,322			35,358
Savings accounts		41,164			39,606
Time deposits		24,700			26,735
Total deposits		128,872			127,905
Official checks		283			325
Advances by borrowers for taxes and insurance		399			29
Other liabilities		531			359
Total liabilities		130,085			128,618
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 authorized, none       issued and outstanding		-			-
Common stock, $.01 par value, 6,000,000 shares authorized, 1,082,310and 1,094,110 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		10			10
Additional paid in capital		8,211			8,334
Retained earnings		14,641			14,709
Unearned Employee Stock Ownership Plan shares		(594	)		(665	)
Total stockholders' equity		22,268			22,388
Total liabilities and stockholders' equity	$	152,353			151,006

See accompanying Notes to Condensed Consolidated Financial Statements.

2

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share information)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2015			2014		2015			2014
Interest income:
Loans	$	1,371			1,347		4,081			3,927
Securities		116			145		367			451
Other		5			5		18			18
Total interest income		1,492			1,497		4,466			4,396
Interest expense		94			95		281			282
Net interest income		1,398			1,402		4,185			4,114
Provision for loan losses		45			-		125			100
Net interest income after provision for loan losses		1,353			1,402		4,060			4,014
Noninterest income:
Fees and service charges on deposit accounts		369			396		1,090			1,213
Gain on sale of loans		9			41		128			113
Gain on sale of foreclosed real estate		-			49		23			49
Gain on sale of land		-			-		451			-
Fees and charges on loans		24			30		107			65
Bank owned life insurance earnings		26			-		50			-
Other		12			3		27			16
Total noninterest income		440			519		1,876			1,456
Noninterest expenses:
Salaries and employee benefits		948			878		2,789			2,640
Occupancy and equipment		298			319		853			923
Data processing services		314			196		979			601
Professional fees		185			142		512			403
Federal Deposit Insurance Corporation insurance		32			34		93			91
Advertising and promotion		23			36		51			87
Stationery and supplies		13			27		53			73
Telephone and postage		34			63		107			187
Foreclosed real estate		13			14		57			36
Credit card expense		31			29		93			98
Other		141			95		463			326
Total noninterest expenses		2,032			1,833		6,050			5,465
(Loss) earnings before income taxes (benefit)		(239	)		88		(114	)		5
Income taxes (benefit)		(118	)		26		(46	)		(3	)
Net (loss) earnings	$	(121	)		62		(68	)		8
Basic (loss) earnings per common share	$	(0.12	)		0.06		(0.07	)		0.01
Diluted (loss) earnings per common share	$	(0.12	)		0.06		(0.07	)		0.01
Cash dividends per common share	$	-			-		-			-

3

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

 (Unaudited)

($ in thousands)

												Unearned
												Employee
												Stock
						Additional						Ownership			Total
	Common Stock					Paid In			Retained			Plan			Stockholders'
	Shares			Amount		Capital			Earnings			Shares			Equity
Balance, December 31, 2013		1,174,454		$	11		9,789			14,670			(756	)		23,714
Net earnings (unaudited)		-			-		-			8			-			8
Stock based compensation  expense (unaudited)		4,000			-		120			-			-			120
Repurchase of common stock (unaudited)		(20,944	)		-		(383	)		-			-			(383	)
Common stock allocated to ESOP participants (unaudited)		-			-		(59	)		-			68			9
Balance, September 30, 2014 (unaudited)		1,157,510		$	11		9,467			14,678			(688	)		23,468
Balance, December 31, 2014		1,094,110		$	10		8,334			14,709			(665	)		22,388
Net loss (unaudited)		-			-		-			(68	)		-			(68	)
Stock based compensation  expense (unaudited)		-			-		150			-			-			150
Repurchase of common stock (unaudited)		(11,800	)		-		(213	)		-			-			(213	)
Common stock allocated to ESOP participants (unaudited)		-			-		(60	)		-			71			11
Balance, September 30, 2015 (unaudited)		1,082,310		$	10		8,211			14,641			(594	)		22,268

See accompanying Notes to Condensed Consolidated Financial Statements.

4

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Nine-Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net (loss) earnings	$	(68	)	$	8
Adjustments to reconcile net (loss) earnings to net cash provided by      operating activities:
Depreciation		288			285
Gain on the sale of land		(451	)		-
Provision for loan losses		125			100
Deferred income tax benefit		(60	)		(19	)
Net amortization of premiums/discounts on securities		36			32
Net amortization of deferred loan fees and costs		13			17
Bank owned life insurance earnings		(50	)		-
Loans originated for sale		(6,102	)		(4,573	)
Proceeds from loans sold		6,254			4,378
Gain on sale of loans		(128	)		(113	)
ESOP compensation expense		11			9
Stock-based compensation expense		150			120
Increase in accrued interest receivable		(3	)		(39	)
(Increase) decrease  in other assets		(4	)		12
Gain on sale of foreclosed real estate		(23	)		(49	)
Write-down of foreclosed real estate		-			34
Decrease in official checks		(42	)		(132	)
Increase in advances by borrowers for taxes and insurance		370			299
Increase in other liabilities		172			139
Net cash provided by operating activities		488			508
Cash flows from investing activities:
Purchases of securities held-to-maturity		-			(3,897	)
Principal pay-downs on held-to-maturity securities		3,831			3,283
Purchase of bank owned life insurance		(3,000	)		-
Net increase in loans		(5,946	)		(6,925	)
Net sales (purchases) of premises and equipment		414			(172	)
(Purchase) redemption of Federal Home Loan Bank stock		(6	)		47
Proceeds from sale of foreclosed real estate		176			716
Capital improvements to foreclosed real estate		(14	)		(12	)
Net cash used in investing activities		(4,545	)		(6,960	)
Cash flows from financing activities:
Net increase in deposits		967			3,007
Repurchase of common stock		(213	)		(383	)
Net cash provided by financing activities		754			2,624
Decrease in cash and cash equivalents		(3,303	)		(3,828	)
Cash and cash equivalents at beginning of period		13,032			14,455
Cash and cash equivalents at end of period	$	9,729		$	10,627
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	-		$	-
Interest	$	281		$	282
Noncash transaction-
Transfer from loans to foreclosed real estate	$	456		$	160

See accompanying Notes to Condensed Consolidated Financial Statements.

5

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.   Organization and Basis of Presentation

Sunshine Financial, Inc. ("Sunshine Financial" or the "Holding Company"), a Maryland corporation, is the holding company for Sunshine Savings Bank (the "Bank") and owns all the outstanding common stock of the Bank.

The Holding Company's only business is the operation of the Bank.  The Bank, through its six banking offices, provides a variety of retail community banking services to individuals and businesses primarily in Leon County, Florida. The Bank's deposits are insured up to the applicable limits by the Federal Deposit Insurance Corporation. The Bank's subsidiary is Sunshine Member Insurance Services, Inc. ("SMSI"), which was established to sell automobile warranty, credit life and disability insurance products associated with loan products. Collectively the entities are referred to as the "Company."

These condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and Article 8-03 of Regulation S-X and do not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for a complete presentation of the Company's consolidated financial condition and results of operations.

In the opinion of management, the information reflects all adjustments (consisting only of normal recurring adjustments) which are necessary in order to make the financial statements not misleading and for a fair representation of the results of operations for such periods.  The results for the three- and nine-month periods ended September 30, 2015 should not be considered as indicative of results for a full year.

6

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

2.   (Loss) Earnings Per Share

(Loss) earnings per share ("EPS") has been computed on the basis of the weighted-average number of shares of common stock outstanding. For the three and nine-months ended September 30, 2015, the outstanding stock options are not considered dilutive securities due to the net loss incurred by the Company.  For the three and nine-months ended September 30, 2014, the outstanding stock options were considered dilutive securities for purposes of calculating diluted EPS which was computed using the treasury stock method.  The shares purchased by the ESOP are included in the weighted-average shares when they are committed to be released ($ in thousands, except per share amounts):

	2015								2014
				Weighted-		Per					Weighted-		Per
				Average		Share					Average		Share
	Earnings			Shares		Amount			Loss		Shares		Amount
Three Months Ended September 30:
Basic EPS:
Net (loss) earnings	$	(121	)		987,627	$	(0.12	)	$	62		1,045,897	$	0.06
Effect of dilutive securities:
Incremental shares from assumed conversion
of options					-							32,360
Diluted EPS:
Net (loss) earnings	$	(121	)		987,627	$	(0.12	)	$	62		1,078,257	$	0.06

	2015								2014
				Weighted-		Per					Weighted-		Per
				Average		Share					Average		Share
	Earnings			Shares		Amount			Loss		Shares		Amount
Nine Months Ended September 30:
Basic EPS:
Net (loss) earnings	$	(68	)		987,455	$	(0.07	)	$	8		1,043,888	$	0.01
Effect of dilutive securities:
Incremental shares from assumed conversion
of options					-							32,493
Diluted EPS:
Net (loss) earnings	$	(68	)		987,455	$	(0.07	)	$	8		1,076,381	$	0.01

(continued)

7

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

3.  Securities Held to Maturity

Securities have been classified as held to maturity according to management intent.  The carrying amount of securities and their fair values are as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
At September 30, 2015
Mortgage-backed securities	$	1,190		50		-			1,240
Collateralized mortgage obligations		20,978		155		(145	)		20,988
Total	$	22,168		205		(145	)		22,228
At December 31, 2014
Mortgage-backed securities		1,580		72		-			1,652
Collateralized mortgage obligations		24,455		65		(337	)		24,183
Total	$	26,035		137		(337	)		25,835

There were no securities pledged at September 30, 2015 or December 31, 2014.

Securities with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position at the date indicated, are as follows (in thousands):

	Less than Twelve Months					Twelve Months or Longer
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
At September 30, 2015:
Collateralized mortgage obligations	$	(11	)		2,031		(134	)		7,007

At December 31, 2014:
Collateralized mortgage obligations	$	(27	)	5,984	(310	)	11,283

At September 30, 2015 the unrealized losses on eleven securities are considered by management to be attributable to changes in market interest rates, and not to credit risk on the part of the issue, that has occurred since the securities' purchase dates, and such unrecognized losses or gains will continue to vary with general interest rate level fluctuations in the future.  We do not intend to sell the temporarily impaired securities and it is not likely that we will be required to sell the securities prior to their maturity.  . As management has the ability and intent to hold debt securities until maturity, or for the foreseeable future, no declines in the fair value below amortized cost are deemed to be other than temporary.

(continued)

8

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.  Loans

The loan portfolio segments and classes as of the dates indicated are as follows (in thousands):

	September 30,			December 31,
	2015			2014
Real estate mortgage loans:
One-to four-family	$	45,663			48,957
Lot		3,676			4,109
Commercial real estate		38,369			29,803
Construction		1,507			1,140
Total real estate loans		89,215			84,009
Commercial loans		1,110			656
Consumer loans:
Home equity		7,446			8,212
Automobile		3,405			3,545
Credit cards and unsecured		6,141			6,583
Deposit account		450			534
Other		767			973
Total consumer loans		18,209			19,847
Total loans		108,534			104,512
Add (deduct)
Loans in process		616			(526	)
Deferred fees and discounts		(126	)		(113	)
Allowance for loan losses		(910	)		(1,087	)
Total loans, net	$	108,114			102,786

(continued)

9

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.  Loans, Continued

The Company has divided the loan portfolio into three portfolio segments and ten classes, each with different risk characteristics and methodologies for assessing risk. The portfolio segments identified by the Company are as follows:

Real Estate Mortgage Loans.  Real estate mortgage loans are loans comprised of four classes: One- to four-family, Lot, Commercial real estate and Construction loans. The Company generally originates one- to four-family mortgage loans in amounts up to 80% of the lesser of the appraised value or purchase price of a mortgaged property, but will also permit loan-to-value ratios of up to 95%. For one- to four-family loans exceeding an 80% loan-to-value ratio, the Company generally requires the borrower to obtain private mortgage insurance covering any loss on the amount of the loan in excess of 80% in the event of foreclosure. The Company also makes loans for the purchase of developed lots for future construction of the borrower's primary residence.  The Company will generally originate lot loans in an amount up to 75% of the lower of the purchase price or appraisal and have a maximum amortization of up to 20 years and maturities up to 20 years. Commercial real estate loans are generally originated at 75% or less loan-to-value ratio and have amortization terms of up to 20 years and maturities of up to ten years.  Construction loans to borrowers are to finance the construction of one- to four-family, owner occupied properties. These loans are categorized as construction loans during the construction period, later converting to residential real estate loans after the construction is complete and amortization of the loan begins. Real estate construction loan funds are disbursed periodically based on the percentage of construction completed.  If the estimate of construction cost proves to be inaccurate, the Company may be compelled to advance additional funds to complete the construction with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower to repay the loan.  The Company carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced. Construction loans are typically secured by the properties under construction. Construction and lot loan lending is generally considered to involve a higher degree of credit risk than long-term permanent financing of residential properties.

Commercial Loans.  Commercial loans are comprised of unsecured loans.  The Company offers unsecured commercial loans generally to its commercial real estate borrowers.

Consumer Loans.  Consumer loans are comprised of five classes: Home Equity, Automobile, Credit cards and unsecured, Deposit account and Other.  The Company offers a variety of secured consumer loans, including home equity, new and used automobile, boat and other recreational vehicle loans, and loans secured by deposit accounts.  The Company also offers unsecured consumer loans including a credit card product.  The Company originates its consumer loans primarily in its market area.  Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are made at fixed and variable interest rates and may be made on terms of up to twenty years. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

(continued)

10

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.  Loans, Continued

An analysis of the change in the allowance for loan losses for the periods indicated, is as follows (in thousands):

	Real Estate Loans												Consumer Loans
	One-toFour-Family			Lot Loans			Commercial RealEstate		Constru-ction		Comme- rcial Loans		Home Equity			Auto- mobile			CreditCards andUnsecured			DepositAccount		Other			Unallo-cated			Total
Three Months Ended September 30, 2015:
Beginning balance	$	266			34			214		1		13		212			14			126			-		27			1			908
Provision (credit) for loan loss		(21	)		-			24		2		1		(9	)		11			43			-		(5	)		(1	)		45
Charge-offs		-			(5	)		-		-		-		(10	)		(8	)		(46	)		-		-			-			(69	)
Recoveries		-			1			-		-		-		18			1			6			-		-			-			26
Ending balance	$	245			30			238		3		14		211			18			129			-		22			-			910
Three Months Ended September 30, 2014:
Beginning balance	$	470			55			159		1		8		156			22			140			-		50			105			1,166
Provision (credit) for loan loss		14			(9	)		24		2		1		(1	)		19			3			-		1			(54	)		-
Charge-offs		-			-			-		-		-		-			(10	)		(28	)		-		-			-			(38	)
Recoveries		-			-			-		-		-		-			-			14			-		-			-			14
Ending balance	$	484			46			183		3		9		155			31			129			-		51			51			1,142
Nine Months Ended September 30, 2015:
Beginning balance	$	454			46			206		2		10		115			31			111			-		39			73			1,087
Provision (credit) for loan loss		(213	)		(18	)		32		1		4		289			(4	)		124			-		(17	)		(73	)		125
Charge-offs		-			(5	)		-		-		-		(221	)		(14	)		(137	)		-		-			-			(377	)
Recoveries		4			7			-		-		-		28			5			31			-		-			-			75
Ending balance	$	245			30			238		3		14		211			18			129			-		22			-			910
Nine  Months Ended September 30, 2014:
Beginning balance	$	605			93			163		1		5		146			12			187			-		64			18			1,294
Provision (credit) for loan loss		8			(23	)		17		2		4		21			36			(25	)		-		27			33			100
Charge-offs		(129	)		(24	)		-		-		-		(10	)		(17	)		(106	)		-		(40	)		-			(326	)
Recoveries		-			-			-		-		-		1			-			73			-		-			-			74
Ending balance	$	484			46			180		3		9		158			31			129			-		51			51			1,142
At September 30, 2015:
Individually evaluated for impairment:
Recorded investment	$	2,791			-			-		-		-		269			-			-			-		-			-			3,060
Balance in allowance for loan losses	$	76			-			-		-		-		33			-			-			-		-			-			109
Collectively evaluated for impairment:
Recorded investment	$	42,872			3,676			38,369		1,507		1,110		7,177			3,405			6,141			450		767			-			105,474
Balance in allowance for loan losses	$	169			30			238		3		14		178			18			129			-		22			-			801
At December 31, 2014:
Individually evaluated for impairment:
Recorded investment	$	3,297			-			-		-		-		289			-			14			-		-			-			3,600
Balance in allowance for loan losses	$	63			-			-		-		-		4			-			2			-		-			-			69
Collectively evaluated for impairment:
Recorded investment	$	45,660			4,109			29,803		1,140		656		7,923			3,545			6,569			534		973			-			100,912
Balance in allowance for loan losses	$	391			46			206		2		10		111			31			109			-		39			73			1,018

(continued)

11

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.  Loans, Continued

The following summarizes the loan credit quality by loan grade and class at the dates indicated (in thousands):

Credit Risk	One to				Commercial										Credit
Profile by Internally	Four				Real		Constru-		Comme-		Home		Auto-		Cards and		Deposit
Assigned Grade:	Family		Lot		Estate		ction		rcial		Equity		mobile		Unsecured		Accounts		Other		Total
At September 30, 2015:
Grade:
Pass	$	41,760		3,676		38,369		1,507		1,110		7,014		3,371		6,085		450		767		104,109
Special mention		-		-		-		-		-		-		6		11		-		-		17
Substandard		3,903		-		-		-		-		432		28		45		-		-		4,408
Doubtful		-		-		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-		-		-
Total	$	45,663		3,676		38,369		1,507		1,110		7,446		3,405		6,141		450		767		108,534
At December 31, 2014:
Grade:
Pass		44,305		4,031		29,803		1,140		656		7,726		3,526		6,563		534		938		99,222
Special mention		375		34		-		-		-		57		14		7		-		12		499
Substandard		4,277		44		-		-		-		429		5		13		-		23		4,791
Doubtful		-		-		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-		-		-
Total	$	48,957		4,109		29,803		1,140		656		8,212		3,545		6,583		534		973		104,512

Internally assigned loan grades are defined as follows:

Pass – A Pass loan's primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary.

Special Mention – A Special Mention loan has potential weaknesses that deserve management's close attention.  If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or theCompany's credit position at some future date.  Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard – A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that theCompany will sustain some loss if the deficiencies are not corrected.

Doubtful – A loan classified Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

(continued)

12

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.  Loans, Continued

Loss – A loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

Age analysis of past-due loans at the dates indicated is as follows (in thousands):

	Accruing Loans
					90 Days
	30-59		60-89		and		Total
	Days		Days		Greater		Past				Nonaccrual		Total
	Past Due		Past Due		Past Due		Due		Current		Loans		Loans
At September 30, 2015:
Real estate loans:
One-to four-family	$	1,437		95		-		1,532		42,992		1,139		45,663
Lot		72		-		-		72		3,604		-		3,676
Commercial real estate		-		-		-		-		38,369		-		38,369
Construction		-		-		-		-		1,507		-		1,507
Commercial loans		-		-		-		-		1,110		-		1,110
Consumer loans:
Home equity		29		-		-		29		7,080		337		7,446
Automobile		22		-		-		22		3,355		28		3,405
Credit cards and unsecured		75		10		26		111		5,985		45		6,141
Deposit account		4		-		-		4		446		-		450
Other		83		-		-		83		684		-		767
Total	$	1,722		105		26		1,853		105,132		1,549		108,534
At December 31,  2014:
Real estate loans:
One-to four-family		417		90		-		507		46,709		1,741		48,957
Lot		69		34		-		103		3,962		44		4,109
Commercial real estate		-		-		-		-		29,803		-		29,803
Construction		-		-		-		-		1,140		-		1,140
Commercial loans		-		-		-		-		656		-		656
Consumer loans:
Home equity		154		27		-		181		7,767		264		8,212
Automobile		12		14		-		26		3,514		5		3,545
Credit cards and unsecured		29		83		7		119		6,441		23		6,583
Deposit account		5		-		-		5		529		-		534
Other		83		12		-		95		855		23		973
Total	$	769		260		7		1,036		101,376		2,100		104,512

(continued)

13

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.  Loans, Continued

The following summarizes the amount of impaired loans at the dates indicated (in thousands):

	With No Related Allowance Recorded				With an Allowance Recorded						Total
	RecordedInvestment		UnpaidPrincipalBalance		RecordedInvestment		UnpaidPrincipalBalance		RelatedAllowance		RecordedInvestment		UnpaidPrincipalBalance		RelatedAllowance
At September 30, 2015:
Real estate loans:
One-to four-family	$	1,608		1,660		1,183		1,199		76		2,791		2,859		76
Consumer loans:
Home equity		141		169		128		128		33		269		297		33
	$	1,749		1,829		1,311		1,327		109		3,060		3,156		109
At December 31, 2014:
Real estate loans:
One-to four-family		2,069		2,196		1,228		1,244		63		3,297		3,440		63
Consumer loans:
Home equity		155		183		134		134		4		289		317		4
Credit card and unsecured		-		-		14		14		2		14		14		2
	$	2,224		2,379		1,376		1,392		69		3,600		3,771		69

The average net investment in impaired loans and interest income recognized and received on impaired loans for the periods shown are as follows (in thousands):

	Three Months Ended September 30,
	2015						2014
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
	Investment		Recognized		Received		Investment		Recognized		Received
Residential estate loans:
One-to-four family	$	2,711		35		36		3,695		33		35
Lot loans		-		-		-		12		-		-
Consumer loans:
Home equity		265		3		4		291		2		2
Credit card and unsecured		-		-		-		15		-		-
Total	$	2,976		38		40		4,013		35		37

	Nine Months Ended September 30,
	2015						2014
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
	Investment		Recognized		Received		Investment		Recognized		Received
Residential estate loans:
One-to-four family	$	2,742		92		93		2,896		100		101
Lot loans		-		-		-		4		-		-
Consumer loans:
Home equity		271		9		10		280		6		6
Credit card and unsecured		-		-		-		45		-		-
Total	$	3,103		101		103		3,225		106		107

(continued)

14

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.   Loans, Continued

The Company had no troubled debt restructurings (TDR) entered into during the three- or nine-months ended September 30, 2015.  There were four TDR's entered into during the three- and nine-months ended September 30, 2014. There were no TDR loans that were modified during the three- and nine-months ended September 30, 2014, that subsequently defaulted during the last twelve months.

5.   Lines of Credit

The Company has an unsecured federal funds line of credit for $2.5 million with a correspondent bank and a $15.4 million line with the Federal Home Loan Bank of Atlanta collateralized by a blanket lien on qualifying loans. At September 30, 2015 and December 31, 2014, the Company had no outstanding balances on these lines.

6.   Off-Balance-Sheet Financial Instruments

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments are unused lines of credit and commitments to extend credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the balance sheets.  The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for unused lines of credit and commitments to extend credit is represented by the contractual amount of those instruments.  The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed-expiration dates or other termination clauses and may require payment of a fee.  Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's credit worthiness on a case-by-case basis.  The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management's credit evaluation of the counterparty.

Unused lines of credit and commitments to extend credit typically result in loans with a market interest rate when funded.  A summary of the amounts of the Company's financial instruments, with off-balance-sheet risk follows at September 30, 2015 (in thousands):

	Contract
	Amount
Unused lines of credit	$	17,315
Commitments to extend credit	$	1,172

(continued)

15

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

7   Fair Value of Financial Instruments

The estimated fair values of the Company's financial instruments are as follows (in thousands):

	At September 30, 2015						At December 31, 2014
	Carrying		Fair				Carrying		Fair
	Amount		Value		Level		Amount		Value		Level
Financial assets:
Cash and cash equivalents	$	9,729		9,729		1		13,032		13,032		1
Securities held to maturity		22,168		22,168		2		26,035		25,835		2
Loans		108,114		109,041		3		102,786		103,152		3
Federal Home Loan Bank stock		136		136		3		130		130		3
Accrued interest receivable		353		353		3		350		350		3
Financial liabilities:
Deposits		128,872		124,838		3		127,905		125,524		3
Off-balance-sheet financial
instruments		-		-		3		-		-		3

Discussion regarding the assumptions used to compute the estimated fair values of financial instruments can be found in Note 1 to the consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2014 filed with the U.S. Securities and Exchange Commission ("SEC") on March 30, 2015 ("2014 Form 10-K").

8.   Employee Stock Ownership Plan

The Holding Company has established an ESOP which acquired 98,756 shares of common stock in exchange for a $988,000 note payable from the Bank to the Holding Company.  The note bears interest at a fixed rate of 4.25%, is payable in annual installments and is due in 2021.  The ESOP expense was $4,000 for the three-months ended September 30, 2015 and $2,000 for the three-months ended September 30, 2014.  The ESOP expense was $11,000 for the nine-months ended September 30, 2015 and $9,000 for the nine-months ended September 30, 2014.  At September 30, 2015 and 2014, there were 52,873 and 65,113 shares, respectively, that had not been allocated under the ESOP.

 (continued)

16

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

9.   Equity Incentive Plan

On May 23, 2012, the stockholders approved the Company's 2012 Equity Incentive Plan ("Plan"). The Plan authorizes the grant of options for up to 123,445 shares of the Holding Company's common stock. The options granted have ten year terms and vest from one to five years.  A summary of the activity in the Company's stock options is as follows:

						Weighted-
				Weighted-		Average
				Average		Remaining	Aggregate
	Number of			Exercise		Contractual	Intrinsic
	Options			Price		Term	Value
Outstanding at December 31, 2013		87,500		$	11.23
Granted		5,000			18.25
Forfeited		(6,500	)		10.75
Outstanding at September 30, 2014		86,000		$	11.69	8.34 years
Outstanding at December 31, 2014		84,000			11.70
Forfeited		(2,500	)		14.35
Outstanding at September 30, 2015		81,500		$	11.62	7.37 years
Exercisable at September 30, 2015		10,000		$	10.75	7.20 years	$	$ 72,500

At September 30, 2015, there was approximately $108,000 of unrecognized compensation expense related to non-vested stock options granted under the Plan. The cost is expected to be recognized over a weighted average period of forty-nine months.  The total fair value of shares vesting and recognized as compensation expense was $11,000 for the three-months ended September 30, 2015 and $13,000 for the same period in 2014.   The total fair value of shares vesting and recognized as compensation expense was $34,000 for the nine-months ended September 30, 2015 and $24,000 for the same period in 2014

(continued)

17

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

9.   Equity Incentive Plan, Continued

The Plan also authorized the grant of up to 49,378 restricted common shares.  The restricted shares awarded vest equally over five years from the date of grant. Restricted shares are forfeited if employment is terminated before the restriction period expires.  The record holder of the Company's restricted shares of common stock possesses all the rights of a holder of the Company common stock, including the right to receive dividends on and to vote the restricted shares. The restricted shares may not be sold, transferred, pledged, assigned, encumbered, or otherwise alienated or hypothecated until they become fully vested and transferable in accordance with the agreements. Compensation expense for restricted stock totaled $39,000 for the three-months ended September 30, 2015 and $36,000 for the three-months ended September 30, 2014. Compensation expense for restricted stock totaled $116,000 for the nine-months ended September 30, 2015 and $83,000 for the nine-months ended September 30, 2014. There was no associated income tax benefit recognized.

A summary of the status of the Company's restricted stock and changes during the periods then ended are presented below:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Outstanding at December 31, 2013		42,500		$	16.75
Issued September 30, 2014		4,000			18.25
Outstanding at September 30, 2014		46,500			16.88
Outstanding at December 31, 2014		38,000			16.91
Vested September 30, 2015		(800	)		18.25
Outstanding at September 30, 2015		37,200		$	16.88

Total unrecognized compensation cost related to these non-vested restricted stock amounted to approximately $496,000 at September 30, 2015.  This cost is expected to be recognized monthly over the related vesting period using the straight-line method through 2019.

(continued)

18

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

10.  Fair Value Measurements

Impaired collateral-dependent loans are carried at fair value when the current collateral value is lower than the carrying value of the loan.  Those impaired collateral-dependent loans which are measured at fair value on a nonrecurring basis are as follows (in thousands):

	FairValue		Level 1		Level 2		Level 3		TotalLosses		LossesRecordedDuring thePeriod
At September 30, 2015:
One-to four-family	$	2,587		-		-		2,587		144		13
Home equity		265		-		-		265		62		30
Total	$	2,852		-		-		2,852		206		43
At December 31, 2014:
One-to four-family	$	2,875		-		-		2,875		206		61
Home equity		285		-		-		285		32		1
Total	$	3,160		-		-		3,160		238		62

Foreclosed real estate is recorded at fair value less estimated costs to sell.  Foreclosed real estate which is measured at fair value on a nonrecurring basis is summarized below (in thousands):

Quoted Prices

In Active

Significant

Markets for

Other

Significant

Losses

Identical

Observable

Unobservable

Recorded

Fair

Assets

Inputs

Inputs

Total

During the

Value

(Level 1)

(Level 2)

(Level 3)

Losses

Period

At September 30, 2015:

Foreclosed real estate

$

523

-

-

523

276

5

At December 31, 2014:

Foreclosed real estate

$

206

-

-

206

63

16

(continued)

19

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

11.   Regulatory Matters

The Bank is subject to minimum capital requirements imposed by the Office of the Comptroller of the Currency ("OCC"). Capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank became subject to new capital adequacy requirements adopted by the OCC which created a new required ratio for common equity Tier 1 ("CET1") capital, increased the minimum Tier 1 risk-based capital ratio, changed the risk-weightings of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over required risk-based capital ratios, and changed what qualifies as capital for purposes of meeting these various capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements.

In addition to the capital requirements, there are a number of changes in what constitutes regulatory capital, subject to transition periods. These changes include the phasing-out of certain instruments as qualifying capital, of which the Bank has none. Mortgage servicing rights and deferred tax assets over designated percentages of CET1 are deducted from capital, subject to a transition period ending December 31, 2017. CET1 consists of Tier 1 capital less all capital components that are not considered common equity. In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt and equity securities, subject to a transition period end December 31, 2017. Because of the Bank's asset size, the Bank is not considered an advanced approaches banking organization and has elected to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in its Tier 1 capital calculations.

The new requirements also include changes in the risk-weighting of assets to better reflect credit risk and other risk exposure. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days past due or otherwise in nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancelable (currently set at 0%); and a 250% risk weight (up from 100%) for mortgage servicing and deferred tax assets that are not deducted from capital.

In addition to the minimum CET1, Tier 1, and total capital ratios, the Bank will have to maintain a capital conservation buffer consisting of additional CET1 capital equal to 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement is to be phased in over a period of four years starting with an increase of 0.625% beginning in January 2016 and increasing by the same amount each year until the full 2.5% becomes effective in January 2019.

20

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

11.  Regulatory Matters, Continued

Under the new standards, in order to be considered well-capitalized, the Bank must have a CET1 risk-based ratio of 6.5% (new), a Tier 1 risk-based ratio of 8% (increased from 6%), a total risk-based capital ratio of 10% (unchanged) and a leverage ratio of 5% (unchanged)

At September 30, 2015, the Bank exceeded all regulatory capital requirements. Consistent with its goals to operate a sound and profitable organization, the Bank's policy is to maintain a "well-capitalized" status under the capital categories of the OCC. Based on capital levels at September 30, 2015, the Bank was considered to be well-capitalized.

The Bank's actual regulatory capital amounts and percentages are presented in the table ($ in thousands).

	Actual					MinimumFor Capital AdequacyPurposes					MinimumTo Be WellCapitalized UnderPrompt and CorrectiveAction Provisions
	Amount		%			Amount		%			Amount		%
At September 30, 2015:
Total Capital to Risk-
Weighted Assets	$	19,088		17.81	%	$	8,572		8.00	%	$	10,715		10.00	%
Tier I Capital to Risk-
Weighted Assets		18,178		16.97			6,429		6.00			8,572		8.00
Tier I Capital
to Total Assets		18,178		12.58			5,779		4.00			7,224		5.00
Common equity Tier 1 Capital to
Risk-Weighted Assets		18,178		16.97			4,822		4.50			6,965		6.50
At December 31, 2014:
Total Capital to Risk-
Weighted Assets		19,211		19.33			7,949		8.00			9,937		10.00
Tier I Capital to Risk-
Weighted Assets		18,124		18.24			3,975		4.00			5,962		6.00
Tier I Capital
to Total Assets		18,124		12.21			5,936		4.00			7,420		5.00

Savings and loan holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. For a savings and loan holding company with less than $1.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company's subsidiary banks to be well-capitalized under the prompt corrective action regulations.

21

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Item 2.  Management's Discussion and Analysis of

Financial Condition and Results of Operations

Forward-Looking Statements

When used in this report and in future filings by Sunshine Financial Inc. ("Sunshine Financial") with the U.S. Securities and Exchange Commission ("SEC"), in Sunshine Financial's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases, "anticipate," "believes," "expects," "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "projected," or similar expressions are intended to identify forward-looking statements."  These forward-looking statements include, but are not limited to:

· statements of our goals, intentions and expectations;

· statements regarding our business plans, prospects, growth and operating strategies;

· statements regarding the asset quality of our loan and investment portfolios; and

· estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.  In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

· the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets;

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

· changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;

· fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market area;

· results of examinations of us by the Office of the Comptroller of the Currency ("OCC") or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings;

· legislative or regulatory changes that adversely affect our business, changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, including as a result of Basel III;

· our ability to attract and retain deposits;

· changes in premiums for deposit insurance;

22

SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

· our ability to control operating costs and expenses;

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

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

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

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

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

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

· our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

· increased competitive pressures among financial services companies;

· changes in consumer spending, borrowing and savings habits;

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

· our ability to pay dividends on our common stock;

· adverse changes in the securities markets;

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

· the impact of changes in financial services laws and regulations, including laws concerning taxes, banking, securities, consumer protection and insurance and the impact of other governmental initiatives affecting the financial services industry;

· changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods including relating to fair value accounting and loan loss reserve requirements; and

· other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere in this report and our Form 10-K for the year ended December 31, 2014 filed on March 30, 2015 ("2014 Form 10-K") and our other reports filed with the SEC.

Any of the forward-looking statements are based upon management's beliefs and assumptions at the time they are made.  We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise.  In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

General

Sunshine Financial is the holding company for its wholly owned subsidiary, Sunshine Savings Bank. Sunshine Savings Bank was originally chartered as a credit union in 1952 as Sunshine State Credit Union to serve state government employees in the metropolitan Tallahassee area.  On July 1, 2007, we converted from a state-chartered credit union known as Sunshine State Credit Union to a federal mutual savings bank known as Sunshine Savings Bank, and in 2009 reorganized into the non-stock mutual holding company structure.  On April 5, 2011, Sunshine Financial completed a public offering as part of Sunshine Saving Bank's conversion and reorganization from a non-stock mutual holding company to a stock holding company structure.  References to we, us and our throughout this document refer to Sunshine Financial and Sunshine Savings Bank, as the context requires.

We currently operate out of six full-service branch offices serving the Tallahassee, Florida metropolitan area.  Our principal business consists of attracting retail deposits from the general public and investing those funds in loans secured by first and second mortgages on one- to four-family residences, commercial real estate, commercial business loans, home equity loans and lines of credit, lot loans, and direct automobile, credit card and other consumer loans.

We offer a variety of deposit accounts, which are our primary source of funding for our lending activities.  Our operations are significantly affected by prevailing economic conditions as well as government policies and regulations concerning, among other things, monetary and fiscal affairs, housing and financial institutions.  Deposit flows are influenced by a number of factors, including interest rates paid on competing time deposits, other investments, account maturities, and the overall level of personal income and savings.  Lending activities are influenced by the demand for funds, the number and quality of lenders, and regional economic cycles.  Sources of funds for lending activities include primarily deposits, borrowings, payments on loans and income provided from operations.

On July 10, 2015, the Company announced that Sunshine Savings Bank had submitted an application to the Florida Office of Financial Regulation ("OFR") to convert its charter from a federally-chartered savings bank to a Florida-chartered commercial bank.  Subject to receiving the necessary regulatory approvals, the conversion is expected to be completed in the fourth quarter of calendar year 2015 or first quarter of calendar year 2016.

Upon completion of the conversion, the Bank's primary regulator will be the OFR, with additional federal oversight provided by the Federal Deposit Insurance Corporation ("FDIC").  The Federal Reserve Board will continue to be the primary banking regulator for Sunshine Financial, Inc.

The conversion to a state charter will not affect the Bank's customers in any way.  Depositors will continue to have full protection of the FDIC.

Sunshine Financial is currently regulated by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and Sunshine Savings Bank is regulated by the OCC and the FDIC.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Critical Accounting Policies

The Company has identified several accounting policies that as a result of judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's Condensed Consolidated Financial Statements. Critical accounting policies and estimates are discussed in the Company's 2014 Form 10-K under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Policies." That discussion highlights estimates the Company makes that involve uncertainty or potential for substantial change. There have been no material changes in the Company's critical accounting policies and estimates as previously disclosed in the Company's 2014 Form 10-K.

Comparison of Financial Condition at September 30, 2015 and December 31, 2014

General.  Total assets increased $1.3 million, or 0.9%, to $152.4 million at September 30, 2015 from $151.0 million at December 31, 2014 primarily funded by a $1.0 million increase in deposits. The composition of total assets changed during the three months ended September 30, 2015   reflecting the purchase of $3.0 million in bank owned life insurance ("BOLI") and a $5.3 million increase in loans, partially offset by a decrease in securities held to maturity of $3.9 million and a $3.3 million decrease in cash and cash equivalents.

Loans.  Our net loan portfolio increased $5.3 million, to $108.1 million at September 30, 2015 from $102.8 million at December 31, 2014.  The increase in loans was due to an $8.6 million increase in commercial real estate loans, and a $454,000 increase in commercial business loans, partially offset by decreases in one- to four-family loans, lot loans, and consumer loans.  We also originated and sold one- to four-family real estate mortgage loans to Freddie Mac to generate additional income.  For the nine-months ended September 30, 2015, we originated $6.1 million of one- to four-family mortgage loans for sale, of which $6.2 million were sold to Freddie Mac at a gain on sale of $128,000.  Recently, management and the Board have decided to retain all mortgage loans to increase interest income in the long term while reducing short term fee income.  Management intends to continually review this strategy's effect on the Bank's interest-rate risk and recommend corrective action if deemed necessary.

Allowance for Loan Losses.  Our allowance for loan losses at September 30, 2015 was $910,000, or 0.84% of loans, compared to $1.1 million, or 1.04% of loans, at December 31, 2014.  Nonperforming loans decreased to $1.5 million at September 30, 2015 from $2.1 million at December 31, 2014.  Nonperforming loans to total loans decreased to 1.43% at September 30, 2015 from 2.01% at December 31, 2014.  Loans on nonaccrual which were less than ninety days past due totaled $205,000 at September 30, 2015 compared to $534,000 at December 31, 2014.

Deposits.  Total deposits increased $1.0 million, or 0.8%, to $128.9 million at September 30, 2015 from $127.9 million at December 31, 2014.  This increase was primarily due to a $480,000 increase in noninterest bearing deposits and a $2.5 million increase in money market and savings accounts, partially offset by a $2.0 million decrease in time deposits.  The increases were the result of retail sales efforts during the period as we continued our emphasis on attracting low-cost core deposit accounts.  The decrease in time deposits was primarily the result of some customers shifting these funds into shorter term interest-bearing demand accounts.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

 Equity.  Total stockholders' equity decreased $120,000 to $22.3 million at September 30, 2015.  This decrease was primarily due to a net loss of $68,000, the repurchase of 11,800 shares of commonstock totaling $213,000 for the nine-months ended September 30, 2015 partially offset by stock-based compensation of $161,000.

Results of Operations

The following tables set forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income earned from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense paid on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) interest-rate spread; and (v) net interest margin. Income and yields on tax-exempt obligations have not been computed on a tax equivalent basis.  All average balances are daily average balances.

	Three Months Ended September 30,
	2015								2014
	AverageBalance			InterestandDividends		AverageYield/Rate			AverageBalance			InterestandDividend		AverageYield/Rate
						($ in thousands)
Interest-earning assets:
Loans (1)	$	105,729		$	1,371		5.19	%	$	100,164		$	1,347		5.38	%
Securities held to maturity		23,081			116		2.01			27,858			145		2.08
Other interest-earning assets (2)		6,613			5		0.30			7,463			5		0.27
Total interest-earning assets		135,423			1,492		4.41			135,485			1,497		4.42
Noninterest-earning assets		15,073								11,245
Total assets	$	150,496							$	146,730
Interest-bearing liabilities:
MMDA and statement savings		77,202			63		0.33			73,438			61		0.33
Time deposits		25,036			31		0.50			27,070			34		0.50
Total interest-bearing liabilities		102,238			94		0.37			100,508			95		0.38
Noninterest-bearing liabilities		25,831								22,853
Equity		22,427								23,369
Total liabilities and equity	$	150,496							$	146,730
Net interest income				$	1,398							$	1,402
Net interest rate spread (3)							4.04	%							4.04	%
Net interest margin (4)							4.13	%							4.14	%
Ratio of average interest-earning assets
to average interest-bearing liabilities		1.32	x							1.35	x

(1)	Includes nonaccrual loans.
(2)	Other interest-earnings assets consist of Federal Home Loan Bank stock and interest-bearing deposits.
(3)	Interest-rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4)	Net interest margin is net interest income divided by average interest-earning assets (annualized).

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

	Nine Months Ended September 30,
	2015								2014
	AverageBalance			InterestandDividends		AverageYield/Rate			AverageBalance			InterestandDividend		AverageYield/Rate
						($ in thousands)
Interest-earning assets:
Loans receivable (1)	$	104,277		$	4,081		5.22	%	$	97,828		$	3,927		5.35	%
Securities held to maturity		24,196			367		2.02			28,430			451		2.12
Other interest-earning assets (2)		7,760			18		0.31			8,721			18		0.28
Total interest-earning assets		136,233			4,466		4.37			134,979			4,396		4.34
Noninterest-earning assets		13,977								11,401
Total assets	$	150,210							$	146,380
Interest-bearing liabilities:
MMDA and statement savings		76,455			186		0.32			72,719			182		0.33
Time deposits		25,692			95		0.49			27,658			100		0.48
Total interest-bearing liabilities		102,147			281		0.37			100,377			282		0.37
Noninterest-bearing liabilities		25,612								22,645
Equity		22,451								23,358
Total liabilities and equity	$	150,210							$	146,380
Net interest income				$	4,185							$	4,114
Net interest rate spread (3)							4.00	%							3.97	%
Net interest margin (4)							4.10	%							4.06	%
Ratio of average interest-earning assets
to average interest-bearing liabilities		1.33	x							1.34	x

(1)	Includes nonaccrual loans.
(2)	Other interest-earnings assets consist of Federal Home Loan Bank stock and interest-bearing deposits.
(3)	Interest-rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4)	Net interest margin is net interest income divided by average interest-earning assets (annualized).

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Comparison of the Three Months Ended September 30, 2015 and 2014

General. Net loss for the three months ended September 30, 2015 was $121,000 compared to net earnings of $62,000 for the three months ended September 30, 2014, resulting in an annualized return on average assets of (0.32)% for the three months ended September 30, 2015 and 0.17% for the three months ended September 30, 2014.  The decrease in net earnings was due primarily to decreases in noninterest income, increases in noninterest expense and in the provision for loan losses.

Net Interest Income.  Net interest income decreased $4,000, or 0.3%, to $1.4 million for the three months ended September 30, 2015 compared to the same period in 2014, primarily due to a $4.8 million decrease in average securities held to maturity, a seven basis point decrease in our average yield on investments, and an 19 basis point decrease in our average yield on loans, partially offset by a $5.5 million increase in average loans.  Our net interest rate spread remained at 4.04% for the three months ended September 30, 2015 and 2014, while our net interest margin decreased to 4.13% at September 30, 2015 from 4.14% at September 30, 2014.  The ratio of average interest-earning assets to average interest-bearing liabilities for the three months ended September 30, 2015 decreased to 1.32 from 1.35 for the three months ended September 30, 2014.

Interest Income. Interest income for the three months ended September 30, 2015 decreased $5,000, or 0.3%, to $1.5 million from the same period in 2014.  The decrease in interest income for the three months ended September 30, 2015 was primarily due to a $4.8 million decrease in average investments for 2015, a seven basis point decrease in our average yield on investments, and an 19 basis point decrease in our average yield on loans, offset by a $5.5 million increase in average loans.  Average loans increased to $105.7 million for the three months ended September 30, 2015 from $100.2 million for the same period in September 30, 2014.  The average rate on loans decreased to 5.19% for the three months ended September 30, 2015 compared to 5.38% for the three months ended September 30, 2014.

Interest Expense. Interest expense for the three months ended September 30, 2015 and September 30, 2014 was $94,000 and $95,000, respectively.  The total cost of funds for the three months ended September 30, 2015 and September 30, 2014 was 0.37% and 0.38%, respectively.

Provision for Loan Losses.  We recorded a provision for loan losses of $45,000 for the three months ended September 30, 2015 and none for the same period in 2014.  The provision for loan losses reflected historical and incurred future loan losses, the increase in our loan portfolio and decline in nonaccrual loans. Net charge-offs for the three months ended September 30, 2015 were $43,000 compared to a net charge-offs of $24,000 for the three months ended September 30, 2014. The increase in net charge-offs was primarily due to charge-offs on credit cards and unsecured loans.  Nonperforming loans to total loans at September 30, 2015 were 1.43% compared to 2.01% at December 31, 2014.  The allowance for loan losses to loans was 0.84% at September 30, 2015 compared to 1.04% at December 31, 2014.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Comparison of the Three Months Ended September 30, 2015 and 2014, Continued

Management considers the allowance for loan losses at September 30, 2015 to be adequate to cover losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future losses will not exceed the amount of the established allowance for loan losses or that any increased allowance for loan losses that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan losses is subject to review by bank regulators, as part of the routine examination process, which may result in additions to our provision for loan losses based upon their judgment of information available to them at the time of their examination.

Noninterest Income. Noninterest income for the three months ended September 30, 2015 decreased $79,000, or 15.2%, to $440,000 compared to $519,000 for the same period in 2014, due to declines in gains on loan sales, lower gains on the sale of foreclosed real estate, and lower fees and service charges on deposit accounts, partially offset by BOLI earnings.  Income from BOLI purchased in April 2015 was $26,000, gain on loan sales decreased $32,000, the gain on sale of foreclosed assets decreased $49,000, and fees and service charges on deposit accounts decreased $27,000 for the three months ended September 30, 2015, compared to the three months ended September 30, 2014.  The primary cause for the decrease in the gain on loan sales was a decrease in the volume of loans sold to Freddie Mac as refinancing activity decreased due to higher mortgage rates as compared to the same period last year.  There was no gain on sale of foreclosed assets during the three months ended September 30, 2015.  The primary cause for a decrease in fees from deposit accounts was a decrease in income from debit card activity.

Noninterest Expense. Noninterest expense for the three months ended September 30, 2015 increased $199,000, or 10.8%, as compared to the same period in 2014.  The largest increases were in data processing services, salaries and benefits, and professional fees.  Data processing services expense increased due to migrating to a service bureau from an in-house processing core system, which was undertaken to avoid higher upgrade and cyber security costs in the future. The increase in salaries and benefits was due to hiring additional staff in the Bank's commercial lending division in order to increase commercial lending, and professional fees increased due primarily to increased legal fees associated with our current charter change to a Florida-chartered commercial bank.

Income Taxes. For the three months ended September 30, 2015, we recorded an income tax benefit of $118,000 on a before tax loss of $239,000.  For the three months ended September 30, 2014, we recorded income taxes of $26,000 on before tax earnings of $88,000.  Our effective tax rate for the three months ended September 30, 2015 was (49.4)% compared to 29.6% for the same time period in 2014.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Comparison of the Nine Months Ended September 30, 2015 and 2014

General.  Net loss for the nine months ended September 30, 2015 was $68,000 compared to net earnings of $8,000 for the nine months ended September 30, 2014, resulting in an annualized return on average assets of (0.06)% for the nine months ended September 30, 2015 and 0.01% for the nine months ended September 30, 2014.  The decrease in net earnings was due to increases in noninterest expense and in the provision for loan losses, partially offset by an increase in net interest income.

Net Interest Income.  Net interest income increased $71,000, or 1.7%, to $4.2 million for the nine months ended September 30, 2015 from $4.1 million for the same period in 2014, primarily due to a $6.4 million increase in average loans for 2015, partially offset by a 13 basis point decrease in our average yield on loans, a $4.2 million decrease in our average balance of investments and a 10 basis point decrease in our average yield on investments.  Our net interest rate spread increased to 4.00% for the nine months ended September 30, 2015 from 3.97% for the same period in 2014, while our net interest margin increased to 4.10% at September 30, 2015 from 4.06% at September 30, 2014.  The ratio of average interest-earning assets to average interest-bearing liabilities for the nine months ended September 30, 2015 decreased to 1.33 from 1.34 for the same period in 2014.  Our average cost of funds stayed steady at 0.37% for both nine month periods ended September 30, 2015 and 2014.

Interest Income. Interest income for the nine months ended September 30, 2015 increased $70,000, or 1.6%, to $4.5 million from $4.4 million for the same period ended September 30, 2014.  The increase in interest income for the nine months ended September 30, 2015 was primarily due to a higher average balance of loans, partially offset by lower rates on loans and lower average balances and yields on investments.

Interest Expense. Interest expense for the nine months ended September 30, 2015 and 2014 was $281,000 and $282,000, respectively.  Neither the average balance nor the average rate paid on deposits significantly changed.

Provision for Loan Losses.  We recorded a provision for loan losses of $125,000 for the nine months ended September 30, 2015 and a provision for loan losses of $100,000 for the same period in 2014.  Net charge-offs for the nine months ended September 30, 2015 were $302,000 compared to $252,000 for the nine months ended September 30, 2014.  The 2015 net charge-offs included one home equity loan for $211,000.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Comparison of the Nine Months Ended September 30, 2015 and 2014, Continued

Noninterest Income. Noninterest income for the nine months ended September 30, 2015 increased $420,000, or 28.9%, to $1.9 million compared to $1.5 million for the same period in 2014, primarily due to a $451,000 gain on the sale of excess land located next to the home office location.  Noninterest income also increased due to income from BOLI purchased in April 2015 of $50,000, fees and charges on loans increasing $42,000 and a $15,000 increase on gain on loan sales partially offset by fees and service charges on deposit accounts decreasing $123,000 and gain on sale of foreclosed assets decreasing $26,000 for the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014.  The primary cause for the decrease in fees from deposit accounts was a decrease in income from debit card activity.

Noninterest Expense. Noninterest expense for the nine months ended September 30, 2015 was $6.1 million compared to $5.5 million for the same period in 2014, an increase of $585,000 or 10.7%.  The largest increases were in data processing services, salaries and benefits, other, and professional fees.  Data processing services expense increased due to migrating to a service bureau from an in-house processing core system, which was undertaken to avoid higher upgrade and cyber security costs in the future. The increase in salaries and benefits was due to a one-time bonus paid to non-executive officer employees.  Other expense increased due to setting up a reserve for debit card losses based on information available from our debit card servicer, and professional fees increased due primarily to increased legal fees associated with our current charter change to a Florida-chartered commercial bank.

Income Taxes. For the nine months ended September 30, 2015, we recorded an income tax benefit of $46,000 on a before tax loss of $114,000.  For the nine months ended September 30, 2014, we recorded an income tax benefit of $3,000 on before tax earnings of $5,000.  Our effective tax rate for the nine months ended September 30, 2015 was (40.35)% compared to (60.0)% for the same time period in 2014.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

The Company provided information about market risk in Item 7A of its 2014 Form 10-K.  There have been no material changes in our market risk since our 2014 Form 10-K.

Item 4.  Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Act")) as of September 30, 2015, was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Chief Financial Officerand several other members of the Company's senior management.Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures in effect as of September 30, 2015, were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

(a) Changes in Internal Control over Financial Reporting

We disclosed in Item 4(a), Controls and Procedures, of our quarterly report on Form 10-Q/A, for the quarter ended June 30, 2014, that there were matters that constituted material weaknesses in our internal control over financial reporting.  Management, with the participation of our Chief Executive Officer and Chief Financial Officer, re-evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2015, and our Chief Executive Officer and Chief Financial Officer concluded that, because of the material weakness in our internal control over financial reporting, our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2015.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.  The material weakness identified was that management did not maintain effective control over the reconciliation process related to the Company's ACH and correspondent bank accounts.  Specifically, the members of our management team with the requisite level of accounting knowledge, experience and training commensurate with our financial reporting requirements did not timely reconcile these accounts. This material weakness resulted in the restatement of the Company's unaudited condensed consolidated financial statements for the quarters ended March 31, 2015 and June 30, 2015 and the six month period ended June 30, 2015.  During the quarter ended September 30, 2015, a new control has been designed and implemented by the Company. This control includes changes to the process and timing of the reconciliations of ACH and correspondent bank accounts, which management believes will remediate the material weakness that was identified and will strengthen the Company's internal control over financial reporting.

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

PART II.  OTHER INFORMATION

Item 1.Legal Proceedings

In the normal course of business, the Company occasionally becomes involved in various legal proceedings.  In the opinion of management, any liability from such proceedings would not have a material adverse effect on the business or financial condition of the Company.

Item 1A.Risk Factors

Not required for smaller reporting companies.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c)  The following table sets forth information for the three months ended September 30, 2015 with respect to our repurchases of our outstanding common shares:

	Total Number of Shares Purchased	Average Price Paid per Share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
July 1, 2015 – July 31, 2015	1,200	$ 18.00	1,200	54,844
August 1, 2015 – August 31, 2015	---	---	---	---
September 30, 2015 – September 31, 2015	6,600	18.00	6,600	48,244
Total	7,200	$18.00	7,800	48,244

On May 19, 2015, the Company announced that its board of directors authorized the Company to purchase up to 56,044 shares, or approximately 5%, of its common stock in the open market or privately negotiated transaction from time to time expiring December 10, 2015.

Item 3.Defaults Upon Senior Securities

Nothing to report.

Item 4.Mine Safety Disclosures

Nothing to report.

Item 5.Other Information

As of this filing, since September 30, 2015, the Company has repurchased an additional 29,744 shares and has 18,500 shares remaining to be repurchased under its current stock buyback plan.

Item 6.Exhibits

See Exhibit Index

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SUNSHINE FINANCIAL, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SUNSHINE FINANICAL, INC.
Date:  November 16, 2015	By:	/s/ Louis O. Davis, Jr.
		Louis O. Davis, Jr.
		President and Chief Executive Officer
		(Duly Authorized Officer)
Date:  November 16, 2015	By:	/s/ Scott A. Swain
		Scott A, Swain
		Senior Vice President, Treasurer and
		Chief Financial Officer
		(Principal Financial Officer)

34

EXHIBIT INDEX

Exhibits:
3.1	Articles of Incorporation of Sunshine Financial, Inc. (incorporated herein by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1, as amended (File No. 333-169555))
3.2	Bylaws, as amended, of Sunshine Financial, Inc. (incorporated herein by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed with the SEC on August 28, 2013 (File No. 000-54280))
4.0	Form of Common Stock Certificate of Sunshine Financial, Inc. (incorporated herein by reference to Exhibit 4.0 to the Registrant's Registration Statement on Form S-1, as amended (File No. 333-169555))
10.1	Employment Agreement by and between Sunshine Savings Bank and Louis O Davis, Jr. (incorporated herein by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1, as amended (File No. 333-169555))
10.2	Form of Change of Control Agreement by and between Sunshine Financial, Inc. and Louis O. Davis Jr. (incorporated herein by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1, as amended (File No. 333-169555))
10.3	Form of Change of Control Agreement by and between Sunshine Financial, Inc. and each of Brian P. Baggett and Scott A. Swain (incorporated herein by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1, as amended (File No. 333-169555))
10.4	Director Fee Arrangements (incorporated herein by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (File No. 000-54280))
10.5	Sunshine Financial, Inc. 2012 Equity Incentive Plan (incorporated herein by reference to Appendix A to the Registrant's Definitive Proxy Statement filed on Schedule 14A on April 20, 2012 (File No. 000-54280))
10.6	Forms of Incentive Stock Option, Non-Qualified Stock Option and Restricted Stock Agreements under the 2012 Equity Incentive Plan (incorporated by reference to the Exhibits to the Registrant's Registration Statement on Form S-8 filed with the SEC on June 29, 2012 (File No. 333-182450))
10.7	Commercial Contract for the acquisition of property located at 3641 Coolidge Ct., Tallahassee, FL. (incorporated by reference to the Registrant's Current Report on Form 8-K filed on May 20, 2013 (File No. 000-54280))
10.8	Commercial Contract for the acquisition of property located at 503 Appleyard Dr., Tallahassee, FL.(incorporated by reference to the Registrant's Current Report on Form 8-K filed on May 20, 2013 (File No. 000-54280))
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer
32.0	Section 1350 Certification
101	Interactive Data Files